> ## Documentation Index
> Fetch the complete documentation index at: https://docs.lerian.studio/llms.txt
> Use this file to discover all available pages before exploring further.

# Chart of accounts

> What a chart of accounts is, why it keeps financial data organized, how it ties accounting together, and how it maps to the account hierarchy in Midaz.

If accounting is a giant filing cabinet of money movements, the **chart of accounts** is the labels on the drawers. It's the organized list of every "bucket" a business uses to sort its transactions — and without it, the records would be an unsearchable pile.

## What it actually is

***

A **chart of accounts** is simply a structured list of all the accounts a business uses to record its financial activity. Each account is a category — a place to put a certain kind of transaction.

Think of how you might organize your own money into labeled envelopes: *Rent*, *Groceries*, *Salary*, *Savings*. A chart of accounts is the same idea, just more complete and consistent. Every transaction gets filed into one of these named buckets, so you always know what it was for.

## How it's organized

***

The accounts are grouped to match the concepts you've already met. Most charts follow the same five families:

| Group           | What goes here             | Examples                           |
| --------------- | -------------------------- | ---------------------------------- |
| **Assets**      | What the business owns     | Cash, equipment, money owed to you |
| **Liabilities** | What the business owes     | Loans, unpaid bills                |
| **Equity**      | What's left for the owners | Owner's stake, retained profit     |
| **Revenue**     | Money earned               | Sales, service income              |
| **Expenses**    | Money spent                | Rent, salaries, supplies           |

The first three feed the [Balance Sheet](/en/fundamentals/accounting/financial-statements); the last two feed the Income Statement. So the chart of accounts is the bridge between raw transactions and the reports everyone reads.

In practice, a simple one looks like this — each family gets its own range of numbers, with individual accounts slotted inside:

```
1000  Assets
  1010  Cash
  1020  Accounts receivable
  1030  Equipment

2000  Liabilities
  2010  Loans payable
  2020  Taxes payable

3000  Equity
  3010  Owner's equity
  3020  Retained earnings

4000  Revenue
  4010  Product sales
  4020  Service income

5000  Expenses
  5010  Rent
  5020  Salaries
  5030  Supplies
```

The numbers aren't decoration — they keep accounts in a fixed order and leave room to add new ones (a `1040` for inventory, say) without disturbing the rest.

## Why it matters

***

A good chart of accounts is what makes financial data **usable**:

* **Consistency** — the same kind of expense always lands in the same place, so reports are reliable.
* **Clarity** — anyone can see, at a glance, where money is going.
* **Scale** — whether you have ten transactions or ten million, they all have a clear home.

Without it, [double-entry](/en/fundamentals/accounting/double-entry-bookkeeping) entries would have nowhere consistent to land, and the [financial statements](/en/fundamentals/accounting/financial-statements) couldn't be assembled. It's the quiet structure that makes everything else work.

## How it connects in Lerian

***

In accounting, the chart of accounts is the structure that organizes your records. In a **ledger system**, that same idea becomes an **account hierarchy** — a tree that groups balances, movements, and the business entities behind them:

```mermaid theme={null}
flowchart TD
    A["Chart of accounts"]:::root --> B["Assets"]:::family
    A --> C["Liabilities"]:::family
    A --> D["Equity"]:::family
    A --> E["Revenue"]:::family
    A --> F["Expenses"]:::family
    B --> B1["Cash"]:::leaf
    B --> B2["Accounts receivable"]:::leaf
    B --> B3["Equipment"]:::leaf
    F --> F1["Rent"]:::leaf
    F --> F2["Salaries"]:::leaf
    F --> F3["Supplies"]:::leaf
    classDef root fill:#f3f4f6,stroke:#6b7280,color:#111827
    classDef family fill:#dbeafe,stroke:#2563eb,color:#1e3a8a
    classDef leaf fill:#eff6ff,stroke:#93c5fd,color:#1e3a8a
```

In **Midaz**, that hierarchy lives inside a Ledger, so you can group and nest accounts to mirror how a real business is structured. [Accounting in Lerian](/en/fundamentals/accounting/accounting-in-lerian) shows exactly how this — and the other accounting ideas — map onto the product.

<Note>
  **See also in Core Banking**

  This same structure becomes an account hierarchy in a ledger — see [The building blocks](/en/fundamentals/core-banking/building-blocks) and [Designing your ledger plan](/en/fundamentals/core-banking/designing-your-ledger-plan).
</Note>

## In short

***

* A **chart of accounts** is the organized list of buckets a business sorts its transactions into.
* It groups accounts into **assets, liabilities, equity, revenue, and expenses** — the bridge between raw entries and readable reports.
* It's what keeps financial data **consistent, clear, and scalable**, and in **Midaz** it becomes a flexible account **hierarchy** that mirrors how a real business is organized.

<Note>
  **Next up**

  Once every transaction is filed into the right account, those totals roll up into reports. Meet them in [Financial statements](/en/fundamentals/accounting/financial-statements).
</Note>