What is a chart of accounts?

• A. A list of employees.
• B. A structured list of all accounts used by an organization, grouped by categories such as assets, liabilities, equity, revenues, and expenses.
• C. A summary of revenues and expenses.
• D. A schedule of assets only.

Answer: (B)

A chart of accounts is the backbone of the accounting system: a structured list of every account the organization uses, organized into categories like assets, liabilities, equity, revenues, and expenses. This setup lets every transaction be categorized consistently, posted to the correct account in the general ledger, and used to generate financial reports such as the balance sheet and income statement. Accounts are often numbered and arranged hierarchically to show relationships and support detailed reporting. The other options don’t fit because a list of employees isn’t a set of accounts, a summary of revenues and expenses is a financial report rather than the account structure, and a schedule of assets only covers one category instead of the full range of accounts.