Understand the chart of accounts in QuickBooks

Updated September 04, 2020

https://quickbooks.intuit.com/learn-support/en-us/manage-fixed-assets/understand-the-
chart-of-accounts-in-quickbooks/00/203681

The chart of accounts is a list of all your company’s accounts and balances. QuickBooks uses
this list to organize your transactions on your reports and tax forms. Your chart of accounts
also organizes your transactions so you know how much money you have and owe in each
account.

Your chart of accounts organizes and gives you a view of your:

 Assets: This includes vehicles, equipment, buildings, and other assets used for
business.
 Liabilities: These are amounts you owe but haven't yet paid.
 Income: This is the money that you get from your normal day to day business tasks
such as sales revenue or income for services rendered.
 Expenses: This is the money that you spend on expenses related to normal business
operations such as advertising and promotion, office supplies, and rent.

QuickBooks automatically creates your chart of accounts based on the industry and type of
company you choose when creating your company file. If you just created your file, make
sure to record the accounts' opening balances.

How to access your chart of accounts

In QuickBooks Online:
 Select Settings ⚙, then select Chart of accounts.

In QuickBooks Desktop:
 Select Chart of accounts from any of the following QuickBooks menu: Company,
Lists, or Accountant (if you’re using an Accountant version).

Types of accounts

There are two main account types in QuickBooks: Balance Sheet accounts and Income and
expense accounts.

1. Balance Sheet accounts

Balance Sheet accounts are accounts that appear on your Balance Sheet report. They
include your businesses:

 Assets, like bank accounts and equipment.

 Liabilities, like credit cards and bank loans.
 Equity, like retained earnings and opening balances.

Each account has its own register. This is where you go to see every transaction
included in your account and their balances. These accounts are on your balance sheet
report.

Account What for When to add

Accounts Tracks transactions Most companies require just one AP

Payable (A/P) related to money you account and QuickBooks creates this for
owe to vendors. you the first time you enter a bill. Your
accountant can advise you of the
circumstances that would require you to
create an additional Accounts Payable
account.
You can use accounts payable reports and
graphs to track the:

 Vendors you need to pay

 Outstanding bills you need to pay
 Amounts you owe your vendors

Accounts Track transactions Most companies require just one AR

Receivable related to customers account, and QuickBooks creates this for
(A/R) who owe you money. you the first time you create an invoice.
Your accountant can advise you of the
circumstances that would require you to
create an additional Accounts Receivable
account.
You can use accounts receivable reports
and graphs to track the:

 Customers who owe you money

 Invoices that are unpaid
 Number of days that an invoice is
past due

Bank Track business checking, You can also add bank accounts to track
savings, money market, your cash in drawer amount if you have a
and petty cash accounts. cash register.

Credit Card Credit card purchases for You can add multiple business credit card
the business. accounts if:
  You have one or more employees
who need a company credit card to
make business-related purchases.
 You want to use different cards for
different types of purchases (one
for travel expenses, one for office
supplies, one for building supplies,
etc.).
Note: If you have multiple business credit
cards for one charge account, create only
one Credit Card account for the statement.

Equity The net worth of the You can also create additional Equity
company. It represents accounts to track:
the difference between  Owner’s equity
your liabilities and  Owner’s draws
assets. If you sold all  Capital investments
your assets today, and if  Capital stocks
you paid off your
liabilities with the money
received from the sale of
your assets, the money
you would have left is
your equity. During your
company setup process,
QuickBooks creates two
Equity accounts
– Opening Bal
Equity and Retained
Earnings (actual
accounts names are
based on the business
entity you select during
the setup interview).

Current Asset Assets that you can You can also add Current Asset account to
easily turn into cash such track:
as checking accounts,  Accounts receivable
savings accounts, money  Inventory
market and CD accounts.

Fixed Asset Items with a minimum You can also add Fixed Asset accounts to
cost that you have to sell track:
 in order to generate  Construction and landscaping
cash. Examples are machines; music, photographic, and
automobile, equipment printing equipment
and land. Consult your  Fixtures and fittings (automotive or
accountant or tax photographic shop fixtures, etc.)
prepare to determine the  Office equipment (cell /telephones,
actual minimum cost computers, copiers, printers, fax
that you should use to machines, projectors, etc.)
determine fixed asset.  Office furniture (chairs, desks, filing
cabinets, lamps, etc.)

Other Current Items that can be You can also use it to track supplies,
Asset converted to cash or deferred income taxes, estimated future
used up within one year income tax benefits, security deposits, and
such as prepaid investment property.
expenses, employee cash
advances, inventory, or
loans from your
business.

Other Asset Items that are neither You can also use Other Asset for tracking
Fixed Asset nor Other Intellectual property, confidential
Current Assets such as information, copyrights, designs, formulas,
goodwill, long term notes patents, and trademarks.
receivable and security
deposits that have been
paid by you.

Long Term Money that your You may also add the account to track
Liability business owes and Bonds payable, Lease payments, and
expects to pay back over Deferred income tax payments.
more than one year such
as Mortgages, Long-term
loans, and notes payable.

Current Money that your You can also use it to track benefits,
Liability business owes and contracts, entitlements, and salaries and
expects to pay within wages.
one year such as Sales Note: If you have one or more loans for
tax, Security deposits,
your business, you should create different
and payroll taxes.
Loan accounts for each one. For example, if
you have loans to fund for equipment,
inventory, or working capital, you should
 create different Loan accounts to track the
principal you owe for each one. When you
create the Loan account, QuickBooks sets
the account type to Other Current Liability.

2. Income and expense accounts

Income accounts track where your money is coming from. Expense accounts track what
your company is spending. When you record transactions to your balance sheet
accounts, you usually assign the transaction to one or more income expense accounts.

Note: QuickBooks doesn’t show balances for income and expense accounts in the chart
of accounts. To see these balances:

 Go to the Reports menu.

 Then select either Profit and Loss or Profit and Loss Detail.

Account What for When to add

Income Money that you get from Aside from tracking product-related
your normal day to day sales, service-related sales, and
business task such as sales discounts, you can also add income
revenue, professional fees, accounts to track:
reimbursable expense or  Residual income from
income for services commissions you receive
rendered.  Leveraged income from work
others perform for you, such as
sub-contractors
 Income you receive as a result
of franchising your business to
others
 Fees you receive from
seminars or classes you give

Other Income Categorizes income you You can also add this account if you
earned outside of the need to track:
normal business operations  Investment interest
like Dividend income,  Profit from the sale of non-
interest income, and inventory assets
Insurance reimbursements.

Expense Money that you spend. Use You can also add expense accounts to
 it for tracking expenses track:
related to the normal  Business-related travel costs
business operations such as  Business-related seminars or
advertising and promotion, conferences you attend
office supplies, insurance,  Dues or subscriptions related
legal fees, charitable to your business
contributions, and rent.

Other Expense Expenses that are outside You can also add this account to track
of your normal business, any expense that is occasional, or
such as a loss on the sale of expenses that do not have a direct
an asset or stockbroker impact on your business, such as:
fees, corporation taxes,  Traffic tickets
penalties, and legal  Lawsuits
settlements. In reports, other expenses are reported
separately from your regular business
expenses, so you can easily
distinguish between those that are
ongoing, and those that are
occasional.

Cost of Good These are the cost You may also add COGS to track:
Sold/ Job Costs associated with your line of  Equipment rentals
business. If you are a home  Overnight mail
builder, the job cost is  Court costs (for an attorney's
whatever costs you to build office)
a home. Job costs may  Blue prints (for an architect)
include materials,  Purchases made on behalf of a
subcontractors, equipment customer (such as furnishings
rental, and/or direct labor. bought by an interior designer
If you sell products, this or auto parts bought by a
includes cost of inventory, mechanic)
raw materials, freight
charges and any labor cost
that you incurred to finish
the product.

Accounts that QuickBooks sets up for you

When you create a new company file, you’ll need to choose a type of company. This will
determine the chart of accounts company file QuickBooks will create for you.
3. Standard accounts

QuickBooks creates the following accounts as you go.

Account What it is Automatically added by

QuickBooks when you...

Accounts Record of the outstanding bills of the Create a bill for the first
Payable (A/P) business. If your business uses multiple time.
A/P accounts, QuickBooks will let you
choose the account you want to use
when you enter and pay bills.

Accounts List of transactions related to customers Create an invoice for the

Receivable who owe you money. If you need to use first time.
(A/R) more than one A/R account, the
program will let you choose the A/R
account that you want to use when you
create an invoice or receive a payment.

Opening Ensures that you get a correct balance Enter the opening balance
Balance Equity sheet for your company, even before for a balance sheet
you've entered all your company's account.
assets and liabilities.

Payroll Expense Tracks payroll items (expense) for the Turn on payroll for the
company, including salaries, wages, first time.
bonuses, commissions, company
contributions such as company paid
health plan and company paid portion
of taxes such as Social Security and
Medicare.

Payroll Tracks taxes you deduct from your Turn on payroll for the
Liabilities employees' salary until you turn them first time.
over to the government, including
federal and state income withholding
taxes, local taxes and the employee paid
taxes like Medicare and Social Security.

Purchase Non-posting account that does not Create a purchase order

Orders affect your balance sheet. for the first time.

Retained Tracks profits from earlier periods Set up a new company

 Earnings which have not yet been distributed to file.
owners. At the beginning of fiscal year,
QuickBooks automatically transfers net
income into your retained earnings
account.

Sales Tax Tracks all sales tax you collect and pay. Turn on sales tax.
Payable

Uncategorized Enter an opening balance

Expense for a vendor.

Uncategorized Enter an opening balance

Income for a customer.

Undeposited Holds the payments collected until you Record a payment for an
Funds deposit them to the bank. invoice or sales order for
the first time.

Inventory Asset Tracks the current value of your Add an inventory part or
inventory. assembly for the first
time.

Reconciliation Tracks reconciliation adjustments. Enter an adjustment

Discrepancy reconcile with
discrepancies.

4. Industry-specific accounts

Here are downloadable Excel spreadsheets describing each account under each
industry type:

Open the Excel spreadsheet that corresponds with your version of Excel.

 Excel 2007 and later

 Excel 2003

From the downloaded Excel sheet, choose your industry from the Industry dropdown
menu. Then select your business type.
Common chart of accounts tasks
Add or edit an account
Chart of accounts is the nuts and bolts of your accounting. It’s already set up and
customized for you. But if you need new accounts to keep track of your transactions, you
can always add more.

Create, edit, or delete account in QuickBooks Desktop

Learn how to create, edit, or delete your account from your chart of accounts in QuickBooks
Desktop.

Your chart of accounts contains a complete list of your accounts and their balances. You use
it to track how much money your company has and owes, and how much money is coming
in and out.

Create a new account and subaccount

1. Go to Lists at the top menu, then select Chart of Accounts.
2. Select the Account drop-down at the bottom, then choose New to create a new
account.
3. Select an account type, then Continue.
4. Enter the account details.
a. Select the Subaccount of checkbox if it's a child account.
b. From the drop-down, choose the parent account.
5. Select Save & Close.

Edit an account
1. Go to Lists at the top menu, then select Chart of Accounts.
2. Right-click the account that you want to edit.
3. Select Edit Account, then make the necessary changes.
4. Select Save & Close.

Delete an account
1. Go to Lists at the top menu, then select Chart of Accounts.
2. Right-click the account that you want to delete.
3. Select Delete Account, then OK.

Add account numbers to your accounts

Although you are not required to use account numbers, your accountant may recommend
that you do so. QuickBooks inserts account numbers before account names in the chart of
accounts. The account number also appears in reports that list the account and on graphs.
Default account numbers are assigned to accounts based on account type and within ranges
based on generally accepted accounting principles (GAAP). You can change an account
number at any time.

Sample standard account numbers:

10000 – 19999 Assets

20000 – 29999 Liabilities

30000 – 39999 Equity

40000 - 49999 Income or Revenue

50000 - 59999 Job Costs/Cost of Goods Sold

60000 - 69999 Overhead Costs or Expenses

70000 - 79999 Other Income

80000 - 89999 Other Expense

Turn on account numbers in QuickBooks Desktop:

1. Go to the Edit menu then Accounting.

2. In the Company Preferences, check the Use account numbers box.
3. Select OK to close the preferences window.

Use account numbers in your chart of accounts

Learn how to turn on and use account numbers for your chart of accounts in QuickBooks
Online.

As your business grows, so does the list of accounts you use to categorize finances. If you
have an extensive chart of accounts, don't worry. You can keep your accounts organized
and easy to find by assigning numbers. We’ll show you how.

Step 1: Turn on account numbers

The account numbers feature is off by default. Here’s how to turn it on.

1. Go to Settings ⚙ and select Account and Settings.

2. Select the Advanced tab.
 3. Select Edit ✎ in the Chart of accounts section.
4. Select Enable account numbers. If you want account numbers to show on reports
and transactions, select Show account numbers.
5. Select Save and then Done.

Step 2: Assign account numbers

Want ideas for how to number your accounts?

1. Go to the Accounting menu and select Chart of Accounts.

2. Select Batch edit in the Action column.
3. Add account numbers in the Number column.
4. Once you’re done, select Save.

To see your accounts’ numbers, go to the Chart of Accounts. Select the Gear icon at the top
of the list (not on the navigation bar) in the Action column. Then, select Number.

Now you can spend less time looking for specific accounts in Chart of Accounts or when
adding transactions. Quickly find accounts using the numbers you assigned to them.

Learn more ways to organize your accounts

Here are more ways to keep your chart of accounts organized:

 Organize accounts into parent accounts and sub accounts

 Hide accounts you no longer use

Create subaccounts in your chart of accounts in QuickBooks Online

Learn how to create subaccounts to keep your chart of accounts organized.

In QuickBooks Online, you can create subaccounts to break down your expenses, income,
and more into greater detail. For example, you can divide your utilities account into
subaccounts, so you can track different types of utility payments, like gas, telephone, water,
and so on.

You can create subaccounts of any main (or “parent”) account. Use them to keep your chart
of accounts organized and make more detailed reports. Here's how.

Create a new subaccount

Follow the steps below to add a subaccount under an existing account. You can also create
a new parent account first if you need to.
 1. Go to Settings ⚙ and select Chart of Accounts.
2. Select New.
3. Select the account type and detail type. You can learn more about account types and
detail types if you have questions.
4. Select Is sub-account and then enter the parent account.
5. Give your new subaccount a name. You can also add a description.
6. Select an When do you want to start tracking your finances from this account in
QuickBooks option Note: Only some account types need this, like bank, credit card,
asset, and liability. If you need help, you can learn more about opening balances.
7. Select Save and Close.

Change an existing account into a subaccount

You can turn an existing account into a subaccount.

1. Go to Settings ⚙ and select Chart of Accounts.

2. Find the account and select the small arrow ▼ in the action column. Then select
Edit.
3. Select Is sub-account and then enter the parent account.
4. Select Save and Close.

How your subaccounts will look like in your Chart of Accounts tab and reports

Explore how Craig's Design and Landscaping uses parent and subaccounts in this sample
QuickBooks company.

Chart of accounts

Here’s how your accounts will look like in your Chart of Accounts tab.
Reports

When you run reports, you'll get a clearer picture of your income, expenses, and more.

Check out this sample profit and loss report. Using subaccounts, it gives a breakdown of
what Craig's Design and Landscaping makes on their landscaping services.