What Is a Chart of Accounts?

A chart of accounts is the list of categories used to classify your business transactions. It's where you place the income, expenses, and assets.

Chart of accounts for small business

The abbreviation for a chart of accounts is COA. Small business owners maintain the COA in a bookkeeping spreadsheet or inside accounting software. The chart of accounts list can be short or long, depending on the needs of your business. 

TIP: It's best to consult with your accountant and bookkeeper before creating your list. Professionals often use a numerical system with each account.

Chart of accounts example

When you're working with the business books, you must place each transaction in the applicable category.

• Example #1: You purchase a ream of paper for your printer, you would classify the transaction under Office Supplies.
• Example #2: You buy a desk for your office; you classify it to Furniture & Fixtures.
• Example #3: You receive a payment from your customer; you classify it under Income.

For specific categories, you'll have a parent account and a sub-account (nested under the parent). The subs contain the most common situations occurring in your business and provide a more in-depth characterization of the transaction. So, if you're a landlord, you may have sub-accounts under Income that look like this:

Income

  Damages

  Late fee

  Rent

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Import chart of accounts into QuickBooks Online

When you're setting up a chart of accounts in QuickBooks, you may use the standard COA, or you can import a custom list. Which one should you choose? Although the express setup sounds like the best option, you might spend more time fixing a generic account list. So, it's better to take the time to customize it now rather than later.

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