Understanding Charts of Accounts: An Overview

A Chart of Accounts is a list of the account used for organising the financial transactions in the bookkeeping.


It is difficult to enter a transaction into the system without putting it into an account where it belongs to.

An important purpose of a Chart Of Accounts is to allocate expenditures, revenue, assets and liabilities in an account found on COA. It helps viewers in getting a sense of a company’s financial health.

How to create Charts of Accounts?

Chart of Accounts has a list of all accounts with:


  • A name of Account
  • A short description of each account (optional)
  • A balance
Here is a basic list:

Adjusting Your Chart of Accounts:

Throughout the year, you can add as many accounts as you want, but careful of deleting any old accounts if any until the end of the year, or it could jumble up the numbers in other categories throughout the year.
How to improve your chart of accounts:
Consistency is the key to produce a chart of accounts. Try to make a chart of accounts that will not change for many years so that you can easily compare results. If you keep adding new accounts, then it will become increasingly difficult to compare your financial information over a multi-year period.  You should also regularly review the chart of accounts to see if any accounts contain inessential data. If they do, shut down these accounts to keep the chart at a manageable size.


Chart of Accounts is a tool that helps business in listing accurately of each account in their general ledger. It is a good way to organise finances and give shareholders more insight into the financial health of the company overall.

Who it’s for: Anyone looking to learn ways to save time on their accounting processes or looking for tips on how to record a tricky transaction in their book-keeping Software?

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