Chart of Accounts

Sample Chart of Accounts for a Small Company

source: www.accountingcoach.com

This is a partial listing of another sample chart of accounts. Note that each account is assigned a three-digit number followed by the account name. The first digit of the number signifies if it is an asset, liability, etc. For example, if the first digit is a "1" it is an asset, if the first digit is a "3" it is a revenue account, etc. The company decided to include a column to indicate whether a debit or credit will increase the amount in the account. This sample chart of accounts also includes a column containing a description of each account in order to assist in the selection of the most appropriate account.

 Asset Accounts

No.	Account Title	To Increase	Description/Explanation of Account
101	Cash	Debit	Checking account balance (as shown in company records), currency, coins, checks received from customers but not yet deposited.
120	Accounts Receivable	Debit	Amounts owed to the company for services performed or products sold but not yet paid for.
140	Merchandise Inventory	Debit	Cost of merchandise purchased but has not yet been sold.
150	Supplies	Debit	Cost of supplies that have not yet been used. Supplies that have been used are recorded in Supplies Expense.
160	Prepaid Insurance	Debit	Cost of insurance that is paid in advance and includes a future accounting period.
170	Land	Debit	Cost to acquire and prepare land for use by the company.
175	Buildings	Debit	Cost to purchase or construct buildings for use by the company.
178	Accumulated Depreciation - Buildings	Credit	Amount of the buildings' cost that has been allocated to Depreciation Expense since the time the building was acquired.
180	Equipment	Debit	Cost to acquire and prepare equipment for use by the company.
188	Accumulated Depreciation - Equipment	Credit	Amount of equipment's cost that has been allocated to Depreciation Expense since the time the equipment was acquired.

 Liability Accounts

No.	Account Title	To Increase	Description/Explanation of Account
210	Notes Payable	Credit	The amount of principal due on a formal written promise to pay. Loans from banks are included in this account.
215	Accounts Payable	Credit	Amount owed to suppliers who provided goods and services to the company but did not require immediate payment in cash.
220	Wages Payable	Credit	Amount owed to employees for hours worked but not yet paid.
230	Interest Payable	Credit	Amount owed for interest on Notes Payable up until the date of the balance sheet. This is computed by multiplying the amount of the note times the effective interest rate times the time period.
240	Unearned Revenues	Credit	Amounts received in advance of delivering goods or providing services. When the goods are delivered or services are provided, this liability amount decreases.
250	Mortgage Loan Payable	Credit	A formal loan that involves a lien on real estate until the loan is repaid.

 Owner's Equity Accounts

No.	Account Title	To Increase	Description/Explanation of Account
290	Mary Smith, Capital	Credit	Amount the owner invested in the company (through cash or other assets) plus earnings of the company not withdrawn by the owner.
295	Mary Smith, Drawing	Debit	Amount that the owner of the sole proprietorship has withdrawn for personal use during the current accounting year. At the end of the year, the amount in this account will be transferred into Mary Smith, Capital (account 290).

 Operating Revenue Accounts

No.	Account Title	To Increase	Description/Explanation of Account
310	Service Revenues	Credit	Amounts earned from providing services to clients, either for cash or on credit. When a service is provided on credit, both this account and Accounts Receivable will increase. When a service is provided for immediate cash, both this account and Cash will increase.

 Operating Expense Accounts

No.	Account Title	To Increase	Description/Explanation of Account
500	Salaries Expense	Debit	Expenses incurred for the work performed by salaried employees during the accounting period. These employees normally receive a fixed amount on a weekly, monthly, or annual basis.
510	Wages Expense	Debit	Expenses incurred for the work performed by non-salaried employees during the accounting period. These employees receive an hourly rate of pay.
540	Supplies Expense	Debit	Cost of supplies used up during the accounting period.
560	Rent Expense	Debit	Cost of occupying rented facilities during the accounting period.
570	Utilities Expense	Debit	Costs for electricity, heat, water, and sewer that were used during the accounting period.
576	Telephone Expense	Debit	Cost of telephone used during the current accounting period.
610	Advertising Expense	Debit	Costs incurred by the company during the accounting period for ads, promotions, and other selling and expenses (other than salaries).
750	Depreciation Expense	Debit	Cost of long-term assets allocated to expense during the current accounting period.

 Non-Operating Revenues and Expenses, Gains, and Losses

No.	Account Title	To Increase	Description/Explanation of Account
810	Interest Revenues	Credit	Interest and dividends earned on bank accounts, investments or notes receivable. This account is increased when the interest is earned and either Cash or Interest Receivable is also increased.
910	Gain on Sale of Assets	Credit	Occurs when the company sells one of its assets (other than inventory) for more than the asset's book value.
960	Loss on Sale of Assets	Debit	Occurs when the company sells one of its assets (other than inventory) for less than the asset's book value.

Accounting software frequently includes sample charts of accounts for various types of businesses. It is expected that a company will expand and/or modify these sample charts of accounts so that the specific needs of the company are met. Once a business is up and running and transactions are routinely being recorded, the company may add more accounts or delete accounts that are never used.

At Least Two Accounts for Every Transaction

The chart of accounts lists the accounts that are available for recording transactions. In keeping with the double-entry system of accounting, a minimum of two accounts is needed for every transaction—at least one account is debited and at least one account is credited.

When a transaction is entered into a company's accounting software, it is common for the software to prompt for only one account name—this is because the software is programmed to automatically assign one of the accounts. For example, when using accounting software to write a check, the software automatically reduces the asset account Cash and prompts you to designate the other account(s) such as Rent Expense, Advertising Expense, etc..

Some general rules about debiting and crediting the accounts are:

• Expense accounts are debited and have debit balances
• Revenue accounts are credited and have credit balances
• Asset accounts normally have debit balances
• To increase an asset account, debit the account
• To decrease an asset account, credit the account
• Liability accounts normally have credit balances
• To increase a liability account, credit the account
• To decrease a liability account, debit the account

To learn more about debits and credits, go to Explanation of Debits & Credits and Drills for Debits & Credits. To learn more about the role of bookkeepers and accountants, go to our Accounting Career Center.