Skip to content
English
  • There are no suggestions because the search field is empty.

Chart of Accounts

A chart of accounts (COA) is a structured list of all the financial accounts in a company's general ledger, organized to categorize every transaction the business records.

General Overview

A chart of accounts can be described as the index or skeleton of a company's entire financial record-keeping system. Each account has a unique code/number and name, making it easier to locate, record, and report financial data.

The five main categories are:

  1. Assets — What the company owns (cash, inventory, equipment)
  2. Liabilities — What the company owes (loans, accounts payable)
  3. Equity — The owners' stake (retained earnings, common stock)
  4. Revenue — Income from operations (sales, service fees)
  5. Expenses — Costs incurred (rent, salaries, utilities)

How the numbering typically works:

Companies assign number ranges to each category, for example:

  • 1000s → Assets
  • 2000s → Liabilities
  • 3000s → Equity
  • 4000s → Revenue
  • 5000s → Expenses

Sub-accounts drill down further (e.g., 1010 = Checking Account, 1020 = Savings Account).

Keeping an accurate chart of accounts: 

  • Ensures consistency in how transactions are recorded
  • Makes financial statements (income statement, balance sheet) easier to produce
  • Helps with budgeting, auditing, and tax reporting
  • Allows management to track performance at a granular level

Every time a financial transaction occurs, you assign it to the appropriate account(s) in the chart of accounts. This process is called coding or classifying transactions.

How it works in practice:

When you pay the office rent, you don't just record "money went out" — you record:

  • Debit → Rent Expense (5000s)
  • Credit → Cash (1000s)

When a customer pays you for services:

  • Debit → Cash (1000s)
  • Credit → Service Revenue (4000s)

Matching to Transactions

This is the foundation of double-entry accounting — every transaction touches at least two accounts, and debits always equal credits.

The flow looks like this:

Transaction occurs → Match to account(s) in the COA → Enter into the general ledger → Rolls up into financial statements

In modern practice, accounting software (QuickBooks, Xero, NetSuite, etc.) makes this easier by letting you:

  • Set up rules that auto-code recurring transactions (e.g., every charge from a known vendor automatically goes to the right expense account)
  • Reconcile your bank feed by matching imported transactions to the correct accounts
  • Flag transactions that don't fit neatly into a category for manual review

So the chart of accounts is essentially the taxonomy you use to make sense of every dollar flowing in and out of the business. The quality of your COA directly affects how useful and accurate your financial reports will be.

For the Real Estate Investor using PropertyTools

A real estate investor's COA needs to track things at both the portfolio level and ideally the property level. Here's how it might look:

1000s — Assets

  • 1010 · Cash – Operating Account
  • 1020 · Cash – Security Deposit Account (kept separate, often legally required)
  • 1100 · Accounts Receivable (rent owed but not yet collected)
  • 1200 · Prepaid Insurance
  • 1500 · Rental Property – Land (per property, or grouped)
  • 1510 · Rental Property – Building (depreciable)
  • 1520 · Accumulated Depreciation (contra-asset)
  • 1600 · CapEx / Improvements in Progress

2000s — Liabilities

  • 2010 · Accounts Payable (contractors, vendors)
  • 2100 · Security Deposits Held (liability — it's the tenants' money)
  • 2200 · Mortgage Payable – Property A
  • 2210 · Mortgage Payable – Property B (and so on)
  • 2300 · Property Tax Payable
  • 2400 · Accrued Expenses

3000s — Equity

  • 3010 · Owner's Capital
  • 3020 · Owner's Draws
  • 3030 · Retained Earnings

4000s — Revenue

  • 4010 · Rental Income – Long-Term
  • 4020 · Rental Income – Short-Term / Vacation (Airbnb, VRBO, etc.)
  • 4030 · Late Fees Collected
  • 4040 · Pet Fees / Other Tenant Fees
  • 4050 · Laundry / Vending Income (if applicable)
  • 4060 · Security Deposit Forfeitures (when you keep a deposit)

5000s — Expenses

Property Operating Expenses:

  • 5010 · Mortgage Interest (deductible; separate from principal)
  • 5020 · Property Taxes
  • 5030 · Insurance
  • 5040 · Repairs & Maintenance
  • 5050 · Capital Improvements (goes to asset account, not expensed directly)
  • 5060 · Property Management Fees
  • 5070 · Landscaping / Snow Removal
  • 5080 · Utilities (if landlord-paid)
  • 5090 · HOA Fees

Short-Term Rental Specific:

  • 5100 · Platform Fees (Airbnb/VRBO commissions)
  • 5110 · Cleaning / Turnover Costs
  • 5120 · Supplies & Amenities (toiletries, coffee, etc.)
  • 5130 · Furnishings / Décor (or capitalize if significant)

General & Administrative:

  • 5200 · Accounting & Bookkeeping
  • 5210 · Legal Fees
  • 5220 · Advertising & Marketing
  • 5230 · Software / Tools (property management software, etc.)
  • 5240 · Mileage / Auto (property visits)
  • 5250 · Depreciation Expense

A few important nuances for this investor:

  • Repairs vs. Capital Improvements is a critical distinction — a new roof gets capitalized (asset account) and depreciated over time, while fixing a leaky faucet is expensed immediately. The IRS cares a lot about this.
  • Mortgage principal payments are NOT an expense — only the interest portion is. The principal reduces the loan liability.
  • Security deposits are a liability, not income, until forfeited.
  • Short-term rentals may have different tax treatment than long-term — worth keeping the revenue and direct costs cleanly separated.
  • Many investors go one level deeper and use classes or tags in their accounting software (one per property) rather than multiplying accounts, keeping the COA clean while still getting per-property reporting.