When adding a new nominal account, you may wish to consider which category to place the account under based on the following guide.
Profit and Loss Categories
Sales
If the account will be for a type of sale you are making to your customers, use this category.
These accounts will be available when entering a sales invoice.
Purchases
Use this category for items that will be purchased and resold in your business or used to render services to your clients.
Such items can include building materials (for construction workers), stock items, and other outsourced services.
Expenses
Expenses are direct costs to your business that enable you to promote and fulfil your services.
For example, advertising and marketing, sub-contractor fees, sales commission, etc.
Overheads
Overheads are fixed administrative costs such as rent, utilities, staff wages, stationery, printing, etc.
Balance Sheet Categories
Assets and Liabilities
An asset is anything of value that your business owns. This can include property, stock, and money owed to you by your clients (debtors).
A liability is anything your company owes to other people or businesses, such as loans, mortgages, and outstanding supplier invoices (creditors).
Capital and Reserves
Capital and reserve accounts are used to track owner’s equity along with the profit/loss for the business; this is transferred to a capital account at the end of each financial period.