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QuickBooks Pro Tutorial 4

In this QuickBooks Pro Tutorial we will discuss setting up a chart of accounts.

A chart of accounts is simply a list of your accounts used to track financial transactions in your small business.

You can find your chart of accounts in your QuickBooks file by clicking on Lists and then going down to Chart of Accounts.

QuickBooks Pro Tutorial 4 - Chart of Accounts

You have installed your QuickBooks and set up your company file. Now it is time to customize your chart of accounts to fit your particular small business.

QuickBooks Pro Tutorial 4-Step 1:

Print out the default list and decide what you want to keep and what you want to delete. To delete an account:

  • Click on and highlight the account you want to delete
  • Click on the account button at the bottom of the window
  • Go up to delete and click.

You can also edit the names of the remaining accounts if you need to. Simply click on the accounting button again and go up to edit and click.

QuickBooks Pro Tutorial 4 Step 2:

Decide if want to use numbers with your account names (most accountants suggest you use a numbers...but if you have a very small business...it may not be necessary).

If you decide to use a numerical system, you can enable this feature in your QuickBooks by selecting Edit → Preferences → Accounting → Company Preferences. Select Use account numbers”.

A maximum of 7 digits can be used, although most small businesses use 4 to 5 digits.

The first digit indicates the classification.

Accounts beginning with:

  • 1” represents Assets (things you own or have rights to)
  • 2” represents Liabilities (things you owe, debts)
  • 3” represents Equity (Assets – Liabilities )
  • 4” represents Revenue (Gross Sales)
  • 5” represents Cost of Goods Sold (COGS) (materials and labor used to create good)
  • 6” represents Selling (Marketing and Promotion) Expenses
  • 7” represents General and Administrative Expenses
  • 8” represents Other Income (Money received for something other than normal business operations, such as interest income)
  • 9” represents Other Expenses (Money spent on something other than normal business operations, such as corporate taxes)

QuickBooks Pro Tutorial 4 Step 3:

 Decide what new accounts you need to add.

There are several methods for deciding what accounts you need. You can look at sample chart of accounts for businesses in your industry or if this is not your first year...get out last year’s tax return for a general idea of the income and expense accounts you need.

If you prepare you taxes on a Schedule C, a great resource is Schedule C: from A to Z (The Sole Proprietor's Guide to Tax Savings) It will help you categorize your expenses.

QuickBooks Pro Tutorial 4 Step 4:

Set up new accounts With your list of new accounts in hand...let’s get them set up:

  • Click on the account button at the bottom of the window
  • Select New. (Add New Account window will pop up)
  • Select which type of account you are adding
  • Click continue (second Add New Account window pops up
  • Type in name of account
  • If the account is a sub-account, click the Subaccount of box and select parent account form drop-down list. Example: I have an expense account titled Selling Fees and then I have several subaccounts under it such as PayPal, Goggle Checkout, etc.
  • From the Tax-Line Mapping drop-down list, select the tax line your will be reporting this account’s information on.
  • Click Save and Close if you are finished or click Save and New to add more accounts.

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