The Winery Chart of Accounts (with Free Template)
In the winery business, you have a million things to track: labor, production costs, COGS, tasting room sales, marketing costs, and so on.
How do you make sense of it all? Accounting, at its foundation, is a process of organizing financial information. Transaction-level data is sorted into bigger buckets so that the information can be summarized and reported on in an organized and logical manner. The winery chart of accounts is at the heart of that exercise.
Want to skip to the good part? Head to the bottom of the article to download your free winery chart of accounts template.
What is a chart of accounts?
The chart of accounts is the organizational framework upon which all of your financial information hangs. You can think of the chart of accounts as a table of contents for your finances. Just like you would organize a book into different chapters, a chart of accounts organizes your financial transactions into different categories or tabs.
It’s an ordered list of sections, or accounts, for all of the transactions that go through your winery.
Why does the winery chart of accounts matter?
If you organize data in a logical manner, you will be able to see things that would not otherwise be evident.
Take for example your winery sales data. You could dump all your revenue into one account called “Sales” and call it good. This might be adequate for tax purposes, but it is fairly useless when you are trying to compare how your tasting room is doing compared to your wholesale channels.
For this reason, to continue with the example of the revenue section of the chart of accounts, we prefer to break income up into sales by channel. For example:
4000 WINE SALES4110 Tasting fees
4120 Wine Sales - Tasting Room
4130 Wine Sales - Wine Club
4140 Wine Sales - Online
4150 Wine Sales - Wholesale
This allows you to see at a glance how each channel is performing compared to other channels.
A well-structured chart of accounts will keep your financial reporting clear and accurate. By sorting your transactions in a meaningful way, your financial reports will be more meaningful. Your financial reports will move from being a cluttered mess to becoming a useful tool for planning and making decisions.
How is the winery chart of accounts structured?
As a standard practice, the chart of accounts is broken down into sections that correspond to the key sections of the financial statements: revenue, expenses, assets, liabilities, and equity.
The account numbering system corresponds to these sections:
1000 Assets
2000 Liabilities
3000 Equity
4000 Income
5000 COGS
6000 Selling Expenses
7000 General and Administrative Expenses
8000 Other Income
9000 Other Expenses
While this is a general schema that you will often see, know that there is no single chart of accounts that is “correct.” There are some basic accounting principles you need to adhere to (yes, put your sales accounts in the income section and put your expense accounts in the expense section), but overall you have a lot of leeway to design a chart of accounts that works for your specific business situation and allows you to see your financial information in a way that is helpful to you.
How can I make the chart of accounts work for me?
Use parent accounts and subaccounts
Sometimes wineries come to us with a chart of accounts that is on the one hand too simple and on the other hand too complicated. We often see all sales lumped together into a single account but a long laundry list of expense accounts detailing spending to the finest detail. These expense accounts might be listed alphabetically or perhaps they will be listed in a completely random order. It’s hard to look at the information and make heads or tails of it!
To avoid this situation, make sure you understand and are using parent accounts and subaccounts to group your accounts in a logical manner.
We have an internal convention of listing parent accounts in all caps, and subaccounts in lowercase. This is just our preference and not a universal fule. It helps us remember to enter all transactions at the subaccount level. To keep things clean, no transactions should be posted to the parent account.
One advantage of using parent accounts is that you can view your financial reports in both collapsed and expanded forms. When you view your reports in a collapsed form, all of the subaccounts will fold up into the parent account. QuickBooks will allow you to do this, as well as most other financial reporting platforms including Fathom, which is the platform we use for performance reporting with our clients.
When looking at your financial reports, we recommend always starting with a collapsed view, to get a high-level understanding of your business performance. After that, you can drill down into subaccounts to see what is really driving the results you are seeing at a high level.
Start with a basic framework and add accounts thoughtfully
Different types of businesses will use different accounts. And even different types of businesses within the same industry will have different accounts. The key is to start with a sound framework, only create the accounts you need, and then build out from there.
Sometimes the accounts you need will be dictated by your business structure. For example, an S- Corp will have an account for the owner’s salary, which you wouldn’t have in an LLC. In a partnership, you might have accounts for Guaranteed Payments, which you would not have in another structure.
Sometimes the accounts you need will be dictated by your business circumstances. For example, don’t create a “tasting room rent” expense if you are not renting tasting room space.
If you find that you have excess accounts in your accounting system that you are not using, go ahead and take the time to delete them. Cleaning house will make everything run smoother, from bookkeeping to reporting.
As your business grows and changes, or as your reporting needs change and grow, your chart of accounts will evolve. If you start leasing new tasting room space, now it’s time to add in that account to track it!
Use detailed account names where it makes sense
Yes, you can have too many accounts, but you can also have too few. There are a few places in the chart of accounts, where we like to add additional accounts to keep track of details that we will need at tax time.
Interest is one of these sections. We keep separate accounts for each type of interest we are paying and title the accounts appropriately. This makes it easier to check that we have posted the correct amount of interest paid year-to-date on each loan.
We also like to list out rent accounts separately, one for each property or building we are renting. Renal of equipment can be lumped together in a separate account.
Bank accounts are another area where naming can be helpful. We like to name these accounts using the name of the bank, the type of account, and the last four digits of the account number–e.g. “Community Bank Checking x1234.”
Asset Accounts
Asset accounts come first in your Chart of Accounts. This section of the financial statements contains everything you own, as opposed to the liabilities section which contains everything you owe.
The chart of accounts generally lists the most liquid assets first (cash and equivalents) and moves from there to the less liquid assets (property and equipment).
These are some of the basic accounts you will see. You may not even need all of these on your chart of accounts, depending on your business circumstances (for instance if you own or rent your land and buildings).
Current Assets
1001 Checking Acct. #11050 Pending Deposits
1200 Bulk Wine Inventory
1240 Bottled Wine Inventory
Fixed Assets
1400 Land1410 Buildings
1450 Leasehold Improvements
1500 Furniture & Equipment
1550 Barrels
1599 Accumulated Depreciation
Note that accumulated depreciation is a contra account. It has a negative balance which reduces the value of the fixed assets.
Liability accounts
Liability accounts start with the most current (the ones you have to pay soonest) and move to the more long-term liabilities.
These are some of the basic accounts you will see.
Current Liabilities
2000 Accounts Payable
2100 Sales Tax Payable
2200 Payroll liabilities
2300 Credit Card x1234
2400 Line of Credit x1234
Long Term Liabilities
2510 Note Payable 1
2520 Note Payable 2
You will want to list out each credit card, line of credit, and note payable separately. You may also list out detailed subaccounts under payroll liabilities.
One thing to note is that most, if not all of your liability accounts can be and should be reconciled regularly. You should be reconciling not just your credit card accounts, but also your lines of credit and loans and other current liabilities like payroll taxes payable, tips payable, benefits payable, and sales tax payable. If your balance sheet accounts have not been reconciled, you can know for certain that your profit and loss statement is not correct!
Equity accounts
The equity section of the financial statements is the difference between your assets and liabilities. It can be thought of as your stake in the business.
The specific accounts in the equity section of the chart of accounts vary depending on your business structure, i.e. the number of owners you have, whether you're an S-Corp or a partnership or an LLC, etc.
For this reason, we keep the equity accounts In our winery chart of accounts template, very generic.
3000 Owner Equity
3100 Owner Contributions
3200 Owner Draws
You should consult with your accountant to see how they prefer this section of the chart of accounts to be organized. One note, however, you should never see a balance in an account called “Opening Balance Equity.” If you have one, you can guarantee your books need a bit of cleanup.
Revenue/Income accounts
We touched on revenue accounts above. There is a lot of leeway here, but we prefer to see wine income listed out by channel. Then we list other types of revenue in their own parent accounts. The collapsed view of income accounts will look something like this:
4000 WINE SALES
4200 FOOD/MERCH SALES
4300 EVENT INCOME
4400 SHIPPING INCOME
4500 OTHER WINERY INCOME
4800 RETURNS & ALLOWANCES
We also like to break income out into different accounts if it has different sales tax treatment. For instance, if some food you sell is taxable and some are tax-exempt, it is a good idea to keep these two types of revenue in separate accounts. As another example, we keep venue rental separate from other event income, as it is taxed differently by the Washington Department of Revenue.
One thing that should NOT generally be included in income is sales tax and tips collected from customers. These should be broken out from sales revenue and recorded in liability accounts.
Cost of goods sold accounts
The Cost of Goods Sold (COGS) accounts include all of the costs that go into generating your revenue. This includes the costs of making your wine and purchasing merchandise and goods for resale.
This section of the chart of accounts deserves its own blog post because it quickly leads to a discussion of wine cost accounting, which is not a simple thing!
But to try and keep it short, the way we prefer to see things is to list out all of the production costs in this section and then use contra accounts to move these costs to the inventory accounts on your balance sheet. We then calculate the cost of wine sold outside of QuickBooks and then post Wine COGS as a journal entry each month.
The production cost accounts will be zeroed out by the contra accounts at the end of each accounting period, leaving only the cost of goods sold accounts (5400 and higher in the example below) showing on your financial statements.
5100 VINEYARD COSTS
5199 Capitalize Vineyard Costs To Bulk Wine
5200 CELLAR COSTS
5299 Capitalize Cellar Costs To Bulk Wine
5300 BOTTLING COSTS
5399 Capitalize Bottling Costs To Bottled Wine
5400 COST OF WINE SOLD
5500 MERCH/FOOD PURCHASES FOR RESALE
Expense accounts
The Expense section of your chart of accounts contains your “GS&A” accounts–that is, your General, Selling, and Administrative expenses.
The truth is that you have quite a lot of leeway when it comes to how you group your expenses on the COA, however, there are 6-7 main categories that we generally recommend for small wineries.
6100 LABOR
6200 TASTING ROOM & WINE CLUB EXPENSES
6500 MARKETING & PROMOTION
7100 GENERAL & ADMINISTRATIVE
7300 FACILITIES & EQUIPMENT
7700 TRAVEL, MEALS, AND ENTERTAINMENT
7800 DEPRECIATION EXPENSE
You can dive into each recommended expense account in more detail here.
Other Income
This section is for income or revenue that is generally not considered operating revenue. Accounts you might see here include:
8110 Insurance Claim Income
8120 Gain/Loss on Sale of Assets
8130 Credit Card Rewards
8140 Interest Income
8150 Undistributed Tips
8160 Patronage Dividends
Other Expenses
These are non-deductible expenses and interest expenses that are generally not considered operating costs. Accounts you might see here include:
9100 Interest Expenses
9220 Charitable Contributions
9230 Penalties & Fines
Some winery accounts use the “Other Expenses” section of the chart of accounts to track their wine production costs which are eventually zeroed out as they are capitalized to the balance sheet. This option can work well and has the advantage of keeping these expenses out of the main section of Profit & Loss if you are only calculating and adjusting COGS once a quarter or once a year.
Tips for creating your own winery COA
When it comes to creating your winery chart of accounts, there aren’t any steadfast rules. However, here are a few things that will help make life easier for you in the process:
Minimize your accounts, but include what makes sense. Creating more accounts than you need will only make life more confusing for you. If you’re using our template, only keep the accounts that you currently use in your business and delete the rest. On the flip side, don’t worry if you end up with a lot if you genuinely need them. For example, the COGS accounts can become really complex for wineries and that’s okay. As long as the accounts are necessary, they are important to have.
You may have to adjust the COA depending on your software. The bookkeeping software you use may dictate a few areas of how your chart of accounts is set up. For example, when using QuickBooks, we always set up a line of credit as a credit card so that you can connect it to the bank feed. You can't connect your line of credit to the bank feed if you don't do this. Additionally, QuickBooks asks for a “type” and “detail type,” but unless you are exporting your financial information directly into Intuit’s tax prep software, you likely will never use this field so you don’t need to worry about getting the detail type exactly right.
Don’t get caught up on the numbers. Last, but not least, understand that our chart of accounts template is simply a guideline. Obviously, there is a general scheme where the assets are 1000s, liabilities are 2000s, equities are 3000s, and so on. But the chart of account numbers is a guideline and doesn't have to be exactly as we’ve put them. Do realize, however, that the numbers are used to sort your accounts and display them in the desired order. So use account numbers that place the accounts where you would like to see them on your winery financial statements.
Download a winery chart of accounts example
To make things really simple for you, we’ve created a template chart of accounts that you can use for your winery.
Remember, there is no one-size-fits-all when it comes to the chart of accounts. But this will start you off in the right direction:
Get help with your winery chart of accounts
To recap, the chart of accounts is a vital asset to your business. Without thoughtful attention to your chart of accounts, your business performance will be nearly impossible to interpret.
However, we’ve only touched the tip of the iceberg when it comes to keeping healthy books for your wine business. If you have more questions, need confirmation, or just want someone to take bookkeeping off of your hands altogether, we’re here to help.
Simply use our form here to get started.
Until next time!
