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