Chart of Accounts NumberingExplained with Examples and How to Create a Numbering System

Written By:
Lisa Borga

Creating a Numbering System for a Chart of Accounts

When businesses want to number their chart of accounts, they first need to set up a structure for their accounts for use.

Then, codes will be assigned to the accounts, which will determine the storage and processing of financial information.

The first step that needs to be taken in determining the numbering for the chart of accounts is to consider their structure.

This involves considering the components that make up the account number.

These components are as follows:

• The Division Code:
  The division code is 2 digits that identify a particular company division that is part of a multi-division firm. This type of code would not be used in a single entity company. This code may be expanded to three digits should the company have over 99 subsidiaries.
• The Department Code:
  A department code is generally a two-digit code that is used to identify a particular department in a business. These departments would typically include sales, accounting, production, and engineering, among others.
• The Account Code:
  This is typically a three-digit code, and it describes what the account is, such as liabilities, expenses, or revenue.

One example of this would be a company with several divisions and departments.

The company would likely have a chart of accounts with numbering like this: xx-xx-xxx.

An additional example would be a company with only one division but a number of departments.

This company would not need to use the first two digits but would have a numbering system such as xx-xxx.

For a third example, a small business that doesn’t have any departments would likely use simply a 3-digit number which it would assign to all of its accounts.

This would be xxx.

After the business sets up its coding structure, it will number its accounts.

This would be the three-digit coding system explained earlier.

Businesses are free to use any numbering system they choose as there are no specific requirements for numbering systems.

But, there is a coding scheme that is commonly used, which is listed below.

Account codes:

Assets – 100 -199

Liabilities – 200-299

Equity accounts – 300-39

Revenues – 400-499

Expenses – 500-599

For a more thorough example of this coding scheme, a company assigns a “05” designator to a subsidy it owns, a “06” to the sales department, and “534” for entertainment expense.

This would result in a chart of accounts number of 05-06-534.