mission Matters How to Set Up a Chart of Accounts for Your Nonprofit February 06, 2023 Now is a great time to get your nonprofit more organized for the year and a Chart of Accounts (COA) is a great place to start. Learn more about this important guide that helps organizations classify and track expenses and revenue. Are you starting a brand-new nonprofit or just trying to get more organized this year? It can be hard to know where to begin. The chart of accounts (or COA) is a great place to start. We dive into this important framework here. What is the chart of accounts? The COA is the framework that categorizes your financial activity into different accounts and subaccounts. Every nonprofit organization has a unique COA which depends on your specific programs, revenue sources, and activities. In general, your COA should follow some standard guidelines and numbering conventions. A chart of accounts is commonly numbered as follows: Statement of Financial Position (Balance Sheet) Assets: 1000-1999Liabilities: 2000-2999Equity/Net Assets: 3000-3999 Statement of Activities (Profit and Loss) Revenue: 4000-4999Expenses: 5000+ Some helpful numbering notes: Any assets owned by your nonprofit (like bank accounts, investments, property, and equipment) should be numbered in the 1000 range. Liabilities (like loans, mortgages, and accounts payable) should be in the 2000 range. Net assets with and without restrictions should be numbered in the 3000 range. Revenue from donations , program services or sales should be in the 4000 range, and Expenses for programs, utilities, salaries, and everything else should be numbered as 5000 or above. When you’re numbering your accounts, follow these three rules: Keep things simple. If you need more detailed layers of organization, you can add subaccounts, funds or class codes.Group similar accounts together. It’s easier to read and understand your financial reports when your accounts are listed in a logical order. Leave room for growth. Leave gaps between your account numbers so you can add new accounts later. What is the importance of a COA? Think of your COA as a filing cabinet—it houses all accounts and ledgers and important information about your payroll, checking account, investments, utilities, programming and more. It serves as the foundation for other financial reports. Sample COA Here is an example of a COA – remember, your nonprofit might have different types of revenue, expenses, and assets that will make your chart of accounts more unique and effective for your organization. Build a solid framework that you can easily scale for the future. Questions? Need help with your COA? Reach out to us.