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Intuit
Intuit
posted
‎August 06, 2020 02:37 AM
last updated ‎April 12, 2021 12:32 PM

Learn about the chart of accounts in QuickBooks

SOLVED•by QuickBooks•QuickBooks Online•9•Updated 2 days ago

The chart of accounts is a list of all your company's accounts and their balances. In QuickBooks, you use these accounts to categorise your transactions on everything from sales forms to reports to tax forms. Each account has a transaction history and breaks down how much money you have (or owe). Here's what you need to know to get started.

What account types are on the chart of accounts

When you open your chart of accounts, you'll see a long list of accounts. These are known as account histories. Each account has its own account history. Simply go to the account history to review its transaction history and current balance.

Your chart of accounts gives you different account types to categorise transactions into:

  • Assets: Records of purchases for things like vehicles, equipment, buildings, and other assets used for business.
  • Liabilities: Records of money you owe but haven't yet paid.
  • Income: Transactions and payments you get from your normal day to day business, such as sales revenue or income for services rendered.
  • Expenses: Transactions of money you spend on expenses related to normal business operations, such as advertising and promotion, office supplies, and rent.

Here's a more detailed breakdown of account types. These definitions may be helpful if you have some accounting expertise. Most QuickBooks users don't need to know this level of detail.

Balance Sheet accounts are accounts that appear on your Balance Sheet report. Generally, this includes:

  • Asset accounts for tracking things like bank accounts and equipment.
  • Liabilities accounts for tracking things like credit cards and bank loans.
  • Equity accounts for tracking things like retained earnings and opening balances.
Account What for When to add
Accounts Payable (A/P) Tracks transactions related to the money you owe to suppliers. Most companies require just one AP account and QuickBooks creates this for you the first time you enter a bill. Your accountant can advise you of the circumstances that would require you to create an additional Accounts Payable account.

You can use accounts payable reports and graphs to track the:

  • Suppliers you need to pay
  • Outstanding bills you need to pay
  • Amounts you owe your suppliers
Accounts Receivable (A/R) Track transactions related to customers who owe you money. Most companies require just one AR account, and QuickBooks creates this for you the first time you create an invoice. Your accountant can advise you of the circumstances that would require you to create an additional Accounts Receivable account.

You can use accounts receivable reports and graphs to track the:

  • Customers who owe you money
  • Invoices that are unpaid
  • Number of days that an invoice is past due
Bank Track business checking, savings, money market, and petty cash accounts. You can also add bank accounts to track your cash in drawer amount if you have a cash register.
Credit Card Credit card purchases for the business. You can add multiple business credit card accounts if:
  • You have one or more employees who need a company credit card to make business-related purchases.
  • You want to use different cards for different types of purchases (one for travel expenses, one for office supplies, one for building supplies, etc.).

Note: If you have multiple business credit cards for one charge account, create only one Credit Card account for the statement.
Equity The net worth of the company. It represents the difference between your liabilities and assets. If you sold all your assets today, and if you paid off your liabilities with the money received from the sale of your assets, the money you would have left is your equity. During your company setup process, QuickBooks creates two Equity accounts – Opening Bal Equity and Retained Earnings (actual accounts names are based on the business entity you select during the setup interview). You can also create additional Equity accounts to track:
  • Owner’s equity
  • Owner’s draws
  • Capital investments
  • Capital stocks
Current Asset Assets that you can easily turn into cash such as checking accounts, savings accounts, money market, and CD accounts. You can also add Current Asset account to track:
  • Accounts receivable
  • Stock
Fixed Asset Items with a minimum cost that you have to sell in order to generate cash. Examples are vehicles, equipment, and land your business owns. Consult your accountant or tax prepare to determine the actual minimum cost that you should use to determine fixed assets. You can also add Fixed Asset accounts to track:
  • Construction and landscaping machines; music, photographic, and printing equipment
  • Fixtures and fittings (automotive or photographic shop fixtures, etc.)
  • Office equipment (cell /telephones, computers, copiers, printers, fax machines, projectors, etc.)
  • Office furniture (chairs, desks, filing cabinets, lamps, etc.)
Other Current Asset Items that can be converted to cash or used up within one year such as prepaid expenses, employee cash advances, stock, or loans from your business. You can also use it to track supplies, deferred income taxes, estimated future income tax benefits, security deposits, and investment property.
Other Asset Items that are neither Fixed Asset nor Other Current Assets such as goodwill, long-term notes receivable, and security deposits that have been paid by you. You can also use Other Asset for tracking Intellectual property, confidential information, copyrights, designs, formulas, patents, and trade marks.
Long Term Liability Money that your business owes and expects to pay back over more than one year such as Mortgages, Long-term loans, and notes payable. You may also add the account to track Bonds payable, Lease payments, and Deferred income tax payments.
Current Liability Money that your business owes and expects to pay within one year such as VAT, Security deposits, and payroll taxes. You can also use it to track benefits, contracts, entitlements, and salaries and wages.

Note: If you have one or more loans for your business, you should create different Loan accounts for each one. For example, if you have loans to fund for equipment, stock, or working capital, you should create different Loan accounts to track the principal you owe for each one. When you create the Loan account, QuickBooks sets the account type to Other Current Liability.

Income accounts track the money coming into your business. Expense accounts track what your company spends. When you record transactions in QuickBooks, you usually assign them to one or more income or expense accounts.

Note: QuickBooks doesn’t show balances for income and expense accounts in the chart of accounts. To see the account balances, run a Profit and Loss Report.

Account What for When to add
Income Money that you get from your normal day to day business, such as sales revenue, professional fees, reimbursable expense, or income for services rendered. Aside from tracking product-related sales, service-related sales, and discounts, you can also add income accounts to track:
  • Residual income from commissions you receive
  • Leveraged income from work others perform for you, such as sub-contractors
  • Income you receive as a result of franchising your business to others
  • Fees you receive from seminars or classes you give
Other Income Categorises income you earned outside of the normal business operations like Dividend income, interest income, and Insurance reimbursements. You can also add this account if you need to track:
  • Investment interest
  • Profit from the sale of non-stock assets
Expense Money that you spend. Use it for tracking expenses related to normal business operations such as advertising and promotion, office supplies, insurance, legal fees, charitable contributions, and rent. You can also add expense accounts to track:
  • Business-related travel costs
  • Business-related seminars or conferences you attend
  • Dues or subscriptions related to your business
Other Expense Expenses that are outside of your normal business, such as a loss on the sale of an asset or stockbroker fees, corporation taxes, penalties, and legal settlements. You can also add this account to track uncommon expenses or expenses that do not have a direct impact on your business, such as:
  • Traffic tickets
  • Lawsuits

In reports, other expenses are reported separately from your regular business expenses, so you can easily distinguish between those that are ongoing and those that are occasional.
Cost of Good Sold/ Job Costs These are the cost associated with your line of business. If you are a home builder, the job cost is whatever costs you to build a home. Job costs may include materials, subcontractors, equipment rental, and/or direct labour. If you sell products, this includes the cost of stock, raw materials, freight charges, and any labour cost that you incurred to finish the product. You may also add COGS to track:
  • Equipment rentals
  • Overnight mail
  • Court costs (for an attorney's office)
  • Blue prints (for an architect)
  • Purchases made on behalf of a customer (such as furnishings bought by an interior designer or auto parts bought by a mechanic)

Open your chart of accounts

In QuickBooks Online

Select Settings ⚙ and then Chart of accounts.

When you create a new company file in QuickBooks, you tell us what type of business you have.

Everyone gets the same set of standards accounts. QuickBooks adds additional accounts automatically based on your industry. you don't see an account you need, you can always create it manually.

Account What it is Automatically added by QuickBooks when you...
Accounts Payable (A/P) Record of the outstanding bills of the business. If your business uses multiple A/P accounts, QuickBooks will let you choose the account you want to use when you enter and pay bills. Create a bill for the first time.
Accounts Receivable (A/R) List of transactions related to customers who owe you money. If you need to use more than one A/R account, the program will let you choose the A/R account that you want to use when you create an invoice or receive a payment. Create an invoice for the first time.
Opening Balance Equity Ensures that you get a correct balance sheet for your company, even before you've entered all your company's assets and liabilities. Enter the opening balance for a balance sheet account.
Payroll Expense Tracks payroll items (expense) for the company, including salaries, wages, bonuses, commissions, employer contributions such as company paid health plan and company paid portion of taxes . Turn on payroll for the first time.
Payroll Liabilities Tracks taxes you deduct from your employees' salary until you turn them over to the government, including federal and state income withholding taxes, local taxes and the employee paid taxes . Turn on payroll for the first time.
Purchase Orders Non-posting account that does not affect your balance sheet. Create a purchase order for the first time.
Retained Earnings Tracks profits from earlier periods that have not yet been distributed to owners. At the beginning of the financial year, QuickBooks automatically transfers net income into your retained earnings account. Set up a new company file.
VAT Payable Tracks all VAT you collect and pay. Turn on VAT.
Uncategorised Expense Enter an opening balance for a supplier.
Uncategorised Income Enter an opening balance for a customer.
Undeposited Funds Holds the payments collected until you deposit them to the bank.
Stock Asset Tracks the current value of your stock. Add an stock part or assembly for the first time.
Reconciliation Discrepancy Tracks reconciliation adjustments. Enter an adjustment to reconcile discrepancies.

QuickBooks automatically sets up your chart of accounts for you. If you need to add additional accounts:

In QuickBooks Online

Here's how to add a new account to your chart of accounts in QuickBooks Online.

In QuickBooks Online

Here's how to make an account inactive (or active) in QuickBooks Online.

Although you're not required to use account numbers, your accountant may recommend them. QuickBooks automatically adds account numbers before account names in the chart of accounts. Default account numbers are based on Generally Accepted Accounting Principles (GAAP). You can change an account number at any time:

In QuickBooks Online

Here’s how to turn on account numbers in QuickBooks Online.

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