Chart of accounts explained
The chart of accounts is the list of every bucket your money can go into. Each transaction you record moves an amount from one account to another, so the chart decides what your reports can show: if there is no separate account for software subscriptions, your income statement can’t show how much you spend on them.
Every account belongs to one of five types. Assets are what the business owns, liabilities are what it owes and equity is the owners’ stake; those three make up the balance sheet. Income and expenses make up the income statement. Many businesses number their accounts by type, for example 1000s for assets and 6000s for expenses, so related accounts sit together and reports read in a sensible order.
A good chart is detailed enough to answer the questions you and your tax preparer ask, and no more. It’s easier to add an account later than to untangle one that mixes unrelated costs.
Example: a starter chart for a small design studio
A short chart, numbered by type:
| Number | Account | Type |
|---|---|---|
| 1000 | Business checking | Asset |
| 1200 | Accounts receivable | Asset |
| 1500 | Computer equipment | Asset |
| 2000 | Accounts payable | Liability |
| 2100 | Business credit card | Liability |
| 3000 | Owner’s equity | Equity |
| 4000 | Design services | Income |
| 6100 | Rent | Expense |
| 6200 | Software subscriptions | Expense |
Paying the Adobe subscription by card moves the amount to 6200 Software subscriptions and adds the same amount to 2100 Business credit card.
Where you’ll see it in fiscal50
When you set up a company, you choose fiscal50’s pre-configured chart of accounts or bring your own. Coming from QuickBooks, the Configuration Agent reads your exported chart of accounts and matches each account by name before anything is imported.
fiscal50 also adds accounts for you where it should: linking a bank or credit card through Plaid creates its account in the chart, and system accounts such as Accounts Receivable are ones fiscal50 requires and posts to automatically. Expense categories map to accounts in the chart, so each bill line lands in the right place.