What is a chart of accounts?

The coded list of GL accounts for assets, liabilities, equity, revenue, and expenses. Good design enables fast close, clean tax mapping, and audit evidence; bad design creates reclasses and restatements.

How many accounts should we have?

Fewer than you think: 80-150 for SMBs, 200-400 for multi-entity. Use departments or classes for detail, not new natural accounts.

What numbering works best?

4-digit with ranges: 1000 cash, 1200 AR, 1500 fixed assets, 2000 AP, 2100 payroll, 3000 equity, 4000 revenue, 5000 COGS, 6000 opex. Reserve blocks for growth.

How often should we change it?

Annually at year-end with mapping and restatement memo. Mid-year changes break comparatives and tax ties.

REPORTING

Chart of Accounts Template and Design Guide for 2026: Structure That Scales

BATO Editorial Team October 06, 2026 3 min read

Numbering Template

Range	Use	Examples
1000-1099	Cash	Operating, payroll clearing, petty
1200-1299	AR + other receivables	Trade AR, allowance, employee advances
1400-1499	Prepaids + inventory	Prepaid insurance, FG, raw — see Inventory
1500-1699	Fixed assets + accum depr	Equipment, ROU — see ASC 842
2000-2099	AP + accruals	Trade AP, GRNI, accrued payroll
2100-2199	Payroll + tax payable	Withholding, sales-tax payable — see Payroll
3000-3999	Equity	Common, APIC, retained
4000-4999	Revenue	Product, SaaS — see ASC 606
5000-5999	COGS	Direct labor, hosting
6000-6999	Opex	Rent, software, travel — see Expense Management

Pair with Bookkeeping Software, Financial Controls, and Month-End Close.

Design Rules

One natural account, many dimensions: department, location, project via classes/tags, not new codes.
Separate payroll clearing, undeposited funds, and intercompany — zero them monthly.
Map each account to tax line and owner; review annually.
Lock structure change to CFO + controller approval with mapping memo.

Enforce in-system per QuickBooks vs Xero.

Migration Checklist

Export trial balance and map old-to-new with sign-off.
Rebuild openings, comparatives, and budget mapping.
Test ERP sync — see NetSuite vs Intacct.
Retrain AP/AR on coding; publish one-page guide.
Retain mapping for Audit Procedures and tax.

Worked Example: Cleaning a 340-Account Mess

Inherited chart: 340 active accounts, including 47 expense accounts containing “misc”, “other”, or “general”. Cleanup:

Export and rank by 12-month activity. 112 accounts have zero postings in 2 years — deactivate (never delete; history must survive for audit).
Merge the misc swamp. 47 misc/other/general accounts → 8 purposeful ones (bank fees, office, dues, small tools, etc.). Every merge mapped old→new with a memo.
Kill dimensions masquerading as accounts. “Travel — John”, “Travel — Priya”, “Travel — NYC” become one Travel account + employee/location dimensions. ~60 accounts collapse this way.
Split overloaded accounts. One “Professional fees” holding legal, audit, tax, and consultants becomes four (audit fees get their own for fee-disclosure support).
Result: 340 → 128 accounts, close 2 days faster, flux actually readable — see Month-End Close.

Run the deactivation in a test environment first, re-run last quarter’s close on the mapped chart, and confirm every report foots before go-live — see NetSuite vs Intacct for ERP-side mapping.

Tax Mapping (Every Account Gets a Line)

The chart’s second job is tax return support. Tag each account: deductible ordinary, capitalized/179-eligible, meals-limited (see Business Meals), nondeductible (fines, political, 50%+ owner life insurance), deferred (prepaids, 174 — see Year-End Tax Planning). Unmapped accounts default to manual reclass at provision time — the #1 source of provision errors. Review the mapping with the CPA annually; new accounts created mid-year get tagged at creation or not at all. Tie the provision tie-out to Financial Statement Analysis and file the mapping memo for PBC.

Dimension Design (Stop the Account Bloat)

Dimension	Use for	Never for
Department / cost center	Who spent	What was bought (that’s the account)
Location / entity	Where, which entity	Intercompany disguised as expense — use clearing + confirmations per Related Party
Project / grant	Funded work, Job-costing	Permanent P&L structure
Class (QuickBooks) / tracking (Xero)	Lightweight splits	Chart replacement — see QuickBooks vs Xero

Rule: if the same question (“travel by person”) needs a new account per answer, it’s a dimension. New natural accounts require CFO + controller approval with a written business case — enforced in-system by restricting chart-edit rights to two people. Review the full account list annually; any account with <12 postings/year is a merge candidate.