Chart of Accounts for Small Business (with Sample Templates)

So, you’ve opened your accounting software and found a list of 60 accounts you didn’t ask for. “Accrued liabilities.” “Retained earnings.” “Suspense.” It’s tempting to close the tab.

Don’t worry. That list is your chart of accounts, and it’s just the set of categories your money gets sorted into. You need far fewer than the software gives you.

I’m an accountant, and below you’ll find what each section means, a ready-made sample chart for a service business and an online store, and the steps I’d follow to set yours up in an hour.

What a chart of accounts is

It’s the full list of accounts in your books. Every transaction is recorded into at least two of them, and every report you run is built from them.

Get it right and your profit and loss reads like a story. Get it wrong and every report needs explaining.

The five types of account

Type	What it holds	Shows on	Examples
Assets	What the business owns	Balance sheet	Bank account, accounts receivable, equipment, inventory
Liabilities	What the business owes	Balance sheet	Credit card, accounts payable, loans, sales tax owed
Equity	The owner’s stake	Balance sheet	Owner’s investment, drawings, retained earnings
Income	Money earned	Profit and loss	Sales, services, interest
Expenses	Costs of running the business	Profit and loss	Rent, software, advertising, wages, bank fees

Many businesses split out cost of goods sold (the direct cost of what you sell) from other expenses, so you can see your gross profit. If you sell products, you’ll want this.

How accounts are numbered

Most charts use number ranges so accounts sort in a sensible order. A common convention:

Range	Type
1000–1999	Assets
2000–2999	Liabilities
3000–3999	Equity
4000–4999	Income
5000–5999	Cost of goods sold
6000–6999	Operating expenses

Your software may use different numbers, or none at all. That’s fine. Consistency matters more than the exact numbers.

Sample chart of accounts: service business

Here’s a lean chart for a consultancy, agency or freelancer. It covers most of what you’ll need:

Code	Account	Type
1000	Business bank account	Asset
1010	Tax savings account	Asset
1100	Accounts receivable	Asset
1500	Computer equipment	Asset
2000	Business credit card	Liability
2100	Accounts payable	Liability
2200	Sales tax / VAT / GST payable	Liability
3000	Owner’s investment	Equity
3100	Owner’s drawings	Equity
3900	Retained earnings	Equity
4000	Service income	Income
6000	Advertising and marketing	Expense
6100	Bank and payment fees	Expense
6200	Contractors	Expense
6300	Insurance	Expense
6400	Office and home office	Expense
6500	Professional fees (accountant, legal)	Expense
6600	Software and subscriptions	Expense
6700	Phone and internet	Expense
6800	Travel	Expense
6900	Meals (check what is deductible where you are)	Expense

Extra accounts for an online store

If you sell products online, add these to the list above:

Code	Account	Type	Why you need it
1200	Inventory	Asset	Stock you hold but have not sold yet
1300	Payouts in transit (Shopify, Stripe, PayPal…)	Asset	Sales collected by the platform but not yet in your bank
4100	Product sales	Income	Kept separate from shipping income
4200	Shipping income	Income	What customers pay you for delivery
4900	Refunds and returns	Income (negative)	So refunds do not hide inside sales
5000	Cost of goods sold	Cost of goods sold	What the products you sold cost you
5100	Shipping and fulfilment costs	Cost of goods sold	Postage, packaging, 3PL fees
5200	Marketplace and platform fees	Cost of goods sold	Amazon, Etsy, Shopify transaction fees

For the software side of running an online store’s books, see the best accounting software for ecommerce and Xero for ecommerce.

Step 1: Start from your software’s default

Don’t build from a blank page. Xero, QuickBooks and the others give you a sensible starting list for your type of business.

Pick the closest business type when you sign up. You’ll trim it next.

Step 2: Hide what you will never use

Go through the expense list and archive or make inactive anything you’ll never touch, like “Vehicle fuel” if you don’t have a vehicle.

Leave the system accounts alone (retained earnings, sales tax, receivables). Your software needs them.

Step 3: Match your expense accounts to your tax return

Look at the expense categories on your tax return: Schedule C in the US, the self-employment pages of your Self Assessment in the UK, or your business schedule in Australia. Try to have one account per line you’ll need to fill in.

This one step makes tax time dramatically faster. Your accountant can lift the totals straight across.

Step 4: Add only the accounts you will want on a report

Before adding an account, ask: will I ever want to see this number on its own? If not, use a broader account and add a note in the description.

If you want to slice numbers by client, project or location, use your software’s tracking categories, classes or tags instead of creating dozens of accounts.

How tracking categories save you dozens of accounts

Say you run a design studio and want to see profit by service: branding, websites and retainers. You could create “Branding income”, “Website income” and “Retainer income”, then the same three for every cost. That’s how charts grow to 100 accounts.

Instead, keep one “Service income” account and tag each transaction with a tracking category (Xero), a class (QuickBooks) or a reporting tag (Zoho Books). Your P&L can then be filtered or split by tag, and the chart stays short.

Use tags for things that change (clients, projects, locations), and accounts for things that stay the same (types of income and cost).

Step 5: Ask your accountant to check it once

Send your chart to your accountant before you start coding transactions. Ten minutes of their time now saves hours of reclassifying later.

Common mistakes

Too many accounts

Separate accounts for “Coffee” and “Snacks” make reports noisy and coding slower. Group them.

Using “Miscellaneous” or “Suspense” as a home

They’re for things you’ll sort out shortly, not permanent storage. Clear them every month.

Deleting accounts that already have transactions

Archive them instead. Deleting can break history, and most software won’t let you anyway.

Putting owner withdrawals in expenses

Money you take out for yourself (drawings) isn’t a business expense for a sole trader. It goes to equity.

Frequently asked questions

How many accounts should a small business have?

Often 30 to 60 in total, including the system accounts your software needs. Fewer expense accounts is usually better than more.

Can I change my chart of accounts later?

Yes. You can add, rename and archive accounts any time. Big changes are easiest at the start of a financial year.

Is the chart of accounts the same in every country?

The structure is the same everywhere. The tax accounts (sales tax, VAT, GST) and the expense categories that match your tax return differ.

What is the difference between the chart of accounts and the general ledger?

The chart of accounts is the list of accounts. The general ledger is every transaction recorded in them.

What to do next

With your accounts set up, the habit that keeps them accurate is a monthly reconciliation: how to do a bank reconciliation. Or go back to the full small business bookkeeping guide.