Chart of accounts

What it means

The chart of accounts lists accounts in classes 0 to 7 and governs how entries are made. The framework chart for businesses is set by a finance ministry decree.

A company adds its own analytical detail to the framework synthetic accounts. That detail decides what can be read out of the books without further work.

The chart of accounts and the company’s account plan are not the same. The chart is a common framework for all businesses, while the account plan lists the accounts a particular company actually uses, including its own analytical detail. The general ledger is opened from the plan, and a company cannot invent a synthetic account the framework does not contain.

How it works in practice

A good working chart answers management’s questions: by cost centre, job, product or country. It is designed once, ideally at incorporation or when the books are taken over.

The chart belongs in the internal policies and does not change mid-year without reason. A change halfway through stops month-on-month comparison from working.

When we take over the books from another accountant, we first compare their account plan with ours and prepare a mapping: which old analytical account corresponds to which new one. Opening balances then carry over without losing detail, and comparison with the previous year still makes sense.

What to watch out for

An over-elaborate chart slows posting and raises errors; too flat a one forces analysis by hand in spreadsheets. The right level follows what actually gets analysed.

Deductible and non-deductible expenses posted together on one account, such as ordinary services and entertainment. At return time the account has to be gone through line by line, and whatever is missed stays wrong in the tax base. Separate analytical accounts fix the problem once and for all.