Key takeaways
- The five main groups are assets, liabilities, equity, income and expenses.
- Numbering ranges such as 1000s for assets and 6000s for expenses are a common convention, not a legal requirement.
- For sole proprietors, expense accounts that mirror the Schedule C categories make tax time much easier. See IRS Publication 334.
- Start small. You can add accounts later, but too many makes categorizing slow and inconsistent.
What is a chart of accounts?
Think of the chart of accounts as the set of labeled folders where your financial records live. Every transaction goes into at least one folder. A receipt for printer ink goes to “Office expense.” A client payment goes to “Service income.” The bank account itself has a folder too.
Each account then keeps its own running balance in the general ledger. When you run a profit and loss report, the software simply adds up the income and expense accounts.
Sort receipts into categories that match your books with the Manage Receipt app.
How it’s structured
Most small business charts use number ranges so related accounts sit together:
| Range | Group | Examples |
|---|---|---|
| 1000–1999 | Assets | Checking, savings, petty cash, equipment |
| 2000–2999 | Liabilities | Credit cards, loans, sales tax payable |
| 3000–3999 | Equity | Owner contributions, owner draws |
| 4000–4999 | Income | Service income, product sales |
| 5000–5999 | Cost of goods sold | Materials, inventory purchases |
| 6000–7999 | Expenses | Rent, software, travel, meals |
Leaving gaps between numbers, such as 6100, 6110 and 6120, lets you add new accounts later without renumbering.
Sample expense accounts for a small business
Here’s a starter set for a freelancer or small service business. The right-hand column shows the Schedule C category each one usually rolls into.
| Account | Name | Typical receipts | Schedule C category |
|---|---|---|---|
| 6000 | Advertising | Online ads, flyers, sponsorships | Advertising |
| 6050 | Vehicle expenses | Fuel, parking, tolls | Car and truck expenses |
| 6100 | Contract labor | Freelancer invoices | Contract labor |
| 6150 | Insurance | Liability, equipment cover | Insurance |
| 6200 | Professional fees | Accountant, lawyer | Legal and professional services |
| 6250 | Office expense | Postage, printer ink, small items | Office expense |
| 6300 | Software and subscriptions | SaaS, cloud storage | Other expenses |
| 6350 | Rent | Studio, coworking desk | Rent or lease |
| 6400 | Supplies | Materials used in your work | Supplies |
| 6450 | Travel | Flights, hotels, rideshares | Travel |
| 6500 | Meals | Client and travel meals | Deductible meals |
| 6550 | Utilities and phone | Internet, phone plan | Utilities |
Setting one up
- Start with a templateMost accounting apps offer one for your industry.
- Match your tax formAlign expense accounts with the categories on your return.
- Trim and renameDelete accounts you’ll never use and use plain names.
- Write simple rulesDecide, for example, whether software goes under office expense or its own account.
- Review yearlyAdd accounts only when a category grows large enough to track on its own.
Keep your receipt app’s expense categories in step with your expense accounts. When the names match, every journal entry becomes a straight copy instead of a judgment call.
Line up receipt categories with your accounts
Manage Receipt sorts each scanned receipt into an expense category, and its reports total spending by category for any period. Keep those categories aligned with your chart of accounts, and posting a month of expenses to your books becomes a copy job, not a sorting job.
Explore AI Expense ReportsFrequently asked questions
How many accounts should a small business have?
There is no fixed number. Many freelancers manage with 20 to 40 accounts in total, including 10 to 20 expense accounts. Add an account when a category becomes large or important enough to watch separately, and avoid tiny accounts that only hold a few transactions a year.
What is an example of a chart of accounts?
A simple example: 1000 Checking, 1100 Savings, 2000 Credit card, 3000 Owner equity, 3100 Owner draws, 4000 Service income, 6000 Advertising, 6250 Office expense, 6300 Software, 6450 Travel, 6500 Meals and 6550 Utilities. The numbers keep related accounts grouped together in reports.
Is the chart of accounts the same as expense categories?
Not exactly. Expense categories are one part of the chart of accounts. The full chart also includes assets, liabilities, equity and income accounts. Keeping your receipt categories identical to your expense account names saves time when recording transactions and reduces miscategorized expenses.
Can I change my chart of accounts later?
Yes. You can add, rename or merge accounts at any time, though it is cleanest to make big changes at the start of a new year so reports compare easily. Avoid deleting accounts that already hold transactions; mark them inactive instead.