Chart of accounts numbering
/How to Create a Numbering System for a Chart of Accounts
Chart of accounts numbering involves setting up the structure of the accounts to be used, as well as assigning specific codes to the different general ledger accounts . The numbering system used is critical to the ways in which financial information is stored and manipulated. The first type of numbering to determine for a chart of accounts involves their structure. This is the layout of an account number, and involves the following components:
Division code- This is typically a two-digit code that identifies a specific company division within a multi-division company. It is not used by a single-entity company. The code can be expanded to three digits if there are more than 99 subsidiaries.
Department code- This is usually a two-digit code that identifies a specific department within a company, such as the accounting, engineering, or production departments.
Account code- This is usually a three digit code that describes the account itself, such as fixed assets , revenue , or supplies expense .
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For example, a multi-division company with several departments in each company would probably use chart of accounts numbering in this manner: xx-xx-xxx
As another example, a single-division company with multiple departments could dispense with the first two digits, and instead uses the following numbering scheme: xx-xxx
As a final example, a smaller business with no departments at all could just use the three digit code assigned to its accounts, which is: xxx
Once the coding structure is set, the numbering of accounts can take place. This is the three-digit coding referred to previously. A company can use any numbering system that it wants; there is no mandated approach. However, a common coding scheme is as follows:
Assets- Account codes 100-199
Liabilities- 200-299
Equity accounts- 300-399
Revenues- 400-499
Expenses- 500-599
As a complete example of the preceding outline of numbering, a parent company assigns the "03" designator to one of its subsidiaries , the "07" designator to the engineering department, and "550" to the travel and entertainment expense. This results in the following chart of accounts number:
03-07-550
