Understanding Numbering in a Chart of Accounts
Question: Do I need account numbers in addition to account names? If so, are there particular numbers?
Answer: I like using account numbers with account names for accounts in the chart of accounts (COA) because it makes it easier to distinguish one account from another more readily, as some account names are deceptively similar.
Account numbers should be assigned in the order in which types of account appear on the balance sheet, and then the income statement or profit and loss.
There are some who assign three-digit account numbers, but I prefer five digits. This leaves more room to add other accounts and their numbers over time. There is not a hard and fast rule about assigning account numbers, but I most often see:
- Asset Accounts: Begin with 1
- Liability Accounts: Begin with 2
- Equity Accounts: Begin with 3
- Income Accounts: Begin with 4
- Cost of Goods Sold Accounts: Begin with 5
- Expense Accounts: Begin with 6 or 7
Please email accounting questions you would like considered for the column to HGatter@AccountingSupportLLC.com with the subject line of "Ask the Accountant."
Harriet Gatter, owner of Accounting Support LLC, was an ad specialty distributor for 23 years and an adjunct professor of accounting at Neumann University. She sold her ad specialty business in 2012, became certified as a QuickBooks ProAdvisor, and now works exclusively with ad specialty distributors nationwide on their QuickBooks, order management and accounting needs.