pro · Lesson 1 · 9 min
Designing a chart of accounts
Lean, typed correctly, mapped to how the owner decides. Tracking does the slicing. The chart does the structure.
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, PAYG. 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 Hubdoc publish to codes.
Check
Choices shuffle each visit. Misses send you back to the section — Look back clears the quiz so you can try again.
Choose an answer, then check.
You need P&L by crew. You should:
Practice: Name the type