From Nookipedia, the Animal Crossing wiki
Feng Shui (pronounced ˌfʌŋˈʃweɪ, "fung-shway") is a game mechanic based on the old Chinese practice in which furniture and items are arranged in a certain way to increase the flow of positive energy throughout a house (applicable only to the first room in Animal Crossing series). Feng Shui increases the HRA score, as well as overall luck regarding money and items, including the chance to receive ore, instead of bells, when striking a money rock.
There are two ways to effect Feng Shui: place items of certain colors in designated areas of the room, or place lucky items anywhere in the room.
Every item has a color assigned to it, but there are only three colors that affect Feng Shui: red, yellow, and green. Feng Shui works by matching the color of the items to their appropriate squares in the room.
Red Feng Shui increases luck regarding items. One may find an increased number of items from outside one's furniture group in Tom Nook's store. Items are also more likely to fall when the player shakes trees.
Yellow Feng Shui increases luck regarding money, increasing the number of bells given to the player by villagers as rewards for helping them. Bells are more likely to drop when the player shakes trees as well as the number of bells that fall increasing from 100 to 200. The number of bells dropped from the money rock will also increase up to a max of 32,000.
Green Feng Shui increases overall luck.
Lucky items increase Feng Shui no matter where they are placed. Certain lucky items also correspond to specific Feng Shui colors, which can further increase luck when placed properly.