Every salon that keeps real books needs a Chart of Accounts — the list of buckets that every rupee flows into. Get it right and your Profit & Loss answers questions in one glance. Get it wrong and you have a beautifully organised report that tells you nothing.
This guide covers what a salon Chart of Accounts should contain, how to structure mother and child accounts, and the mistakes that make a chart useless.
What a Chart of Accounts actually is
It is a filing system for money. Five top-level categories, always, in this order:
- Assets — what you own (cash, bank, equipment, money owed to you)
- Liabilities — what you owe (suppliers, loans, unredeemed loyalty points, unused packages)
- Equity — the owner's stake
- Revenue — what you earn
- Expenses — what you spend
Assets, liabilities and equity form your Balance Sheet. Revenue and expenses form your Profit & Loss. That is the whole architecture.
A structure that works for most salons
Here is a starting point. Codes are conventional — 1000s for assets, 2000s liabilities, 3000s equity, 4000s revenue, 5000s expenses.
| Code | Account | Type |
|---|---|---|
| 1000 | Assets (mother) | Asset |
| 1010 | Cash in Drawer | Asset |
| 1020 | Bank — Current Account | Asset |
| 1030 | Accounts Receivable | Asset |
| 1040 | Staff Advances | Asset |
| 1050 | Inventory — Retail Products | Asset |
| 1100 | Fixed Assets (mother) | Asset |
| 1110 | Salon Equipment | Asset |
| 1120 | Furniture & Fit-out | Asset |
| 1190 | Accumulated Depreciation | Contra-asset |
| 2000 | Liabilities (mother) | Liability |
| 2010 | Accounts Payable | Liability |
| 2020 | Deferred Revenue — Packages & Memberships | Liability |
| 2030 | Loyalty Points Liability | Liability |
| 2040 | Salaries Payable | Liability |
| 2050 | Tax Payable | Liability |
| 3000 | Equity (mother) | Equity |
| 3010 | Owner's Capital | Equity |
| 3020 | Retained Earnings | Equity |
| 4000 | Revenue (mother) | Revenue |
| 4010 | Service Revenue — Hair | Revenue |
| 4020 | Service Revenue — Colour | Revenue |
| 4030 | Service Revenue — Skin & Beauty | Revenue |
| 4040 | Retail Product Sales | Revenue |
| 4050 | Academy — Course Fees | Revenue |
| 4090 | Discounts Given (contra-revenue) | Revenue |
| 5000 | Expenses (mother) | Expense |
| 5010 | Salaries & Wages | Expense |
| 5020 | Staff Commissions | Expense |
| 5030 | Product & Consumable Cost | Expense |
| 5040 | Rent | Expense |
| 5100 | Utilities (mother) | Expense |
| 5110 | Electricity | Expense |
| 5120 | Water & Gas | Expense |
| 5130 | Internet & Phone | Expense |
| 5200 | Marketing & Advertising | Expense |
| 5300 | Repairs & Maintenance | Expense |
| 5400 | Depreciation Expense | Expense |
| 5900 | Bank Charges | Expense |
In TressyPOS you build exactly this — mother and child accounts, your own codes — rather than accepting a fixed template.
The three accounts most salons are missing
Deferred Revenue (2020)
When a client pays PKR 50,000 for a ten-session package, you have not earned PKR 50,000. You have earned nothing yet and taken on an obligation. Booking it as revenue on day one overstates that month and starves every month after it — which is why so many salons have a wonderful March and an inexplicable April. Read more on memberships and deferred revenue.
Loyalty Points Liability (2030)
Outstanding points are a real promise with a real monetary value. If your clients are collectively sitting on PKR 300,000 of redeemable points, that is a liability whether or not you have written it down.
Discounts Given (4090)
Recording a discounted sale at its net price hides the discount permanently. A contra-revenue account lets you answer "what did we give away last quarter?" — often an uncomfortable number, and always a useful one.
Four mistakes to avoid
- Too many accounts. Forty accounts you read beat two hundred you ignore. Add a child account only when the number alone would change a decision.
- Mixing owner and business money. Owner's drawings are equity, not an expense. Run them through the P&L and your profit is fiction.
- One giant "Miscellaneous" account. It always grows, and by year end it is the biggest expense line and nobody remembers what is in it.
- Restructuring mid-year. You lose comparability. Change the chart at year end, or carry it forward deliberately.
Set it up once
Spend an afternoon on this with your accountant. A Chart of Accounts is one of the few decisions in a salon that pays back every single month afterwards — and one of the very few you cannot cheaply change later.