Chart of Accounts

Chart of accounts is a list of all the accounts used by an entity in its general ledger to record double-entry transactions.

Structure

A chart of accounts includes asset accounts, liability accounts, equity accounts, income accounts, expense accounts and relevant contra-accounts. Each account is given a specific number depending on the nature of the account. For example, asset accounts may be given numbers starting from 1000 to 1999, liability accounts may be assigned numbers in the range of 2000-2999 and so on. Some numbers are left unassigned between different accounts, which makes entering new accounts easier. Further, there are group accounts to hold sub-totals and grand totals. It may also include definition of accounts included in order to provide guidance on correct classification of transactions.

Chart of accounts is the starting point of an accounting system because it tells which accounts to include in a general ledger and what mechanism to use in making and posting journal entries. The trial balance is prepared by using the list of accounts from the chart of accounts and extracting balances for each account from the general ledger. A chart of accounts is also critically important in preparation of financial statements because it helps in outlining how to group different accounts in financial statement line items.

Template/Example

There is no single chart of accounts template that fits all businesses. Its size and the nature of accounts included depend on the complexity of the business and its legal structure. For example, a company will have share capital account and dividend account, etc. in the equity section of its chart of accounts, while a partnership and a sole proprietorship will have partners’ accounts, owner’s equity account, withdrawals account, etc.

Below is a sample chart of accounts appropriate for a small business.

Account #SummaryNatureNormal or ContraSignAccount Name
10000AssetNormalDebitAssets
11000AssetNormalDebitCurrent assets
11100AssetNormalDebitCash
11110AssetNormalDebitChecking account
11120AssetNormalDebitDeposit account
11130AssetNormalDebitPetty cash
11200AssetNormalDebitNet accounts receivable
11210AssetNormalDebitAccounts receivable
11220AssetContra-accountCreditProvision against receivables
11300AssetNormalDebitPrepayments
11310AssetNormalDebitPrepaid rent
11320AssetNormalDebitPrepaid wages
11400AssetNormalDebitOther receivables
11410AssetNormalDebitSalary advance
11420AssetNormalDebitDeposits with customers
11500AssetNormalDebitNotes receivable
12000AssetNormalDebitNon-current assets
12100AssetNormalDebitProperty, plant and equipment
12110AssetNormalDebitVehicles-Cost
12120AssetNormalDebitEquipment-Cost
12130AssetNormalDebitFurniture-Cost
12150AssetContra-accountCreditAccumulated depreciation
12160AssetContra-accountCreditVehicles-accumulated depreciation
12170AssetContra-accountCreditEquipment-accumulated depreciation
12180AssetContra-accountCreditFurniture-accumulated depreciation
12200AssetNormalCreditIntangibles
12300AssetNormalDebitInvestments
20000EquityNormalCreditShareholder's Equity
21000EquityNormalCreditShare Capital
22000EquityNormalCreditAdditional paid-up capital
23000EquityNormalCreditRetained earnings
24000EquityNormalCreditUnrealized gains and losses
25000EquityContra-accountDebitTreasury stock
30000LiabilityNormalCreditLiabilities
31000LiabilityNormalCreditNon-current liabilities
31100LiabilityNormalCreditBonds Payable
31110LiabilityNormalCreditBond-1
31120LiabilityNormalCreditBond-2
31200LiabilityNormalCreditLong-term bank loans payable
32000LiabilityNormalCreditCurrent liabilities
32200LiabilityNormalCreditCurrent loans payable
32300LiabilityNormalCreditCurrent notes payable
32400LiabilityNormalCreditAccounts payable
32500LiabilityNormalCreditSalary payable
32600LiabilityNormalCreditTaxes payable
32700LiabilityNormalCreditUtilities payable
32800LiabilityNormalCreditAccrued expenses
40000RevenueNormalCreditTotal income
41000RevenueNormalCreditTotal revenue
41100RevenueNormalCreditGross sales
41110RevenueNormalCreditProduct-A sales
41120RevenueNormalCreditService-B sales
41200RevenueNormalDebitSales returns and allowances
41210RevenueNormalDebitProduct-A sales
41220RevenueNormalDebitService-B sales
41500RevenueNormalCreditOther income
50000ExpenseNormalDebitTotal expenses
51000ExpenseNormalDebitCost of sales
51100ExpenseNormalDebitProduct-A costs
51110ExpenseNormalDebitMaterials
51120ExpenseNormalDebitLabor
51130ExpenseNormalDebitDepreciation
51200ExpenseNormalDebitService-B costs
52000ExpenseNormalDebitSelling, admin and general expenses
52100ExpenseNormalDebitDelivery vehicles cost
52200ExpenseNormalDebitFuel
52300ExpenseNormalDebitSalaries
52310ExpenseNormalDebitSalaries-selling
52320ExpenseNormalDebitSalaries-admin
52600ExpenseNormalDebitRent
52700ExpenseNormalDebitDepreciation-SGA
52800ExpenseNormalDebitOther expenses
52900ExpenseNormalDebitLosses

Written by Obaidullah Jan, ACA, CFA <--- Hire me on Upwork