Reading a chart of accounts
Objective: Use account numbering to locate and choose accounts.
Recommended first: The five account types
A chart of accounts is the list of every account a business uses, usually numbered by type. This course uses a common pattern: 1000s assets, 2000s liabilities, 3000s equity, 4000s revenue, 5000s cost of goods sold, 6000s operating expenses, and 7000s other expenses.
Within each group, accounts follow presentation order. Current assets such as Cash (1000) come before long-lived assets such as Equipment (1500). Each business chooses accounts that fit its activity — a café needs Inventory; a consultant may not.
A well-designed chart is consistent: similar items always go to the same account, so reports can be compared month to month. Before creating a new account, check whether an existing one already fits. Too many accounts make reports noisy; too few hide useful information. In this course every company uses codes from one shared master chart so you can build familiarity.
Check your work
- Is there a more specific account than 'Miscellaneous'?
- Does the account number fall in the right range for its type?
- Would another bookkeeper code this item the same way?
A café pays $95 to fix its espresso machine. The chart has Equipment (1500) and Repairs and Maintenance Expense (6800). A routine repair is an expense, so use 6800.
| Account | Debit | Credit |
|---|---|---|
| Repairs and Maintenance Expense | $95.00 | |
| Cash | $95.00 |
Common mistakes
✗ Creating a new account for every vendor.
✓ Vendors belong in a subledger; the chart groups by type of item.
Guided practice
Use hints freely here.
Item 1 of 2
Classify: Equipment
Classify the account “Equipment”. Choose its account type, its normal balance, and the financial statement where it is reported.
Independent practice
Try these without hints. Completing the lesson needs at least one independent item solved without revealing the answer.
Item 1 of 4
Classify: Notes Payable
Classify the account “Notes Payable”. Choose its account type, its normal balance, and the financial statement where it is reported.
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Key terms
- Chart of accounts
- The numbered list of all accounts a business uses.
- Subledger
- A detailed ledger supporting a control account.
References and provenance
- OpenStax, Principles of Accounting, Volume 1: Financial Accounting (accessed 2026-10-29)
Original lesson written for Bookkeeping Exercises (AI-assisted drafting). Calculations are verified by the platform's automated accounting tests. Not yet reviewed by a credentialed accountant. Updated 2026-10-29.