A chart of accounts template is the list of accounts your ledger posts to, grouped into assets, liabilities, equity, income and expenses. A small business needs 40 to 80 accounts, numbered with gaps, named for the decisions you make from the reports. Below is the numbering scheme, the design rules and 12 industry outlines.
What is a chart of accounts and why does the design matter?
The chart of accounts is the skeleton of every report you will ever run. The profit and loss statement is the income and expense accounts in order; the balance sheet is the asset, liability and equity accounts in order. If the list is wrong, every report built on it is wrong in the same way, and no amount of careful posting fixes that.
Design matters because the list is hard to change later. Once a year of transactions sits in an account, renaming or merging it breaks comparisons and confuses the tax preparer. The IRS record-keeping guidance for new businesses assumes a stable set of accounts from the first return onward (IRS, 2026). Get the structure right first, then post.
The second reason is margin. A business that lumps materials, subcontractors and merchant fees into one cost account cannot see which product or job makes money. A business with separate accounts for each sees it on the first report. That is the whole point of the cost of sales section.
How should you number and group the accounts?
Both major ledgers organize accounts by type. QuickBooks Online uses account types and detail types to decide which report each account lands on, and it ships with default accounts such as accounts receivable, accounts payable, undeposited funds, opening balance equity and retained earnings (Intuit, 2026). Xero uses account codes and account types with a default chart per country (Xero, 2026). The numbering scheme below works in either.
| Range | Type | Typical accounts | Rule |
|---|---|---|---|
| 1000 to 1999 | Assets | 1000 Operating bank, 1010 Savings, 1050 Payment clearing, 1200 Accounts receivable, 1300 Inventory, 1400 Prepaid expenses, 1500 Fixed assets, 1590 Accumulated depreciation | Current assets first, then long-term |
| 2000 to 2999 | Liabilities | 2000 Accounts payable, 2100 Credit cards, 2200 Payroll liabilities, 2300 Sales tax, VAT or GST payable, 2400 Customer deposits and deferred revenue, 2500 Loans | Current liabilities first |
| 3000 to 3999 | Equity | 3000 Owner capital or share capital, 3100 Owner draws or distributions, 3900 Retained earnings | Opening balance equity stays at zero |
| 4000 to 4999 | Income | 4000 Service revenue, 4100 Product sales, 4200 Other operating income, 4900 Discounts and refunds | One account per revenue stream you price differently |
| 5000 to 5999 | Cost of sales | 5000 Materials, 5100 Direct labor, 5200 Subcontractors, 5300 Merchant fees, 5400 Shipping and freight | Only costs that rise and fall with sales |
| 6000 to 6999 | Operating expenses | 6000 Salaries and wages, 6100 Rent and utilities, 6200 Software, 6300 Marketing, 6400 Insurance, 6500 Professional fees, 6600 Travel, 6900 Depreciation | Group by decision, never by vendor |
| 7000 to 7999 | Other income and expense | 7000 Interest income, 7100 Interest expense, 7200 Gain or loss on disposal | Below operating profit |
| 8000 to 8999 | Income tax | 8000 Income tax expense | Companies and corporations only |
Leave gaps. Number in steps of 10 or 100 so a new account slots in next to its neighbors without renumbering. Sub-accounts are fine for two levels, such as 6300 Marketing with 6310 Paid ads and 6320 Events, but three levels make reports unreadable.
How many accounts does a small business need?
Between 40 and 80. The balance sheet usually needs 15 to 25 accounts, income 3 to 8, cost of sales 3 to 8, and operating expenses 15 to 30. Anything beyond that should justify itself with a decision that someone makes from that line and no other.
The most common inflation is on the expense side. One account per vendor, one per software subscription, one per credit card, one per employee. None of those change a decision. Software is one account; the vendor detail is in the transaction. Payroll is one account per pay type, not per person.
The second inflation is using accounts as dimensions. Ten locations need one rent account and a location class or tracking category, not ten rent accounts. The same is true of jobs, funders, departments and product lines.
What rules keep a chart of accounts clean?
Five rules cover most of it. Name accounts for what they are, not for who was paid. Post to the most specific account that exists and never to a parent. Keep undeposited funds, clearing accounts and suspense at zero at every month-end. Keep opening balance equity at zero after setup. And only one person can add an account, with a written reason.
The last rule is the one that matters. A chart of accounts sprawls because a bookkeeper in a hurry adds “Misc expense 2” rather than asking. In our model the dedicated accountant owns the list, the team lead approves changes, and the year-end review merges anything that was added without a decision behind it.
Cost of sales deserves its own rule. Put a cost there only if it rises and falls with revenue: materials, direct labor, subcontractors, merchant fees, freight, hosting for a SaaS company, food for a restaurant. Rent, admin salaries and software are operating expenses even when they feel essential. The split is what makes gross margin mean something.
What do the 12 industry chart of accounts templates look like?
Each outline below lists the accounts that differ from the base template above. Everything else stays the same. The industry pages linked in each heading describe the bookkeeping in more depth, and our chart of accounts setup service loads the finished list into your file.
Construction
- Income: contract revenue, change orders, service and repair revenue.
- Cost of sales: materials, direct labor and burden, subcontractors, equipment rental, permits and bonds.
- Balance sheet: retainage receivable and payable, costs and billings in excess (work in progress), customer deposits.
- Rule: every cost of sales line is tagged to a job for job costing. See construction bookkeeping.
E-commerce
- Income: sales by channel (own store, Amazon, other marketplaces), shipping income, discounts and refunds as contra accounts.
- Cost of sales: product cost, inbound freight and duty, marketplace fees, merchant fees, fulfillment and packaging.
- Balance sheet: inventory, payout clearing accounts per processor, sales tax payable by state or VAT and GST payable, gift-card liability.
- Rule: post gross sales, fees and refunds from the settlement report, never the net deposit. See e-commerce bookkeeping.
Restaurants
- Income: food sales, beverage sales, catering, delivery-platform sales, gift-card breakage.
- Cost of sales: food cost, beverage cost, kitchen labor, front-of-house labor, delivery-platform commissions.
- Balance sheet: tips payable, gift-card liability, sales tax payable, small inventory of food and beverage.
- Rule: prime cost (food, beverage and labor) needs its own subtotal on the profit and loss. See restaurant bookkeeping.
Agencies
- Income: retainer revenue, project revenue, media management fees.
- Cost of sales: contractor and freelancer costs, pass-through media and production costs billed to clients.
- Balance sheet: unbilled revenue (WIP), deferred revenue for retainers paid in advance, client-funded media as a liability.
- Rule: client ad spend that passes through your accounts is never revenue. See agency bookkeeping.
SaaS
- Income: subscription revenue, usage or overage revenue, implementation and services revenue.
- Cost of sales: hosting and infrastructure, third-party software in the product, customer support, payment processing.
- Balance sheet: deferred revenue by contract term, accounts receivable by billing platform, payout clearing for Stripe.
- Rule: operating expenses split into research and development, sales and marketing, and general and administrative. See SaaS bookkeeping.
Home care
- Income: revenue by payer (Medicaid, private pay, long-term care insurance, Veterans Affairs), with contractual adjustments as a contra account.
- Cost of sales: caregiver wages and burden, mileage reimbursement, background checks and training.
- Balance sheet: receivable by payer, credit balances and refunds due, EVV-related unbilled visits.
- Rule: unbilled visits are tracked weekly, not monthly, because payer timely-filing windows are short. See home care bookkeeping.
Trucking
- Income: linehaul revenue, fuel surcharge revenue, accessorial charges, brokerage revenue if any.
- Cost of sales: fuel, driver pay and per diem, tolls and permits, maintenance and tires, insurance on equipment, factoring fees.
- Balance sheet: tractors and trailers with accumulated depreciation, factoring reserve receivable, IFTA and heavy-vehicle tax payable.
- Rule: track cost per mile, which needs miles recorded alongside the ledger. See trucking bookkeeping.
Law firms
- Income: fee revenue by practice area, reimbursed client costs, interest on operating accounts.
- Cost of sales: associate and paralegal compensation if you cost matters, court fees and expert fees advanced.
- Balance sheet: client trust bank account with a matching client trust liability, advanced client costs receivable, unearned retainers.
- Rule: trust funds are kept separate from firm funds and reconciled monthly to the client ledger, as ABA Model Rule 1.15 requires (American Bar Association, 2026). See law firm bookkeeping.
Nonprofits
- Income: contributions, grants, program service fees, special events, in-kind donations, split between restricted and unrestricted.
- Cost of sales: usually none; direct program costs sit in expenses.
- Balance sheet: net assets with and without donor restrictions in place of equity, grants receivable, deferred grant revenue.
- Rule: every expense is coded by function (program, management and general, fundraising) as Form 990 requires (IRS, 2026). See nonprofit bookkeeping.
Property management
- Income: management fee revenue, leasing fees, maintenance markup, late fees retained.
- Cost of sales: maintenance labor and contractors when the company performs the work.
- Balance sheet: trust or escrow bank accounts, owner funds held as a liability, tenant security deposits held as a liability, due to and from owners.
- Rule: owner money and company money never share an account, and each owner’s balance reconciles to the trust bank statement. See property management bookkeeping.
Medical practices
- Income: patient service revenue by payer class (commercial, Medicare, Medicaid, self-pay), contractual adjustments and write-offs as contra accounts.
- Cost of sales: provider compensation, clinical staff, medical supplies, lab and outside services.
- Balance sheet: patient receivable by aging bucket, credit balances and refunds due, prepaid malpractice.
- Rule: post charges, adjustments and collections from the practice-management system, and reconcile the ledger receivable to it monthly. See medical practice bookkeeping.
Retail
- Income: sales by channel (in-store, online), sales returns and discounts as contra accounts, gift-card breakage.
- Cost of sales: product cost, freight in, inventory shrinkage, merchant fees.
- Balance sheet: inventory by location, gift-card liability, sales tax payable, layaway or customer deposits.
- Rule: the point-of-sale system is the sales ledger; post daily totals and reconcile to the processor payouts and the bank. See retail bookkeeping.
How do you set it up in QuickBooks Online and Xero?
In QuickBooks Online, turn on account numbers in the advanced settings first, then import the list with type and detail type columns. The default accounts cannot be deleted, so map yours to them rather than creating duplicates. Use classes and locations for dimensions; Plus allows up to 40 and Advanced is unlimited (Intuit, 2026).
In Xero, replace the default chart with an import that carries codes, names, types and tax rates, then archive what you do not use. Two tracking categories cover most dimension needs. Lock dates and the conversion balances screen keep opening balances from drifting.
In either product, the last setup step is the same: enter the opening trial balance, reconcile the bank to the statement on the start date, and confirm opening balance equity is zero. Our accounting software setup service does this as one project, with the chart of accounts, bank rules and opening balances signed off together. Pricing depends on volume and scope, so we send a custom quote within 1 business day.
What mistakes should you avoid?
Six mistakes account for most messy files. Vendor-named expense accounts. Miscellaneous accounts that hold more than 2% of spend. Cost of sales that includes rent. Owner draws coded as salary. Sales tax collected recorded as income. And a chart imported from another business in a different industry, with 200 accounts that will never be used.
The fix in every case is the same: decide what each account is for, merge what does not earn its line, and give one person the job of keeping it that way. A clean chart of accounts is not a one-time setup; it is a small standing discipline, reviewed at year-end and left alone in between.
Sources
- Intuit, Learn about the chart of accounts in QuickBooks Online: quickbooks.intuit.com
- Intuit, Use account numbers in your chart of accounts: quickbooks.intuit.com
- Xero Central, Chart of accounts in Xero: central.xero.com
- IRS, Publication 583, Starting a Business and Keeping Records: irs.gov
- IRS, About Form 990: irs.gov
- American Bar Association, Model Rule 1.15, Safekeeping Property: americanbar.org
Frequently asked questions
What is a chart of accounts template?
A chart of accounts template is a pre-built list of ledger accounts, grouped into assets, liabilities, equity, income, cost of sales and expenses, that a business copies and adapts before posting its first transaction. Good templates carry account numbers with gaps, plain names and an industry-specific cost of sales section. Our chart of accounts setup service builds and loads the list in QuickBooks Online, Xero or Zoho Books.
How many accounts should a small business have?
Most small businesses need 40 to 80 accounts. Fewer than 40 usually means costs are lumped into a miscellaneous account and margins cannot be read. More than 100 usually means the list has become a vendor directory or a project list. The test is whether each account changes a decision. If two accounts are always read together and never separately, merge them.
Should I use account numbers in QuickBooks Online or Xero?
Yes. Numbers keep reports in a fixed order, make imports and mapping reliable, and stop two similar names from being confused. Xero uses account codes by default; QuickBooks Online has account numbers as a setting that must be turned on (Intuit, 2026). Use four digits with gaps of 10 or 100 so new accounts slot in without renumbering the list.
Can I change my chart of accounts mid-year?
You can add accounts at any time, but renaming, merging or renumbering mid-year breaks comparisons with prior months and confuses the tax preparer. The cleaner approach is to add what is needed now, keep a list of proposed changes, and apply the restructure on the first day of the new financial year with the prior year mapped to the new list.
What is the difference between an account and a class or tracking category?
An account says what kind of transaction it is, such as advertising or subcontractor cost. A class in QuickBooks Online or a tracking category in Xero says which part of the business it belongs to, such as a location, department, job or funder. Use accounts for the profit and loss structure and dimensions for the breakdown, so that adding a location never adds a row of accounts.
Sources
- Intuit, Learn about the chart of accounts in QuickBooks Online (account types, detail types and default accounts)
- Intuit, Use account numbers in your chart of accounts in QuickBooks Online
- Xero Central, Chart of accounts in Xero
- IRS, Publication 583, Starting a Business and Keeping Records
- IRS, About Form 990, Return of Organization Exempt From Income Tax (functional expense reporting)
- American Bar Association, Model Rule 1.15, Safekeeping Property (client trust accounts)
