Chart Of Accounts
If your bookkeeping feels messy, unorganized, or hard to track, it probably comes down to one thing: your Chart of Accounts (COA). Most new business owners skip this step. Don’t make this mistake.
What Is a Chart of Accounts?
It’s simply a list of all the categories your business uses to track money.
Think of it as your financial filing cabinet in which each drawer is a type of income, expense, asset, or liability.
The 5 Main Account Types in a COA
Assets
What your business owns: cash, inventory, equipment, accounts receivableLiabilities
What your business owes: credit cards, loans, unpaid billsEquity
Your ownership stake: owner’s investment, retained earningsRevenue (Income)
Money you earn from sales, services, consulting, etc.Expenses
What you spend to run the business: software, rent, supplies, marketing
Sample Chart of Accounts
| Account Type | Example Accounts |
|---|---|
| Revenue | Sales Income, Service Income |
| Expenses | Rent, Utilities, Software, Payroll |
| Assets | Business Checking, Inventory |
| Liabilities | Credit Card, Business Loan |
| Equity | Owner’s Draw, Retained Earnings |
Why Is a Chart of Accounts So Important?
Cleaner books
You know where every dollar goes.Better reporting
Profit & Loss and Balance Sheets are accurate.Smarter decisions
You can see if marketing is eating your budget or where profit is coming from.Faster tax prep
Everything is already categorized and organized.
Mistakes to Avoid
Using too many categories (clutter)
Using too few categories (lack of insight)
Mixing personal and business transactions
Naming things inconsistently
(e.g., “Office Expense” vs. “Office Supplies”)
Start Simple
You don’t need 100 categories. Just use what’s relevant to your business.
As you grow, you can always add more.
Tools That Use Charts of Accounts
Most accounting software like QuickBooks, Xero, or Wave has a built-in COA.
But you still need to review and customize it to match your business model.
If you want clarity, clean books, and real insight into your business, start with your Chart of Accounts. It’s the quiet foundation of great bookkeeping.
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