How do I create a chart of accounts for a South African business?

# How to Create a Chart of Accounts for a South African Business A chart of accounts is the foundation of your business's financial record-keeping system. For South African businesses, it must comply with local accounting standards and SARS requirements whilst providing clear financial reporting capabilities. ## Standard Chart of Accounts Structure Your chart of accounts should follow the **five main account categories**: ### 1. Assets (1000-1999) - **Current Assets (1000-1499)**: Cash, bank accounts, accounts receivable, inventory, prepaid expenses - **Non-Current Assets (1500-1999)**: Property, plant, equipment, investments, intangible assets ### 2. Liabilities (2000-2999) - **Current Liabilities (2000-2499)**: Accounts payable, VAT payable, PAYE payable, short-term loans - **Non-Current Liabilities (2500-2999)**: Long-term loans, bonds, deferred tax ### 3. Equity (3000-3999) - **Owner's Equity (3000-3199)**: Share capital, retained earnings, current year earnings - **Reserves (3200-3999)**: Capital reserves, revaluation reserves ### 4. Revenue (4000-4999) - **Operating Revenue (4000-4499)**: Sales, service income, rental income - **Other Income (4500-4999)**: Interest received, foreign exchange gains ### 5. Expenses (5000-8999) - **Cost of Sales (5000-5999)**: Direct materials, direct labour, manufacturing overheads - **Operating Expenses (6000-7999)**: Salaries, rent, utilities, professional fees - **Finance Costs (8000-8999)**: Interest paid, bank charges ## South African Specific Requirements ### VAT Accounts Create separate accounts for: - **VAT Input (1200)**: VAT on purchases you can claim back - **VAT Output (2200)**: VAT collected on sales, payable to SARS ### SARS Compliance Accounts - **PAYE Payable (2300)**: Employee tax deductions - **UIF Payable (2350)**: Unemployment Insurance Fund contributions - **SDL Payable (2360)**: Skills Development Levy (1% of payroll if above **R500,000** annual payroll) - **Provisional Tax (2400)**: Estimated tax payments for companies and individuals ### Employment Equity Levy If your annual payroll exceeds **R500,000**, include: - **EE Levy Payable (2370)**: 0.5% of payroll for Employment Equity compliance ## Account Numbering Best Practices **Use 4-digit numbering** with logical groupings: - Start each category with different thousands (1000, 2000, 3000, etc.) - Group similar accounts together (e.g., 6100-6199 for office expenses) - Leave gaps for future accounts (use 6100, 6110, 6120 rather than 6101, 6102, 6103) ## Step-by-Step Setup Process 1. **Choose your accounting software** that supports South African tax codes 2. **Create main categories** following the 5-category structure above 3. **Add sub-accounts** based on your business needs 4. **Set up VAT codes** for each account (Standard 15%, Zero-rated, Exempt) 5. **Configure SARS reporting** categories for automatic tax return preparation 6. **Test with sample transactions** before going live ## Industry-Specific Considerations **Retail businesses** need detailed inventory tracking accounts. **Service businesses** focus on billable hours and work-in-progress. **Manufacturing** requires cost centre accounting for accurate job costing. WeekdayApp helps South African accounting professionals manage chart of accounts setup and ongoing maintenance with automated SARS compliance tracking, starting at **R199/user/month**. Your chart of accounts should grow with your business whilst maintaining consistency for year-on-year financial comparison and SARS reporting accuracy.