What is a chart of accounts?

A chart of accounts is the list of every category a business records transactions against — sales, materials, rent, bank, VAT, debtors — each with a nominal code. It is the structure the ledger and the accounts are built on.

A plain-English definition for UK small businesses, not tax advice. Where a figure changes at a Budget, check gov.uk or ask your accountant.

LAST REVIEWED 29 AUGUST 2026 · BIZZLE

What is a chart of accounts for?

Every transaction has to be recorded somewhere. The chart of accounts is the list of somewheres. It groups accounts into types — assets, liabilities, equity, income and expenses — and gives each a code so that the software knows which report a figure belongs on.

The income and expense accounts feed the profit and loss. The asset, liability and equity accounts feed the balance sheet. Get the chart right and the reports write themselves; get it wrong and a van purchase turns up as an expense or a loan repayment as income.

Most software ships with a sensible default chart. The useful work is trimming it to what your business actually does, and adding the handful of lines you genuinely want to see separately — labour sales apart from materials, say, or one line per van.

A worked example

A plumber's chart of accounts, trimmed to the lines he uses:

Code	Account	Type	Appears on
1100	Trade debtors	Asset	Balance sheet
1200	Bank current account	Asset	Balance sheet
2100	Trade creditors	Liability	Balance sheet
2200	VAT control	Liability	Balance sheet
4000	Sales — labour	Income	Profit and loss
4010	Sales — materials	Income	Profit and loss
5000	Materials purchased	Cost of sales	Profit and loss
7300	Van fuel and running	Expense	Profit and loss
7400	Tools and small equipment	Expense	Profit and loss
7600	Insurance	Expense	Profit and loss

How does a transaction use it?

He invoices a customer £2,400 including VAT for a boiler replacement: £1,500 labour, £500 materials, £400 VAT. The entry debits trade debtors (1100) £2,400, and credits sales — labour (4000) £1,500, sales — materials (4010) £500 and VAT control (2200) £400. The chart decides where each piece lands.

When the customer pays, bank (1200) goes up by £2,400 and trade debtors (1100) comes down by the same. Nothing touches the sales accounts, because the sale was already recorded. Every report he ever runs is a sum of accounts from this list.

TERMS USED ON THIS PAGE

assets liabilities balance sheet invoice VAT debtors All terms →

COMMON QUESTIONS

Questions people ask.

Do I have to use a standard chart of accounts?

No. There is no statutory UK chart; the accounts you file have to follow a format, but the codes and names behind them are yours. Most businesses start from their software's default because it maps cleanly onto the year-end accounts, and adjust from there.

What is the difference between a chart of accounts and a general ledger?

The chart is the list of accounts. The general ledger is those accounts with the transactions in them. One is the index; the other is the book. You can print a chart of accounts on one page; the general ledger for a year is every entry the business made, grouped under those headings.

Can I change my chart of accounts mid-year?

Adding an account is harmless at any time. Renaming or merging accounts is fine as long as the year-end reports still make sense. Deleting an account with transactions in it is not usually possible, and reclassifying old transactions to a new account should be done deliberately, so comparisons with earlier periods stay meaningful.

Does a sole trader need a chart of accounts?

If you use any bookkeeping software, you already have one, whether you looked at it or not. A sole trader on the cash basis needs fewer lines than a company — no share capital, no corporation tax — but the same structure of income, expenses, assets and liabilities still applies, and the Self Assessment return asks for expenses by category.

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What is a chart of accounts?