Chart of Accounts for Nigerian Businesses: Setup Guide

A chart of accounts is the backbone of your accounting system. It's a complete list of all accounts used to record financial transactions. For Nigerian businesses, a well-designed chart of accounts supports tax compliance, financial reporting, and business analysis. This guide shows you how to set one up.

What is a Chart of Accounts?

Definition

A chart of accounts (COA) is:

• A systematic list of all accounts
• Organized by category
• Used to classify transactions
• Foundation for financial statements

Purpose

Purpose	Benefit
Organization	Logical structure for recording
Consistency	Same classification every time
Reporting	Clear financial statements
Analysis	Meaningful financial insights
Compliance	Proper tax categorization

Standard Account Categories

The Five Main Categories

Category	Account Types	Normal Balance
Assets	What you own	Debit
Liabilities	What you owe	Credit
Equity	Owner's stake	Credit
Revenue	Income earned	Credit
Expenses	Costs incurred	Debit

Subcategories

Assets

• Current Assets (cash, receivables, inventory)
• Non-Current Assets (property, equipment, vehicles)
• Intangible Assets (patents, goodwill)

Liabilities

• Current Liabilities (payables, short-term loans, taxes due)
• Non-Current Liabilities (long-term loans, bonds)

Equity

• Share Capital
• Retained Earnings
• Reserves

Revenue

• Operating Revenue (sales, service income)
• Other Income (interest, gains)

Expenses

• Cost of Sales
• Operating Expenses
• Finance Costs
• Tax Expenses

Account Numbering System

Standard Structure

A common numbering approach:

Category	Number Range
Assets	1000-1999
Liabilities	2000-2999
Equity	3000-3999
Revenue	4000-4999
Expenses	5000-5999
Cost of Sales	6000-6999

Example Account Numbers

Account	Number
Cash in Hand	1010
Cash at Bank - Naira	1020
Accounts Receivable	1100
Inventory	1200
Office Equipment	1510
Motor Vehicles	1530
Accounts Payable	2100
VAT Payable	2210
PAYE Payable	2220
Share Capital	3010
Retained Earnings	3200
Sales - Products	4010
Sales - Services	4020
Rent Expense	5100
Salary Expense	5200

Sample Chart of Accounts

For a Nigerian Trading Company

ASSETS (1000-1999)

Account #	Account Name
1010	Cash in Hand
1020	Cash at Bank - Naira
1025	Cash at Bank - USD
1030	Petty Cash
1100	Accounts Receivable
1110	Allowance for Doubtful Debts
1150	Staff Advances
1200	Inventory - Finished Goods
1210	Inventory - Raw Materials
1300	Prepaid Expenses
1310	Prepaid Rent
1320	Prepaid Insurance
1400	VAT Input (Recoverable)
1410	WHT Receivable
1500	Land
1510	Buildings
1515	Accumulated Depreciation - Buildings
1520	Office Equipment
1525	Accumulated Depreciation - Office Equipment
1530	Motor Vehicles
1535	Accumulated Depreciation - Motor Vehicles
1540	Furniture and Fixtures
1545	Accumulated Depreciation - Furniture

LIABILITIES (2000-2999)

Account #	Account Name
2100	Accounts Payable
2110	Accrued Expenses
2200	VAT Output (Payable)
2210	PAYE Payable
2220	WHT Payable
2230	Pension Payable
2240	NHF Payable
2250	NHIS Payable
2300	Short-term Bank Loan
2400	Current Portion of Long-term Debt
2500	Long-term Bank Loan
2600	Director's Loan

EQUITY (3000-3999)

Account #	Account Name
3010	Share Capital
3020	Share Premium
3100	Retained Earnings
3200	Current Year Earnings
3300	Reserves

REVENUE (4000-4999)

Account #	Account Name
4010	Sales - Products
4020	Sales - Services
4030	Sales - Export
4100	Sales Discounts
4110	Sales Returns
4500	Interest Income
4510	Foreign Exchange Gain
4520	Gain on Asset Disposal
4600	Other Income

COST OF SALES (5000-5999)

Account #	Account Name
5010	Cost of Goods Sold
5020	Direct Materials
5030	Direct Labour
5040	Manufacturing Overhead
5100	Freight Inward
5110	Import Duties

EXPENSES (6000-6999)

Account #	Account Name
6010	Salaries and Wages
6020	Directors' Fees
6030	Staff Welfare
6040	Staff Training
6050	Medical Expenses
6100	Rent Expense
6110	Electricity
6120	Water
6130	Security Services
6140	Cleaning Services
6200	Office Supplies
6210	Communication (Phone, Internet)
6220	Postage and Courier
6300	Professional Fees - Legal
6310	Professional Fees - Accounting
6320	Professional Fees - Consulting
6400	Advertising
6410	Marketing
6420	Entertainment
6500	Motor Vehicle Expenses
6510	Travel Expenses
6520	Local Travel
6530	International Travel
6600	Insurance
6610	Bank Charges
6620	Interest Expense
6700	Depreciation Expense
6710	Amortization Expense
6800	Repairs and Maintenance
6810	Equipment Repairs
6820	Building Maintenance
6900	Miscellaneous Expenses
6950	Foreign Exchange Loss
6960	Loss on Asset Disposal

Industry-Specific Considerations

Manufacturing

Additional accounts:

• Work in Progress
• Raw Materials Inventory
• Finished Goods Inventory
• Manufacturing Overhead
• Direct Labour

Services

Focus on:

• Service Revenue categories
• Project costs
• Professional fees
• Billable hours tracking

Retail

Include:

• Multiple inventory categories
• Sales by product line
• Point of sale accounts
• Inventory shrinkage

Construction

Add:

• Work in Progress (projects)
• Contract Revenue
• Contract Costs
• Retentions

Nigerian Tax-Related Accounts

VAT Accounts

Account	Purpose
VAT Input	VAT paid on purchases (asset)
VAT Output	VAT collected on sales (liability)
VAT Payable	Net VAT due to NRS (Formerly FIRS)

WHT Accounts

Account	Purpose
WHT Receivable	WHT deducted from your income
WHT Payable	WHT you've deducted, not yet remitted

Payroll Tax Accounts

Account	Purpose
PAYE Payable	Employee tax to remit
Pension Payable	Employee/employer pension
NHF Payable	Housing fund contributions
NHIS Payable	Health insurance contributions

Setting Up Your Chart of Accounts

Step 1: Identify Your Needs

Consider:

• Business type (trading, services, manufacturing)
• Reporting requirements
• Tax obligations
• Management information needs

Step 2: Choose Structure

Decide on:

• Numbering system
• Category groupings
• Level of detail

Step 3: Create Main Categories

Set up the five main categories with appropriate numbering ranges.

Step 4: Add Subcategories

Create logical groupings within each category.

Step 5: Add Individual Accounts

Create specific accounts based on your transactions.

Step 6: Review and Test

• Enter sample transactions
• Generate reports
• Verify categorization

Step 7: Document

Create documentation:

• Account descriptions
• Usage guidelines
• Approval for new accounts

Best Practices

Do's

Practice	Reason
Keep it simple	Don't over-complicate
Use consistent numbering	Easy to find accounts
Group logically	Meaningful reports
Plan for growth	Room to add accounts
Review regularly	Keep relevant

Don'ts

Practice	Problem
Too many accounts	Confusion, errors
Too few accounts	Insufficient detail
Inconsistent naming	Hard to find
No documentation	Unclear usage
Frequent changes	Disrupts comparability

How Finora Handles Chart of Accounts

Pre-Built Template

Finora provides Nigerian-specific COA:

• Standard account categories
• Tax-related accounts (VAT, WHT, PAYE)
• Common business accounts
• Proper numbering system

Customization

Easily modify to fit your business:

• Add new accounts
• Rename accounts
• Adjust numbering
• Create subcategories

Automatic Classification

When you record transactions:

• Select appropriate account
• System categorizes correctly
• Reports reflect proper structure

Financial Statements

Generate standard reports:

• Statement of Financial Position
• Statement of Profit or Loss
• All using your COA structure

Frequently Asked Questions

Can I change my chart of accounts later?

Yes, but carefully. Changes affect historical reporting. Add new accounts freely; modify existing ones with care.

How many accounts do I need?

Enough for meaningful reporting, not so many that it's confusing. A small business might have 50-100 accounts; larger businesses may have hundreds.

Should I use the same COA as my industry peers?

Not necessarily, but industry standards can be a good starting point. Customize for your specific needs.

Do I need sub-accounts?

Sub-accounts add detail (e.g., separate receivables by customer). Use them if you need that level of tracking.

Conclusion

A well-designed chart of accounts is essential for:

• Accurate record keeping
• Meaningful financial reports
• Tax compliance
• Business analysis

Take time to set it up properly, and it will serve your business well for years.

Finora provides a Nigerian-specific chart of accounts template that you can use as-is or customize for your business—getting you started quickly with best-practice structure.

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