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Reading a chart of accounts you have never seen

Account code patterns, common abbreviations, duplicates and catch-all accounts, and the questions to ask your finance team.

Written by Misha Cajic

How are account codes usually grouped?

Many charts of accounts group codes by type. A common pattern:

Codes

Type

1000 to 1999

Assets

2000 to 2999

Liabilities

3000 to 3999

Equity

4000 to 4999

Revenue

5000 to 5999

Cost of sales

6000 to 9999

Expenses

Your business may use a different pattern. Use the Account Type column, not the code, to decide the type.

A business with several entities may give each entity its own codes, or share one chart of accounts across all of them.

What do the abbreviations mean?

Abbreviation

Meaning

Usual treatment

Accum dep, A/D

Accumulated depreciation

Exclude

Accr, Accrued

Accrual

Exclude, unless supplier invoices post there first

Prov

Provision: an estimate of a future cost

Exclude

I/C, Interco

Intercompany

Exclude

COGS, COS

Cost of goods sold, cost of sales

WIP

Work in progress

Exclude

GRNI

Goods received not invoiced

Exclude

P&E, PP&E

Plant and equipment

Include as Capital goods

R&M

Repairs and maintenance

Include

ROU

Right-of-use asset (a lease)

Opex, Capex

Operating spend, capital spend

What do I do with catch-all accounts?

Accounts such as Sundry expenses, Other operating costs or General expenses can hold anything. Include them, and flag them for your finance team.

If a catch-all account holds a large share of your spend, one category will not describe it. Use classification rules on the supplier and description to split it.

A suspense account holds amounts finance has not yet allocated. Ask what is in it before you decide.

Why does my chart of accounts have duplicates?

There are two kinds:

  • The same code appears twice. Each account code must be unique. Ask your finance team which row is correct, and remove the other before you upload.

  • The same name appears under two codes. These are two different accounts. They often come from a move to a new finance system, or from old accounts kept for history. Ask your finance team which one holds transactions in your reporting period.

An old account marked "do not use" can stay in the chart of accounts. If its transactions net to nil within that account, exclude it.

What do I ask my finance team?

Take these questions to your first meeting with finance:

  1. Where do supplier invoices first post for stock, for prepaid items such as insurance, and for freight and utilities?

  2. Do any supplier invoices post to an accrual or clearing account first?

  3. Which accounts hold month-end accruals, reversals or allocation journals?

  4. Which accounts are intercompany?

  5. Is depreciation posted to the same accounts as asset purchases?

  6. Is stock recorded as an asset, or as an expense with a year-end adjustment?

  7. Can the ledger extract include a column for the transaction type, such as Supplier invoice or Journal?

  8. Which accounts are catch-alls, and what goes into them?

  9. Does the export show one signed amount, or separate debit and credit columns?

  10. Did the chart of accounts change during the year, for example after a move to a new finance system?

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