G&A101 Chart of Accounts

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Accounting Policies, Procedures and Forms Paragonmultisolutions.com

SOP # Revision: Prepared by:Effective Date: Approved by:

Title: G&A101 CHART OF ACCOUNTS

Policy: To facilitate the record keeping process for accounting, all ledger accountsshould be assigned a descriptive account title and account number.

Purpose: To provide the method for assignment and maintenance of the company'schart of accounts in order to produce meaningful financial data for theCompany.

Scope: This procedure applies to all general ledger accounts.

Responsibilities: The Controller is responsible for monitoring and approving changes tothe companys Chart of Accounts.

Definition: Chart of Accounts A categorized listing of all account titles and numbersbeing used by an organization to track income, expenses, assets, equity,

and liabilities is called a Chart of Accounts.

Procedure:

1.0 DESIGN OF ACCOUNTS

1.1 Accounts should have titles and numbers that indicate specific ledger accountssuch as Cash in Checking, Furniture and Fixtures, Accounts Payable, etc.

1.2 Accounts should be arranged in the same sequence in which they appear in thefinancial statements. Asset accounts should be numbered first, followed by liabilityaccounts, owner's equity accounts, revenue accounts and expense accounts.

1000 - Asset Accounts2000 - Liability Accounts

3000 - Owner's Equity Accounts

4000 - Sales or Revenue Accounts

5000 - Cost of Sales Accounts

6000 - Administration Expense Accounts

7000 - Sales Expense Accounts

9000 - Other Accounts

1.3 Sub-divisions should be used to provide additional clarification, as needed. A sub-division among the balance sheet accounts should be designated short term to longterm, (i.e. current assets should precede long term assets and current debt shouldprecede long-term debt).

Further, accounts will be numbered so that all sales amounts are recorded by eitherProduct or Sales Territory and so that cost of sales amounts, sales expenseamounts and administration and other expense amounts are recorded according tothe department that is accountable for the cost and the nature of the cost.

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Unassigned number sequences should be left open within each group of accountsto provide for additional accounts, which may be added later.

1.4 Accounts may be numbered using a four-digit sequence (An automated accountingsystem will generally have a predetermined account numbering format). In anaccount number, the location and the value of each digit have a specific meaning.

Below is a general description of the meaning of the numbers in a chart ofaccounts.

_XXX - The first digit in each account number indicates the majorclassification of the account in the general ledger and the value of the digitindicates whether it is an asset, liability, owners equity, department orother kind of account. For example, the number 1000 indicates assetaccount.

X_XX - The second digit indicates a sub-classification of a major accountand the value of the digit indicates a specific sub-classification. Forexample, the account number 1100 indicates Cash and MarketableSecurities accounts.

XX_X - The third digit indicates a further sub-classification of each majoraccount classification and the value of the digit indicates the specific sub-classification. For example, the account number 1110 indicates the Cashaccount and the account number 1120 indicates the Marketable Securitiesaccount.

XXX_ - The fourth digit is used to provide a more detailed classification ofthe account and the value of the digit indicates a specific classification. Forexample, account number 1111 indicates the Cash in Checking account andnumber 1112 indicates the Petty Cash account.

2.0 DESCRIPTION OF ACCOUNTS

2.1 Each account should be given a short title description that is brief but will allowthe reader to quickly ascertain the purpose of the account. A sample chart ofaccounts is attached as G&A101 Ex1 ACCOUNT CODES.

2.2 For training and consistent transaction coding, as well as to help other non-accounting managers understand why something is recorded as it is, each accountshould be defined. Definitions should be concise and meaningful. One or twosentences of definition are usually sufficient.

The definition tells the user what can be recorded in a specific numbered account.However, if there is a confusing account usage, or if repetitive coding errors are

being made, the definition can also inform the reader of what may not be recordedin this account.

Since the definitions are reference sources, they should be developed for quick andeasy lookup. The account number and name should be on one line and thedefinition should be indented beginning on the following line in a consistentpattern. If the account is part of a group, the group title should be at the top ofthe group or page.



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An example of definitions follows:

ASSETS

1111 - Cash in Checking

Includes all cash held in the operating bank account. All

withdrawals by check and deposits are recorded here. The reportedbalances are supported by a bank reconciliation prepared monthly.

1112 - Petty Cash

Includes the petty cash and change fund held by the cashier. Thisaccount is used only when a new fund is initiated or an existingfund is terminated.

Revision History:

Revision Date Description of changes Requested By

011/06/0

2Initial Release



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G&A101 Ex1 ACCOUNT CODES

AS OF XX/XX/XX

ASSETS

1100 - CASH AND MARKETABLE SECURITIES ACCOUNTS

1111 - Cash in Checking

Includes all cash held in the operating bank account. All withdrawals bycheck and deposits are recorded here. The reported balances aresupported by a bank reconciliation prepared monthly.

1112 - Petty Cash

Includes the petty cash and change fund held by the cashier. This accountis used only when a new fund is initiated or an existing fund is terminated.

1120 - Marketable Securities

Includes debt securities such as government and corporate bonds and

equity securities such as common and preferred stock acquired with cashthat is not immediately needed in operations.

1200 RECEIVABLES

1210 - Notes Receivable

Formal short-term receivables documented by a promissory note and aprovision for interest.

1220 - Accounts Receivable

Short-term receivables generated from sales and other activities.

1230 - Interest Receivable

Accrued interest receivable generated by notes and past-due accountsreceivable.

1290 - Allowance for Uncollected Accounts

The estimated accrual for bad debts result from the current period's sales.

1300 - INVENTORY ACCOUNTS

1310 - Raw Materials

The cost assigned to goods and materials on hand and not in production.

1320 - Work in Process

The cost of the raw material on which production has been started but notcompleted, plus the cost of direct labor applied specifically to this materialand a ratable share of manufacturing overhead costs.

1330 - Finished Goods

The costs identified with completed products on hand.



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1500 - PREPAID EXPENSE ACCOUNTS

1510 - Prepaid Insurance

The current portion of insurance premiums paid that cover future periods.

1520 - Prepaid Taxes

Tax payments paid by the Company that relate to a future revenue period.

1530 - Deposits

Current deposits paid by the Company for future services or acquisitionssuch as trade show deposits, deposits on an equipment purchase, etc.

1600 - OTHER CURRENT ASSET ACCOUNTS

1700 - FIXED ASSET ACCOUNTS

1710 - Land

Represents the company's original cost for the purchase of real estate.

1720 - Buildings

The company's original cost for the purchase of buildings and structures.

1722 - Machinery and Equipment

The company's original cost for the purchase of machinery and equipment.

1724 - Furniture and Fixtures

Represents the company's original cost for the purchase of furniture andother accessory items.

1726 - Vehicles

The company's original cost for the purchase of automobiles and trucks.1728 - Leasehold Improvements

The company's original cost for structural additions to leased premises.

1790 - ACCUMULATED DEPRECIATION ACCOUNTS

The cumulative depreciation expense recorded to date for all assets in aclass.

1790 - Accumulated Depreciation, Buildings

1792 - Accumulated Depreciation, Machinery and Equipment

1794 - Accumulated Depreciation, Furniture and Fixtures1796 - Accumulated Depreciation, Vehicles

1798 - Accumulated Depreciation, Leasehold Improvements



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1800 - INTANGIBLE ASSET ACCOUNTS

1810 Goodwill

Represents the excess cost, over the fair market value of the identifiableassets, of a business entity purchased by the company.

1820 - PatentsThe purchase price paid for the rights to a patent from an inventor. Forinternally developed products it also includes the cost of securing ordefending a patent such as attorney's fees. Does not include research anddevelopment costs such as labor, materials, consultants, etc. which aredirectly expensed.

1900 - OTHER ASSET ACCOUNTS

LIABILITY ACCOUNTS

2100 - CURRENT LIABILITY ACCOUNTS

2110 - Notes PayableObligations (written promissory notes) that will mature within one year.

2120 - Accounts Payable

Balances owed for goods, supplies and services purchased on openaccount.

2130 - Wages and Salaries Payable

The amount of wages or salaries earned for time worked but not yet paidas of the period being reported.

2135 - Long-Term Debt Due Within One Year

The principal of long-term debt that will be repaid during the next year.

2140 - Interest Payable

Represents the amount of interest accrued on debt obligations but not yetpaid.

2150 - Dividends Payable

Represents the amount of dividends declared or earned on stockinvestments but as not yet paid to the shareholder.

2160 - Payroll Taxes Payable

Represents the amount of employee's payroll taxes withheld and employer'staxes due on employees payroll that have not yet been deposited.

2170 - Property Taxes Payable

Represents the accrual amount of property taxes to be assessed to theCompany but not yet paid.



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2190 - INCOME TAXES PAYABLE

2191 - Federal Income Taxes Payable

Represents the estimated accrual of federal taxes due on company earnings.

2192 - State Income Taxes Payable

Represents the estimated accrual amount of state taxes due on companyearnings.

2300 - LONG-TERM LIABILITY ACCOUNTS

2310 - Bank Loan

Represents the amount of debt principal that is to be repaid after the nexttwelve-month period.

2320 - Mortgage Payable

Represents the amount of debt principal that is to be repaid after the nexttwelve-month period.

OWNERS' EQUITY ACCOUNTS

3100 - Common Stock

Represents the amount of the par value for investments in common stockof the company.

3200 - Preferred Stock

Represents the amount of investments in preferred stock of the company.

3300 - Paid-in-Capital in Excess of Par Value

Represents the excess amount paid for investment in common stock of the

Company over the stated par value amount.

3400 - Treasury Stock

Represents the cost amount paid by the Company to repurchase stock fromshareholders.

3900 - Retained Earnings

Represents the company's cumulative net profits and losses to date.

3910 - Dividends

Represents the amount of dividends declared during the current period.

SALES ACCOUNTS4010 - Sales Product A

Represents the amount of net sales for this product line.



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4011 - Sales Returns and Allowances Product A

Represents the amount for refunds given for returned or damagedmerchandise.

4020 - Sales Product B

4021 - Sales Returns and Allowances Product B4030 - Sales Product C

4031 - Sales Returns and Allowances Product C

COST OF SALES AND DEPARTMENTAL EXPENSE ACCOUNTS

5010 - Cost of Materials Product A

Represents the costs for materials used in the product.

5020 - Cost of Materials Product B

5030 - Cost of Materials Product C

5090 - Material Price Variance

Represents the differences between actual costs paid for materials and thestandard costs used by the Company for pricing these materials.

NOTE: the following accounts are set-up for each department when applicable.

5XXX - Cost of Sales Accounts

6XXX - Administration Expense Accounts

7XXX - Sales Expense Accounts

X100 - Salaries

Represents the gross amount for labor costs.X110 - Employer Taxes

Includes the employer's matching FICA and unemployment taxes.

X120 - Employee Benefits

Includes the portion of health insurance premiums paid by the company.

X200 - Telephone

Includes the costs for monthly line fees and long-distance charges.

X210 - Utilities

Includes the costs for electricity, natural gas, water and sewer use.

X220 - Postage and Delivery

Includes the amounts for postal costs and delivery costs such as, overnightservices and messenger services.



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X230 - Supplies and Small Equipment

Includes the costs for office and production supplies, tools and equipmenttype items that fall below the company's capitalization requirements.

X240 - Dues and Subscriptions

Includes amounts paid for membership in professional organizations andamounts paid for subscriptions to publications.

X250 - Travel

Includes the amounts paid for employee's business travel, such as airfare,lodging, rental cars, etc.

X260 - Meals and Entertainment

Includes the amounts paid to reimburse employee's for meals whiletraveling on company business and entertainment incurred whileconducting business with business prospects and customers.

X310 - Rent, BuildingIncludes leases payments for the company's office and manufacturingspace.

X320 - Rent, Equipment

Includes amounts for lease payments for office and manufacturingequipment.

X330 - Repairs and Maintenance

Includes amounts for repairs, cleaning and general maintenance ofbuildings, grounds and equipment.

X340 - Depreciation

Represents the estimated amount of deterioration and depreciation ofcapital assets during the current period.

X350 - Amortization

Represents the scheduled amount of amortization of intangible assetsduring the current period.

X410 - Insurance

Represents the portion of insurance premiums paid for coverage of thecurrent period for property, casualty and other business insurance.

X420 - Property Taxes

Represents the estimated amount of property taxes on buildings, propertiesand furniture and equipment for the current period.

X430 - Licenses

Includes amounts for business licenses and fees.

X510 - Consulting Services



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This includes fees to non-employee individuals or firms for advisoryservices to the company.

X520 - Legal Fees

This includes all fees paid for attorneys, appraisers, notaries, court costs,document recording fees and witnesses.

X530 - Accounting Fees

Includes costs to outside firms for auditing services and accounting advice.

X540 - Seminars and Conferences

This includes amounts incurred by employees attending outside seminar orconference programs.

X550 - Bank Fees

This includes amounts charge by banks to the Company for processingfinancial transactions. This does not include interest expense items.

X610 - Advertising and Promotions

This includes costs for camera and layout work, published advertisements,brochures and trade show expenses.

X620 - Printing Costs

This includes amounts for printing, binding and padding paid to outsideprint shops. This does not include Advertising and Promotions.

OTHER EXPENSE ACCOUNTS

9110 - Interest Income

Includes interest income from cash and security investments.

9120 - Dividend Income

Represents dividend income from the company's security investments.

9190 - Miscellaneous Income

Includes minor income items not classified in the revenue accounts.

9210 - Interest Expense

Represents interest incurred by the Company for short-and long-termdebts.

9220 - Penalties

Includes penalty items such as late payment or filing fees.

9290 - Miscellaneous Expense

Includes minor expense items not classified in the expenditure accounts.



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G&A101 Chart of Accounts

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