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Chart of Accounts

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Introduction to Chart of Accounts

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A chart of accounts is a listing of the names of the accounts that a company has identified and made available for recording transactions in its general ledger. A company has the flexibility to tailor its chart of accounts to best suit its needs, including adding accounts as needed.


Within the chart of accounts you will find that the accounts are typically listed in the following order:


Balance sheet accounts
  • Assets
  • Liabilities
  • Owner's (Stockholders') Equity
Income statement accounts
  • Operating Revenues
  • Operating Expenses
  • Non-operating Revenues and Gains
  • Non-operating Expenses and Losses


Within the categories of operating revenues and operating expenses, accounts might be further organized by business function (such as producing, selling, administrative, financing) and/or by company divisions, product lines, etc.


A company's organization chart can serve as the outline for its accounting chart of accounts. For example, if a company divides its business into ten departments (production, marketing, human resources, etc.), each department will likely be accountable for its own expenses (salaries, supplies, phone, etc.). Each department will have its own phone expense account, its own salaries expense, etc.


A chart of accounts will likely be as large and as complex as the company itself. An international corporation with several divisions may need thousands of accounts, whereas a small local retailer may need as few as one hundred accounts.




Sample Chart of Accounts For a Large Corporation

Each account in the chart of accounts is typically assigned a name and a unique number by which it can be identified. (Software for some small businesses may not require account numbers.) Account numbers are often five or more digits in length with each digit representing a division of the company, the department, the type of account, etc.


As you will see, the first digit might signify if the account is an asset, liability, etc. For example, if the first digit is a "1" it is an asset. If the first digit is a "5" it is an operating expense.


A gap between account numbers allows for adding accounts in the future. The following is a partial listing of a sample chart of accounts.


Current Assets (account numbers 10000 - 16999)
10100   Cash - Regular Checking
10200   Cash - Payroll Checking
10600   Petty Cash Fund
12100   Accounts Receivable
12500   Allowance for Doubtful Accounts
13100   Inventory
14100   Supplies
15300   Prepaid Insurance

Property, Plant, and Equipment (account numbers 17000 - 18999)
17000   Land
17100   Buildings
17300   Equipment
17800   Vehicles
18100   Accumulated Depreciation - Buildings
18300   Accumulated Depreciation - Equipment
18800   Accumulated Depreciation - Vehicles

Current Liabilities (account numbers 20000 - 24999)
20100   Notes Payable - Credit Line #1
20200   Notes Payable - Credit Line #2
21000   Accounts Payable
22100   Wages Payable
23100   Interest Payable
24500   Unearned Revenues

Long-term Liabilities (account numbers 25000 - 26999)
25100   Mortgage Loan Payable
25600   Bonds Payable
25650   Discount on Bonds Payable

Stockholders' Equity (account numbers 27000 - 29999)
27100 Common Stock, No Par
27500 Retained Earnings
29500 Treasury Stock

Operating Revenues (account numbers 30000 - 39999)
31010   Sales - Division #1, Product Line 010
31022   Sales - Division #1, Product Line 022
32015   Sales - Division #2, Product Line 015
33110   Sales - Division #3, Product Line 110

Cost of Goods Sold (account numbers 40000 - 49999)
41010   COGS - Division #1, Product Line 010
41022   COGS - Division #1, Product Line 022
42015   COGS - Division #2, Product Line 015
43110   COGS - Division #3, Product Line 110

Marketing Expenses (account numbers 50000 - 50999)
50100   Marketing Dept. Salaries
50150   Marketing Dept. Payroll Taxes
50200   Marketing Dept. Supplies
50600   Marketing Dept. Telephone

Payroll Dept. Expenses (account numbers 59000 - 59999)
59100   Payroll Dept. Salaries
59150   Payroll Dept. Payroll Taxes
59200   Payroll Dept. Supplies
59600   Payroll Dept. Telephone

Other (account numbers 90000 - 99999)
91800   Gain on Sale of Assets
96100   Loss on Sale of Assets




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