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Five Digit Chart of Accounts
A five digit chart of accounts is designed for those organizations with clearly defined departments, each of which is tracked with a separate income statement. This format uses the same account codes for the balance sheet accounts used for three digit account codes, but replicates at least the operating expenses for each department (and sometimes for the revenue accounts, too). An example of this format is as follows, using the engineering and sales departments to illustrate the duplication of accounts:
| Account Number | Department | Description |
| 00-010 | xxx | Cash |
| 00-020 | xxx | Petty cash |
| 00-030 | xxx | Accounts receivable |
| 00-040 | xxx | Reserve for bad debts |
| 00-050 | xxx | Marketable securities |
| 00-060 | xxx | Raw materials inventory |
| 00-070 | xxx | Work-in-process inventory |
| 00-080 | xxx | Finished goods inventory |
| 00-090 | xxx | Reserve for obsolete inventory |
| 00-100 | xxx | Fixed assets – Computer equipment |
| 00-110 | xxx | Fixed assets – Computer software |
| 00-120 | xxx | Fixed assets – Furniture and fixtures |
| 00-130 | xxx | Fixed assets – Leasehold improvements |
| 00-140 | xxx | Fixed assets – Machinery |
| 00-150 | xxx | Accumulated depreciation – computer equipment |
| 00-160 | xxx | Accumulated depreciation – Computer software |
| 00-170 | xxx | Accumulated depreciation – Furniture and fixtures |
| 00-180 | xxx | Accumulated depreciation – Leasehold improvements |
| 00-190 | xxx | Accumulated depreciation – Machinery |
| 00-200 | xxx | Other assets |
| 00-300 | xxx | Accounts payable |
| 00-310 | xxx | Accrued payroll liability |
| 00-320 | xxx | Accrued vacation liability |
| 00-330 | xxx | Accrued expenses liability – other |
| 00-340 | xxx | Unremitted sales taxes |
| 00-350 | xxx | Unremitted pension payments |
| 00-360 | xxx | Short-term notes payable |
| 00-370 | xxx | Other short-term liabilities |
| 00-400 | xxx | Long-term notes payable |
| 00-500 | xxx | Capital stock |
| 00-510 | xxx | Retained earnings |
| 00-600 | xxx | Revenue |
| 00-700 | xxx | Cost of goods sold – materials |
| 00-710 | xxx | Cost of goods sold – direct labor |
| 00-720 | xxx | Cost of goods sold – manufacturing supplies |
| 00-730 | xxx | Cost of goods sold – applied overhead |
| 10-800 | Engineering | Bank charges |
| 10-805 | Engineering | Benefits |
| 10-810 | Engineering | Depreciation |
| 10-815 | Engineering | Insurance |
| 10-825 | Engineering | Office supplies |
| 10-830 | Engineering | Salaries and wages |
| 10-835 | Engineering | Telephones |
| 10-840 | Engineering | Training |
| 10-845 | Engineering | Travel and entertainment |
| 10-850 | Engineering | Utilities |
| 10-855 | Engineering | Other expenses |
| 10-860 | Engineering | Interest expense |
| 20-800 | Sales | Bank charges |
| 20-805 | Sales | Benefits |
| 20-810 | Sales | Depreciation |
| 20-815 | Sales | Insurance |
| 20-825 | Sales | Office supplies |
| 20-830 | Sales | Salaries and wages |
| 20-835 | Sales | Telephones |
| 20-840 | Sales | Training |
| 20-845 | Sales | Travel and entertainment |
| 20-850 | Sales | Utilities |
| 20-855 | Sales | Other expenses |
| 20-860 | Sales | Interest expense |
| 00-900 | xxx | Extraordinary items |
In this example, all expense accounts are replicated for every department. This does not mean, however, that all accounts must be used for every department. For example, it is most unlikely that bank charges will be ascribed to either the engineering or sales departments. Accordingly, those accounts that are not to be used can be rendered inactive in the accounting system, so that they never appear in the general ledger.
Related Topics
3-digit chart of accounts
7-digit chart of accounts
Alphanumeric account codes
Chart of accounts overview
Reduce the chart of accounts
Standardize the chart of accounts