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Content Leader

Real World - Accounting: What Should You Name Your Accounts?

Compared to deciding how many accounts you need, naming accounts is a far more straight-forward, but no less important, process. Each time you create an account in QuickBooks, you can give it a unique name (and rename it in your Chart of Accounts).

 

Trevor Matheson and David O’Brien from Real World Training are back to share more practical accounting guidelines with the community, this time on account naming conventions:

 

Real World Accounting 2.PNG


According to the Real World trainers, account names are more or less subjective. Give accounts meaningful, easy-to-understand names that jive with your bookkeeper’s personal tastes - it will make the process faster and infinitely less painful.

 

blue vinyl 2.PNG

 

I renamed my Undeposited Funds Account "Blue Vinyl Bank Bag" as a throwback to my restaurant days when we kept the store's cash in a navy blue 11x 6" bag before depositing it in the bank. Makes me nostalgic every time!

 

The names of your accounts may be different from other people’s accounts, and that’s ok. As long as the stakeholders understand each account’s function, you’re golden.

 

Keep Real World’s tips in mind when naming (or renaming) your accounts:

 

  • Less is more, shorter is better
  • Keep names simple but meaningful
  • Make names sensible and relevant
     

 

 Now it’s your turn

 

What is the strangest name you’ve ever given an account?

 

Are there any account names you refuse to change – and if so, why?

12 Comments
Established Community Backer ***

Re: Real World - Accounting: What Should You Name Your Accounts?

The only thing I agree with is to keep the name short and concise - but, keeping in mind that others who may see the CoA need understand the listing.  Blue bag? really?

 

I set up business accounts per the tax form the company files.  (schedule C, form 1065, depending)

 

then create the sub accounts I feel I want under those tax form blocks to track detail, ie

Utilities expense

>> elect
>> gas
>> water
>> etc

Content Leader

Re: Real World - Accounting: What Should You Name Your Accounts?

@Rustler, good tips on setting up sub-accounts.

 

And you're exactly right about keeping listings understandable - "As long as the stakeholders understand each account’s function, you’re golden." 

 

That's the key takeaway!

Established Community Backer ***

Re: Real World - Accounting: What Should You Name Your Accounts?

I liked the Blue Vinyl Bag bit! As the author points out, the main thing is that everyone who sees your CoA must understand what the name refers to. I remember those blue bags from the bank - it is actually a thing, and pretty easy to remember. Provided that all the folks who are privy to your books understand the name of the account I see no harm in it. Probably not a good idea to come up with crazy names for all your accounts...but just one? Have a little fun, I say! Just be super-clear about it with those who need to know.

Not applicable

Re: Real World - Accounting: What Should You Name Your Accounts?

Beyond/before naming - what are your recommendations for numbering.  We have 3 separate schools in our district - how can we add sub accounts to help us report on each?  Our online accounts were set up a 4 digits followed immediately by a letter -- this is proving difficult to work with. Thank you!  

Established Community Backer ***

Re: Real World - Accounting: What Should You Name Your Accounts?

You use the Tax Form the entity files, for the reference for the Chart of Accounts. If you are working with a Parent Entity you would need to comply with their standard, such as I have to do with town clerks and other governmental entities that report to their State.

 

For any of the QB programs, you use the Items/Products/Service to get your reporting details, while leaving the account list Generic and simple to read and use for reporting.

 

A typical example is micro-managing Cost of Goods Sold, because the products already handle that detail. You can get by with One COGS account, which is all you see on your tax form in the US.

 

The same is true for account Numbering. You don't need to use them, unless there is a compliance request by another party or someone insists that they be used. The Tax Forms have no numbers, and there are not Industry Standards beyond the main header codes, which you can search on the web to find. A perfect example of Both of these concepts (account names and account numbers) is the Not For Profit "UCOA." There is a cross reference of Accounts Names, Codes, Functions (keyword) and For 990+ line numbers. That is the best example of Compliance issues.

Established Community Backer ***

Re: Real World - Accounting: What Should You Name Your Accounts?

You don't need Letters in account codes, and you don't need More account Rows (names). The function you overlooked is Class Tracking. Set up each school, and the library, as a Class. Now you have one Supplies account, with the details on the P&L in Columns = By Class = By School. Don't forget one Class for Admin/Overhead.

Content Leader

Re: Real World - Accounting: What Should You Name Your Accounts?

Hey @JD in Maine,

 

Are the four digits sequential? Generally, I recommend doing a pattern with 5 digits so it's complicated enough to be unique but not too much to handle. Let the first two digits represent the school/location (you'll have 99 options) and the last three designate what the account is for (you'll have 999 options, and you can space them by 10s so you have plenty of room if you want to add more between specific categories/account types down the road). Adding a letter to the end would enhance this even further if you wanted to into even further detail. 

 

Example: 

01200a

01 (Location/Segment) - 200 (the product/account category) - a (the specific type of sub category within said group)

 

There is no concrete rule on this, just do whatever is easiest and makes sense for your bookkeeper. 

Established Community Backer ***

Re: Real World - Accounting: What Should You Name Your Accounts?

I set up files and support towns and local government entities (sewer, water, fire) and have done this for Montana, Oklahoma, and even Massachusetts. They all have different requirements.

 

Here's the Montana guidance I need to follow:

 

Asset & Liability Accounts - (Illustration 1)

                                       1st Digit 1 = Assets & Other Debits

1st Digit 2 = Liabilities & Other Credits

 

 

Fund

Number

 

Account

Number

 

XXXX

 

XXXXXX

 

                                                                                                                                       

 

 

                                       Revenue Accounts - (Illustration 2)

                                                 1st Digit 3 = Revenue

 

 

 

 

Program

 

 

 

Job

 

 

Fund

Code

 

Organization

Code

(Department)

 

 

Major

Source

 

 

 

Sub-Source

 

 

 

Detail

 

X

 

XXX

 

XXXX

 

XXX

 

XX

 

X

 

XXX

 

Optional

 

 

 

Optional

 

 

 

 

 

 

 

                                                                                                                                              

 

                                     Expenditure Accounts - (Illustration 3)

                                           1st Digit 4 & 5 = Expenditures

 

 

 

 

Program

 

 

 

Job

 

 

Fund

Code

 

Organization

Code

(Department)

 

 

 

Function

 

 

 

Activity

 

 

Sub-

Activity

 

 

Major

Object

 

 

Sub-

Object

 

 

 

Detail

 

X

 

XXX

 

XXXX

 

XXX

 

XX

 

XX

 

XX

 

X

 

X

 

X

 

Optional

 

 

 

Optional

 

 

 

 

 

 

 

 

 

Optional

Content Leader

Re: Real World - Accounting: What Should You Name Your Accounts?

That's some pro work right there, @qbteachmt. You're clearly one for structure. 

Not applicable

Re: Real World - Accounting: What Should You Name Your Accounts?

Thanks - sounds extremely reasonable without having to worry about alpha's.  JD 

Highlighted
Not applicable

Re: Real World - Accounting: What Should You Name Your Accounts?

Thank you  -  this is a powerful and well developed scheme.  JD

Established Community Backer ***

Re: Real World - Accounting: What Should You Name Your Accounts?

That is Mandated by the State of Montana.

 

I would never be that crazy!

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