Creating Your Chart of Accounts and Assigning Nominal Codes
In This Chapter
- Getting familiar with some accounting concepts
- Charting your accounts
- Adding nominal codes in your chart of accounts
- Changing your chart of accounts
In this chapter, I get down to the nitty-gritty of the accounting system – the chart of accounts (COA), which is made up of nominal codes. Think of the COA as the engine of the accounting system. From the information in your COA, you produce your profit and loss report, your balance sheet, your budget report, and prior-year reports. Set up your COA properly and the chart grows with your business – but set it up wrongly and you'll have problems for ever more.
Luckily, Sage gives you a lot of help and does the hard work for you, but you still need to understand why Sage is structured in the way that it is and how you can customise it to suit your business.
Understanding as Much as You Need to about Accounting
To use Sage, it helps if you have an appreciation of accounts and understand what you want to achieve. But you certainly don't need to understand all the rules of double-entry bookkeeping. In this section I give you the basics of accounting principles so you can use Sage more comfortably.
Dabbling in double-entry bookkeeping
Accounting systems and accounting programs such as Sage use the principle of double-entry bookkeeping, so called because each transaction is recorded twice. For every debit entry, you record a corresponding credit entry. Doing ...