Chart of Accounts

What Is a Chart of Accounts?

A chart of accounts (COA) is the complete listing of every account used to record financial transactions in an organization’s general ledger. It serves as the foundation for all financial reporting, providing the structure that determines how transactions are categorized and how financial statements are organized.

A well-designed chart of accounts:

• Organizes accounts logically by type and function
• Uses consistent numbering conventions
• Supports required financial reporting
• Enables meaningful management analysis
• Scales as the business grows

Chart of Accounts Structure

Account Types

Accounts are typically organized into five main categories:

Assets (1000-1999) What the company owns:

• Cash and equivalents
• Accounts receivable
• Inventory
• Fixed assets
• Intangible assets

Liabilities (2000-2999) What the company owes:

• Accounts payable
• Accrued expenses
• Notes payable
• Long-term debt

Equity (3000-3999) Owners’ stake in the business:

• Common stock
• Retained earnings
• Additional paid-in capital

Revenue (4000-4999) Income from operations:

• Product revenue
• Service revenue
• Other income

Expenses (5000-9999) Costs of doing business:

• Cost of goods sold
• Operating expenses
• Interest expense
• Taxes

Account Numbering

Typical numbering conventions:

1100 - Cash
1200 - Accounts Receivable
1300 - Inventory
2100 - Accounts Payable
4100 - Product Revenue
5100 - Cost of Goods Sold
6100 - Salaries Expense

Numbering should allow for:

• Logical grouping of related accounts
• Room for new accounts without renumbering
• Consistent structure across entities

Chart of Accounts Best Practices

Keep It Simple

• Start with fewer accounts; add as needed
• Avoid overly granular accounts that rarely get used
• Use dimensions/segments for detailed tracking instead of separate accounts

Think About Reporting

• Structure supports required financial statements
• Enables management reporting needs
• Allows benchmarking against industry standards

Plan for Growth

• Leave gaps in numbering for future accounts
• Design for potential new entities or divisions
• Consider multi-currency requirements

Maintain Consistency

• Standardize across entities where possible
• Use consistent naming conventions
• Document account purposes and usage rules

Chart of Accounts vs. Dimensions

Modern accounting systems use both accounts and dimensions:

Accounts: What type of transaction (revenue, expense, asset)

Dimensions: Additional categorization (department, location, project, customer)

Instead of creating separate accounts like:

• Sales - East Region
• Sales - West Region
• Sales - Central Region

Use one Sales account with a Region dimension:

• Sales + Region: East
• Sales + Region: West
• Sales + Region: Central

This approach:

• Reduces account proliferation
• Enables flexible analysis
• Simplifies maintenance

Common COA Challenges

Over-complexity: Too many accounts making data entry and reporting difficult

Inconsistency: Different structures across entities preventing consolidation

Inflexibility: Design that can’t accommodate business changes

Poor documentation: Unclear account purposes leading to miscoding

Mapping difficulties: Hard to map to external reporting requirements

Multi-Entity Chart of Accounts

Organizations with multiple entities must decide:

Standardized COA: All entities use the same chart

• Pros: Easy consolidation, consistent reporting
• Cons: May not fit local requirements

Localized COA with mapping: Entities use local charts that map to corporate

• Pros: Flexibility for local needs
• Cons: Mapping maintenance required

Hybrid approach: Core accounts standardized, local accounts for specific needs

• Pros: Balance of consistency and flexibility
• Cons: Requires clear governance

How Go Fig Works with Charts of Accounts

Go Fig connects to your existing chart of accounts regardless of structure:

Multi-system mapping: Map accounts from different ERPs to a unified structure

Semantic layer: Define metrics that work across different COA structures

Consolidation: Automatically map and consolidate diverse charts of accounts

Reporting flexibility: Generate reports using any account grouping or hierarchy

Account analysis: Identify unused accounts, inconsistent coding, and optimization opportunities