Three digit chart of accounts

A three digit chart of accounts allows a business to create a numerical sequence of accounts that can contain as many as 1,000 potential accounts.

The three-digit format is most commonly used by small businesses that do not break out the results of any departments or divisions in their financial statements.  A sample three digit chart of accounts is shown below:

Account Number Description
010 Cash
020 Petty cash
030 Accounts receivable
040 Reserve for bad debts
050 Marketable securities
060 Raw materials inventory
070 Work-in-process inventory
080 Finished goods inventory
090 Reserve for obsolete inventory
100 Fixed assets – Computer equipment
110 Fixed assets – Computer software
120 Fixed assets – Furniture and fixtures
130 Fixed assets – Leasehold improvements
140 Fixed assets – Machinery
150 Accumulated depreciation – computer equipment
160 Accumulated depreciation – Computer software
170 Accumulated depreciation – Furniture and fixtures
180 Accumulated depreciation – Leasehold improvements
190 Accumulated depreciation – Machinery
200 Other assets
300 Accounts payable
310 Accrued payroll liability
320 Accrued vacation liability
330 Accrued expenses liability – other
340 Unremitted sales taxes
350 Unremitted pension payments
360 Short-term notes payable
370 Other short-term liabilities
400 Long-term notes payable
500 Capital stock
510 Retained earnings
600 Revenue
700 Cost of goods sold – materials
710 Cost of goods sold – direct labor
720 Cost of goods sold – manufacturing supplies
730 Cost of goods sold – applied overhead
800 Bank charges
805 Benefits
810 Depreciation
815 Insurance
825 Office supplies
830 Salaries and wages
835 Telephones
840 Training
845 Travel and entertainment
850 Utilities
855 Other expenses
860 Interest expense
900 Extraordinary items

In the example, each block of related accounts begins with a different set of account numbers.  Thus, current liabilities begin with “300,” revenue items begin with “600,” and cost of goods sold items begin with “700.” This numbering scheme makes it easier for the accounting staff to remember where accounts are located within the chart of accounts. This type of account range format is also required by the report writing module in many accounting software packages.

When a company increases in size and wants to track information for individual subsidiaries or departments, it should instead adopt a 5-digit or 7-digit chart of accounts.