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Learn about the chart of accounts in QuickBooks Online

by Intuit•1409• Updated 3 days ago

The chart of accounts is a complete list of your QuickBooks Online accounts and their balances. Use it to keep your books and records current.

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Hi, this is Katheryn from the QuickBooks team. The Chart of Accounts is the hub of your accounting. It’s the central place where you decide how you organize your transactions. Every account or category you use in QuickBooks for every transaction comes from the Chart of Accounts. Let's go over the Chart of Accounts, how it helps you organize your business, and how it affects your financial statements. To get to the Chart of Accounts, select the gear > Chart of Accounts. Every transaction you record in QuickBooks affects at least two of these accounts. Usually, it’s the bank or credit card account you spent or received money to, and then an account that describes why. Let’s look at an example. Open the Bank Transactions screen. You see a purchase of some staplers for the office. The transaction is already assigned to the correct bank account. And, QuickBooks suggest the most likely category. You just need to enter or confirm the correct category for why you spent the money. Office Supplies, which is an expense account. Back on the Chart of Accounts, the balance for the bank account decreases by what you spent on the staplers. But down in the Office Supplies expense account you don’t see a balance, like you do with the accounts at the top. Let’s look closer at the types of accounts to see why. Each account uses a specific type. The type tells QuickBooks what the account should track, either the balance of the account, or a total of the transactions for specific time periods. Accounts at the top of the list show you how much you own or owe right now. They include accounts you’re already familiar with, like bank accounts, or credit cards. They have balances that tell you how much money you have in those accounts, or how much you owe. Other accounts, like fixed assets, tell you the value of things you own, like a truck or a warehouse…and liabilities tell you how much you owe, like on a mortgage. Equity accounts show you how much the business is worth to the owner. They also help you track ways the owner invests or draws money from the business. You use equity accounts when the owner deposits money into the business, or when they withdraw money for their personal expenses. Income accounts help you track why you receive money from customers or donors. Cost of goods sold and expense accounts, like Office Supplies, help you track your spending. These accounts don’t have balances because they help you track the profit of your business for a specific time period. You don’t usually want to see how much you spent on Office Supplies since you opened your business. So instead, you run a report to see how much you spent for a month or year. QuickBooks comes with many accounts already set up for you. However, you’ll probably want to add some more. When you do you can add them here. This other video here will show you how. Your accounts don’t have account numbers by default, but you can check out this video to learn how to turn on account numbers. Note that it’s best to work with your accountant to decide which accounts will give you the best insight into your business. Now let’s look at a report. Select Reports. As you categorize transactions, QuickBooks builds your financial statements behind-the-scenes. These are powerful tools that let you and your accountant know how your business is doing. Let’s take a look at the Profit and Loss statement. The Profit & Loss shows all your income, costs of goods sold, and expenses for a specific period of time. These are the same accounts you see in your Chart of Accounts. The total for Income is a sum of all the transactions you categorize as Sales income during this period. The total for Expenses is a sum of all the transactions you categorize as Expenses during this period. And the Office Supplies total includes the stapler expense we recorded earlier. The final line subtracts all your cost of goods sold and expenses from your income to show you the Net Income. If you want to learn more about how to read Reports in QuickBooks Online there is a video at the end of this one with more details. Now you have a basic understanding of what the chart of accounts is and how it affects your transactions and financial statements. If you want to learn more, we have a free Accounting 101 webinar that you can sign up for here.

Get familiar with the chart of accounts

To view your chart of accounts: Follow this link to complete the steps in product

Your accounts are listed with columns for name, account type, detail type, balance in QuickBooks, and bank balance. Use the buttons above the chart to batch edit multiple accounts, print your chart of accounts, or edit the columns you see.

Account types and detail types determine the data that shows up in reports like the Balance Sheet and Profit & Loss.

If your account has a register, you can see its transaction history and current balance. To view the register or report in the chart of accounts, select View register or Run report.

Note: If an account doesn't have a register, run a report to see its transactions.

Learn about account types in the chart of accounts

The account type column categorizes transactions into a few main account types, including:

Assets: Money spent on vehicles, equipment, buildings, or other assets used for business.
Liabilities: Money you owe but haven't yet paid, like loans, mortgages, or lines of credit.
Income: Money you earned or gained from your normal day-to-day business, like sales revenue or income from services rendered.
Expenses: Money you spend on things you do every day, like advertising, office supplies, or rent.

Customize your chart of accounts

QuickBooks automatically sets up your chart of accounts, but you can customize it to meet your business needs. You can add or remove accounts, edit them, or reactivate them. You don't have to use account numbers, but your accountant may recommend it.

You can make an account inactive to remove it from your current chart of accounts. This prevents further transactions within it, but doesn't delete it from your records.

Learn about accounts that QuickBooks sets up for you

When you first set up QuickBooks Online, we create accounts based on your business entity. When you take certain actions in QuickBooks we’ll create the account to track them in if it doesn’t exist already.

Here are a few of the most common accounts QuickBooks creates for you:

Accounts Payable (A/P): Outstanding bills that your business owes. If you have more than one A/P account, you can pick which one to use when you enter and pay bills.
Accounts Receivable (A/R): Transactions related to customers who owe you money. If you have more than one A/R account, you can pick which one to use when you create an invoice or receive a payment.
Opening Balance Equity: Your starting balance before you enter your company's assets and liabilities.
Payroll Expense: Payroll items (expenses) for the company, including salaries, wages, bonuses, commissions, company contributions such as company paid health plans, and company paid portion of taxes such as Social Security and Medicare.
Payroll Liabilities: Taxes you take from your employees' pay that you owe the government. These taxes include federal and state income taxes, local taxes, and the taxes paid by the employee like Medicare and Social Security.
Payroll Tax Asset Holding: This account is only available if you have QuickBooks Online Payroll and we pay your taxes for you. This account keeps track of taxes we debit from you when you run payroll, but haven't yet paid to the tax agencies.
Retained Earnings: All profits from earlier periods that haven't yet been distributed to owners. At the beginning of the fiscal year, QuickBooks automatically transfers net income into your retained earnings account.
Sales Tax Payable: Sales tax you collect and pay. You might not see this account if you haven’t turned on sales tax in QuickBooks.
Uncategorized Expense: Money your business spends that needs to be categorized.
Uncategorized Income: Money your business earned that needs to be categorized.
Undeposited Funds (also called Payments to Deposit): Cash or checks that your business is ready to deposit at the bank.
Inventory Asset: Your inventor’s current value. You might not see this if you haven’t turned on inventory tracking.
Reconciliation Discrepancy: Reconciliation adjustments. This account is automatically created if you have a discrepancy in a reconciliation.