sample chart of accounts

In the interest of not messing up your books, it’s best to wait until the end of the year to delete old accounts. An expense account balance, for example, shows how much money has been spent to operate your business, whereas a liabilities account balance shows how much money your business still owes. Your chart of accounts is a living document for your business, meaning, over time, accounts will inevitably need to be added or removed.

sample chart of accounts

Download a Chart of Accounts Example and Template

  • Yes, it is a good idea to customize your chart of accounts to suit your unique business.
  • These accounts equate to the equity value remaining in your business after deducting your liabilities from your assets.
  • On the other hand, the income statement includes revenue and expense accounts.
  • To help illustrate the types of accounts that can be included in a chart of accounts, here are some common examples categorized by type.

It’s not always fun seeing a straightforward list of everything you spend your hard-earned money on, but the chart of accounts can give you an important view of your spending habits. You can get a handle on your necessary recurring expenses, like rent, utilities, and internet. You can also examine your other expenses and see where you may be able to cut down on costs if needed. Assets are resources your business owns that can be converted into cash and therefore have a monetary value. Examples of assets include your accounts receivable, loan receivables and physical assets like vehicles, property, and equipment.

How to set up the chart of accounts

A small business will likely have fewer transactions and accounts than a larger one, meaning a three-digit system of identification codes might suffice. There’s nothing special about the balance sheet accounts you use within your COA since they flow into the balance sheet you already know and love. For example, additional information like company and cost center lists flesh out simple transactional data, providing more nuanced insights that your leadership will undoubtedly benefit from.

Do you already work with a financial advisor?

The general rule for adding or removing accounts is to add accounts as they come in, but wait until the end of the year or quarter to remove any old accounts. ‍Create unique account numbers and names for each account in your chart of accounts. Ensure that each account number and name is descriptive and easy to understand.

You use a COA to organize transactions into groups, which in turn helps you track money coming in and out of the company. Speaking of your statements, they can play a major role in how you customize your chart of accounts. For instance, if there’s a particular area you want to provide deeper insights on in your financials, you’ll want to include sufficiently detailed account categories in your chart of accounts. Once you have an adequate system in place, then it’s not a problem to tweak your COA by adjusting account categories when needed. We suggest proceeding with caution with your adjustments, however, as you want to make sure you are consistent and logical. For example, if you have unneeded categories in your COA, it’s usually not a good idea to eliminate them mid-period due to possible orphaned data in your financial statements.

Example Chart of Accounts Numbering For Large and Small Companies

You should ask yourself, what do I want to track in my business and how do I want to organize this information? For example, we often suggest our clients break down their sales by revenue improvements to employee leave in nz payroll stream rather than just lumping all sales in a Revenue category. By doing so, you can easily understand what products or services are generating the most revenue in your business.

In manufacturing, the production process involves different stages, such as raw materials, work in progress, and finished goods. TYou can keep track of these stages with the Raw materials inventory, Work-in-progress inventory, and Finished goods inventory accounts, monitoring the value at each production step. The revenue accounts appear based on the source of where the income comes from. To understand the chart of accounts, you might want to look at the concepts of accounts and general ledger. She would then make an adjusting entry to move all of the plaster expenses she already had recorded in the “Lab Supplies” expenses account into the new “Plaster” expenses account. To do this, she would first add the new account—“Plaster”—to the chart of accounts.

A financial professional will offer guidance based on the information provided and offer a no-obligation call to better understand your situation. The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. 11 Financial is a registered investment adviser located in Lufkin, Texas.