What must be set up in the chart of accounts before adding fixed assets in Xero?

Before adding fixed assets in Xero, it is essential to set up asset types and account codes in the chart of accounts. This is crucial because the asset types categorize the fixed assets in a way that makes them easier to manage and report on. Each asset type typically has associated characteristics and can determine how the asset is treated in terms of depreciation and reporting.

The account codes are necessary as they help organize financial reporting by linking fixed assets to specific accounts within the accounting system. This ensures that transactions related to fixed assets are recorded accurately and correspond to the correct accounts, which is vital for maintaining an accurate financial picture of the organization.

Having predefined asset types and account codes enables users to streamline the process of tracking and managing fixed assets effectively, making it easier to handle depreciation, disposals, and asset-related financial analysis.