Learn what the chart of accounts is and why it’s important to set up correctly in QuickBooks Online.
The chart of accounts is a list of all the accounts that QuickBooks uses to track your financial information. 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.
Because the chart of accounts is foundational for good accounting, it’s important to understand it and set it up correctly.
Get familiar with the chart of accounts
To open and view your chart of accounts, select Settings ⚙, and then Chart of accounts.
The accounts are organised by columns including name, type, and detail type. Account types and detail types determine the data that shows on key financial reports like the Balance Sheet and Profit & Loss statements. Learn more about the importance of account types and detail types.
Many accounts have an account history where you can review the transaction history and current balance. For accounts that don’t have a history, you can run a report to see transactions on that account. To view the history or reports from your chart of accounts list, select either Account history or Run report from the Action column.
Learn about account types in the chart of accounts
The account type column categorises transactions into a few main account types, including:
- 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 like loans, mortgages, and lines of credit.
- 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.
Customise your chart of accounts
QuickBooks automatically sets up your chart of accounts for you, but you can tailor it to fit your business by adding additional accounts, or, if you have accounts you don’t use, you can make them inactive.
Although you aren’t required to use account numbers in your chart of accounts, your accountant may recommend them. If you decide to use them, QuickBooks automatically adds default account numbers based on Generally Accepted Accounting Principles (GAAP). You can edit the account numbers at any time. Here’s how to turn on account numbers in QuickBooks Online.
Learn about accounts that QuickBooks sets up for you
QuickBooks Online automatically sets up a few of the same standard accounts in the chart of accounts and then gives you additional accounts automatically based on your business entity. There are also accounts that are only created when you take certain actions in QuickBooks.
Here are a few of the most common accounts QuickBooks creates for you:
|Account||What it’s for|
|Accounts Payable (A/P)||A record of the outstanding bills that your business owes. 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.|
|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, QuickBooks will let you choose the A/R account that you want to use when you create an invoice or receive a payment.|
|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.|
|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.|
|Sales tax Payable||Tracks all sales tax you collect and pay. You might not see this account if you haven’t turned on sales tax in QuickBooks.|
|Uncategorised Expense||Money your business spends that needs to be categorised.|
|Uncategorised Income||Money your business earned that needs to be categorised.|
|Undeposited Funds||Holds cash or cheques that your business is ready to deposit at the bank.|
|Inventory Asset||Tracks the current value of your inventory. You might not see this if you haven’t turned on inventory tracking.|
|Reconciliation Discrepancy||Tracks reconciliation adjustments. This account is automatically created if you have a discrepancy in a reconciliation.|