Chart of Accounts

A chart of accounts represents all the accounts at a given business. It’s made up of a list of account codes. Each individual code is made up of several segments , each representing a different aspect or department of the business.

The chart of accounts is at the center of all bookkeeping, accounting, and financial reporting activities. Creating a thoughtful chart of accounts for your lease portfolio is important — a mistake can have severe repercussions down the road. A well-organized chart of accounts simplifies record keeping, ensures accuracy, identifies metrics and analytics, and helps ensure compliance with policies and regulations.

For ASC 842, you'll need accounts for the Right-of-Use (ROU) asset, Lease Liability, Lease Expense, and any Variable Lease Payments to track and report lease transactions accurately.

IFRS 16 requires right-of-use asset accounts, lease liability accounts (split between current and non-current portions), and depreciation and interest expense accounts on the income statement.

The core balance sheet accounts are similar — both standards require ROU asset and lease liability accounts — but the income statement treatment differs significantly. Under IFRS 16, all leases are treated like finance leases, meaning depreciation on the ROU asset and interest on the lease liability are recorded separately, front-loading expense in the early years. Under ASC 842, operating leases use a single straight-line lease expense with no separate interest and depreciation split, which means the chart of accounts needs to distinguish between operating and finance lease expense accounts in a way that IFRS 16 does not require.