24/07/2025
Chart of Accounts (COA)
# The Chart of Accounts (COA) is a structured listing of all the accounts used by a company in its general ledger (GL). It is the foundation for recording and reporting financial transactions in accounting systems.
# Structure of COA
account in the COA typically includes:
Number: Unique numeric/alphanumeric code
Name: Descriptive name of the account
Type: Asset, Liability, Equity, Revenue, or Expense
(optional): Additional detail about the account usage
# Major Categories in a COA
- Resources owned Cash, Accounts Receivable, Inventory, Prepaid Expenses
- Obligations owed Accounts Payable, Accrued Expenses, Loans Payable
- Owners’ interest Capital, Retained Earnings, Drawings
- Income earned Sales Revenue, Service Income, Interest Income
- Costs incurred Rent, Salaries, Utilities, Depreciation
# Sample COA (Numbering Example)
💡1000 Assets Cash
💡2000 Liabilities Accounts Payable
💡3000 Equities Owner’s Capital
💡4000 Revenues Sales Revenue
💡5000 Expenses COGS
# Key Features of a Good COA
✅Logical structure (by business type/industry)
✅Scalability for growth
✅Standardized across departments/entities
✅Alignment with financial reporting requirements (GAAP/IFRS)
🧩 Types of COA Segmentation (ERP like SAP/Oracle/Quickbooks/Zohobooks)
➡️Company Code - Identifies legal entities
➡️Business Area - Segregates by function/region
➡️Cost Center - Tracks departmental expenses
➡️Profit Center - Measures profitability by unit
➡️GL Account - Tracks financial transactions
✅ Best Practices
✔️Use consistent account numbering
✔️Keep it simple but detailed enough
✔️Review and update periodically
✔️Align with tax and audit requirements
✔️Separate operating and non-operating items
