 QuickBooks Online 2024 chart of accounts. Get ready because we don't just do data input. We get totally into it. Within tuits. QuickBooks Online. First a word from our sponsor. Actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us. But that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our trust me I'm an accountant product line. Yeah it's paramount that you let people know that you're an accountant because apparently we're among the only ones equipped with the number crunching skills to answer society's current deep complex and nuanced questions. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Here we are online in our browser searching for QuickBooks Online Test Drive. 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Opening up the major financial statement reports like we do every time reports on the left hand side and then in the favorites we're going to right click on the balance sheet open link in a new tab right click on the profit and loss open the link in a new tab let's go up to that middle tab close up the hamburger there is our balance sheet I'm going to do a range change bringing us back to 2023 so I'm going to go from 010123 tab 123123 tab running it to refresh it tabbing to the right closing the hamburger running the date range from 010123 tab 123123 tab run it to refresh it there's our our financial statements back to the first tab that's the setup process that we do every time we want our data input happening in the first tab I'm going to check the results of that to the financial statements on the tabs to the right so in prior presentations we've been talking about the cycles noting that the entire accounting process is a series of cycles and then we have cycles within the cycles and that's the customer cycle vendor cycle employee cycle remembering that these is where you typically go once the setup process has been created and you're you're well into your normal cyclical accounting process however if you're setting up a new company file you have to set up those foundational things which we said were often named in QuickBooks terminology as lists and we saw that we can find the chart of accounts being the most important of the lists so if we hit the drop down and we go into the lists here we can go into the all lists and that will get us to our chart of accounts here you'll probably do this a different way I mean most people are probably going to use the searches on the left hand side with the chart of accounts because although the chart of accounts is a fundamental underlying list we still might be checking it out oftentimes we might use it in order to get into the registers so I think most people will probably go into the lists by going to the transaction tabs under the menu and then you've got your chart of accounts on the right hand side that's how I tend to go in there most often because this is so fundamental we want to go over the chart of accounts in some detail here so the chart of accounts is the foundational items that will have the list of accounts that will be then used to create the financial statements so that whenever we do a data input form such as the forms under the customer vendor or employee cycle those will create a journal entry in essence journal entry meaning that at least two accounts on the financial statements will be impacted and there will be imbalance so we'll remain in balance in terms of the balance sheet and so we have to have this chart of accounts fundamentally set up before we can really do anything now when you start a new company file and QuickBooks online it'll actually create a default chart of accounts for you automatically if you're used to the desktop version note that it's a little bit different with online with the desktop version when you tell the system what industry end you are in and the type of business that you have then QuickBooks will actually make a pretty customized chart of accounts with the online version you still have to tell the system as we will see when we start up a new company file in a future course or section you have to tell the system you know what kind of company you are and are the industry you're in but it doesn't really change the chart of accounts at this point in time i thought they would have kind of updated that by now but they haven't really really customized the different chart of accounts that they give therefore usually they give this really long chart of accounts no matter what time of business you are in so that it can basically compensate for all of the different industries and types of business entities so that means that you're going to start up with probably too many accounts and need to trim it down so when you if you start up a new company file one way you might do it is start the chart of accounts and then possibly trim it down to the ones that you think you're going to need or you might start the company file have a chart of accounts and then do data input for the first month of operations at least and you might do that with the bank feeds and create transactions with the bank feeds and then the idea would be every time you enter a transaction such as an expense form for example which are the most plentiful transactions typically then you're going to look for and see if there is a an item in the chart of accounts that ties out to what you think it should be going to so if it's a telephone expense you see one that says telephone expense and you use that one instead of creating a new account and if you don't like the name in the chart of accounts instead of creating a new one just calling it phone instead of telephone perhaps or putting it under utilities then you're going to go into your chart of accounts and actually modify the chart of accounts so that it you don't have two accounts that are similar in nature if you have multiple accounts that are similar in nature it's likely that you will then record two different accounts for the same items which will kind of be messy that'll be that won't be consistent we want consistency with the accounting so that's one approach you can do you could take their chart of accounts enter the transactions use the chart of accounts to the best ability that of the accounts that are there and then go back into the chart of accounts and adjust the chart of account names if the account is not there that you want and if there's nothing anywhere near what you want then and only then did you add a new account the last way you might do this if you have especially if you're if you want to customize your chart of accounts a lot and you're possibly using the bank feeds you could try to delete all of the accounts and this is what we might take a look at when we get to the bank feeds section or course where we where you can then remove the chart of accounts and then just add the accounts as you do data input for example as you have the bank feeds and add expense forms you add them as you go in that way you'll be creating your exact own custom chart of accounts as you go the reason you have to be careful with that however is because if you're not very good at knowing when an account type should be an income account a cost of good sold an expense asset account or liability account then that could be a little bit tricky so if you don't know like those fundamental account types and some accounting fundamentals then you might just want to use the chart of account that has been provided would be the general idea so if we look at the chart of accounts we have up top we've got the name of of the accounts over here and then and we can we can adjust the filtering by name if we wanted to right we can adjust by name if you wanted to search by name but typically the default is going to be by the type of account that we have and and that's going to end or the detail or the type of the account which is going to be the main characteristic of the account so when we think about the actual accounts that we can have the types of accounts you can think about it as in essence the balance sheet on top of the income statement meaning if I look at the balance sheet it's most fundamental components are assets liabilities equity and then the income statement is income cost a good sold if you have inventory and expenses those are the those are the main components and that's what's in the chart of accounts right that's going to be the kind of accounts you have assets liabilities equity and then the income and expense now it gets a little bit more complicated than that however because you could have different kind of assets that do basically different things so if I go back into here you could see then we have the top ones listed by the account type the reason we listed by account type is because that will be in order in essence of assets liabilities equity income and expense balance sheet on top of the income statement and then within there we have the bank accounts so if I compare that to the balance sheet here just know if I kind of expand these as we go under the assets we then have current assets current assets is a normal term for reporting purposes for financial reporting purposes so that's why they're going to put that there but then they have another sub-account of the bank accounts that's not normal because normally you would you would just call it cash under normal reporting purposes so why do they have it why do they call it bank accounts here that's because they have the accounts that are have a special need that have the bank feeds that could be tied to them so you could see you have a subgroup for the bank accounts here that's these account types right here so those are going to be your checking account your savings account in this example and then you've got the accounts receivable again accounts receivable is really just another current assets but it has another drop down which is really kind of weird because then it makes two lines for one accounts receivable why do we have why why is that going on well again the accounts receivable from an internal software standpoint has special needs to be able to track the customers and on a sub ledger and therefore QuickBooks has to give it its own little category here and break it out as something different than other current assets and then every other kind of asset that we have here inventory prepaid and so on are just they don't have any extra special need for QuickBooks apparently and therefore they're going to just simply go into other current assets so when you think about your assets then you have the bank accounts as a special account accounts receivable due to the sub ledger and then all the other accounts you would think inventory would have to be broken out special but I don't think it is even though it has a sub ledger because that the accounts receivable you have to they the system forces the sub ledger to match the accounts receivable by not letting you post to accounts receivable without a customer and they don't do that with inventory so which has its pros and cons but in any case then we're going to go down to the fixed assets this is going to be your your property plants and equipment the depreciable assets the large purchases that are made so we just have a truck under here and that's going to go under fixed assets fixed assets will include both the fixed asset accounts equipment trucks so on and the accumulated depreciation which will go under this category now this is the first category note that we have these indentations here the indentations represent a sub account so this is going to help us out with our formatting on the report so if I look at my reports here you'll note that we have the trucks and then this sub account so with these triangles what do these triangles mean well the asset triangle is a financial account type of of triangle it's there automatically and then the current assets again is kind of a financial account triangle this will be there automatically and these accounts will be there these triangles will be there depending on the the type of account every account type will have its own triangle and then you can make your own sub triangle here with the sub accounts so this is a pretty flexible tool because if you want to order your accounts for example if you want to order your accounts you have to order them by assets liabilities equity because that's just how the financial statements work but within that you could further order them possibly with account numbers because you could see within these two these two here then how do I what if I want the savings account to be above the checking account well I could use account numbers to that to do that or that can get kind of messy in and of itself we have a section on account numbers if you want to check that out a section or course on that looks specifically at account numbers you can make a sub account so this will come in also when we get to the expenses where you might want to group your expenses by having basically a sub account which can help you to group certain expenses in a general area without using the account numbers so some people get carried away with the sub accounts by the way so you don't want to go overboard with them but here we've got the accounts payable so now we're on the liability side so if I go to the balance sheet and we go into the liabilities we have liabilities and equity and I'll close up the equity for now and then under the liabilities we've got the current liabilities which is a general kind of category for financial reporting and then we have the accounts payable similar to the accounts receivable has its own like two accounts here and why does it have that because because accounts payable has a sub ledger that needs to be tracked by vendor who we owe the money to so once again it's got its own special category instead of just being other like a current liability the credit card down here is actually similar to the bank accounts so it needs its own category because it can connect to the bank feeds even though it's going to be a liability account so now we've got the credit cards has its own category because that allows you to connect to the bank feeds for those types of accounts and then everything else is going to fit into other current liabilities all the accounts that don't have a special need by QuickBooks to track the sub ledger or connect to the financials or connect to a bank and then you've got the long-term liabilities these are things that are going to be due in a period longer than 30 days so you have your your loans might go in there and then we get down to the equity side so the equity side down here we have these opening balance equity retained earnings and net income on the balance sheet now here's where it gets kind of confusing when you when you think about different types of industries because if I was a sole proprietorship I might call it not retained earnings but just owner's capital or my capital account or owner's equity itself if it was a partnership then I would need multiple capital accounts for the capital per partner basically and only if it was a corporation would you want retained earnings so it's kind of funny that QuickBooks online is probably geared more towards small to mid-sized businesses which many of which might be like some type of corporation like an S corporation possibly more likely than many C corporations possibly but but it has retained earnings because a lot of the users are probably sole proprietors ships and and partnerships in which case retained earnings is not exactly the proper term because you would be using basically capital accounts so the retained earnings account is going to be the account that everything rolls into so the income statement will roll into retained earnings so you can't really like delete the retained earnings you could change the name of the retained earnings to whatever you want it to be such as the owner's equity or owner's capital or a partnership account the income account here notice it doesn't actually have an account on the find on the on the on the chart of accounts that's because this isn't actually an account this is QuickBooks trying to tie in and show us that the income statement is related to the balance sheet meaning if I go to the next year this will roll into retained earnings doing the closing process basically for us so if I show you that 010124 to 123124 see this closes out then into the retained earnings so if it was an if it was a sole proprietorship you might want to rename the retained earnings to owner's capital account or something like that and now the net income is ready to start over again for the current year and and then add and then it'll add in here now that retained earned that net net income is kind of good and kind of bad it shows you the link but if you're a partnership it becomes kind of a problem because in a partnership you're going to have to allocate that net income to the related capital to the related capital accounts per partner and so so so then you're going to have to do like a journal entry but you don't have this account to hit because this is like an account that's not really an account so it's kind of messy that way but we might talk about that more in the future let's go back over here now you might also have a equity account for for draws if it was a sole proprietor for you taking money out of the business and you might also have an investment equity account if you're a corporation you might have a dividends account which would be like taking money out to the owners in the form of dividends then we're on the income statement so it's the balance sheet on top of the income statement the income statement over here at its most basic level is just income and expenses but then we can further break out the types of income and expenses right so if I go into the income this is all the general income usually you don't have that many accounts here but this being a construction company they have more income accounts than you might see elsewhere so you could see we have our income accounts they made a lot of sub accounts we have sub of sub accounts here so they might have gone a little bit overboard on the sub accounts in my opinion but it can be a useful tool to use those sub accounts so these are all income accounts usually you would only have like a few income accounts for most businesses that weren't like a contractor cost of goods sold is just basically a special expense account and that's the inventory that we are selling because it's such an important expense if you sell inventory it has its own sub ledger over here so that's why it's basically an expense has its own area again because it has its own account type there's a triangle to it even if you only have one cost of goods sold account and then down below that we've got all of our expenses so these would be most of the things that you're going to do when you set up a new company file especially for small business because for small business you're going to be doing certain things to generate revenue and paying for everything else so you might be paying it through electronic transfers you might be recording the bank feeds and as you record the bank feeds this is where you're going to record the other side to some kind of expense in other words the expense typically has more account types in it than any other category we have the more variance of types of things that we pay for for our business so under the expenses you can see we've got the ad it's in alphabetical order unless you have account numbers or you can use sub ledgers to kind of break that out so this is where it becomes most kind of problematic on the expenses the fact that if we don't have account numbers then I can't order the accounts the way I want to as easily however the account numbers can be a little bit messy to deal with and we could use the sub accounts to help us out with this so for example if I had the automobile they put fuel under automobile we might also have auto maintenance and and so on and so forth and we might put them as sub accounts which once again when I go over to my income statement will result in an added triangle a triangle that's not there due to due to it having its own account category like expenses but rather because we made a sub account so the sub accounts can be great but also note that they that they add a lot to an extended report meaning now instead of having one line item I've got a line item and then a subtotal so it adds like two extra lines including and then the account on top of that but we could print reports where we collapse these line items and so it gives you some more variance so again some people really love the sub accounts and sometimes people sometimes people might over overdo it a little bit to get a little bit more but then we got the bank accounts it's an order insurance has a sub account the job expenses with the sub accounts job materials you could see the sub accounts legal and professional so this is a classic example for many different kind of businesses where you might put the accounting bookkeeping and lawyer for example under legal and professional and then the maintenance again the building repairs and so on that you might put under the one account now also it's interesting to note here it's useful to note that all of the balance sheet accounts are permanent accounts so all the all the ones up top are permanent and they have a register so you're probably most used to seeing the register on a checking account but any balance sheet account has a similar kind of functionality register so if I go into this register for example you have your checking account and you can enter forms in here in a quick method so this will be a quick data input method to enter the basic kind of forms if I go into other accounts it's often the case when you have a situation where you have a journal entry there's no form that can be used so you're going to enter a journal entry like the purchase of equipment that you made with a loan or something like that if I purchased a truck and I financed the entire thing I might then go into this item here and view the register and then I can see it in terms of increases and decreases notice I only have a few options now as opposed to the cash account the transfer and the journal entry if I enter a journal entry I can see it as increases and decreases note that that works well if you only have two accounts impacted but if you have a whole lot of accounts that are impacted then debits and credits are actually an easier way to see what is happening that's why that's why they use them right but if you're if you're not comfortable debits and credits or even if you are it's a little bit easier sometimes possibly to use a register but you have to make sure that you're going to use the balance sheet side of the register so we'll probably test that out a little bit in future presentations if we're doing batch action activities we can batch the entire thing or whatever accounts we want we can make them inactive if we so choose if you're starting a new company file for example and you want to make them all inactive then you could do that you can't really delete them even though you might not want to use them even if you don't have anything in there in QuickBooks online in the desktop version you can delete the account if there's nothing posted to it but online I don't believe you can delete any of them so you can make them inactive with that one you can search for a particular account we have the all accounts or the ones created by you which is kind of nice because now you can see the difference between the default accounts and the ones that you created we've got the batch edit here so if you go into this you can go in here and actually edit a little bit more quickly this might be maybe a lot more quickly this might be something that would be useful if again you started a new company file you got their chart of accounts but you want to go in here and customize your own names of those chart of accounts so I'm going to cancel that we can print them and then in the dropdown we've got the columns type detail type QuickBooks balance and the bank balance if you want less information to see them a little bit clearer you can remove some of these notice down here what is not included the inactive items so you can't delete them but you can make them inactive if they're inactive they may have had something posted to them in the past so you might want to still look at them at some point in the future and you could still find them by going to the active include active items here also just realize it it gets a little it's a little you have to get used to the web-based system because if I go all the way down you might say there's all the accounts but we could have more on the right so if I keep going if I go to the next one we have more expenses over here so just realize that you have to make sure that you're there might be more than one page of the expenses and so these are just going to be more of the accounts of which might be mostly expenses down here they have other income and other expenses if you go to the income statement those show up on the bottom of the income statement and why would you do that well maybe you have an income that's not normal like let's say you get income from like a one-time thing or possibly you have investment income from stocks and bonds that you invest in but that's not our normal business our normal business is in this case landscaping right so then that other income I might want to put it down here so that so that it's not included in my net operating income is generally the idea so I might say hey look I don't want to include it in my normal income because it's not what I normally do or if I had someone one time event I don't want to include it up here I want to say hey look there's my operating income from normal operations and then I've got this and then I've got this other thing down here which could be income or an expense expenses are the same way you might have a one-time expense that you're saying hey that was totally weird or unusual I don't expect it to happen in the future I don't want to make projections about it therefore I want to put it on the bottom of the income statement after the subtotal of net operating income so that's the general idea with that one and then of course if I go into any of these accounts and want to edit them I can go into the dropdown here I can edit or I can make it inactive and so if I edit we've got our editing options and this window will show how to we'll add more accounts when we start a new company file in the future course or section but it's an expense type of account and then we choose the expense category that we are under we have to choose a tax item which isn't as important because I find that most people aren't connecting directly to a tax software I haven't seen that to be I have not I've yet to seen it work quite really well to like link directly the tax lines to to the tax software I've tested it out before and if I if they get to the point where I think it's useful I will I will test it out but my testing has shown me that you're going to take the income statement and enter it into the software is like easier most of the time but in any case there we have that I'm going to close this back out and there's the fundamentals of the chart of accounts we'll talk more about the chart of accounts a bit when we when we get to the section or course of starting a new company file where we will see this chart of account created from scratch or created by QuickBooks what their default chart of account is and then how we can move forward with that default chart of accounts which you can do you could just basically say I'm just going to use that and move forward to the best that we can and then when we get to the bank feed course or section I believe will actually delete all of the chart of accounts and show you how we can create it from scratch with the bank feeds by going to say the transaction tabs here's our bank feeds and then as we go through the checking account area as we add each of these items we can then assign our own account that we want to have it assigned to and if we do that for a couple months it's tedious for the first couple months but once we're done we have our own customized chart of accounts and it won't have all that bloat in it all that added accounts that we're not using and so on so sometimes that might actually be easier to do then because then you know exactly you you built it basically yourself you know what's you know what's going on but there's pros and cons to that because you have to have some understanding of how the accounts work and account types asset liability equity income and expense