What is a chart of accounts for an HVAC company?

A chart of accounts is the list of every account your books can post to — income, cost of goods sold, operating expenses, assets, and liabilities. For an HVAC shop, the version that matters separates install revenue from service revenue with matching cost accounts underneath, so you can see install margin and service margin as separate numbers instead of one blended figure that hides which side of the business is carrying the other.

How many accounts should an HVAC shop have?

Roughly 40 to 60 for most shops. Fewer than about 30 and your P&L can't answer pricing questions. More than about 80 and techs and office staff start miscoding transactions, which is worse than having fewer accounts. The test isn't the count — it's whether every account maps to a decision you actually make. If you'd never price differently based on an account's balance, it probably belongs merged into its parent.

Should equipment and materials be separate COGS accounts?

Yes. Equipment is the condenser, furnace, or heat pump — a large, traceable, per-job cost you should be marking up deliberately. Materials are line sets, refrigerant, fittings, and duct. Combined into one account, a supplier price increase on equipment looks identical to material waste in the field, and you can't tell which one moved your margin.

Do maintenance agreements need their own income account?

Yes, and it's one of the highest-value splits you can make. Agreement revenue is your recurring baseline — the part of the year that doesn't depend on weather. Tracked separately, you can see what share of revenue is contracted before the season starts. Buried inside service revenue, you lose the one number that tells you how much of your business is predictable. Note that agreements are usually billed before the work is performed, which creates a deferred revenue liability — a conversation worth having with your CPA.

What are the most common HVAC chart of accounts mistakes?

Four recur constantly: one blended income account so install and service margin can't be separated, vehicles and equipment expensed instead of capitalized as assets, direct labor sitting in operating expenses instead of COGS (which makes gross margin meaningless), and an 'Ask My Accountant' or 'Uncategorized' account that becomes a permanent parking lot. The last one is the clearest signal that a close is being skipped.

HVAC Chart of Accounts: A Complete Template for Shop Owners

A chart of accounts is the list of every account your books can post to. It sounds like plumbing — the kind of setup detail you configure once and forget — but it is the single thing that determines whether your P&L can answer a pricing question or only tell you what your bank balance did. Most HVAC shops inherit a generic template from QuickBooks, never change it, and end up with books that reconcile perfectly and explain nothing. This guide covers the accounts an HVAC shop actually needs, why each one exists, and the setup mistakes that quietly make a P&L useless.

Free download: HVAC chart of accounts template (CSV) — the structure in this guide as 49 numbered accounts, with account types and a one-line note on why each exists. Imports into QuickBooks Online, Xero, and most accounting software. No email required.

Why the default template fails HVAC shops

The generic small-business chart of accounts was built for a business that sells one thing at one margin. An HVAC shop sells at least three: installs, service and repair, and maintenance agreements. Those carry genuinely different economics — an install might run 25–35% gross margin on a large equipment cost, service can run 50–65% on mostly labor, and agreements are closer to recurring revenue with a service obligation attached.

Blend them into one "Sales" account with one "Materials & Supplies" account underneath, and your P&L reports a single blended gross margin. That number is the average of three different businesses, and it is precisely the figure that hides a mispriced install line. Two shops with identical blended margin can be in completely different shape: one is making money on both sides, the other is losing money on every install and doesn't know it because service margin covers the bleed.

The fix is structural, not cosmetic. You need income split by line of business, and cost of goods sold split by what actually drives cost per job.

Income accounts

Start here, because everything downstream depends on it.

Account	What belongs in it
Install revenue — residential	Equipment changeouts and new installs for homeowners
Install revenue — commercial	Commercial installs, if you do enough to matter
Service & repair revenue	Diagnostic calls, repairs, emergency work
Maintenance agreement revenue	Recurring plan billings — your predictable baseline
Indoor air quality / accessories	Filtration, humidifiers, UV — often higher margin, worth watching
Parts sales (over the counter)	If you sell parts without labor
Other income	Rebates, referral fees, warranty reimbursements — not operating revenue

If you only make one change to your books this year, make it the split between install revenue and service revenue with matching cost accounts underneath. Everything else on this page is refinement; that one is the difference between a P&L you can price from and one you can't.

A note on maintenance agreements: because you typically bill before performing the work, the money you collect isn't fully earned yet. Strictly, that creates a deferred revenue liability that draws down as visits are delivered. Whether your shop needs to track it that precisely depends on your size and your CPA's guidance — but keep the revenue in its own account either way.

Cost of goods sold

COGS is for costs that vary with the job. This is where most shops go wrong, and where job costing lives or dies.

Account	Why it's separate
Equipment	Condensers, furnaces, heat pumps, air handlers — large, traceable, deliberately marked up
Materials & supplies	Line sets, refrigerant, fittings, duct, thermostats
Direct labor — install	Burdened tech cost on install work
Direct labor — service	Burdened tech cost on service work
Permits & inspections	Directly attributable and routinely forgotten
Subcontractors	Crane work, electrical, duct cleaning
Equipment rental	Lifts, specialty tools per job
Warranty & callback cost	Return trips on work already invoiced
Freight & delivery	Supply-house delivery, drop-ship equipment

Three of these deserve elaboration.

Equipment separate from materials. Combined, a supplier price increase on condensers looks identical to material waste in the field. Separated, you can see which one moved and respond to the right problem.

Direct labor belongs in COGS, not operating expenses. This is the most common structural error I see. If tech wages sit in operating expenses, your gross margin is calculated as revenue minus parts — a number that has nothing to do with job profitability. Labor is a direct cost of the job. It goes above the gross margin line. Use a burdened rate: wage plus payroll taxes, workers' comp, and benefits, typically 1.3–1.4× the base hourly wage.

Warranty and callback cost. Give return trips their own account and charge them back to the original job. A repair that looked like 60% margin is a different number after a tech goes back for two unbilled hours. Without this account, that cost lands in general labor and the original job stays wrong in your books permanently.

Operating expenses

These are the costs of being in business regardless of which jobs you run. They belong below the gross margin line.

Vehicles — fuel, maintenance, repairs, registration, and vehicle insurance
Insurance — general liability, workers' comp (the non-burdened portion), umbrella
Office & administrative — rent, utilities, dispatch salaries, office supplies
Software & technology — Jobber or Housecall Pro, accounting software, phone system
Marketing — ads, truck wraps, website, review platforms
Professional fees — CPA, legal, bookkeeping
Licensing & continuing education — EPA certifications, state licensing, training
Bank & merchant fees — processor fees, financing program costs
Depreciation — non-cash, but it belongs on the P&L

Merchant and financing fees deserve their own account. Consumer financing is common on large installs, and the dealer fee can run several percent of the ticket. Buried in general expenses, that cost never gets attributed to the install line that generated it, and your install margin reads better than it is.

Assets, liabilities, and equity

The balance sheet is where the depreciation and tax conversations happen.

Section	Accounts
Assets	Operating bank · Payroll/tax reserve · Accounts receivable · Inventory (parts stock) · Vehicles · Tools & equipment · Accumulated depreciation
Liabilities	Accounts payable · Credit cards · Equipment loans & vehicle notes · Payroll liabilities · Sales tax payable · Deferred agreement revenue
Equity	Owner's capital · Owner's draw · Retained earnings

Two things shops get wrong here. Vehicles and equipment are assets, not expenses. A $58,000 truck expensed in the month you bought it destroys that month's P&L and misstates every margin calculation you make from it. Capitalize it and depreciate it — and your CPA needs it recorded properly to elect Section 179 or bonus depreciation. Sales tax payable is not your money. It sits in a liability account until remitted. Shops that let it flow through income accounts routinely spend it by accident.

Setting it up without breaking your history

If you're restructuring an existing chart of accounts rather than starting clean:

Change at a period boundary — the start of a quarter or year. Mid-period changes make comparisons meaningless.
Rename before you create. If "Sales" becomes "Install revenue," renaming preserves the transaction history. Creating a new account and abandoning the old one splits your history across both.
Merge rather than delete. Deleting an account with transactions either fails or orphans data. Merging moves the history somewhere sensible.
Map the old to the new in writing before you touch anything, so you can restate at least the prior year for comparison.
Tell whoever codes transactions. A chart of accounts is only as good as the coding discipline behind it. If your techs pick categories on supply-house purchases, they need the new list and a short explanation of the install/service split.

What good looks like

Once the structure is right, your P&L should let you answer these without opening another system:

What was install gross margin last month, and how does it compare to the same month last year?
What is service gross margin, separately?
What percentage of revenue is under maintenance agreement?
What did callbacks cost as a percentage of service revenue?
What is labor as a percentage of revenue on install versus service?

If your current books can't answer those, the problem is almost certainly the chart of accounts rather than the bookkeeper. And once the structure is in place, the next step is assigning those costs to individual jobs — that's job costing, and it's what turns a correct P&L into a pricing tool. For the broader picture — the Jobber-to-books handoff, a monthly close routine, and what each bookkeeping option costs — see the complete guide to HVAC bookkeeping. If you run plumbing work alongside HVAC, the plumbing chart of accounts covers the truck stock and retainage structure that trade needs.

The bottom line

A chart of accounts is not administrative housekeeping. It's the structure that decides which questions your books can answer. Split income by line of business, put direct labor in COGS where it belongs, give callbacks and equipment their own accounts, and capitalize your trucks. That's most of the work, and it costs nothing but an afternoon and the discipline to code consistently afterward.

If you want the structure without rebuilding it by hand, the HVAC chart of accounts template (CSV) has all 49 accounts numbered and ready to import.

*Written by Austin Semple, a former controller with 10+ years of audit and controller experience, and the founder of Poof. If you'd rather have the structure built for you and maintained every month — with per-job P&L on every close, reviewed by a controller you can text — that's what Poof Managed for Trades is.*