how to set up chart of accounts in QuickBooks

Chart of account in QuickBooks is the list of accounts that can be categorized as assets and liabilities and other expenses. It provides you with a clear picture of the bank balance and bank accounts of your company. The chart of accounts provides you with a technical report about the financial status of the company like how much money a company owns and how much it owes. Chart of accounts in QuickBooks is a quite great feature because it helps to realize the growth of your company as well as its performance. There are different categories in which the chart of accounts has been categorized which we have mentioned in the next section of the article. It is important to know the whole process of setting up a chart of accounts in QuickBooks before proceeding with the process. We have mentioned the detailed process of how to set up a chart of accounts in QuickBooks. Read the article till the end.

Categories of the Chart of Accounts in QuickBooks

Before proceeding with the process to set up a chart of accounts in QuickBooks, you must know what are the different categories of the chart of accounts and what do they mean. The chart of accounts in QuickBooks is divided into four categories. 

An Asset Account

The very first kind of QuickBooks chart of accounts is the asset account. This chart of the account consists of all the money that you own like a property, car, or anything. It also includes the money from other bank accounts and liquidated funds. It also includes cheques.

A Liability Account

The next category is the liability accounts which includes the money that you owe. It can be anything like mortgages, credit cards, loans, and all the payments that you have to make to others. You need to know QuickBooks auto data recovery that is important for your data. One thing that you should remember is to make sure that you are adding the sum amount while adding a loan to the account.

An Income Account

The next on the list is the income account. This account includes additional sources of income that you have. You can add any source of income. The type of account can be the same for some business and can be different for another. You are needed to choose the account based on the requirements.

An Expense Account

The last on the list is the expense account. This account consists of all the money that you have already spent. You can keep track of the money and decide your expenses accordingly. Other than this, you can create a sub-category for the expenses that you have made or you will make.

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Steps to Set up Chart of Accounts in QuickBooks

It is an easy process to set up a chart of accounts in QuickBooks. We have mentioned the stepwise process below to make it easier for you to set up a chart of accounts in QuickBooks.

• The very first step is to go to the list section and then go to the chart of accounts option.

• The next step is to hit the account button. You will be provided with an account menu on the screen. 
• next, you will have to click on the option to create a new account.

• After this, You have to select the kind of account you are adding. A list of the type of accounts will be provided to you and you are needed to choose the relevant option.

• Next, you will be directed to the next window. You are required to click on the account name option if you want to give a different name to your account.
• In case you are creating a sub-account, you are then needed to select the parent account.
• You can also add a description to your account if you want. Other than this, we will suggest that there is no point in adding a description because QuickBooks doesn’t use it.
• After this, you can see the tax line in the corporation’s tax return. You can also add an account if you wish to.
• Once you are done with the above steps, you are needed to click on next to proceed with the process.
• Once the process is completed, you will be able to see the accounts you have created in the chart of accounts.

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Steps to Modify the Account in the Chart of Accounts in QuickBooks

If your account is present in the Chart of accounts and you want to make changes to it, you can follow the steps mentioned below:

• Initially, you are needed to select the account that you want to modify. You are needed to go to the chart of accounts option and then click on the account that you want to modify. You are then needed to click on the report option and then select Edit from the drop-down menu.

• The next step is to modify the account. After you have clicked the edit option, you will be redirected to the new window. You are needed to modify the details that you want. We would recommend you not to change the type of account in case you have any transactions present in the account. 

• Lastly, review the changes that you have made and then click on the save option.

Conclusion

This was the entire process to set up a chart of accounts in QuickBooks. We have mentioned the entire process in detail to make it easy for you. You can also call our customer support if you want guidance with the topic. 

Frequently Asked Questions (FAQs)

Q1. Why create the chart of accounts in QuickBooks?

It is important to create a chart of accounts in QuickBooks so that you can keep complete track of your funds including where the money is coming from, where the money is going, and everything about debts, etc.  

Q2. What is the main purpose of a chart of accounts?

The main purpose of a chart of accounts is to maintain a record of all your business funds. With this, you can know where you are spending your money. 

Q3. What is the difference between a general ledger and a chart of accounts?

A general ledger is basically a record of all the transactions, whereas a chart of accounts is a record of all the transactions, debits, credits, increases or decreases in sales, etc.