How To Set Up A Chart Of Accounts

xero chart of accounts template

This will let you use the account in the payment section of the Purchase and Sales modules.If your organisation has a Tree COA, a field will be added for Parent Account. Selecting NONE normal balance for Parent Account will create a new root account. Selecting a parent account will cause the new sub-account to inherit the properties of the parent account, which cannot be changed.

Xero have compiled an agriculture-specific chart of accounts template that you can use as a great starting point for getting your Xero account up and running. One of the first things you will do in any accounting system is set up your chart of accounts. Think of the chart of accounts as the foundation of your business. You need it to be strong, and robust, so nothing falls through the cracks. When you’re doing this in Xero, it’s very easy to assign each of these categories and subcategories a code, and all your transactions can be tracked against these codes. At Accela Finance, we think a chart of accounts is really exciting – it’s the anatomy of your business! And while we do appreciate that not everyone gets as excited about a spreadsheet as us, our team of Xero-certified advisors is here to make them as simple and painless as possible.

In this post, we’re going to help you better understand the chart of accounts and how to set up yours. We’re going to break down what a chart of accounts is, what it should include, and step-by-step instructions for getting started. We’ll also include expert tips from CPAs and an example of a chart of accounts to help you through the process. However, please note that the integration will only automatically create sub-accounts relevant to sales and payments data that can be taken from Shopify.

Quickly create and share reports using your Xero, QuickBooks, Sage or Excel data. Creating consolidated financial reports using spreadsheets for multi entity businesses is a real pain point. Time consuming and potentially error prone, these issues are made all the more pertinent when xero chart of accounts template working with a non-standardised chart of accounts. Your chart of accounts will show you the current balance of your sales. If you’re using software like Xero, you can click on the balance for more detail. The software will then show you every transaction goes into the total balance.

As opposed to using sub-accounts for the balance sheet only, and classes for the income statement. Finally, good business management starts with good, clean accounting. Your accountant and your banker will both appreciate your organization. Standardized reports that can be run practice-wide or be customized at the client level. Reporting based upon this schema means that an accounting professional could run reports across all their clients with ease. It also means that the same reporting nomenclature and classifications can conform to the applicable standards of reporting. But dynamic flexibility in the reporting allows for not only standardized sets of reports at a practice level , but permits customization of reports at the client level.

Group Accounts In A Way That Makes Sense

For example, Meals Expense might be a standalone account or it might be spread across the categories the meals relate to, such as Marketing, Conferences, or Travel. Indirect costing applies to project-oriented companies, particularly manufacturers and construction contractors. Companies that are not project-oriented, such as retailers and restaurants, typically would not incorporate indirect costing into their account structure.

Unfortunately, there is no one-size-fits-all chart of accounts as every business is different. When you look behind the curtain of most GL systems, the common factor is the starting number for major classifications on a balance sheet. Having the ability to zoom in and out is important not only for presenting buttoned-up financial statements but also for understanding how your current state compares to the old. In the early days of a SaaS business, organizing your chart of accounts probably isn’t top of mind.

xero chart of accounts template

The chart of accounts is a list of every account used by a business. It is important because it’s used for categorizing financial transactions, is used to create general ledger entries, and gives a basic overview of the accounts of the business. The general ledger is not the same as the chart of accounts. The general ledger is used to track the financial transactions of the business. However, the two are similar in that the general ledger uses the same account names and numbers as listed in the chart of accounts. A proper chart of accounts lets you track specific business information.

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For example, if depreciation is $50 per month and sales are $500 per month, depreciation is 10% of sales. If sales spike to $1,000 one month, depreciation is still $50 and is now only 5% of sales. In that situation, sales—not production efficiency or better estimating—has changed gross margin.

  • For instance, revenue and expense accounts go on the Income Statement (aka the Profit & Loss Statement).
  • Although it is not necessary to use block numbering, it is what we find to be most useful.
  • For example, you can use a Shopify and Xero integration or Shopify and QuickBooks integration to connect your e-commerce platform to your accounting software.
  • For example, if the first digit is a “1” it is an asset, if the first digit is a “3” it is a revenue account, etc.
  • Thankfully, the Xero Chart of Accounts is very customizable and you can adjust it to fit your business needs.
  • To make a chart of accounts, you’ll need to first create account categories relevant to your business, and then assign a four-digit numbering system to the accounts you create.

Building some level of detail into the chart of accounts is a practical way to ensure key information is always in the face of the management team. It is hard for me to be critical because 90% of business owners can probably relate to never having looked at their chart of accounts. Even many controllers and CFOs are weak on how to structure a robust chart of accounts that easily and plainly produces the financial information management wants to see. Accounts are the specific “bins” that hold accounting transactions. The chart of accounts is simply the organized list of all the bins and shelves. We’ll offer specific tips and examples, including a sample chart of accounts for a property management company. Your chart of accounts can let you know where all the money in your business is coming from.


These categories become your primary revenue accounts. A business can create as many sub-accounts as it needs to categorise its transactions. However there are some standard accounts that are typically used across most businesses.

All the different types of accounts are grouped under various class headings (Asset, Liability, Expense, etc.). You can sort the screen to only show a particular class. In a tree COA, transactions can only be posted to the bottom-most level of sub-accounts. Parent accounts and higher-level sub accounts QuickBooks cannot hold transactions, and are used for organisational purposes only. Adding a sub-account to an account with transactions will trigger a confirmation message, confirming that all transactions will be moved to the sub-account. Accounts with transactions can not be deleted, but can be deprecated.

xero chart of accounts template

An account needs to be archived first before it can be deleted. Once an account has been used in a transaction, it is no longer possible to delete the account.

The chart of accounts is the first step in creating your business’s accounting system, so it starts with organizing all your company’s financial information. You’ll then assign a four digit numbering system to the accounts you’ve created. It is a record of all activity that affects an account’s balance. A chart of accounts is broken into five main categories. These are assets, liabilities, equity, revenue, and expenses.

(If you don’t know your company number, log in to QuickBooks and search for your company name). Go to the Accounting module of Xero and select Chart of accounts. Tick the box that says No Balance Due and then click the next button. This button is located on the top right hand corner of the file. Once created, reports within Joiin can then be run month-on-month at the click of a button. If you have any questions about creating accounts in Xero please ask them in the comments. Enter the name of your new account in the “Name” field.

In Workpapers CS, you’ll need to specify the spreadsheet from which to import Xero account balances. Unlike some foundational problems, a chart of accounts can be optimized relatively quickly. A well-executed remodel can generally be implemented within a month and have a noticeable effect on financial reporting immediately. An effective chart of accounts structure directly or indirectly drives virtually all financial reporting. Yet, many organizations ignore this foundational concept and limp along with unmet expectations. The same is true for complex journal entries that adjust work in progress values, or over/under billings entries at companies that work with multi-month projects. For organizational elegance, keep numbers and descriptions consistent.

How To Create A Chart Of Accounts For A Saas Business

This structure allows organisations to consolidate their transactions by levels for summary purposes. Accounting software frequently includes sample charts of accounts for various types of businesses. It is expected that a company will expand and/or modify these sample charts of accounts so that the specific needs of the company are met.

The chart of accounts is therefore the foundation of the financial statements. One of the advantages of a powerful chart of accounts is that it can prolong the useful life of even entry-level accounting software. Often frustration with financial reporting can be fixed by remodeling the chart of accounts, rather than going through the very painful process of migrating to new software.

If an account is not used much, you should consider rolling it into another. However, if there is a valid reason for keeping it separate, then do so.

If you don’t keep your chart of accounts organized, your Income Statement and Balance Sheet will be pretty useless and you’re back to bank account business management – Money in the bank? The chart of accounts is a financial organization tool that lists every account in your accounting system – accounts are the ‘buckets’ where you put every business transaction. Standard out-of-the-box report templates work automatically with Xero-provided regional chart of accounts templates.

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Don’t forget that Owner/Member Draws do not affect your bottom line and only show up on the Balance sheet. Finally, Retained Earnings is the net revenue carried over from the prior year of business- there is no need to manually adjust this account as adjustments are made automatically by Xero. InQuickBooks, you will want to create just a two-level hierarchy of accounts and sub-accounts (also referred to as parent-child accounts) using levels 3 and 4 of the hierarchy you defined. The QuickBooks ‘account type’ serves as level 1 in the hierarchy. Level 2 is completely excluded because the reporting limitations of QuickBooks – the expand/collapse function of QuickBooks reports can only show the highest or lowest level.

Xero Reports & Templates

Core exports data from all available columns and not just the columns visible in the grid. As a good housekeeping measure, you could go back to your cloud accounting software and reclassify any incorrect accounts, using Joiin as a guide. Joiin holds the information for every account within each of your entities from your source software, Xero, QuickBooks or Sage. Using our Chart of Accounts list you can easily see which accounts have variations between entities. A chart of accounts is an index of the financial accounts in a company’s general ledger, broken down into sub categories to provide an insight into a company’s finances. In this first blog in our bite-sized how-to series, we look at how you can re-map your chart of accounts across a multi-entity business for consolidated reporting.

Check that these are correct, changing them, if necessary. For those activities that don’t have any accounts yet, select the correct accounts from the lists. Only the bottom level of sub-accounts can be mapped in Account Mapping, selected in DEAR fields during sales, purchases, etc, and used in journals. You can perform bulk actions such as deleting archived accounts and importing/exporting the Chart of Accounts from a spreadsheet by clicking More. On the Add a new Accountwindow, enter all the relevant details like Account Type, Account Code, Name of the account and also an optional description. If you are using DEAR standalone, you can create accounts in DEAR by going to Settings → Reference Books → Financial → Chart of Accounts.

Author: Emmett Gienapp