How to add a new category

This article shows you how to add new accounting categories to your list in FreeAgent.

What are categories?

When you add invoice items, expenses, bills, explain bank transactions or create journal entries, you need to allocate these into categories to explain the type of income or cost that they are. For example, pens and pencils for use in the office would be put into the ‘Stationery’ category.

Before you add new categories, double-check that you aren’t duplicating an existing category that would suit your needs.

You can add Income categories with level 7 access, to add the others you'll need full, level 8.

Once you’ve added them, accounting categories will show up in your accounting reports, like your profit and loss report.

Adding a new category

Select 'Settings' from the drop-down menu at the top right-hand corner of the screen and then choose 'Accounting Categories'.

Select the ‘Add New’ button and choose which type of new category you want to add.

Here are some example uses for each category type:

• Income: if you want to split your sales into different income streams.
• Admin: expenses of all your other day-to-day business costs.
• Cost of Sales: for costs that relate directly to the sales you make (for example, if you're a jeweller, this might be purchases of metal and precious stones).
• Capital Asset Types: if you’d like to record equipment, machinery, computers, cars, or anything else that has a high cost and is going to be used in your business for more than a year.
• Current Assets: are items you own that adds measurable value to your business in the future.
• Liabilities: are obligations you have that will cost you in the future.
• Equity: is values owed to the business owners.  

Income category

Next, give the category a name and choose a new nominal code number for it.

A nominal code is the unique number that you use for each different category. Nominal codes are especially important if you ever want to export your data to other accounts production software.

FreeAgent will only let you pick certain codes, for example, Income can only go from 001 to 049, and some of the codes will already be taken by FreeAgent's existing categories.

Once you’ve chosen a nominal code, select ‘Create Category’ to save this new category. If you want to save this category and create another new one, select ‘Create and Add Another’, or ‘Cancel’ to exit without saving this category.

Admin Expenses category

Give the category a name, for example - subsistence, clothing or petrol - and choose a new nominal code number for it.

A nominal code is the unique number that you use for each different category. Nominal codes are especially important if you ever want to export your data to other accounts production software.

FreeAgent will only let you pick certain codes, for example,  Admin Expenses can only go from 200 to 399, and some of the codes will already be taken by FreeAgent's existing categories.

Choose the tax reporting name for this category, and whether it's allowable for tax.

Choose what you want the default VAT rate to be for this category. This is the VAT rate which is usually used for costs in this category. (You can use a different VAT rate to the default when you enter individual bills and costs.)

Once you’ve chosen a nominal code, select ‘Create Category’ to save this new category. If you want to save this category and create another new one, select ‘Create and Add Another’, or ‘Cancel’ to exit without saving this category.

Cost of Sales category

Give the category a name, and choose a new nominal code number for it.

A nominal code is the unique number that you use for each different category. Nominal codes are especially important if you ever want to export your data to other accounts production software.

FreeAgent will only let you pick certain codes, for example, Cost of Sales can only go from 100 to 199, and some of the codes will already be taken by FreeAgent's existing categories.

Choose the tax reporting name for this category, and whether it's allowable for tax.

Choose what you want the default VAT rate to be for this category. This is the VAT rate which is usually used for costs in this category. (You can use a different VAT rate to the default when you enter individual bills and costs.)

Once you’ve chosen a nominal code, select ‘Create Category’ to save this new category. If you want to save this category and create another new one, select ‘Create and Add Another’, or ‘Cancel’ to exit without saving this category.

Capital Asset type

Give the Capital Asset type a description, and select ‘Create Capital Asset Type’.

When you explain a purchase or disposal of a capital asset in the future, you’ll see your new asset types in the drop-down menus.

Current Asset category

Please note that at the moment, the only way to post transactions to the new Current Asset categories is by means of Journal Entries.

Give the category a name, and choose a new nominal code number for it.

A nominal code is the unique number that you use for each different category. Nominal codes are especially important if you ever want to export your data to other accounts production software.

FreeAgent will only let you pick certain codes, for example, Current Assets can only go from 671 to 720, and some of the codes will already be taken by FreeAgent's existing categories. Choose the ‘Reporting Type’ for this category.

Once you’ve chosen a nominal code, select ‘Create Category’ to save this new category. If you want to save this category and create another new one, select ‘Create and Add Another’, or ‘Cancel’ to exit without saving this category.

Liabilities category

Please note that at the moment, the only way to post transactions to the new Liabilities categories is by means of Journal Entries.

Give the category a name, and choose a new nominal code number for it.

A nominal code is the unique number that you use for each different category. Nominal codes are especially important if you ever want to export your data to other accounts production software.

FreeAgent will only let you pick certain codes, for example, Liabilities can only go from 731 to 780, and some of the codes will already be taken by FreeAgent's existing categories.

Choose the ‘Reporting Type’ for this category.

Once you’ve chosen a nominal code, select ‘Create Category’ to save this new category. If you want to save this category and create another new one, select ‘Create and Add Another’, or ‘Cancel’ to exit without saving this category.

Equity category

Please note that at the moment, the only way to post transactions to the new Equity categories is by means of Journal Entries.

Give the category a name, and choose a new nominal code number for it.

A nominal code is the unique number that you use for each different category. Nominal codes are especially important if you ever want to export your data to other accounts production software.

FreeAgent will only let you pick certain codes, for example, Equity can only go from 921 to 960, and some of the codes will already be taken by FreeAgent's existing categories.

Once you’ve chosen a nominal code, select ‘Create Category’ to save this new category. If you want to save this category and create another new one, select ‘Create and Add Another’, or ‘Cancel’ to exit without saving this category.

How to edit or delete an existing category

You can only do this before you've put transactions into that category. A category containing transactions, and some of FreeAgent's pre-existing categories, such as all of the initial Current Assets, Liabilities, and Equity categories, cannot be changed. Once you’ve deleted a category, it cannot be recovered.