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.
When you created your company file, you may have 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 your own account list, you should import this list now.
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.
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 organize 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.
- You cannot allocate transactions to a header account.
- The balance of a header account is the sum of the detail accounts indented directly below it.