Chart of accounts and accounting setup

Build the chart of accounts around the figures your business needs to report and reconcile. Give each account a clear purpose, use tracking labels for business segments where they suit the software, and agree on opening balances before routine transactions begin.

Start with reports and transactions

List the figures you need each month: sales, direct costs, operating expenses, cash, amounts customers owe, amounts owed to suppliers and loans. Trace common transactions to their intended accounts. A rent payment differs from loan principal. A customer payment against an existing invoice should reduce the amount owing, not record another sale.

Charts commonly group accounts as assets, liabilities, equity, income, cost of sales and expenses. Names vary by product. In the MYOB Business browser interface, general ledger accounts are called categories: header categories organise detail categories, and transactions are allocated to detail categories. AccountRight also uses the term cost centres for a separate segment reporting feature.

AccountRight supplies a list of basic accounts when you create a company file. Review it to reflect how cash moves in and out of your business, adding, editing or deleting accounts as needed.

Choose account types and codes

Most accounting software supplies a default chart of accounts you can customise. Xero groups accounts under five main types: assets, liabilities, equity, revenue and expenses. MYOB uses eight classifications: Asset, Liability, Equity, Income, Cost of Sales, Expense, Other Income and Other Expense. Within each classification there is at least one type.

MYOB identifies each category with a unique five-digit code in the browser version; the first digit shows the classification, so categories starting with 1 are assets, and lower numbers appear higher in the list. AccountRight uses a four-digit number that must be unique within each account classification.

You can have up to three header category levels; transactions are allocated only to detail categories. A header category's balance is the sum of the detail categories indented directly below it.

Name accounts specifically and group them correctly so reports are useful. A service business may not need inventory accounts but will need to track services income; break down income streams and expenses where a separate account supports a decision. Your accountant or bookkeeper can review the list before you rely on it.

Keep the chart useful

Use separate accounts for balances that need different treatment or reconciliation, such as individual bank accounts and loans. An office or project may instead be a tracking label applied to the same expense account. Check which labels and reports the chosen product supports before relying on that design.

Define accounts that staff could confuse. For example, say whether ‘Software subscriptions’ includes a one-off implementation charge. Ask the accountant to settle classifications that need judgement. Review unused and near-duplicate legacy accounts before carrying them into the new chart.

Where a department, office or other segment needs its own view, MYOB AccountRight cost centres act as labels on transactions. They feed cost centre balance sheet, general ledger and profit and loss reports, and you can consolidate cost centres across the business.

Plan payroll accounts

Payroll often needs several expense accounts so labour costs are visible: wages for salaried staff, wages for casual staff, superannuation expense, leave expense or leave accruals, payroll tax, and WorkCover or workers' compensation. When payroll software exports journal entries, each pay category and on-cost is mapped to one or more chart accounts.

Set the changeover boundary

Agree on the opening date, financial year, GST settings and responsibility for entering invoices and bills. Decide whether the new system will contain opening balances and unpaid items, or earlier transactions as well. Keep the earlier records needed to explain periods that are absent from the new system.

Use a dated closing trial balance to prepare opening amounts, allowing for any documented year-end entries or agreed changes in account structure. Compare each bank ledger balance with its statement and identify uncleared transactions.

Check that unpaid customer and supplier items explain their respective control balances. If stock is tracked, compare its ledger value with the item quantities and values being brought in. Have the accountant resolve differences before approving the starting figures.

Many businesses choose the start of a new BAS or GST period, or the start of the financial year, as the change-over date. Aim to lock in the date two to four weeks before switching.

Decide whether to bring across only opening balances or full transaction history; bringing more history means more cleaning and checking. Importing transactions is only possible if you move to MYOB AccountRight. Involve your accountant or bookkeeper before importing so they can review the chart of accounts and GST codes.

Setting the changeover boundary: key steps for Australian businesses

Check the setup

Run a trial balance, balance sheet and profit and loss for the relevant date or period. Trace a few ordinary transactions through the reports, including an invoice and receipt, and a supplier bill and payment. Check that payments clear the amounts owing without duplicating sales or expenses.

Save the approved chart, account descriptions, opening date and opening balance reports. Assign an owner to later account changes so the chart stays consistent.

In MYOB AccountRight, review the accounts list summary report from the Accounts command centre. The browser version has a Categories list report under the Reporting menu. Both let you check account names, numbers and groupings before you save the approved setup.

Pre-launch checklist: reviewing your chart of accounts