A well-structured chart of accounts is the foundation of accurate financial reporting. For startups, it does more than organize transactions—it shapes how founders understand performance, communicate with investors, and make decisions as the business grows.
This guide explains how a chart of accounts works, what to include, and how to structure it in a way that supports both day-to-day operations and long-term growth.
What is the Chart of Accounts?
The Chart of Accounts is a listing of the names of accounts used to record transactions in the company’s general ledger. These accounts are assigned a category: Assets, Liabilities, Equity, Income or Expense. These categories are further broken down into sub-categories such as, Current Assets, Other Current Assets or Non-current Assets. The Chart of Accounts organizes these accounts by type.
What is this listing of accounts used for?
These accounts will be shown on your company’s financial statements, so it is essential to have enough accounts to provide the detail necessary, but not too many where the end user of the financials is overwhelmed.
Are all Chart of Accounts the same?
No, that would be too easy. The Chart of Accounts vary between companies and are designed to suit the specific needs of an individual company. While most companies will have an “Office Supplies” expense account or a “Checking” asset account, there are certain accounts specific to each industry. For example, a service-based company may have no use for Cost of Goods Sold accounts, but the Cost of Goods Sold accounts are essential to a manufacturing company. Each business needs to determine specific items they want to keep track of. For example, to keep track of Administrative Salaries vs. Selling Salaries you would set up a separate account for each. The goal is to provide enough detail, but not too much detail where the financials end up unreadable because there is so much going on.
How Does a Chart of Accounts Support Startup Growth?
For early-stage companies, the chart of accounts is more than an accounting tool—it becomes the foundation for how financial information is used.
A well-structured chart of accounts can help:
- Prepare clean financials for investors
- Support forecasting and runway analysis
- Track key cost drivers as the business scales
- Align reporting with future funding expectations
As startups grow, financial structure starts to matter more—not less. Early clarity makes it easier to adapt as the business evolves.
Do you have an example of a Chart of Accounts?
Sure do! Below is an example Chart of Accounts, separated by which financial statement they will ultimately appear on.
Balance Sheet
The Balance Sheet is an accumulation of all activity shown at a specific point in time, such as December 31. Compare this to the Income Statement shown below, which is for a period of time, January – December.
Assets: What the company owns of value
Current Assets – Can be quickly converted to cash if necessary
– Checking
– Savings
– Accounts Receivable – Amounts owed to the company from customers
– Inventory
Other Current Assets
– Prepaid Expenses
– Employee Loans
Non-Current Assets or Fixed Assets
– Furniture & Equipment
– Leasehold Improvements
– Accumulated Depreciation: Fixed Assets have a useful life of more than one year. They are not expensed in the year purchased, instead they are depreciated each year until the entire value has been recovered or until sold
Other Assets
– Intangibles
-Patents & Trademarks
-Organizational Costs
-Goodwill
-Accumulated Amortization: Same as Accumulated Depreciation, except these accounts are amortized each year
-Long-term Notes Receivable
Liabilities – What the company owes
Current Liabilities
– Line of Credit
– Credit Card Payable
– Accounts Payable: Amounts you owe to vendors
– Payroll Taxes Payable
Long-term Liabilities
– Mortgage Payable
– Auto Loan Payable
Equity = Assets – Liabilities
Equity is the value of the company determined by adding up all items of value the company owns and subtracting all items the company owes. Equity will vary based on the entity type, for example:
Additional Paid in Capital and Capital Stock – These both apply for C-Corporation and S-Corporation owners
Owner Contributions/ Distributions – Apply to LLC’s and partnerships. S-Corporations can also have distributions
Retained Earnings – Income is closed each year to the Retained Earnings account, which is used to keep track of earnings/losses of the company over time. C-Corporations and S-Corporations utilize the retained earnings account
Partner Capital Accounts – These accounts are similar to retained earnings for LLCs and partnerships. Each partners’ allocation of company income or loss, along with their contributions and distributions are consolidated into their capital account at the end of the year
Income Statement
The Income Statement, or Profit & Loss Statement, is used to show the company’s Net Income/Loss over a period of time: a month, quarter, year. At the end of each year, the Net Income/Loss is closed to the company’s Retained Earnings account and the statement starts over fresh with the opening of a new year. Learn more about the Income Statement.
Income
Product Sales
– Consulting Income
– Returns & Allowances – will show as a negative number, reduces income
– Discounts – will show as a negative number, reduces income
Other Income
– Interest Income
– Gain on Sale of Equipment
Cost of Goods Sold – Direct costs from the production of goods
-Purchases
-Materials & Supplies
-Freight
Expenses
-Advertising & Marketing
-Office Supplies
-Rent Expense
-Interest Expense
-Professional Fees
-Depreciation
-Amortization
-Travel
Other Expenses
– Loss on Sale of Equipment
Frequently Asked Questions about The Chart of Accounts
Do startups need a custom chart of accounts?
Yes. While most software provides templates, startups benefit from tailoring accounts to match their business model and reporting needs.
How detailed should a chart of accounts be?
Detailed enough to provide insight, but not so complex that reports become difficult to interpret. The right balance depends on your stage and industry.
How to Get Started with The Chart of Accounts
The Chart of Accounts can be an overwhelming concept. Thankfully, most accounting software packages generate the list for you based on your industry. You can then customize the list to your specifications by adding, deleting or renaming accounts.
A chart of accounts doesn’t need to be perfect from day one—but it should be intentional. As your startup grows, having the right structure in place makes it easier to produce reliable financials, communicate with investors, and make informed decisions.
If you’re setting up or refining your financial structure, our team works with startups to align accounting, tax strategy, and growth planning from the outset.