--- title: "Chart of Accounts for Small Business: Setup & Example | MCC" description: "How to build a short chart of accounts that fits your tax return, with an example list and a yearly clean-up." url: "https://mcc-solutionsnj.com/bookkeeping/guides/chart-of-accounts-for-small-business" --- Bookkeeping guide · Updated October 7, 2026 # Chart of accounts for a small business: how to set one up The chart of accounts is the list of categories your transactions go into. A clean one makes reports readable. A messy one makes every report suspect. By [Matthew Coleman](/about), MCC Solutions **Quick answer.** The chart of accounts is the list of categories every transaction goes into: assets, liabilities, equity, income or expenses. Your profit and loss and balance sheet are built from it, so a clean one makes reports readable. Want this handled for you? Monthly bookkeeping, cleanup and year-end close for small businesses. Start with a free health check of your books. [Free health check](/bookkeeping/health-check)[Get a quote](/bookkeeping/#interest) **Related:** [Owner contribution or loan](/bookkeeping/guides/owner-equity-and-capital-contributions) · [Closing entries and retained earnings](/bookkeeping/guides/closing-entries-and-retained-earnings) · [Void vs delete a transaction](/bookkeeping/guides/voiding-vs-deleting-transactions) **Free tools:** [Are my books ready for taxes?](/bookkeeping/is-my-quickbooks-ready-for-taxes) · [Profit margin and markup calculator](/bookkeeping/profit-margin-and-markup-calculator) Working through a backlog? The [QuickBooks Cleanup Kit](/toolkits/quickbooks-cleanup-kit) is a step-by-step checklist, a reconciliation log and a READY or NOT READY page for your books. [![Intuit ProAdvisor Gold tier badge](/img/credentials/intuit-proadvisor-gold.png)](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77)Gold tier in Intuit's ProAdvisor program. [See my Intuit listing](https://proadvisor.intuit.com/app/accountant/search?searchId=matthew-coleman77) Keeping your own books? Tallyfinch does invoices, bank import and reports on your computer. [See Tallyfinch](/bookkeeping/mcc-books-downloadable-bookkeeping-software) ## What it is Every transaction is assigned to an account: assets, liabilities, equity, income or expenses. The chart of accounts is the full list. Your profit and loss and balance sheet are built from it. ## Start small Use your software's default chart for your industry, then remove unused accounts and add only what you need to see separately. Fifty to seventy accounts is plenty for most small businesses. ## Common structure Income by type of revenue. Cost of goods sold for direct costs. Operating expenses grouped by purpose: rent, insurance, payroll, software, marketing, professional fees, travel and meals, vehicle. Separate liabilities for sales tax payable and payroll taxes. Owner draws or distributions in equity, not expenses. ## Want us to handle it? We set up your books with you, or keep them for you every month, online for businesses in any state. **Price:** Free review of your books first, then a written quote before any work starts. [Get a free review and quote](/bookkeeping/#interest) [Done-with-you setup packages](/bookkeeping/done-with-you-bookkeeping-setup) ## Mistakes to avoid Using "miscellaneous" for everything. Creating a new account for every vendor. Putting owner spending in expenses. Mixing loan principal with expense. ## Ask your tax preparer The categories should line up with the lines on your tax return. A short call with your preparer can save time at year end. ## Worked example with numbers A small service firm might begin with: checking, accounts receivable, credit card, sales tax payable, loan payable, owner equity, owner draws, service income, software, insurance, rent, vehicle expense, professional fees, and office supplies. Fourteen accounts cover most of a month. Add detail only when you will act on it. If you never review a 'meals' split, do not create three meal accounts. ## Check your work Once a year, hide accounts with no activity and merge ones that mean the same thing. Check with your preparer that the list maps to your tax return. ## Common questions **Can I change my chart of accounts later?** Yes. Merging or renaming accounts is simple in most programs, and a bookkeeper can restructure it. **Should I use classes or tags?** Only if you track separate locations, projects or departments. This guide is general information, not tax, legal or accounting advice. Rules, fees and due dates change; check with the IRS, the NJ Division of Taxation or a licensed professional for your situation. Let us handle it [### Monthly bookkeeping Categorizing, reconciling and monthly reports, with cleanup, payroll and NJ filings available. Bookkeeping →](/bookkeeping/) [### QuickBooks Online Monthly bookkeeping, cleanup and reconciliation in QuickBooks Online for New Jersey small businesses. Your account stays in your name. QuickBooks →](/bookkeeping/software/quickbooks-online)[### Xero Bookkeeping and reconciliation in Xero for New Jersey small businesses, including cleanup and moving from spreadsheets or another program. Xero →](/bookkeeping/software/xero)[### Zoho Books Bookkeeping and reconciliation in Zoho Books for New Jersey businesses, especially those already using other Zoho apps. Zoho Books →](/bookkeeping/software/zoho-books) More guides - [What business records to keep, and for how long](/bookkeeping/guides/how-long-to-keep-business-records) - [How to switch accounting software and keep your history](/bookkeeping/guides/how-to-switch-accounting-software) - [Separating personal and business money: why and how](/bookkeeping/guides/separating-personal-and-business-finances) - [What to send your bookkeeper each month: a checklist](/bookkeeping/guides/what-to-send-your-bookkeeper-each-month) Free tool - [Bookkeeping health check](/bookkeeping/health-check) [All guides](/bookkeeping/guides) Reach small business owners, freelancers and bookkeepers who read this guide: [advertise here](/advertise#bookkeeping). Do it yourself ### Chart of Accounts and QuickBooks Import Pack Start your books with an account list built for your type of business, instead of the generic default, and compare it with the accounts you already have. [See what's inside ($24)](/toolkits/chart-of-accounts-quickbooks-import-pack)14-day full refund Course: [Small Business Bookkeeping Basics](/courses/small-business-bookkeeping-basics) ($49) covers chart of accounts, reconciliations, the monthly close, payroll and 1099 basics for owners. It is training with a certificate of completion, not a credential. [![Cover of Bookkeeping Fundamentals (ebook) by Matthew Colt](/img/toolkits/bookkeeping-fundamentals-ebook/cover.webp)](/toolkits/bookkeeping-fundamentals-ebook) From the bookshelf ### Bookkeeping Fundamentals A college-level bookkeeping course, without the tuition. By Matthew Colt, $9.99 as an ebook (EPUB and PDF). [See the book](/toolkits/bookkeeping-fundamentals-ebook) [Read the first pages free](/toolkits/bookkeeping-fundamentals-ebook#free-starter) Excel library and CSV files ### Chart of Accounts and QuickBooks Import Pack Start your books with an account list built for your type of business, instead of the generic default, and compare it with the accounts you already have. [See what is inside ($24)](/toolkits/chart-of-accounts-quickbooks-import-pack) Also in the [Nonprofit Treasurer Bundle](/toolkits/nonprofit-treasurer-bundle): 3 products for $65 instead of $87 separately. ## Rather have us keep the books? Ask for a quote. [Get a Quote](/bookkeeping/#interest)[Call (908) 444-6373](tel:+19084446373)