Chart of Accounts Basics

Introduction to the Chart of Accounts

A Chart of Accounts is a list of all the names of the accounts found in the General Ledger with an account code allocated to it. Chart of Accounts is sometimes abbreviated to COA.

The Chart of Accounts simply sets out the structure of your accounts so that all similar accounts are grouped together. For example, balance sheet fixed asset accounts might have codes from 10-50, income accounts might have codes from 4000-4999.

A simple structure allows you to easily identify accounts and helps in the posting of transactions and the preparation of the trial balance and financial statements. It is usually best to use numbers for account codes as this will speed up the process of entering transactions as the numeric key pad can be used.

What Should a Chart of Accounts look like?

The Chart of Accounts should be split into balance sheet and income statement sections, each of which is then subdivided into groups (e.g. fixed assets, accounts receivable, sales etc). Generally the most used accounts should be kept near the top of each group.

A sample Chart of Accounts is shown in the interactive table below.

Chart of Accounts Example Guide and Key

1. Account Name: The name of the account in the general ledger
2. Section: The Financial Statement in which the account appears
3. BS: Balance Sheet
4. IS: Income Statement (Profit and Loss Account):
5. Group: The type of account.
6. Code: A suggested Account code for the account (chart of accounts numbers)

 

Notice how each account is classified as balance sheet or income statement and then further classified into a group such as for example accounts receivable. The account names will depend on your type of business, but the classification and grouping should be similar to the table above.

When allocating account codes (chart of accounts numbers) don’t forget to leave space for additional accounts and codes to be inserted in a group at a later stage. For example the sales codes run from 4000 to 4199 so there is plenty of room to incorporate new categories of sales if needed.