Chart of Accounts (COA)

A chart of accounts (COA) is an organized index of all financial accounts used in a company’s general ledger. It categorizes and lists every account that records the company’s financial transactions for an accounting period, making it easier to prepare financial statements and analyze financial health.

Key takeaways

• The COA organizes assets, liabilities, equity, revenue, and expenses into a consistent framework.
• Each account typically has a unique code, a name, and a short description to speed identification.
• Companies customize COAs to fit their size and operations, but consistent structure over time is essential for comparable financial reporting.
• COAs support accurate financial statements and compliance with accounting standards.

How a COA works

A COA groups accounts so stakeholders can easily see what a company owns, owes, earns, and spends. It’s commonly arranged in the same order as financial statements: balance sheet accounts first (assets, liabilities, equity), then income statement accounts (revenue, expenses). This arrangement simplifies preparing and reading the balance sheet and income statement.

Analogy: viewing a COA is like logging into an online banking dashboard that shows checking, savings, and investments in one place—except a COA shows every ledger account for a business.

Typical structure

Primary account categories:
* Assets
* Liabilities
* Shareholders’ equity
* Revenue
* Expenses

These can be broken into sub-accounts, for example:
* Operating vs. non-operating revenues and expenses
* Current vs. noncurrent assets and liabilities
* Departmental expense groupings (e.g., sales, engineering, accounting)

Organizing by business function or division helps track costs and revenues by area of the company.

Account identifiers (coding)

Most COAs use numeric codes to make accounts easy to locate and sort. A common convention:
* 100–199: Assets (110–119: current assets)
* 200–299: Liabilities (210–219: current liabilities)
* 300–399: Equity
* 400–499: Revenue
* 500–599: Expenses

The number of digits and ranges depends on company size and transaction volume. Departments often reuse the same expense account numbers so costs can be aggregated by function across divisions.

Example (sample COA items)

Assets
* 101 Cash
* 102 Savings account
* 103 Petty cash
* 110 Accounts receivable
* 120 Inventory
* 130 Prepaid insurance
* 150 Vehicles
* 160 Buildings

Liabilities
* 201 Accounts payable
* 210 Company credit card
* 220 Accrued liabilities
* 230 Payroll liabilities
* 240 Notes payable

Shareholders’ equity
* 301 Common stock
* 302 Preferred stock
* 310 Retained earnings

Revenue and Expenses (examples)
* 401 Sales revenue
* 501 Cost of goods sold (COGS)
* 510 Salaries expense
* 520 Utilities expense
* 530 Depreciation expense

Special considerations

• Consistency matters: keep the COA format stable across periods to enable accurate comparisons.
• Customization: tailor the COA to the company’s operations and reporting needs, but maintain logical grouping and clear descriptions.
• Compliance: the COA should support preparation of financial statements that comply with applicable accounting standards (e.g., GAAP or IFRS).

FAQs

Q: Why is a COA important?
A: It organizes financial transactions so managers, auditors, and investors can quickly find and understand account balances and trends.

Q: Is there a single, required COA format?
A: No. Businesses can design a COA that fits their needs, but common sequencing and consistent coding practices are recommended.

Q: Is a COA required?
A: Not legally required for every entity, but it is a standard, essential tool for bookkeeping and financial reporting.

Bottom line

A chart of accounts is a foundational accounting tool that lists and codes all ledger accounts in a consistent, logical structure. Properly designed and maintained, a COA simplifies reporting, improves financial clarity, and supports accurate, comparable financial statements over time.