Truly, COA lays the groundwork of income statements, balance sheets, and cash flow statements. A well-designed chart of accounts should separate out all the company’s most important accounts, and make it easy to figure out which transactions get recorded in which account. Every time you record a business transaction—a new bank loan, an invoice from one of your clients, a laptop for the office—you have to record it in the right account.

Account categories include assets, liabilities, equity, revenue, and expenses. To create a COA for your own business, you will want to begin with the assets, labeling them with their own unique number, starting with a 1 and putting all entries in list form. The balance sheet accounts (asset, liability, and equity) come first, followed by the income statement accounts (revenue and expense accounts). While the chart of accounts can be similar across businesses in similar industries, you should create a chart of accounts that is unique to your individual business. 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 stream rather than just lumping all sales in a Revenue category.

Asset Accounts

Regular reviews and updates to the CoA are recommended to reflect changes in operations and financial practices. In this chart of accounts for small business template the sub-group column divides each group into the classifications shown in the listings below. The purpose of the sub-group is to classify each account into categories that the business need to produce the balance sheet and income statement for accounting reports. The chart of accounts often abbreviated to COA, is the foundation of the double entry bookkeeping system for a small startup business.

Assets and Liabilities

Pay no monthly fees, get payouts up to 7 days earlier, and earn cashback on eligible purchases. This includes entering the umbrella categories and your chosen subcategories. Once you’ve set it up you’ll be able to tag each transaction and file it under the relevant subcategory, easily. Just because you can have separate accounts for office supplies (analog), office supplies (digital), office supplies (snacks), and office supplies (drinks) doesn’t mean sample chart of accounts for a small company you should.

Major Types Of Chart Of Accounts

Angela Boxwell, MAAT, is an accounting and finance expert with over 30 years of experience. She founded Business Accounting Basics, where she provides free advice and resources to small businesses. The trial balance lists all the accounts and the debits and credits related to them. The COA has been a fundamental component of accounting systems for centuries, evolving with accounting practices. While we can’t name the exact date when it became a standard accounting practice, we can trace its evolution through history – from tally sticks to accounting software.

• You can see everything in the same place, which helps you spot potential problems and fix them before they affect your finances.
• Maintaining an organized, user-friendly chart of accounts is important for operating a double-entry accounting system.
• A chart of accounts is a systematic listing of accounts in a business, like assets, liabilities, equity, revenue, and expenses.
• A record in the general ledger that is used to collect and store similar information.
• The best part of this template is that it has been designed for the church.
• Regardless of how small your business is, a chart of accounts will help you stay on top of your company’s financial health.

Non-operating Expenses

In financial statements, liabilities are typically found on the balance sheet. Liabilities are listed alongside assets, representing the company’s financial obligations. The total liabilities reflect the company’s debts and obligations that need to be settled in the future. 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. This Chart of Accounts provides a foundation for nonprofit organizations to systematically track and report their financial transactions.

A Chart of Accounts is a fundamental tool for any business seeking to maintain accurate and organized financial records. By defining account categories, assigning account numbers, and customizing the COA to suit your business’s needs, you can create a robust accounting framework that supports effective financial management. By mastering this essential aspect of accounting, you lay the foundation for your business’s long-term success and stability.

• The accounts list may also include codes you do not require but are worth keeping for future use.
• For example, a company will have a Cash account in which every transaction involving cash is recorded.
• If the business offers manufacturing services to others, a separate revenue account, Manufacturing services, is included to track income from these services.
• It helps organize financial information into different categories, like what the company owns, what it owes, and where it gets money from.
• A well-designed chart of accounts should separate all the company’s most important accounts and make it easy to determine which transactions should be recorded in which account.
• Kristen Slavin is a CPA with 16 years of experience, specializing in accounting, bookkeeping, and tax services for small businesses.

This is where a chart of accounts is needed to organize and track the details of each transaction. A chart of accounts helps you keep track of your transactions by breaking them down into five main categories. Here’s everything you need to know about charts of accounts, from how they work to getting started with them.

Long-term Liabilities

At the risk of sounding repetitive, being thorough on the front-end will save you much heartache on the backend. Specifically, you want to use an identifier numbering system that provides plenty of real estate for you to add account categories down the road without having to reinvent the COA wheel. Yes, we understand we’re venturing into Accounting 101 territory here, stopping just short of a refreshing dip into the magical world of debits, credits, and double-entry bookkeeping. As a matter of fact, this high-level review provides a perfect segue into our next topic. Even worse, if your competition has a highly efficient and streamlined COA, they will always have a competitive advantage over you.

Fixed assets are also subject to depreciation, which reflects the decrease in their value over time due to wear and tear, obsolescence, or other factors. Current assets are expected to be converted into cash or used up within one year or the company’s operating cycle, whichever is longer. They are highly liquid, meaning they can be easily converted to cash. In this sample chart of accounts numbering system, the company breaks its cost of goods sold (COGS) off into its own account name and number group, allowing it to categorize transactions with greater detail. Thus, an identifier like might signify a COGS transaction (the first digit) from sales division #4 (the second digit) and product line #120 (the final three digits).

Pacific Accounting & Business Services is focused on providing high-quality accounting, finance, and related back office services to businesses. 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. Instead of recording it in the “Lab Supplies” expenses account, Doris might decide to create a new account for the plaster. In setting up a COA, it’s important to have a systematic structure that is easily understandable and scalable as the company grows.

The classification of assets and liabilities into current and non-current categories helps businesses and investors assess the financial health of a company. By examining the liquidity of a company, one can better understand the organization’s ability to meet short-term financial obligations and its prospects for long-term growth and stability. Small businesses may record hundreds or even thousands of transactions each year. A chart of accounts (COA) is a comprehensive catalog of accounts you can use to categorize those transactions.