Balance sheet chart of accounts for small businesses

Numb Account Title Balance Sheet

er 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- Asset
Equipment
113 Building Asset
114 Accumulated Depreciation-Building Asset
115 Leasehold Improvements Asset
116 Accumulated Depreciation- Asset
Leasehold Improvements
117 Furniture and Fixtures Asset
118 Accumulated Depreciation- Asset
Furniture and 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

Numb Account Title Balance Sheet

er 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- Asset
Equipment
1120 Building Asset
1121 Accumulated Depreciation-Building Asset
1130 Leasehold Improvements Asset
1131 Accumulated Depreciation- Asset
Leasehold 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:

Numbe Account Title Income Statement

r Section
4000 Sales of Goods Revenue
4010 Sales Discounts Revenue
4020 Sales Returns and Revenue
Allowances
5000 Purchases Cost of goods sold
5010 Purchase Cost of goods sold
Discounts
5020 Purchase Returns Cost of goods sold
and Allowances
5030 Freight Cost of goods sold
6000 Salaries and Expense
Wages
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 Expense
Accounting
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 Non-operating income
Fixed Assets
8020 Miscellaneous Non-operating expense
Expense
9000 Extraordinary Non-operating income/expense
items