The chart of accounts often abbreviated to COA, is the foundation of the double entry bookkeeping system. It is basically a listing of all the accounts found in the general ledger that the business will use to code each bookkeeping transaction. This sample chart of accounts provides an example using some of the most commonly found account names.
The exact layout of the accounting chart of accounts is a matter of choice depending on the exact reporting requirements of the business. The important point to remember is not to over complicate the chart of accounts. This sample chart of accounts structure allows the business to easily identify accounts and account codes enabling transactions to be posted and the trial balance and financial statements to be prepared.
The business should decide what accounting reports it needs and then provide sufficient account codes to allow the report to be produced. For example, one business might simply want to see its total sales, and has one account headed sales to which all sales are posted, another larger business might want to report sales by type such as retail sales, online sales etc. and so will have multiple sales accounts.
The only required features of the chart of accounts are the account name and the account code. In addition, this sample chart of accounts sets out which financial statement the account belongs to, how the accounts are grouped and sub-grouped so that all similar accounts are grouped together, and indicates whether the account is normally a debit or a credit.
Sample Chart of Accounts Guide
The sample chart of accounts is divided into the following columns:
The name of the account in the general ledger. The account names will depend on your type of business, but the classification and grouping should be similar to the sample chart of accounts.
Each account is given an account code or reference. In this sample chart of accounts, the code is a number, but could be any appropriate system which allows accounts to be grouped together. For example, all the inventory accounts start with the number four. It is normally better to use chart of accounts numbering for account codes as this speeds up the entering of bookkeeping transactions using the numeric key pad on a typical keyboard.
The purpose of the code is simply to group similar accounts together, and to provide an easy method of referring to an account when preparing journal entries. 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 inventory codes run from 400 to 499 so there is plenty of room to incorporate new categories of inventory if needed.
This column shows the financial statement in which the account appears, and for a profit making business is either the balance sheet of the income statement.
The group refers to the categorization of the account into one of the headings shown below. It generally helps to keep the most used accounts towards the top of each group as this helps speed up locating the account and the posting of double entry transactions.
- Current assets
- Long term assets
- Current liabilities
- Long term liabilities
- Cost of sales
The first five headings refer to the balance sheet accounts and represent the accounting equation
The final three headings refer to the income statement showing:
In this sample chart of accounts template the sub-group column divides each group into the categories shown in the listings below. The purpose of the sub-group is to categorize each account into classifications that you might need to present the balance sheet and income statement in accounting reports.
In the sample chart of accounts for example, the expense accounts are sub-divided into business functions such as research and development, sales and marketing, and general and administrative expenses.
- Cash and cash equivalents
- Short term marketable securities
- Accounts receivable
- Other current assets
Long term assets
- Long term marketable securities
- Property, plant and equipment
- Intellectual property
- Other long term assets
- Notes payable
- Accounts payable
- Other current liabilities
Long term liabilities
- Retained earnings
- Other Income
Cost of sales
- Cost of sales
- Research and development
- Sales and marketing
- General and administrative
- Finance costs
- Income tax expense
Normally a Debit or Credit
This column is for information only to indicate whether the account is normally increased by a debit or a credit. For example expense accounts are normally increased by a debit entry, whereas income accounts are normally increased by a credit entry.
Further information on the use of debits and credits can be found in our bookkeeping basics tutorials.
Sample Chart of Accounts Free Download
The sample chart of accounts template will help you to produce your own chart of accounts, and is available for download in Excel format by following the link below.
Users use this free sample chart of accounts template at their own risk. We make no warranty or representation as to its accuracy and we are covered by the terms of our legal disclaimer, which you are deemed to have read. This is an example of a standard chart of accounts template that you might use when considering how to set up a chart of accounts. It is purely illustrative. This is not intended to reflect general standards or targets for any particular company or sector. If you do spot a mistake in the sample chart of accounts numbers, please let us know and we will try to fix it.
About the Author
Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.