The Chart of Accounts

The chart of accounts is a listing of all accounts used in the general ledger of an organization. The
chart is used by the accounting software to aggregate information into an entity's financial
statements.
The chart is usually sorted in order by account number, to ease the task of locating specific
accounts. The accounts are usually numeric, but can also be alphabetic or alphanumeric.
Accounts are usually listed in order of their appearance in the financial statements, starting with
the balance sheet and continuing with the income statement. Thus, the chart of accounts begins
with cash, proceeds through liabilities and shareholders' equity, and then continues with accounts
for revenues and then expenses. Many organizations structure their chart of accounts so that
expense information is separately compiled by department; thus, the sales department,
engineering department, and accounting department all have the same set of expense accounts.
Typical accounts found in the chart of accounts are:
Assets:

Cash

Marketable Securities

Accounts Receivable

Prepaid Expenses

Inventory

Fixed Assets

Accumulated Depreciation (contra account)

Other Assets

Liabilities:

Accounts Payable

Accrued Liabilities

Taxes Payable

Wages Payable

Notes Payable

Stockholders' Equity:

Common Stock

Retained Earnings

Revenue:

Revenue

Sales returns and allowances (contra account)

Expenses:

Cost of Goods Sold

Advertising Expense

Bank Fees

Depreciation Expense

Payroll Tax Expense

Rent Expense

Supplies Expense

Utilities Expense

Wages Expense

Other Expenses

There are a number of ways to structure the chart of accounts. Click here for an example of threedigit codes, here for an example of five-digit codes, and here for an example of seven-digit codes.
Chart of Accounts Best Practices
The following points can improve the chart of accounts concept for a company:

Consistency. It is of some importance to initially create a chart of accounts that is unlikely

to change for several years, so that you can compare the results in the same account over
a multi-year period. If you start with a small number of accounts and then gradually
expand the number of accounts over time, it becomes increasingly difficult to obtain
comparable financial information for more than the past year.

Lock down. Do not allow subsidiaries to change the standard chart of accounts without a
very good reason, since having many versions in use makes it more difficult to consolidate
the results of the business.

Size reduction. Periodically review the account list to see if any accounts contain relatively
immaterial amounts. If so, and if this information is not needed for special reports, shut
down these accounts and roll the stored information into a larger account. Doing this
periodically keeps the number of accounts down to a manageable level.

If you acquire another company, a key task is shifting the acquirers chart of accounts into the
parent company's chart of accounts, so that you can present consolidated financial results. This
process is known as mapping the acquirers information into the parent's chart of accounts.

Chart of accounts

Set up different accounts in Microsoft Dynamics Marketing to track revenue and

expenses. Dynamics Marketing provides the following account types:

Asset Accounts:
Use asset accounts to track the value of depreciable assets you purchase
and own that aren't likely to be converted into cash within a year, such as
equipment or furniture.

Bank Accounts:
Bank accounts are asset accounts used to pay bills.

Cost of Goods Sold (COGS) Accounts:

Use COGS accounts to track the value of the cost of goods and materials
held in inventory and then sold.

Expense Accounts:
Use expense accounts to track marketing expenses such as supplies,
advertising, etc.

Liability Accounts:
Use liability accounts to track the value of liabilities that are scheduled to
be paid within one year, such as purchases, sales and short-term loans.

Revenue Accounts:
Use revenue accounts to track revenue from services such as design,
copywriting, etc.

Tax Accounts:
Use tax accounts to track sales tax, withholding taxes, value added taxes,
and other tax payments.

Payment Holding Accounts:

Payment holding accounts are a type of current asset account used to hold
payments until they are deposited into a bank account. Payment holding
accounts are used to temporarily hold cash receipts.

Chart of accounts
The chart of accounts is a listing of all the accounts in the general ledger; each
account is accompanied by a reference number. To set up a chart of accounts,
define the various accounts to be used by the business first. Each account should

have a number to identify it. For very small businesses, three digits may suffice
for the account number, though more digits are desirable in order to allow for
new accounts to be added as the business grows. With more digits, new accounts
can be added while maintaining the logical order. Complex businesses may have
thousands of accounts and require longer account reference numbers. It is
worthwhile to put thought into assigning the account numbers in a logical way,
and to follow any specific industry standards. An example of how the digits might
be coded is shown in this list:
Accounts numbering

1000 - 1999: asset accounts

2000 - 2999: liability accounts

3000 - 3999: equity accounts

4000 - 4999: revenue accounts

5000 - 5999: cost of goods sold

6000 - 6999: expense accounts

7000 - 7999: other revenue (for example, interest income)

8000 - 8999: other expense (for example, income taxes)

By separating each account by several numbers, many new accounts can
be added between any two while maintaining the logical order.

Accounts definition
There is a trade-off between simplicity and the ability to make historical
comparisons. Keeping the number of accounts to a minimum has the advantage
of making the accounting system simple initially. If you start with a small number
of accounts, as certain accounts acquire significant balances they would be split
into smaller, more specific accounts. However, following this strategy makes it
more difficult to generate consistent historical comparisons. For example, if the
accounting system is set up with a miscellaneous expense account that later is
broken into more detailed accounts, it then would be difficult to compare those
detailed expenses with past expenses of the same type. In this respect, there is
an advantage to organizing the chart of accounts with a higher initial level of
detail.
Some accounts must be included due to tax reporting requirements. For
example, in the U.S. the IRS requires that travel, entertainment, advertising, and
several other expenses be tracked in individual accounts. One should check the
appropriate tax regulations and generate a complete list of such required
accounts.

Other accounts should be set up according to vendor. If the business has more
than one checking account, for example, the chart of accounts might include an
account for each of them.
Accounts order
Balance sheet accounts tend to follow a standard that lists the most liquid assets
first. Revenue and expense accounts tend to follow the standard of listing the
items most closely related to the operations of the business first. For example,
sales would be listed before non-operating income. In some cases, part or all of
the expense accounts simply are listed in alphabetical order.

Prerequisites
To view the Chart of Accounts, users must have an Edit/View Chart of Accounts
User role. More information: License, create, and approve users

Sample chart of accounts

View accounts
Enter an opening balance for an account
Create a new account
View and change user access privileges
Deactivate accounts
General ledger
Transactions and posting
Post transactions to the general ledger
Analytical accounting and job profitability
Make entries directly into the General Ledger: Journal
Entries
Financial notice
Financial and general ledger accounts are designed for marketing budget
management only. Financial features are restricted to the limits stated in the
Security and Financial Disclaimer. Microsoft Dynamics Marketing is not designed
to comply with country/region-specific laws, regulations, or common business
practices.

See Also
Financial management functions in Microsoft Dynamics Marketing

Basic IFRS chart of accounts

Additional charts available to

Basic with expanded nature of expense section

Basic with expanded function of expense section

Account
Assets
Property, Plant and Equipment
Land and Buildings
Machinery and Equipment
Vehicles
Fixtures and Fittings
Exploration and Evaluation Assets
Additional Property, Plant and Equipment
Construction In Progress
Investment Property
Investment Property Under Construction Or Development
Investment Property Completed
Intangible Assets
Intangible Assets Other Than Goodwill
Goodwill
Financial Assets
Group Companies (Intercompany Investments)
Investments and Financial Instruments
Derivative Financial Assets
Other Financial Assets
Allowance For Credit Losses (aggregate)
Financial Assets Classified By Designation
Biological Assets
Biological Assets At Cost
Biological Assets At Fair Value
Accrued Assets and Other Assets
Prepayments and Other Current Assets
Tax Related Receivables
Service Providers
Construction Contracts
Set Up Costs
Additional, Other and Miscellaneous Assets
Inventories
Raw Materials
Merchandise
Production Supplies and Comsumables
Spare Parts
Fuel
Work In Progress
Finished Goods
Additional Inventory Items
Other Inventories
Inventories Pledged As Security For Liabilities
Inventories At Fair Value Less Costs To Sell
Receivables
Trade Receivables
Contract Assets
Other Receivables
Adjustments
Cash and Cash Equivalents
Cash
Cash Equivalents
Short-Term Investments
Other Cash and Cash Equivalents

With XBRL
Advanced order of liquidit
Advanced current / non-c
Advanced nature / functio
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