A chart of accounts is the list of every account your business records money in, grouped into assets, liabilities, equity, income and expenses. A small shop or café in Nepal usually needs only 30 to 40 accounts — including VAT payable and TDS payable if it collects VAT or deducts tax.
KhataIN Business comes with a chart of accounts you can rename, extend and group, so you don't have to build one from scratch.
What is a chart of accounts?
Every transaction you record goes into at least two accounts — one debited, one credited. The chart of accounts is the fixed list of those accounts, each with a code and a name. It decides how your profit and loss statement and balance sheet will look, so a clean chart means clean reports.
The five groups
| Group | What it holds | Normal balance |
|---|---|---|
| Assets (1xxx) | What the business owns or is owed | Debit |
| Liabilities (2xxx) | What the business owes | Credit |
| Equity (3xxx) | The owner's stake | Credit |
| Income (4xxx) | What the business earns | Credit |
| Expenses (5xxx–6xxx) | What it costs to run | Debit |
Assets = Liabilities + Equity, always. Income and expenses flow into equity through profit.
Sample chart for a shop or café
| Code | Account | Group | Use it for |
|---|---|---|---|
| 1010 | Cash in hand | Asset | Till and cash box |
| 1020 | Bank — current account | Asset | One account per bank account |
| 1030 | eSewa / Khalti merchant wallet | Asset | One account per wallet |
| 1040 | QR / card settlement | Asset | Fonepay QR or card money not yet in the bank |
| 1100 | Receivables (customers) | Asset | Credit sales not yet paid |
| 1200 | Inventory (stock) | Asset | Goods for sale, ingredients |
| 1300 | Advances and deposits | Asset | Rent deposit, supplier advances |
| 1400 | Input VAT | Asset | VAT on purchases you can claim |
| 1500 | Furniture and equipment | Asset | Fridge, coffee machine, shelves |
| 1510 | Accumulated depreciation | Asset (minus) | Wear on equipment |
| 2010 | Payables (suppliers) | Liability | Supplier bills not yet paid |
| 2100 | VAT payable (output VAT) | Liability | VAT charged on sales |
| 2200 | TDS payable | Liability | Tax deducted from salary, rent and other payments, not yet deposited |
| 2300 | Salaries payable | Liability | Wages earned but unpaid |
| 2400 | Loans | Liability | Bank or personal loans to the business |
| 3010 | Owner's capital | Equity | Money the owner put in |
| 3020 | Drawings | Equity (minus) | Money the owner took out |
| 3030 | Retained earnings | Equity | Profits of past years |
| 4010 | Sales | Income | Goods and food sold |
| 4020 | Sales returns | Income (minus) | Credit notes for returns |
| 4030 | Service and delivery income | Income | Catering, delivery charges |
| 4100 | Other income | Income | Bank interest, scrap sales |
| 5010 | Cost of goods sold | Expense | Cost of what was sold |
| 6010 | Rent | Expense | Shop rent |
| 6020 | Salaries and wages | Expense | Staff pay |
| 6030 | Electricity and water | Expense | Utility bills |
| 6040 | Gas and fuel | Expense | Cooking gas, generator fuel |
| 6050 | Internet and phone | Expense | Wi-Fi, mobile |
| 6060 | Bank and wallet charges | Expense | Bank fees, merchant charges |
| 6070 | Repairs and maintenance | Expense | Fixing equipment |
| 6080 | Marketing | Expense | Flyers, social media ads |
| 6090 | Depreciation | Expense | Yearly wear on equipment |
| 6100 | Miscellaneous | Expense | Small items — keep it small |
A café would also keep packaging and food wastage as separate expenses; a shop selling on credit to many customers may want discounts allowed.
Why VAT payable and TDS payable are liabilities
When a VAT-registered shop sells for Rs 10,000 plus 13% VAT, it collects Rs 11,300 — but Rs 1,300 belongs to the government. So the entry is:
| Account | Debit | Credit |
|---|---|---|
| Cash | Rs 11,300 | |
| Sales | Rs 10,000 | |
| VAT payable | Rs 1,300 |
VAT on purchases goes to Input VAT. Each month the two are set off and the difference is paid with the VAT return — see VAT in Nepal.
TDS works the same way. If you pay a staff member's salary and deduct tax, the deducted amount is not your money; it sits in TDS payable until you deposit it. For salary tax, read remuneration tax in Nepal.
Five rules for a chart that stays useful
- Keep it short. Add an account only if you will look at its total separately.
- Number by group. Codes starting with 1 are assets, 2 liabilities and so on, so reports sort themselves.
- One account per bank and wallet. You reconcile each one separately — see the bank reconciliation guide.
- Never post the owner's personal spending to expenses. Use Drawings.
- Don't rename an account into something else mid-year. Create a new one so past reports still make sense.
Frequently asked questions
How many accounts does a small business need?
Most small shops and cafés manage well with 30 to 40. Too many accounts make reports hard to read; too few hide where money goes. Start small and add accounts when a question keeps coming up that your reports can't answer.
Do I need Input VAT and VAT payable if I am not VAT-registered?
No. A business that is not VAT-registered does not charge VAT and cannot claim input VAT, so VAT paid on purchases is simply part of the cost. You only need these accounts once you register.
Is the owner's capital income?
No. Money the owner puts into the business is equity, not income, and money the owner takes out is drawings, not an expense. Mixing these is one of the most common mistakes in small-business books.
Should eSewa and Khalti balances be separate accounts?
Yes. Treat each wallet like a bank account so you can match it against the provider's statement. See recording eSewa, Khalti and Fonepay payments.