What Are the Types of Accounts Under a Chart of Accounts?
If you’re running a business-or managing one for a client-you’ve probably seen the term Chart of Accounts (COA). But what exactly is it? And what types of accounts are included?
Download Our Free Brochure →Whether you’re new to bookkeeping or just want to make sense of your financial reports, understanding the chart of accounts is a foundational step.
What Is a Chart of Accounts (COA)?
A Chart of Accounts is a structured list of all accounts used to record financial transactions in your bookkeeping system-typically QuickBooks or Xero.
Think of it as the blueprint of your books.
Every entry, from your rent payment to a product sale, is categorized under one of these accounts.
5 Main Types of Accounts in a COA
Every COA typically includes the following five categories:
1. Assets
These are resources your business owns.
Examples:
- Cash
- Accounts Receivable
- Equipment
- Inventory
2. Liabilities
These are obligations you owe to others.
Examples:
- Loans Payable
- Credit Card Balances
- Accounts Payable
3. Equity
This shows the owner’s value or stake in the business.
Examples:
- Owner’s Capital
- Retained Earnings
- Owner’s Draw
4. Revenue (Income)
This tracks your earnings from sales or services.
Examples:
- Sales Income
- Consulting Income
- Interest Income
5. Expenses
These are costs incurred to run your business.
Examples:
- Rent Expense
- Payroll Expense
- Utilities
Why the Chart of Accounts Matters
A well-organized COA helps you:
- Track business performance
- File taxes accurately
- Generate CPA-ready reports
- Avoid misclassified expenses
It’s also essential when you outsource bookkeeping or bring on a tax advisor. Clean COA = faster, cheaper financial prep.
Test Case: Real Estate Broker Simplifies Reporting with a Clean COA
A multi-agent real estate brokerage came to Remote Books Online with messy books and 4 years of improperly categorized transactions.
After cleaning their chart of accounts and restructuring it to match industry norms, we were able to:
- Produce CPA-ready reports for 3 prior years
- Identify $22,000 in missed deductible expenses
- Set up class tracking by agent for monthly performance
FAQs
How many accounts should a COA have?
Most small businesses have 30-50 accounts. Too few = lack of clarity. Too many = confusion.
Can I rename or reorganize my chart of accounts?
Yes, but be careful-it can affect historical reporting. Use a professional if unsure.
Does QuickBooks create a COA automatically?
Yes, but it’s generic. You’ll likely need to customize it for your business or industry.
Is it worth outsourcing bookkeeping just for COA setup?
Absolutely. A proper COA structure sets the foundation for clean, accurate books.
Final Thoughts
Understanding the chart of accounts-and the five main account types-is the first step toward clear, accurate financial records. Whether you’re DIYing your books or working with a firm like Remote Books Online, a solid COA structure pays off in clarity and compliance.
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