# How to set up a chart of accounts

List every account you need under five groups: assets, liabilities, equity, income and expenses. Give each a number in a fixed range, keep the list short and add tracking for jobs or locations instead of more accounts.

Free tool: [Chart of accounts generator](https://www.pulsify.tech/free-tools/chart-of-accounts-generator/). Start from a template for your industry and edit it.

## Why it matters

The chart of accounts decides what your reports show. Too few accounts hides costs. Too many makes coding slow and inconsistent.

A clear chart makes bill coding faster and BAS easier.

## The steps

1. **Start with the five groups.** Assets, liabilities, equity, income and expenses.
2. **Number the ranges.** For example 1000s assets, 2000s liabilities, 3000s equity, 4000s income, 5000s cost of sales and 6000s expenses.
3. **List income by stream.** Create one income account for each product or service line you want to report.
4. **List cost of sales.** Include materials, freight in, subcontractors and direct labour.
5. **List overheads.** Group rent, insurance, wages, vehicles, software, professional fees and bank fees.
6. **Add GST accounts.** Add a GST liability account and an input tax account if your system needs them.
7. **Use tracking for jobs and sites.** Use tracking categories or classes for jobs, sites and departments. Do not create an account for each.
8. **Set a naming rule and review.** Use one style for names. Remove unused accounts once a year.

## The Pulsify way

1. Pulsify reads each invoice into line items and gives each line its own account.
2. The account comes from how that supplier's past bills were coded in your accounting system, such as Xero or MYOB.
3. Every value lands in an editable review screen before approval.

## Worked example

Example Distribution Pty Ltd sets this short chart.

| Number | Account | Type |
| --- | --- | --- |
| 1100 | Bank | Asset |
| 1200 | Accounts receivable | Asset |
| 2100 | Accounts payable | Liability |
| 2200 | GST | Liability |
| 3100 | Owner equity | Equity |
| 4100 | Product sales | Income |
| 5100 | Cost of goods sold | Cost of sales |
| 5200 | Freight in | Cost of sales |
| 6100 | Wages | Expense |
| 6200 | Rent | Expense |

Ten accounts are enough to start. The business adds a job tracking category so it can report by site without more accounts.

## Common mistakes

- Copying a template with hundreds of unused accounts.
- Creating an account for each customer or job.
- Changing account names without telling the team.
- Mixing cost of sales and overheads.

## Common questions

### How many accounts do I need?

Use as few as your reports allow. Add an account only when you want to see that number on its own.

### Can I change the chart later?

Yes, but changing an account type can change old reports. Ask your accountant first.

### Should I follow my accountant's layout?

Ask them. A layout that matches their tax work saves time at year end.

## Next step

Use the [Chart of accounts generator](https://www.pulsify.tech/free-tools/chart-of-accounts-generator/) first. Then see [automated line item coding](https://www.pulsify.tech/automated-line-item-coding/).

Source: https://www.pulsify.tech/how-to/set-up-a-chart-of-accounts/ (last checked 2026-10-20)