The foundation on which you build your DCAA compliant accounting system is your chart of accounts.
The chart of accounts is simply a list of general ledger accounts, grouped by their function, within your accounting system. The chart of accounts is a listing of general ledger accounts organized by account type. In a typical chart of accounts, you will find a balance sheet section that includes assets, liabilities, and equity section, and you will find a profit and loss (P&L) section.
However; there is a difference in the P&L section for government contracting in comparison to the P&L section in the commercial sector. In the P&L section of a government contractor’s DCAA chart of accounts template, you will see the revenue and expense accounts further divided into standard subsets such as revenue, direct costs (cost of goods sold), fringe benefits, overhead, facilities, (G&A) general and administrative, and unallowable expenses. The subsets are utilized to represent cost of sales, intermediate and final indirect expense pools, allocation bases, and expenses segregated from the government contracting business. These are standard to the industry of government contracting and universally recognized by industry accounts and DCAA auditors.