Accounting 101

What is Chart of Account (COA)

Examples of Account Types
ElectricityBill
Purchase of goods for sale
Sales of goods
Acquiring of Air Conditioner
Purchase of stationery
Dinner for staff
Examples of Account Types
ElectricityBill – Utility Expense
Purchase of goods for sale - Inventory
Sales of goods - Sales
Acquiring of Air Conditioner - Asset
Purchase of stationery - Expense
Dinner for staff – Entertainment Expense
What is a COA?
List of accounts, designed specifically for
your company, that helps you track and
report each class of items for which money
is spent or received.
◦ Aligns with your financial structure
◦ Offers level of detail required in your financial
statements
◦ Indexed list of accounts – classifications and
sub-classifications that are used to classify
your financial transactions
The Core of Your Accounting System

Chart of
Accounts
(COA)
QuickBooks COA
Setting up a numbering system and assigning
account numbers must be completed before a
company can make a transaction.
 QuickBooks has a default numbering system in
place
 When you create a new company file, QuickBooks
will recommend that certain accounts be added to
your chart of accounts
 It is important to follow the default numbering
system in QuickBooks so that your accounts
remain in the proper order. 
QuickBooks COA Selection
QuickBooks Numbering system
QuickBooks COA
CATEGORIES OF CHART
OF ACCOUNTS
QuickBooks Numbering system
ASSETS
Everything your company owns,
which provides future value, including:
Current assets
Fixed assets
Accounts receivable (A/R)
Inventory
Long-term assets
 LIABILITIES

Everything your company owes (or may owe).

Current liabilities Long-term liabilities

include: might include:
 Mortgage

 Accounts  Other
long-term debt
payable (A/P)
 Taxes (both payroll and account
sales)
OWNERS EQUITY

Your business investments, including:

Common stock
Preferred stock
Treasury stock
Retained earnings
Revenue and Cost of Goods Sold
(COGS)

Operating Revenue (primary business)

◦ Sales revenue is your primary source of income
◦ Sales discounts or returns (contra-revenue)
Cost of Goods Sold (Cost of Sales)
◦ Any direct costs attributable to the productions of
goods/services sold by a company
◦ Cost of materials, direct labor, hosting, etc.
◦ Excludes indirect costs like marketing or sales
commissions

Revenue – COGS = Gross Profit

 Operating Expenses

General Sales & Research &

Administrative Marketing Development

Rent Advertising Hosting Fees

Utilities Printing Consulting

G&A wages S&M Wages Research

R&D Wages
Other Income or Expense

Interest income
Interest expense
Gain/loss on sale of assets
COA – A Numbering System
Typical COA: four to six digit
numbering system
Each category of accounts shares
initial digits (e.g. assets category
could be 10000)
Following digits used for sub-
categories
(e.g. each asset assigned in
sequence 10000, 11000, 12000, etc.)
Fine-tuning your COA
Add greater level of granularity
Depending on your business, it may
make sense to offer a greater level of
detail in some categories
COA isn’t static – will grow and
change as your business grows
Keep working until it is aligned with
your financial plan