Chart of Accounts for Small Business: Setup Guide
Your chart of accounts is the backbone of your bookkeeping system. This guide shows you how to set one up properly, with real examples and templates you can use today.
What Is a Chart of Accounts?
A chart of accounts (COA) is a complete list of every financial account in your bookkeeping system. Think of it as the filing system for all your transactions. Every dollar that enters or leaves your business gets recorded under one of these accounts. A well-structured COA makes reporting, tax filing, and financial analysis far easier.
The Five Account Categories
Every chart of accounts is built on five fundamental categories:
| Category | What It Tracks | Examples |
|---|---|---|
| Assets (1000s) | What your business owns | Cash, accounts receivable, equipment |
| Liabilities (2000s) | What your business owes | Loans, accounts payable, credit cards |
| Equity (3000s) | Owner value in the business | Owner investment, retained earnings |
| Revenue (4000s) | Money earned from operations | Sales revenue, service income |
| Expenses (5000s-6000s) | Costs of running the business | Rent, payroll, marketing, supplies |
How to Set Up Your Chart of Accounts
Step 1: Start with a Template
Do not build your COA from scratch. Start with a standard template for your industry. Most bookkeeping tools provide default charts of accounts that you can customize. This gives you a proven starting structure and saves hours of setup time.
Step 2: Use a Numbering System
Number your accounts logically. A common approach uses ranges: 1000-1999 for assets, 2000-2999 for liabilities, 3000-3999 for equity, 4000-4999 for revenue, and 5000-6999 for expenses. Leave gaps between numbers so you can add new accounts later without renumbering everything.
Step 3: Keep It Simple at First
The biggest mistake businesses make is creating too many accounts too early. Start with broad categories and add sub-accounts only when you need more detail. You can always break "Marketing" into "Digital Marketing" and "Print Marketing" later. You cannot easily merge accounts that were split too early.
Step 4: Review and Refine Quarterly
As your business evolves, your chart of accounts should evolve with it. Review it each quarter. Remove accounts you never use. Add new ones for emerging expense categories. A clean COA is an active COA.
Sample Chart of Accounts for a Small Business
- 1010 -- Business Checking Account
- 1020 -- Business Savings Account
- 1200 -- Accounts Receivable
- 1500 -- Office Equipment
- 2010 -- Accounts Payable
- 2020 -- Business Credit Card
- 2100 -- Business Loan
- 3000 -- Owner Equity
- 3100 -- Retained Earnings
- 4010 -- Service Revenue
- 4020 -- Product Revenue
- 5010 -- Rent Expense
- 5020 -- Payroll Expense
- 5030 -- Marketing Expense
- 5040 -- Office Supplies
- 5050 -- Software Subscriptions
For more on how to categorize expenses within your chart of accounts, or to understand how the COA connects to your general ledger, follow those in-depth guides.
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