A chart of accounts is the organised list of every account a business uses to record its transactions. Accounts are grouped into categories — typically assets, liabilities, equity, income and expenses — and give each transaction a consistent place to be recorded.
In plain terms
It is the backbone of an accounting system. A well-structured chart of accounts, often multi-level, lets a firm report at the level of detail it needs.
Example
A firm records client fees under an income account and office rent under an expense account, both defined in its chart of accounts.
Why it matters
A clear chart of accounts makes reporting accurate and meaningful, and keeps transactions consistently classified over time.
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