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|
|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
- Recommended online courses in accounting from UDEMY
- Recommended online courses in accounting from Coursera
- 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
|Example Current Asset||2xxx|
Fixed Assets – Account No. 3001 to 3999
|Example Fixed Asset||3xxx|
Current Liabilities – Account No. 4001 to 4999
|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.