Chart of accounts template

Why use a chart of accounts template for your business?

A chart of accounts is a list of all your company’s accounts together in one place. It provides you with a birds-eye view of every area of your business that spends or makes money. The primary account types include revenue, expenses, assets, liabilities, and equity. Companies in different lines of business will have different looking charts of accounts.

The chart of accounts template should give viewers a rough idea of the nature of your business by listing all of the accounts involved in your company’s day-to-day operations.

Benefits of using a chart of accounts template

Using a chart of account templates helps inform people of all levels of know-how to ensure every transaction is accurately recorded.

Some benefits of using a template are:

Save time. Drafting up a chart of accounts from scratch takes a lot of time and consideration. But with a template, you simply need to customize it to suit your needs. ‍
Improve technical compliance. As customizable as accounting is, rules still need to be followed. A chart of accounts template cuts out the guesswork so you’ll know you’re being compliant. ‍
Boost consistency. Once your template is finalized, you’ll have a well-structured document that acts as a north star to all your ongoing accounting work.

Using a chart of accounts template is one small step you can take with a substantial impact on the rest of your accounting practices. It sets you up for success in all other accounting work you do.

What are the typical account types on a chart of accounts?

A chart of accounts can be broken up into five main account types:

Assets. What the business owns. The most common asset is the cash you hold on hand or in bank accounts, but other examples include vehicles, equipment, and intellectual property. ‍
Liabilities. What the business owes. This includes any loans, credit cards, accounts payable, or lines of credit with outstanding amounts owing. ‍
Equity. A representation of ownership in the business. The two most common examples are ownership contributions (money put into the business) and ownership drawing (money taken from the business). ‍
Income. Money coming into the business. Most often, this is sales revenue, but there are alternate sources like interest on a bank account. ‍
Expenses. Money or other costs related to goods or services used in your business operations.

Within each of these account types are a wide variety of specific accounts that reflect standardized categories or the unique operations of your business.

Use standardized categories (like these common business expense examples) that reflect the line items on the forms you use for tax filing. This helps you track and maximize tax deductions that minimize your tax bill.

What is the standard format of a chart of accounts?

The standard format of a chart of accounts may vary depending on the industry, organization size, and specific accounting practices. However, a commonly used and recommended format for a chart of accounts follows a hierarchical structure known as the “account numbering system.”

Chart of accounts numbering system

The chart of accounts numbering system assigns a unique code or number to each account, enabling easy identification and classification. The numbering system provides a clear structure, with the first digit indicating the major account category and subsequent digits providing further subcategories.

Chart of accounts numbering best practices

Here are some best practices for numbering your chart of accounts:

Consistency. Use the same number of digits for each level of the account hierarchy to create a uniform structure. ‍
Logical sequence. Assign account numbers in a logical sequence that reflects the hierarchy and relationship between accounts. Generally, accounts within the same category should have consecutive numbers. ‍
Major categories. Reserve specific ranges or digits for major categories, such as assets, liabilities, equity, revenue, and expenses. For example:

1000-1999 for assets
2000-2999 for liabilities
3000-3999 for equity
4000-4999 for revenues
5000-5999 for expenses and so on

Subcategories. Use additional digits to indicate subcategories within each major category. For example, in the assets section, accounts related to cash might have numbers starting with 1100, while accounts related to accounts receivable might start with 1200. ‍
Expansion. Leave room for future expansion or addition of new accounts by reserving unused numbers or using a range for miscellaneous accounts. ‍
Documentation. Document your chart of accounts numbering system, including the meaning of each digit or range.

The goal is to create a chart of accounts numbering system that is logical, consistent, and easy to navigate.

Chart of accounts example

Below is an example of how a chart of accounts may be set up. A chart of accounts is tailored to a business’s operations and yours may look very different when accounting for the categories that are most important to you.

How to set up a chart of accounts template in Excel

Here’s how to do a chart of accounts in Excel:

Step 1: Download chart of accounts Excel template
Step 2: Create business accounts names
Step 3: Assign unique account numbers
Step 4: Organize into account types
Step 5: Check for discrepancies

You can find more detailed instructions on how to use our sample chart of accounts when you download this template.

How does a chart of accounts relate to a business’s financial statements?

A chart of accounts is the framework that two essential financial statements are built off of.

All asset, liability, and equity accounts show up on the balance sheet, the document that compiles what a business owns, owes, and has invested in it at a point in time.

The revenue and expense accounts are used on the income statement (or profit and loss statement. The income statement reports how profitable a business is and breaks down that profit into its revenue and expenses.

Your chart of accounts defines how these financial statements are structured. This means taking the time to carefully structure your chart of accounts (especially by using a template) will give you the best foundation for the rest of your financial reporting.

Chart of accounts template FAQ

What information does a chart of accounts include?

While the specific details may vary depending on the chart of accounts template and the needs of your business, here are the common components you can expect to find in a chart of accounts template:

Account codes. Each account is assigned a unique code or number that helps identify and categorize it within the chart of accounts. It is best practice to use a chart of accounts numbering system to keep everything organized. These codes follow a hierarchical structure. When allocating account numbers don’t forget to leave space for additional accounts and codes to be inserted in a group at a later stage.
‍Account titles. Account titles provide a descriptive name for each account. They should be clear and concise. ‍
Account types. Accounts are typically classified into different types, such as assets, liabilities, equity, revenue, and expenses. ‍
Sub-accounts. In some cases, accounts may have sub-accounts to further classify transactions within a specific category. For example, under the “Expenses” category, you may have sub-accounts like: ‍

Advertising expenses
Rent expenses
Salaries and wages

Group. Accounts are often grouped into categories to provide a logical structure. Categories can be industry-specific or based on standard accounting principles. Examples of categories include:

Current assets
Long term assets
Current liabilities
Cost of sales and more

Notes. These fields allow you to provide additional details or explanations about specific accounts. ‍
Account balance columns. This column is for information only to indicate whether the account is normally increased by a debit or a credit. For example expense accounts are normally increased by a debit entry, whereas income accounts are normally increased by a credit entry.

Can I customize my chart of accounts?

A chart of accounts template can be easily customized to fit the needs of your business. While you should still maintain consistency with standard accounting principles, accounts can be tailored to track the activity that’s most essential to your understanding of the business’s finances.

How many accounts should be included in a chart of accounts?

There’s no maximum or minimum number of accounts that should be included in a chart of accounts. Ultimately, how many accounts you choose to include reflects the size and complexity of the business.

A smaller business with limited capital and expenses would have fewer accounts than a larger enterprise.

What is the difference between a general ledger and a chart of accounts?

The chart of accounts is a list of all account names and associated numbers. Every transaction you record will be recorded with two accounts: one that the money comes from and the other that the money is going towards.

The general ledger is where you record these transactions. When you record transactions, check with your chart of accounts to determine the correct accounts to use to record the transaction.

How is a chart of accounts used in budgeting?

When you’re budgeting, you should refer to your chart of accounts to get an idea of what kind of expenses you might face in the period you’re budgeting for.

Jump to the “expense” account types and go line-by-line. Set an estimate or target of what that expense will be as you move down the list.

If you’re unsure about what a reasonable target is, look at past financial statements, mainly the income statement. Monthly income statements can be used to see how your expenses have been trending over time.

Can this chart of accounts template be used in Google Sheets?

Yes, download our chart of accounts Excel template. Then in Google Sheets, follow these steps:

Create a new or open an existing spreadsheet.
Click File. Import.
Choose the Excel chart of accounts template file and click Select.
Choose an import location option:
Create new spreadsheet,
Insert new sheet(s),
or Replace spreadsheet.
Click Import data and you should have this sample chart of accounts in Google Sheets.