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.
Short Quiz for Self-Evaluation