To tidy up your chart of accounts in Xero please follow these simple steps
To Add A New Account
- Go to the settings tab
- Select general settings
- Select chart of account
- Press on the “Add Account” button
- Select the type of account you want to create by pressing on the arrow
- Add a unique code to the account you are creating
- Add a name
- Also add a description to what you are coding into the account
- Important! Select the correct default tax setting to the account
If you are creating an account that you want to use to make payments into also tick the box “Enable payments to this account”
You can show some important accounts on the Dashboard. It will give you the figure for the current month and the year to date. That way you can easily keep track of your income, important expenses or liabilities (e.g. GST). To include an account on the dashboard, tick the box ” Show on Dashboard Watchlist”.
How To Archive Or Delete An Account
(Note: Do not archive an account with a balance. It should always be $0.)
- In the Chart of Accounts, tick the box next to the account that you want to either archive or delete ( if you choose to delete an account you will not be able to restore it as if you choose the archive button instead).
- Select the archive or delete button and press OK
If the account you want to archive includes a balance, you need to book this balance to another account. Depending on the account type this is achieved in different ways.
For bank accounts (incl. Credit Card and PayPal), you need to create a Spend Money or Receive Money transaction to move the balance to a non-bank account. To move it to another bank account, use Transfer Money.
For non-bank accounts, use a journal entry to move it to another non-bank account or a Spend/Receive Money from the bank account you want to move it to.
You might want to ask your bookkeeper or accountant for help with this.
Undeposited Funds, Electronic Clearing Account
You might be familiar with accounts for undeposited funds and the electronic clearing account from other accounting software. In Xero these are not necessary and a prime example for accounts that can be archived.
They should definitely have no balance in them if your books are in order.
Why Fewer Bank Accounts are Better
In some accounting software it is necessary to call something a bank account even if it is not a bank account (e.g. director’s loan, Drawings). In Xero there is no need for that. If you want to use a non-bank account for payments, you can just tick the “Enable Payments from this Account” box.
Bank accounts are the ones you actually want to reconcile. Usually you’ll get a bank feed for them as well. They can show on your dashboard. If you keep non-reconcilable “bank” accounts (where you do not have a bank feed) in Xero, you’ll keep seeing how many transactions are not reconciled, even though you might be totally up to date with the real bank accounts. Not the most beautiful way to use beautiful accounting software.