Jess Stratton explains the QuickBooks Pro 2017 chart of accounts and how to use it. She also adds an expense account and a new income account, and shows how to find them later.
- [Lecturer] When I set my new company up, I showed you how to choose an industry that was close to the one that you're setting up as this is how QuickBooks chooses and default accounts to get you started. I mentioned that you could change these or add some at any time and I'm going to show you how to do that in this video. I'm going to go ahead and click on the Chart of Accounts on the top right-hand side of the screen. Here I can see the list of starting accounts that you have in the company file that we created earlier. These accounts are created so that you can match a line item transactions such as a deposit or an expense and match it up to a business account such as advertising costs or legal fees.
This way when it's tax time, it's easy to see what you're legitimate business expenses are and your profit and loss. Remember earlier when I talked about how QuickBooks uses the industry standard double entry system, that's where one account is debited and another account is credited. This Chart of Accounts is a main list of where QuickBooks is debiting and crediting. The Chart of Accounts is an easy to read list of all the accounts that your company file uses in one place. You can see the account, the type of the account and the current balance in one place.
You can have Fixed Asset accounts which are items that you own such as Furniture and Equipment, liability accounts which are accounts that hold money you're liable for such as loans and income accounts. These are the transactions that pay you money and are money toward your business. You can also have Equity accounts which is money that you put in towards your business. There's also Expense accounts which is how you can keep track of things like travel and all the other costs associated with running a business.
Income and Expense accounts are all directly related to your company's profit and loss. You can have multiple account types. For example, here you can see that we have lots of different Expense accounts. You can also have lots of income accounts. These are other ways that you'll get money toward your business. Once you start sending invoices to clients and entering bills to vendors, you'll see new accounts that QuickBooks creates that could have balances. For example, in a later video when we create an invoice, we'll have a new account set up in here called Accounts Receivables, that's money that's owed to you such as your invoice to clients.
There's also another account that will be created called Accounts Payable which is money that you owe other people such as bills for vendors. Accounts receivable and accounts payable are industry terms and you can use these terms to ask for the right department when you're calling about money owed or money that you sent. Over this course, as we create invoices and add products and services, you'll become very familiar with these accounts and how you interact with them on a day-to-day basis. The first thing you'll want to do is go through and clean up some accounts you know you'll never need.
Here's one, Rent Expense, if you're not renting a business or an office space, you don't need this account cluttering up your view. You can go ahead and make it inactive and you can do that by right clicking the mouse and choosing Make Account Inactive. Rent disappears. This is great because it's not deleted and we can bring it back if we need to. We might have rent one day in the future. To bring it back, on the bottom left-hand side of your screen under Account, click the black triangle and choose Show Inactive Accounts. Here's where we can see our Rent Expense and we can find it quickly because it has the black x beside it.
I can right click on it again and this time, I'll choose Make Account Active. Now I can see it back in the view. Let's add an account now. To add an account, click the Account button and choose New. The first thing we need to decide is what type of an account it is. Is it an Income account, an Expense account or an asset and a liability account such as a loan or a credit card? In this case, I'm going to create an Expense account. I want to create an account to track my conference fees.
I'll click the blue Continue button. Here's where I can give my account a name. This is for my reference only, it isn't in any official capacity. I'll call this one Conference Fee. I don't have to make it a Subaccount of something but if I wanted to, I could. For example, I could make my Conference Fee expense, a Subaccount of Travel Expenses. I can put in a description in it if I want and I could also choose a Tax-Line Mapping. In this case, for the Tax-Line Mapping, I'll choose Schedule C Travel.
I could click Save & Close but in this case, I'm going to create one more so I'll click Save & New. This time, I'm going to change the Account Type and I do that by clicking the dropdown arrow next to Account Type at the very top of the screen. I'm going to create a new Income account. Wisdom Pet Medicine offers a service called a Shelter Package in which we go to a shelter if a new animal or a multiple animals arrive and do things like grooming, give them vaccinations and other products that they might need all in one go.
This is an Income account because I'm going to be getting paid for this service. I want to track it so that's why I'll create an account. In the Account Name, I'll call it Shelter Package. I'm not going to make it a Subaccount of anything and in the Tax-Line Mapping, I'll choose Schedule C Other Business Income. Now I'm ready to click Save & Close. I can see my two new accounts that I created here. There's one more thing I want to show you. You may notice that some of these items have balances and some don't.
Double clicking on particular accounts bring up different results. If I click on a account with a balance, it's going to bring up a register in which you can see transactions that match up with other accounts because of the double entry system that QuickBooks uses. I'll close out of this by clicking the x on the top right-hand side. If I click on an account that doesn't have a balance such as an Income or Expense account, it's going to bring up a report because these are directly related to profit and loss accounts. Once again, I'll click the x to close out of this.
Up next, let's add a bank account and after that, I'm going to show you how you can add account numbers.
- Setting up a new company file
- Working with the chart of accounts
- Adding bank accounts and credit cards
- Adding service or inventory items
- Setting up sales tax
- Adding customer, vendor, and employee profiles
- Billing customers
- Receiving payments
- Recording deposits
- Handling refunds and credits
- Paying employees
- Sharing QuickBooks with others
- Running reports