Jess Stratton explains the QuickBooks Pro 2018 chart of accounts, and how to use it. She also adds an expense account and an new income account and will show users how to find them later.
- [Narrator] When I set my new company up, I showed you how to choose an industry that is close to the one that you're setting up as this is how QuickBooks chooses the default accounts to get you started. I mentioned that you can change these or add some at any time and I'm going to show you how to do that. If you're going to be following along with the exercise files it's important to note that these files are only available to work with the U.S. version of QuickBooks. I'll go ahead and click on Chart of Accounts on the top right hand side of the screen. Here I could see a list of starting accounts that you have in the company file that we created earlier.
These accounts are created so that your can match a line item transaction 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 your 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 all in one place. You can have a fixed asset account. These are items that you own such as furniture and equipment. You can also have liability accounts. These are accounts that whole money are liable for such as loans and income accounts. These are the transactions that pay you money and are money towards your business. You can have equity accounts which has 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 different 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.
They first thing that you'll want to do here is go through and clean up some accounts you know you'll never need. Here's a good one to start with, rent expense. If you're not renting a business or office space, you don't need this account cluttering up you view. You can go ahead and make it inactive by right clicking on the mouse and choosing make account inactive. Rent disappears. This is great because it's not deleted and we can bring is 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 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. We can right click on it again and this time I'll choose make account active. Now we can see it again in the view. Let's add an account. To add one, click the account button again and choose new all the way at the top. The first thing we need to decide is what type of an account it is. Is it an income or an expense account? Or an asset and a liability account such as a loan or a credit card. In this case I'll create an expense account.
I'll click the blue continue button. I want to create an account to track my conference fees when I attend conferences. Here's where I can give my account a name. This is for my reference only. It isn't in any official capacity so I'll call it conference fee. I don't need to make it a subaccount of anything but if I wanted to I could. For example I could click and make it a subaccount of travel expenses. I could put a description in if I wanted for my reference but I could also choose a tax line mapping.
In this case for tax line mapping, I can could choose schedule C travel. I could click and save and close if I'm done but I'll create one more so I'll click save and new. This time I'm going to change the account type. I do that by clicking the drop down arrow at the top. I'm going to create a new income account. Hansel and Petal is a flower shop. We do a lot of weddings. It's a service that we offer and 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 and the account name, I'm going to call it wedding 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. I'm ready to click save and close. I can see my two new accounts that I created here. Here's my wedding package and here's my conference fee as a subaccount underneath travel expenses. 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 an 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 QuickBook 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 an expense account, it's going to bring up a report because these are directly related to profit and loss accounts. Once again I can close out of it by clicking the X. Up next let's add a bank account and after that I'm going to show you how you can add account numbers to this list.
- Setting up a new company file
- Backing up the 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
- Creating estimates, purchase orders, and invoices
- Receiving payments
- Recording deposits
- Handling refunds and credits
- Paying employees
- Managing online banking
- Sharing QuickBooks with others
- Searching for data
- Running reports
- Closing the books