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Creating a chart of accounts for a hardware startup

Launching a hardware startup, designing groundbreaking products, and forging strategic partnerships is exciting. But you can’t overlook the crucial foundation of financial management. As part of that, a well-built chart of accounts (COA) is essential.

Many of the accounts are common to most businesses, but some need to be tailored to the distinct requirements of your hardware startup.

Hardware startups need different accounts than other startups

Hardware startups focus on designing, developing, manufacturing, and selling physical products, typically in the realm of technology or electronics. These startups often create innovative devices or equipment like consumer electronics, industrial machinery, medical devices, or specialized hardware components.

Unlike software startups that primarily deal with digital products, hardware startups deal with tangible goods that often involve complex manufacturing processes, supply chain management, and physical distribution logistics. They typically require substantial investment in research, development, prototyping, and production facilities. That means these businesses need accounts that reflect the physical requirements of building products.

What accounts could a hardware startup use?

A hardware startup will have some unique accounts that other businesses may not need. Kruze Consulting uses six-digit accounting codes in our charts of accounts, which allows us to create more unique accounts in each category, to capture more information. We have more detail on charts of accounts here.

We use the following categories and number groupings:

Current Assets 100000 -199999
Liabilities 200000 - 299999
Equity 300000 - 399999
Sales 400000 - 499999
Cost of Good Sold 500000 - 599999
Sales, General, and Administrative Expenses 600000 - 699999
Research & Development Expenses 700000 - 799999
Other Operating Expenses 800000 - 899999
Other Income / Expenses 900000 - 999999

Under these accounts, you’ll find sub-accounts that roll up into the main asset category. The first digit of each account number indicates which group the account belongs to.

Hardware startup chart of accounts - some specific accounts

Account Number Account Name Account Type Detail Type
104000 Cash on Hand Current Assets Checking
105000 Cash in Bank Current Assets Checking
120000 Accounts Receivable Current Assets Accounts Receivable
131100 Prepaid Expenses Current Assets Prepaid Expense
139000 Inventory Current Assets Inventory
156000 Property, Plant, and Equipment Current Assets Furniture & Fixtures
159000 Accumulated Depreciation Current Assets Accumulated Depreciation
210000 Accounts Payable Liabilities Accounts Payable
235100 Accrued Expenses Liabilities Accrued Expenses
301000 Common Stock Equity Common Stock
301002 Common Stock - Additional Paid-In Capital Equity Additional Paid-in Capital
309000 Retained Earnings Equity Retained Earnings
400000 Sales Revenue Sales Sales
401000 Service Revenue Sales Service Revenue
500000 Cost of Goods Sold Cost of Goods Sold Cost of Goods Sold
502002 Electrical Cost of Goods Sold Utilities
600000 Sales, General, and Administrative Expenses SG&A Expense SG&A Expenses
601000 Marketing Expenses SG&A Expense Marketing
614000 Rent Expense SG&A Expense Rent
700000 Research and Development Costs R&D Expense Research & Development
810000 Depreciation Expense Other Operating Expenses Depreciation
901000 Interest Income Other Income / Expenses Interest Income

In a hardware startup’s chart of accounts, several unique accounts might be included to accurately reflect the specialized nature of the industry.

Some of these accounts could include:

  • Inventory. Tracks the cost of raw materials, components, and finished products held by the company for sale.
  • Technology Development Costs. Accounts for expenses related to the research, development, and testing of new hardware products.
  • Cost of Goods Sold (COGS). Records the direct costs associated with producing or acquiring the computer hardware products sold by the company, including materials, labor, and overhead.
  • Depreciation Expense. Reflects the allocation of the cost of property, plant, and equipment (such as manufacturing machinery and equipment) over their useful lives.
  • Research and Development (R&D) Expenses. Tracks expenditures incurred in designing and improving computer hardware products, including salaries of R&D staff, materials, and equipment.
  • Sales Revenue. Records income generated from the sale of computer hardware products to customers.
  • Service Revenue. Tracks revenue generated from providing post-sale services, such as maintenance, warranties, or technical support.
  • Marketing Expenses. Accounts for costs associated with advertising, promotion, and other marketing activities to promote the company’s computer hardware products.
  • General and Administrative (G&A) Expenses. Includes overhead costs not directly associated with manufacturing or sales, such as salaries of administrative staff, office rent, utilities, and insurance.
  • Utilities Expense. Tracks expenses related to utilities necessary for operating manufacturing facilities and office spaces, such as electricity, water, and gas.
  • Rent Expense. Accounts for the cost of leasing manufacturing facilities, warehouses, and office spaces.
  • Royalties and Licensing Fees. Records payments made to third parties for the use of patented technology, intellectual property, or software in the company’s computer hardware products.

These unique accounts provide insight into the financial dynamics of a computer hardware startup and help management make informed decisions to drive growth and profitability in this competitive industry.

The process of building a chart of accounts for your fintech startup begins with a review of your business to create a list of the types of accounts you’ll need.

To find out more about setting up a COA for your business, contact us.


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