Chart of accounts in business accounting

4. Five-digit account code for a chart of accounts

A five-digit account code is used by organizations with defined departments: each department has the same balance sheet account codes but separate income statement account codes (at least for operating expenses). To see a simple example, refer to the table below.

Illustrations 4: Five-digit account code for a chart of accounts

Number

Department

Account Title

00-010

---

Cash

00-020

---

Accounts Receivable

00-030

---

Reserve for Bad Debts

00-040

---

Marketable Securities

00-050

---

Inventory

00-100

---

Fixed Assets Machinery

00-110

---

Accumulated Depreciation - Machinery

00-120

---

Fixed Assets Furniture and Fixtures

00-130

---

Accumulated Depreciation Furniture & Fixtures

00-140

---

Fixed Assets Computer Equipment

00-150

---

Accumulated Depreciation Computer Equipment

00-160

---

Fixed Assets Leasehold Improvements

00-170

---

Accumulated Depreciation Leasehold Improvements

00-200

---

Other Assets

00-300

---

Accounts Payable

00-310

---

Accrued Payroll

00-320

---

Sales Taxes Payable

00-330

---

Short-term Notes Payable

00-400

---

Long-term Notes Payable

00-500

---

Capital Stock

00-510

---

Retained Earnings

00-600

---

Revenue

00-700

---

Cost of Goods Sold

10-800

Sales

Bank Services Charge

10-810

Sales

Depreciation

10-820

Sales

Salaries and Wages

10-830

Sales

Office Supplies

10-840

Sales

Utilities

10-850

Sales

Travel and Meals

10-860

Sales

Training

20-800

Marketing

Bank Services Charge

20-810

Marketing

Depreciation

20-820

Marketing

Salaries and Wages

20-830

Marketing

Office Supplies

20-840

Marketing

Utilities

20-850

Marketing

Travel and Meals

20-860

Marketing

Training

00-900

---

Extraordinary Items

National and multi-national companies can have their charts of accounts organized by departments and divisions. See a short example below.

Illustrations 5: Chart of accounts organized by departments and divisions

Number

Division

Department

Account Title

50-10-800

Indianapolis

Sales

Bank Services Charge

50-10-810

Indianapolis

Sales

Depreciation

50-10-820

Indianapolis

Sales

Salaries and Wages

50-10-830

Indianapolis

Sales

Office Supplies

50-10-840

Indianapolis

Sales

Utilities

50-10-850

Indianapolis

Sales

Travel and Meals

50-10-860

Indianapolis

Sales

Training

80-10-800

Chicago

Sales

Bank Services Charge

80-10-810

Chicago

Sales

Depreciation

80-10-820

Chicago

Sales

Salaries and Wages

80-10-830

Chicago

Sales

Office Supplies

80-10-840

Chicago

Sales

Utilities

80-10-850

Chicago

Sales

Travel and Meals

80-10-860

Chicago

Sales

Training

In the example above, an account number has the following pattern:

XX-YY-ZZZ, where

XX represents the division (i.e., 50 is Indianapolis location, 80 is Chicago location);
YY represents the department (i.e., 10 is the Sales Department); and
ZZZ represents the account itself (i.e., 800 is Bank Services Charge).

By using this pattern in numbering the account, one can easily identify which division and department an account belongs to even without having such information readily available.

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