 zero accounting software chart of accounts get ready to be an office hero with zero here we are in our custom zero home page we set up in a prior presentation scrolling in a bit holding down control scrolling up on the mouse wheel currently at 175 percent scrolling we're gonna open the demo company file but do so by hitting the reset button resetting the data and opening the file at the same time we're gonna be opening up two new tabs to put our financial statement reports balance sheet and income statement in hiding this item right click the tab up top duplicate it we're gonna do this every time so I'm gonna do this fairly quickly right click the tab again duplicate again tab in the middle has done thinking so I'm gonna go to the accounting drop down we want the balance sheet the big balance sheet tab to the right accounting drop down we want the income statement or P&L the profit and loss back to the tab to the left need to change the date we're gonna bring it to a custom date up to 22 and the 31st of 22 update it that's the set up process we've been doing every time back to the first tab now in prior presentations we've been looking at some of the items in our drop down up top primarily focusing in on the forms the forms being the data input that we are putting in place in a form format in order to record most of these being financial transactions that are then used to create the end result that we've been looking at the balance sheet the income statement and the related reports now we want to look at some of those underlying things that need to be set up in order to get the data input to be as easy as possible now this is stuff that usually is set up when you first set up a company file such as the chart of accounts it's also something that if you're working in a in a in a business that's already been set up if you go work for an accounting firm then usually or you go work for a business let's say in the accounting department then usually you're not gonna get to see the creation of the company file you're just gonna work and see what has happened that's kind of what we're doing here in the demo we're deconstructing but in the second half of the presentation we will actually create a company file which is a good practice even if you're if you don't need to do that as an accountant or a bookkeeper all the time because it lets you kind of set up those underlying foundational items like the chart of accounts so just to recap that a little bit more if I go to the flow chart over here we've been looking at the flows or thinking about the forms in a flow the vendors representing the expenses cycle or the payment cycle where money is going to go out at the end of the day for goods and services we purchase the revenue at the end of the flow whatever that flow looks like for our particular business we expect money to be coming in typically for goods and services we provide to others and then we've got the employee cycle of money going out specifically of course for the pain of the employees in that case note that the forms invoices receive payment and so on are designed to create the financial transactions to build the financial statements balance sheet and income statement these forms need to be set up properly so that the data input can be as easy as possible so the more we know about how to set things up the more valuable we are because we can do more than just do the data input we can also say okay there's a problem in the system and we know how the system works so we can kind of fix it and drill down to the source so one of those things is the chart of accounts so we could find the chart of accounts by going to the accounting drop down and we're gonna go down to the chart of accounts support accounting instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course each course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page we also include added resources such as Excel practice problems PDF files and more like QuickBooks backup files when applicable so once again click the link below for a free month membership to our website and all the content on it so when we first set up a company file we want to be thinking about what kind of accounts do we want in the company file some of those accounts are going to be standard across basically all industries like the telephone expense utilities expense you would think those would be fairly standardized no matter what industry you're in some will be will be specific to an industry for example things like inventory would only be necessary if you sell inventory if you're not tracking inventory you have a service business then you wouldn't need say an inventory account for example so the chart of accounts are going to be those underlying foundational things that if I go to like a form that I'm going to right click on this tab and duplicate it and so then if I was to open up a form plus button and enter like a bill form for example then of course the accounts down here are going to be necessary in order for us to populate a bill form or basically any form that has a financial transaction in it and those are going to be the foundational things that if I go to the balance sheet the balance sheet is constructed or made up of the accounts that are in use these being assets liabilities and equity accounts and the income statement of the income and expense accounts that are in use from the chart of accounts so the end result financial statements are being constructed by building financial transactions used from the forms on top of the foundational thing that we set up the chart of accounts so if I go back to the first half how was it organized so we usually organize the chart of accounts by code in essence account number but when we add new accounts to the system we want to make sure that we put a code in place that is in alignment with the type of account that we're going to be setting up so in other words you really want to think of the chart of accounts kind of an order of account type and then when you're adding new accounts make sure that you do so so that it is in alignment the code that is with the type of account that you are setting up so to just understand that a little bit more in detail notice these chart of accounts are making the balance sheet in the income statement if I go to the balance sheet we overall have assets liabilities equity accounts and then we have the income statement income cost a good sold and expense accounts that is in essence the order of the chart of accounts so you can think of it as in essence the balance sheet on top of the income statement and that's going to be important because even if you assign a different code number to it if it gets out of out of alignment in terms of the numbering when you make the end result the financial statements it's an order by type right assets liabilities equities income and expense and then within these types we've got we've got subcategories current assets fixed assets the current liabilities so if I go over here we have the same in essence thing we've got assets liabilities equity income and then expense balance sheet on top of the income statement and then within those types we've got the checking account the bank account the current assets and so forth so I'll go into that in a bit more detail in the second but note you can sort by name if you want to but it's just probably not you know the way that you would normally sort it you could sort by type over here if you want to but that's going to sort it not by balance sheet on top of the income statement but rather in alphabetical order which isn't generally what you want what you want is to sort it by code to make but when you're adding new accounts making sure that you're adding an account that's in alignment with with the type of account that we are adding also note that it's kind of useful to add longer I like a four digit account numbers oftentimes if you have a larger company and make sure that you give enough space between the account numbers so that if I was to add an account between them then I could I could do so so like this one I have a problem if I wanted to put a checking account between those two because I put the account numbers right next to each other so just be careful with the spacing of your account numbers notice that the general convention with account numbers is like the assets start with a one liabilities start with a two they have a whole different range of numbers right and then when I get down to the equity they start with a three so you can kind of get an idea of a four for sales cost good sold five and expenses six you can get an idea of where something should lie in terms of the account numbers so now let's go through them by type bank accounts that's going to be obviously like a checking account if you look at it in the balance sheet it's still going to be up here it would be if it wasn't overdrawn because it's down here but it's overdrawn but it would be up here in current assets the reason it's got a different name other than just current assets is because it's got a special convention within the zero system which is that it could connect to the bank feed so it needs its own special category for logistic purposes even though it's a current asset and then we've got the accounts receivable which has a sub ledger that is tied that is tied to it but we're still got it here as the current asset prepayments other current assets inventory another kind of special account which has its own kind of designation even though it's basically just a current asset from financial reporting purposes because zero needs to track the sub ledger related to it if you have perpetual inventory turned on and then we've got the fixed asset which you might also hear called property plants and equipment or pp and e depreciable assets these are things that we're putting on the books as an asset and then depreciating them typically over time they're longer term assets we need to break them out into their own category so there they are then we've got the current liabilities so now we're on the liabilities typically starting with the accounts payable account numbers now at the two starting with a two instead of a one and current liabilities are those that are going to be due we have to pay them typically or do something to fulfill the obligation within a year and then we've got the current liabilities and then a bunch of current liabilities down here and then we've got equity which represents in essence our owner share in the assets of the company assets minus liabilities equals equity or assets equals who has the claim to the assets third party the the liabilities and us the owner now if we're if we're a sole proprietorship you would think the terminology of equity would basically be like like a capital account or just the owner's equity account and then you might have draws when you pull the money out if it's a if it's a partnership then you might have multiple capital accounts for the partners because now you got to track which partners have what claim and if it's a corporation that's usually when you use the term retained earnings and then common stock representing the purchase so the equity gets a little bit confusing in the terminology but equity as a whole just represents assets minus liabilities the claim to the owner and then it's a question about how do you break up the claim to how many owners if there's only one that's a little bit easier if there's multiple owners in a partnership that's actually more complex in some ways than a corporation because they might you know they might have different capital accounts it's not all the same corporations try to standardize everything or they do standardize everything with common stock instead of like breaking out separate accounts on the on the income state or the balance sheet like is done in a partnership so then we've got the revenue accounts income accounts the on the income statement now cost of goods sold being the major expense account if you sell inventory and then the advertising and other expenses the expenses usually be in the largest category of accounts down below and and so there is that now in terms of what kind of accounts you're going to be setting up notice like for example on the expense accounts you often have a lot more kind of this is one area where people do more customization do you want to have like one utility account that's going to be taking up the telephone and the gas and the electric or do you want to be breaking out the utility account and the gas and the electric you know how many how many expense accounts you want there's a lot of kind of leeway and you want to be careful and have a balance between having too many accounts which becomes overwhelming and and tedious to work with and doesn't add a whole lot of extra information to having too little accounts like just one expense account that's an expense I put it into the expense account but that's too that's too restrictive that's easy to do but it's too restrictive so then if you were to set up on another account if I add an account this is the adding process you got the type of account asset fixed assets so these you want to make sure that you're picking up the correct type of account when you add the account that account code that's here basically the number that you want to make sure is in alignment and then the name that we have here and then the deferred tax settings for for this account down below that's the setup process if you need to edit any of the accounts if I go into the accounts you can basically edit the account there notice that the bank account was not in when I add the account it didn't show the bank accounts because when you add a bank account you want to do it separately here because the zero system is going to try to connect you to the bank now you don't have to connect the bank account to the bank you can kind of fake it like I'm gonna pretend I'm gonna connect to the bank but I don't want to actually add a bank account connected to the bank so then you just say skip skip that process and don't connect to the bank and then you could go and then you can add the necessary information so I won't continue that but that's the general idea with that let's go back to the chart of accounts so back to the chart of accounts and so then so then we can sort it up here you can you can delete you can archive now you got it you need to be careful with deleting you probably you know I don't believe the system will even let you delete something that has activity in it because now you've got activity and if it had no activity in it then then you might be able to delete the account so if you had some default accounts that were set up and you want to trim down you might be able to do that archiving it so now you're gonna say I don't want it to be showing up and like my drop downs or pop-ups so I want to archive the account here so that could be a useful tool to kind of clean up your accounts change the tax rates here for a particular item as well they also broke down the accounts all accounts to just asset accounts and so now you can kind of see it by account type and this this could be useful especially for if you got your account codes messed up because then then everything sorted by account code right over here and if someone messed up all the account numbers then then it's gonna be hard to see it by code so then you can then you could go over here and say okay here's all my assets you know that are that are the assets section even if even if the code numbers got messed up and here's all my liability type of accounts so that can be useful it could be a quick way especially if you have a long list of accounts then this might be a faster way to get to the particular accounts that you want so that's kind of neat the archive accounts over here for the archived items let's go back to the all accounts so once again you can add the account up top and add a bank account you can print a PDF you can import if you wanted to try to import a preset chart of accounts that had already been set up and then of course and then you can export the chart of accounts here so that's a general overview of the chart of accounts in the second half of the course when we set up a new company file then that's when we get to kind of set up the chart of accounts and build what needs to be put in place in order to do the data input forms one of the other major lists that are going to be kind of linked to the chart of accounts is going to be the products and services the things that we sell so if you think about the order of setting up the new company file the chart of accounts is one of the fundamental items that you're going to need and once that is set up then one of the other fundamental items you're going to need are the products and services because those are going to help you to automate the process of entering of the forms here so we'll talk about that in a future presentation