# Chart of Accounts: How to Build One From Scratch in Saudi Arabia *The foundational step small business owners skip, then pay for later* > **In short:** A practical guide to building a chart of accounts for a Saudi business: the five categories, numbering, ready examples, and cleaner financial reports. - **URL:** https://www.snad.io/en/blog/bina-dalil-hisabat-chart-of-accounts - **Arabic original:** https://www.snad.io/blog/bina-dalil-hisabat-chart-of-accounts - **Category:** Guides — Core Accounting - **Tags:** Accounting, Chart of Accounts, Accounting Basics, ERP, Financial Reports - **Published:** 2026-05-10 - **Updated:** 2026-08-02 - **Publisher:** Snad (snad.io) The chart of accounts is the skeleton of accounting in any company. Ask an experienced accountant why the financial reports of so many small companies in Saudi Arabia are a mess, and the answer comes in three words: a bad chart of accounts. The owner never sees the problem, because the chart of accounts is something the accountant builds in the background. The consequences, though, show up every day: reports that answer none of the owner's questions, expense categories that make no sense, and no easy way to know how much was spent on marketing this quarter. This guide is written for an owner who does not need to become an accountant. You only need to understand the logic of a chart of accounts, so you can ask your accountant to build it properly, or build it yourself if you already use an off-the-shelf accounting system such as Snad. ## What is a chart of accounts and why do you need one? A chart of accounts (CoA) is a structured list of every account your company uses to record its financial transactions. Picture a library classification system: every book has a number and a defined place on the shelf, so you can find it in seconds. Without the system, the books are just piled up with no logic. In your company, every movement of money in or out has to be classified under a specific account. Buy coffee for a meeting and that is 'hospitality expenses'. Pay a salary and that is 'salaries and wages'. Receive income from a customer and that is 'sales'. The chart of accounts defines all of these categories in advance. The practical payoff: - **Reports that mean something**: an income statement that shows you exactly where you spend and where you earn. - **Valid comparisons**: this month's marketing spend against last month's. - **Better decisions**: 'Branch rents total SAR 80,000 a month. Is the third branch worth keeping?' - **Easier audits**: the external accountant or auditor moves between accounts without wading through chaos. - **Funding readiness**: the bank asks for clear financial statements, and a sound chart of accounts makes them easy to prepare. ## The five core categories Every chart of accounts in the world is built on five main groups. They are fixed and do not change with the type of business you run: 1. **Assets** — everything your company owns: - Current assets: cash, banks, customers (accounts receivable), inventory. - Fixed assets: land, buildings, vehicles, equipment, furniture, hardware. 2. **Liabilities** — everything you owe to others: - Current: suppliers (accounts payable), short-term loans, VAT payable, GOSI payable. - Long-term: long-term bank loans, long-term lease obligations. 3. **Equity** — the owners' share in the company: - Capital, retained earnings, distributions. 4. **Revenue** — all income from the business: - Sales, service revenue, commissions, other income. 5. **Expenses** — every cost of running the business: - Cost of goods sold, salaries, rent, electricity, marketing, maintenance. Assets + Expenses = Liabilities + Equity + Revenue. This is the basic accounting equation, and the chart of accounts is built to respect it. ## The numbering system: the backbone of your chart The numbering system is what makes your chart readable and sortable. The most widely used scheme worldwide is four- or five-digit numbering: - **1xxxx — Assets** - **2xxxx — Liabilities** - **3xxxx — Equity** - **4xxxx — Revenue** - **5xxxx — Cost of goods sold** - **6xxxx — Operating expenses** - **7xxxx — General and administrative expenses** Here is what a tree-style numbering for assets looks like: ``` 1 Assets 11 Current assets 111 Cash 1111 Head office cash box 1112 Branch one cash box 112 Banks 1121 Saudi National Bank — current account 1122 Al Rajhi — current account 113 Accounts receivable 1131 Local customers 1132 International customers ``` The logic: each level adds one digit and one more layer of detail. That lets you pull a report on all current assets (11x), or only the banks (112), or only Saudi National Bank (1121). One practical tip: leave gaps. If you number 1131 then 1132 with nothing in between, you had better hope you never need to add 'VIP customers' later. Better: 1131 regular local customers, 1135 local VIP customers, 1140 international customers. The gaps will save you trouble down the line. ## Practical examples for small Saudi companies **Example 1: a small restaurant** The chart of accounts focuses on: - Separate revenue lines: dine-in sales, delivery sales, catering sales. - Cost of goods: raw materials (meat, vegetables, grains, beverages). - Expenses: chef salaries, waiter salaries, rent, electricity and gas, digital marketing, kitchen equipment maintenance. **Example 2: a retail shop** - Revenue: sales by category (menswear / womenswear / kidswear). - Cost of goods: purchase cost plus shipping plus customs. - Expenses: sales staff salaries, rent, electricity, marketing, card payment commissions. **Example 3: a consulting firm** - Revenue: contracted projects, hourly consulting, training. - Expenses: consultant salaries (the largest line), office rent, software subscriptions, travel. Every business has its own detailed accounts, but the logic is identical. Think about the questions you ask yourself every month: 'How much did I spend on X?' For each question, you should have an account that answers it. ## Common mistakes when building a chart of accounts Many small business owners build a broken chart of accounts from day one, and it hands them reports that do nothing for their decisions: 1. **Too much detail**: 'Electricity expense branch 1', 'Electricity expense branch 2', 'Head office electricity expense'. Better: one 'Electricity' account, with the branch tracked through cost centres. 2. **Too little detail**: an 'Other expenses' account holding large amounts. That hides problems. Find out what is inside it and split it up. 3. **Mixing fixed assets with expenses**: buying a computer for SAR 5,000 and booking it as 'stationery expense'. The correct treatment is a fixed asset depreciated over several years. 4. **An unstructured 'owner takes cash' account**: an owner's personal drawing is not an expense, it is a deduction from equity. Mixing the two distorts the income statement. 5. **Not separating VAT**: recording the invoice at its full value instead of splitting out the VAT payable. This inflates revenue and corrupts the tax report. 6. **Never updating the chart**: you start selling a new line of business and there is no separate revenue account for it, so your numbers blur together. The rule: every category should answer a question you need answered regularly. If the answer does not matter to you, merge. If it matters and you cannot get it easily, add an account. ## How Snad helps you build a sound chart of accounts Snad ships with a **default chart of accounts** built along the accounting standards commonly applied in Saudi Arabia, and it works as a starting point for most types of business: - **A clear tree structure**: the five categories, with systematic numbering you can extend. - **Fully editable**: add or change any account so it fits your business, whether that is a restaurant, a retail shop, a services firm or a workshop. - **Linked to every module automatically**: when you issue an invoice from the sales app, the journal entries are posted automatically to the correct accounts. No duplicate manual entries. - **Cost centres**: track expenses by branch, department or project without duplicating accounts. - **VAT split automatically**: issue an invoice for SAR 1,000 plus SAR 150 VAT and the system records SAR 1,000 as revenue and SAR 150 as VAT payable, automatically. - **Instant reports**: income statement, balance sheet, trial balance and general ledger all read from the chart of accounts and are produced on the spot. - **Excel and PDF export**: for your external accountant's review or for submission to the authorities. The 30-day free trial lets you explore the chart of accounts and edit it freely before you subscribe. ## A practical summary for the business owner Five steps to a chart of accounts that actually serves your decisions: 1. **Write down 5-10 questions you ask yourself every month about your numbers**: 'How much did I spend on marketing? How much revenue did each branch bring in?' Those questions set the level of detail your accounts need. 2. **Start from a recognised default chart**: do not invent one from scratch. Take an existing chart, from your accounting system or from your accountant, and adapt it to your business. 3. **Leave gaps between the numbers**: that is what gives you room to expand later. 4. **Use cost centres instead of duplicating accounts**: a single 'Electricity' account allocated across 'Riyadh branch' and 'Jeddah branch' is cleaner than two separate accounts. 5. **Review your chart of accounts once a year**: delete unused accounts and add accounts for new activities. The chart is a living thing. Two days invested in building the chart of accounts correctly will save you years of messy reports and decisions based on misleading numbers. ## Frequently asked questions ### Can I change the chart of accounts after years of use? Yes, but it is not trivial. Adding new accounts is easy. Merging old accounts is possible, but it requires adjusting the earlier entries. Avoid deleting accounts that carry historical transactions. It is far better to build a sound chart from the start, or to make any major changes at the beginning of a new financial year. ### How many accounts do I need in a small company? It depends on the business. A small services company may need 50-80 accounts. A retail shop, 100-150 accounts. A mid-sized restaurant, 80-120. The rule: do not pile on accounts you do not need the detail for, and do not cut back if you need the answers. Focus on the questions you ask yourself. ### Does a chart of accounts in Saudi Arabia differ from one in other countries? The logic is the same everywhere: the five sections and the tree numbering. What is specific to Saudi Arabia is the set of accounts for VAT at 15%, GOSI accounts, Zakat accounts, and withholding tax accounts for foreign suppliers. Any well-localised accounting system takes these into account. ### What is the difference between the chart of accounts and cost centres? The chart of accounts classifies the type of transaction: rent, salaries, revenue. Cost centres classify the place or the reason behind it: Riyadh, Jeddah, project X. You can post a journal entry that specifies an account and a cost centre at the same time, which is how you learn how much the Riyadh branch spends on salaries. ### Do I need a specialist accountant to build the chart of accounts? For simple businesses such as a small shop, a restaurant or basic services, a good accounting system comes with a default chart that is enough after minor adjustments. For complex businesses such as manufacturing, contracting or multi-branch groups, one or two sessions with an experienced accountant is an investment that saves years of trouble. --- ## About the publisher **Snad (سند)** — a private Saudi software company based in Riyadh, founded 2025. Legal form: Sole proprietorship. Commercial registration: 7038154642 VAT number: 310959226500003 Only official domain: snad.io > Snad is a private commercial business-management platform. It is not a > government body, not a bank, and not a government services portal, and it > is not affiliated with any government entity. Any site or app with a > similar name is unrelated to Snad.