I know this is an old hat topic, but I have googled and searched and read, and honestly I have not found a clear, well explained, appropriate answer to these questions. So hoping maybe someone in here can help.
If you are a small company (say <$1mil, single member LLC) is it easiest to just set up your chart of accounts to match the Schedule C? (or a Schedule F for farming, as I help some friends with their farming book keeping).
Specifically is this still suitable for a small renovation / construction business (we have Plus version and I plan to use projects to help track job costs)?
Follow up question, if the answer to above is yes, than it is so annoying that QBO doesn't let you change, or rename, the job detail categories, as they seem to be the top level account category, and the one that would seem to make the most sense to match to what the account is called on the Schedule C.
Furthermore, Does anyone have any good examples of chart of accounts for a small renovation business?
I can find info for small handyman type businesses (pretty much basic COA), and then more complicated bigger construction stuff (things seem to really change at that level with job length, deposits, draws, and WIP accounts, etc. etc), but we are kind of in the middle and I am not sure how complex to get, and just want to be set up correctly.
(and yes, we will be working with an accountant, but I am trying to do my homework and get things set up for now).
Or if anyone knows of good reading, you tube, or books, that are specifically for this size and type of business, I would love to know about them.
Thanks in advance for any help!!
You are correct that all you need at a minimum are accounts that appear on the tax forms applicable to your business. Certain versions of QB desktop do offer industry-specific startup COA but even then, look at what you are going to file.
Specifically for Schedule F you will need income accounts for Crop Insurance proceeds and other government programs. Do know this - that farm markets may or may not qualify as a "farm" business and some, especially if selling products not raised - or taxable - may need to separately file a Schedule C.
You can certainly add as many accounts as your subscription allows (250 in Plus) to , for your own satisfaction, break down income/expenses by more categories than necessary. If you wish to track the purchase of nails separate from drywall you can in COA but a better place for that is with Items. As far as specific jobs - leave them out of the COA and use projects or classes to track profitability on each. At the end of the year, however, your profit or loss is a sum of all activity and ignores which deals generated profit.
Rental real estate (Schedule E even though you might never use it), though, demands a separate column per property and P or L must be reported by property (for most people)
Thank you for your reply.
And to address this first... yes, I am aware that it is very specific to be Schedule F. My friends have do have an accountant and I, as a friend, just help them enter in transactions etc. I am certainly using it as a learning experience though!
I am definitely using projects to track particular job costs, rather than COA. So I got that.
I am not totally familiar with Items, but I am sure that will make sense as I build out our accounts and products and services.
As far as adding the accounts, I am doing that, and making sub accounts if I want more definition about what the expense was.
It is just irritating that we can't make the Detail type (which it the master category) match what it says on the Schedule C.
For Example, on the C it has Line 24 - Travel & Meals. Yet, I cannot have a Travel & Meals Detail Type, with travel and then meals as the sub category. Instead there is only Travel and separately Promotional Meals and Entertainment Meals as Detail Type options. Those are valuable breakdowns for sure, but should be sub categories, to detail types. If all that make sense! It's just a tad annoying!
I am unclear whether things should be COGS or just expenses?
We do not make a specific "thing" that we sell. We do not make the cabinets, or bathtubs, or sinks, etc.
So it seems that all the materials needed to complete a renovation should just be material expenses. And, If we (say) purchase the cabinets that we will install they would be classified and reimbursable expense (as the client will pay us back for them).
But I am not sure this is accurate, as maybe the new bathroom we make counts as a good sold, and all the expenses and labor should fall under COGS accounts?
Any clarification here would be very appreciated.
Hello there, @Cbyrd.
The Cost Of Goods Sold (COGS) is the accumulated total of all costs used to create a product or service, which has been sold. These costs fall into the general sub-categories of direct labor materials. In a service business, the COGS is considered to be the labor, payroll taxes, and benefits of those people who generate billable hours. In a retail or wholesale business, the COGS is likely to be merchandise that was bought from a manufacturer. The following are types of expenses that go into figuring the COGS:
An expense is a reduction in the value of an asset as it is used to generate revenue. If the underlying asset is to be used over a long period, the expense takes the form of depreciation and is charged over the useful life of the asset. If the expense is for an immediately consumed item, such as a salary, then it is usually charged to expense as incurred. Common expenses are:
Under cash basis accounting, an expense is usually recorded only when a cash payment has been made to a vendor or an employee. Under the accrual basis of accounting, an expense is recorded as noted above, when there is a reduction in the value of an asset.
I recommend reaching out to your accountant for further assistance in how you should enter these transactions. If you have additional questions or concerns, I'm just right around the corner. Have a beautiful day.