Published: May 2025

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A Chart of Accounts (CoA) is like a big list that keeps track of all the money coming in and going out of your business. It’s a super important tool for Australian businesses to stay organised, follow Australian Taxation Office (ATO) rules, and understand how their money is doing.

Think of it as a filing cabinet where every dollar has its own labelled folder, or you have lots of sand at the beach and you're sorting this into different coloured buckets.

This article explains what a Chart of Accounts is in a simple way, how it’s set up, and how businesses can use it, with easy examples for Australian businesses.

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What is a Chart of Accounts?

A Chart of Accounts is a list of all the places your business’s money goes, like income (money you earn), expenses (money you spend), assets (things you own), liabilities (debts you owe), and equity (your business’s value). Each item on the list has a name and a short code to make tracking easy.

Here’s why it’s awesome for your business:

• Keeps Things Tidy: Puts your money into clear categories, like “Sales” or “Rent,” so you can find everything fast.
• Helps with ATO Rules: Makes sure GST (the 10% tax on most sales) is tracked right for your Business Activity Statement (BAS).
• Shows Your Money Story: Helps you see if you’re making a profit or spending too much with reports like profit and loss.
• Grows with You: You can add new categories as your business gets bigger, like if you start a new service.

“Your Chart of Accounts is like a map for your money, helping you stay on track,” says the Institute of Certified Bookkeepers (ICB). Businesses can use software like Xero or work with a bookkeeper to keep the CoA neat and compliant with ATO rules.

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Structure of a Chart of Accounts

The CoA is split into five main groups, with smaller sub-categories (accounts) that fit your business. Each account gets a simple three-digit code (e.g., 101, 202) and a name. Here’s how it looks, with examples for professional services firms like consultants or lawyers:

1. Assets (100–199): Stuff your business owns.
   • Cash (101): Money in your bank account.
   • Accounts Receivable (102): Money clients owe you.
   • Computers (151): Laptops or desktops you own.
2. Liabilities (200–299): Money you owe.
   • Accounts Payable (201): Bills you haven’t paid yet.
   • GST Payable (202): GST you’ve collected for the ATO.
   • Bank Loan (251): Money you borrowed from the bank.
3. Equity (300–399): Your business’s value.
   • Owner’s Capital (301): Money you put into the business.
   • Retained Earnings (302): Profits you’ve kept.
4. Revenue (400–499): Money you earn.
   • Consulting Fees (401): Cash from client projects.
   • Training Fees (402): Money from workshops or courses.
5. Expenses (500–599): Money you spend.
   • Salaries (501): Pay for your team.
   • Rent (502): Office space costs.
   • Software (503): Subscriptions like Xero or Zoom.

Each account has a code (e.g., 401 for Consulting Fees) and a GST setting to help with BAS reports. Your bookkeeper can set this up and keep it updated, making sure everything is ready for the ATO.

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How Businesses Can Use a Chart of Accounts

Your CoA helps you keep track of money, stay legal with the ATO, and make smart business choices. Here’s how to use it, with simple examples for professional services firms.

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Step 1: Set Up Your Chart of Accounts

You’ll need a CoA to start tracking your money, and it’s easy with software or a bookkeeper.

1. Pick a Tool or Helper:
   • Use Xero, a cloud-based app with a ready-to-go CoA you can tweak.
   • Or, hire a bookkeeper like Scale Suite to build and manage your CoA for you.
2. Make It Your Own:
   • Add accounts that match your business, like “Legal Fees” for a law firm.
   • Set GST codes (e.g., “GST on Income” for money you earn, “GST on Expenses” for stuff you buy).
   • Give each account a three-digit code, like 401 for Consulting Fees.
3. Bring in Old Data:
   • If you’re switching from another app (e.g., MYOB), your bookkeeper can import your old CoA, making sure GST settings are right for the ATO.

Example: ABC Consulting, a Brisbane firm helping businesses grow, sets up a CoA in Xero with their bookkeeper. They add accounts like “Consulting Fees” (401, GST on Income), “Training Fees” (402, GST on Income), “Salaries” (501, GST-Free), and “Software” (503, GST on Expenses). The bookkeeper moves 30 accounts from QuickBooks, matching “Client Fees” to “Consulting Fees” (401) and locking GST Payable (202) for ATO rules.

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Step 2: Track Your Money

The CoA sorts your money into the right places so you can see what’s happening.

1. Record Money Moves:
   • In Xero, money from your bank (like client payments) gets matched to a CoA account, e.g., a payment goes to “Consulting Fees” (401).
   • Your bookkeeper adds the right GST code, like “GST on Income” for sales.
2. Make It Automatic:
   • Set up bank rules in Xero to auto-sort regular payments, like coding Zoom bills to “Software” (503).
   • Your bookkeeper can do this to save you time.

Example: ABC Consulting gets a $3,300 client payment for a project. Their bookkeeper puts it in “Consulting Fees” (401, GST on Income), with $300 GST for BAS field 1A. A $110 Zoom bill goes to “Software” (503, GST on Expenses), with $10 GST claimable in 1B. The bookkeeper sets a rule to auto-code Zoom bills, keeping things quick.

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Step 3: Update the CoA as Your Business Changes

As your business grows, you can add or remove accounts to keep the CoA useful.

1. Add New Accounts:
   • In Xero, go to Chart of Accounts > Add New Account.
   • Example: Add “Online Course Fees” (403, GST on Income) if you start selling courses.
2. Clear Out Old Accounts:
   • Hide accounts you don’t use anymore (e.g., for a service you stopped) by archiving them in Xero. This keeps old data safe.
   • Your bookkeeper can handle this.
3. Tweak Accounts:
   • Change account names for clarity, like switching “Other Costs” to “Travel Costs” (504).

Example: ABC Consulting starts online courses. Their bookkeeper adds “Online Course Fees” (403, GST on Income) and “Course Software” (504, GST on Expenses). They archive “Workshop Fees” (405) since they stopped in-person events, keeping old records safe.

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Step 4: Use the CoA for BAS and Taxes

The CoA helps you get your GST right and file your BAS easily.

1. Track GST:
   • Money you earn (like Consulting Fees) gets “GST on Income” or “GST-Free” (e.g., for overseas clients).
   • Money you spend (like Software) gets “GST on Expenses” for GST credits or “GST-Free” for things like salaries.
2. Make BAS Simple:
   • In Xero, run the GST Report to see BAS numbers, like G1 (all sales), 1A (GST you collected), and 1B (GST you can claim back).
   • Your bookkeeper checks the CoA matches these numbers.
3. Fix Mistakes:
   • Xero’s “BAS Exceptions” report shows if you forgot to code something. Your bookkeeper can fix it.

Example: For Q1 2025 BAS, ABC Consulting’s CoA shows $50,000 in “Consulting Fees” (401, $4,545 GST in 1A) and $5,000 in “Software” (503, $455 GST in 1B). The bookkeeper spots a $1,000 uncoded payment in the “BAS Exceptions” report and puts it in “Travel Costs” (504, GST on Expenses) to keep BAS correct.

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Step 5: Check Your Business’s Health

The CoA helps you see how your business is doing with reports.

1. Look at Reports:
   • Use Xero’s Profit and Loss report to compare money earned (e.g., Consulting Fees) to money spent (e.g., Salaries).
   • Check the Balance Sheet to see what you own (e.g., Cash) and owe (e.g., GST Payable).
2. Spot Trends:
   • See which accounts make the most money (e.g., Consulting Fees vs. Training Fees) to plan what to focus on.
   • Watch expenses (e.g., Software) to avoid overspending.
3. Talk to Your Bookkeeper:
   • Ask your bookkeeper to explain CoA reports to help you plan budgets or grow.

Example: ABC Consulting checks their Profit and Loss report, seeing $80,000 in “Consulting Fees” (401) and $10,000 in “Training Fees” (402), with $30,000 spent on “Salaries” (501). The Balance Sheet shows $20,000 in Accounts Receivable (102). The owner works with their bookkeeper to chase unpaid invoices and invest more in training to boost income.

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Examples of Chart of Accounts for Professional Services

Here are CoA examples for Australian professional services businesses to show how it helps.

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Example 1: Small Consulting Firm

Business: GrowEasy Consulting, a Perth firm helping small businesses, with 10–20 monthly transactions.

CoA Snapshot:

• Assets: Cash (101), Accounts Receivable (102), Laptops (151).
• Liabilities: GST Payable (202), PAYG Withholding (203).
• Equity: Owner’s Capital (301), Retained Earnings (302).
• Revenue: Consulting Fees (401, GST on Income), Workshops (402, GST on Income).
• Expenses: Salaries (501, GST-Free), Rent (502, GST on Expenses), Software (503, GST on Expenses).

How It Helps: GrowEasy tracks a $2,200 client payment to “Consulting Fees” (401, $200 GST) and a $110 Xero bill to “Software” (503, $10 GST). The CoA makes BAS easy (1A: $200, 1B: $10) and shows $5,000 profit in the Profit and Loss report, helping the owner plan marketing.

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Example 2: Medium Law Firm

Business: TrueLegal, a Melbourne firm doing business law, with 50–80 monthly transactions.

CoA Snapshot:

• Assets: Cash (101), Accounts Receivable (102), Office Furniture (151).
• Liabilities: Accounts Payable (201), GST Payable (202), Bank Loan (251).
• Equity: Partner Capital (301), Retained Earnings (302).
• Revenue: Legal Fees (401, GST on Income), Advisory Fees (402, GST on Income), Overseas Legal Work (403, GST-Free).
• Expenses: Salaries (501, GST-Free), Software (503, GST on Expenses), Travel Costs (504, GST on Expenses).

How It Helps: TrueLegal puts a $5,500 overseas payment in “Overseas Legal Work” (403, no GST, G2 for BAS) and a $550 legal software bill in “Software” (503, $50 GST). The CoA keeps BAS right (1B: $50) and shows $30,000 in Accounts Receivable (102) on the Balance Sheet, so they follow up with clients.

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Example 3: Large Engineering Firm

Business: ArchPro, a Sydney engineering firm, with 200+ monthly transactions.

CoA Snapshot:

• Assets: Cash (101), Accounts Receivable (102), Computers (151), Software Licenses (152).
• Liabilities: GST Payable (202), PAYG Withholding (203), Lease Debt (251).
• Equity: Retained Earnings (302), Drawings (303).
• Revenue: Tax Services (401, GST on Income), Engineering Fees (402, GST on Income), Training Fees (403, GST on Income).
• Expenses: Salaries (501, GST-Free), Software (503, GST on Expenses), Client Meals (504, No GST due to FBT).

How It Helps: ArchPro records a $22,000 client payment in “Tax Services” (401, $2,000 GST) and a $3,300 software bill in “Software” (503, $300 GST). The CoA ensures BAS is correct (1A: $2,000, 1B: $300) and shows $80,000 in “Engineering Fees” (402) on the Profit and Loss report, helping plan new hires.

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Tips for Businesses Using a Chart of Accounts

• Get a Bookkeeper: They’ll set up and manage your CoA, keeping it ATO-ready and saving you time. Scale Suite offer this service.
• Use Simple Names: Pick clear account names, like “Legal Fees” instead of “Income,” so everyone understands.
• Try Xero: It has a built-in CoA and auto-sorts money, making life easier.
• Check It Often: Look at your CoA every few months with your bookkeeper to add or remove accounts.
• Watch GST: Make sure accounts match BAS needs, like “GST on Income” for sales.
• Save Records: Keep CoA reports for five years, as the ATO requires.
• Use Reports: Check Profit and Loss or Balance Sheet reports to plan spending or growth.

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FAQs on Chart of Accounts

Q: How does the CoA help with GST?
A: It puts GST in the right place (e.g., “GST on Income” for sales, “GST on Expenses” for purchases), so your BAS is correct (1A for GST collected, 1B for GST you claim).

Q: Can I add new accounts to my CoA?
A: Yes, your bookkeeper can add accounts in Xero, like “Course Fees” (403) for a new service, via Chart of Accounts > Add New Account.

Q: What if I pick the wrong account for money?
A: Your bookkeeper can fix it in Xero with “Remove and Redo” and check the General Ledger report to make sure it’s right.

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Conclusion

The Chart of Accounts is like a cheat sheet for your business’s money, helping you stay organised, follow ATO rules, and make smart choices. With a clear CoA, you can track your cash, file BAS easily, and see how your business is growing. Tools like Xero and a good bookkeeper make it super simple.

Whatever your business, this guide, with its easy examples, shows you how to use a CoA. If things get tricky, talk to a bookkeeper or BAS agent to keep your finances on track.