Chart of accounts

The chart of accounts is the list of accounts in your accounting system: the revenue lines, the cost lines, the overhead lines, and the assets, liabilities and equity. Every transaction is coded to one of them. The chart decides what the reports can show. If revenue is one account, there is no report that shows revenue by service. If labour is one account, there is no report that shows what a crew costs.

It matters because most charts in BC companies were built by the first bookkeeper for tax filing, not for running the business, and they have grown by accident since. The result is a set of reports that cannot answer the owner's questions without a spreadsheet, a monthly close that takes weeks, and margin by line of business that nobody has ever seen. The fix is structural and it is the foundation of everything else in the finance function.

In practice, we rebuild the chart around how decisions are made: revenue by line of business, direct cost by the same lines, overhead by function, and classes, locations or tags for anything that would otherwise multiply accounts. We keep it short, usually a few dozen accounts, coordinate the change with your CPA at a fiscal year boundary where possible, and reclassify enough history that the trend reports are usable from day one.