chart-of-accounts

Chart of Accounts

Structural foundation for GL account design and classification in C-corporations under US GAAP. Covers the five root account types, standard numbering ranges, hierarchical grouping, C-corp equity accounts, and Form 1120 tax-line mapping.

Account Type Taxonomy

Every GL account belongs to exactly one of five root types that determine which financial statement it appears on and its normal balance direction.

Balance Sheet accounts (cumulative, carry forward):

• Asset — Normal debit. Current (cash, receivables, inventory, prepaids) and non-current (fixed assets, intangibles, investments).
• Liability — Normal credit. Current (AP, accrued expenses, current debt, unearned revenue) and non-current (long-term debt, deferred tax liabilities).
• Equity — Normal credit. Common stock, APIC, retained earnings, treasury stock (contra-equity, debit), AOCI.

Income Statement accounts (periodic, reset at year-end close):

• Revenue — Normal credit. Gross revenue, returns/allowances (contra-revenue, debit), other income.
• Expense — Normal debit. COGS, operating expenses, depreciation, interest expense, tax expense.

Contra accounts reverse the normal balance of their parent type (accumulated depreciation is contra-asset with credit balance; sales returns is contra-revenue with debit balance).

Numbering Convention

Standard 4-digit ranges for C-corporations. Leave gaps between active accounts for future inserts — at least 10 between accounts, 100 between categories.

• 1000–1999 Assets — 1000s cash/equivalents, 1100s investments, 1200s receivables, 1300s inventory, 1400s prepaids, 1500–1699 fixed assets, 1700s accumulated depreciation, 1800s intangibles, 1900s other non-current
• 2000–2999 Liabilities — 2000s AP, 2100s accrued liabilities, 2200s credit cards/short-term notes, 2300s current portion LTD, 2400s unearned revenue, 2500s payroll liabilities, 2600–2799 long-term debt, 2800s deferred tax liabilities
• 3000–3999 Equity — 3000s common stock, 3100s APIC, 3200s retained earnings, 3300s treasury stock, 3400s AOCI, 3500s dividends declared
• 4000–4999 Revenue — 4000s gross revenue, 4100s returns/allowances/discounts, 4200s other operating income, 4800s interest/dividend income, 4900s non-operating income/gains
• 5000–5999 COGS — 5000s direct materials, 5100s direct labor, 5200s subcontractors, 5300s overhead
• 6000–7999 Operating Expenses — 6000s compensation, 6100s rent/occupancy, 6200s professional fees, 6300s insurance, 6400s office/admin, 6500s technology, 6600s marketing, 6700s travel, 6800s depreciation/amortization, 6900s repairs, 7000s utilities, 7100s taxes/licenses, 7200s bad debt, 7300s contributions, 7400s non-deductible penalties/fines
• 8000–8999 Other Income/Expense — 8000s interest expense, 8100s gain/loss on disposal, 8200s unrealized gain/loss, 8300s FX gain/loss
• 9000–9999 Income Tax — 9000s federal current, 9100s state current, 9200s deferred tax expense/benefit

Group parent/child accounts numerically (1500 PP&E group → 1510 Land, 1520 Buildings). Mirror contra accounts near their parent (1520 Buildings → 1720 Accum Depr – Buildings). Separate deductible from non-deductible expenses at the account level to simplify M-1 reconciliation.

Hierarchical Structure

Accounts form a tree: group (parent) accounts aggregate child balances for reporting; only leaf (detail) accounts receive postings. 3–4 levels is typical for mid-market C-corps (root type → classification → sub-group → detail).

Assets [group — no posting]
├── Current Assets [group]
│   ├── Cash and Equivalents [group]
│   │   ├── 1010 Operating Checking [leaf — postable]
│   │   ├── 1020 Payroll Checking [leaf]
│   │   └── 1030 Money Market [leaf]
│   └── Accounts Receivable [group]
│       ├── 1200 Trade Receivables [leaf]
│       └── 1210 Allowance for Doubtful Accounts [leaf, contra]
├── Fixed Assets [group]
│   ├── 1510 Land, 1520 Buildings, 1530 Equipment [leaves]
│   └── 1720 Accum Depr – Buildings, 1730 Accum Depr – Equipment [contra leaves]
└── ...

C-Corporation Equity Accounts

• 3000 Common Stock — Par value × shares issued. For no-par stock, entire issuance price here or APIC per board resolution.
• 3100 APIC — Excess over par from issuance. Also receives stock compensation (ASC 718).
• 3200 Retained Earnings — Cumulative net income less cumulative dividends. Receives year-end close entry.
• 3300 Treasury Stock — Contra-equity (debit). Shares repurchased but not retired, typically at cost method.
• 3400 AOCI — Unrealized items bypassing P&L: FX translation, available-for-sale securities, pension adjustments, cash flow hedges.
• 3500 Dividends Declared — Temporary equity. Debited on declaration, closed to retained earnings at year-end.

Year-end close: Revenue (4xxx) and expense (5xxx–9xxx) accounts net to Income Summary, which transfers to Retained Earnings (3200). Dividends Declared (3500) also closes to Retained Earnings.

Form 1120 Tax-Line Mapping

Design the COA so each account maps to a specific Form 1120 line. Key mappings:

Income — 4000 gross revenue → Line 1a, 4100 returns → Line 1b, 4800 interest income → Line 5, 4810 dividends → Line 10 (Schedule C for DRD), 4900 rents → Line 6, 8100 asset sale gains → Line 8 (Schedule D / Form 4797)

Deductions — 6000 officer comp → Line 12, 6010 wages → Line 13, 6300 repairs → Line 14, 7200 bad debts → Line 15, 6100 rents → Line 16, 7100 taxes/licenses → Line 17, 8000 interest → Line 18, 7300 contributions → Line 19 (10% limit), 6800 depreciation → Line 20 (Form 4562), 6900–7999 other → Line 26

Non-deductible (M-1/M-3 add-backs) — 7400 penalties (IRC §162(f)), 7410 50% meals (IRC §274), 7420 entertainment (100% post-TCJA), 9000 federal income tax, 8200 unrealized gain/loss

Book-Tax Differences

Timing (deferred tax — reverse in future periods): depreciation (GAAP straight-line vs. tax MACRS/bonus per IRC §168), revenue recognition (ASC 606 vs. constructive receipt), bad debt (allowance vs. direct write-off per IRC §166), prepaids (matching vs. 12-month rule), deferred revenue (GAAP vs. Rev. Proc. 2004-34), Section 179 expensing.

Permanent (never reverse): meals 50% disallowed (IRC §274), entertainment 100% disallowed post-TCJA, fines/penalties (IRC §162(f)), federal income tax, tax-exempt interest, DRD 50/65/100% (IRC §243), officer life insurance premiums (IRC §264), political contributions (IRC §162(e)).

Separate accounts for items with different tax treatment at the GL level — deductible meals vs. entertainment in separate accounts, officer comp separate from staff wages, depreciation by asset class if book/tax methods differ, interest expense by purpose if §163(j) applies.

Special Account Roles

• Bank/Cash — One GL account per physical bank account. Reconciled monthly to statements.
• AR/AP — Controlled by sub-ledgers. GL shows aggregate; individual balances in sub-ledger.
• Undeposited Funds — Staging for receipts not yet deposited. Clears on deposit.
• Suspense/Clearing — Temporary holding. Any period-end balance means incomplete transactions.
• Intercompany — Parent-subsidiary transactions. Must net to zero across consolidated group.
• Retained Earnings — System account for year-end close. Never post directly during the year except prior-period adjustments.
• Opening Balance Equity — Initial setup balancing. Should be zero after setup is complete.

COA Design Principles

1. Start with the tax return — Form 1120 lines define minimum granularity. Every applicable return line gets at least one GL account.
2. Match reporting needs — Management, tax, audit, and regulatory audiences. Create sub-accounts for management detail (6610 Digital Marketing, 6620 Print) rather than relying on tags alone.
3. Keep it lean — Only accounts with distinct reporting or compliance purpose. Signs of bloat: accounts that never receive postings, accounts always combined in reports.
4. Plan for growth — Numerical gaps (10+ between accounts, 100+ between categories). A COA that requires renumbering will accumulate workarounds.

Supporting References

Read these for deeper detail on specific topics:

• references/ccorp-coa-design.md — Expanded version of the content above with full sub-range tables, detailed tree examples, complete Form 1120 mapping tables, and extended book-tax difference analysis with IRC citations. Read when you need the detailed lookup tables or are building a COA from scratch.
• references/accounting-system-architecture.md — Accounting system architecture showing how COA concepts map to system implementation. Read section 2 for the account data model (root_type, report_type, account_type fields, nested set tree), section 3 for GL entry validation rules, section 9 for how the financial report engine uses account hierarchy, section 14 for period closing mechanics.
• references/guide-cpa-expert.md — Authoritative source bibliography. Read §2 for FASB ASC topic index and Big 4 technical guides, §3 for IRC section references and IRS publications (Pub 542, 535, 946, Form 1120 instructions).

Cross-Plugin References

For platform-specific COA implementation:

• Invoke qbo-integration:qbo-coa for QBO account creation, detail types, tax-line mapping within QBO, special QBO accounts and pitfalls
• Invoke qbo-integration:qbo-api for programmatic COA management via the QBO API

For related foundation knowledge:

• Invoke accounting-foundation:categorization-rules for transaction-to-account routing logic
• Invoke accounting-foundation:financial-statements for presentation requirements that depend on account classification
• Invoke accounting-foundation:entity-profile for corporate entity details that affect COA design (entity type, fiscal year, ownership structure)

Cross-Plugin Consumers

• bookkeeping:transaction-processing — account classification for categorization
• tax-prep:form-1120-prep — tax-line mappings for return preparation
• tax-prep:tax-planning — book-tax difference analysis
• financial-planning:budgeting-forecasting — account hierarchy for budget structure