Chart of Accounts
Organized list of all accounts used to record transactions in your accounting system.
Definition
The chart of accounts (COA) is the framework for your accounting system—a categorized list of all accounts: assets, liabilities, equity, revenue, and expenses. Each account has a number and name. Every transaction is recorded using accounts from the COA.
A well-structured COA makes reporting easier and ensures consistency. Common categories include cash accounts, receivables, payables, revenue by product line, and expenses by type (salaries, rent, marketing).
Why It Matters
The COA determines how you track and report financial data. A poorly designed COA creates confusion, inconsistent categorization, and difficult-to-read financial statements. A good COA aligns with your business model and reporting needs.
Setting up the COA correctly from the start is important—restructuring later requires recategorizing historical transactions. Most accounting software provides standard templates you can customize.
Examples
- 1
Revenue accounts: 4000-Sales Revenue, 4100-Service Revenue, 4200-Interest Income.
- 2
Expense accounts: 6000-Salaries, 6100-Rent, 6200-Marketing, 6300-Software Subscriptions.
- 3
Asset accounts: 1000-Cash, 1200-Accounts Receivable, 1500-Equipment.
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