QuickBooks Pro automatically gives you a list of default accounts when you select an industry for your company, but you can tailor this list to suit your needs by eliminating unnecessary accounts and adding different accounts. Your accounts will show all incoming and outgoing funds to help you budget. This training video will help you learn more about working with the chart of accounts in QuickBooks Pro.
When I set up my new company, I showed you how to choose an industry that was close to the one you're setting up. Is that's how QuickBooks chooses some default accounts to get you started? Previously, I had mentioned that you could change or add these accounts at any time. I'm going to show you how to do that in this video. We do that by going over to the company section and clicking on chart of accounts. This is going to bring up your company's chart of accounts, these accounts are created so that you can match a line item transaction such as that deposit or expense and match it up to a real business account.
Such as advertising cost or legal fees, this way when its tax time its easy to see what is a legitimate business expense. The chart of accounts is an easy to read list of all the accounts that your company file uses, all in one place. You can see the account name, the type of account and the current balance in each account. There's things like fixed assets, which are items that you own, such as furniture and equipment. There's also liability accounts, which are accounts that hold money that you're liable for. There is also income accounts, these are transactions that pay you money and our money towards your business.
There is also equity accounts, such as money that you put into towards your business, equity accounts are also the difference between your liability accounts which is what you owe versus your asset which are the things that you own. There's also an account called a cost of goods sold. This is a way to keep track of things like shipping fees, and what you're certainly from you're collecting money from your customer, but it's not direct income to you. This money goes right back out as you're collecting the costs to ship them the product. Then there's Expense accounts, which is how you can keep tracks of things like travel and all other things associated with running a business.
Income and Expense accounts are directly related to your company's profit and loss. Over this course as we create invoices and add products and services, you're going to become very familiar with these accounts and how you interact with them on a day to day basis. But, for now let's add and remove some accounts. So, we're in the chart of accounts. We'll be able to see our bank accounts here once we add them in too. There's some special items you see that could have balances, and there's some important terminology for QuickBooks. For example, you'll see the accounts receivable, which is money that's owed to you, such as invoice clients.
There's also an account called the accounts payable, which is money that you owe other people, such as bills for vendors. These accounts are going to show up once we start creating invoices. So, the first thing that you can do is go through this list and clean out any accounts that you know you're not going to need. For example, if you don't have a Rent Expense, you don't need this showing up in your view. So, what I'm going to do, is right-click and select Make Account Inactive. Now you'll notice that rent has now disappeared from this list. So, now we don't have to look at it anymore.
But, if we ever do need rent one day, we can get it back at any time. Place a check box next to Include Inactive at the bottom of the screen. This is going to bring back all your accounts, including the ones that you previously made inactive. Now that I see Rent again, I can simply right-click on it, and choose Make Account Active. So, that's how to remove accounts, but now let's add one. Select Account from the bottom of the screen and choose New. Here's where we have to decide what it is. So, for example, is it an income account or an Expense account? Is it a Bank, Loan, or Credit Card account? For now, we're going to create an Expense account.
I'll select the blue Continue button. Now we give our Expense account a name. In this case, I'm going to call it a Conference Fee. I can give it any account name I want, and I don't have to make it a sub account, but I'm going to in this case so I can find it easily in the list. I'm going to make this a sub account of. If I click the pulldown list, I can see all my other Expense accounts. This is going to be a sub-account of a Travel Expense. I can put in a description if I want. I can also choose a correct Text Line Mapping if I wanted to. For example, schedule see travel.
Click Save and Close and we'll be brought back to the list and now under Travel Expenses, I can see my Conference Fee. Let's add one more. Let's add a service. I'm going to select Account. I'll choose New and this is going to be an Income account. Because this is going to be something that I'm going to setup later on in my item list. Now, remember that we do host tasting parties. So, I'll select this as another Income account. Click the blue Continue button. And in the account name, I'm going to choose Testing Party. For my Tax Line Mapping, Im going to call this one schedule see other business income, I will click Save and Close again.
And now if I scroll up to my Income account, I can see my Testing Party is now in this list. Now, you can double-click on these accounts for any account that has an actual balance total if you double-click on it, you'll see a check register. You can close out of it, and for any accounts such as an Income and Expense account if you double-click on that, you'll get a report. Income and Expense yields a report because they're direct profit and loss accounts. So, that's how easy it is to work with a chart of accounts. So, take some get it all set up and remember that you can add a new account at any time should you get a new business expense over the course of having your business.
When you're done you can click the X at the top right-hand side, and you're brought back to the home screen.
- Setting up a new company file
- Working with the chart of accounts
- Adding bank accounts and credit cards
- Setting up sales tax
- Adding customer, vendor, and employee profiles
- Billing customers
- Receiving payments
- Handling refunds
- Recording deposits
- Paying employees
- Sharing QuickBooks with others
- Running reports