What is the Chart of Accounts?

The chart of accounts is a listing of all accounts offered in the general ledger of an company. The chart is used by the accounting software program to aggregate indevelopment right into an entity"s financial statements. The chart is commonly sorted in order by account number, to ease the task of locating certain accounts. The accounts are generally numeric, but deserve to also be alphabetic or alphanumeric.

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Accounts are generally detailed in order of their appearance in the financial statements, founding with the balance sheet and also proceeding through the revenue statement. Thus, the chart of accounts begins via cash, proceeds via liabilities and shareholders" equity, and also then continues with accounts for revenues and then costs. Many organizations structure their chart of accounts so that cost information is independently compiled by department; therefore, the sales department, engineering department, and accountancy department all have actually the same set of expense accounts. The exact configuration of the chart of accounts will be based upon the needs of the individual organization.

Chart of Accounts Best Practices

It is of some prominence to initially create a chart of accounts that is unmost likely to readjust for several years, so that you deserve to compare the outcomes in the very same account over a multi-year period. If you begin with a small number of accounts and then gradually expand also the variety of accounts over time, it becomes increasingly difficult to obtain similar financial indevelopment for even more than the previous year.

Another best exercise is to not enable subsidiaries to readjust the traditional chart of accounts without a very excellent factor, because having actually many versions in usage renders it more difficult to consoliday the results of the organization.

In enhancement, periodically review the account list to view if any accounts contain fairly immaterial amounts. If so, and also if this information is not essential for unique reports, shut dvery own these accounts and also roll the stored indevelopment into a larger account. Doing this periodically keeps the number of accounts down to a controllable level.

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Sample Chart of Accounts

Common accounts discovered in the chart of accounts are as follows:


Cash (payroll account)


Stockholders" Equity:



Bank Fees

Other Expenses

Chart of Accounts Mapping

If you acquire another agency, an essential task is changing the acquiree"s chart of accounts right into the parent company"s chart of accounts, so that you have the right to existing consolidated financial results. This process is recognized as mappingthe acquiree"s information right into the parent"s chart of accounts.