Introduction
The Chart of Accounts is the foundation of your Xero accounting system. It categorises every transaction — from sales and expenses to assets and liabilities — to ensure accurate financial reporting. Setting it up correctly helps maintain clear, organised records that support decision-making and compliance.
Understanding Xero’s Default Chart of Accounts
Xero automatically provides a standard set of accounts commonly used in small businesses. These include:
• Assets – Cash, Accounts Receivable, Equipment
• Liabilities – Accounts Payable, Loans, Taxes
• Equity – Owner’s Capital, Retained Earnings
• Revenue – Sales, Fees, Commissions
• Expenses – Rent, Utilities, Salaries
You can rename or adjust these to better fit your business operations.
How to Set Up Chart of Accounts in Xero?
When you create a new Xero organisation, a default Chart of Accounts is provided based on your business type. You can use it as-is or customize it to suit your needs.
Step 1: From the dashboard, go to Accounting, choose the Chart of Accounts.
Step 2: Click Add Account.
Step 3: Select the account type (e.g. Expense, Revenue, Asset).
Step 4: Enter the account name, description, code, and tax rate.
Step 5: Click Save.
How to Edit or Unlock the Chart of Accounts?
To modify an existing account:
Step 1: From the dashboard, go to Accounting, choose the Chart of Accounts.
Step 2: Click the account name.
Step 3: Edit details such as name, code, or tax rate. Click Save.
How to Unlock Locked Accounts in Xero
Some system accounts in Xero are automatically locked to protect essential functions such as payments, payroll, and tax tracking. These accounts cannot be deleted or fully edited. However, you can still manage certain aspects if needed.
Step 1: From the dashboard, go to Accounting, choose the Chart of Accounts.
Step 2: Locate the account marked as System Account or Locked.
Step 3: Resolve the issue based on the type of lock:
If the account is locked because it’s linked to a transaction (e.g., payment or repeating journal), you must first remove or reassign that transaction before editing.
If the lock relates to a system function (e.g., Accounts Receivable, Accounts Payable, or Bank Accounts), it cannot be unlocked — these are fixed by Xero.
For standard accounts, once all linked entries are cleared, you’ll be able to edit or archive the account as needed.
Once you’ve resolved or removed the linked transactions, the account will automatically unlock, allowing you to make adjustments or updates as needed.
How to Import or Export a Chart of Accounts
To import a Chart of Accounts:
Step 1: From the dashboard, go to Accounting, choose the Chart of Accounts.
Step 2: Click Import.
Step 3: Download Xero’s sample import template (CSV).
Step 4: Delete the example data and replace it with your own account information.
Step 5: In Xero, choose which system you’re importing from and specify whether the file includes opening balances. Set your conversion date, click Browse to upload the CSV file, then select Import to complete the process.
To export the Chart of Accounts:
Step 1: From the dashboard, go to Accounting, choose Chart of Accounts.
Step 2: Click Export.
Step 3: Xero will automatically download your Chart of Accounts as a CSV file, which can be used for backup or import into another organisation.
Linking Chart of Accounts to Hubdoc
When Hubdoc is connected to Xero, any documents you upload — such as bills, receipts, or invoices — can be published straight into your Xero accounts. Hubdoc automatically syncs with Xero’s Chart of Accounts, so all account codes, tax rates, and contacts remain up to date.
This ensures that when you process documents in Hubdoc, you can select the correct expense or revenue account directly from your Xero chart, keeping your financial records consistent and accurate.
Where Does Purchase Tax Go in the Chart of Accounts?
Purchase tax (e.g. Sales tax) is typically recorded under Liabilities, usually in an account such as “820 – Sales Tax.” Xero automatically tracks tax amounts from transactions, helping you reconcile them easily when filing returns.
Frequently Asked Questions (FAQs) about Xero Chart of Accounts
Q: Can I delete a chart of account?
A: Only if it’s not used in any transaction. Xero will block deletion if the account has entries to maintain data integrity.
Q: Can I re-order account codes?
A: Yes. You can edit account codes anytime, but keep numbering consistent to avoid confusion in reports or linked systems.
Q: Can I import accounts from another accounting software?
A: Yes. Export your existing accounts as a CSV, format them according to Xero’s template, then upload.
Q: What is the best chart of accounts structure for SMEs?
A: For Malaysian service-based SMEs, a typical setup is:
100–199 Assets
200–299 Liabilities
300–399 Equity
400–499 Income
500–799 Expenses
Q: What happens if I link Dext and then update the chart of accounts in Xero?
A: You’ll need to re-sync Dext with Xero so the new or updated accounts appear for selection.
Conclusion
Setting up and managing your Chart of Accounts in Xero ensures your financial data is organised, accurate, and aligned with your reporting needs. By customising account codes, linking them to tools like Hubdoc, and keeping your tax accounts correctly classified, you can streamline bookkeeping and maintain a clear picture of your business’s financial health.