QuickBooks Chart of Accounts is a list of accounts that help to categorize assets, owner’s equity amount, income, and liabilities. Most importantly, the Chart of Accounts is the broad list of the company’s balances and accounts. It helps you in telling how much money your firm has, money it owns, the amount of money that you currently have. The chart of accounts proffers the outline of the basic financial reports in one place. The organized chart of accounts gives you a correct snapshot of how your company is performing and how it is spending and receiving money. QuickBooks chart of accounts is the backbone of the accounting system and this is the main reason as why you should know how it operates.
Now, before going through the steps of setting up the accounts, let’s have a brief overview of the different types of Chart of Accounts.
Types of Chart of Accounts in QuickBooks
These are the types of accounts that help you to keep your business accounting error-free and easy-going:
- Asset accounts
Asset accounts comprise everything that contains the value, such as land, equipment, building, inventory, valuables, and vehicles. The account not only tracks the amount that you paid for the property but also includes things like depreciation. Also, Asset accounts comprise of things that are in liquid forms, like checking accounts and other bank accounts.
- Liability accounts
The accounts contain things such as mortgages, payroll taxes, bank loans, promissory notes, credit card balances, personal loans, and income tax payable. While adding a loan into the company’s chart, you need to make certain to include the sum of the loan.
- Income accounts
Income accounts carry expenses, revenues, cost of sales, and additional income or expenses. Furthermore, some accounts are the same for all business forms while on the other hand, other accounts are definite to particular business types. Along with this, some types of income are simple and economical to generate, others need time, expense and efforts.
- Expense accounts
Expense accounts inform you about the money that you have spent. Most importantly, Expense accounts permit you to keep track of the cash that is not left with you. It’s better to break up the expenses into separate accounts. Also, you have the opportunity to create sub-categories for expenses.
Next, let’s move on to the steps of setting up the Chart of Accounts list and how to plan your financial activities with the straightforward steps.
Steps to Set Up QuickBooks Chart of Accounts List
Follow the steps to maintain good business health and make better financial decisions for your business:
Select the Lists→Chart of Accounts Command
To begin with, QuickBooks displays the Chart of Accounts window on your computer system screen.
Click on the Account button
QuickBooks shows the Account menu on your system screen. With this, the “Account menu options are New” will be visible on the PC screen.
Add a new account via selecting Account → New
Next, QuickBooks displays the first Add New Account window on the screen.
Use the account-type buttons
QuickBooks delivers these account types: Income, Loan, Credit Card, Fixed Asset, Expense, Bank, and Equity. Along with this, Accounts Payable, Accounts Receivable, Other Income, Cost of Goods Sold, Other Asset, Long Term Liability, Other Current Asset, Other Current Liability, and other Expenses. Furthermore, via the help of account, you will come to know the location where your data gets reported.
After this, QuickBooks shows the second Add New Account window on the system screen. Furthermore, the name of the account will appear in the financial statements. You need to use the Account Name box to give the new account a distinctive name.
Now, after choosing the Subaccount of the checkbox, it’s your task to name the parent account.
If QuickBooks knows that you work in many currencies, then the tool asks you to find those customers, bank accounts, customers, and vendors that use a currency unlike from home currency.
Description of the New Account (Optional)
There is no need to describe the new account. QuickBooks uses the account name in financial statements, without the description requirement. Furthermore, you can use the Description box for more- descriptive labels placed in accounting reports.
Here, the credit card account type version of the Add New Account window allows you to store your card number.
Recognize the Tax Line
Cash account balances are recorded on a corporation’s tax return. Still, if you’re adding a bank account, then you can use the Tax-Line Mapping drop-down list.
The last step is to Save the Account
Finally, you have to click on the Next button option to save the account info and then redisplay the Add New Account window.
These are the steps that assist you in tracking the financial activity of your business and keeps you up-to-date on a daily basis.
The blog has covered the right method to handle QuickBooks Chart of Accounts by covering what QuickBooks chart of accounts is. The steps and types of Chart of Accounts should give you a clearer view of the accounting system. In fact, customizing your chart of accounts assist you to review your financials activities with confidence. If you are going to start a business or you happened to be an owner/budding entrepreneur who is looking to simplify or enhance his/her practices, then a chart of accounts QuickBooks is exactly what you need to excel in your field of profession.
If you want to know more about QuickBooks chart of accounts or are facing issues with setting it up, feel free to get in touch with our expert technicians by dialing the QuickBooks Support Phone Number.