Reader wrote: I am trying not to rename my accounts has much as possible. I know once I will get into the chart of accounts there will be some re-building in the names. But to answer your question; in my financials the name of Current portion long term debt is Long Term Liabilities.
Tom replied: You will need to work with your accountant to rename your accounts so that READERS of your financial statements (which usually means your Banker) can understand them. Specifically, I see a problem with your statement, “…in my financials the name of Current portion Long term debt is Long Term Liabilities.” That’s because it means the exact opposite.
Specifically, current is anything that turns into cash or uses cash in the next twelve months. Non-current (older verbiage calls this long-term) means anything that turns into cash or uses cash BEYOND twelve months. So, to name your “current portion of long term debt” as “Long Term Liabilities” is technically incorrect and needs to be changed.
Reader went on to write: I will be speaking with my CPA to see exactly how he wants me to peruse the renaming of my accounts.
Tom added: Your chart of accounts belongs to the company, not the CPA. Fact it, since it is the representation of management as to the financial condition of the business, the naming decisions belong to you, not the CPA. Now certainly the CPA can advise and assist because there are certain accounts that should be maintained for tax purposes (usually specific payroll tax accounts) but in the big picture … the accountant serves the business not the other way around.
Now the CPA certainly should have input for specific purposes (such as maintaining certain accounts usually for tax purposes). But they should rely on the owner to tell them what is important in this type of business (example: keeping paper separate from shop supplies). However, I know in reality what happens is the printer relies on the accountant who doesn’t know what the printer needs, so they plug in a chart of accounts based on some other business they’ve dealt with at some point and it may or may not be that representative.
That’s why we publish a recommended chart of accounts for small press and digital printers – because so many folks face this problem. For more info on our 2012 Chart of Accounts, $50, Click Here.
This chart has evolved based on working with hundreds of printing companies for over twenty-five years. It also is similar to the format used by NAQP for surveys although more detailed as required of a chart vs. a survey.
So, this document is our advice to the accountant as well as the owners as to what is important … and it’s done in such a way that the info may be used in BUDGETING. Example is splitting digital expenses – copying for some – into direct materials or click costs and overhead or basic rental of the equipment.
Hope this helps.