What is a Chart of Accounts?
A chart of accounts is the organized list of every category your business uses to track income, expenses, assets, and liabilities. Learn why it matters for your books.
The Foundation of Your Bookkeeping
A chart of accounts (COA) is the master list of every category your business uses to track financial activity. Think of it as a structured filing system for money: every transaction that flows into or out of your business gets assigned to one of these categories.
Your chart of accounts determines how clean and useful your financial records are. A well-structured COA makes it easy to see where your money comes from, where it goes, and how healthy your business is at any given time. A poorly structured COA turns your books into an unreadable mess.
The Five Account Types
Every chart of accounts is organized around five fundamental account types:
1. Assets
What your business owns or is owed.
- Checking accounts, savings accounts, petty cash
- Accounts receivable (money clients owe you)
- Equipment, vehicles, inventory
- Prepaid expenses (insurance paid in advance, etc.)
2. Liabilities
What your business owes to others.
- Accounts payable (bills you owe vendors)
- Credit card balances
- Business loans and lines of credit
- Sales tax collected (owed to the state)
3. Equity
The owner's stake in the business — what's left after subtracting liabilities from assets.
- Owner's capital contributions
- Owner's draws/distributions
- Retained earnings
4. Revenue (Income)
Money earned from your business activities.
- Product sales
- Service revenue
- Consulting fees
- Rental income
- Interest income
5. Expenses
Money spent to operate the business.
- Rent and utilities
- Payroll and contractor payments
- Supplies and materials
- Software subscriptions
- Marketing and advertising
- Meals and entertainment
- Professional services (legal, accounting)
Why the Structure Matters
The same transaction can be coded to wildly different accounts depending on how your COA is set up — and that affects both your day-to-day visibility and your annual taxes.
Example: You pay $200/month for project management software. This could be:
- Coded to "Software & Subscriptions" → clean, clearly a business expense
- Coded to "Office Supplies" → technically legal but muddy
- Coded to "Computer Equipment" → wrong category; equipment is capitalized differently
When your tax preparer receives your books at year-end, a well-structured COA means they spend less time cleaning up miscodings and more time optimizing your tax position.
Standard Account Numbering
Most bookkeeping systems use a numbered chart of accounts based on a standard convention:
| Range | Type |
|---|---|
| 1000–1999 | Assets |
| 2000–2999 | Liabilities |
| 3000–3999 | Equity |
| 4000–4999 | Revenue |
| 5000–5999 | Cost of Goods Sold |
| 6000–8999 | Operating Expenses |
| 9000–9999 | Other Income/Expenses |
Industry-Specific COAs
The right chart of accounts varies by industry. A freelance designer has different expense categories than a restaurant, which is different from a retail store.
Administry builds your COA based on your business type and industry. For example:
Service businesses (consultants, agencies, contractors):
- Prominent categories for contractor payments (1099 workers)
- Separate tracking of billable vs. non-billable expenses
- Client reimbursement accounts
Retail businesses:
- Inventory asset accounts
- Cost of Goods Sold (COGS) breakdown
- Shrinkage and returns
Real estate / property:
- Rental income by property
- Depreciation schedules
- Mortgage interest separation
How Administry Sets Up Your COA
When you onboard with Administry, we create your chart of accounts based on your business type, entity structure, and the specific revenue streams and expense categories that apply to you.
We use a QuickBooks-compatible structure so that if you ever move to a full-service CPA, your books import cleanly with no rework.
See How Administry Categorizes Transactions for what happens once your COA is set up.