How to set up a chart of accounts
Stepping up to do the bookkeeping in a new business? You may have to set up the chart of accounts. Let’s look at how.
What is the chart of accounts?
The chart of accounts sits just under the five main accounts in the general ledger. You can learn more about the main accounts in our chapter on double-entry bookkeeping.
A business can create as many sub-accounts as it needs to categorize its transactions. However there are some standard accounts that are typically used across most businesses.
What is the purpose of a chart of accounts?
A chart of accounts groups together transactions of a certain type. This allows you to produce detailed reports into specific areas of the business and its finances.
Standard chart of accounts
A standard chart might look like this:
How is a chart of accounts used in accounting software?
The five core accounts are part of any accounting software and they’re the same for every business. The categories that sit beneath them in the chart of accounts can be customized to suit your business. For example, you might create several accounts for sales revenue – one for each region you trade in, or one for each department of your business.
When you enter a transaction into your software, it may ask you where to record the opposing credit or debit. Or you can teach the software where to make the opposing entry and it will happen automatically.
Disclaimer: Xero does not provide accounting, tax, business or legal advice. This guide has been provided for information purposes only. You should consult your own professional advisors for advice directly relating to your business or before taking action in relation to any of the provided content.
How to do bookkeeping
Bookkeeping includes everything from basic data entry to tax prep. Let’s look at the core jobs and see how they’re done.
- How to do bookkeeping
Small businesses can do their own bookkeeping or outsource to professionals. We look at how to find a good balance.
- Setting up a chart of accounts
Stepping up to do the bookkeeping in a new business? You may have to set up the chart of accounts. Let’s look at how.
- How to do bookkeeping data entry
Data entry is the foundation of bookkeeping. Enter the numbers right and you’ll learn exactly how the business is doing.
- How to do bank reconciliation
Humans aren’t always perfect at punching numbers. Bank reconciliation is a way to do quality control on your books.
- How to manage accounts receivable
Many businesses issue invoices, and those invoices need to be tracked. Learn how to manage accounts receivable.
- How to manage accounts payable
Paying bills isn’t glamorous. But they’re debts and need to be dealt with. Let’s look at how to manage accounts payable.
- Creating monthly financial reports
There are dozens of financial reports that you could create. But there are some monthly mainstays that bookkeepers love.
- How to do payroll
If all you had to do was pay staff, it would be easy. But there’s more to it than that. Let’s look at how to do payroll.
- How to prepare tax returns
Tax returns can be hard for small business owners. There are deadlines to make, and rules to follow. Let’s take a look.
- Using bookkeeping software
Whether you do a lot of your own bookkeeping or outsource it all, software can help you save your time and budget.
- Using professional bookkeeping services
If you don’t have the time or confidence to take on bookkeeping, a professional can help. Let’s look at what they do.
Download the guide on how to do bookkeeping
Learn about the eight core bookkeeping jobs, from data entry to reporting and tax prep. Fill out the form to receive the guide as a PDF.
Start using Xero for free
Access all Xero features for 30 days, then decide which plan best suits your business.
- Safe and secure
- Cancel any time
- 24/7 online support