Accounting > Chart of Accounts

Chart of Accounts

The chart of accounts is a listing of all the accounts in the general ledger, each account accompanied by a reference number. To set up a chart of accounts, one first needs to define the various accounts to be used by the business. Each account should have a number to identify it. For very small businesses, three digits may suffice for the account number, though more digits are highly desirable in order to allow for new accounts to be added as the business grows. With more digits, new accounts can be added while maintaining the logical order. Complex businesses may have thousands of accounts and require longer account reference numbers. It is worthwhile to put thought into assigning the account numbers in a logical way, and to follow any specific industry standards. An example of how the digits might be coded is shown in this list:

Account Numbering

1000 - 1999: asset accounts
2000 - 2999: liability accounts
3000 - 3999: equity accounts
4000 - 4999: revenue accounts
5000 - 5999: cost of goods sold
6000 - 6999: expense accounts
7000 - 7999: other revenue (for example, interest income)
8000 - 8999: other expense (for example, income taxes)

By separating each account by several numbers, many new accounts can be added between any two while maintaining the logical order.

Defining Accounts

Different types of businesses will have different accounts. For example, to report the cost of goods sold a manufacturing business will have accounts for its various manufacturing costs whereas a retailer will have accounts for the purchase of its stock merchandise. Many industry associations publish recommended charts of accounts for their respective industries in order to establish a consistent standard of comparison among firms in their industry. Accounting software packages often come with a selection of predefined account charts for various types of businesses.

There is a trade-off between simplicity and the ability to make historical comparisons. Initially keeping the number of accounts to a minimum has the advantage of making the accounting system simple. Starting with a small number of accounts, as certain accounts acquired significant balances they would be split into smaller, more specific accounts. However, following this strategy makes it more difficult to generate consistent historical comparisons. For example, if the accounting system is set up with a miscellaneous expense account that later is broken into more detailed accounts, it then would be difficult to compare those detailed expenses with past expenses of the same type. In this respect, there is an advantage in organizing the chart of accounts with a higher initial level of detail.

Some accounts must be included due to tax reporting requirements. For example, in the U.S. the IRS requires that travel, entertainment, advertising, and several other expenses be tracked in individual accounts. One should check the appropriate tax regulations and generate a complete list of such required accounts.

Other accounts should be set up according to vendor. If the business has more than one checking account, for example, the chart of accounts might include an account for each of them.

Account Order

Balance sheet accounts tend to follow a standard that lists the most liquid assets first. Revenue and expense accounts tend to follow the standard of first listing the items most closely related to the operations of the business. For example, sales would be listed before non-operating income. In some cases, part or all of the expense accounts simply are listed in alphabetical order.

Sample Chart of Accounts

The following is an example of some of the accounts that might be included in a chart of accounts.

Sample Chart of Accounts

Asset Accounts

Current Assets


Petty Cash
1010 Cash on Hand (e.g. in cash registers)
1020 Regular Checking Account
1030 Payroll Checking Account
1040 Savings Account
1050 Special Account
1060 Investments - Money Market
1070 Investments - Certificates of Deposit
1100 Accounts Receivable
1140 Other Receivables
1150 Allowance for Doubtful Accounts
1200 Raw Materials Inventory
1205 Supplies Inventory
1210 Work in Progress Inventory
1215 Finished Goods Inventory - Product #1
1220 Finished Goods Inventory - Product #2
1230 Finished Goods Inventory - Product #3
1400 Prepaid Expenses
1410 Employee Advances
1420 Notes Receivable - Current
1430 Prepaid Interest
1470 Other Current Assets

Fixed Assets


Furniture and Fixtures
1510 Equipment
1520 Vehicles
1530 Other Depreciable Property
1540 Leasehold Improvements
1550 Buildings
1560 Building Improvements
1690 Land
1700 Accumulated Depreciation, Furniture and Fixtures
1710 Accumulated Depreciation, Equipment
1720 Accumulated Depreciation, Vehicles
1730 Accumulated Depreciation, Other
1740 Accumulated Depreciation, Leasehold
1750 Accumulated Depreciation, Buildings
1760 Accumulated Depreciation, Building Improvements

Other Assets


1910 Organization Costs
1915 Accumulated Amortization, Organization Costs
1920 Notes Receivable, Non-current
1990 Other Non-current Assets

Liability Accounts

Current Liabilities


Accounts Payable
2300 Accrued Expenses
2310 Sales Tax Payable
2320 Wages Payable
2330 401-K Deductions Payable
2335 Health Insurance Payable
2340 Federal Payroll Taxes Payable
2350 FUTA Tax Payable
2360 State Payroll Taxes Payable
2370 SUTA Payable
2380 Local Payroll Taxes Payable
2390 Income Taxes Payable
2400 Other Taxes Payable
2410 Employee Benefits Payable
2420 Current Portion of Long-term Debt
2440 Deposits from Customers
2480 Other Current Liabilities

Long-term Liabilities


Notes Payable
2702 Land Payable
2704 Equipment Payable
2706 Vehicles Payable
2708 Bank Loans Payable
2710 Deferred Revenue
2740 Other Long-term Liabilities

Equity Accounts


Stated Capital
3020 Capital Surplus
3030 Retained Earnings

Revenue Accounts


Product #1 Sales
4020 Product #2 Sales
4040 Product #3 Sales
4060 Interest Income
4080 Other Income
4540 Finance Charge Income
4550 Shipping Charges Reimbursed
4800 Sales Returns and Allowances
4900 Sales Discounts

Cost of Goods Sold


Product #1 Cost
5010 Product #2 Cost
5020 Product #3 Cost
5050 Raw Material Purchases
5100 Direct Labor Costs
5150 Indirect Labor Costs
5200 Heat and Power
5250 Commissions
5300 Miscellaneous Factory Costs
5700 Cost of Goods Sold, Salaries and Wages
5730 Cost of Goods Sold, Contract Labor
5750 Cost of Goods Sold, Freight
5800 Cost of Goods Sold, Other
5850 Inventory Adjustments
5900 Purchase Returns and Allowances
5950 Purchase Discounts



Default Purchase Expense
6010 Advertising Expense
6050 Amortization Expense
6100 Auto Expenses
6150 Bad Debt Expense
6200 Bank Fees
6250 Cash Over and Short
6300 Charitable Contributions Expense
6350 Commissions and Fees Expense
6400 Depreciation Expense
6450 Dues and Subscriptions Expense
6500 Employee Benefit Expense, Health Insurance
6510 Employee Benefit Expense, Pension Plans
6520 Employee Benefit Expense, Profit Sharing Plan
6530 Employee Benefit Expense, Other
6550 Freight Expense
6600 Gifts Expense
6650 Income Tax Expense, Federal
6660 Income Tax Expense, State
6670 Income Tax Expense, Local
6700 Insurance Expense, Product Liability
6710 Insurance Expense, Vehicle
6750 Interest Expense
6800 Laundry and Dry Cleaning Expense
6850 Legal and Professional Expense
6900 Licenses Expense
6950 Loss on NSF Checks
7000 Maintenance Expense
7050 Meals and Entertainment Expense
7100 Office Expense
7200 Payroll Tax Expense
7250 Penalties and Fines Expense
7300 Other Taxes
7350 Postage Expense
7400 Rent or Lease Expense
7450 Repair and Maintenance Expense, Office
7460 Repair and Maintenance Expense, Vehicle
7550 Supplies Expense, Office
7600 Telephone Expense
7620 Training Expense
7650 Travel Expense
7700 Salaries Expense, Officers
7750 Wages Expense
7800 Utilities Expense
8900 Other Expense
9000 Gain/Loss on Sale of Assets

Accounting > Chart of Accounts

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