![]() Note: It is important that you have a consistent coding system for your Chart of Accounts, particularly if you have multiple people in your accounting software (such as a tax accountant, bookkeeper, virtual CFO, you, and your senior management team). Whereas, a client service business will want to see aged payables and aged receivables. There can be significant differences based on the type of business you own.įor example, if you run a DTC eCommerce business on Shopify, you’ll want to clearly see your top-performing and worst-performing products in your chart of accounts layout. For example, the expenses category might include. Non-Current Liabilities & Equity such as Retained Earnings, Current Year Earnings and Owner Contributions/DrawingsĮach of those categories will have sub-categories listed.Current Liabilities such as Short Term Debt like Credit Cards & Shopify Capital Loans (as these are paid back within 12 months), Accounts Payable, & Tax Liabilities.Non Current Assets such as: Fixed Assets like Office and Computer Equipment.Cash and Cash Equivalents like Bank Accounts, Accounts Receivable, Inventory.Standard categories in a Chart of Accounts will include: When you set up your financial accounting software, it is important that you customize the Chart of Accounts to the needs of your specific business. The standard Chart of Accounts allows you to allocate every transaction to a category in your general ledger so that you can see a complete list of sales and expenses. Want to save yourself a ton of time and headaches working out how to properly set up your Chart of Accounts (or Xero file), and be trained by a Xero expert? Check out our “How to do Bookkeeping in Xero” online course here. Screenshot below of the Chart of Accounts screen in Xero It also helps meet the needs of management reporting while also complying with all financial reporting standards. It is important because it is designed as a way to separate expenditures, revenue, assets, and liabilities, so a business can have a clear understanding and view of their overall financial health. How to customize your chart of accounts.Is the Chart of Accounts similar to a balance sheet?.Why is a Chart of Accounts so important?.
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