--- title: Chart of Accounts | Types, Format, Example, Advantages, Disadvantages description: The chart of accounts refers to the directory of every account made in the general ledger in an accounting system. Click to know more. --- [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo-white.4f6047d4.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) [![Carbon collective](https://www.carboncollectiveinvesting.com/hubfs/raw_assets/public/CarbonCollective_August2021%20copy/images/carbon-collective-green-investing-logo.53b28bee.svg "Carbon collective")](https://www.carboncollectiveinvesting.com/) - About - Employers - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - [401(k) Comparison Tool](https://www.carboncollectiveinvesting.com/401k/plan-comparison-tool) - Individuals - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [ETF](https://www.carboncollectivefunds.com/) - Learn - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Blog](https://blog.carboncollective.co/) - [Tools](https://tools.carboncollective.co/calculator/) - Log in - [Carbon Collective](https://app.carboncollective.co) - [Altruist](https://app.altruist.com) [Talk to a human](https://ask.carboncollective.co/f4o5dylkg) [Sign up](https://app.carboncollective.co/sign-up) [Log In](http://app.carboncollective.co/) **[Home](https://www.carboncollectiveinvesting.com/) > [Sustainable Investing](https://www.carboncollectiveinvesting.com/sustainable-investing) >** Chart of Accounts # Chart of Accounts ![](https://www.carboncollectiveinvesting.com/hubfs/Brooke%20Tomasetti.png) Written by Brooke Tomasetti | Reviewed by [Subject Matter Experts](https://www.carboncollectiveinvesting.com/subject-matter-experts) Updated on October 1, 2024 Fact Checked Why Trust Carbon Collective? ### Table of Contents The chart of accounts refers to the directory of every account made in the general ledger in an accounting system. It’s a simple list of accounts with titles of accounts and numbers. Unlike a trial balance, the chart does not incorporate any other information like debit and credit balances. ## Types of Accounts In a chart of accounts, there are primarily 2 accounts which are further divided into sub-accounts, in groups. ### Balance Sheet Accounts The [balance sheet](https://www.carboncollectiveinvesting.com/sustainable-investing/balance-sheet/) accounts are responsible for storing 3 accounts: - [Asset account](https://www.carboncollectiveinvesting.com/sustainable-investing/asset-accounts) - [Liability account](https://www.carboncollectiveinvesting.com/sustainable-investing/liabilities) - [Equity account](https://www.carboncollectiveinvesting.com/sustainable-investing/equity-accounts) ### Income Statement Accounts The [income statement](https://www.carboncollectiveinvesting.com/sustainable-investing/income-statement/) accounts are used to store and store transactions involving: - Operating revenue - Operating expenses - Non-operating revenues and gains - Non-operating expenses and losses The larger the company’s size, the more complex will be its chart of accounts. For example, if a company has more than 15 departments in its structure, each department will take into account its own expense and revenue account, etc. ## Format and Number System Each account in an accounting chart is assigned a number based on how it is displayed on the [financial statements](https://www.carboncollectiveinvesting.com/sustainable-investing/financial-statements/). The accounts which are usually presented first are the balance sheet accounts, which are followed by the income statement accounts. Most companies today use a numbering system to group accounts into financial categories. The numbering system may look like this: - **Assets.** Identification number: 10000-19999 - **Liabilities.** Identification number: 20000-29999 - **Equity.** Identification number: 30000-39999 - **Income.**  Identification number: 40000-49999 - **Expenses.** Identification number: 50000-59999 The main reason why these number systems are used is that it enables accountants to keep track of the accounts and identify what group do they belong to. For example, if the information available to the accountants is unclear regarding these accounts, they can easily fix the error by looking at the prefix of the numbering system. ## How to Make a Chart of Accounts Before you construct a chart of accounts, you must keep in mind a few things that will help you create an accurate chart without any problems. ### Size Firstly, identify the structure of your business, whether it is a sole trading business, partnership, or corporation. After going through the structure, set up your chart in a way where you have enough records, to document financial transactions. Also, ensure that you don’t have extra accounts, as this will cost a lot of time when [preparing financial statements](https://www.carboncollectiveinvesting.com/sustainable-investing/preparing-financial-statements/) and can also reduce the accuracy of the accounts. ### Numbering Secondly, it is essential to carry out the numbering, as it can help us pick any account based on its number. For example, a cash account is usually numbered as 1001, so this method may help an accountant in identifying the cash account details and save plenty of time.  Further, it is also recommended to leave gaps between accounts when assigning numbers, because subsequently, a few accounts are created later. For example, if you want to add a petty cashbook account that did not exist previously in your accounting books, it has to line up after the cash account as the charts of account have to be listed according to the most liquid enough assets. ### Changes The [consistency principle](https://www.carboncollectiveinvesting.com/sustainable-investing/consistency-principle/) states once you endorse an accounting method, continue to follow it consistently, even in the future accounting periods. This concept teaches us not to change the structure of our charts of accounts, as it will be more complicated to monitor or compare our previous accounting records with each other. However, it is imminent, that you will need to expand your accounts in the future, so it is recommended not to add accounts drastically. ## Example of a Chart of Accounts ![](https://www.carboncollectiveinvesting.com/hubfs/image-png-Apr-26-2022-02-49-32-12-PM.png) This is a graphical representation of a standard sample of chart of accounts. As you can see in this example, all accounts are listed according to their numbers. Also, the chart of accounts shows the title, account type and the financial statements of each account recorded in the chart. ## Advantages of Chart of Accounts As the identification process of the accounts is simple, it is easier to analyze and control the costs of a company. The chart of accounts encourages the use of the consistency principle which helps a company with the assistance of comparing financial reports of previous years. One other advantage of the chart of accounts is that as it is easier to manage the accounts, there are fewer chances of errors and more accuracy. Lastly, this chart also helps companies when making their financial statements, by categorizing all accounts into their specific statements. ## Disadvantages of Chart of Accounts However, there are many benefits of using the chart of accounts, there are also a few problems with this chart. Firstly, it is expensive as it requires specialized employees to record financial transactions daily. Secondly, as the chart requires the formation of extra general ledger accounts, this process can be very time-consuming. ## Conclusion Even though there are a few drawbacks to the chart of accounts, it is still recommended to use it, because it reduces the risk of error and arranges the assets, liabilities, and equity into a group, which makes it easier to record these accounts. The chart of accounts is best for businesses that need simple and easier ways to manage documents. ## FAQs ### 1. What is the chart of accounts? The chart of accounts is a graphical representation of all the general ledger accounts in a company. This chart arranges all the accounts into their respective titles, account types, and financial statement. ### 2. What are the 5 basic charts of accounts? The 5 basic charts of accounts are: cash, accounts receivable, prepaid expenses, inventory, and land building. ### 3. Why is the chart of accounts important? The chart of accounts is important as it provides a simple and easy way to identify, analyze and control the costs of a company. Additionally, the chart encourages consistency which is beneficial for companies when comparing their financial reports from different years. Lastly, the chart helps businesses with the creation of their financial statements by categorizing all accounts into their specific statements. ### 4. What does charts of accounts show you? The chart of accounts shows you the title, account type, and the financial statement of each account recorded in the chart. This information is beneficial for businesses as it provides a snapshot of all the general ledger accounts in a company and their respective financial statements. ### 5. How do you adjust your chart of accounts? You can adjust your chart of accounts by adding or deleting general ledger accounts. Additionally, you can also rearrange the order of the accounts to suit your company's needs. ### Related Topics - [Sustainable 401(k) Plan](https://www.carboncollective.co/401k) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing/) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - [Retirement Glossary](https://www.carboncollective.co/sustainable-investing/retirement-planning-glossary) - [Best Retirement Plans](https://www.carboncollective.co/sustainable-investing/the-10-best-retirement-plans) - [Wealth Manager Vs Financial Advisor](https://www.carboncollective.co/sustainable-investing/wealth-manager-vs.-financial-advisor) ![Attend Our Next Webinar](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-webinar.12af7b6e.svg) ### Attend Our Next Webinar Join our next Sustainable Investing 101 webinar, get our favorite DIY options, and walk through how we build our portfolios. [Watch Now](https://www.carboncollective.co/sustainable-investing-webinar-green-retirement-month) ![Get Our Newsletter](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-demo.6ed28722.svg) ### Get Our Newsletter Go a level deeper with us and investigate the potential impacts of climate change on investments like your retirement account. Join Newsletter ![close-typeform](data:image/gif;base64,R0lGODlhEQARAIAAAODn7P///yH5BAEHAAEALAAAAAARABEAAAIqBIKpab3v3EMyVHWtWZluf0za0XFNKDJfCq5i5JpomdUxqKLQVmInqyoAADs=) ![Talk To A Human](https://www.carboncollectiveinvesting.com/hubfs/carbon-collective-green-investing-icon-chat.49d48c5b.svg) ### Talk To A Human Joining a new investment service can be intimidating. We’re here for you. Click below to email us a question or book a quick call. [Ask a Question](https://ask.carboncollective.co/f70pooobq) Topics ## Sustainable Investing Topics View our list of some topics below. See More - Portfolios - [Performance](https://www.carboncollectiveinvesting.com/returns) - About - [Sustainable 401(k)](https://www.carboncollectiveinvesting.com/401k) - Learn - [FAQ](https://www.carboncollective.co/en/knowledge/faqs) - [Sustainable Investing](https://www.carboncollective.co/sustainable-investing) - [Investing Basics](https://www.carboncollective.co/sustainable-investing/investing-basics) - Contact - [Contact us](mailto:hello@carboncollective.co) - [Legal](https://www.carboncollective.co/legal) - [Privacy Policy](https://www.carboncollectiveinvesting.com/hubfs/2022-11%20Carbon%20Collective%20Privacy%20Policy.pdf) - [Back to top](https://www.carboncollectiveinvesting.com/sustainable-investing/chart-of-accounts#top-of-page) DISCLAIMERS: Advisory services provided by Carbon Collective Investment LLC (“Carbon Collective"), an SEC-registered investment adviser. A copy of Carbon Collective's current written disclosure statement discussing Carbon Collective’s business operations, services, and fees is available at the SEC’s investment adviser public information website – [www.adviserinfo.sec.gov](https://adviserinfo.sec.gov/firm/summary/310129) or [our legal documents here](https://blog.carboncollective.co/legal-documents/). The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. Carbon Collective does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to Carbon Collective’s web site or incorporated herein, and takes no responsibility therefor. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Investments in securities: Not FDIC Insured • No Bank Guarantee • May Lose Value. Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Before investing, consider your investment objectives and Carbon Collective's charges and expenses. Carbon Collective's internet-based advisory services are designed to assist clients in achieving discrete financial goals. They are not intended to provide comprehensive tax advice or financial planning with respect to every aspect of a client's financial situation and do not incorporate specific investments that clients hold elsewhere. For more details, see our Form CRS, Form ADV Part 2 and other disclosures. Past performance does not guarantee future results, and the likelihood of investment outcomes are hypothetical in nature. Not an offer, solicitation of an offer, or advice to buy or sell securities in jurisdictions where Carbon Collective is not registered. © 2026 Carbon Collective Corporation. All rights reserved. × #### Fact Checked Carbon Collective partners with financial and climate experts to ensure the accuracy of our content. Our team of reviewers are established professionals with years of experience in areas of personal finance and climate. They have contributed to top tier financial publications, such as Reuters, Axios, Ag Funder News, Bloomberg, Marketwatch, Yahoo! Finance, and many others. This team of experts helps Carbon Collective maintain the highest level of accuracy and professionalism possible. × #### Why Trust Carbon Collective Carbon Collective is the first online investment advisor 100% focused on solving climate change. We believe that sustainable investing is not just an important climate solution, but a smart way to invest. We follow ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. Much of our research comes from leading organizations in the climate space, such as Project Drawdown and the International Energy Agency (IEA). Our goal is to deliver the most understandable and comprehensive explanations of climate and finance topics. Our writing and editorial staff are a team of experts holding advanced financial designations and have written for most major financial media publications. Our work has been directly cited by organizations including MarketWatch, Bloomberg, Axios, TechCrunch, Forbes, NerdWallet, GreenBiz, Reuters, and many others. We strive to empower readers with the most factual and reliable climate finance information possible to help them make informed decisions. } ```json { "@context" : "https://schema.org", "@type" : "Organization", "alternateName" : "Carbon Collective", "contactPoint" : { "@type" : "ContactPoint", "areaServed" : "US", "availableLanguage" : "en", "contactType" : "customer service", "telephone" : "(650) 868-2697" }, "logo" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png", "name" : "Carbon Collective Investing LLC", "sameAs" : [ "https://www.facebook.com/carboncollectiveinvesting/", "https://twitter.com/carbncollective", "https://www.instagram.com/carbon.collective/", "https://www.youtube.com/channel/UC769Y-F-L_B37kyQfdpvyXA", "https://www.linkedin.com/company/carbon-collective/", "https://www.crunchbase.com/organization/carbon-collective", "https://adviserinfo.sec.gov/firm/summary/310129", "https://www.wikidata.org/wiki/Q110243690" ], "url" : "https://www.carboncollective.co/" } ``` ```json { "@context": "https://schema.org", "@type": "FAQPage", "mainEntity": [{ "@type": "Question", "name": "What is the chart of accounts?", "acceptedAnswer": { "@type": "Answer", "text": "The chart of accounts is a graphical representation of all the general ledger accounts in a company. This chart arranges all the accounts into their respective titles, account types, and financial statement." } },{ "@type": "Question", "name": "What are the 5 basic charts of accounts?", "acceptedAnswer": { "@type": "Answer", "text": "The 5 basic charts of accounts are: cash, accounts receivable, prepaid expenses, inventory, and land building." } },{ "@type": "Question", "name": "Why is the chart of accounts important?", "acceptedAnswer": { "@type": "Answer", "text": "\"The chart of accounts is important as it provides a simple and easy way to identify, analyze and control the costs of a company. Additionally, the chart encourages consistency which is beneficial for companies when comparing their financial reports from different years. Lastly, the chart helps businesses with the creation of their financial statements by categorizing all accounts into their specific statements.\"" } },{ "@type": "Question", "name": "What does charts of accounts show you?", "acceptedAnswer": { "@type": "Answer", "text": "The chart of accounts shows you the title, account type, and the financial statement of each account recorded in the chart. This information is beneficial for businesses as it provides a snapshot of all the general ledger accounts in a company and their respective financial statements." } },{ "@type": "Question", "name": "How do you adjust your chart of accounts?", "acceptedAnswer": { "@type": "Answer", "text": "You can adjust your chart of accounts by adding or deleting general ledger accounts. Additionally, you can also rearrange the order of the accounts to suit your company's needs." } }] } ``` ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "https://20345524.fs1.hubspotusercontent-na1.net/hubfs/20345524/Brooke%20Tomasetti.png", "url" : "https://www.carboncollectiveinvesting.com/sustainable-investing/author/brooke-tomasetti" }, "dateModified" : "2024-10-01", "datePublished" : "2021-03-24", "description" : "The chart of accounts refers to the directory of every account made in the general ledger in an accounting system. Click to know more.", "headline" : "Chart of Accounts | Types, Format, Example, Advantages, Disadvantages", "image" : "", "mainEntityOfPage" : { "@id" : "https://www.carboncollectiveinvesting.com/sustainable-investing/chart-of-accounts", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.carboncollective.co/hubfs/CarbonCollectiveLogo.png" }, "name" : "Carbon Collective" } } ```