When you create a new account in the Chart of Accounts, you need to specify both an account type and detail type so transactions are and remain properly categorized. This step is absolutely essential for getting accurate data on what you own and owe, as well as what you are owed and earning from sales (i.e. what appears on your Balance Sheet and Profit and Loss Reports).

If you haven’t done so already (or you need a refresher), take some time familiarizing yourself with the main account types in QuickBooks so you understand how each is used to record your income, expenses, assets and liabilities. In the process, you might ask yourself: 

According to Stacy Kildal (QBO Show host, Certified ProAdvisor and QuickBooks superstar, among many other accolades):

Remembering the difference is easy.

Account types are actual accounting-related classifications (income, expense,

asset, liability) that determine whether the money in the account represents a

positive or negative balance.

Account type is more important because that’s what actually determines 

how transactions hit your books.

Detail type offers additional information for reporting and tracking.

The only time a QuickBooks user really has to be aware of detail type is when

merging accounts or making sub-accounts. In that case, the new account or

sub-account needs to be same detail type as the merging or the parent account.

So, think of account type as the primary category that designates how money is accounted for and impacts your bottom line. Detail type as the secondary category that helps you track specific information for reporting purposes.

Don't feel nervous. Good organization takes practice. Take a breath and follow Stacy’s recommendation about approaching account creation one step at a time. Focus on the account type first since it has the most significant impact, then find the detail type that best matches the data you’re trying to track.

If you have a particularly tricky transaction or asset that you just can’t seem to categorize, reach out to your accountant and ask the community for guidance – others have certainly dealt with the same scenario.

Try it for yourself

Go into your QuickBooks Online Chart of Accounts. Explore a few of your existing accounts but don’t change anything.

Click the “New” Button. Select an account type and read the detail type descriptions in the grey boxes so you know what’s available. When you’re done, hit “cancel” so you don’t accidentally add the account.