What the chart of accounts does
The chart of accounts is the structured list of accounts used to classify the company's transactions. At a high level it organizes assets, liabilities, equity, revenue, cost of sales, and operating expenses. It becomes the grammar of every financial statement the business produces.
Design for decisions, not for every vendor
Create an account when the category is economically different and worth reviewing over time. Do not create a new expense account for every software vendor, contractor, or one-off purchase. Vendor detail already exists in the transaction ledger and payables system; the chart should preserve meaningful categories.
Keep the structure stable
If marketing is one account in January, three accounts in February, and seven accounts in June, period comparisons become noisy. Decide on a durable hierarchy and make intentional changes with a mapping from old to new accounts.
Balance-sheet accounts deserve equal attention
A chart of accounts is not only an expense-category list. Create clear accounts for each material bank, card, processor clearing account, loan, payroll liability, tax payable, fixed-asset class, accumulated depreciation, owner or shareholder equity category, and other balances that require reconciliation.
A useful test
Print the P&L and balance sheet with no transaction detail. Can an operator understand how the business makes money, where the major costs sit, what it owns, and what it owes? If not, the chart is either too vague or too fragmented.