Your first major Xero decision – the COA
The COA for your business is like a table of contents. It has major sections (assets, liabilities, equity, revenue, and expenses). It also has sub-sections (current assets, non-current assets, and more) and line items. Your COA is involved in everything you do in Xero moving forward. The choices here lay out how you record your transactions and how they will be reported later.
How do you plan on laying out your COA? Are you going with a flat structure or a broad structure? What I mean by flat is using as few accounts as necessary, such as a single sales account, let’s say Revenue. A broad structure involves using multiple accounts in an area. Let’s say we want to track sales by channel; we might have Revenue – Retail, Revenue – Online, and Revenue – Wholesale. This should be driven by what the data and reporting needs are of your company and its management. We will cover tracking categories later...
