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All You Need to Know about the Accounts Manual

كل ما تريد معرفتة عن دليل الحسابات | ECPA

The accounts manual is one of the most important pillars of the accounting system. It is used to settle all accounts of the activity performed by your company. It is a coherent and complete proof or statement of each account within the company, and it give each account a special code or number. Each main account is divided into sub-accounts. Meanwhile, each sub-account is also divided into other accounts and so on, making it like a chart. That is why it was called the “Chart of Accounts”.

The accounts manual is also one of the most important indicators of judging the success of financial management and its business performance. Therefore, from the first moment of your company’s birth, you will need to start designing the Chart of Accounts, whatever the size or complexity of your business, whether you follow the old traditional method in your accounting system or work on the Accounts program. 

The Importance of The Accounting Manual

The accounting manual grants easy identification of the company's main accounts, its sub-accounts, data, numbers, and everything that is related to it

Giving a code to each account will prevent account duplication thus it gives more accurate data

The Chart of Accounts is a visual illustration of accounts so access to the account is easier, faster, and less expensive

Easy and simple registration of entries

Automatic posting between accounts and records

Preparing more accurate financial statements

It is a more reliable tool for business owners, decision makers, and investors

It is also a tool to measure the company's performance during the fiscal year

Helps decision makers to set goals and plans in accordance with the accounts manual

The accounts manual is an illustration of the financial expenses that were paid during the fiscal year

Helps to determine the size of investments that the company will need during the coming financial period

Division of Accounts Manual

The levels of the accounting manual vary from one company to another depending on the volume of business and activity.  However, the cornerstone of any accounting manual remains the same five main items, Assets, liabilities, equity, revenues, and expenses

The chart of the accounts is divided into two main types

Balance Sheet

Income Statement

Income Statement

Any accounts related to the current financial period and does not last for other periods and are proven in the income statement. The Income Statements are divided into expenses with the code No.3 and revenues and code No.4. Through these accounts, we can find out the result of your business activity during the fiscal year

Balance Sheet

It means any account related to the company's financial balances for several extended financial periods. Financial position accounts are divided into assets, liabilities, and equity. Assets has the code No.1, liabilities and has the code No.2, each of which appears in the Balance Sheet.

How to Set up an Account Manual

We said that the accounts directory is similar to a chart, so the main accounts carry the main code and sub-accounts carry the main code in addition to their own code and so on. Each code must be adhered to and ensure that there is no error in the code number, otherwise it will lead to huge errors in all lists.

As an example, we mentioned that assets carry code (1) inside the chart of Accounts manual are divided into fixed and current assets. Each of them is given a unique subcode number. This can be understood by the following:

Fixed assets, carrying code (11), are divided into several items such as

Land code (111): which in turn can be divided into several types. For example, it can be divided into:

Shubra land (1111)

Pyramid Land (1112)

and so on

Buildings and their code (112): As an example, they can be divided into

Main building (1121)

Stores (1122)

and so on

Cars (113): It can be divided into

Jumbo cars (1131)

Transport vehicles (1132)

and so on

First term goods also appear in the accounts manual on the asset side and are divided in the same manner across all branches of fixed assets and current assets, as well as the rest of the accounts

Accounts of liabilities (2) are divided into short term liabilities (21) and long-term liabilities (22)

Equity accounts (3) are divided into capital (3), retained profits (32) and reserves (33)

Expenses (4) are divided into salaries (41), rents (42) and miscellaneous expenses (43)

Revenue accounts (5) are divided into activity revenues (51) and other revenues (52)

Each account is divided into different items and accounts that are given a subcode as happened in assets, and so on until the final form of the entire account chart is reached.

How to build a tree of accounts

Consolidated Accounts Manual

The accounts manual is based on five main items and is coded according to the details of the activity and business. For example, the accounts manual for a commercial company differs from the accounts manual for a contracting company, but in the end the previous form remains the unified accounting manual for all types of companies.

Below we will try to explain the minor differences in the accounts manual from one company to another:  

Accounts manual for a contracting company

 The accounting manual for a contracting company is one of the most difficult things that an accountant faces during the implementation of the Chart of the Account, although it is like dividing the accounts in any company, in terms of dividing the five main accounts, the sub-clauses included in each account are different except equity, which do not differ for any one company from the other.

For example, the fixed assets account includes a timber and intensity account. Current assets also include advance payments and letters of guarantee. First-term goods are added to the accounts manual for a contracting company. A business insurance account is also opened, which concerns funds that have been allocated by customers to ensure the quality of work and delivery on time.

liabilities can include accounts such as false contractors and supplier business insurance. Expense accounts in the accounts manual of a contracting company can include false contractors and other accounts such as business risks, permits, engineering fees, etc.

Expenses include all materials used in the works, including paints, and building materials such as cement, sand, and bricks, and each has a different account. 

A Continuous Inventory Chart of Accounts

 A continuous inventory chart of accounts differs from the accounts manual in other cases, as there is no purchase account in the case of continuous inventory. In this case, the value of purchases is added to the inventory value. In most cases, a continuous inventory account tree is used for companies or shops that have many items such as an account manual for a commercial company or retail store.

Among the most important calculations related to the continuous inventory process when designing the chart of the accounts are:

Sales account.

Proof of the calculation of the goods of the first period in the accounts manual.

Calculate the cost of goods sold. 

Services of ECPA Office

 The accounting company ECPA is one of the largest accounting offices in Egypt and the Middle East. It has an integrated team with a great deal of knowledge, experience, and excellence who are ready 24 hours a day to grant your company the financial security you wish for

We offer many accounting services such as

Create a chart of accounts for your company with the highest possible accuracy

Prepare more than one public account program for your company

Provide tax and legal advice at any time

Conduct an internal and an external audit of your company

Dealing with various financial sectors

Compliance with all Egyptian and international laws of accounting, auditing, law, and taxes

We are ready to serve you at any time, we are happy to receive your inquiry

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