Five digit chart of accounts
/The number of digits used to describe each account in a chart of accounts drives the level of detail that can be recorded. A five digit chart of accounts is used by organizations that want to track information at the departmental level. With a five-digit code, they can produce separate income statements for each department. This format duplicates the account codes found in a three digit chart of accounts, but then adds a two-digit code to the left, which indicates specific departments. The three-digit codes for expenses (and sometimes also revenues) are then duplicated for each department for which management wants to record information.
A typical structure for a five-digit chart of accounts is as follows:
Digits 1-2: Identifies the department, such as the accounting department or engineering department.
Digits 3-5: Identifies the account, such as accounts receivable, inventory, or accounts payable.
Related AccountingTools Courses
A sample of the five digit chart of accounts format follows, using the accounting and production departments to show how expense account codes can be duplicated.
| Account Number | Department | Description |
| 00-010 | xxx | Cash |
| 00-020 | xxx | Petty cash |
| 00-030 | xxx | Accounts receivable |
| 00-040 | xxx | Reserve for bad debts |
| 00-050 | xxx | Marketable securities |
| 00-060 | xxx | Raw materials inventory |
| 00-070 | xxx | Work-in-process inventory |
| 00-080 | xxx | Finished goods inventory |
| 00-090 | xxx | Reserve for obsolete inventory |
| 00-100 | xxx | Fixed assets – Computer equipment |
| 00-110 | xxx | Fixed assets – Computer software |
| 00-120 | xxx | Fixed assets – Furniture and fixtures |
| 00-130 | xxx | Fixed assets – Leasehold improvements |
| 00-140 | xxx | Fixed assets – Machinery |
| 00-150 | xxx | Accumulated depreciation – computer equipment |
| 00-160 | xxx | Accumulated depreciation – Computer software |
| 00-170 | xxx | Accumulated depreciation – Furniture and fixtures |
| 00-180 | xxx | Accumulated depreciation – Leasehold improvements |
| 00-190 | xxx | Accumulated depreciation – Machinery |
| 00-200 | xxx | Other assets |
| 00-300 | xxx | Accounts payable |
| 00-310 | xxx | Accrued payroll liability |
| 00-320 | xxx | Accrued vacation liability |
| 00-330 | xxx | Accrued expenses liability – other |
| 00-340 | xxx | Unremitted sales taxes |
| 00-350 | xxx | Unremitted pension payments |
| 00-360 | xxx | Short-term notes payable |
| 00-370 | xxx | Other short-term liabilities |
| 00-400 | xxx | Long-term notes payable |
| 00-500 | xxx | Capital stock |
| 00-510 | xxx | Retained earnings |
| 00-600 | xxx | Revenue |
| 00-700 | xxx | Cost of goods sold – materials |
| 00-710 | xxx | Cost of goods sold – direct labor |
| 00-720 | xxx | Cost of goods sold – manufacturing supplies |
| 00-730 | xxx | Cost of goods sold – applied overhead |
| 10-800 | Accounting | Bank charges |
| 10-805 | Accounting | Benefits |
| 10-810 | Accounting | Depreciation |
| 10-815 | Accounting | Insurance |
| 10-825 | Accounting | Office supplies |
| 10-830 | Accounting | Salaries and wages |
| 10-835 | Accounting | Telephones |
| 10-840 | Accounting | Training |
| 10-845 | Accounting | Travel and entertainment |
| 10-850 | Accounting | Utilities |
| 10-855 | Accounting | Other expenses |
| 10-860 | Accounting | Interest expense |
| 20-800 | Production | Bank charges |
| 20-805 | Production | Benefits |
| 20-810 | Production | Depreciation |
| 20-815 | Production | Insurance |
| 20-825 | Production | Office supplies |
| 20-830 | Production | Salaries and wages |
| 20-835 | Production | Telephones |
| 20-840 | Production | Training |
| 20-845 | Production | Travel and entertainment |
| 20-850 | Production | Utilities |
| 20-855 | Production | Other expenses |
| 20-860 | Production | Interest expense |
The preceding sample chart of accounts shows an exact duplication of accounts for each department listed. This is not necessarily the case in reality, since some departments have accounts for which they are the only probable users. For example, the accounting department in the example has an account for bank charges that the production department is unlikely to use. Thus, some accounts can be avoided by flagging them as inactive in the accounting system. By doing so, they do not appear in the formal chart of accounts.