Question

Describe some of the problems that might arise from a failure to maintain and update an existing chart of accounts

Answer 1

A chart of accounts contains a list of all accounts in a ledger with a unique identification number assigned to each account. These accounts are listed in the order they would appear in financial statements. Every chart of accounts is tailored to the unique characteristics and needs of an organization needs. A properly maintained chart of accounts is essential for recording the transactions properly, for the application of accounting policies consistently and for the preparation of financial statements in a timely manner and therefore a well designed and maintained chart of accounts is the foundation for the financial and management reporting systems.