11.2. Chart of Accounts

A chart of accounts (COA) is a detailed listing of the general ledger accounts and the account numbers assigned to the accounts. The chart of accounts is the heart and soul of any accounting system. All of the entries in the general ledger must use an account number from the COA. Traditionally, GL accounts use a numbering scheme in which the first digit indicates the type of the account: Asset = 1, Liability = 2, Equity = 3, Income = 4, and Expense = 5. A scheme with four-digit or eight-digit account numbers is usually sufficient for most small businesses. With an eight-digit system, the first four digits represent the major account groups, and the last four digits are reserved for variations of the main account.

The following list provides an example of a COA showing how the numbering scheme works: