taxreqThe chart of accounts (COA) is a listing of all accounts used by a company in its accounting system. The accounts listings are used to classify the type and nature of transactions that the company uses. All financial transactions of a company are posted to the accounts, and all these transactions become the company’s general ledger.
Typically, a COA contains the account’s name, description and account type.
The accounts listings are grouped in the categories that form the financial statements
Balance sheet
Assets
Current Assets:
- Cash and bank
- Prepaid Expenses
- Accounts Receivables
- Inventory
Non-Current Assets:
- Fixed Assets (Property, Plant & Equipment)
- Long-term investments
- Liabilities
Liabilities
Current Liabilities:
- Accounts Payables
- Taxes Payable
- Credit card payable
- Payroll liabilities
- Unearned Revenues
Non-Current Liabilities
- Loans
- Long-term leases
- Warranties
- Equity
Equity
- Retained Earnings
- Common stock
Income statement
- Income
- Cost of Goods Sold
- Expenses
If you are starting a new business and setting up your accounting system, most accounting software programs like QuickBooks, Sage 50, Xero, Freshbooks, Zoho Books, etc. will have standard charts of accounts that you can select for your business type. Using the standard chart of accounts provided by your accounting software is the easiest way to start off. You can always add accounts or edit to suit your business needs.
If you are not familiar with accounting, do not attempt to set up your bookkeeping system and chart of accounts on your own! Have an accountant or bookkeeper get you started.
Example of a chart of accounts
| Account | Type | Description |
| RBC Chequing | Bank | Chequing |
| Accounts Receivable (A/R) | Current assets | Accounts Receivable (A/R) |
| Inventory Asset | Current assets | Inventory |
| Prepaid expenses | Current assets | Prepaid Expenses |
| GST/HST Payable | Current Liabilities | GST/HST Payable |
| Accounts Payable | Current Liabilities | Accounts Payables (A/P) |
| Opening Balance Equity | Equity | Opening Balance Equity |
| Retained Earnings | Equity | Retained Earnings |
| Billable Expense Income | Income | Other Primary Income |
| Fees Billed | Income | Service/Fee Income |
| Refunds-Allowances | Income | Discounts/Refunds Given |
| Sales of Product | Income | Sales of Product Income |
| Services | Income | Service/Fee Income |
| Cost of Goods Sold | Cost of Goods Sold | Supplies and materials – COS |
| Advertising | Expenses | Advertising/Promotional |
| Bad Debt | Expenses | Bad debts |
| Bank charges | Expenses | Bank charges |
| Commissions and fees | Expenses | Other Miscellaneous Service Cost |
| Dues and Subscriptions | Expenses | Office/General Administrative Expenses |
| Insurance | Expenses | Insurance |
| Legal and professional fees | Expenses | Legal, Accounting fees |
| Meals and entertainment | Expenses | Meals and entertainment |
| Office expenses | Expenses | Office/General Administrative Expenses |
| Promotional | Expenses | Advertising/Promotional |
| Purchases | Expenses | Supplies |
| QuickBooks Payments Fees | Expenses | Other selling expenses |
| Rent or lease payments | Expenses | Rent or Lease of Buildings |
| Repair and maintenance | Expenses | Office/General Administrative Expenses |
| Stationery and printing | Expenses | Office/General Administrative Expenses |
| Supplies | Expenses | Supplies |
| Taxes and Licenses | Expenses | Taxes Paid |
| Travel | Expenses | Travel |
| Travel meals | Expenses | Travel meals |
| Utilities | Expenses | Utilities |
| Interest earned | Other Income | Interest earned |
| Other Portfolio Income | Other Income | Income |
| Miscellaneous | Other Expense | Other Miscellaneous Expense |
| Penalties and settlements | Other Expense | Non-deductible Expense |
You can chose to add an account code or account number to make it easy to reference. The numbering system you chose should be representative of the account type. As an example, assets would have 1xxx number series, liabilities would be the 2xxx number series, income 4xxx series, expenses 5xxx series, and so on.
For example:
| Account Number | Account | Type | Description |
| 1000 | RBC Chequing | Bank | Chequing |
| 1200 | Accounts Receivable (A/R) | Current assets | Accounts Receivable (A/R) |
| 2200 | Accounts Payable | Current Liabilities | Accounts Payables (A/P) |
| 4000 | Sales of Product | Income | Income from product sales |
| 5600 | Legal and Professional Fees | Expenses | Legal, Accounting fees |
As you do business, you will find that you may need to add more accounts to better reflect your business activities. That is perfectly fine, but make sure to be consistent and maintain the integrity of your accounting records.
