Starter chart of accounts

A chart of accounts is the list of categories your bookkeeping uses to sort every dollar in and out. Get it right once and your monthly reports, your budget and your yearly IRS return all use the same buckets. Get it wrong and someone spends a week every spring re-sorting a year of transactions.

This starter chart maps each account to a line on Form 990: Part VIII (revenue), Part IX (functional expenses) and Part X (balance sheet). Even if you file the shorter 990-EZ or 990-N today, building on these lines means you're ready if you grow. Our guide to your annual budget uses the same Form 990 split into programs, management and fundraising.

How to adapt it

• Keep it short. Delete accounts you won't use. A charity with no employees doesn't need payroll accounts yet. Fewer accounts mean fewer mistakes.
• Add detail with sub-accounts, not new top-level accounts. For example, under 4100 Individual gifts you might add 4110 Online and 4120 Mail.
• Use classes or tags for function. The Form 990 instructions say section 501(c)(3) and 501(c)(4) organizations must complete all the Part IX columns: program services, management and general, and fundraising. Rather than tripling every expense account, tag each transaction with its function (and, if you like, its program).
• Track restrictions separately. Gifts with donor restrictions need to be tracked so you can report net assets with and without donor restrictions (Part X, lines 27 and 28). Use a class, tag or fund for each restricted gift. See restricted funds.
• Fundraising events and sales are split. Form 990 Part VIII separates the gift part of an event ticket (line 1c) from the rest (line 8a), and shows event, gaming and inventory costs as "direct expenses" netted against that income (lines 8b, 9b, 10b), not in Part IX. Give these their own accounts.
• In-kind gifts get their own accounts so you can show them separately. Donated services and free use of property aren't reported as revenue on Form 990, even if your books record them. See noncash gifts.
• Check your state. States set their own rules on which financial reports charities must file and when an audit or review is required, and these vary. Your chart should produce whatever your state asks for.
• Get your accountant's sign-off before you start, and don't renumber accounts mid-year.