All that you needed to know about setting up Charts of Accounts in QuickBooks
It is a known fact, that QuickBooks is one of the best accounting software available now. It is considered a boon for small and medium sized businesses as this software helps in managing their finances and accounting tasks, thereby streamlining their business operations. QuickBooks has various features and every year when Intuit launches a new version of the application it comes with new and improved features. In this blog we will discuss about Chart of Accounts.
The QuickBooks Chart of Accounts is a list of accounts that assist in categorizing assets, owner’s’ equity amount, liabilities and income. In simple words, it is basically a list of balances and accounts of the company. This basically helps in understanding how much money the firm has, how much it owns, how much it owes etc. by providing a full-proof financial report. The organized chart of accounts gives an insight of how your company is performing. In fact, it is considered a very crucial aspect of the accounting system. Thus, it is important to know the procedure to set up a chart of accounts in QuickBooks. Thus, make sure to read this post till the end, or you can also get in touch with our QuickBooks support team via our toll-free number i.e. 1-888-383-0323. Our team will ensure to provide the best possible support services for QuickBooks users.
What is chart of accounts?
The Chart of Accounts is basically a list of account numbers and names that are relevant to the company. in general, the chart of accounts will have four categories. The four groups in a standard chart of accounts are as follows:
- Asset accounts
- Liability accounts
- Income accounts
- Expense accounts
These were the four basic categories, and within each of the category, the line items will distinguish the specific accounts. Each line item represents an account within each category. A few of the chart of accounts might also display the equity accounts, which is a representation of anything that remains after accounting for all operating expenses and revenue accounts.
Type of Chart of Accounts
There are four types of Chart of Accounts that helps in business accounting error and hassle free:
1. Asset Accounts
Asset accounts basically contains of everything that has some value such as building, vehicles, land, inventory, valuables etc. So, this type of Chart of Accounts helps in tracking how much you paid for a property and also other factors like depreciation. Items that are in liquid form like cheques, and other bank accounts are also included in this Chart of Accounts.
2. Liability Accounts
The Liability Accounts consists of things like mortgages, payroll taxes, promissory notes, credit card balances, bank loans, personal loans and income tax payables. When you add loan to this account, do ensure that you have also added the sum of the loan.
3. Income Accounts
Income Accounts mostly has expenses, revenues, additional incomes or expenses, and cost of sales. Some of the accounts are same for all businesses, while some accounts are definite to particular business type. Few of the types of incomes are simple and economical to generate while few others require time, expenses and efforts.
4. Expense Accounts
This account keeps you informed about all the amount of money that you have spent. In fact, it allows you to track the cash that is not with you. It is always suggested to break up the expenses in separate accounts and you even get the opportunity to create sub-categories for your expenses.
Tips for organizing the chart of accounts
Before the user begin with the steps to organize the chart of accounts, the following pointers or tips should be considered.
- Many accounting systems are preset with a chart of accounts. The lines of preset accounts include numbered headers like 1430.2 and 530.8. These numbers can be effective for huge firms, but are usually a waste for entrepreneurs and small firms.
- The user should keep the line items simple in the first go. And also ensure that the line items have titles that make sense to the accountant and also to you. Using straightforward titles are recommended.
- Another point that the user should consider is to avoid creating a new line item for each of the transaction, as it would litter the entire chart of accounts. Instead of that, the user should make use of the accounting software’s sub headings.
- For example, while creating a new account for PayPal fees, in such a case instead of creating a new line, the user can simply create a sub account under the bank fees.
How to access your chart of accounts?
On QuickBooks Desktop:
- Firstly, choose Chart of accounts from any of the following QuickBooks menu:
- Go to the Company and then click on Lists, or Accountant.
On QuickBooks Online:
Firstly, click on Settings ⚙ icon, and then choose Chart of accounts.
How to Set Up Chart of Accounts in QuickBooks?
Below are the steps to set up the Chart of Accounts that will help in making your business health better:
Step 1: Select the Lists- Charts of Accounts Command
- QuickBooks displays the Charts of Accounts window on your computer screen
Step 2: Click on the Account Button
- On the screen of your computer, QuickBooks will display the Account Menu. When you click on the tab ‘Account menu option New’ will be pop up on your system’s screen
Step 3: Add New Account by selecting Account and then New
- QuickBooks will showcase the Add New Account window on the screen
Step 4: Use the Account Type buttons
- QuickBooks provides with different account types like Income, loan, Fixed Asset, Expenses, Credit Card, equity, Accounts Payable, Other Income, Costs of Good Sold, Accounts Receivable, Other Assets, Long Term Liability, Other Expenses and more.
- Moreover, through the Accounts you will come to know about the location where your data is getting reported.
Step 5: Click Continue
- Once you click on Continue, QuickBooks will show the second Add Account window on your computer screen. Note that the name of the account will appear in the financial statements. So, you have to use the Account Name Box to give it a very distinctive name to the new account.
Step 6: Check the Sub-account
- Once you have selected the sub-account of the check box, you have to give a name to the Parent account.
Step 7: Bank Account
- If QuickBooks understands that you work in different currencies then it will prompt you to look for all those customers, bank accounts, vendors etc. who use different currencies.
Step 8: Description of the New Account
- Actually, there is no need to describe the new account. QuickBooks uses only the account name in the financial statements and so no description is as such required.
Step 9: Account Info
- The credit card account type version of the Add New Account window will help in storing all the card details.
Step 10: Recognize the Tax Line
- On corporation’s Tax return, the cash account balances will be recorded. If you still want to add a bank account, then you can make use of the Tax-Line Mapping drop-down list.
Step 11: Save the New Account
- Lastly, you have to click on the Next tab in order to save the account information and then you will display the Add New Account Window.
- Once both accounts have been set up, the new accounts will appear on the chart of accounts list, as indicated below:
How to modify an Account from the Chart of Accounts List?
The steps to modify an account from the chart of accounts are illustrated below:
- Selecting the Account- The very first step is to choose the account, which is to be modified. In QuickBooks, the user can modify the accounts regardless of the time. From the chart of accounts, the user should scroll down to the account that is to be modified and then click on the drop arrow, which is situated next to Run Report, and then select Edit option.
- Making modifications to the account- The user will then guided to the window shown below, where the user can make changes to the Account Name and Account Description fields. The point to be noted here is that, do not change the category Type, in case the user has already entered transactions using the account. Doing so can lay a serious impact on the financial statements.
- Save and Close- The user should not miss out saving the changes before exiting the account, or else the work will be lost.
For Further Information Call us at 1(888)-383-0323!
All the above steps will help you in tracking your business activities on a daily basis and you are now able to Set Up the Chart of Accounts in QuickBooks. However, if you get stuck anywhere while performing these tasks or have any query then you can always connect with the QuickBooks support team at 1(888)-383-0323 that is available all through the day to help you.