This is a list of groupings that helps you categorise your business transactions into similar groups.
For example, you might have a Chart of Accounts codes called “Rent”, "Printing and Stationery", and "Hire of Equipment" where you record your rent, stationary costs and printer lease costs. Most accounting systems come with a standard template option, and there is always the ability to add new codes if it doesn’t reflect your business.
When you run your Profit and Loss Account, these groups will be separate line items. Not only can you see the expense / revenue item for the current year, by adding comparatives you can compare against the previous year.