Tracking categories in Xero enable you to report and drill down into detail in your accounts particularly your profit & loss.
You can use categories to report on:
You can define tracking categories at any level you want. As a general rule, I would look at tracking items that would continue over a number of months or years.
When naming Tracking categories, use names that everyone in your business will understand and be able to identify with. As tracking is applied at the transaction level, names and options need to be really easy for people to understand.
Tracking categories applies to transactions (sales, purchases, payroll, bank transactions) rather than accounts or contacts.
This means that to use tracking you need to attach a tracking code to each relevant transaction.
For this reason, I would not have too many tracking categories because it makes the process of entering transactions just a little bit more time consuming.
You can automate a part of the entering of tracking codes by using rules.
The next step is reporting by category.
Select Profit & Loss and click reporting "by division"
You can take the reporting further by using layouts to limit the information that you provide to users of this report.
Download the full Step by Step as a PDF that you can save and use any time plus add to your accounting standard operating procedures.
Download the Full Procedure as PDF