Announcing new features for real-time, AI-assisted reconciliation. Learn more →

Learn

Chart of Accounts (COA)

Welcome to Learn, where we provide straightforward, easy-to-understand definitions of the payments industry.

Follow us

A chart of accounts is used to organize a company’s finances. A COA can also be helpful in giving shareholders or potential investors a clear picture of a company’s financial health.

What is a Chart of Accounts (COA)?

A chart of accounts (COA) is an index of all the different accounts within a company’s ledger. Simply put an account is a 'bucket' of value–or the balances a company needs to track. Most businesses have important balances they want to track such as revenue, money spent on wages, or what amounts are owed to suppliers. Each of these balances has their own account.

The COA is essentially a chart that maps a company’s account types by category. It also dictates how the transactions should be entered in the ledger.

How does a COA work?

A COA typically includes a name, a short description, and an identification code for each of the different accounts. A company’s transactions are then recorded throughout the year by debiting and crediting against these accounts.

Let’s look at a sample COA for a bakery, Pies-A-Plenty:

Reference NumberAccount DescriptionAccount Type

1010

Cash

Assets

1020

Commercial Baking Equipment

Assets

2010

Accounts Payable

Liabilities

3010

Pies-A-Plenty Owners Equity

Equity

4010

Pie Sales

Revenues

5010

Bakery Rent

Expenses

5020

Bakery Employee Wages

Expenses

Typically, a COA contains these different accounts types:

  • Asset accounts: This includes things like fixed assets, prepaid expenses, accounts receivable, cash, etc.
  • Liability accounts: This includes things like notes payable, lines of credit, accounts payable, debt, etc.
  • Equity accounts: This includes things like owner’s capital, distributions, stock, dividends, retained earnings, etc.
  • Revenue accounts: This includes things like sales, services fees, etc.
  • Expense accounts: This includes things like wages and salaries, rent, utilities, etc.
  • Gain and loss accounts: This includes things like interest, investment, disposal of an asset, etc.

For each of these accounts, the company’s ledger shows the account balance at the beginning of a given period, all credits and debits from the account during that period, and the ending balance at the end of that period.


While COAs can be tailored to a specific company’s needs and operations, they must still follow the guidelines of the Financial Accounting Standards Board (FASB) and generally accepted accounting principles (GAAP).


To learn more about the Chart of Accounts and related topics, take a look at these articles:

Try Modern Treasury

See how smooth payment operations can be.

Talk to sales
More from

Learn

Learn topic image

Ledgers are foundational to any company that moves money at scale. Explore the accounting fundamentals behind the ledgering process, the differences between application ledgers and general ledgers, and more.

A chart of accounts (COA) is an index of all the different accounts within a company’s ledger.

Read more

A digital wallet (also sometimes called an electronic wallet) is an application that securely stores digital payment information and password data for a user.

Read more

A Ledger Database is a database that stores accounting data. More specifically, a ledger database can store the current and historical value of a company’s financial data.

Read more

Learn the difference between Single-Entry Accounting and Double-Entry Accounting

Read more

Data immutability is the idea that information within a database cannot be deleted or changed. In immutable—or append-only—databases, data can only ever be added.

Read more

In the context of software, concurrency control is the ability for different parts of a program or algorithm to complete simultaneously without conflict. Concurrency controls in a database ensure that simultaneous transactions will be parsed appropriately.

Read more

An API call is idempotent if it has the same result, regardless of how many times it is applied. Inadvertent duplicate API calls can cause unintended consequences for a business, idempotency helps provide protection against that.

Read more

A ledger API allows companies who need to move money at scale quickly and easily access, track, audit, and unify all of their financial data in one place.

Read more

The ledger balance, also called the current balance, is the opening amount of money in any checking account every morning. The ledger balance should remain the same for the duration of the day.

Read more

A ledger (also called a general ledger, accounting ledger, or financial ledger) is a record-keeping system for a company’s financial transaction data.

Read more

A subsidiary ledger is used to keep track of the details for a specific control account within a company’s general ledger.

Read more

Subscribe to Journal updates

Discover product features and get primers on the payments industry.

Subscribe

Products

Platform

Modern Treasury For

Case Studies

Insights

Documentation

Company

Legal


Popular Integrations

© Modern Treasury Corp.