Understanding Numbering in a Chart of Accounts

Ask the Accountant…

Question: Do I need account numbers in addition to account names? If so, are there particular numbers?

Answer: I like using account numbers with account names for accounts in the chart of accounts (COA) because it makes it easier to distinguish one account from another more readily, as some account names are deceptively similar.

Account numbers should be assigned in the order in which types of account appear on the balance sheet, and then the income statement or profit and loss.

There are some who assign three-digit account numbers, but I prefer five digits. This leaves more room to add other accounts and their numbers over time. There is not a hard and fast rule about assigning account numbers, but I most often see:

• Asset Accounts: Begin with 1
• Liability Accounts: Begin with 2
• Equity Accounts: Begin with 3
• Income Accounts: Begin with 4
• Cost of Goods Sold Accounts: Begin with 5
• Expense Accounts: Begin with 6 or 7

Please email your questions to Harriet at Ask The Accountant.

QuickBooks Premier and Enterprise can be modified to better serve ad specialty distributors. Harriet Gatter is a QuickBooks ProAdvisor, a former accounting professor and a former ad specialty distributor. She advises ad specialty distributors to use QuickBooks Premier and Enterprise, often in conjunction with other industry-specific software, to manage the complexities of the ad specialty business, with the results being time saved, errors eliminated and an overall accurate accounting of your business. Contact her at hgatter@accountingsupportllc.com.