Chart of Accounts

What is a Chart of Accounts?

A chart of accounts is a list of all the accounts in your general ledger – separated into account type.

How it Works

A company may have hundreds of accounts.

When working with these accounts, you refer to them by number.

To provide a record of account names and  numbers, the business sets up a chart of accounts.

It lists all the accounts in your general ledger. 

The general ledger comprises every account in your accounting system. 

It is divided up into several categories.

Likewise, the chart of accounts is divided into account categories. 

Each account is assigned a number.

The numbers are prefixed according to category.

Asset accounts are prefixed with a 1.

Liability accounts are prefixed with a 2 and so on.

When numbering accounts, spaces are left in between. 

This allows you to add further accounts later on, if necessary. 

© R.J. Hickman 2020