Revenue and expense accounts (income statement) come after balance sheet accounts in the chart of accounts. On this page, I show what my web-based arts and crafts business sample chart of accounts looks like after I've deleted all the accounts suggested by my software that I don't need.
Revenue accounts generally are assigned chart of accounts numbers in the 400 or 4000 series and expenses in the 500/5000 and above series of numbers.
Here's a brief explanation of the type of revenue and expenses accounts in your chart of accounts:
* Income: This account reflects amounts earned from your company's arts or crafts activities.
* Cost of goods sold: This account reflects all expenses directly tied to hand crafting or buying your arts or crafts product.
* Expense: In this account, you record all costs you incur to produce your income - not including cost of goods sold. For example, rent, postage, and travel expense to craft shows.
* Other income: Money brought in by means other than your arts and craft sales is considered other income. For example, if you earn interest on your checking or savings account, that income isn't the result of selling your crafts, so it's other income.
* Other expense: If you lost money on a sale unrelated to your arts and crafts business, you'd record it in this account. For example, if you lost money when you sold an old piece of equipment, you'd reflect the loss (called a loss on disposal) as an other expense.
The accounts I show in my sample chart of accounts for Metropolitan Arts and Crafts provide a good base for your own craft business chart of accounts. Some of my accounts you may find unnecessary and you'll probably have to add others specifically tailored to your type of arts or crafts business.
Now that you understand the basics, open your accounting software and start setting up your own chart of accounts! Just remember to keep the numbering sequence for the accounts straight, don't co-mingle business and personal accounts and ask your accountant for help if need be.