Bookkeeping Basics · Edmonton
A chart of accounts for small business in Canada, done right.
The list of accounts every transaction lands in. Here's a sample numbered chart for a Canadian small business, what changes when you incorporate, and how to keep it tidy in QuickBooks Online.
By the Plum team- Updated Oct 2026
- 9 min read
- Your chart of accounts is the list of every account in your books, grouped into five types.
- Number them in blocks: 1000s assets, 2000s liabilities, 3000s equity, 4000s revenue, 5000s and up for costs and expenses.
- Match your expense accounts to your tax return: the T2125 for sole proprietors, GIFI on the T2 for corporations.
- Fewer, clearer accounts beat dozens of near-duplicates.
Every transaction in your books lands in an account, and the chart of accounts for a small business in Canada is the master list of those accounts. Get it right and your reports make sense, your GST return is easy and your accountant finishes year-end faster. Get it wrong and you end up with "Miscellaneous" holding a third of your spending.
This is part of our Bookkeeping Basics series. If you're new to debits and credits, read the double entry guide and the debits and credits cheat sheet first, because the chart of accounts is where those entries live.
1The five account types
Every account belongs to one of five types. The first three make up the balance sheet; the last two make up the profit and loss statement (income statement).
- Assets: what the business owns or is owed. Bank accounts, accounts receivable, equipment, vehicles, prepaid expenses.
- Liabilities: what it owes. Credit cards, loans, accounts payable, GST/HST Payable, payroll liabilities.
- Equity: the owner's stake. Owner's equity and drawings for a sole proprietor; share capital and retained earnings for a corporation.
- Revenue: what you earn from sales and services.
- Expenses: what it costs to run the business, often split into cost of sales and operating expenses.
2A sample chart of accounts for small business in Canada
Here's a starting point for a GST-registered service business. Numbers are grouped in blocks so you can add accounts later without renumbering everything.
| Number | Account | Type |
|---|---|---|
| 1010 | Business chequing | Asset |
| 1020 | Business savings (GST and tax holding) | Asset |
| 1200 | Accounts receivable | Asset |
| 1300 | Prepaid expenses | Asset |
| 1500 | Computer equipment | Asset |
| 1510 | Accumulated amortization, computer equipment | Asset (contra) |
| 2010 | Business credit card | Liability |
| 2100 | Accounts payable | Liability |
| 2200 | GST/HST Payable | Liability |
| 2300 | Payroll liabilities | Liability |
| 2700 | Loan payable | Liability |
| 3000 | Owner's equity (or share capital) | Equity |
| 3100 | Owner's drawings (or shareholder loan, see below) | Equity |
| 3900 | Retained earnings | Equity |
| 4000 | Service revenue | Revenue |
| 4100 | Product sales | Revenue |
| 5000 | Subcontractors | Cost of sales |
| 5100 | Materials and supplies for jobs | Cost of sales |
| 6000 | Advertising and marketing | Expense |
| 6100 | Bank charges and merchant fees | Expense |
| 6200 | Insurance | Expense |
| 6300 | Meals and entertainment | Expense |
| 6400 | Office expenses and software | Expense |
| 6500 | Professional fees | Expense |
| 6600 | Rent | Expense |
| 6700 | Telephone and internet | Expense |
| 6800 | Vehicle expenses | Expense |
| 6900 | Wages and benefits | Expense |
You'll adjust this for your industry. A salon adds retail product sales and inventory; a contractor adds holdbacks and job materials; a realtor adds commission income and brokerage fees.
How many accounts is right?
There's no magic number, but most small service businesses work well with somewhere around 30 to 60 accounts in total. A good test for each expense account: would you, or your accountant, ever want to see this number on its own? Fuel and vehicle repairs, yes, because vehicle expenses have their own rules. "Coffee for the office" and "printer paper," probably not; they both belong in office expenses.
A second test: could two people code the same receipt and land in the same account? If your chart has "Supplies," "Office supplies" and "Shop supplies" with no clear difference, they won't. Write a one-line description for each account in QuickBooks so everyone codes the same way.
Cost of sales vs operating expenses
Costs that rise and fall directly with each sale, like subcontractors on a job, materials or products you resell, belong in cost of sales (sometimes called cost of goods sold). Everything else, like rent, software and insurance, is an operating expense. Separating them gives you your gross margin: revenue minus cost of sales. If you invoice $100,000 and your direct costs are $40,000, your gross margin is 60%, and you can watch that percentage month to month to see whether your pricing is holding up.
3Lining it up with CRA
Your chart of accounts isn't a tax form, but it should make filling one in easy.
- Sole proprietors report business income and expenses on the T2125. Its expense lines include advertising, meals and entertainment, insurance, office expenses, professional fees, rent, and motor vehicle expenses. If your accounts match those lines, your year-end is mostly a copy-and-paste job.
- Corporations file a T2 with financial statements coded using GIFI, the General Index of Financial Information. Each of your accounts gets mapped to a GIFI code. Clear, specific account names make that mapping simple.
- Meals and entertainment deserve their own account, because they're generally only 50% deductible. Mix them into "Office" and someone has to dig them back out.
- Capital assets like equipment and vehicles go on the balance sheet. For tax, they're claimed through capital cost allowance (CCA) by class, not expensed all at once.
4A worked example: one purchase, two charts
Say you run a cleaning company in St. Albert and buy a commercial vacuum for $800 plus $40 GST with your business debit card. Here's how it should be recorded:
| Account | Debit | Credit |
|---|---|---|
| 1520 Cleaning equipment | $800 | |
| 2200 GST/HST Payable | $40 | |
| 1010 Business chequing | $840 | |
| Totals | $840 | $840 |
Now imagine a messier chart where the only option that looks close is "Supplies." Code the full $840 there and three things go wrong at once: your expenses are overstated by $840, you miss the $40 input tax credit on your GST return, and your accountant has no record of an asset to claim CCA on. One unclear account, three errors.
Whether a particular item is equipment or a supply can depend on the amount and how long it lasts, so check with your accountant if you're not sure. The point is that your chart should give you a clear place to put each kind of purchase.
5Setting it up in QuickBooks Online
QuickBooks Online Canada creates a default chart of accounts when you set up a company, including GST/HST Payable once you turn on sales tax. It's a reasonable start, but it usually needs trimming and renaming.
- Find it: the Chart of accounts lives under the Accounting (or Transactions) section of the left menu, depending on your layout.
- Turn on account numbers: in Settings, under Account and settings, then Advanced, you'll find a Chart of accounts option to enable account numbers.
- Each account has a type and a detail type. The type decides where it appears on your reports, so pick it carefully. Renaming an account is easy; a wrong type quietly puts it in the wrong report section.
- Use sub-accounts sparingly. "Vehicle: Fuel" and "Vehicle: Repairs" under a Vehicle parent is useful. Three levels deep is usually too much.
- Make old accounts inactive rather than deleting them. Move any wrongly coded transactions first.
6Common chart of accounts mistakes
- Too many accounts. "Office supplies," "Supplies," "Office," and "Stationery" all mean the same thing. Pick one.
- A giant "Miscellaneous" or "Ask my accountant." Fine for a few uncertain items; a problem when it's thousands of dollars.
- Personal accounts in the business books. Your personal Visa doesn't belong in the chart unless the business genuinely uses it, and even then it needs care.
- GST inside expense accounts. If you're registered, GST you pay should land in GST/HST Payable, not in the expense.
- Changing the chart every year. Consistency lets you compare this year with last year. Change it deliberately, at year-end if you can.
A quick tidy-up checklist
Once the chart is set, the next step on the learning path is seeing how entries flow into it: our journal entry examples walk through the transactions you'll record most often.
Setting up or cleaning up a chart of accounts is one of the first things we do with new clients in Edmonton, Sherwood Park and Leduc, and it's part of every plan on our pricing page. If yours has grown messy, book a short call and we'll take a look.
7Questions people ask
What is a chart of accounts?
It's the full list of accounts a business uses to record transactions, grouped into assets, liabilities, equity, revenue and expenses. Every transaction in your books lands in at least two of these accounts.
How many accounts should a small business have?
There's no set number. Most small service businesses work well with roughly 30 to 60 accounts. Enough detail to see where money goes and fill in your tax return, but not so much that coding becomes guesswork.
Do I need account numbers in QuickBooks Online?
No, but they help. You can turn them on in QuickBooks Online's advanced settings, which makes reports easier to read and keeps related accounts grouped together.
Should my chart of accounts match my tax return?
It should line up with it. Sole proprietors report on the T2125 and corporations report using GIFI codes on the T2, so naming your expense accounts to match those categories makes year-end much faster.
Can I delete an account in QuickBooks Online?
You can make an account inactive, which hides it from lists. If it has transactions, QuickBooks keeps the history, so move those transactions to the right account first if they were coded wrongly.
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Book a free 15-min callThis article is general information for Alberta businesses and isn't tax or legal advice. Rules and thresholds change, so confirm your situation with your accountant or CRA.