> ## Documentation Index
> Fetch the complete documentation index at: https://docs.hitaji360.com/llms.txt
> Use this file to discover all available pages before exploring further.

# Accounting Basics in Hitaji 360

> This page explains the core accounting ideas that everything else in the Accounting module is built on: accounts, debits and credits, ledger entries,…

This page explains the core accounting ideas that everything else in the
Accounting module is built on: **accounts**, **debits and credits**, **ledger
entries**, **accounting books**, and **accounting periods**. You don't need an
accounting degree to use Hitaji — but understanding these few ideas makes every
screen (invoices, expenses, payments, reports) much easier to read.

Hitaji keeps a real, double-entry set of books behind the scenes. When you do
something practical — "record this expense", "mark this invoice paid" — Hitaji
quietly writes the matching bookkeeping entries for you, so your financial
reports are always correct and always balance.

You'll find the building blocks here:

* **Chart of Accounts** — `/accounting/accounts`
* **Accounting Periods** — `/accounting/periods`
* **Financial Reports** — `/accounting/reports`

> 📷 *Screenshot: The Chart of Accounts page showing accounts grouped by type — to be added.*

***

## A note on multi-business

Hitaji is multi-tenant and multi-business. **Each business keeps its own
separate set of accounting books** — its own chart of accounts, its own ledger,
its own periods. When you switch the active business using the business switcher
at the top of the app, the whole Accounting module re-points to that business's
book. Numbers never bleed across businesses.

Throughout this module the word **book** (or "accounting book") refers to one
business's set of books. Internally, an account, period, or ledger entry is
stamped with a `workspaceId` — but that is just the technical name for "which
accounting book this belongs to". It has nothing to do with task-management
workspaces.

***

## 1. Accounts and account types

An **account** is a labelled bucket that money flows into and out of — for
example "Cash at Bank", "Sales Revenue", "Rent Expense", or "Accounts Payable".
The full list of your accounts is called the **Chart of Accounts**
(`/accounting/accounts`).

Every account belongs to exactly one of **five account types**. These five types
are the foundation of all accounting:

| Type          | What it holds                     | Everyday examples                                     |
| ------------- | --------------------------------- | ----------------------------------------------------- |
| **Asset**     | What the business owns or is owed | Cash, Bank, Accounts Receivable, Inventory, Equipment |
| **Liability** | What the business owes            | Accounts Payable, Loans, Taxes Payable                |
| **Equity**    | The owners' stake in the business | Owner's Equity, Retained Earnings                     |
| **Income**    | Money earned                      | Sales, Service Revenue, Other Income                  |
| **Expense**   | Money spent running the business  | Rent, Salaries, Utilities, Cost of Goods Sold         |

These five types are fixed — they are the backbone of your Balance Sheet
(Assets, Liabilities, Equity) and your Income Statement (Income, Expenses).

### Detail types and subtypes

Beyond the five top-level types, each account can carry a finer label so Hitaji
knows how to treat it. You'll see these as a **subtype** on system accounts —
for example `cash`, `bank`, `ar` (accounts receivable), `ap` (accounts payable),
`tax_payable`, `inventory`, `fixed_asset`, `retained_earnings`, `sales`,
`cogs` (cost of goods sold), `staff_advances`, `other_receivable`, and so on.
You rarely set these by hand — Hitaji's standard chart templates and automated
postings use them to route money to the right place.

### Account structure and behaviour

Each account has a few practical properties you may notice:

* **Code & name** — a short code (e.g. `1000`) and a readable name (e.g.
  "Cash at Bank"). The code is unique within a book.
* **Group accounts** — an account marked as a **group** is a heading/folder
  (e.g. "Current Assets"). You don't post transactions directly to a group; you
  post to the real accounts nested underneath it. This gives the chart its
  tree/hierarchy and is what lets reports roll sub-totals up.
* **Allow direct posting** — whether entries can be booked straight onto this
  account.
* **System accounts** — some accounts are created and owned by Hitaji
  (`is system`) because automated flows depend on them (e.g. the Accounts
  Receivable control account). These are protected from accidental changes.
* **Active / inactive** — inactive accounts are kept for history but hidden from
  pickers.
* **Frozen** — an account can be **frozen** (with a reason and timestamp) to
  stop any further posting to it without deleting its history.

> 📷 *Screenshot: An account's detail showing its type, subtype, and "group" toggle — to be added.*

For day-to-day setup of the chart, see **[Chart of Accounts](/accounting/user/chart-of-accounts/chart-of-accounts)**.

***

## 2. Debits and credits (in plain English)

Double-entry accounting has one golden rule:

> **Every transaction touches at least two accounts, and the total debits always
> equal the total credits.**

"Debit" and "credit" are not "good" and "bad" — they simply mean **left side**
and **right side** of an entry. What a debit or a credit *does* depends on the
account type. Every account has a **normal side** — the side on which it
naturally increases:

| Account type | Normal side | A **debit** to it… | A **credit** to it… |
| ------------ | ----------- | ------------------ | ------------------- |
| Asset        | Debit       | increases it       | decreases it        |
| Expense      | Debit       | increases it       | decreases it        |
| Liability    | Credit      | decreases it       | increases it        |
| Income       | Credit      | decreases it       | increases it        |
| Equity       | Credit      | decreases it       | increases it        |

A simple way to remember it: **Assets and Expenses go up with debits; Income,
Liabilities, and Equity go up with credits.**

Some accounts can also carry a hint that their balance **must be** a Debit or a
Credit — a guard rail that helps catch a posting that landed on the wrong side.

### A worked example

You pay UGX 200,000 cash for office rent. Two accounts are involved:

* **Rent Expense** (an Expense — normal side Debit) → **debit 200,000**
  (the expense went up)
* **Cash at Bank** (an Asset — normal side Debit) → **credit 200,000**
  (cash went down)

Debits (200,000) equal credits (200,000). The books balance. In Hitaji you'd
just record an expense paid from your bank account — Hitaji writes both lines for
you.

***

## 3. Ledger entries — the permanent record

Every debit or credit Hitaji posts is stored as a **ledger entry** (an
"Accounting Ledger Entry"). The ledger is the complete, permanent, line-by-line
history of your money. You can browse it through the **General Ledger** and
**Account Ledger** financial reports.

Each ledger entry records:

* **Account** — which account it hit.
* **Entry date** — the accounting date of the line.
* **Debit and credit amounts** — one of these is the value, the other is zero.
* **Source type & source ID** — *where the entry came from*: a sales invoice, a
  bill, a payment, a payroll run, a manual journal, and so on. This is how
  Hitaji links every ledger line back to the document that created it.
* **Reference number** and **description** — for searching and reconciliation.
* **Contact** — the customer, vendor, or employee involved (when relevant).
* **Posting batch** — entries created together by one action share a batch, so
  they can be viewed or reversed as a unit.
* **Reversal flags** — if a line reverses an earlier one (e.g. a cancelled
  payment), it is marked as a reversal and points back to the original entry.
  Hitaji **reverses** rather than deletes, so the audit trail is never broken.
* **Opening flag** — entries that set a starting balance (see below) are flagged
  as opening entries.
* **Dimensions** — optional tags (such as a cost centre, fund, or project) used
  for analysis and filtered reporting.

> 📷 *Screenshot: An account's ledger showing dated debit/credit lines with running balance — to be added.*

**You normally never type ledger entries by hand.** You record business
documents — an invoice, an expense, a payment — and Hitaji generates the
balanced ledger entries automatically. Manual journal entries exist for the rare
cases that need them (corrections, opening balances, adjustments).

### Opening balances

When you start using Hitaji partway through your business's life, you'll usually
need to tell it what each account's balance already is. Those are recorded as
**opening entries** and are balanced against an **Opening Balance Equity**
account so the books still balance on day one.

***

## 4. Accounting books

An **accounting book** is one complete set of books for one business. It defines:

* **Code & name** — how the book is identified.
* **Currency** — the book's reporting currency (default **UGX**).
* **Fiscal year start month** — which month your financial year begins
  (e.g. January = 1, July = 7).
* **Chart template** — the standard chart of accounts the book was built from.
* **Key control accounts** — the book remembers its **Retained Earnings** and
  **Opening Balance Equity** accounts (and a default expense-claim payable
  account), which Hitaji uses automatically during year-end close and opening
  balances.
* **Status** — Active, Inactive, or Closed.

Hitaji also supports more than one *kind* of book so larger organisations can
keep parallel views:

| Book type      | Purpose                                               |
| -------------- | ----------------------------------------------------- |
| **Statutory**  | The official, regulatory set of books (the default)   |
| **Management** | An internal management-reporting view                 |
| **Branch**     | Books scoped to a branch                              |
| **Fund**       | Fund accounting (e.g. for grants or restricted funds) |

For most businesses there is a single statutory book and you never think about
this — but the structure is there when you need it.

***

## 5. Accounting periods at a glance

An **accounting period** is a slice of time (usually a month) that your
transactions fall into. Periods let you "close the books" for a stretch of time
so that finalised numbers can't be quietly changed afterwards.

Each period has:

* A **name** and a **start/end date**.
* A **fiscal year** it belongs to.
* A **status**: **Open**, **Closed**, or **Locked**.

What the statuses mean in practice:

* **Open** — you can post, edit, and reverse transactions dated in this period.
* **Closed** — the period has been finalised. Hitaji will **block** new postings
  dated into a closed period and tell you the period is closed. (When a
  transaction must land in a finalised stretch, Hitaji routes it to the next
  open period instead.)
* **Locked** — a stronger form of the same protection.

When a period is closed, Hitaji records **when** it was closed and **who** closed
it, so there's a clear audit trail.

> 📷 *Screenshot: The Accounting Periods page showing months with Open/Closed status — to be added.*

This protection is why your finalised monthly and yearly reports stay
trustworthy: once a month is closed, its totals are settled. See
**[Accounting Periods](/accounting/user/periods/accounting-periods)** for how to open and
close them.

***

## Putting it together

Here's the whole flow in one breath:

1. You set up a **chart of accounts** (your buckets) inside your business's
   **accounting book**.
2. Day to day, you record real documents — invoices, expenses, payments.
3. Behind the scenes Hitaji posts **balanced ledger entries** (equal debits and
   credits) to the right accounts, tagged with where they came from.
4. Those entries live inside dated **accounting periods**.
5. When a period is done, you **close** it so its numbers are locked.
6. Your **financial reports** read straight off the ledger — and because every
   entry balanced, every report balances too.

***

## Related

* [Accounting Dashboard](/accounting/user/basics/dashboard)
* [Chart of Accounts](/accounting/user/chart-of-accounts/chart-of-accounts)
* [Accounting Periods](/accounting/user/periods/accounting-periods)
* [Financial Reports](/accounting/user/reports/financial-reports)
* [Invoices](/accounting/user/sales/invoices)
* [Expenses](/accounting/user/purchases/expenses)
* [Payments](/accounting/user/payments/payments)