A well-structured chart of accounts (COA) is the backbone of clear financial reporting and tax compliance. This guide walks Australian SMEs through setting up a COA that supports accurate bookkeeping, effortless GST/BAS reporting, and smart business decisions.

1. Understand What a Chart of Accounts Is

A COA is a structured list of all ledger accounts your business uses—grouped into assets, liabilities, equity, revenue, and expenses
It helps create financial statements, like the balance sheet and profit & loss, by organising each transaction precisely.

2. Choose a Logical Numbering System

  • Use standard numbering groups:
    • 1xxx = Assets, 2xxx = Liabilities, 3xxx = Equity, 4xxx = Revenue, 5xxx+ = Expenses
  • Keep numbers consistent (e.g. four or five digits), reserving gaps for future accounts

3. Map Out Essential Account Categories

Start with ATO essentials tailored for SMEs:

  • Assets: Cash, Receivables, Equipment
  • Liabilities: Payables, GST Payable, Loans
  • Equity: Owner’s Capital, Retained Earnings
  • Revenue: Sales Income, Fee Income
  • Expenses: Rent, Wages, Utilities, Software

4. Add Clear Descriptions & Sub-Accounts

Label accounts clearly (e.g., “Consulting Fees – GST”) and include brief descriptions to guide sorting.
Use sub-accounts (e.g., Expense: Travel > Sub–Domestic) to maintain clarity and avoid generic “Other” categories

5. Set Up in Your Accounting Software

  • In Xero or QuickBooks, select Chart of Accounts > New.
  • Enter account name, number, type, and GST classification.
  • Check “Subaccount” if nesting under a broader category

6. Test & Refine for Growth

  • Record sample transactions (sales, purchases) and confirm they map correctly.
  • Archive or hide unused accounts—don’t delete them until the year-end
  • Review annually, especially after adding new services or revenue streams

Best Practices Checklist

  • Use ATO-compliant numbering (1000s–5000s)
  • Add descriptive names & sub-accounts
  • Assign GST codes correctly for BAS
  • Test with sample transactions before going live
  • Archive unused accounts at year-end
  • Review and update regularly, especially after growing or diversifying

Why This Matters

A well-organised COA leads to accurate reporting, compliance with ATO requirements, and reliable insights for budgeting, forecasting, and decision-making

How We Can Help

At Win Professionals, we customise your COA for your specific needs, ensuring ATO compatibility, clean software setup, and financial clarity from the start.

👉 Contact us today to build a chart of accounts that supports your growth.

Simpler BAS GST bookkeeping guide