What is a Chart of Accounts?

Chart of Accounts is a list of all the accounts categories that a business has available to be used in any financial statements for bookkeeping.

The Chart of Accounts list can be amended, added to and changed to suit the needs of the business. Every single financial transaction is allocated to an account (which can be found on the Chart of Accounts).

Why is it needed?

The Chart of Accounts can help a business to classify income and expense transactions into specific categories. Many of the top online accounting software packages like Sage and Xero have a set chart of accounts.

The Chart of Accounts is the foundation of the business accounting system.  Even if you use Excel spreadsheets, you will still have a list of accounts.

Where can it be found?

The Chart of Accounts can be found at the front of the ledger books (bookkeeping books).

Where is it used?

The Chart of Accounts is used to create the financial statements for a business.  These are the main reports that a company will use to make decisions and to produce monthly and year-end accounts.

In the UK, Chart of Accounts are the same as in any other country.  The only difference being the VAT rates.

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