A Simple Chart of Accounts for Small Business

I have been asked many times if there is a simple Chart of Accounts for small business. You would think NOT when you do an online search on “Chart of Accounts,” but this is untrue. Most small businesses can start simple and add accounts as business gets more detailed. A true chart of account is numbered, but with the invention of small business accounting software such as QuickBooks, it is not necessary to use a numbered Chart of Accounts. Here is an example:

 Account Name                                  Type

Checking                                               Bank

Savings                                                  Bank

Petty Cash                                             Bank

Accounts Receivable                            Accounts Receivable

Inventory                                               Other Current Assets

Furniture & Equipment                        Fixed Assets

Accumulated Depreciation                  Fixed Assets

Prepaid Expenses                                 Other Assets

Accounts Payable                                  Accounts Payable

Loans                                                      Long-term Liabilities

Payroll Taxes Payable                           Other Current Liabilities

Sales Tax Payable                                  Other Current Liabilities

Member’s Draw                                      Equity

Member’s Equity                                    Equity

Sales                                                        Income

Cost of Goods Sold                                Cost of Goods Sold

General & Administrative                      Expense

Insurance                                                Expense

Marketing                                               Expense

Payroll                                                     Expense

Professional Fees                                   Expense

Travel & Entertainment                          Expense

Utilities                                                     Expense

As you can see, this is a very simple, abbreviated chart of accounts, but it works and it can easily be expanded as you want more detail. For example, when you want to know more about what specific types of sales you are making, you would create new detail in the income category. It might look like this:

Payroll Service Sales                                Income

Bookkeeping Service Sales                     Income

Financial Statements Sales                     Income

This is also true for the expense categories. All of these categories can have sub categories attached to them so you can see more specifically where you are spending in that category. An example would be:

Payroll

Payroll Service                                          Expense

Payroll Taxes                                            Expense

Wages                                                        Expense

So, my advice is to start your chart at the level you are now, and grow the detail as your company grows. There is no need to overwhelm yourself with more detail than you need. It is better to have your information in an easy format, that you can just hand to your CPA at the end of the year, than to be overwhelmed by it, and not do it at all.

Please feel free to contact me with questions on details and suggestions for your small business.

3 Comments

  1. What are the essential bookkeeping items an online startup should track? - Quora
    August 2, 2011

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  2. Matt
    August 16, 2011

    Great article, thank you. One think that I do like is to turn on account numbering in the chart of accounts for Quickbooks. I find that it can make communication with a client easier too, they start referring the accounts by the numbers. You can find more information here http://chart-of-accounts-online.com

  3. Anonymous
    August 16, 2011

    Thank you Matt. I agree that there is a time that account numbers should be used, but I have also found that they confuse some people. When I am working with start-up’s I usually set the accounts without them first and bring them in when it gets more complicated.

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