A chart of accounts is the list of every account a company uses to record transactions, each with a code and a name, grouped into assets, liabilities, equity, income and expenses. Its structure decides what the ledger can report, so a clear chart makes the close and the reports easier.
What is a chart of accounts?
The chart of accounts, or COA, is the index of the general ledger. Every journal line is posted to one of its accounts, and every report is built by adding accounts together. If the chart has no account for something, the books cannot show it without manual work.
Each account has a code, a name and a type. The type decides where the balance appears: the statement of financial position for assets, liabilities and equity, the income statement for income and expenses. Many systems also mark control accounts, such as trade receivables, that only a subledger may post to.
How is a chart of accounts structured?
| Code range | Account type | Examples |
|---|---|---|
| 1000 to 1999 | Assets | Bank, trade receivables, prepayments, equipment |
| 2000 to 2999 | Liabilities | Trade payables, accruals, VAT payable, loans |
| 3000 to 3999 | Equity | Share capital, retained earnings |
| 4000 to 4999 | Revenue | Sales of goods, services income |
| 5000 to 5999 | Cost of sales | Materials, direct labour |
| 6000 to 6999 | Operating expenses | Salaries, rent, marketing |
- Keep it lean. Use dimensions such as cost centre, project or branch for analysis, instead of a new account for every department.
- Separate what you must report. Taxes such as input VAT and output VAT, and intercompany balances, each need their own accounts.
- Control changes. Adding or merging accounts should go through one owner, so reports stay comparable over time.
How do groups combine different charts of accounts?
A group rarely has one chart. Companies bought over the years keep their own systems and their own charts. Rather than forcing each company to change, the group maps every local account to one reporting structure.
Why does the chart of accounts matter for finance teams in the GCC?
Finance teams in the region often prepare VAT, zakat and withholding tax workings from the ledger, and report to a group in another currency. A chart that separates taxes, intercompany balances and the main cost types makes those workings a report instead of a spreadsheet exercise. Bilingual account names help when the accountants and the board read different languages.
Questions people ask
How many accounts should a chart of accounts have?
As few as your reports need. Many growing companies manage with a few hundred accounts and use cost centres or projects for the rest. A chart with thousands of accounts is usually doing the job of dimensions.
Can we change the chart of accounts during the year?
Yes, but plan it. Map each old account to its new one, so comparatives and budgets still line up, and move balances with a dated journal rather than by editing history.
What is the difference between the chart of accounts and the general ledger?
The chart of accounts is the list of accounts. The [general ledger](/glossary/general-ledger) is the record of everything posted to them, with their balances.