What is a chart of accounts?
A chart of accounts is the complete list of accounts a business can post transactions to, each with its own code. It sets out the structure of the nominal ledger — which accounts exist, what each is for, and how they roll up into the profit and loss account and balance sheet. Every posting has to name one, so the chart decides what the accounts can later report on.
Also called COA, Nominal structure
How codes are usually structured
Most UK charts group accounts into numbered ranges, so the code itself says what kind of account it is. A common shape:
- 0000–0999 fixed assets — property, plant, vehicles, accumulated depreciation.
- 1000–1999 current assets — bank, debtors control, stock, prepayments.
- 2000–2999 liabilities — creditors control, VAT control, loans, accruals.
- 3000–3999 capital and reserves — share capital, retained profit.
- 4000–4999 income — sales, by product group or region.
- 5000–9999 costs — cost of sales, then overheads by category.
Cost centres and analysis, not more codes
The usual mistake is to build the analysis into the code list: separate sales accounts for every product, every region and every salesperson, and a chart that runs to thousands of lines.
The alternative is to keep one sales account and carry the analysis alongside it, as a cost centre or department against the posting. The account says what happened, the cost centre says where. That keeps the profit and loss readable while still letting you report by branch, and it means adding a new depot does not mean adding thirty accounts.
Getting it right at the start
A chart of accounts is easy to extend and painful to restructure, because the comparatives are already posted against the old codes. It is worth deciding three things before the first transaction: how granular the profit and loss needs to be, what has to be reportable separately, and which of those are better handled as cost centres than as accounts.
What this looks like in an accounting system
The chart is configured per company, which matters in a group: each company can carry its own structure while still consolidating, so a newly acquired business does not have to be forced onto the parent's codes on day one.
The cost-centre design is the part worth copying. Rather than multiplying accounts, a cost centre sits underneath the chart as a separate reporting dimension, letting the profit and loss be sliced by department, project or location without a single extra nominal code. One sales account, analysed many ways — which is why a well-built chart of accounts is usually shorter than people expect.
Chart of accounts questions.
What is a nominal code?
The reference number identifying one account in the chart of accounts — 4000 for sales, 7000 for wages. Posting to a nominal code is how a transaction is filed to the right account.
How many accounts should a chart of accounts have?
Fewer than most businesses build. If an account has not been posted to in a year, or exists only to split something you could analyse by cost centre, it is adding maintenance without adding information.
Can you change a chart of accounts later?
You can add to it freely. Restructuring is harder, because prior-year comparatives sit against the old codes and either have to be re-mapped or reported separately. Most software supports merging or renumbering, but it is a controlled exercise rather than a routine change.
What is the difference between a chart of accounts and a nominal ledger?
The chart of accounts is the list of accounts; the nominal ledger is the record of what has been posted to them. The chart defines the structure, the ledger holds the values.
Nominal Ledger
See a chart of accounts configured per company, with cost centres as a separate reporting dimension so the profit and loss stays readable as the business grows.
Explore the Nominal LedgerNext in the glossary.
What is a nominal ledger?
A nominal ledger is the central accounting record that holds every financial transaction a business makes, summarised by account.
Read the definition →What is a sales ledger?
A sales ledger is the record of everything each customer has been invoiced and everything they have paid, kept account by account.
Read the definition →What is a purchase ledger?
A purchase ledger is the record of everything each supplier has invoiced you and everything you have paid them, kept account by account.
Read the definition →