Interior Design Firm Accounting: COA Template & Account Hierarchy

Posted In | Chart of Accounts

Interior design firms provide professional services related to the planning, designing, and furnishing of interior spaces for residential and commercial clients. Effective financial management is essential for the success of any interior design firm, and a key component of this process is the Chart of Accounts (COA). In this article, we will discuss the importance of a COA for interior design firms, provide an example template, and outline the account hierarchy.
 

What is a Chart of Accounts (COA)?

A Chart of Accounts (COA) is an organized list of all financial accounts used by a business to record and report its financial transactions. The COA serves as the foundation for the company's accounting system, enabling accurate tracking and reporting of financial activities. For interior design firms, a well-structured COA can provide insights into profitability, cost management, and areas for improvement.

 

Example COA Template for Interior Design Firms

The following is an example COA template designed specifically for interior design firms. Keep in mind that every business is unique, and your COA should be tailored to your specific needs and requirements:
 

1. Assets
 

1.1. Current Assets

1.1.1. Cash

1.1.2. Accounts Receivable

1.1.3. Inventory

1.1.4. Prepaid Expenses
 

1.2. Non-Current Assets

1.2.1. Property, Plant, and Equipment

1.2.2. Intangible Assets

 

2. Liabilities
 

2.1. Current Liabilities

2.1.1. Accounts Payable

2.1.2. Accrued Expenses

2.1.3. Current Portion of Long-term Debt
 

2.2. Non-Current Liabilities

2.2.1. Long-term Debt

2.2.2. Deferred Tax Liabilities

 

3. Equity

3.1. Owner's Capital

3.2. Retained Earnings

 

4. Revenue

4.1. Design Service Revenue

4.2. Product Sales

4.3. Other Income

 

5. Expenses
 

5.1. Cost of Services

5.1.1. Material Costs

5.1.2. Labor Costs

5.1.3. Subcontractor Fees
 

5.2. Operating Expenses

5.2.1. Salaries and Wages

5.2.2. Rent and Utilities

5.2.3. Marketing and Advertising

5.2.4. Office Supplies

5.2.5. Insurance

5.2.6. Depreciation and Amortization
 

5.3. Interest Expense
 

5.4. Income Tax Expense

 

Account Hierarchy in Interior Design Firm Accounting

Account hierarchy is essential for maintaining consistency and accuracy in financial reporting. A typical account hierarchy for interior design firms consists of the following levels:
 

1. Category: The highest level in the hierarchy, representing the main divisions of the financial statement (assets, liabilities, equity, revenue, and expenses).
    

2. Subcategory: A more detailed level within the main categories, further segregating accounts based on their nature or function (e.g., current assets, non-current assets, operating expenses).
    

3. Account: The most detailed level, representing individual financial accounts used to record specific transactions (e.g., cash, accounts receivable, material costs).
    

A well-organized Chart of Accounts is crucial for effective financial management in interior design firms. By creating a customized COA tailored to the specific needs of your interior design firm and establishing a clear account hierarchy, you will ensure accurate financial record-keeping, facilitate reporting, and provide valuable insights for decision-making. Interior design firms have unique accounting needs, such as tracking material costs, managing labor expenses, and handling subcontractor fees. It is essential to consider these specific requirements when developing your COA. You may also want to include accounts for staff training, permits and licenses, and design software subscriptions, as these are common financial events in the interior design industry.