The chart of accounts is a listing of all the accounts in the general ledger, each account accompanied by a reference number. To set up a chart of accounts, one first need to define the various accounts to be used by the business. Each account should have a number to identify it.
For very small businesses, three digits may suffice for the account number, though more digits are highly desirable in order to allow the new accounts to be added as the business grows.
With more digits, new accounts can be added while maintaining the logical order.
Completes businesses may have thousands of accounts and require longer account reference numbers. It is worthwhile to put thought into assigning the account numbers in logical way and to follow any specific industry standards.