Chart of Accounts

Last updated: June 20, 2026

The chart of accounts is the master list of every ledger your books post to. It is the backbone the whole module rests on: every invoice, payment and journal ends up as debits and credits against accounts defined here, and the financial statements are simply these accounts grouped and totalled. Build the chart well and the reports look after themselves.

What you will learn
  • The six account types and how they map to the two statements
  • How the account tree rolls detail up into summaries
  • What control accounts and subledgers are
  • Why each account carries a currency and revaluation behaviour
BALANCE SHEETPROFIT AND LOSSAssetswhat you ownLiabilitieswhat you oweEquitynet worthIncomerevenueCost of salesdirect costExpenseoverheadsBank / CashReceivablesPayablesLeaf accounts post; parent nodes only summarise
Six account types; the first three build the balance sheet, the last three the profit and loss simplified mockup

Anatomy of an account

Each account (ledger) has a code, a name and a description, and three settings that decide how it behaves:

  • Type – one of six classes: Asset, Liability and Equity (which form the balance sheet) and Income, Cost of sales and Expense (which form the profit and loss). The type decides which statement the account belongs to.
  • Subtype – a position in a hierarchy within the type. An asset may be bank, receivable or fixed; a receivable may be trade or non-trade. The tree lets detailed accounts roll up into summary totals.
  • Currency – the account's native currency. Some accounts, such as receivables, are flagged multi-currency to hold balances in several at once.
  • Tax allowable – whether the account may be used on tax-deductible documents; marking an account non-allowable keeps personal or disallowed costs out of the tax figures.

How it behaves

Control accounts and subledgers

Receivables and payables are control accounts: their balance is the sum of a subledger that holds one line per customer or vendor. You never post to them by hand, the documents do, each tagged with who owes what, so the control balance and the customer-by-customer detail always agree.

Placeholder accounts do not post

Parent nodes in the tree are placeholders that exist only to summarise. You cannot post to them; postings go to the leaf accounts and roll up the tree. This keeps totals clean and stops a balance hiding at a summary level.

Currency and revaluation behaviour

Each account also carries how it treats foreign currency: a rate mode (use the rate on the day, or a weighted average) and a revaluation mode (leave it at historical cost, or mark it to market at period end and post the gain or loss). This is why a foreign bank balance revalues as rates move while cash held at historical cost does not. The detail lives in Multi-currency.

Worked example

A posted sales invoice debits Assets > Receivables (trade), tagged to the customer, and credits Income > Sales. The customer's subledger shows their balance, the trial balance shows the rolled-up receivables total, and the profit and loss picks up the sales, all from this one structure.

Edge cases and good practice

  • Never post to a placeholder. If an account will not accept a posting, it is a summary node; use the leaf beneath it.
  • Keep tax-allowable honest. It is what separates deductible from non-deductible costs in the tax reports.
  • Set currency and revaluation deliberately on foreign-facing accounts, because they drive period-end FX.

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