Chart of accounts

The list of categories every transaction gets recorded into — your revenue lines, cost lines, assets and liabilities.

Example

Revenue: Subscriptions, Services. COGS: Hosting, Payment fees. OpEx: Salaries, Marketing, Software, Rent.

Important

This is the one setup decision that shapes every report you will ever produce. Too few categories and you cannot see anything; too many and nobody keeps it consistent. Around fifteen to twenty-five lines is right for a small company.

Related terms

• Bookkeeping — Recording every transaction accurately and on time.
• General ledger — The complete record of every transaction, sorted into the accounts from your chart of accounts. Every report is built from it.
• Income statement (P&L) — A statement of revenue, costs and profit over a period. Revenue − COGS = gross profit; gross profit − OpEx = operating profit.
• Accounting — Turning bookkeeping records into financial statements and meeting filing obligations.

Lessons that explain it

• Where to actually start keeping books — Day one, with no accounting background and no system. What to record, where to put it, and the three habits that make everything after this easy. (12 min)
• Building a chart of accounts — The twenty-odd categories every transaction lands in. Get this right once and every report you ever run is useful; get it wrong and no amount of software helps. (12 min)

All 176 terms in the Founder glossary