When you’re reconciling your bank account in Xero, you’ll be assigning a category to every item of income and expenditure. In accounting terms, this category is called a nominal code, and the full list of available codes is known as your Chart of Accounts.
Sometimes it’s obvious which code to use. Other times, it’s less clear - and that’s when it’s worth checking in with your accountant to see whether an existing code is suitable.
Xero (like all accounting software) comes with a standard set of codes that work for most businesses. But every business is different, and you may want to track certain types of income or expenditure in more detail. In those cases, you can add your own custom categories.
What Is the Chart of Accounts?
Your Chart of Accounts is simply a list of all the account codes available to your business. In Xero, you can view it by going to:
Accounting → Advanced → Chart of Accounts
Before adding anything new, it’s worth checking whether an existing code already fits. Having two very similar codes can lead to confusion later, especially if transactions end up split between them.
Step 1: Check for Similar Existing Codes
If you can’t immediately see a suitable category, look for something similar to help you decide where your new code should sit.
For example, if you want to add a category for staff accommodation while travelling, you might check where travel costs are currently coded. Xero’s default travel codes are:
- 493: Travel – National
- 494: Travel – International
Both sit under Overheads, so you might decide to create:
- 495: Accommodation
This keeps your Chart of Accounts tidy and logically grouped.
Step 2: Add a New Account Code
To create a new category:
- Scroll to the top of the Chart of Account and click Add Account.
- Choose the Account Type (e.g. Overheads).
- Enter the Code (e.g. 495) and Name (e.g. Accommodation). You can also add a Description if helpful.
- Select the default Tax Rate (Choose No VAT if you are not VAT registered).
- Click Save.
Your new account will now be available when reconciling your bank feed. If you already had the reconciliation screen open, you may need to refresh it before the new code appears.
Any Questions?
If you have any questions, or simply want to check something with us, feel free to get in touch.
If there is no category that suits your expenditure, what you will want to do is find something similar to see whereabouts in the Chart of Accounts it sits. For example, if you want to add a category for paying for staff accommodation when they are away on trips, you might look to see where travel costs are coded. The default travel codes are 493 for Travel – National and 494 for Travel – International and they are both classed as Overheads. You might therefore pick code 495 for Accommodation and realise you should class it as an overhead.
To add a new code, scroll to the top and select Add Account. You will then be able to add Overheads at the account type, 495 for the Code, Accommodation for the Name and if you want you can add a short description of what the account should be used for.
Finally you can select the default Tax setting (select No Tax if you are not VAT registered) and hit save. The account should now be available to use when you are doing your bank reconciliation, although if you had the screen open it will likely need to be refreshed.
