A chart of accounts (COA) is a list of the accounts used by a business entity to record and categorize financial transactions. COA is used to organize the finances of the entity and to segregate expenditures, revenue, assets, and liabilities in order to give interested parties a better understanding of the financial health of the entity. The chart of accounts is a list of all the accounts and their numbers contained in the general ledger. The accounts are listed in the order of assets, liabilities, owner's equity, revenue, and expenses. Transactions can be posted to each defined account in COA and it can capture balances in the general ledger Chart of accounts is a way to outline the accounting system of a business, the chart of accounts establishes how the business will operate, what information will be captured, and what information will subsequently be readily retrievable by the system for reporting and other needs.
In automated accounting systems and ERPs, the chart of accounts is made up of and represented as a string of numeric and alphanumeric fields that act as identifiers. The companies define different segments to capture relevant business dimensions along with the natural account associated with the transaction.