# What Is a Chart of Accounts?

A chart of accounts is the complete list of categories a business uses to record every transaction: assets, liabilities, equity, income and expenses. Each account gets a name, a type and often a number. For a contractor, a good chart of accounts separates job costs like materials, subs and field labor from overhead, so the P&L shows real gross profit.

## Key takeaways

- Every transaction you record lands in at least one account from the chart of accounts. Bad categories mean bad reports.
- The five main account types are assets, liabilities, equity, income and expenses. Contractors should split expenses into cost of goods sold (job costs) and overhead.
- Keep it short. Track jobs with customers, projects or classes, not with a separate account per job.
- Numbering accounts (1000s assets, 2000s liabilities, 3000s equity, 4000s income, 5000s job costs, 6000s overhead) keeps reports in a sensible order.
- Clean up once with your bookkeeper or CPA, then leave it alone. Constant changes break year-over-year comparisons.

## How does a chart of accounts work?

Think of it as the filing cabinet for your money. When you invoice a customer, the sale goes to an income account. When you buy wire at the electrical supply house, the cost goes to a materials account. Your [profit and loss statement](https://www.brix.so/learn/profit-and-loss-statement) and balance sheet are simply totals of these accounts. If an electrician's wire, fuel and owner's lunch all land in "Supplies," the reports can't tell you whether jobs are profitable.

## What are the main types of accounts?

**The account types, in the order they appear on financial statements**

| Type | Report | Contractor examples |
| --- | --- | --- |
| Assets | Balance sheet | Operating checking, tax savings account, [accounts receivable](https://www.brix.so/learn/accounts-receivable), retainage receivable, trucks, equipment, tools |
| Liabilities | Balance sheet | [Accounts payable](https://www.brix.so/learn/accounts-payable), credit cards, payroll liabilities, sales tax payable, customer deposits, truck loans, line of credit |
| Equity | Balance sheet | Owner's investment, owner's draws (or distributions), retained earnings |
| Income | Profit and loss | Service revenue, installation revenue, maintenance agreement revenue, change orders |
| Cost of goods sold | Profit and loss | Materials, subcontractors, field labor, equipment rental, permits, dump fees. See [cost of goods sold](https://www.brix.so/learn/cost-of-goods-sold). |
| Expenses (overhead) | Profit and loss | Office wages, rent, insurance, marketing, software, vehicle costs not charged to jobs |
| Other income and expense | Profit and loss | Interest income, interest expense, gain or loss on selling a truck |

## What does a contractor chart of accounts look like?

Here is a compact example for a residential service and installation company. A sample with more detail, ready to import into QuickBooks, is in our [QuickBooks chart of accounts for contractors](https://www.brix.so/templates/quickbooks-chart-of-accounts-for-contractors) template.

**Sample contractor chart of accounts (abbreviated)**

| Number | Account | Type | Notes |
| --- | --- | --- | --- |
| 1000 | Operating checking | Bank | Where customer payments land |
| 1010 | Tax savings | Bank | Set aside for quarterly estimated taxes |
| 1200 | Accounts receivable | Accounts receivable | Created automatically by QuickBooks |
| 1210 | Retainage receivable | Other current asset | Commercial and GC work only. See [retainage](https://www.brix.so/learn/retainage). |
| 1500 | Vehicles | Fixed asset | Trucks and vans |
| 1510 | Equipment and tools | Fixed asset | Larger items you depreciate. See [depreciation](https://www.brix.so/learn/depreciation). |
| 2000 | Accounts payable | Accounts payable | Supplier and sub bills |
| 2100 | Business credit card | Credit card | One account per card |
| 2200 | Customer deposits | Other current liability | Money received for work not done yet |
| 2300 | Sales tax payable | Other current liability | If your state taxes your work or materials |
| 2700 | Truck loan | Long-term liability | One per loan |
| 3000 | Owner's equity / draws | Equity | Use distributions for an S corporation |
| 4000 | Service and repair income | Income |  |
| 4100 | Installation and replacement income | Income |  |
| 4200 | Maintenance agreement income | Income | See [maintenance agreements](https://www.brix.so/learn/maintenance-agreement) |
| 5000 | Job materials | Cost of goods sold | Everything bought for a specific job |
| 5100 | Subcontractors | Cost of goods sold | Track 1099 subs here |
| 5200 | Field labor and payroll taxes | Cost of goods sold | Technician and crew wages for job time |
| 5300 | Equipment rental and permits | Cost of goods sold | Job-specific rentals, permit and dump fees |
| 6000 | Office and admin wages | Expense | Not job labor |
| 6100 | Vehicle fuel and repairs | Expense | Unless you charge vehicles to jobs |
| 6200 | Insurance | Expense | General liability, workers' comp (or split to field labor) |
| 6300 | Marketing and advertising | Expense |  |
| 6400 | Software and phones | Expense |  |
| 6500 | Rent and utilities | Expense | Shop and office |
| 7000 | Interest expense | Other expense | Loans and credit lines |

_Example structure, not accounting advice. Your bookkeeper or CPA should adapt it to your entity and state._

## How should a chart of accounts differ by trade?

**Accounts worth adding for specific trades**

| Trade | Income accounts to split | Cost accounts to split |
| --- | --- | --- |
| HVAC | Service, replacement installs, maintenance agreements | Equipment (units) separate from parts and refrigerant |
| Plumbing | Service, drain cleaning, water heaters, new construction | Fixtures and water heaters separate from pipe and fittings |
| Roofing | Retail, insurance, commercial | Shingles and underlayment, dumpsters, subcontracted crews |
| Electrical | Service, panel and EV charger installs, commercial contract work | Wire and gear; lift rentals; retainage receivable on the asset side |
| General contractor | Contract revenue, change orders | Subcontractors by trade, materials, permits; retainage payable and receivable |
| Landscaping | Maintenance contracts, installs, snow removal | Plants and hardscape materials, fuel, equipment repair |
| Cleaning | Recurring commercial, one-time residential | Supplies, field labor |

## Should each job have its own account?

No. Accounts describe *what* the money was for (materials, subs, labor). Jobs describe *where* it was spent. In QuickBooks Online, track the job with a customer, sub-customer or project, and use classes for things like trade divisions or locations. Creating an account per job bloats the chart of accounts and makes the P&L unreadable. See [QuickBooks classes vs. projects](https://www.brix.so/learn/quickbooks-classes-vs-projects) and [how to do job costing in QuickBooks](https://www.brix.so/learn/how-to-do-job-costing-in-quickbooks).

## How do you set up a chart of accounts in QuickBooks Online?

QuickBooks builds a starter chart of accounts from your business type when you create the company. To add an account, Intuit's help (updated August 2026) says to go to All apps, then Accounting, then Chart of accounts, and select New account. Pick an account type and a detail type, name it, and check "Make this a subaccount" if it belongs under a parent account. Intuit's menus change often; if yours look different, search "chart of accounts" in QuickBooks.

- **Turn on account numbers** in your account settings if you want numbered accounts like the table above.
- **Make unused accounts inactive** instead of deleting them, so past transactions keep their history. QuickBooks plans also cap the number of accounts, and inactive accounts free up room.
- **Use subaccounts sparingly.** One level (Job materials → HVAC equipment) is usually enough.
- **Connect your bank feeds** after the chart is set, so every imported transaction has the right place to go.

## Common chart of accounts mistakes

1. **Putting job costs in overhead.** Field labor and materials in "Expenses" instead of cost of goods sold hides your [gross margin](https://www.brix.so/learn/gross-margin).
2. **Too many accounts.** A hundred accounts with a few transactions each is noise. Use projects and classes for detail.
3. **Catch-all accounts.** "Miscellaneous" and "Ask my accountant" that grow every month mean nobody is categorizing.
4. **Owner draws as expenses.** Owner draws (for a sole proprietor or LLC taxed as one) are equity, not an expense.
5. **Customer deposits as income.** A deposit for work not done yet is a liability until you do the work, if you keep accrual books.
6. **Changing it constantly.** Renaming and merging accounts mid-year breaks comparisons. Set it up once and stick with it.

BRIX keeps expenses categorized to your chart of accounts and syncs customers, invoices and payments with QuickBooks, so transactions land in the right place without a shoebox at month-end.

- [Bookkeeping and tax help](https://www.brix.so/features/bookkeeping-taxes): Keeps expenses categorized, tracks 1099 subcontractors and sales tax, and reminds you of quarterly estimated tax dates. BRIX does not file taxes or give tax advice.
- [QuickBooks sync](https://www.brix.so/integrations/quickbooks): Syncs customers, invoices and payments with QuickBooks so the books match the jobs.

## Frequently asked questions

### How many accounts should a small contractor have?

Enough to separate income types, job costs and overhead clearly, which for most small trades businesses is somewhere between a few dozen and around sixty. Use customers, projects and classes for job and division detail instead of adding accounts.

### What is the numbering system for a chart of accounts?

A common convention is 1000s for assets, 2000s for liabilities, 3000s for equity, 4000s for income, 5000s for cost of goods sold, 6000s for operating expenses and 7000s or 8000s for other income and expense. Numbering is optional in QuickBooks, but it keeps reports in a logical order.

### Should materials be cost of goods sold or an expense?

Materials bought for specific jobs belong in cost of goods sold, so they're subtracted before gross profit. Shop supplies and small tools that aren't tied to a job usually go in overhead expenses.

### Is a chart of accounts the same as a general ledger?

No. The chart of accounts is the list of accounts. The general ledger is the record of every transaction posted to those accounts, with running balances. The chart is the structure; the ledger is the history.

### Can I change my chart of accounts mid-year?

You can, but it makes year-over-year comparisons harder and can confuse your tax preparer. If you must change it, do it at the start of a month, rename rather than delete, and tell your bookkeeper or CPA.

### Does QuickBooks have a contractor chart of accounts?

QuickBooks suggests a starter chart based on the business type you choose, and some editions include contractor-oriented accounts. Most contractors still need to adjust it to separate job costs from overhead. Our template gives a ready-made list you can import.

## Related

- [QuickBooks Chart of Accounts for Contractors (Import CSV)](https://www.brix.so/templates/quickbooks-chart-of-accounts-for-contractors)
- [What Is Cost of Goods Sold (COGS) for a Contractor?](https://www.brix.so/learn/cost-of-goods-sold)
- [How to Read a Profit and Loss Statement (Contractor's Guide)](https://www.brix.so/learn/profit-and-loss-statement)
- [QuickBooks Classes vs. Projects: What's the Difference?](https://www.brix.so/learn/quickbooks-classes-vs-projects)
- [How to Do Job Costing in QuickBooks Online](https://www.brix.so/learn/how-to-do-job-costing-in-quickbooks)
- [Bookkeeping Checklist for Contractors (Weekly, Monthly, Year-End)](https://www.brix.so/learn/bookkeeping-checklist-for-contractors)
- [How to Set Up QuickBooks for a Contracting Business](https://www.brix.so/guides/quickbooks-setup-for-contractors)
- [QuickBooks for contractors: the right version, real job costing and a sync that keeps the books matched to the jobs](https://www.brix.so/integrations/quickbooks)
- [Bookkeeping for contractors that keeps your books tax-ready all year](https://www.brix.so/features/bookkeeping-taxes)
- [Contractor invoicing software that sends the invoice and chases the money](https://www.brix.so/features/invoicing-payments)

## Sources

- [Intuit QuickBooks — Add an account to your chart of accounts in QuickBooks Online](https://quickbooks.intuit.com/learn-support/en-us/help-article/chart-accounts/add-account-chart-accounts-quickbooks-online/L0mCv3AKn_US_en_US) (checked 2026-10-12)

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Written by BRIX Editorial Team. Last updated 2026-10-12.
Canonical: https://www.brix.so/learn/chart-of-accounts