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Understanding Accounts (Chart of Accounts)

The Chart of Accounts is the backbone of your accounting system. It's a complete listing of every account in your general ledger, organized by type and purpose.

Overview

An Account (also called a ledger account or GL account) is where financial transactions are recorded. Each account tracks a specific type of asset, liability, equity, income, or expense.

Key Concepts

Account Types

Kezi uses five fundamental account types:

  • Asset: Things your business owns (Cash, Inventory, Equipment)
  • Liability: What your business owes (Loans, Accounts Payable)
  • Equity: Owner's stake in the business (Capital, Retained Earnings)
  • Income: Revenue from business activities (Sales, Service Revenue)
  • Expense: Costs of running the business (Rent, Salaries, Utilities)

Account Code

Each account has a unique code that determines its position in the chart. Typical conventions:

  • 1xxx - Assets
  • 2xxx - Liabilities
  • 3xxx - Equity
  • 4xxx - Income
  • 5xxx - Expenses

Account Groups

Accounts are organized into Account Groups for reporting purposes. This allows you to see summarized totals on financial statements.

Reconciliation

Some accounts (like bank accounts) can be marked for reconciliation, enabling you to match your records against external statements.

Creating an Account

  1. Navigate to Accounting > Configuration > Chart of Accounts.
  2. Click Create Account.
  3. Fill in the details:
    • Code: Unique identifier (e.g., 101001)
    • Name: Descriptive name (e.g., "Cash on Hand")
    • Type: Select the appropriate account type
    • Account Group: Choose or create a group for reporting
    • Currency: If this account tracks a specific currency
    • Reconcile: Enable for accounts that need statement matching

Best Practices

  1. Plan Your Structure: Design your chart of accounts before entering transactions
  2. Use Consistent Coding: Follow a logical numbering pattern
  3. Keep It Simple: Don't create more accounts than necessary
  4. Document Purpose: Use descriptions to clarify each account's purpose
  5. Review Regularly: Periodically clean up unused accounts