Setting Up a Chart of Accounts for Your Startup

Your startup’s chart of accounts (COA) acts as a roadmap for your financial data. It’s a structured list of all the accounts – assets, liabilities, equity, revenue, and expenses – that your startup uses to record transactions in the general ledger. The general ledger serves as the central hub for all your company’s financial information, capturing every detail down to the smallest expense.

The COA guides you on where to record each transaction in the general ledger and makes it easy to locate those transactions later. As the backbone of your accounting system, the chart of accounts provides a systematic way to organize, categorize, and track all your financial activities.

Charts of accounts can change based on business sector

A chart of accounts is a structured list of all the accounts and categories a business uses to record financial transactions. While every COA typically includes assets, liabilities, equity, revenues, and expenses, the specific accounts and categories within a chart of accounts can vary based on the type of business due to differences in operations, industries, and reporting requirements.

Charts of accounts by industry

Why is your startup’s chart of accounts important?

Your chart of accounts is critical to good bookkeeping and financial management. The COA allows you to sort and categorize all your startup’s transactions during a specific period. Once you’ve separated your revenue, assets, liabilities, and expenses, you can see how effective the different areas of your business are.

Your chart of accounts helps you with:

Financial reporting. A well-structured COA facilitates accurate and standardized financial reporting. It provides your stakeholders with insights into the financial health of the business, aiding in your decisions and strategic planning.
Budgeting and forecasting. By categorizing and reviewing expenses and revenues, your business can effectively budget and forecast future financial performance. This helps you set realistic goals and monitor your progress over time.
Compliance and taxation. A properly maintained chart of accounts helps make sure that your company is in compliance with regulatory requirements, and simplifies the tax filing process. It also provides a clear audit trail, minimizing the risk of errors or discrepancies.
Analysis and insights. With a detailed COA, your business can conduct in-depth financial analysis and gain valuable insights, like identifying cost-saving opportunities or evaluating the profitability of your product.
Audit trail. Using the chart of accounts, businesses can quickly identify any discrepancies in their financial statements, helping them investigate and correct problems.
Investor‑ready reporting. A clean, consistent startup chart of accounts makes it much easier to produce GAAP‑style financials that board members, VCs, and potential acquirers can understand and compare.

Another important point about your chart of accounts is that they are generally standardized across businesses. While individual companies may have some additional account types that are specific to that industry (more on that below), the main categories are used by all businesses. That makes it easy for an accountant or financial professional to come into your business and quickly understand your finances.

Building a chart of accounts

The basic framework of a chart of accounts is consistent across businesses. However, you’ll have to tailor your COA to the specific needs and structure of your startup. Your COA will consist of the accounts you’ve identified and added to your general ledger for recording transactions. Here are some steps that we follow to create a customized COA for startup clients:

Understanding your business. We analyze the nature of your business operations, revenue streams, and the expense categories you use, to make sure your COA is aligned with your company’s goals.
Creating hierarchy and structure. We establish a logical hierarchy and structure for your accounts, balancing the need for detail with the ease of use.
Build in flexibility. We anticipate future growth and changes in your business environment, and design the COA with scalability and flexibility in mind.

A typical chart of accounts consists of several components:

Account Code. Each account is assigned a unique numerical or alphanumeric code for easy identification and reference.
Account Name. This is a brief description of the account, providing clarity on its purpose and contents.
Account Type. Accounts are categorized into different types such as assets, liabilities, equity, revenue, and expenses, enabling proper classification of financial transactions.
Sub-Accounts. Some accounts may have sub-accounts for further granularity and detail. For example, under the “Expenses” category, you might have sub-accounts like “Advertising Expenses,” “Utilities,” etc.

Your accounts will typically be listed in the order that they appear in your financial statements. Normally balance sheet accounts, including assets and liabilities, are listed first. Accounts that feed into your income statement will come next, including revenue and expense accounts.

While COAs can be flexible to fit the needs of your individual business, most organizations use a common numerical scheme to identify accounts. In many systems, the first digit (or first few digits) of the account number indicate which of the main groups the account belongs to.

The basic account types include

1000 - 1999	2000 - 2999	3000 - 3999	4000 - 4999	5000 - 5999
Assets	Liabilities	Equity	Income or Revenue	Expenses

These broad categories correspond to the requirements for two financial statements, the balance sheet and income statement. The balance sheet uses assets, liabilities, and equity, while the income statement relies on income/revenue and expenses.

The common numbering system helps to find and reference specific accounts. The numbering system can vary for individual companies, but they generally follow the standard convention noted above.

At Kruze, we’ve expanded on those basic categories to better serve our clients and provide more detailed information. We use a six-digit numbering system, which allows us to create more unique accounts in each category, to capture more information.

We use the following categories and number groupings

Category	Range
Current Assets	100000 - 199999
Liabilities	200000 - 299999
Equity	300000 - 399999
Sales	400000 - 499999
Cost of Good Sold	500000 - 599999
Sales, General, and Administrative Expenses	600000 - 699999
Research & Development Expenses	700000 - 799999
Other Operating Expenses	800000 - 899999
Other Income / Expenses	900000 - 999999

Under these accounts, you’ll find sub-accounts that roll up into the main asset category. Let’s look at a more detailed breakdown of some of the Asset category for a startup with three different checking accounts.

Account Number	Account / Subaccount Name	Parent Account Number	Parent Account Name	Details
100000	Current Assets	N/A	N/A	N/A
101000	Bank Account 1	100000	Current Assets	Checking
102000	Bank Account 2	100000	Current Assets	Checking
103000	Bank Account 3	100000	Current Assets	Checking

All of the checking accounts have unique account numbers beginning with the digit 1 to indicate they are assets. They are grouped under Current Assets with the parent account number noted in the COA. It’s easy to see what type of account each listing is and what group each record belongs to.

What items go into the COA categories?

The basic categories noted above are the ones that most startups will want to include in their charts of accounts, along with other categories tailored to your business. Let’s look at each category in more detail.

Remember, these lists aren’t comprehensive; your startup may have other categories based on the type of business it conducts.

Assets

Assets are the funds that your startup has on hand, any funds owed to you, and any property your startup owns. Some examples are:

Cash (main checking account).
Cash for payroll.
Marketable securities, like Treasury bills.
Savings accounts.
Prepaid expenses.
Accounts receivable, which is money owed to you by customers for your products or services.
Property your company owns, like equipment, vehicles, and real estate, but also intangibles like patents or trademarks.
Inventory, which includes products you have ready for sale but also pre-paid materials, supplies, and parts.

Liabilities

Liabilities are money that your startup owes or are due for payment. Examples include:

Accounts payable, which are normally funds that you owe to vendors or contractors.
Customer down payments and deposits.
Company credit cards.
Business loans or debt.
Income and sales taxes payable.

Equity

Equity is the value of your startup after you deduct all the liabilities from the assets. You’ll see it represented by the balance sheet formula: Assets - Liabilities = Shareholders’ Equity. Note that this is an accounting definition (it is the “accounting equation”) and it is not the same as the valuation that VCs put on your business when they invest equity. Examples of items in this category include: :

Common stock.
Preferred stock.
Retained earnings.

Income

Income or revenue is the money you generate from business activities, like:

Sales of your product or service.
Interest income from bank accounts or other investments.
Sales returns and allowances.
Grant revenue for certain businesses.
Fees earned.

Expenses

Expenses are often divided into direct and indirect expenses. Direct expenses feed into your cost of goods sold (COGS) are linked to a specific cost object (any item for which costs are being separately measured). Direct expenses include items like:

Labor costs like salaries, employee benefits, and any employment taxes your company is responsible for.
Material costs such as parts or raw materials you need to build your product.
Subcontractor or non-employee expenses that are required for your product or service.
Equipment cost, including both equipment your startup owns and rents.

Indirect expenses, also known as selling, general, and administrative (SG&A) expenses or overhead, are expenses that are associated with your entire business, and can’t be attributed to a cost object. These expenses can include:

Administrative costs including labor and administrative software.
Office expenses like rent or office supplies.
Taxes including income and sales taxes.
Insurance like liability, workers compensation, and automotive.

Managing your chart of accounts

The process of recording a startup’s financial transactions is known as bookkeeping. Each specific transaction is recorded in an account created for that type of transaction. The individual accounts make up your company’s general ledger, a comprehensive listing of every transaction.

The first step in bookkeeping is entering transactions in a journal. This is a chronological record of every transaction. After a transaction is recorded in a journal, those amounts are posted to the appropriate accounts.

Transactions are recorded using the double-entry accounting system, with each transaction having an equal and opposite effect in at least two different accounts. Called debits and credits, debits increase asset and expense accounts or decrease liability and equity accounts, while credits increase liability, equity, and revenue accounts or decrease asset and expense accounts. Debits and credits must always balance in total.

For a simple example, let’s assume your startup issues an invoice to a customer for $10,000. Your accountant will record the $10,000 as a debit to your accounts receivable (an asset account). At the same time, your accountant will record a $10,000 credit in your revenue account. When your customer pays your invoice, the accountant records a $10,000 credit in accounts receivable, and a $10,000 debit in your cash accounts. All the credits and debits balance.

Sample chart of accounts

A chart of accounts that’s compatible with generally accepted accounting principles (GAAP) contains all the information needed for your startup’s balance sheet (assets, liabilities, and equity) and the income/profit and loss statement (income/revenue and expenses). Along with unique account numbers, each account is assigned a name.

As your startup grows, you may need to make changes to your chart of accounts. You might want to add an account because you just started using a new credit card. Or you might want to delete an account because you’re not using it any longer. It’s okay to add an account to the COA during the year, but you shouldn’t delete any accounts until your books are closed at the end of the year.

The following table includes the standard chart of accounts that Kruze uses for our clients. This COA is customized based on the individual company and the industry it serves. For example, a SaaS company’s chart of accounts could include Software Subscription Revenue under the Income parent account category.

Account Number	Account / Subaccount Name	Parent Account Number	Parent Account Name	Details
100000	Current Assets	N/A	N/A	N/A
101000	Bank Escrow	100000	Current Assets	Checking
102000	Bank Operating	100000	Current Assets	Checking
103000	Online Payments	100000	Current Assets	Cash on hand
104000	Bank Checking 1	100000	Current Assets	Checking
105000	Bank Checking 2	100000	Current Assets	Checking
106000	Money Market 1	100000	Current Assets	Checking
107000	Checking 3	100000	Current Assets	Checking
111000	Invoicing Money Out Clearing	100000	Current Assets	Checking
112000	Invoicing Money In Clearing	100000	Current Assets	Checking
120000	Accounts Receivable	100000	Current Assets	Accounts Receivable (A/R)
130000	Other Current Assets	100000	Current Assets	Other Current Assets
131000	Prepaids	100000	Current Assets	Prepaid Expenses
131100	Prepaid Expenses	100000	Current Assets	Prepaid Expenses
131200	Prepaid Rent	100000	Current Assets	Prepaid Expenses
132000	Payroll Receivable	100000	Current Assets	Other Current Assets
133000	Clearing Account	100000	Current Assets	Other Current Assets
133100	Clearing Account 1	100000	Current Assets	Other Current Assets
133200	Clearing Account 2	100000	Current Assets	Other Current Assets
133300	Other Clearing	100000	Current Assets	Other Current Assets
134000	Deferred Cost of Revenue	100000	Current Assets	Other Current Assets
135000	Deferred Refunds & Discounts	100000	Current Assets	Other Current Assets
136000	Accrued Revenue	100000	Current Assets	Other Current Assets
137000	Loan to Shareholder	100000	Current Assets	Other Current Assets
138000	Undeposited Funds	100000	Current Assets	Undeposited Funds
150000	Fixed Assets	100000	Fixed Assets	Depletable Assets
151000	Furniture & Fixtures	100000	Fixed Assets	Fixed Asset Furniture
152000	Computers	100000	Fixed Assets	Fixed Asset Computers
153000	Office Equipment	100000	Fixed Assets	Fixed Asset Copiers
154000	Machinery & Equipment	100000	Fixed Assets	Machinery & Equipment
155000	Autos & Trucks	100000	Fixed Assets	Vehicles
156000	Building	100000	Fixed Assets	Buildings
157000	Land	100000	Fixed Assets	Land
158000	Leasehold Improvements	100000	Fixed Assets	Leasehold Improvements
159000	Accumulated Depreciation	100000	Fixed Assets	Accumulated Depreciation
160000	Intangible Assets	100000	Intangible Assets	Intangible Assets
161000	Domain	100000	Intangible Assets	Intangible Assets
162000	Trademarks	100000	Intangible Assets	Intangible Assets
163000	Patents	100000	Intangible Assets	Intangible Assets
164000	Intangible Asset 1	100000	Intangible Assets	Intangible Assets
165000	Intangible Asset 2	100000	Intangible Assets	Intangible Assets
169000	Accumulated Amortization	100000	Intangible Assets	Accumulated Amortization
170000	Other Assets	100000	Current Assets	Other Long-term Assets
171000	Accumulated Depreciation	100000	Current Assets	Other fixed assets
172000	Security Deposit	100000	Current Assets	Security Deposits
173000	Interest Receivable	100000	Current Assets	Other Long-term Assets
200000	Liabilities	N/A	N/A	N/A
210000	Accounts Payable	200000	Liabilities	Accounts Payable (A/P)
220000	Credit Cards	200000	Liabilities	Credit Card
221000	Credit Card 1	200000	Liabilities	Credit Card
222000	Credit Card 2	200000	Liabilities	Credit Card
223000	Credit Card 3	200000	Liabilities	Credit Card
224000	Credit Card 4	200000	Liabilities	Credit Card
225000	Credit Card 5	200000	Liabilities	Credit Card
230000	Other Current Liabilities	200000	Liabilities	Other Current Liabilities
231000	401(k) Payable	200000	Liabilities	Other Current Liabilities
232000	Loan from Shareholder	200000	Liabilities	Other Current Liabilities
233000	Payroll Liabilities	200000	Liabilities	Payroll Clearing
234000	Payroll Tax Liabilities	200000	Liabilities	Payroll Tax Payable
235000	Accruals	200000	Liabilities	Other Current Liabilities
235100	Accrued Expenses	200000	Liabilities	Other Current Liabilities
235200	Accrued Rent	200000	Liabilities	Other Current Liabilities
235300	Accrued Vacation	200000	Liabilities	Other Current Liabilities
235400	Employee Reimbursement Liability	200000	Liabilities	Other Current Liabilities
236000	Taxes Payable	200000	Liabilities	Other Current Liabilities
236100	Sales Tax Payable	200000	Liabilities	Other Current Liabilities
236200	Use Tax Payable	200000	Liabilities	Other Current Liabilities
236300	SF Tax Payable	200000	Liabilities	Other Current Liabilities
237000	Deferred Revenue	200000	Liabilities	Other Current Liabilities
238000	Sublease Deposit & Prepaid Rent	200000	Liabilities	Other Current Liabilities
240000	Long Term Liabilities	200000	Liabilities	Other Long Term Liabilities
241000	Notes / Bonds Payable	200000	Liabilities	Notes Payable
242000	Accrued Interest	200000	Liabilities	Notes Payable
300000	Equity	N/A	N/A	N/A
301000	Common Stock	300000	Equity	Common Stock
301001	Common Stock - Par Value	300000	Equity	Common Stock
301002	Common Stock - Additional Paid-In Capital (APIC)	300000	Equity	Common Stock
320000	Preferred Stock	300000	Equity	Preferred Stock
320000	Series Seed: Preferred Stock	300000	Equity	Series Seed
320000	Series Seed: Preferred Stock - Par Value	300000	Equity	Series Seed
320000	Preferred Stock: Series Seed - Additional Paid-In Capital (APIC)	300000	Equity	Series Seed
320000	Preferred Stock: Series Seed - Financing Costs	300000	Equity	Series Seed
320000	Preferred Stock: Series A	300000	Equity	Preferred Stock
320000	Preferred Stock: Series A - Par Value	300000	Equity	Series A
320000	Preferred Stock: Series A - Additional Paid-In Capital (APIC)	300000	Equity	Series A
320000	Preferred Stock: Series A - Financing Costs	300000	Equity	Series A
320000	Preferred Stock: Series B	300000	Equity	Preferred Stock
320000	Preferred Stock: Series B - Par Value	300000	Equity	Series B
320000	Preferred Stock: Series B - Additional Paid-In Capital (APIC)	300000	Equity	Series B
320000	Preferred Stock: Series B - Financing Costs	300000	Equity	Series B
330000	Treasury Stock	300000	Equity	Treasury Stock
340000	SAFE Notes	300000	Equity	Preferred Stock
400000	Sales	N/A	N/A	N/A
401000	Product 1	400000	Sales	Sales of Product Income
402000	Product 2	400000	Sales	Sales of Product Income
403000	Product 3	400000	Sales	Sales of Product Income
404000	Discounts	400000	Sales	Discounts/Refunds Given
405000	Refunds	400000	Sales	Discounts/Refunds Given
500000	Cost of Goods Sold	N/A	N/A	N/A
501000	Direct Labor	500000	Cost of Goods Sold	Cost of Labor - Cost of Services (COS)
502000	Direct Parts & Materials	500000	Cost of Goods Sold	Supplies & Materials - Cost of Goods Sold (COGS)
502001	Direct Parts & Materials: Mechanical	500000	Cost of Goods Sold	Other Costs of Services (COS)
502002	Electrical	500000	Cost of Goods Sold	Other Costs of Services (COS)
503000	Freight & Delivery	500000	Cost of Goods Sold	Shipping - Cost of Services (COS)
504000	Overhead Allocation	500000	Cost of Goods Sold	Other Costs of Services (COS)
505000	Hosting Fees	500000	Cost of Goods Sold	Other Costs of Services - COS
600000	Sales, General, and Administrative (SGA) Expenses	N/A	N/A	N/A
601000	Sales & Marketing	600000	SGA Expenses	Advertising/Promotional
601300	Sales & Marketing: Paid Ads	600000	SGA Expenses	Advertising/Promotional
601400	Sales & Marketing: Promotional Items	600000	SGA Expenses	Advertising/Promotional
601500	Sales & Marketing: Conferences	600000	SGA Expenses	Advertising/Promotional
601600	Sales & Marketing: Sales Commission	600000	SGA Expenses	Advertising/Promotional
602000	Payroll Expense	600000	SGA Expenses	Payroll Expenses
602100	Wages	600000	SGA Expenses	Payroll Expenses
602102	Bonuses	600000	SGA Expenses	Payroll Expenses
602103	Vacation Expense	600000	SGA Expenses	Payroll Expenses
602104	Payroll Taxes	600000	SGA Expenses	Payroll Expenses
602105	Employee Benefits	600000	SGA Expenses	Payroll Expenses
602106	Workers’ Compensation	600000	SGA Expenses	Payroll Expenses
602200	Payroll Expense - International	600000	SGA Expenses	Payroll Expenses
602201	Wages - International	600000	SGA Expenses	Payroll Expenses
602202	Payroll Taxes - International	600000	SGA Expenses	Payroll Expenses
602203	Employee Benefits - International	600000	SGA Expenses	Payroll Expenses
602300	Payroll Processing Fees	600000	SGA Expenses	Payroll Expenses
603000	Software & Web Services	600000	SGA Expenses	Office/General Administrative Expenses
604000	Professional Fees	600000	SGA Expenses	Legal & Professional Fees
604100	Professional Fees: Legal	600000	SGA Expenses	Legal & Professional Fees
604200	Professional Fees: Accounting	600000	SGA Expenses	Legal & Professional Fees
604300	Professional Fees: Recruiting	600000	SGA Expenses	Legal & Professional Fees
604400	Professional Fees: Contractors & Consultants	600000	SGA Expenses	Legal & Professional Fees
605000	Travel Expenses	600000	SGA Expenses	Travel
606000	Meals	600000	SGA Expenses	Travel
607000	Entertainment / Team Events	600000	SGA Expenses	Other Business Expenses
608000	Insurance Expense	600000	SGA Expenses	Insurance
609000	Office Furniture / Equipment	600000	SGA Expenses	Office/General Administrative Expenses
610000	Office Supplies & General Expense	600000	SGA Expenses	Office/General Administrative Expenses
611000	Telephone / Internet Expense	600000	SGA Expenses	Office/General Administrative Expenses
612000	Utilities Expense	600000	SGA Expenses	Office/General Administrative Expenses
613000	Bank Charges	600000	SGA Expenses	Bank Charges
614000	Rent Expense	600000	SGA Expenses	Rent or Lease of Buildings
615000	Gifts	600000	SGA Expenses	Office/General Administrative Expenses
700000	Research & Development (R&D) Expenses	N/A	N/A	N/A
710000	Direct Labor - R&D	700000	R&D Expenses	Other Business Expenses
720000	Machinery & Equipment	700000	R&D Expenses	Other Business Expenses
730000	Supplies	700000	R&D Expenses	Other Business Expenses
740000	Freight & Delivery - R&D	700000	R&D Expenses	Other Business Expenses
750000	Other Indirect Costs	700000	R&D Expenses	Other Business Expenses
800000	Other Operating Expenses	N/A	N/A	N/A
810000	Depreciation Expense	800000	Other Operating Expenses	Other Business Expenses
820000	Amortization Expense	800000	Other Operating Expenses	Other Business Expenses
900000	Other (Income) / Expenses	N/A	N/A	N/A
901000	Interest (Income) / Expense	900000	Other (Income) / Expenses	Other Miscellaneous Expense
902000	Taxes & Licenses	900000	Other (Income) / Expenses	Other Miscellaneous Expense
902100	R&D Tax Credit Income	900000	Other (Income) / Expenses	Other Miscellaneous Expense
903000	Bad Debt Expense	900000	Other (Income) / Expenses	Other Miscellaneous Expense
904000	Misc Other (Income) / Expenses	900000	Other (Income) / Expenses	Other Miscellaneous Expense

A Chart of Accounts Can Guide Your Business Decisions

The chart of accounts is more than a list of numbers and names; it’s a powerful tool that drives financial transparency, efficiency, and strategic decision-making. For startup founders, a well-crafted chart of accounts is the cornerstone of sound financial management. For more information about charts of accounts and accounting for startups, contact us.

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