Five Digit Chart of Accounts

A five digit chart of accounts is used by organizations that want to track information at the departmental level. With a five-digit code, they can produce separate income statements for each department.

This format duplicates the account codes found in a three digit chart of accounts, but then adds a two-digit code to the left, which indicates specific departments. The three-digit codes for expenses (and sometimes also revenues) are then duplicated for each department for which management wants to record information.

A sample of the five digit chart of accounts format follows, using the accounting and production departments to show how expense account codes can be duplicated.

Account Number	Department	Description
00-010	xxx	Cash
00-020	xxx	Petty cash
00-030	xxx	Accounts receivable
00-040	xxx	Reserve for bad debts
00-050	xxx	Marketable securities
00-060	xxx	Raw materials inventory
00-070	xxx	Work-in-process inventory
00-080	xxx	Finished goods inventory
00-090	xxx	Reserve for obsolete inventory
00-100	xxx	Fixed assets – Computer equipment
00-110	xxx	Fixed assets – Computer software
00-120	xxx	Fixed assets – Furniture and fixtures
00-130	xxx	Fixed assets – Leasehold improvements
00-140	xxx	Fixed assets – Machinery
00-150	xxx	Accumulated depreciation – computer equipment
00-160	xxx	Accumulated depreciation – Computer software
00-170	xxx	Accumulated depreciation – Furniture and fixtures
00-180	xxx	Accumulated depreciation – Leasehold improvements
00-190	xxx	Accumulated depreciation – Machinery
00-200	xxx	Other assets
00-300	xxx	Accounts payable
00-310	xxx	Accrued payroll liability
00-320	xxx	Accrued vacation liability
00-330	xxx	Accrued expenses liability – other
00-340	xxx	Unremitted sales taxes
00-350	xxx	Unremitted pension payments
00-360	xxx	Short-term notes payable
00-370	xxx	Other short-term liabilities
00-400	xxx	Long-term notes payable
00-500	xxx	Capital stock
00-510	xxx	Retained earnings
00-600	xxx	Revenue
00-700	xxx	Cost of goods sold – materials
00-710	xxx	Cost of goods sold – direct labor
00-720	xxx	Cost of goods sold – manufacturing supplies
00-730	xxx	Cost of goods sold – applied overhead
10-800	Accounting	Bank charges
10-805	Accounting	Benefits
10-810	Accounting	Depreciation
10-815	Accounting	Insurance
10-825	Accounting	Office supplies
10-830	Accounting	Salaries and wages
10-835	Accounting	Telephones
10-840	Accounting	Training
10-845	Accounting	Travel and entertainment
10-850	Accounting	Utilities
10-855	Accounting	Other expenses
10-860	Accounting	Interest expense
20-800	Production	Bank charges
20-805	Production	Benefits
20-810	Production	Depreciation
20-815	Production	Insurance
20-825	Production	Office supplies
20-830	Production	Salaries and wages
20-835	Production	Telephones
20-840	Production	Training
20-845	Production	Travel and entertainment
20-850	Production	Utilities
20-855	Production	Other expenses
20-860	Production	Interest expense
00-900	xxx	Extraordinary items

The preceding sample chart of accounts shows an exact duplication of accounts for each department listed. This is not necessarily the case in reality, since some departments have accounts for which they are the only probable users. For example, the accounting department in the example has an account for bank charges that the production department is unlikely to use. Thus, some accounts can be avoided by flagging them as inactive in the accounting system. By doing so, they do not appear in the formal chart of accounts.