Balance sheet chart of accounts for small businesses

Num Account Title Balance Sheet

ber Section
100 Cash in Checking Asset
101 Cash in Savings Asset
102 Cash on Hand Asset
103 Accounts Receivable Asset
104 Merchandise Inventory Asset
105 Office Supplies Asset
106 Prepaid Insurance Asset
110 Land Asset
111 Equipment Asset
112 Accumulated Depreciation-Equipment Asset
113 Building Asset
114 Accumulated Depreciation-Building Asset
115 Leasehold Improvements Asset
116 Accumulated Depreciation-Leasehold Asset
Improvements
117 Furniture and Fixtures Asset
118 Accumulated Depreciation-Furniture and Asset
Fixtures
120 Organization Costs Asset
121 Amortization-Organization Costs Asset
130 Patents Asset
131 Amortization-Patents Asset
200 Accounts Payable Liability
201 Salaries Payable Liability
202 Sales Taxes Payable Liability
203 Unearned Rent Liability
210 Notes Payable Liability
211 Loans Payable-National Bank Liability
212 Credit Card Payable-MasterCard Liability
220 Accrued Expenses Liability
250 Long-term Notes Payable Liability
300 Retained Earnings Equity
310 Capital Equity
311 Drawing Equity

Some accounts explained below:

Cash in Checking: cash used to pay expenses or deposit revenue
Cash in Savings: cash kept in a depository account
Cash on Hand: cash kept for small expenditures (Petty Cash) or cash kept in cash
registers
Accounts Receivable: sales on credit
Leasehold Improvements: expenses incurred to accommodate leased space to
the business needs
Furniture and Fixtures: desks, chairs, store fixtures
Organization Costs: start-up costs
Capital: initial investment by owners
Drawing: withdrawals by business owners.
A three-digit account code can be sufficient for a small business as such code would
allow creating up to 1,000 accounts. However, a larger business might need to use a
four-digit code that would allow up to 10,000 accounts.

Balance sheet chart of accounts for corporations

Num Account Title Balance Sheet

ber Section
1000 Cash Asset
1010 Petty Cash Asset
1020 Accounts Receivable Asset
1030 Inventory Asset
1040 Prepaid insurance Asset
1100 Land Asset
1110 Equipment Asset
1111 Accumulated Depreciation-Equipment Asset
1120 Building Asset
1121 Accumulated Depreciation-Building Asset
1130 Leasehold Improvements Asset
1131 Accumulated Depreciation-Leasehold Asset
Improvements
2000 Accounts Payable Liability
2010 Salaries Payable Liability
2020 Accrued Expenses Liability
2100 Notes Payable Liability
2110 Bonds Payable Liability
3000 Common Stock Equity
3010 Retained Earnings Equity
3020 Dividends Equity

Note that only some numbers within a sequence are assigned. For instance, Cash and
Petty Cash have been assigned the numbers 1000 and 1010, respectively. As no account
was assigned a number within the 1001-1009 range, the company can add more
accounts within that range when the need arises: for instance, 1001: Cash - X Bank; and
1002: Cash - Y Bank.

Income statement accounts within a chart of accounts

Revenue is an increase in assets (e.g., cash sale) or decrease in liabilities (e.g.,

recognition of unearned service revenue as earned revenue) resulting from operating
activities of an entity. Revenue accounts normally have credit balances. Revenues are
compared to expenses to calculate net income.

Cost of goods sold (cost of sales) is the difference between the cost of goods available
for sale and the cost of goods on hand at the end of an accounting period. This cost
represents the cost of goods sold by the company during the period.

Expenses are decreases in assets (e.g., rent expenses) or increases in liabilities (e.g.,
accrued utility expenses) that result from operating activities undertaken to generate
revenue. Expense accounts normally have debit balances. Expenses may be classified as
selling, general, and administrative. Note that the cost of goods sold is also an expense,
but it is usually shown separately from other operating expenses. Expenses are
subtracted from revenues to determine net income.

Other income and expenses represent non-operating income or expenses and include
extraordinary items. Non-operating income or expenses relate to transactions or events
that are not part of a companys normal operating activity. Examples of non-operating
activities include sales of fixed assets, interest income/expense (for entities whose
operating activity is not related to earning interest), and miscellaneous income.
Extraordinary items are revenues or expenses that arise from activities that are not
ordinary and not expected to recur regularly (frequently). Examples of extraordinary
items: gain (loss) on early retirement of debt, natural disaster, expropriation of property
by foreign government, property condemnation, etc. Extraordinary items are reported
net of taxes.

Chart of accounts with income statement elements

Let us look at a simple chart of accounts with income statement elements for a
merchandising business. The chart of accounts has the following ranges for income
statement accounts:

Numb Account Title Income Statement

er Section
4000 Sales of Goods Revenue
4010 Sales Discounts Revenue
4020 Sales Returns and Revenue
Allowances
5000 Purchases Cost of goods sold
5010 Purchase Discounts Cost of goods sold
5020 Purchase Returns and Cost of goods sold
Allowances
5030 Freight Cost of goods sold
6000 Salaries and Wages Expense
6005 Payroll Taxes Expense
6010 Advertising Expense
6015 Depreciation Expense
6020 Amortization Expense
6025 Bank Services Expense
6030 Rent Expense
6035 Utilities Expense
6040 Insurance Expense
6045 Legal and Accounting Expense
6050 Postage Expense
6055 Office Expense Expense
6060 Supplies Expense
7010 Interest Income Non-operating income
7020 Interest Expense Non-operating expense
8010 Gain on Sale of Fixed Non-operating income
Assets
8020 Miscellaneous Expense Non-operating expense
9000 Extraordinary items Non-operating income/expense

Formula: