Setting Up A Functional Chart of Accounts For Your Business in QuickBooks

• 06 May 2017
• by: admin
• in: Uncategorized
• note: no comments

[ad_1]

Tracking sales and business expenses is one of the most fundamental functions of running a successful company. Without knowing how much money your company is making or spending it’s difficult to ascertain true performance and profitability. Many entrepreneurs tell me that they think they are making money but when I ask how much, they’re usually stumped.

QuickBooks makes sales and expense tracking easy but to get it right, you must properly set it up from the start. The setup begins with the Chart of Accounts List. This is a list containing all financial categories in a company’s accounting system. An account is a unique category representing a specific type of a financial transaction. This list is used to organize a company’s finances, prepare financial reports and record various transactions such as expenses, sales, investments, purchase of assets, loans, etc.

The most important point about designing an effective Chart of Accounts is to begin with the end in mind. In other words, you first need to identify what information is relevant to your decision making process and then determine how detailed you want your Chart of Accounts to be. For instance, if you are running a trucking company it might be relevant to know what you spend on gas, parking, and tolls. Since these expenses may represent a substantial portion of your total financial output, many trucking companies will specifically track these expenses individually. However, if you are an interior design business then the individual breakdown of these auto/truck expenses might not be relevant or significant. Designers often record all auto related expenses into one general category called “Automobile Expenses”. For an interior design company the level of expense detail might be more important in a different area such as: client purchases like art, furniture, fabric, etc. Or in the area of job related costs such as: blue print reproduction, travel or subcontractor fees. Therefore, identifying the level of detail you need is the most important step in designing a well functioning Chart of Accounts.

QuickBooks allows you to group and organize expenses into a standard Chart of Accounts template using one master category and numerous sub-accounts.The sub-accounts enable users to get detail level reporting along with a master category summary. For examples: most companies pay various types of insurance expenses. QuickBooks allows you to create a master category called Insurance with sub-categories listing various types such as: health, liability, auto, etc. At the end of the period you’ll be able to see not only your total Insurance costs but also amounts for each individual sub-category. This level of reporting will help you understand your company better and enable you to solve problems quicker, strategize smarter, and make intelligent decisions faster.

Simple Step by Step Instructions for Setting Up Your Chart of Accounts Using QuickBooks Software

Make sure your QuickBooks software is open.

1. Chose Lists on the upper menu bar and then click Chart of Accounts

2. Click on the Account button on the lower left and choose New. This command is used to create a new account

3. When the New Account window opens, identify which type of category the account belongs to. QuickBooks will use this information for reporting purposes

4. Click Continue

5. In the Name field type the name you are assigning to the account. For example: Insurance, Legal Expense, Accounting Fees, etc. Please keep it short and don’t use Vendor or Customer names names such as: Jon’s Automotive. The category name is a general description.

6. If you are adding a sub-account to a master category, click on the Subaccount checkbox. If you have created an account called Utilities you can now create sub-accounts such as: Electric, Gas, Water, Recycling, etc.

7. In the Description box provide a short explanation as to the purpose of this account

8. Proceed to enter any relevant information about your bank in the other fields

9. If you know which tax return line item the new account belong to you can select it from the Tax Line drop-down menu. Most people leave it blank and you can do so too. Unless you plan to import QuickBooks financial data into an Intuit compatible tax preparation software, you do not need to map the tax lines for your new accounts

[ad_2]

Source by Kerry Daniels