Specifications

Computer Tutorial 3 Lesson 7  3
There are two common ways to include the Accumulated amortization contra accounts in a
chart of accounts:
1. Place them in a block, for example:
1500 Warehouse
1510 Delivery truck
1520 Office computer
1600 Accum. amortization – warehouse
1610 Accum. amortization – delivery truck
1620 Accum. amortization – office computer
2. Place each of the Accumulated amortization accounts immediately after the related
asset account, for example:
1500 Warehouse
1501 Accum. amortization – warehouse
1510 Delivery truck
1511 Accum. amortization – delivery truck
1520 Office computer
1521 Accum. amortization – office computer
Many accountants prefer the second method because it is easier to remember and locate the
contra accounts. Also, other contra accounts, such as Allowance for doubtful accounts for
receivables, can use this convention.
Leave sufficient gaps between accounts for future additions
Accounts should be numbered so that there are sufficient gaps between account numbers to
add new accounts in a logical place. The following chart of accounts shows poor design:
1000 Petty cash
1001 Royal Chequing
1002 Scotia Chequing
1003 CIBC Chequing
1004 CIBC Savings
1005 Term deposits
1006 Accounts receivable
Suppose you purchased some Treasury bills and needed to add an account number to your
chart of accounts to record this. T-bills are less liquid than cash accounts, but more liquid than
term deposits. However, because there is no space between account 1004 (CIBC Savings) and
1005 (Term deposits), you would be obliged to use account 1007, assuming this account
number is still available.
A preferable structure would be:
1000 Petty cash
1100 Royal Chequing
1120 Scotia Chequing
1130 CIBC Chequing
1140 CIBC Savings
1180 Term deposits
1300 Accounts receivable
With this account structure, you can easily create a new account, 1170 (Treasury bills), for
your T-bills. Remember that Accpac accommodates very large account numbers, so there is
no reason not to plan for future needs.