How To Create Chart of Account (New Vers.)

Pre-requisite: you may need to have Accounting role to access certain feature of this article.

How To Create Chart of Account (New Vers.)

Easily set up a Chart of Accounts to organize financial transactions, track expenses, and manage your business's financial structure efficiently.

Learn How To

1. Create Chart of Account
2. Customize chart of account 

Create Chart of Account

1. Click on Chart of Account

2. Click on Add New

3. Enter a name

(The name of your new Chart of Account that will be displayed in most of the reports and dropdown selection.)

4. Choose an Account Type

5. The code of Chart of Account will be auto generated 

6. Enter a description (optional)

(To describe the purpose / details about this Chart of Account for reference)

7. Choose a Parent COA (optional)

(To create Multi-Level Chart of Accounts, please refer to How To Create Multi-Level Chart of Account)

8. Check Debit Side (optional)

(When you choose an account type, the system will automatically set the "debit_side" for you.)

9. Click on Save

10. If you choose account type under profit & loss, will reflect in P&L report

11. If you choose account type under balance sheet, will reflect in balance sheet report

Customize chart of account 

Properly categorizing income and expenses ensures compliance with accounting standards and tax regulations, making audits and financial reporting smoother.

Example Scenario - Rental Income: If your business generates fixed income from rental properties or equipment, you would create specific accounts under 'Other Income' to categorize these earnings. 

1. Select Account Type

1. Other Current Assets: These are short-term assets that can be converted into cash or used up within a year. Examples include prepaid expenses, short-term investments, and accounts receivable.

2. Other Current Liabilities: These are short-term financial obligations that a company must settle within a year, such as accrued expenses, short-term loans, and tax liabilities.

3. Other Expense: This account type is used to record expenses that are not directly related to your primary operations. For instance, expenses incurred in maintaining or managing rental properties or equipment can be categorized under 'Other Expense'.

4. Other Income: This account type is used to record income that doesn't fall under your primary business activities. For example, rental income from properties or equipment that your business owns can be categorized under 'Other Income' because it's not directly related to your core sales or services.

5. Other Long-Term Liabilities: These are financial obligations that extend beyond one year, such as long-term loans, deferred tax liabilities, and pension obligations.

2. By following these steps and customizing your chart of accounts to include specific categories for rental income and expenses, you can effectively manage and analyze the financial aspects of your rental business within your accounting system.