Chart of accounts
A chart of accounts (COA) is a created list of the accounts used by an organization to define each class of items for which money or the equivalent is spent or received. It is used to organize the finances of the entity and to segregate expenditures, revenue, assets and liabilities in order to give interested parties a better understanding of the financial health of the entity.
Normally defined by an identifier and a heading explaining text title and coded by account type. In computerized accounting systems with computable quantity accounting, the accounts can have a quantity measure definition.
The charts of accounts can, as in Sweden and Norway, be picked from a standard chart of accounts, a list of predefined accounts, like the BAS in Sweden. In some countries defined by the accountant from a standard charts of accounts general layout, in some regulated by law. But in most countries it is entirely up to each accountant to make and design.
The list can be numerical, alphabetic, or alpha-numeric identifiers. However in many computerized environments like the SIE format only numerical are allowed. The structure and headings of accounts should assist in consistent posting of transactions. Each nominal ledger account is unique to allow its ledger to be located. The list is typically arranged in the order of the customary appearance of accounts in the financial statements, balance sheet accounts followed by profit and loss accounts.
- 1 Nomenclature, classification and codification
- 2 International aspects and accounting information interchange - Charts of accounts and tax harmonisation issues
- 3 Trial Balance
- 4 Types of accounts
- 5 Example
- 5.1 US GAAP Simple Chart of Accounts
- 5.2 Equity Accounts (for corporations)
- 5.3 French GAAP chart of accounts layout
- 5.4 Swedish BAS chart of accounts layout
- 6 See also
- 7 Notes and references
Nomenclature, classification and codification
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 "6" 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.
International aspects and accounting information interchange - Charts of accounts and tax harmonisation issues
Most countries have no national standard charts of accounts, public or privately organised, and improvisation is the case. In many countries there are general guidelines, and in France the guidelines have been codified in law. Sweden has a very well developed standard chart of accounts, the branch organisat The EU commission has spent a great deal of effort on administrative tax harmonisation, and this harmonization is the main focus of the latest version of the EU VAT directive, which aims to achieve better harmonization and support electronic trade documents, such as electronic invoices used in cross border trade, especially within the European Union Value Added Tax Area. However, there is still a great deal to be done to realize a standard chart of accounts and international accounting information interchange structure.
Types of accounts
- Asset accounts: represent the different types of economic resources owned or controlled by business, common examples of Asset accounts are cash, cash in bank, building, inventory, prepaid rent, goodwill, accounts receivable
- Liability accounts: represent the different types of economic obligations by a business, such as accounts payable, bank loan, bonds payable, accrued interest.
- Equity accounts: represent the residual equity of a business (after deducting from Assets all the liabilities) including Retained Earnings and Appropriations.
- Revenue accounts or income: represent the company's gross earnings and common examples include Sales, Service revenue and Interest Income.
- Expense accounts: represent the company's expenditures to enable itself to operate. Common examples are electricity and water, rentals, depreciation, doubtful accounts, interest, insurance.
- Contra-accounts: Some balance sheet items have corresponding contra accounts, with negative balances, that offset them. Examples are accumulated depreciation against equipment, and allowance for bad debts against long-term notes receivable.
US GAAP Simple Chart of Accounts
Within each of these headings will be the individual nominal ledger accounts that make up the chart of accounts. E.g. establishment expenses may consist of rent, rates, repairs, and so on.
Balance Sheet Accounts
Equity Accounts (for sole proprietorships and partnerships)
- 300 Owner's capital
- 330 Capital contributions
- 360 Drawings
Equity Accounts (for corporations)
- 300 Preferred stock
- 310 Common stock
- 320 Additional paid-in capital (Capital in excess of par)
- 330 Retained earnings
- 350 Treasury stock
Profit & Loss accounts
- 400 Sales Revenue
- 420 Interest Income (Non-Operating Revenue)
- 430 Intercompany
Cost of Goods Sold Accounts
- 500 Purchases (note: COGS = Beginning Inventory + Purchases - Ending Inventory)
- 670 Office Expense
- 685 Legal Expense
- 690 Personnel Benefits' Expenses
- 695 Communication Expense
- 696 Traveling & Conveyance
- 697 Labour & Welfare Expenses
- 698 Advertising Expenses
- 699 Printing & Stationery Expenses
- 670 Carriage Outward
French GAAP chart of accounts layout
The French generally accepted accounting principles chart of accounts layout is used in France, Belgium and many francophone countries. The use of the French GAAP chart of accounts layout (but not the detailed accounts) is stated in French law.
Balance Sheet Accounts
- Class 1 Liability Accounts
- Class 2 Asset Accounts
- Class 3 Stocks Accounts
- Class 4 Third-Party Accounts
- Class 5 Financial Accounts
Profit and Loss Accounts
- Class 6 Costs Accounts
- Class 7 Revenues Accounts
- Class 8 Special Accounts
Swedish BAS chart of accounts layout
The complete Swedish BAS standard chart of about 1250 accounts is also available in English and German texts in a printed publication from the non-profit branch BAS organisation.
BAS is a private organisation originally created by the Swedish industry and today owned by a set general interest groups like, several industry organisations, several government authorities (incl GAAP and the revenue service), the Church of Sweden, the audits and accountants organisation and SIE (file format) organisation, as close as consensus possibly (a Swedish way of working without legal demands).
The BAS chart use is voluntary. It is not any legally required in Sweden, but so politically well anchored and well developed that it is commonly used by all.
The BAS chart is not an SIS national standard because SIS is organised on pay documentation and nobody in the computer world are paying for standard documents. BAS were SIS standard but left. SIS Swedish Standards Institute is the Swedish domestic member of ISO. This is not a government procurement problem due to the fact all significant governmental authorities are significant members/part owners of BAS.
An almost identical chart of accounts is used in Norway.
Balance Sheet Accounts
- 1000 Immaterial assets
- 1100 Buildings and land assets
- 1200 Inventories, Machines, Vehicles & Equipment assets
- 1300 Financial relations with other near companies
- 1400 Stored products and work in progress
- 1500-1699 Receivables
- 1700 Pre-payments and accrued income
- 1800 Securities market assets
- 1900 Cash & Bank Accounts
- 2000 Equity 1
- 2100 Reserves
- 2200 Deposits (staff pensions etc.)
- 2300 Loans
- 2400 Short debts (payables 2440)
- 2500 Income Tax Payable
- 2600 VAT Payable
- 2700 Staff income Payable
- 2800-2999 other liabilities
Profit & Loss accounts
- 3000 Revenue Accounts
- 4000 Costs directly related to revenues
- 5000-7999 General expense Accounts
- 8000 Financial Accounts
- 9000 Contra-accounts
- Bank account
- French generally accepted accounting principles
- BAS Swedish standard chart of accounts