Set up accounts

Setting up your company file > Set up accounts

Set up accounts

Accounts provide a means for grouping similar transactions. For example, if your business pays rent for the use of its premises, you would create a rent account and then allocate all rent payments to that account. The accounts you use for your business are grouped in an accounts list.

note : Do you need to complete this task?

If your accountant or Certified Consultant has provided you with a company file, this task may have been completed for you. In this case, go to ‘Enter account opening balances’.

When you created your company file, you selected a default accounts list to start with. This list may already have the accounts you need. If not, you can change the list to suit your needs. If you are unsure, ask your accountant which accounts you should create, edit or delete.

If you selected to import a list of accounts, you should import this list now. See ‘Importing data’.

Account numbers

Each account is identified by a unique five digit number. The first digit indicates the account’s classification (for example, accounts starting with 1 are asset accounts). The remaining four digits determine its location within the classification. The lower the number, the higher up in the list it appears. For example, account 1-1100 appears above 1-1200.

Account classifications and types

The accounts list groups accounts into eight classifications—Assets, Liabilities, Equity, Income, Cost of Sales, Expenses, Other Income and Other Expenses. Within each account classification there is at least one account type.

Account classifications and types are described in the following table.

Classification	Type	Description
Asset (1-xxxx)	Bank	Money in the bank, for example, in a cheque or savings account.
	Accounts Receivable	Money owed to you by your customers.
	Other Current Asset	Assets that, if required, can be turned into cash within a year. These may include your term deposits.
	Fixed Asset	Assets which have a long life, for example, buildings, cars and computers. Fixed assets are usually depreciated.
	Other Asset	Other assets you own such as loans made to others and goodwill.
Liability (2-xxxx)	Credit Card	Repayments required to service credit card debt.
	Accounts Payable	Money owed by you to your suppliers.
	Other Current Liability	Money owed by you that is due in less than a year, for example, GST.
	Long Term Liability	Money owed by you that is due in more than one year, for example, a business loan.
	Other Liability	Other money you owe.
Equity (3-xxxx)	Equity	The business’s net worth, that is, its assets minus its liabilities. Common equity accounts are current year earnings, retained earnings and shareholders’ equity.
Income (4-xxxx)	Income	Revenue from the sale of goods and services.
Cost of Sales (5-xxxx)	Cost of Sales	The direct cost of selling your goods and providing services, for example, purchase costs and freight charges.
Expense (6-xxxx)	Expense	The day-to-day expenses of running your business, for example, utility bills, employee wages and cleaning.
Other Income (8-xxxx)	Other Income	Other revenues, for example, interest earned on savings and dividends paid from shares.
Other Expense (9-xxxx)	Other Expense	Other expenses, for example, interest charged.

Header and detail accounts

Your accounts list consists of detail accounts (the accounts to which you allocate transactions) and header accounts. Header accounts group related detail accounts to help you organise your accounts list.

For example, you could group your telephone, electricity and gas expense accounts using a Utilities header account. This makes it easier for you to locate the utility expense accounts in the accounts list and to see your combined utility expenses.

You group accounts by indenting the detail accounts located directly below a header account.

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You cannot allocate transactions to a header account.

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The balance of a header account is the sum of the detail accounts indented directly below it.

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You can create up to three header account levels as shown in the example above.

Next task: Setting up accounts

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Setting up accounts

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Enter account opening balances

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Tracking financial information

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