What is Chart of Accounts?


Chart of Accounts

Also known as COA, chart of accounts is a list of all accounts in a company’s general ledger. They are the identified accounts which are available for a company to record transactions.

ERPs such as Oracle, SAP, etc., can allow each account a unique number as defined. With this, it can be identified and modified according to the business’ needs.

 

Think of chart of accounts as a Tree!

  • “Assets” will be branches of the tree.
  • “Current assets, fixed assets, other assets” are its sub-branches.
  • Finally, accounts such as Cash, Bank, Debtor, Prepaid Insurance are like leaves of the sub-branches. 

Keeping the same fundamentals, chart of accounts tree can be differently designed for separate businesses depending on need, size and divisions inside a company.

 

Below is a sample listing of the order where accounts appear inside chart of accounts.

  Type of Accounts Sub Classification Examples
Balance Sheet Accounts Assets E.g. Current Assets, Fixed Assets, Other Assets
  Liabilities E.g. Current Liabilities, Long-Term Liabilities
  Capital E.g. Equity
      
Profit & Loss Accounts Operating Revenues & Gains E.g. Sales
  Non-Operating Revenues & Gains E.g. Profit on sale of assets
      
  Operating Expenses E.g. Cost of goods sold
  Non-Operating Expenses & Losses E.g. Loss on sale of assets

 

Few reasons for using the chart of accounts

  • Chart of accounts helps in differentiating and properly recording different types of transactions such as Assets, Liabilities, Capital, Revenue, Expenditure, etc.
  • Chart of accounts also helps in efficiently organizing and managing the financial data.

Related Topic – What is a Subledger?

Sample Chart of Accounts Format

Current Assets – Account No. 2001 to 2999

Cash 2001
Receivables 2002
Prepaid Expenses 2003
Stock 2004
Example Current Asset 2xxx

 

Fixed Assets – Account No. 3001 to 3999

Building 3001
Land 3002
Furniture 3003
Stock 3004
Example Fixed Asset 3xxx

 

Current Liabilities – Account No. 4001 to 4999

Overdraft 4001
Payables 4002
Wages Payable 4003
Accrued Expenses 4004
Example Current Liability 4xxx

 

Just like the above accounts, chart of accounts will have different groups such as capital, revenue and expenditure with their subtypes, accounts and individual account numbers to record transactions.

 



 

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