If you’re a freelancer (designer, developer, marketer, consultant), your finances are usually simple: you sell services, not products.
That means your Chart of Accounts (COA) should focus on:
- Tracking income clearly
- Managing client payments
- Keeping expenses organized for tax
👉 You do NOT need complex accounts like inventory or manufacturing.
✅ Step 1: Set Up Your Income Accounts
Design Income (or Service Income)
This is your main income account.
Why you need it:
- Tracks how much you earn from your services
- Used for reports like Profit & Loss
- Helps you see your actual business performance
👉 You can rename this to:
- Consulting Income
- Freelance Income
- Service Revenue
Other Income (Optional)
Use this only if you earn outside your main service.
Examples:
- Affiliate income
- Bonuses / tips
- Side earnings not related to core work
Why it’s optional:
- Keeps your main income clean and separate
- Avoids mixing unrelated earnings
✅ Step 2: Set Up Your Asset Accounts
These track what you own or are owed.
Bank
Your main business bank account.
Why you need it:
- Tracks all real cash movements
- Matches your actual bank balance
Cash
For physical cash (if you use it).
Why you need it:
- Useful if you accept cash payments
- Keeps records accurate
Not really applicable if:
- You’re 100% digital (GCash, bank, Stripe, etc.)
Accounts Receivable
Money your clients owe you.
Why you need it:
- Tracks unpaid invoices
- Helps you follow up on clients
- Prevents missed payments
👉 Very important if you invoice clients.
Undeposited Funds
Temporary holding account before money hits your bank.
Why you need it:
- Useful for payment processors (like Stripe)
- Helps match deposits correctly
Not really needed if:
- Payments go directly into your bank instantly
✅ Step 3: Set Up Your Liability Accounts
These track what you owe.
Accounts Payable
Money you owe to suppliers or tools.
Why you need it:
- Tracks unpaid bills
- Keeps your obligations clear
Income Tax Payable
Taxes you owe but haven’t paid yet.
Why you need it:
- Avoids mixing tax with expenses
- Helps you prepare for tax season
Unearned Revenue (Optional)
Money you received before completing work.
Example:
- Client pays upfront for a project
Why you need it:
- Prevents overstating income
- Keeps reporting accurate
Not needed if:
- You only get paid after finishing work
✅ Step 4: Set Up Your Expense Accounts
These track where your money goes.
Office / Software Expenses
(Can use "Office Expenses")
Examples:
- Canva, Adobe, Notion, etc.
Why you need it:
- Tracks tools needed to run your work
Telephone / Internet Expenses
Why you need it:
- Essential for remote freelancers
- Common tax-deductible expense
Rent Expenses (Optional)
Why you need it:
- If you pay for office or coworking space
Not needed if:
- You work fully from home (or don’t track it separately)
Travel Expenses
Examples:
- Client meetings
- Business trips
Why you need it:
- Helps separate personal vs business travel
Meals & Entertainment
Examples:
- Client meetings
- Business meals
Why you need it:
- Often partially tax-deductible
Bank Charges / Stripe Fee
Why you need it:
- Tracks transaction fees
- Shows the real cost of getting paid
Accounting & Audit Fees (Optional)
Why you need it:
- If you hire an accountant or bookkeeper
❌ Accounts You Usually DON’T Need (And Why)
Inventory / Finished Goods Inventory
Why not applicable:
- Freelancers don’t sell physical products
- No stock to track
Cost of Goods Sold (COGS)
Why not applicable:
- No production or product costs
- Your main cost is time, not goods
Manufacturing Overhead
Why not applicable:
- This is for factories, not service work
Leasehold Improvements / Fixed Assets (Usually)
Why not applicable:
- Only needed if you invest in office renovations or large assets
Accrued Purchases / Complex Liabilities
Why not applicable:
- Too advanced for most freelancers
- Adds unnecessary complexity
⚙️ Optional Advanced (Use Only If Needed)
- Interest Expenses → if you have loans
- Gain/Loss on Foreign Exchange → if working with international clients
- Bad Debt → if clients fail to pay
🚀 Simple Setup Summary
If you want the minimum clean setup, start with:
Income
- Service Income
Assets
- Bank
- Accounts Receivable
Liabilities
- Accounts Payable
- Income Tax Payable
Expenses
- Office Expenses
- Bank Charges
👉 That’s it. You can already run your business with just these.
✨ Final Tip
Don’t try to use every account available.
A clean COA = easier reports + less confusion + faster bookkeeping