Easily explained, they are the categories of where you need to allocate the money that comes in and goes out of your bank account through your bank feeds if you are using a cloud accounting programme. There are generally 5 categories
๐๐ฃ๐๐ค๐ข๐ - this one is easy, Itโs the money you get paid for your goods or your services
๐๐ญ๐ฅ๐๐ฃ๐จ๐๐จ - this is a little more tricky and has many sub categories. This is what you pay for to run your business.
๐ผ๐จ๐จ๐๐ฉ๐จโ This is where it will show your bank accounts and equipment you have purchased for the business. Like cars, machinery, large tools, office equipment and bank balance.
๐๐๐๐๐๐ก๐๐ฉ๐๐๐จ โ This one shows you who you owe money to. Like bank loans, credit cards, tax, GST, superannuation & PAYG tax (for employees).
๐๐ฆ๐ช๐๐ฉ๐ฎ โ And this is a favourite because it will show you how much your business is worth. It will take the profit earned, assets owned and deduct the money you owe and Voila thatโs your net worth. (in a nutshell)
Keep your eye out for our next post - we will explain how the chart of accounts is used to build a Profit & Loss and Balance sheet report.
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Chart of Accounts