Components of an account in your chart of accounts
Every account in your chart of accounts has several components. You can edit some components, and use components to learn more about the account.
Each account has an account code. A code can be up to 10 characters. The code is used to group similar or frequently used accounts together in your chart of accounts. There is no one 'right' code for each account.
If you are used to a different coding system, or would prefer to create your own, you can edit any of the accounts and change the code.
Your accountant or bookkeeper may have a preferred set of codes that they would like you to use.
When you change a code in your Chart of Accounts, Xero moves the old data under the new code for all new reports. Published reports will not reflect this change in code.
Name and description
Every account in Xero must have a name. The name can be up to 150 characters.
The account description is optional, except for bank accounts (where you mustn't use it). Use letters, numbers or symbols for the description, up to 1000 characters. Use symbols within the description, not at the start.
You can edit the account name and description.
Each account has a type. Xero uses the account type to determine where the account appears in your financial reports. Xero also uses some account types for specific purposes. For example, if you purchase an item and code it to an account with the Fixed Assets account type, Xero will add the item to the fixed asset register as a draft fixed asset.
Changing the account type may move the account to a different section on reports. This won't affect reports already published.
Choose the account type when you add a new account. You can change the account type at any time by editing the account.
Account types in Xero are arranged in 5 categories:
- Current Asset
- Fixed Asset
- Non-current Asset
- Current Liability
- Non-current Liability
Xero treats Liability and Non-current Liability identically. You can choose which type to allocate to your account.
- Direct Costs
Xero treats Expense and Overhead identically. You can choose which type to allocate to your account.
- Other Income
Xero treats Revenue and Sales identically. You can choose which type to allocate to your account.
Each account has a default tax rate. The tax rate determines how Xero treats the transactions for sales tax purposes.
Default sales tax rates are applied to each account in the Xero default chart of accounts. The tax rates are all set to 0%. You can edit these tax rates, or add your own tax rates to meet your tax requirements. If you add your own accounts to the chart of accounts, you choose the tax rate.
The default tax rates are:
- Tax Exempt (0%)
- Tax on Purchases (0%)
- Tax on Sales (0%)
- Sales Tax on Imports (0%)
If you've selected 'None' for your sales tax basis, accounts in Xero's default chart of accounts won't have a tax rate applied. Transactions you enter will have a tax rate of 'No Tax'. If tax applies to your organization later, you'll need to edit accounts in your chart of accounts to apply the right default tax rate. Talk to your accountant or bookkeeper about how to do this.
YTD (Year to date)
Each account on your chart of accounts shows a year to date figure. The year starts at the beginning of your organization's fiscal year, as set in Financial Settings.
The YTD balance shown depends on the type of account:
- Expense and revenue accounts - The sum of all transactions in the account from the start of the financial year. When you click on the YTD balance you'll see all transactions for the account, not just those for the financial year.
- Asset, liability & equity accounts - The balance as at today's date. When you click on the YTD balance you'll see all the transactions counted in the balance.
The YTD balance displays in the YTD column on the Dashboard if you mark the account to go on the Account Watchlist.