They're not completely arbitrary, but there isn't anything that requires them to be used.
Older software required them to assign accounts to the report writer software. Quickbooks doesn't need account numbers, but then would sort accounts by type and then by alpha. So if you wanted to sort your liquid assets by what is most liquid, in an account number system account 100 would be Cash on Hand, 110 would be Bank of America......
Under the Alpha sort, Bank of America would be listed first, followed by Cash on Hand.
In a numeric account system, accounts are generally sorted as follows:
100 = Cash and other liquid assets, accounts receivable, fixed assets, long term assets, etc.
200 = accounts payable, current notes and loans payable, long term notes and loans payable, etc
300 = equity type accounts, stock, retained earnings, etc.
400 = sales and operating revenues, etc
500 = cost of goods.
600, 700, 800 = operating costs.
900 = other revenues and expenses
Most decent chart of accounts can be held together by as little as three numbers, you might want four or more if you want more detail:
710 = Telephone
711 = Local Service
712 = Long Distance
713 = 800 Service
714 = Cell phones
715 = ..............
And you can see how messy it can get if you want to, or need to, get too detailed.
Some accounting systems also allow for sub-numbers for projects, cost centers, jobs, locations, departments, etc.
710.1 is the main office
710.3 is the lake office
710.5 is the mountain job
710.7 is the shipping department.
What ever you decide to use, be sure you plan in advance how far you will need to carry out the numbers, if you'll be adding accounts in the future, etc.
Thanks Paul for the info. So it sounds like it's arbitrary, but generally good to be familiar for the CPA. I'm into whatever is going to save our guy time. If most people are following this type of numbering scheme, I'll not deviate. :)
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