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.
Accounts are typically defined by an identifier (account number) and a caption or header and are 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 be picked from a standard chart of accounts, like the BAS in Sweden. In some countries, charts of accounts are defined by the accountant from a standard general layouts or as regulated by law. However, in most countries it is entirely up to each accountant to design the chart of accounts.
The list can use numerical, alphabetic, or alpha-numeric identifiers. However, in many computerized environments like the SIE format, only numerical identifiers are allowed. The structure and headings of accounts should assist in consistent posting of transactions. Each nominal ledger account is unique, which allows 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 Charts of Accounts
- 5.1 Simple Example Chart of Accounts
- 5.2 French GAAP Chart of Accounts Layout
- 5.3 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, such as QuickBooks, 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.
The first digit might signify the type of account (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.
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 organized. In many countries, there are general guidelines, and in France the guidelines have been codified in law. The European 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.
The trial balance is a list of the active general ledger accounts with their respective debit and credit balances. A balanced trial balance does not guarantee that there are no errors in the individual ledger entries.
Types of accounts
- Asset accounts represent the different types of economic resources owned or controlled by an entity. Common examples of asset accounts are cash on hand, cash in bank, real estate, inventory, prepaid expenses, goodwill, and accounts receivable.
- Liability accounts represent the different types of economic obligations of an entity, such as accounts payable, bank loans, bonds payable, and accrued expenses.
- Equity accounts represent the residual equity of an entity (the value of assets after deducting the value of all liabilities). Equity accounts include common stock, paid-in capital, and retained earnings. The type and captions used for equity accounts are dependent on the type of entity.
- Revenue or income accounts represent the company's earnings and common examples include sales, service revenue and interest income.
- Expense accounts represent the company's expenditures. Common examples are utilties, rents, depreciation, interest, and insurance.
- Contra-accounts are accounts with negative balances that offset other balance sheet accounts. Examples are accumulated depreciation (offset against fixed assets), and the allowance for bad debts against (offset against long-term notes receivable).
Example Charts of Accounts
Simple Example Chart of Accounts
Balance Sheet Accounts
Bank/Cash at Bank
- 108 Deferred Expense
- 110 Other Assets
- 201 Accounts Payable
- 210 Tax Payable
- 211 Bonds Payable
Equity Accounts (for sole proprietorships and partnerships)
- 300 Owner's capital
- 330 Capital contributions
- 360 Drawings (Distributions)
Equity Accounts (for corporations)
- 300 Common Stock
- 310 Capital in excess of par
- 330 Retained earnings
Profit & Loss Accounts
- 400 Rental Income
- 420 Interest Income
- 570 Office Expense
- 595 Communication Expense
- 597 Labour & Welfare Expenses
- 598 Advertising Expenses
- 599 Printing & Stationery Expenses
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 Equity and long term debts
- Class 2 Fixed Assets
- Class 3 Stocks Accounts
- Class 4 Third-Party Accounts
- Class 5 Bank & Cash
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 not legally required in Sweden. However, it is politically anchored and so well developed that it is commonly used.
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
- 1100 Buildings and land assets
- 1200 Inventories, Machines
- 1210 Alterna
- 1220 IngDirect Savings
- 1230 Tangerine chequing
- 1240 Account Receivable
- 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, Version in English