How to set up a chart of accounts

When setting up a chart of accounts you will need to:

1. define the various accounts to be used in the business, such as different classes of assets, liabilities, expenses and sales revenue
2. make a list of all of these under the financial classifications as noted above – that is each different type of account for assets, liabilities, sales revenue and expenses
3. it can be useful to allocate a numbering system for each account within the chart of accounts, such as all asset accounts will have been classified under the 1000 number and all liability accounts will be classified under the 2000 number etc
4. you will then allocate various sub accounts under these main accounts
5. depending on the level of information you need in your business, each sub account may also need further sub accounts.

The chart of accounts is very important to the overall effectiveness and accuracy of your bookkeeping, so if you don't feel you understand it enough, then you should discuss with your bookkeeper or accountant before you set up your bookkeeping records.