The Chart of Accounts

The Chart of Accounts

Overview

The Chart of Accounts (CoA) is a comprehensive list of all general ledger (GL) accounts used to record and categorize your company's financial transactions. Each account is assigned a unique account code and organized into categories that support accurate bookkeeping, reporting, and financial analysis.

The Chart of Accounts serves as the foundation of your accounting system and is used throughout CustomBooks™ to track assets, liabilities, equity, income, and expenses. A well-structured Chart of Accounts helps ensure financial data is organized consistently and reported accurately.



Benefits of Using the Chart of Accounts

The Chart of Accounts helps your organization:

  • Organize financial transactions into meaningful categories.
  • Improve the accuracy of financial reporting.
  • Support budgeting and financial analysis.
  • Create a logical account hierarchy using parent and sub-accounts.
  • Maintain consistency across accounting processes.
  • Simplify account management through account groups and account numbering.

Structure of a Chart of Accounts

A standard COA typically consists of the following categories:
  1. Assets – Cash, accounts receivable, inventory, fixed assets.
  2. Liabilities – Loans, accounts payable, accrued expenses.
  3. Equity – Retained earnings, owner’s equity.
  4. Revenue – Sales income, service revenue.
  5. Expenses – Rent, utilities, salaries, office supplies.
Each account is assigned a unique account number for easy identification.

Numbering System

CustomBooks™ allows customization of account numbers. A common structure includes:
  1. 1000–1999: Asset accounts
  2. 2000–2999: Liability accounts
  3. 3000–3999: Equity accounts
  4. 4000–4999: Revenue accounts
  5. 5000–5999: Cost of Goods Sold accounts
  6. 6000–6999: Expense accounts
Check this article for a sample Chart of Accounts that provides a basic structure you can use as a reference or starting point.

Account Groups

Account Groups provide an additional organizational structure for your accounts. They help determine how accounts are grouped and displayed on financial statements and reports.

Benefits of Account Groups include:

  • Improved financial organization.
  • Simplified account management.
  • Better visibility into financial performance.
  • Consistent reporting hierarchies.

Parent and Sub-Accounts

Parent and sub-accounts help organize your Chart of Accounts by grouping related accounts. This structure makes your chart of accounts easier to manage and provides more detailed financial reporting.

What is a Parent Account?

A parent account is a main account that serves as a category for one or more related sub-accounts. Parent accounts are typically used to summarize balances and organize similar accounts under a single heading.

For example, you may create a parent account called Utilities Expense to group all utility-related expenses.

Example:

Account Number
Account Name
Type
5200
Utilities Expense
Parent Account
5210
Electricity Expense
Sub-Account
5220
Water Expense
Sub-Account
5230
Internet Expense
Sub-Account

In this example, Utilities Expense is the parent account, while Electricity Expense, Water Expense, and Internet Expense are sub-accounts.

What is a Sub-Account?


A sub-account is a child account that belongs to a parent account. Sub-accounts allow you to track specific transactions while keeping related accounts grouped.

Using sub-accounts provides greater detail and visibility into your financial data without cluttering your Chart of Accounts.

For example, instead of recording all utility expenses in a single account, you can track each utility separately using sub-accounts.


When to Use Sub-Accounts:

Consider creating sub-accounts when:

  • You need to track multiple categories within a single account group.
  • You want more detailed financial reports.
  • You need to separate expenses or income sources for budgeting or analysis purposes.

For example, a business may create a parent account called Sales Revenue with sub-accounts for:

  • Retail Sales
  • Online Sales
  • Wholesale Sales

This setup allows the business to see total sales revenue while also analyzing revenue generated from each sales channel.


Creating a Sub-Account:
  1. In the Chart of Accounts list view, double-click the account that will become the sub-account.
  2. In the Parent field, enter the account number of the account that will become the parent.
  3. Click Save and Close.
Then, to remove a sub-account from a parent account, just remove the account from the parent field and save.

For a quick overview of the process and guided steps, please watch the video below.


Know more about the Chart of Accounts

Use the articles below to learn about account structures, account management, and setup.
  1. Setting Up the Chart of Accounts
    1. Learn how to create, edit, and manage accounts in CustomBooks™.

    1. Learn more about the Account Groups and the upgraded financial reports.

    1. View example account structures that can be customized for your business.

    1. Learn how to import existing account structures or export your Chart of Accounts for backup, migration, or editing purposes.


    Need help applying this to your business?

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    If you are evaluating CustomBooks™ or want help setting up workflows for your business, explore the product or schedule a conversation with our team.

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