Chart of Accounts
A structured listing of all accounts used by an organization to record financial transactions, organized by category to facilitate record-keeping and reporting.
Chart of Accounts
A structured listing of all accounts used by an organization to record financial transactions, organized by category and account type to facilitate consistent record-keeping, reporting, and analysis.
For instance, a manufacturing company’s chart of accounts might be organized with numbering conventions: assets (1000-1999, with cash as 1010, accounts receivable as 1200), liabilities (2000-2999), equity (3000-3999), revenue (4000-4999), cost of goods sold (5000-5999), and operating expenses (6000-6999), with sub-accounts for detailed tracking.
The chart of accounts serves as the organizational foundation of the accounting system, determining how transactions are recorded and reported. Its structure typically follows financial statement presentation, with accounts grouped by type (assets, liabilities, equity, revenue, expenses) and then further subdivided by function, department, product line, or other relevant classifications. Effective design balances detail (providing sufficient granularity for management needs) with simplicity (avoiding unnecessary complexity). While basic categories remain consistent, the specific accounts and structure should align with industry requirements, organizational complexity, and management information needs. Modern accounting systems allow hierarchical arrangements and multiple dimensions for reporting flexibility.