Chart of Accounts & Categorization
Chart of Accounts for a Small Service Business (Template)
Short answer
A chart of accounts (COA) is the list of buckets every transaction is sorted into. A small service business needs about 25–40 accounts — not 200. Keep it lean so your P&L is actually readable.
Most accounting software ships with a bloated default COA. Strip it down to what you actually need and your monthly reports become decision tools instead of noise.
Starter chart of accounts
- Revenue: Service Income, Product Sales, Other Income
- Cost of Goods Sold: Materials, Subcontractor Labor, Job-Site Supplies
- Operating Expenses: Vehicle/Fuel, Tools & Equipment, Software, Phone, Insurance, Marketing, Office, Bank Fees, Merchant Fees, Professional Services
- Payroll: Wages, Payroll Taxes, Benefits
- Assets: Checking, Savings, Tax Savings, A/R, Equipment, Vehicle
- Liabilities: A/P, Credit Card, Sales Tax Payable, Loan Payable
- Equity: Owner's Investment, Owner's Draw, Retained Earnings
Three rules to keep it sane
- Don't create a new account for a one-off expense — use 'Other' first, then promote it only if it recurs monthly.
- Separate COGS (costs tied to a job) from Operating Expenses (overhead). This is what makes gross margin visible.
- Match account names to your tax form (Schedule C lines for sole props). Year-end goes 10× faster.
Frequently asked questions
Should I number my accounts?
Yes — use 1000s for assets, 2000s liabilities, 3000s equity, 4000s revenue, 5000s COGS, 6000s expenses. It's the industry standard.
Bookkeeping, done for you.
Glo Invoice keeps your P&L, AR, and expenses in sync automatically — no spreadsheets, no surprises.
Sources & further reading
Primary sources we consulted when writing and reviewing this guide.