QuickBooks Tip - Modifying & Working With Your QuickBooks Chart of Accounts

Setting up or modifying an existing Chart of Accounts is not an overwhelming task in QuickBooks.

If you are new to QuickBooks, when you create your company file (File menu -> New Company), the EasyStep Interview provides you with a "wizard", industry specific templates, and example accounts are even suggested. If you need a starting point, grab your tax return or financial statement compiled by your CPA, and enter the "headings" you find there, turning summary accounts from the financial statements into subaccounts in QuickBooks.

If you have already started using QuickBooks you can easily add, edit, or merge accounts in your Chart of Accounts for your business with a matter of a few clicks of your mouse by selecting the Lists menu -> Chart of Accounts OR Company menu -> Chart of Accounts.

By creating a more organized and efficient general ledger, you will not only save on accounting fees and tax preparation but you will improve your in-house reporting as well.

Always BACKUP your company's QuickBooks file before making ANY changes (File menu -> Save Copy or Backup) - just in case, you wish to reverse the process.

To add an account, click the Account button at the bottom of the Chart of Accounts list and choose New. QuickBooks prompts you to choose what type of account you want to create - Income, Expense, Fixed Asset, Bank, Loan, Credit Card, Equity, Accounts Receivable, Other Current Asset, Other Asset, Accounts Payable, Other Current Liability, Long Term Liability, Cost of Goods Sold, Other Income, or Other Expense. As you select an account type to create, QuickBooks even includes a suggestion box on the right-hand side of the window, listing common accounts under each account type.

To edit an account name or type, right click on the account that you wish to work with and choose Edit Account, and simply type in the new name or select a different account type.

Merge accounts, if you have duplicate names. Edit the duplicate, and in Account Name, enter the name of the account you wish to keep; all of the information in the previously separate accounts become merged into the one remaining account. As a precaution, before merging accounts, it would be prudent to make a copy of your QuickBooks file in the event that you discovered later that a merge was inappropriate.

Subaccounts are a critical feature of structuring your Chart of Accounts and ultimately your reports in QuickBooks. For example, on a tax return, rather than report separate totals for electricity, natural gas, and water, it is more efficient to combine their amounts under a heading, "utilities". It is also true for the various kinds of insurance, professional services, taxes, etc. By grouping such related items in QuickBooks, its reports appear more organized and readable, especially since QuickBooks provides subtotals for each grouping.

Creating a subaccount is easy in QuickBooks. Go to the Lists menu -> Chart of Accounts OR Company menu -> Chart of Accounts, highlight the account that you want to turn into a subaccount, click the Account button -> choose Edit Account, click "Subaccount of" and select its parent account.

Note - Accounts may be added to or deleted from the chart of accounts at any time, but it cannot be deleted once a transaction has been posted to it. Consequently, ensure the chart of accounts is complete and unnecessary ones have been deleted or merged with others before recording any transactions.

Account Numbers:

You are allowed up to 7 digits for an account number in QuickBooks; a minimum of 5 is recommended if you require numerous accounts and subaccounts. Unfortunately, QuickBooks preconfigured their numbering system using 4 digit - which is rather limiting. I often use, and recommend, a 5-digit numbering system for construction companies:

10000 - 19999: Assets 10000 - 14999: Current Assets

10000 - 10999: Cash
11000 - 11999: Receivables
12000 - 12999: Inventory
13000 - 14999: Other Current Assets

15000 - 19999: Noncurrent Assets

15000 - 15999 - Fixed Assets
16000 - 19999 - Other Assets

20000 - 29999: Liabilities 20000 - 25999: Current Liabilities

20000 - 20499 - Accounts Payable
20500 - 20999 - Credit Cards
21000 - 25999 - Other Current Liabilities
21000 - 21999 - Accrued Expenses
22000 - 22999 - Payroll Liabilities
23000 - 23999 - Debt, Current Portion
24000 - 24999 - Capitalized Leases, Current Portion
25000 - 25999 - Other

26000 - 29999: Noncurrent Liabilities

26000 - 26999 - Debt, Noncurrent Portion
27000 - 27999 - Capitalized Leases, Noncurrent Portion
28000 - 29999 - Other

30000 - 39999: Equity

30000 - 30999 - Capital Stock
39000 - 39999 - Retained Earnings

Revenue: 40000 - 49999 50000 - 59999: Cost of Goods Sold

50000 - 50999 - Materials
51000 - 51999 - Labor
52000 - 52999 - Subcontractors
53000 - 53999 - Equipment
54000 - 59999 - Other Direct Costs

60000 - 89999: Expenses

60000 - 69999 - Selling Expenses
70000 - 89999 - General and Administrative Expenses

90000 - 99999: Other Income (Expenses)

Of course, there could be an endless variety of items under all of the above categories particularly under Expenses: Selling as well as General and Administrative. If there were an insufficient number of accounts required under Selling, you may omit the distinction and lump all under Expenses. If you apply overhead to your jobs reported in Cost of Goods Sold later than posting, you may even wish to add an Overhead grouping under Expenses for those amounts to be allocated to jobs. I find this especially convenient and timesaving, alleviating a frantic search through a mass of expense accounts containing thousands of transactions.

Nancy Smyth is a Certified QuickBooks ProAdvisor and Intuit Gold Developer specializing in offering QuickBooks users an easy and efficient means of complying with Federal and State Prevailing Wage Laws and generate certified payroll reports from QuickBooks data. For additional information on Certified Payroll Solution - which integrates with QuickBooks, visit http://www.sunburstsoftwaresolutions.com.