A chart of accounts (COA) gives your business a clear, consistent structure for recording financial activity, which leads to cleaner reporting and smoother audits. It categorizes every transaction across assets, liabilities, equity, revenue, and expenses so your books stay organized as you grow.

This guide walks through how a COA is structured and includes examples to help you set up your own.

What is a chart of accounts?

A chart of accounts is the master index your business uses to categorize every financial transaction into standardized groups such as assets, liabilities, equity, revenue, and expenses. This structure keeps your data consistent and ensures your reports are accurate and easy to interpret.

Companies usually follow standard conventions when building a COA. Most group accounts into broad categories and then use a numbering system to organize subaccounts within each category so teams can sort and report on transactions efficiently.

Numbering best practices

• Use consistent digit lengths so reports stay uniform
• Leave gaps between account numbers to make space for future accounts
• Group related subaccounts together in logical ranges, such as 11xx for receivables
• Avoid renumbering unless absolutely necessary, since it disrupts historical comparisons
• Document your numbering rules so everyone on your team applies them the same way‍

Chart of accounts structure: 5 core categories

Five main sections make up a typical chart of accounts. These categories standardize how transactions are classified and make your financial reports easier to read and compare over time.

1. Assets: What you own

Assets represent what your business owns or controls. They include the resources you use to operate, from cash in the bank to equipment in the field.

Common asset accounts include:

• Cash and cash equivalents
• Accounts receivable
• Inventory
• Prepaid expenses
• Equipment and vehicles

Most COAs number asset subaccounts starting with 1, such as 1000 for cash or 1200 for accounts receivable.

2. Liabilities: What you owe

Liabilities are what your business owes. These accounts track obligations such as unpaid vendor bills, loans, and other debts so you can manage upcoming payments.

Examples include:

• Accounts payable
• Credit card and loan debt
• Payroll liabilities
• Bank loans

Short-term liabilities are due within a year, and long-term liabilities extend beyond that. Many businesses number liability subaccounts in the 2000 range.

3. Equity: What your business is worth

Equity represents the owners’ or shareholders’ stake in the business. It reflects invested capital and accumulated profits. Over time, equity shows your company’s book value.

Typical equity subaccounts include owner’s capital, retained earnings, and dividends or distributions. Corporations also include common stock and additional paid-in capital in this section.

4. Revenue: What you earn

Revenue accounts track the money your business earns from sales or services. Clear revenue categorization helps you see which income streams perform best and where you may need to adjust pricing or strategy.

Depending on your business model, revenue subaccounts may include SaaS revenue, consulting income, or retail sales. These accounts typically fall in the 4000 range.

5. Expenses: What your business spends

Expense accounts capture the costs required to operate the business. These categories help you monitor spending, manage budgets, and identify opportunities to reduce costs.

Common expenses include salaries, rent, software subscriptions, utilities, and marketing. Some companies also group expenses by department, such as sales or operations, to improve reporting clarity.

Sample chart of accounts

Here’s an example of how a typical COA might list the account type, account number, account name, and description:

How to set up a chart of accounts

When you’re ready to record transactions with a chart of accounts, these four steps will help you set up a COA efficiently and keep your financial data organized from day one.

Step 1: Determine your business structure

Your business type shapes your COA. A sole proprietor may only need a few equity accounts, while a corporation requires shareholder-specific accounts. Whether your organization is a partnership, LLC, or corporation, outline how capital, contributions, and distributions work early on so you avoid cleanup later.

Step 2: Choose your numbering system

Most COAs use a standard numbering convention to record transactions and group accounts by category. This approach keeps your reporting consistent and makes it easier to retrieve financial information. Start with simple blocks, such as 1000 for assets and 2000 for liabilities, and leave space between numbers so you can add new accounts without renumbering.

Step 3: Create your account list

Identify the accounts your business actually needs today. You don’t need dozens of subaccounts on day one. Start lean and build only when necessary. Focus on capturing major financial activities, including how you earn money, what you spend, and what you own or owe. For example, you might include cash, accounts receivable, and inventory in the asset category.

Step 4: Implement accounting software

Most accounting software tools, including QuickBooks, Xero, and NetSuite, come with default COAs you can automate and customize. Start by editing or removing accounts you don’t need. If you’re importing your own COA, use CSV templates to speed things up. Organize accounts with clear names, logical numbers, and consistent formatting so the structure stays clean as your business grows.

Industry-specific charts of accounts

Different industries need different levels of detail. Use these examples to tailor your COA to the way your business operates.

Retail business

Retail companies often have inventory-heavy COAs. Expect accounts for merchandise purchases, shrinkage, freight-in, and cost of goods sold (COGS). You’ll also see multiple inventory categories, such as finished goods, in-store inventory, or returned goods.

Service business

Service businesses rely less on inventory and more on labor. Their COAs typically emphasize revenue streams, contractor expenses, and software tools rather than inventory accounts, freight charges, or manufacturing costs. They may also include job-based or project-based income accounts.

Manufacturing

Manufacturers need detailed tracking for production costs. This includes raw materials, work-in-process (WIP), finished goods, and manufacturing overhead. A strong manufacturing COA also includes COGS subaccounts such as direct labor and factory supplies.

Nonprofit

Nonprofits have unique requirements because restrictions govern how funds are tracked and used. Restricted funds must be used for a specific purpose, while unrestricted funds are typically used for operating costs such as staff salaries or technology. Nonprofits also use subaccounts for program-specific income, grant tracking, fundraising, and donations tied to donor intent.

Best practices for maintaining your chart of accounts

A clean and consistent chart of accounts makes your reporting easier to manage as your business grows. Use these practices to keep your COA organized and reliable:

• Keep the structure logical and straightforward: Stick to broad categories and a clear numbering system so accounts fall into predictable groups. When your team can quickly find the right account, you reduce errors and speed up the month-end close.
• Use consistent naming conventions: Apply the same style to all account names. Consistency prevents confusion, makes onboarding faster, and keeps your financial reports aligned over time.
• Review your accounts at least once a year: Look for outdated, duplicate, or unused accounts during an annual review. Merge overlapping accounts and remove any that no longer serve a purpose.
• Avoid creating duplicate or overly specific accounts: Before adding a new account, check whether an existing one will work. Keeping the COA lean helps you stay efficient and prevents clutter.
• Document changes for your bookkeeping or finance team: Share updates to naming conventions and account structures so everyone categorizes transactions the same way

Download Ramp’s free chart of accounts template

A well-organized chart of accounts gives your business cleaner data, clearer reporting, and a stronger foundation for growth. With the right COA structure in place, your team can spend less time sorting transactions and more time managing your financial health.

Ramp’s automation tools categorize business expenses into key accounting categories such as COGS and operating and non-operating expenses, which reduces manual work and improves accuracy. Bill Pay also helps you track your current and short-term liabilities in real time.

Our free chart of accounts template includes pre-built categories, numbering conventions, and customizable account names. You can tailor the template to fit your industry, size, or reporting needs. Copy it, remove the accounts you don’t need, and update the descriptions to match your workflows.

Download Ramp’s free COA template and start building a smarter chart of accounts for your business.