Chart of Accounts is a complete list of all the company’s accounts and balances.
QuickBooks automatically create your chart of accounts based on the industry and type of company you choose. Chart of accounts track how much money your company has, how much money it owes, how much money is coming in and how much money is coming out. You can also check record account opening balance if you just created your file and you need to enter opening balance.
These the assets that you can easily turn into cash such as checking accounts, savings accounts, money market and CD accounts, accounts receivable and inventory.
These are items with a minimum cost that you have to sell in order to generate cash. Example of this are automobile, equipment and land. Consult your accountant or tax preparer to determine the actual minimum cost that you should use to determine fixed asset.
Funds that the company owes
Your capital account structure depends on whether your company is organized as a sole proprietorship, partnership, or corporation.
If your company is a sole proprietorship, you need a Capital account and an Owner's Drawing account. Use the Capital account to keep track of the total amount of money you've invested since starting the business, plus or minus the net profit or loss each year since you started the business. Use the Owner's Drawing account for money you take out of the business for personal use, such as checks to the grocery store, dry cleaners, ATM transactions, your salary, and any money that gets deposited into your personal accounts. It's important to keep in mind that the owner of a sole proprietorship doesn't get a regular "employee" paycheck with money deducted for payroll taxes. Instead you pay quarterly estimated taxes, which you should always allocate to the Owner's Drawing account.
If your company is a partnership or LLP (Limited Liability Partnership), you need to set up Capital and Drawing accounts for each partner.
If your company is an "S or C corporation" or an "LLC corporation," it should have a Common Stock account and sometimes a Preferred Stock account. Common stock and preferred stock represent the total sum of stock the company has issued. An LLC might have Member stock if there is more than one person who owns stock.
This is the income that you get from your normal day to day business task such as sales revenue, professional fees, reimbursable expense or income for services rendered.
These are the cost associated with your line of business. If you are a home builder, the job cost are whatever it cost you to build a home. Example are materials, subcontractor, and equipment rental including direct labor. If you sell product, this includes cost on inventory, raw materials, freight charges and any labor cost that you incurred to finish the product.
Overhead Costs or Expenses, are fixed costs you have even if you run out of work. Examples include rent, telephone, insurance, and utilities.
Other income is the income you earned out of the normal business process like rent for a building you own, stock sale, insurance settlement and interest income.
Other Expense is an expense that's outside of your normal business, such as a loss on the sale of an asset or stockbroker fees.
Users are not required to use account numbers in their chart of accounts. However, your account might require you to do this. Below are the standard chart of accounts number ranges:
To enable account number:
These are the accounts that appears on a balance sheet report. Balance sheet accounts is the money or thing that you own and the debts that you owe. This includes assets like banks accounts and buildings and the money that people owe you. It also includes liabilities like credit cards and loans from banks. Another category of balance sheet accounts is equity account which represents the health of your business.
Each balance sheet account has its own register that tracks the balance of each account.
When you create a new company file, QuickBooks will require you to select a type of company and that will determine the Chart of accounts that the company file will begin with. However, there are some accounts that the program will automatically create regardless of the company type selected.
A/P is the record of the outstanding bills of the business. This is an account that QuickBooks automatically add to your Chart of Accounts the first time you created a bill. 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.
QuickBooks uses this account to track the money owed to your business. It is automatically created by the program when you first created an invoice. 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.
Equity is 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.
Equity represents the health of your business and can come from two sources; Money invested to your company and Profits and loss from your business. Moreover, the owner can take money out of the company (owner’s draw) which reduces the company’s equity.
QuickBooks creates this account the first the time that you enter an opening balance for a balance sheet account.
This is an account that the program automatically create for you the first time you turn on payroll. It is designed to tract payroll items that are expense for the company. This includes salaries, wages, bonuses, commissions, company contributions such as company paid health plan and company paid portion of taxes such as Social Security and Medicare.
Like payroll expense, this account is automatically added to your chart of accounts the first time you turned on payroll. It tracks taxes that you deducted from your employees salary until you turn them over to the government. This include federal and state income withholding taxes, local taxes and the employee paid taxes like Medicare and Social Security.
This an account that QuickBooks automatically create the first time that you create purchase orders. This is a non-posting account that does not affect your balance sheet.
QuickBooks automatically adds this account to your chart of accounts when you set up a new company file. The program use this account to track profits from earlier periods that have not yet been distributed to owners. At the beginning of fiscal year, QuickBooks automatically transfers net income into your retained earnings account.
QuickBooks create the sales tax payable account to track all sales tax you collect and pay.
An account that QuickBooks automatically adds to your chart of accounts the first time you enter an opening balance for a vendor.
An account that QuickBooks automatically adds to your chart of accounts the first time you enter an opening balance for a customer.
QuickBooks is using this account to hold the money you’ve collected until you deposit them to your bank. The program automatically create this account the first time you receive a payment from an invoice or sales order.
QuickBooks automatically adds this account to your chart of accounts the first time that you add an inventory part or assembly to your file. The program use it track the current value of your inventory.
This is an expense account that the program automatically creates when you enter an adjustment reconcile with discrepancies.
By default, QuickBooks will not show non-balance sheet accounts like expense and income. However, you can modify this by following the steps bellow.