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    Five Digit Chart of Accounts

    The number of digits used to describe each account in a chart of accounts drives the level of detail that can be recorded. A five digit chart of accounts is used by organizations that want to track information at the departmental level. With a five-digit code, they can produce separate income statements for each department.

    This format duplicates the account codes found in a three digit chart of accounts, but then adds a two-digit code to the left, which indicates specific departments. The three-digit codes for expenses (and sometimes also revenues) are then duplicated for each department for which management wants to record information.

    A sample of the five digit chart of accounts format follows, using the accounting and production departments to show how expense account codes can be duplicated.

    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 Accounting Bank charges
    10-805 Accounting Benefits
    10-810 Accounting Depreciation
    10-815 Accounting Insurance
    10-825 Accounting Office supplies
    10-830 Accounting Salaries and wages
    10-835 Accounting Telephones
    10-840 Accounting Training
    10-845 Accounting Travel and entertainment
    10-850 Accounting Utilities
    10-855 Accounting Other expenses
    10-860 Accounting Interest expense
    20-800 Production Bank charges
    20-805 Production Benefits
    20-810 Production Depreciation
    20-815 Production Insurance
    20-825 Production Office supplies
    20-830 Production Salaries and wages
    20-835 Production Telephones
    20-840 Production Training
    20-845 Production Travel and entertainment
    20-850 Production Utilities
    20-855 Production Other expenses
    20-860 Production Interest expense
    00-900 xxx Extraordinary items

    The preceding sample chart of accounts shows an exact duplication of accounts for each department listed. This is not necessarily the case in reality, since some departments have accounts for which they are the only probable users. For example, the accounting department in the example has an account for bank charges that the production department is unlikely to use. Thus, some accounts can be avoided by flagging them as inactive in the accounting system. By doing so, they do not appear in the formal chart of accounts.

    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