Chart of Accounts and Nominal Codes

User of our online accounting software should rarely, if ever, see terms like “Chart of Accounts” or “Nominal Codes” in our software. It’s designed to be used by non-accountants so it’s written in plain English without the fancy jargon.

But some people see these terms elsewhere and may wonder how they relate to the accounting software they are using. So here I’m hoping to explain some of these terms.

When you receive money into your business or when you spend money from your business you need to classify it  – perhaps as “income from sale of product x” or “Office Rental Expenses” or “Bank interest”. These classifications have a number of uses. Firstly in analysis – without the classifications how would you know how sales of product X compare to sales of product Y. Or how much your bank has charged you (or paid you) in interest in the last year.
The second purpose for these different classifications is for tax and accounting purposes. Depending on what the money you received or paid out was for, it will be treated differently for tax purposes and will be displayed different in your company accounts.

So a “nominal code” is simply one of these classifications. They’re also sometimes referred to as “accounts”. So the complete set of different classifications for your bookkeeping records are called the “Chart of Accounts”.

They do exist in KashFlow. But we break them down into subsets of “Sales Types”, “Outgoing Types” and “Bank Transaction Types” – each subset is accessible in the specific area of the software.  We don’t see the point in showing you codes that are Sales Types when you’re entering bank transactions and vice versa. If you really want all codes to show in all areas then go to Settings – > Advanced Settings and enable the Access All Nominals  option.

This entry was posted on Friday, November 21st, 2008 at 10:17 am and is filed under Accounting, Accounting Terms Explained. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.