Chart of Accounts (COA)

What is a Chart of Accounts?

A chart of accounts (COA) is a list of all the accounts a business uses to record financial transactions. It’s the backbone of an accounting system, categorizing assets, liabilities, revenue, and expenses into accounts that make bookkeeping and financial reporting easier. A well-structured chart of accounts helps you track where money is coming in and where it’s going. Instead of digging through messy records, a COA gives you a clear financial picture.

Key Points

• A Chart of Accounts organizes financial transactions. It categorizes a business’s finances into assets, liabilities, revenue, and expenses, making bookkeeping and financial reporting easier.
• It’s different from a General Ledger. The COA is a list of all accounts but doesn’t contain transaction details. The general ledger records every financial entry related to those accounts.

Standard Chart of Accounts numbering

Most businesses use a standard numbering system to keep their accounts structured and uniform. Typically, it follows this format:

• 1000–1999: Assets (Cash, Accounts Receivable, Inventory)
• 2000–2999: Liabilities (Loans, Accounts Payable, Taxes)
• 3000–3999: Equity (Owner’s Equity, Retained Earnings)
• 4000–4999: Revenue (Sales, Service Income)
• 5000–5999: Expenses (Rent, Payroll, Marketing)

If you look at your chart of accounts and see an account number starting with “1,” you immediately know it’s related to assets. This numbering makes it easy to categorize transactions and generate reports.

Chart of Accounts Example

A landscaping business has all sorts of accounts where money might be either coming in from or going out to. The COA for this kind of company might look like this:

Assets:

• 1001 – Cash
• 1002 – Accounts Receivable
• 1003 – Equipment

Liabilities:

• 2001 – Business Loan Payable
• 2002 – Accounts Payable

Revenue:

• 4001 – Landscaping Services
• 4002 – Lawn Care Contracts

Expenses:

• 5001 – Payroll
• 5002 – Fuel for Equipment
• 5003 – Advertising

This structure ensures every transaction has a designated place, simplifying financial tracking.

Chart of Accounts vs. General Ledger

The chart of accounts (COA) is a list of all the accounts a business uses to track its financial transactions. It’s a framework for organizing different types of accounts, such as assets, liabilities, revenue, and expenses. The COA contains no transaction details – just the account names and numbers.

The general ledger (GL) records all the actual financial transactions. It logs every debit and credit entry related to each account in the COA. It also provides a complete history of a company’s financial activity.

Although the COA serves as a structure for organizing accounts, the GL is the document that houses all of the transaction information related to those accounts.