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Chart of Accounts: Definition and Meaning
Definition
A chart of accounts is an organized list of all accounts used in a business’s accounting system.
Why It Matters
A well-designed chart of accounts helps a company classify transactions consistently and generate financial reports that management can use. The account structure should reflect the company’s operations, reporting needs, and industry-specific requirements.
Construction companies may need accounts that distinguish direct job costs, labor, materials, subcontractors, equipment, overhead, retainage, and other activity important to project reporting.
Example
A company’s chart of accounts may include separate accounts for cash, accounts receivable, sales, materials, subcontractors, payroll, rent, and equipment expense.
Related Terms
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