All About Chart of Accounts and Bookkeeping for the Education Industry
The education sector is quickly growing, and many organizations are looking for new talent. Schools, colleges, universities, and private institutions make up the education sector. The education sector equips students with knowledge. Also, their abilities are necessary to adapt to a constantly changing workplace. In this article, we will go into detail about the function of chart of accounts in the education industry. Also, how does Chart of Accounts (COA) maintains financial records for a sector that is continually expanding.
Many businesses in the education sector work to give their clients access to lifelong learning. The primary, secondary, higher, and vocational education sectors comprise most of the education market. All other industries’ capacity to recruit and retain talent depends on the education sector. But it also has its workforce development issues. The education sector is under close public and political inspection, so it undergoes waves of policy change. It also has a charge of educating the existing workforce and preparing coming generations for work and life.
What is a Chart of Accounts?
An organization’s general ledger’s accounts are listed systematically in a chart of accounts (COA). It is, in essence, a tool for organizing that offers a precise analysis of all financial transactions. As a result, COA allows companies to manage money and gives interested parties a deeper understanding of a company’s performance. This includes shareholders and investors. Each account on a chart of accounts has a name, a brief explanation, and an identifying code to make it simpler for readers to find specific accounts.
Companies use a chart of accounts (COA) to arrange their finances and provide shareholders and other parties an understanding of their financial situation. COA helps to guarantee that the financial statements are made disclosure requirements and is done by separating expenses, revenues, assets, and liabilities. The accounts in the COA are in the order they appear in the company’s financial statements. For example, accounts on the income statement include revenues and expenses. They came after accounts on the balance sheet, including assets, liabilities, and shareholders’ equity.
The Education Industry
The education sector is quickly growing. Many organizations within it are keen to hire fresh talent. Including seasoned experts and passionate recent graduates. From pre-kindergarten to postsecondary education. The private sector is assisting in the transformation of education. However, a consistent influx of fresh workers can only maintain the rate of progress. Globally, the education sector is booming. The industry creates a significant number of jobs and revenue. Postsecondary education generates more than $400 billion in revenue in the US. Fast-growing markets like China and India offer this business enormous growth potential. Unfortunately, these nations still have lower than 60% literacy rates.
Education Industry Sectors
Four sectors comprise the education sector, each with distinct tasks and responsibilities. Market segments that are unique to each category are all defined in the following section. Understanding the industry is essential for learners to comprehend the dynamics of the education sector. In addition, this knowledge helps investigate institutions.
- Elementary and secondary education, alternative school services, education management organizations, community colleges, virtual schools, and proprietary schools are among the services offered by schools and service providers.
- Supplementary educational services include higher education, vocational training, academic advising, and assessment services.
- The educational products sector includes producing and distributing educational products and services, including publishing and supplementary products related to education.
- The educational services sector provides support and auxiliary services to the education sector, such as education consultants, information and research in the field of education, education investment services, education policy experts, and technology services.
Private schools, also known as private institutions, are not under the control of local, state, or federal governments. As a result, they are free to choose the students they will teach. Private schools fund their education by the tuition fees they charge their students instead of relying on compelled taxation for public (government) funding. These institutions sometimes offer some fully funded and partial scholarships, but mostly, they charge tuition fees.
Military academies and schools with a particular religion are examples of other private schools. In the education sector, private schools are a well-established market niche. There will always be a market for private schools if parents are unhappy with public schools. Private for-profit institutions can be either locally based or multinational corporations.
Schools are referred to as public schools if the government operates them through public tax money. They are open to all students and governed by a government body, such as a school board. The main goal of these institutes is to increase public access to high-quality education. The public education system has been there since the early 19th century.
There are also numerous private institutions from which to choose. In addition, families now have the option of selecting between private and public schools.
A traditional university degree is a degree obtained by full-time enrollment at a college or university in a standard academic discipline. Online degree programs do not currently count toward traditional university degrees.
Instead of using traditional grades to determine graduation, non-traditional college degree programs might include full-time, on-campus study for academic majors that students have created themselves or programs that review student portfolios. Additionally, degree programs offered via correspondence or the internet often do not qualify as regular advanced degrees.
Products for the Education sector:
- Government-run schools
- Education at a private school
- Early childhood education
- Higher education institutions like universities
- Linguistic Centres
- Technical education and advanced study
- Early Education (Pre-School)
- Secondary and higher secondary Schooling
Chart Of Accounts of the Education Industry
The chart of accounts records account in the general ledger that an educational institute uses to classify each transaction. A chart of accounts is, in simplest terms, a management tool. Your team may find it simpler to discover accounts, transactions, and other items with a decent chart of accounts for school business. COA at your school does not have to resemble those at other schools. Instead, each school can alter it to meet its bookkeeping requirements best. Doing so is crucial because each institution has different accounts and transactions.
Why Is It Important to Have a Chart of Accounts?
A chart of accounts is a highly useful reporting tool that organizes and clarifies the financial data for your educational institute. A COA offers clarity into the financial health of your business. A chart of accounts also guarantees compliance with financial reporting requirements.
Formerly known as the “Common Form,” public and private schools record financial data using this form. Gradually institutions started reporting to the Financial Accounting Standards Board. The Integrated Postsecondary Education Data System (IPEDS) had an impact on public schools as well. By 2004, all public universities had to submit reports to GASB guidelines.
Revenues, expenditures, scholarships, and fellowships are the main areas impacted. In addition, they are affected by the evolution of accounting rules over time. In addition to providing insightful data, comprehensive financial reporting also provides financial insights. That is essential to comprehending the financial stability of your institution. The chart of accounts has a role in this process.
What to Include in the Chart of Accounts?
The chart of accounts for your institute should first be divided into manageable categories to facilitate easy movement within the sheet or document. The components in a typical chart of accounts list could consist of the following:
- Teaching materials
- Operations and maintenance
- Community services
- Acquisition, improvement, and replacement of fixed assets
- Professional development
Account name: The name of the general ledger account. Your type of business will choose the account names, and the grouping and classification should resemble the example chart of accounts.
Account description: In this section, you should give a brief overview of the purpose or function of each account or application.
Program purpose code: Each account should contain a particular code or reference number. Five-digit account numbers are typical, with each digit designating a department, account type, etc.
Comprehensive Overview Of School Finances
Your balance sheet portrays a detailed breakdown of your school’s financial status. Accounts on the balance sheet include:
Asset accounts: Any valuable resource your school has, such as land, machinery, and accounts receivable.
Accounts of liability: It includes all the debt your school owes, such as payables, taxes due, and wages due.
Accounts for equity: Assets – liabilities = equity. Occasionally referred to as the company’s book value or the worth of a business.
The costs and revenues incurred by the business throughout each accounting period are the main components of your income statement (also known as your profit and loss statement). Therefore, two categories of accounts are present in income statements:
- Accounts for revenue serve as a record of the money your institution earns.
- Account for Expenses includes the funds your institution uses to make money, which is all reflected in your school’s expense accounts.
Chart Of Accounts – Groups
Accounts on Income Statement (Profit and Loss)
- Cost Expenses of goods
- Other Earnings
- Miscellaneous Charges
Accounts on the Balance Sheet
- Equity of the Institution Owner
The following group refers to the categorization of the account. Group includes:
- Current assets
- Long-term assets
- Current liabilities
- Long-term liabilities
- Cost of sales
- Cash and cash equivalents
- Short-term marketable securities
- Accounts receivable
- Other current assets
- Property and equipment
- Intellectual property
- Notes payable
- Accounts payable
- Retained earnings
- Research and development
- Sales and marketing
- General and administrative
Chart of Accounts – Expenditures Education Industry:
When appropriate, you could additionally want to use object values to specify the category of expenses. The COA object codes for your school, as an illustration, might be:
- 01 Salaries, Professional
- 02 Salaries, Clerical
- 03 Salaries, Other
- 04 Contract Services
- 05 Materials and/or Supplies
There would be no consideration for the expense of school advertisement or cost beyond the production in the cost of goods sold (COGS) section.
COGS= Beginning Inventory + P – Ending Inventory
P is referred to as purchases during some specific period.
Other Income and Expenses Account in COA
Other Incomes for your school business is any income that does not tie to your business’s regular operations. Here are some other income accounts:
- Bank Interests
- Payments From Insurance
- The Sale of A Valuable Asset
Other Expenses include additional costs and they are called “other expenditures.” Hence, those may include:
- Seek the advice
- Charges of Damages
Operating Expenses Account of COA
By examining all operating costs in a specific industry, you can learn how to sum up all costs, including sales, general, and administrative charges. Consequently, the following are a few examples of operating expenses:
- Repairs and Maintenance
- Equipment Depreciation
- Insurance for School Set Up
- Mortgage interest
- Bonuses for Employers
Accounting Rules To Record Expenses
Costs are categorized as expenditures under accounting regulations, while GAAP handles bookkeeping. Promoting a school and running its operations requires the education sector to invest money in advertising, promotion, and personal commission. Expenses records after each financial month. Therefore, the transactions and journal entries for the education company’s general ledger are equivalent.
Under accounting rules, classify costs as expenditures, and GAAP does bookkeeping. The education institute’s general ledger transactions and journal entries are identical. You may determine your company’s operating expense as follows:
(COGS+OPEX) / Revenues = OER ratio using this formula.
There is no denying the significance of a chart of accounts for any business. The education sector will benefit most from it; operating an educational institute is expensive. The educational industry is highly competitive. The cost of tuition is continuously varying. Scholarships and financial help are not always predictable. Government funding is occasionally erratic. Maintaining the operations of your educational institution can be very challenging if you don’t have a firm hand on your money. So, setting up and adhering to a budget is crucial.
After going through this article now, you can understand the significance of the chart of accounts in the education sector.