Category

1.1. Chart of Accounts

Theory

00:00 What is a chart of accounts;
01:07 Key components of a chart of accounts explained;
01:27 Benefits of using a structured chart of accounts;
01:44 The five main account categories in accounting;
02:04 Understanding input and output tax accounts.

Key Terms & Definitions

Chart of Accounts (COA) — A structured list of all accounts used by a business to record financial transactions. It serves as the foundation of the entire accounting system and ensures consistency, clarity, and accurate financial reporting.

Account — An individual record within the Chart of Accounts used to track a specific type of financial activity, such as cash, sales, rent, or loans.

Account Name — A descriptive title that explains what the account is used for (e.g., “Cash,” “Sales Revenue,” “Office Rent”).

Account Code — A unique numeric identifier assigned to each account to organize accounts logically and support system automation and scalability.

Account Category — Defines the financial role of the account, such as Asset, Liability, Equity, Income, or Expense. Categories determine how transactions affect financial statements.

Five Fundamental Account Categories:

  • Assets — Resources owned or controlled by a business that bring future economic benefit. Examples: Cash, Bank, Inventory, Equipment.
  • Liabilities — Amounts the business owes to others, such as lenders or suppliers. Examples: Loans, Accounts Payable, Taxes Payable.
  • Equity — The owner’s interest in the business after liabilities are deducted from assets. Examples: Share Capital, Retained Earnings.
  • Income – Money earned from business activities such as selling products or providing services. Examples: Sales Revenue, Service Income.
  • Expenses – Costs incurred to operate the business and generate income. Examples: Salaries, Rent, Utilities, Marketing.