A chart of accounts (COA) is a financial organizational tool that provides a complete listing, by category, of every account in the general ledger of a company. It is a list of financial accounts set up, usually by an accountant, for an organization, and available for use by the bookkeeper for recording transactions in the organizations general ledger. The COA is typically set up to display information in the order that it appears in financial statements. That means that balance sheet accounts are listed first and are followed by accounts in the income statement.

The COA is divided into five main account types: asset accounts, liability accounts, equity accounts, revenue accounts, and expense accounts. Each account in the chart of accounts is typically assigned a name and may also be assigned a unique account number by which the account can be identified. Account numbers may be structured to suit the needs of an organization, such as digit/s representing a division of the company, a department, the type of account, etc. .

The COA is used to organize finances and give interested parties, such as investors and shareholders, a clearer view and understanding of a company’s financial health. It is a comprehensive catalog of accounts that can be used to categorize transactions in a companys general ledger. Small businesses may record hundreds or even thousands of transactions each year, and a chart of accounts helps to make sense of a large pool of data and understand a business’s financial history.

Although most accounting software products set up a standard COA or let you import your own, it’s a good idea to have an accountant scan it and add any other accounts that are specific to your business. The accounts in the list provide the basic structure for an organization’s financial statements and general ledger. They are customized to provide the information required for needed visibility, reporting, and compliance.