Your chart of accounts decides what your reports can tell you. Here is how to build one that still works in three years.
The chart of accounts is the list of buckets every transaction lands in. It sets how things appear on your balance sheet and income statement. Get it right and your reports answer real questions. Get it wrong and you spend every month end reclassifying.
How the numbering works
Accounts are grouped into assets, liabilities, equity, revenue and expenses. A numbering scheme gives you sort order and room to grow.
- 1000–1999: Assets
- 2000–2999: Liabilities
- 3000–3999: Equity
- 4000–4999: Revenue
- 5000–9999: Cost of goods sold and operating expenses
Leave gaps. If your bank accounts are 1010, 1020 and 1030, the fourth one has somewhere to go.
Name accounts the way your team talks. A bookkeeper who started two weeks ago should know what belongs in each one.
Build it around the questions you actually ask
Set up accounts to match how you read the numbers: by product line, by department, by location. If you cannot name the decision an account supports, you probably do not need it.
There is a limit. Past a few hundred accounts the chart stops helping. Use classes, tags or dimensions for the finer cuts and keep the chart itself short.
Where tax rules and your own reporting disagree, keep separate accounts for each.
Decide who can add an account
Write the rules down: who approves a new account, how it gets named, what happens to one nobody posts to. Without that, everyone adds their own and the same cost ends up in four places.
Review the chart once a year during budgeting. Merge the accounts that never get used. Split the ones that have quietly become a dumping ground.
More than one company
Run a master chart and map each subsidiary's local chart to it. Consolidation is then a lookup rather than an argument.
Set up intercompany accounts on day one. Adding them at year end means unpicking twelve months of entries.
Written by the team at Ambivo, a business platform that keeps CRM, accounting and ERP on one customer record. This article is general guidance on the topic rather than a description of Ambivo features.