This is the first of a 5-step process to set up Quickbooks to create financial statements for your business.
Step 1: Setting up your chart of accounts
The chart of accounts is how you organize and report on the transactions that occur in your business. Accounts are assigned to either the income statement or the balance sheet.
This video provides background on the chart of accounts in QuickBooks.
QuickBooks will come with a default chart of accounts and I would recommend making some adjustments.
Bank and Credit Card Accounts
You will want to make sure you have accounts set up for each bank account and credit card account. This will need to be referenced when connecting your bank accounts and credit card account in QuickBooks which will allow QuickBooks to pull in transactions as they occur.
Remove Unnecessary Accounts
Determine the accounts you will not use and make them inactive.
Make an account inactive:
Go to Settings ⚙ and select Chart of accounts.
Find the account you want to make inactive.
Select the Action ▼ dropdown and select Make inactive.
Fix Account Types
Some accounts may have the incorrect type, for example they may be Other Income and Expense and you want it to be Operating Expense.
Change account types
To change the type of an account, start with the subaccounts, then change the parent account.
Locate the first subaccount to change.
From the ACTION column, select the ▼ dropdown, then select Edit.
Clear the Make this a subaccount checkbox.
Select the Account type ▼ dropdown, then select the new account type.
You’ll get the prompt Changing the type or detail type of an account may affect your accounting and reporting. Are you sure you want to do this? Select Yes.
Select the Detail type ▼ dropdown, then select the appropriate detail type.
Select Save.
Standard Chart of Accounts
Here is a comprehensive starter chart of accounts designed to give you immediate clarity on your business’s finances. It contains the core accounts every business needs and can be easily tailored to your unique operations by adding new accounts as required.