Chart of Accounts Example Format Structured Template Definition

Here are tips for how to do this, plus details about what a COA is, examples of a COA and more. Liability accounts are a record of all the debts your company owes. Liability accounts usually have the word “payable” in their name—accounts payable, wages payable, invoices payable. “Unearned revenues” are another kind of liability account—usually cash payments that your company has received before services are delivered.

Assign account numbers to business accounts

Size – Set up your chart to have enough accounts to record transactions properly, but don’t go over board. The more accounts you have, the more difficult it will net purchases is calculated by taking the cost of new inventory purchases plus freight be consolidate them into financial statements and reports. Also, it’s important to periodically look through the chart and consolidate duplicate accounts.

Use simple account names

1. In the interest of not messing up your books, it’s best to wait until the end of the year to delete old accounts.
2. In some countries, charts of accounts are defined by the accountant from a standard general layouts or as regulated by law.
3. Most new owners start with one or two broad categories, like “sales” and “services.” While some types of income are easy and cheap to generate, others require considerable effort, time, and expense.
4. The complete Swedish BAS standard chart of about 1250 accounts is also available in English and German texts in a printed publication from the non-profit branch BAS organisation.

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Categories on the Chart of Accounts

In accounting software, using the account number may be a more rapid way to post to an account, and allows accounts to be presented in numeric order rather than alphabetic order. Many companies use a different number sequence for each type of account. For instance, asset accounts might use the numbers 100–199 and liability accounts might use the numbers 200–299. Liability accounts also follow the traditional balance sheet format by starting with the current liabilities, followed by long-term liabilities. The number system for each liability account can start from 2000 and use a sequence that is easy to follow and compare in different accounting periods.

At the end of the year, review all of your accounts and see if there’s an opportunity for consolidation. Here’s how to categorize transactions in QuickBooks Online and navigate the COA.

A company selling merchandise on credit will record these sales in a Sales account and in an Accounts Receivable account. A gap between account numbers allows for adding accounts in the future. As you will see, the first digit might signify if the account is an asset, liability, etc.

Your COA enables you make more informed financial decisions by showing you a clear picture of where you’re earning money and how you’re spending it. For example, a company may decide to code assets from 100 to 199, liabilities from 200 to 299, equity from 300 to 399, and so forth. Those could then be broken down further into, e.g., current https://www.kelleysbookkeeping.com/control-account-definition/ assets ( ) and current liabilities ( ). The number of figures used depends on the size and complexity of a company and its transactions. The table below reflects how a COA typically orders these main account types. It also includes account type definitions along with examples of the types of transactions or subaccounts each may include.

Thus, the sales department, engineering department, and accounting department all have the same set of expense accounts. Examples of expense accounts include the cost of goods sold (COGS), depreciation expense, utility expense, and wages expense. A company’s organization chart can serve as the outline for its accounting chart of accounts. Each department will have its own phone expense account, its own salaries expense, etc. In France, liabilities and equity are seen as negative assets and not account types in themselves, just balance accounts.