Written by The Pragmatic CFO. 15+ years running restaurant P&Ls.
This article is part of The Operating Costs Series.
A chart of accounts is the list of buckets your bookkeeper puts every dollar into. Get it right once and your P&L tells you prime cost, 4-wall EBITDA and channel profit without a spreadsheet. Get it wrong and you’ll be rebuilding the numbers by hand every month.
The layout
This follows the order of the Uniform System of Accounts for Restaurants: sales, cost of sales, labor, controllable expenses, occupancy, then the rest. The numbers are a suggestion. What matters is the order and the splits.
| Range | Section | Accounts |
|---|---|---|
| 4000 | Sales | 4010 Food, 4020 Beverage (liquor, beer, wine as subaccounts), 4030 Catering, 4040 Delivery, 4090 Discounts and comps (negative) |
| 5000 | Cost of sales | 5010 Food, 5020 Liquor, 5030 Beer, 5040 Wine, 5050 Non-alcoholic beverage, 5060 Packaging |
| 6000 | Labor | 6010 Hourly front of house, 6020 Hourly back of house, 6030 Management salaries, 6040 Payroll taxes, 6050 Benefits, 6060 Workers’ comp |
| 7000 | Controllable operating expenses | 7010 Direct operating (smallwares, linen, cleaning), 7020 Music and entertainment, 7030 Marketing, 7040 Utilities, 7050 General and administrative, 7060 Repairs and maintenance, 7070 Card fees, 7080 Third-party delivery commissions |
| 8000 | Occupancy | 8010 Rent, 8020 Common area charges, 8030 Property tax, 8040 Property insurance |
| 8500 | Other | 8510 Depreciation, 8520 Interest, 8530 Corporate overhead or management fee |
The five splits that matter most
- Food and beverage sales apart, and costs to match: otherwise you can’t see food cost or pour cost, only a blend.
- Hourly and salaried labor apart: hourly labor flexes with sales, salaries don’t. Your break-even depends on knowing which is which.
- Payroll taxes and benefits in labor: not in G&A. Labor cost without them is understated by a lot.
- Delivery commissions as their own line: buried in “other,” they hide what a delivery order really earns. See the delivery math.
- Occupancy separate from operating: that line is what makes a 4-wall EBITDA possible.
A worked example: one month, coded two ways
Here’s a $97,000 month at a full-service restaurant with a bar and some delivery. First the lumped chart most bookkeepers set up, then the split one.
| Line | Lumped chart | Split chart |
|---|---|---|
| Sales | $97,000 net | Food $70,000, liquor $11,000, beer $5,000, wine $4,000, delivery $10,000, comps and discounts minus $3,000 |
| Cost of sales | $31,550, 32.5% | Food 31.9%, liquor 20%, beer 25%, wine 35%, packaging 12% of delivery sales |
| Labor | $29,000, with $3,600 of payroll taxes and benefits sitting in G&A | $32,600, 33.6%, taxes and benefits included |
| Prime cost | 62.4% | 66.1% |
| Delivery commissions | $2,500 buried in other | $2,500 on its own line |
The lumped chart says cost of sales is 32.5%. Is that good? You can’t tell, because food, liquor and wine are mixed together. The split chart says food is fine and liquor is at the top of its range, so that’s where you look first.
Labor is the bigger miss. With payroll taxes and benefits parked in G&A, prime cost reads 62.4%. Put them back in labor and it’s 66.1%. That’s 3.7 points, about $3,600 a month you think you’re making and aren’t.
Delivery is the third. On its own lines, $10,000 of delivery sales costs $3,190 in food, $1,200 in packaging and $2,500 in commissions. That leaves $3,110, about 31 cents on the dollar before anyone gets paid to cook it.
Mistakes I’d fix first
- Too many accounts: 300 accounts nobody codes the same way twice is worse than 60 used consistently.
- Comps hidden in cost: record comps and discounts against sales, so sales show what guests really paid.
- Card fees in G&A: they move with sales. Give them their own line.
- One “supplies” account: split cleaning, paper and smallwares, or you’ll never know which one grew.
With the accounts in place, read the P&L the same way every month. How to read a restaurant P&L walks through it, and the P&L template uses this same order.
Free: The Restaurant Financial Health Checklist. 30 monthly checks across sales mix, prime cost, 4-wall EBITDA, cash and operations, with the target ranges I use. Written by a former chain CFO. Instant PDF.
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Get the P&L layout ready made.
The Toolkit’s P&L Template follows this order, with budget, actual and variance and a benchmark beside every line.
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What is a restaurant chart of accounts?
The list of accounts your books use, in the order the P&L reads: sales, cost of sales, labor, controllable expenses, occupancy, other.
How many accounts should a restaurant have?
Enough to see food, beverage, hourly labor, salaried labor and each major expense on its own. For most independents, 50 to 80 is plenty.
Where do payroll taxes go?
In labor, next to wages.
Does QuickBooks have a restaurant chart of accounts?
You can set this one up in QuickBooks or any accounting software. See QuickBooks vs Restaurant365.