What is a chart of accounts?
A chart of accounts (COA) is the index of your books. Every transaction is posted to one or more accounts on this list, so the way you design it decides how useful your reports will be.
Standard structure
Accounts are usually numbered by type:
- 1000s – Assets: cash, bank, receivables, inventory, equipment
- 2000s – Liabilities: payables, loans, VAT or sales tax payable
- 3000s – Equity: owner's capital, [retained earnings](/glossary/retained-earnings), drawings
- 4000s – Income: sales, service revenue, other income
- 5000s+ – Expenses: cost of sales, rent, salaries, marketing, utilities
The first group feeds the [balance sheet](/glossary/balance-sheet); income and expenses feed the [income statement](/glossary/income-statement).
Tips for a good chart of accounts
- Keep it simple; add accounts only when you need the detail.
- Use consistent names and numbering with gaps for future accounts.
- Match the categories your tax return and lenders need.
- Use tags, classes or departments for extra detail rather than many near-duplicate accounts.
- Avoid deleting used accounts; deactivate them instead.
Why it matters
A clear chart of accounts makes [bookkeeping](/glossary/bookkeeping) faster, reduces miscoding and produces reports you can trust and compare year to year.