The Chart of Accounts is one of those unknown parts of your accounting software we don’t even think about. What most entrepreneurs don’t realize is that the chart of accounts represents the foundation of your accounting process, if you don’t set up the chart of accounts correctly, your bookkeeping and financial records will have major negative impacts. In this ultimate guide, not only do we explore examples of a common chart of accounts but also we discuss best practices on how to properly set up your chart of accounts.

What is the Chart of Accounts?

As we discussed in our article: Bookkeeping Services for Small Business, the chart of accounts is a listing of all accounts tracked by your business in your accounting software general ledger.

Why is The Chart of Accounts important?

Think about the chart of accounts as the foundation of a building, in the chart of accounts you decide how your transactions are categorized and reported in your financial statements.

While the chart of accounts can be similar across businesses in similar industries, you should create a chart of accounts that is unique to your individual business. You should ask yourself, what do I want to track in my business and how do I want to organize this information? For example, we often suggest our clients break down their sales by revenue stream rather than just lumping all sales in a Revenue category. By doing so, you can easily understand what products or services are generating the most revenue in your business. Be careful not to overly complicate your chart of accounts. If you create too many categories in your chart of account, you can make your entire financial reports difficult to read and analyze. Therefore, you need to find the right balance between, creating a chart of accounts that organizes transactions in broad categories and provides the level of detail you need in order to make informed business decisions.

Chart of Accounts examples:

In virtually all accounting software, chart of accounts are grouped in a specific numeric range that identifies the type of account and where is reported in the financial statements. Below is how Xero usually groups their chart of accounts, QuickBooks uses a similar methodology:

Numeric Range Account Type Financial Report
100 – 199 Assets Balance Sheet
200 – 299 Liabilities Balance Sheet
300 – 399 Equity Balance Sheet
400 – 499 Revenue Profit & Loss
500 – 599 Cost of Goods Sold Profit & Loss
600 – 699 Operating Expenses Profit & Loss
700 – 799 Taxes Paid Profit & Loss
800 – 899 Other Expenses Profit & Loss


Below is an example of a typical chart of account:

*Code *Name *Type
101 Checking Account Bank
102 Savings Account Bank
120 Accounts Receivable Accounts Receivable
130 Prepayments Current Asset
140 Inventory Inventory
150 Office Equipment Fixed Asset
151 Less Accumulated Depreciation on Office Equipment Fixed Asset
160 Computer Equipment Fixed Asset
161 Less Accumulated Depreciation on Computer Equipment Fixed Asset
200 Accounts Payable Accounts Payable
205 Accruals Current Liability
210 Unpaid Expense Claims Unpaid Expense Claims
215 Wages Payable Wages Payable
216 Wages Payable – Payroll Current Liability
220 Sales Tax Sales Tax
230 Employee Tax Payable Current Liability
231 Federal Tax withholding Current Liability
232 State Tax withholding Current Liability
233 Employee Benefits payable Current Liability
234 Employee Deductions payable Current Liability
235 PTO payable Current Liability
240 Income Tax Payable Current Liability
250 Suspense Current Liability
255 Historical Adjustment Historical Adjustment
260 Rounding Rounding
265 Tracking Transfers Tracking
290 Loan Non-current Liability
300 Owners Contribution Equity
310 Owners Draw Equity
320 Retained Earnings Retained Earnings
330 Common Stock Equity
400 Sales Revenue
460 Other Revenue Revenue
470 Interest Income Revenue
480 Refunds Revenue
500 Cost of Goods Sold Direct Costs
600 Advertising Expense
604 Bank Service Charges Expense
608 Janitorial Expenses Expense
612 Consulting & Accounting Expense
620 Entertainment Expense
624 Postage & Delivery Expense
628 General Expenses Expense
632 Insurance Expense
640 Legal Expenses Expense
644 Utilities Expense
648 Automobile Expenses Expense
652 Office Expenses Expense
656 Printing & Stationery Expense
660 Rent Expense
664 Repairs and Maintenance Expense
668 Wages and Salaries Expense
669 Wages & Salaries – California Expense
672 Payroll Tax Expense Expense
676 Dues & Subscriptions Expense
680 Telephone & Internet Expense
684 Travel Expense
690 Bad Debts Expense
700 Depreciation Expense
710 Income Tax Expense Expense
720 Federal Tax expense Expense
721 State Tax expense Expense
722 Employee Benefits expense Expense
723 PTO expense Expense
800 Interest Expense Expense
810 Bank Revaluations Bank Revaluations
815 Unrealized Currency Gains Unrealized Currency Gains
820 Realized Currency Gains Realized Currency Gains
835 Revenue Received in Advance Current Liability
855 Clearing Account Current Liability

Chart of Accounts Contra Accounts:

You will notice in the example above that account code 480 Refunds is listed as a revenue account, but you might ask yourself: isn’t refunds a reduction of sales? Yes, these are called contra accounts in accounting jargon. They are intended to be a direct reduction of specific accounts like revenue, why? Because by being placed in the revenue category you will be able to see your overall revenue and your refunds all on the same section of the Profit & Loss Statement.