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.
For Accounting Practice
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.