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setting up Chart o Accounts

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4 views

setting up Chart o Accounts

Uploaded by

itzmotion46
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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ACCOUNTING LABORATORY AND APPLICATION SOFTWARE/ACC204

QUICKBOOKS
SETTING UP CHART OF ACCOUNT
The Chart of Accounts in QuickBooks is the backbone of your accounting system.
It's a comprehensive list of all accounts used to categorize your financial transactions.
How to set the chart of Account
Step 1: Understand the Account Types in the Chart of Accounts
 Assets: Resources owned by your business (e.g., cash, inventory, equipment).
 Liabilities: What your business owes to others (e.g., loans, credit card debt).
 Equity: Represents the owner’s interest in the business (e.g., owner’s capital,
retained earnings).
 Income: Revenue generated from business activities (e.g., sales, services).
 Expenses: Costs incurred in running your business (e.g., rent, utilities,
supplies).
Step 2: Access the Chart of Accounts
1. Go to Settings (or the Gear icon) in QuickBooks.
2. Select Chart of Accounts. Here you’ll see an existing list of accounts or start from
scratch if it’s a new setup.
Step 3: Add Accounts in Each Category
For each account type, you’ll need to create specific accounts to organize your
transactions accurately.
1. Click on "New": This will open a window where you can add a new account.
2. Choose the Account Type and Detail Type:
- Account Type: Choose the general category (e.g., Assets, Liabilities).
- Detail Type: Choose a more specific category (e.g., Accounts Receivable, Bank,
Credit Card).
3. Name the Account: Use clear, descriptive names (e.g., “Checking Account” instead
of “Bank 1”).
4. Enter a Description (optional): Add details to clarify the purpose of the account.
5. Save the Account: Click Save and Close*or Save and New to continue adding
accounts.
Step 4: Organize Assets
 Bank Accounts: Set up checking and savings accounts to track all deposits
and withdrawals.
 Accounts Receivable (A/R): Track money customers owe for sales or
services.
 Inventory: If you sell products, set up an Inventory account to track stock.
 Fixed Assets: For long-term assets like property, vehicles, and equipment,
create accounts for each asset type. These will depreciate over time.
Step 5: Organize Liabilities
 Accounts Payable (A/P): This account tracks bills you owe to suppliers or
vendors.
 Credit Card Accounts: Create a liability account for each business credit card
to track outstanding balances.
 Loans: Set up loan accounts (e.g., “Business Loan”) to monitor principal and
interest payments.
 Other Liabilities: Include accounts for any other debts, such as payroll
liabilities or tax obligations.
Step 6: Set Up Equity Accounts
 Owner’s Equity: This tracks the initial capital invested by the owner.
 Retained Earnings: Represents accumulated profits or losses carried over
from previous periods.
 Drawings/Distributions: Set up an account to track any withdrawals made by
the owner.
Step 7: Organize Income Accounts
 Sales Income: Create separate income accounts for each type of product or
service. For example, “Product Sales” and “Service Revenue.”
 Other Income: For additional income sources like interest earned or rental
income, set up distinct accounts.
Step 8: Organize Expense Accounts
 Operating Expenses: Common categories include “Rent,” “Utilities,” “Office
Supplies,” and “Marketing.”
 Cost of Goods Sold (COGS): If applicable, set up COGS accounts to track
costs directly related to producing goods, like raw materials and
manufacturing.
 Payroll Expenses: Use separate accounts for wages, taxes, and benefits to
streamline payroll tracking.
 Other Expenses: Set up other expenses specific to your business (e.g., travel
expenses, insurance, professional fees).

This setup will provide a solid foundation for tracking finances in QuickBooks and
maintaining clear financial records as your business grows.

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