What is a Chart of Accounts?
The Chart of Accounts is your financial filing system. It lists every account where transactions can be recorded, organized by type: assets, liabilities, equity, revenue, and expenses. Each account has a number and name.
Why Chart of Accounts Matters
A well-designed chart of accounts makes financial reporting easy. A poorly designed one makes it impossible to answer basic questions like "How much did we spend on marketing last quarter?"
For SaaS founders, your chart should separate recurring revenue from professional services, distinguish hosting costs from other COGS, and track customer acquisition costs clearly.
Setting Up Your Chart
Start simple and add accounts as needed. Too many accounts creates complexity without insight. Too few obscures important distinctions. Most startups need 30-50 accounts initially.
Formula
Standard Account Numbering:
1000-1999: Assets
2000-2999: Liabilities
3000-3999: Equity
4000-4999: Revenue
5000-9999: Expenses
Example
Sample SaaS Chart of Accounts (partial):
- 1010 - Cash
- 1200 - Accounts Receivable
- 2010 - Accounts Payable
- 2100 - Deferred Revenue
- 4010 - Subscription Revenue
- 4020 - Professional Services Revenue
- 5010 - Hosting Costs
- 6010 - Salaries - Engineering
- 6020 - Salaries - Sales
- 7010 - Marketing - Paid Ads