What is a chart of accounts?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
A chart of accounts is the list of every account a business uses to record its transactions. Accounts are usually grouped into assets, liabilities, equity, income and expenses, and each transaction is recorded against the accounts it affects in the general ledger.
Each account has a name and usually a code, such as one account for bank fees and another for interest received, so the same kind of transaction always lands in the same place.
The chart of accounts decides how a business's figures are grouped in its reports, such as the profit and loss statement and the balance sheet. Accounting software usually comes with a default chart of accounts that a business can change to suit how it operates.
In Australia
Under section 286 of the Corporations Act 2001, a company must keep written financial records that correctly record and explain its transactions, financial position and performance, and that would let true and fair financial statements be prepared and audited. A chart of accounts is how a bookkeeping system sorts transactions so those statements can be produced from them.
Sole traders and partnerships are not covered by section 286, but the ATO still expects every business's records to hold enough information to show the purpose of each transaction and how it relates to the business's income and expenses.
Common mistakes
- Creating a new account for a one-off transaction, which clutters every report.
- Changing what an account is used for partway through the year, so it holds two different kinds of transaction.
Related terms
Sources
- Corporations Act 2001, sections 9 and 286
Federal Register of Legislation, Office of Parliamentary Counsel. Compilation No. 149, 19 September 2026, released 19 September 2026. Checked 15 October 2026.
Based on content from the Federal Register of Legislation at 15 October 2026. For the latest information on Australian Government legislation please go to https://www.legislation.gov.au. Licence: CC BY 4.0.
- Overview of record-keeping rules for business
Australian Taxation Office. Current at 18 June 2026 (QC60718), released 18 June 2026. Checked 15 October 2026.
© Australian Taxation Office for the Commonwealth of Australia Licence: ATO website copyright notice (copy, adapt and distribute, without implying ATO endorsement).