Chart of Accounts Example

A chart of accounts is an important part of the accounting system and serves as a base for preparing accounts. It lists all the accounts that a company uses in the accounting system. It does not include other information about the accounts, including their balances, either debits or credits. Before moving to the chart of accounts example, it is crucial to know what is a chart of accounts. We recommend reading the article – Chart of Accounts prior to moving toward the example.

Refer to the chart of accounts example below to get a basic idea of how companies number their chart of accounts.

Chart of Accounts Example

A company first needs to define the range of numbers it will use for numbering its assets, liabilities, revenues, and expenses. Below is a table that defines the range of numbers that the company ABC has used.

Account Group Description	Account Numbers
	From	To
Assets	10000	19999
Equities & Liabilities	20000	29999
Revenue	30000	39999
Expenses	40000	49999

Here, we have used five-digit codes. A company can also use up to ten-digit codes for its chart of accounts depending on the number of ledgers it is required to maintain.

After defining the range, the next step is to divide this range among the account groups and sub-groups such as the assets group will have current assets, property & equipment, etc. while liabilities include current liabilities and long-term liabilities. The following table shows how the above range is divided among various account groups.

Account Group Description	Account Numbers
	From	To
ASSETS
Current Assets
Cash & Cash Equivalents	10000	10999
Account Receivables	11000	13999
Other Current Assets	14000	14999
Property & Equipment
Land & Building	15000	15999
Plant & Machinery	16000	16999
Furniture	17000	17999
Intangible Assets
Trademark	18000	18999
Patent	19000	19999
EQUITIES & LIABILITIES
Share Capital	20000	20999
Accounts Payable	21000	24999
Other Current Liabilities	25000	27999
Long-term Liabilities	28000	29999
REVENUE
Revenue from Operations	30000	35999
Other Income	36000	39999
EXPENSES
Cost of Revenue	40000	42999
Services & Others	43000	43999
General & Administrative	44000	45999
Sales & Marketing	46000	46999
Research & Development	47000	47999
Other Expenses	48000	48999
Provision for Income Tax	49000	49999

This range is assigned on the basis of the expectation of the number of ledgers that will be covered under each account group.

Now the accounts (general ledgers) falling under these account groups will be numbered from the range allowed to these account groups. Look below to know how.

How to Edit Chart of Accounts

In the future, if there is a new account, ABC company can adjust it between the same range of numbers. Usually, a company sets a range of numbers for a particular account type. In the above case, ABC has set numbers 10000-19999 for assets, 20000-29999 for equities & liabilities, 30000-39999 for revenue, and 40000-49999 for expenses.

For instance, if there is a new asset account for prepaid insurance. The company can list it as 14979 or any other number between 14000-14999 that has not been allocated. If the numbers are allocated, then the company can give it a sub-number, such as 14999-1.

Though an option to add a sub-number is available, the company should always try to avoid such situations. It should frame its chart of accounts in a manner that the range defined for an account group should have enough codes available for the addition of new ledgers.

A point to note is that the chart of accounts of one company may not be suitable for another company. Ledgers under the account group “inventory” in a company operating in the FMCG industry will be more as compared to the one operating in the Iron & Steel industry.

Show References

1. Chart of Accounts: A Simple Guide (With Examples) | Bench Accounting [Source]
2. Chart of Accounts [Source]
3. Chart of Accounts and Financial Reports Manual [Source]