chart of account template

These charts don’t cover individual accounts or transactions specific to businesses. Industry-specific sample charts of accounts, however, may cover accounts for particular industries or business models. Kristen Slavin is a CPA with 16 years of experience, specializing in accounting, dependent care fsas for individuals bookkeeping, and tax services for small businesses. A member of the CPA Association of BC, she also holds a Master’s Degree in Business Administration from Simon Fraser University. In her spare time, Kristen enjoys camping, hiking, and road tripping with her husband and two children.

  • A chart of accounts has accounts from the balance sheet and income statement and feeds into both of these accounts.
  • Use that information to allocate resources to more profitable parts of your business and cuts costs in areas that are lagging.
  • Similarly, if you pay rent for a building or piece of equipment, you might set up a ‘rent expense’ account with sub-accounts for ‘building rent’ and ‘equipment rent’.
  • It consists of various accounts, each of which represents a specific category of transactions.

Organize Your People Resources the Right Way

This allows you to focus on managing your business and generating profits. Let’s say you sell an asset – not including inventory – for greater than that asset’s book value. These are the types of gains – as well as interest income, assuming you’re not a bank – that fall within this COA category, the ones you generate outside of your typical operations.

chart of account template

Expense accounts

Changes – It’s inevitable that you will need to add accounts to your chart in the future, but don’t drastically change the numbering structure and total number of accounts in the future. A big change will make it difficult to compare accounting record between these years. The group refers to the categorization of the account into one of the headings shown below. During each annual review, look closely at all your business’s accounts to determine if you can safely delete any. If some are no longer needed but still contain vital financial records, keep them inactive instead of deleting them outright. Current liabilities and assets tend to have lower numbers in their respective ranges than long-term assets and liabilities.

Key Elements of a Chart of Accounts

Losses represent a cash outflow or some other form of financial loss on some other non-operating activity. Revenue is the amount of money your business brings in by selling its products or services to clients. In order to keep the number of accounts down to a manageable level, you may periodically review the list and close any accounts that are not fully utilized. On one hand, keeping the number of accounts to a minimum will make the accounting system more straightforward to use. Overall, the format and numbering system of a COA should be tailored to the business’s needs.

Organise account names into one of the four account category types

Accounting systems have a general ledger where you record your accounts to help balance your books. Keeping your accounts in place and up-to-date is important for analyzing your finances. If you’re ready to revamp your Chart of Accounts and immediately experience more actionable financial analyses, download our free template now. Not only does this enhance the benefits mentioned above, but it also helps you to demonstrate ROI.

The data interchange between your accounting software and expense-tracking or payroll platforms helps financial transaction data flow automatically. Once you set up your basic chart of accounts, you can add business-specific financial accounts if needed. 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. A chart of accounts is an important organizational tool in the form of a list of all the names of the accounts a company has included in its general ledger.

A Chart of Accounts (COA) is a key accounting tool that organizes all financial transactions into standardized categories like assets, liabilities, income, and expenses. This structure ensures accurate and consistent financial recording, which is essential for generating reliable financial reports, maintaining regulatory compliance, and making informed business decisions. The first three are assets, liabilities, and equity, which flow into the balance sheet. The remaining two are income or revenue and expenses, which flow into the income statement. There are five main account type categories that all transactions can fall into on a standard COA.

The group refers to the classification of the account into one of the headings shown below. It generally helps to keep the most used accounts towards the top of each group as this helps speed up locating the account and the posting of double entry transactions. Your chart of accounts is a living document for your business, meaning, over time, accounts will inevitably need to be added or removed. 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. The account name is the given title of the business account you’re reporting on, such as bank fees, cash, taxes, etc.

Instead, each entity has the flexibility to customize its accounts chart to fit the specific individual needs of the business. Nevertheless, the exact structure of the chart of accounts is the reflection on the individual needs of each entity. You can utilize our free editor right from your cell phone, tablet, or computer. The outcome you’ll achieve will surpass what you could achieve with Excel or even if you were a Photoshop expert. One benefit of breaking out departments is to easily call out your ROI on Sales/Marketing relative to revenue.

A chart of accounts is an essential tool for businesses for several reasons. Firstly, it helps businesses organize their financial transactions and track their financial performance. Secondly, it facilitates the preparation of financial statements, such as the balance sheet and income statement. Thirdly, it enables businesses to monitor their cash flow and make informed financial decisions. A chart of accounts organizes your finances into a streamlined system of numbered accounts. You can customize your COA so that the structure reflects the specific needs of your business.

The important point to remember is not to over complicate the chart of accounts. This sample chart of accounts structure allows the business to easily identify accounts and account codes enabling transactions to be posted and the trial balance and financial statements to be prepared. Chart of accounts is the starting point of an accounting system because it tells which accounts to include in a general ledger and what mechanism to use in making and posting journal entries. The trial balance is prepared by using the list of accounts from the chart of accounts and extracting balances for each account from the general ledger. A chart of accounts is also critically important in preparation of financial statements because it helps in outlining how to group different accounts in financial statement line items. Keeping an updated COA on hand will provide a good overview of your business’s financial health in a sharable format you can send to potential investors and shareholders.

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