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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.