chart of accounts example

It provides you with a birds eye view of every area of your business that spends or makes money. The main account types include Revenue, Expenses, Assets, Liabilities, and Equity. This numbering system helps bookkeepers and accountants keep track of accounts along with what category they belong two.

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In this sample chart of accounts template the sub-group column divides each group into the categories shown in the listings below. The purpose of the sub-group is to categorize each account into classifications that you might need to present the balance sheet and income statement in accounting reports. The main components of the income statement accounts include the revenue accounts and expense accounts. The COA is typically set up to display information in the order that it appears in financial statements. That means that balance sheet accounts are listed first and are followed by accounts in the income statement.

Operating Revenue Accounts

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Asset accounts

Some charts of accounts use four digits instead of three, but the first digit remains the same. You can use four-digit codes—assets (1000 to 1999) and liability accounts (2000 to 2999). While not legally required, a chart of accounts is considered necessary by businesses of all types and sizes. It helps categorize all transactions so that they can be referenced quickly and easily.

#2 – A production (manufacturing) company

For instance, if an account’s name or description is ambiguous, the bookkeeper can simply look at the prefix to know exactly what it is. An account might simply be named “insurance offset.” What does that mean? The bookkeeper would be able to tell the difference by the account number. An asset would have the prefix of 1 and an expense would have a prefix of 5. This structure can avoid confusion in the bookkeeper process and ensure the proper account is selected when recording transactions.

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  • The chart of accounts is not just a regular financial document but rather it is an integral part of strategic financial management and informed decision-making.
  • Some of the components of the owner’s equity accounts include common stock, preferred stock, and retained earnings.
  • Below, I explain what a chart of accounts is and how you will use it in bookkeeping and accounting.
  • Provide higher-level accounting guidance to the Xendoo Accounting team.
  • When recording transactions in the charts of accounts, you assign reference or account numbers to entries.

Intuit accepts no responsibility for the accuracy, legality, or content on these sites. For bigger companies, the accounts may be divided into several sub-accounts. Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching. After almost a decade of experience in public accounting, he created to help people learn accounting & finance, pass the CPA exam, and start their career. Further information on the use of debits and credits can be found in our bookkeeping basics tutorials.

chart of accounts example

Anatomy of a COA

It can also come in handy and save you money with business tax deductions. By categorizing financial transactions, you can more easily create statements like balance sheets. Additionally, it shows you the big picture of your financial health and day-to-day operations.

chart of accounts example

chart of accounts example

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. Now, let’s explore a couple of the COA examples for businesses in various industries Navigating Financial Growth: Leveraging Bookkeeping and Accounting Services for Startups – online retail, manufacturing, and service businesses. We presume they accept online payments via payment platforms (for example, Stripe, Paypal, or Square). You might also notice that there are specificities of the business that might affect the COA structure. Liabilities are the amounts of money a company owes to others or the obligations it needs to fulfill in the future.

  • For example, the expense of office supplies might be assigned the code 5600, or a credit card liability the code 2200.
  • In accounting and bookkeeping, we use the term accounts for categories under which you typically record your business’s financial activities.
  • We believe everyone should be able to make financial decisions with confidence.
  • In accounting, each transaction you record is categorized according to its account and subaccount to help keep your books organized.
  • The company decided to include a column to indicate whether a debit or credit will increase the amount in the account.
  • It often follows a pattern where the first digit represents the major category, and subsequent digits provide more detail.

Major Types Of Chart Of Accounts

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