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 Courses

Bookkeeping Guidebook 
New Controller Guidebook