Designing a chart of accounts

Start from decisions, not from a template

Ask what the owner needs to see: job margin, location, crew, taxable vs nontaxable sales. Those are tracking (Xero) or classes/locations (QBO), not new GL accounts. The chart only needs a new account when the balance sheet or P&L line itself is a different kind of thing.

• Separate revenue streams that have different margins or tax treatment.
• Keep direct costs out of overhead.
• One AR, one AP, one sales-tax payable per tax regime unless you have a real reason.
• Merchant clearing, payroll clearing, and undeposited funds as needed — named, not “misc.”
• Archive, don’t delete, accounts with history.

Xero types are a closed list

The Accounting API’s types include BANK, CURRENT, CURRLIAB, DEPRECIATN, DIRECTCOSTS, EQUITY, EXPENSE, FIXED, INVENTORY, LIABILITY, NONCURRENT, OTHERINCOME, OVERHEADS, PREPAYMENT, REVENUE, SALES, TERMLIAB. NONCURRENT is a long-term *asset* (deposits, investments). A multi-year loan is TERMLIAB (term / non-current liability), not NONCURRENT. AU/NZ files also show PAYG and superannuation types — ignore those on a US org. There is no “crypto,” no “goodwill” special, no “subaccount.” Pick the nearest honest type. Wrong type breaks the cash-flow statement and the lock-date reports.

Numbering

Use 1000 assets, 2000 liabilities, 3000 equity, 4000 income, 5000 direct costs, 6000 expenses. Leave gaps (6010, 6020) so you can insert. Do not renumber a live file casually — bank rules, repeating invoices, and document-capture publish to codes.