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Along with direct costs (refer to preceding section), three other expense account types are possible: Expense, Depreciation and Overhead. These represent the overall operating expenses for the business, and I like to break them up over four groups:

 Promotion: This relates to any advertising, marketing or promotional spend incurred by the business and is allocated to account type Expense. A catering business, for example, may include Facebook advertising and website design here.

 People: This relates to staff expenditure, including wages, amenities and training advertising. Expenditure for full-time staff could be allocated to Overhead, while expenditure on casual staff is allocated to account type Expense. Continuing to use the catering business example, people expenses for this type of business may include wages, workers’ insurance and kitchen amenities.

 Place: This relates to all expenses associated with the location the business occupies and is allocated to account type Overhead. A catering business may include rent, electricity and rates here.

 Provisions: This relates to all the general expenses of the business and may be allocated to account type Expense, Depreciation or Overhead. For example, a catering business may include telephone expenses, petrol expenses, depreciation and subscriptions here.

Do not create promotion, people, place and provisions as account types. How these terms can be used is covered in Chapter 9, which discusses customising report templates.

Refer to the section ‘Working out how account types affect your reports’, earlier in this chapter, for details of what to include in the Equity, Assets and Liabilities section of your Chart of Accounts within Xero. See Chapter 9 for more on reporting outcomes.