A chart of accounts is a listing of accounts that make up the journal.

• A. True
• B. False
• C. It varies by business
• D. Includes only assets

Answer: (B)

The chart of accounts is the list of all accounts a business uses to classify its financial activity, while the journal is where each transaction is recorded in date order and shown with the accounts debited and credited. The chart of accounts provides the framework and names for the accounts that will be used when postings are made to the general ledger, but it is not the journal itself. Saying that a chart of accounts is a listing that makes up the journal mixes the two different roles: the journal contains the individual transactions, whereas the chart of accounts is the stock of accounts used to categorize those transactions. The chart of accounts can vary by business, reflecting which accounts a company needs for reporting, but its purpose remains to organize accounts—not to constitute the journal.