Level 1 · Lesson 1.57 minutes

The chart of accounts

Read a chart of accounts, understand its numbering and add an account in the right place.

Principles:
Consistency

The list of every account

The chart of accounts is the organized list of every account a business uses. Every transaction lands in at least two of these accounts.

Think of it as the table of contents for the books. A good chart is short enough to use and detailed enough to answer real questions.

How the numbers work

Leah Books gives each account a four-digit number. The first digit tells you the section. In the sample books, Business Checking is 1000 and Fuel is 6000.

Numbers	Section	What goes here	Report
1000–1999	Assets	What the business owns	Balance sheet
2000–2999	Liabilities	What the business owes	Balance sheet
3000–3999	Equity	The owner's stake	Balance sheet
4000–4999	Income	Money you earn	Profit and loss
5000–5999	Cost of goods sold	Direct costs of each job	Profit and loss
6000–6999	Operating expenses	Costs of running the business	Profit and loss

The numbers leave gaps on purpose. You can add 6560 between 6550 and 6600 later without renumbering anything.
Once an account has transactions, Leah Books locks its number. You can still rename it or make it inactive.

Current vs. long-term

Assets and liabilities are split by timing. Current means within about one year. Long-term (or noncurrent) means longer than that.

The balance sheet lists current items first. That makes it easy to see whether the business can cover its short-term bills.

Group	Sample accounts
Cash	1000 Business Checking, 1010 Savings
Other current assets	1100 Accounts Receivable, 1200 Prepaid Expenses
Fixed (long-term) assets	1500 Equipment, 1510 Accumulated Depreciation
Current liabilities	2000 Accounts Payable, 2100 Business Credit Card, 2200 Sales Tax Payable, 2300 Accrued Liabilities
Long-term liabilities	None in the sample yet. A truck loan paid over five years would go here.

Formula

Working capital = Current assets − Current liabilities

How Leah Books lays it out

Each section has a colored range chip, like 6000–6999. Every account shows its number, name, type, a one-line "What goes here" note and its current balance.

You can search by number, name or note. You can also show inactive accounts, which keep their history but leave the pick lists.

The Chart of accounts screen in the Leah Books sample books, for the sample company Evergreen Landscaping — Numbered sections, a "What goes here" note for each account and live balances.

Try it in Leah Books

Go to Accountant > Chart of accounts. Click the 6000–6999 chip to jump to operating expenses.
Type "fuel" in the search box. Find 6000 Fuel and read its "What goes here" note.
Click New account. Pick the Operating expenses section and notice Leah Books suggests the next free number.
Name it Truck Repairs and click Add account. Then find it in the 6000s.

Key terms

Chart of accounts (COA): The organized list of accounts a business uses.
Account number: A code that places an account in its section, like 1000s for assets.
Current asset: An asset expected to become cash or be used up within about one year.
Fixed asset: A long-term physical asset used in the business, like a mower or truck.
Current liability: An obligation due within about one year, like a vendor bill.
Long-term liability: An obligation due beyond one year, like a multi-year loan.
Working capital: Current assets minus current liabilities.
Inactive account: An account hidden from pick lists that keeps its past transactions.