What Is a Chart of Accounts? Examples for Indian Companies

A chart of accounts is the master list of every ledger your business uses to record transactions: assets, liabilities, equity, income and expenses, organised into groups with codes. It looks like a boring setup screen, but it decides what your profit and loss statement can tell you, how quickly you can file GST and TDS returns, and how painful your audit will be. This guide explains what a chart of accounts is, how to design one for an Indian company that reports under Schedule III of the Companies Act, 2013, with a sample structure, numbering conventions, and the mistakes that force businesses to rebuild their books later.

What is a chart of accounts?

Every journal entry debits one or more accounts and credits one or more accounts. The chart of accounts (often shortened to CoA) is the list of those accounts. In Tally you would call them ledgers under groups; in most ERPs they are general ledger (GL) accounts under account groups or types. Each account has:

• A code: a number such as 4010 that sorts and identifies the account.
• A name: such as "Sales: Domestic, Taxable".
• A type: asset, liability, equity, income or expense, which decides whether it appears in the balance sheet or the P&L.
• A parent group: such as "Revenue from Operations", which decides where it rolls up in financial statements.
• Attributes: whether it is a bank account, a control account for receivables or payables, whether it accepts manual journals, and its tax mapping.

The five account types and how they map to Indian financial statements

Schedule III prescribes the format of the balance sheet and statement of profit and loss for companies. Designing your chart of accounts so that groups mirror Schedule III line items means your statements come out right without a spreadsheet rework at year end.

Account type	Schedule III heads it feeds	Typical code range
Assets	Property, plant and equipment; intangible assets; investments; inventories; trade receivables; cash and cash equivalents; short-term loans and advances; other current assets	1000 to 1999
Liabilities	Long-term borrowings; short-term borrowings; trade payables (MSME and others); other current liabilities; provisions	2000 to 2999
Equity	Share capital; other equity (reserves and surplus)	3000 to 3999
Income	Revenue from operations; other income	4000 to 4999
Expenses	Cost of materials consumed; purchases of stock-in-trade; changes in inventories; employee benefits expense; finance costs; depreciation; other expenses	5000 to 9999

Partnership firms, LLPs and proprietorships are not bound by Schedule III, but following a similar structure still makes bank and investor reporting easier.

Sample chart of accounts for an Indian trading company

Below is an illustrative, trimmed structure for a hypothetical Ahmedabad trading company with one GST registration. A real CoA would have 150 to 400 accounts.

Code	Account	Group
1110	Cash in Hand: Head Office	Cash and cash equivalents
1120	HDFC Bank Current A/c	Cash and cash equivalents
1210	Trade Receivables: Domestic (control)	Trade receivables
1310	Inventory: Finished Goods	Inventories
1410	Input CGST	Other current assets
1411	Input SGST	Other current assets
1412	Input IGST	Other current assets
1420	TDS Receivable	Other current assets
1510	Plant and Machinery	Property, plant and equipment
1590	Accumulated Depreciation: Plant	Property, plant and equipment
2110	Trade Payables: MSME (control)	Trade payables
2120	Trade Payables: Others (control)	Trade payables
2210	Output CGST	Other current liabilities
2230	Output IGST	Other current liabilities
2310	TDS Payable: Contractors	Other current liabilities
2410	Term Loan: SBI	Long-term borrowings
3110	Equity Share Capital	Share capital
4110	Sales: Domestic Taxable	Revenue from operations
4120	Sales: Exports	Revenue from operations
4910	Interest Income	Other income
5110	Purchases: Stock-in-trade	Purchases of stock-in-trade
6110	Salaries and Wages	Employee benefits expense
7110	Interest on Term Loan	Finance costs
8110	Rent: Warehouse	Other expenses
8210	Freight Outward	Other expenses

Notice the separate MSME and non-MSME payables control accounts. Schedule III requires disclosure of dues to micro and small enterprises, and the income-tax rules on delayed payments to MSMEs make it important to track these balances and their ageing separately.

How to design a chart of accounts: step by step

1. Start from your reporting needs, not your old ledger list. List the reports you need: Schedule III statements, monthly MIS, GST returns, TDS returns, bank stock statements, and any investor or lender covenants.
2. Fix the numbering scheme. Four or five digits, with the first digit for the type and the second for the group. Leave gaps (1110, 1120, 1130) so you can insert accounts later without renumbering.
3. Use control accounts for parties. Do not create one GL account per customer or vendor. Keep customers and vendors as sub-ledgers under a receivables or payables control account. This keeps the CoA short and the trial balance readable.
4. Separate tax ledgers by tax type and direction. Input and output CGST, SGST and IGST, cess if applicable, and TDS payable by section. If you have multiple GST registrations, either separate ledgers per GSTIN or use a branch or location dimension.
5. Use dimensions instead of duplicate accounts. Instead of "Salary: Mumbai", "Salary: Pune", "Salary: Delhi", keep one Salary account and tag entries with a branch or cost centre. This is the most common design improvement when moving from Tally to an ERP.
6. Decide posting rules. Mark control accounts as non-postable by manual journal, so receivables can only change through invoices, receipts and credit notes.
7. Document it. A one-page CoA policy describing what goes where prevents five accountants from creating five versions of "Miscellaneous Expenses".

Dimensions: the modern way to keep a chart of accounts lean

Older accounting systems forced you to encode every analysis into the ledger name. ERPs allow tagging each line with dimensions such as branch, department, cost centre, project or product line. Suppose a Pune engineering firm wants profit by three divisions and two branches. Without dimensions, each expense account becomes six accounts. With dimensions, it stays one, and the report is filtered or pivoted.

The rule of thumb: use an account for "what" the transaction is, and a dimension for "where" or "for whom". Fininvo's accounting module supports a chart of accounts alongside budgets and cost centres, which is the structure that makes this possible.

Common chart of accounts mistakes in Indian businesses

• Too many "Sundry" and "Misc" accounts. If miscellaneous expenses exceed 1 to 2 percent of total expenses, auditors will ask questions and your MIS loses meaning.
• Party names as GL accounts. Creating "ABC Traders" as an expense ledger instead of a vendor under payables breaks ageing and TDS tracking.
• Mixing GST into expense accounts. Posting the gross amount, including eligible input tax, to "Repairs" understates input tax credit and overstates expenses.
• No separate account for blocked credits. Tax on items where credit is not available should be added to cost explicitly, not left sitting in input tax ledgers.
• Renaming accounts mid-year. Changing "Freight" to "Logistics" with a different meaning breaks year-on-year comparison. Create a new account and close the old one at year end.
• No owner for the CoA. Allowing anyone to create ledgers is how a 200-account CoA becomes 1,800 accounts in three years.

Chart of accounts for different industries

Manufacturing

Add inventory accounts for raw materials, work in progress, finished goods, stores and spares, and packing material. Expense groups should separate cost of materials consumed, power and fuel, and direct labour so that you can compute contribution and cost per unit.

Services and consulting

Revenue accounts by service line, unbilled revenue and advances from customers, and a strong project dimension. Professional fees paid and subcontractor costs often need separate TDS mapping.

Distribution and trading

Focus on purchases, freight inward, trade discounts, scheme receivables from principals, and stock-in-transit. Principal-wise margin is usually best handled through a brand or principal dimension.

Chart of accounts review checklist

• Every account maps to exactly one Schedule III line (for companies).
• Receivables and payables are control accounts with party sub-ledgers.
• MSME payables are separately identifiable.
• GST input and output ledgers exist per tax type, and TDS payable per section.
• Branch, department and project analysis uses dimensions, not duplicate accounts.
• Inactive accounts are blocked, not deleted, so history is preserved.
• Only designated users can create or edit accounts, and changes are logged.

If you are restructuring your CoA as part of a move from Tally, read the companion guide on migrating from Tally to an ERP, which covers mapping old ledgers to a new structure.

Frequently Asked Questions

How many accounts should a chart of accounts have?

There is no fixed number. Most Indian SMBs work well with 150 to 400 GL accounts when customers, vendors and employees are kept as sub-ledgers and analysis uses dimensions. If you have thousands of GL accounts, parties or locations are probably being created as ledgers.

Is there a standard chart of accounts prescribed in India?

No mandatory account list exists for private companies. Schedule III prescribes the presentation format of financial statements, so a good CoA is designed to roll up into those heads. Some regulated sectors have their own formats.

Can I change my chart of accounts mid-year?

You can add accounts at any time. Restructuring existing accounts is safest at the start of a financial year. If you must change mid-year, create new accounts, transfer balances with documented journals, and block the old ones.

Should each GST registration have separate ledgers?

Each GSTIN files its own returns, so you need to report tax per registration. You can do that with separate ledgers per GSTIN or with a location dimension, as long as reports can be produced per GSTIN reliably.

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

A ledger is a single account with its transactions and balance. The chart of accounts is the organised list of all ledgers and their groups.

How Fininvo Helps

Fininvo ERP provides a chart of accounts, journal entries, general ledger, receivables and payables, budgets and cost centres and standard financial reports in one cloud system. Explore the accounting features and financial reports, or compare plans on the pricing page.