Categories are means of classifying products in product catalog. Categorizing your products can be very useful for sales and stock reports. Category hierarchies are used to classify products in a more useful way. Subcategories will inherit tax groups and properties from their parent categories.
To define new category, open Categories page and then click on the [Add New Category] button. 
This opens Add New Category page.
- Enter the category name in the Name text box
- In case there is a parent category for it, search and select the parent category from the list.
- Track stock option - Select YES/NO to enable/disable track stock for all products belongs to this category, when select [No]; all the products within this category will be not tracked on stock (Choose this option for services).
- Enter the Chart of Accounts (COA) value if necessary. This field is used when integrating with other aplications.
- Select the tax group from the tax group drop-down list. When selecting the parent category, tax group and properties are inherited from it.
- Click on [CREATE] button or press F9 keyboard key to save the changes, or click on the [CANCEL] button to ignore the changes.