What it is
The chart of accounts is the list of buckets your money moves between. Every transaction moves an amount from one account to another: a sale moves money into Sales income and into Bank; paying rent moves it out of Bank and into Rent expense.
Get it right before you post real transactions. Changing it later is possible, but reports you have already given a bank or a tax authority were built on the old structure.
The six account types
| Type | Holds | Appears on |
|---|---|---|
| Asset | Bank, cash, stock, money owed to you | Balance Sheet |
| Liability | Suppliers, loans, tax payable | Balance Sheet |
| Equity | Capital introduced, retained profit | Balance Sheet |
| Income | What you earn | Profit & Loss |
| COGS | Direct cost of what you sold | Profit & Loss |
| Expense | Running costs | Profit & Loss |
The split between COGS and Expense is what produces gross profit as distinct from net profit. If you sell 100 chairs, the chairs are COGS and the shop rent is Expense.
Setting yours up
Go to Accounting → Chart of Accounts. Apply an industry template for a complete chart ready to use, seed a basic chart if you want to build your own from a clean base, or add accounts one at a time.
Leave gaps in your codes
Numbering expenses 6000, 6001, 6002 means the next account has to go on the end. Numbering them 6000, 6100, 6200 means you can slot one in where it belongs.
Deactivate, never delete
An account with transactions against it cannot simply disappear — the history pointing at it would stop making sense. Mark it inactive instead: it stops appearing when posting new transactions, and old reports still work.
The full chapter is in the Kinxso Accounts manual.