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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