Basics of Chart of Accounts in Quickbooks Desktop

In this tutorial, we will talk about chart of accounts in QuickBooks desktop.

 Charts of Accounts is actually a list of all accounts that are used to track business or financial activities. We can track personal financial activities too but this tutorial is all about business activities.

Tutorial Instructions:

 

 

Anyhow, an account is something that you use to assign business or financial transactions to. It may be of different types like accounts concerning, Income, expenses, assets, liabilities, equity etc. Anyhow, you can get to the chart of accounts by clicking on this icon in the company center  or you can use company menu and select chart of accounts and if you like to use shortcuts, you can open the chart of accounts by Pressing CTRL + A.

Well, at this point in time, All the accounts you see here are the default ones that have been created by the quickbooks when we setup our company file according the industry we chose and going forward, we will create so many accounts to track our business activities and delete or in active the ones from the default accounts we find of no use for the time being.

Anyhow, I am going to use sample company file chart of accounts as this company file does not have many accounts and balances so far. Well, when you open chart of accounts, you see four main columns, like, Accounts Name, Type, balances, and a column for attaching documents, and you definitely have observed that the accounts haven’t been placed randomly, there is a pattern to keep every type of accounts organized, like at the top, you see accounts related to assets then  Liabilities, then Equity, then Income, then Cost of Goods sold, then Expenses and other income and expenses and then non posting accounts, this is a “Standard chart of accounts” pattern that we use to organize the chart of account under Generally Accepted Accounting Principles which is also know as GAAP and to organize the chart of accounts according to the GAAP principles. we can assign numbers to each type of accounts too, assigning numbers to accounts are not necessary but if you want, you sure can.

So, To assign numbers to your accounts, you first need to activate this feature in your accounting software if its not already activated and to activate it into quickbooks, just go to preferences under “edit” menu and select “Accounting section here and check this checkbox under “company preferences” tab.

Well, Some of the accounts have balances and others don’t and the ones you see with the balances actually show up in the balance sheet which is one of the financial statements and the accounts with no balances appear in the income or profit and loss statement of the company.

When you double click on an account with a balance, it takes you to that very account register where you can directly post your transections related to that account and when you open an account with no balance, it opens a report related to that account.

Well, A chart of accounts will likely be as large and complex as the company itself. An international corporation with several divisions may need so many accounts, whereas a small local retailer may need a few. And if your chart of accounts is large then instead of scrolling up and down to find a certain account, you can use the search box to find it, here you can find an account by writing its name or number.

And if you don’t find an account in the list, you sure can create a new one by clicking on this “account” button and selecting “New”, here you need to chose what type of account you want to create and if you don’t see an account type in this visible list, just click on “other account types” and select one of your choice and then click on “Continue”.

Here, just name your account and the rest of the fields are optional and for tax line mapping, your accountant or CPA will help you with that. Anyhow, Here you can see that the new account has been created and if you want you can make it a sub account of another account by dragging it right from your chart of accounts and also you can right click on it to edit it, like, when you created the account, you didn’t make it a sub account of any other account, well you can now, just select this checkbox and select an account you want to make it a sub-account of.

Lets, I create another account named “Travel” with a couple of sub-accounts, here you can see that these accounts have no account numbers assigned to them as I,ve mentioned earlier its totally fine as its not mandatory, anyhow, we can delete an account by right clicking on it. Remember, an account will not be deleted if a transection has been assigned to it and if you have to delete an account you can do that by assigning the linked transections to another account and if you don’t use an existing account more often, you can make that account inactive by right clicking and selecting “Make account inactive” option  and to make an inactive account active again, just click on the “Account” button and select “Show inactive accounts” all the account you see cross next to them are the inactive accounts and you can make them active again either by right clicking and selecting “make account active” or you can just click on the cross sign.

Moreover, if you want, you can add more columns to the chart of account, to do that click on account button and select “Customize columns”, here just select the one you want to add and click on add button and then click on ok and exactly the same way you can remove the column too.

Now we have a basic understanding of chart of accounts.