How to Set Up the Chart of Accounts List in QuickBooks 2011
QuickBooks' Chart of Accounts List is a list of accounts that you use to categorize your income, expense, assets, liabilities, and owner's equity amounts. If you want to see a particular line item of financial data on a report, you need an account for that line item. If you want to budget by a particular line item, you need an account for that budget amount. If you want to report some bit of financial information on your tax returns, you need an account to collect that specific data.
Fortunately, the steps for creating new accounts are quite straightforward. To set up a new account within your Chart of Accounts List, follow these steps:
1
Choose Lists→Chart of Accounts.
QuickBooks displays the Chart of Accounts window.
2
Choose Account→New at the bottom of the window.
QuickBooks displays the first Add New Account window.
3
Use the Type buttons to identify the type of account that you're adding.
QuickBooks supplies a number of account types. These account groups essentially tell QuickBooks in which area of a financial statement account data gets reported. Note that the first Add New Account window shows examples of the selected account type in the box above the Continue and Cancel command buttons.
QuickBooks displays the second Add New Account window.
5
Use the Name box to give your new account a unique name.
The name that you give the account will appear on your financial statements.
6
If the account you're adding is a subaccount of a parent account, indicate the parent account.
Select the Subaccount Of check box and choose the parent account from the drop-down list.
7
(Optional) If you're setting a bank account that uses another currency other than your home country currency, select the bank account currency from the Currency drop-down list box.
If you told QuickBooks that you work in multiple currencies — you would have done this during the EasyStep Interview setup process — QuickBooks wants you to identify those bank accounts, customers, and vendors that use a currency different from your home currency.
8
Provide other account information.
You can provide a description, but QuickBooks can still use the account name on financial statements if you don't. The Add New Account window also includes a Bank Acct. No. box that lets you record the bank account number. Other account types may have similar boxes for storing related account information.
9
Identify the tax line on which the account information is to be reported by selecting a tax form and tax line from the Tax-Line Mapping drop-down list.
You might not need to assign a particular account to a tax line if that account data isn't reported on the business's tax return. A bank account for a sole proprietor doesn't have any required tax line data, for example, but cash account balances are recorded on a tax return of a corporation.
10
(Optional but dangerous) Consider recording an opening balance for the account.
Typically, you should set starting balances for accounts using a journal entry, not here. But the second Add New Account window does let you set the starting balance for the account as of some date.
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accounting equation
The equation Assets = Liabilities + Equity, which demonstrates the two-sided nature of accounting and is useful for explaining the concept of double-entry accounting (or double-entry bookkeeping).
Accounting Glossary
accounting period
The time period for which financial information is being tracked in a business, such as monthly, quarterly, or annually.
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accounts receivable
An account that records the amounts that customers owe to a business.
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adjusting entry
A correction made to a bookkeeping account that adjusts for accounting errors or other necessary changes at the end of the accounting period.
Accounting Glossary
cash flows
Used to describe the source or sources of cash or how cash is used.
Accounting Glossary
Chart of Accounts
A list of all the accounts used by a business, including what types of transactions go into each account.
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debit
An accounting entry that increases an asset or expense account, and decreases a liability or income account.
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dividends
A portion of a company’s profits paid by share of common stock on a quarterly or annual basis.
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Financial Accounting Standards Board. FASB is the highest-ranking authority in the private (non-government) sector of the U.S. for making pronouncements on GAAP and for keeping accounting standards up-to-date.
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fidelity bonds
A type of insurance — typically carried by employers for their employees — that helps guard against theft and reduce the risk of loss.
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First-in, first-out. A method for costs of goods sold in which a business charges out product costs to cost of goods sold expense in the chronological order in which the goods were acquired.
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fungible
Describes a product that is interchangeable and virtually indistinguishable from another product.
Accounting Glossary
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Accounting Glossary
IASB
International Accounting Standards Board. The IASB (based in London) is the main authoritative accounting standards setter outside the U.S.
Accounting Glossary
Journals
The location in which bookkeepers keep records (in chronological order) of daily company transactions.
Accounting Glossary
LIFO
Last-in, first-out. A method for costs of goods sold that selects the last item you purchased first, and then works backward until you have the total cost for the total number of units sold during the period.
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LLP
Limited liability partnership. A legal structure that state laws offer to qualified professionals in which all the partners have limited liability.
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PC
Professional corporation. A legal structure that state laws offer to qualified professionals who otherwise would have to operate as an unlimited partnership liability.
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petty cash
A cash account that businesses keep on hand for unexpected expenses.
Accounting Glossary
revenue
Monies that are collected in the process of selling a company’s goods and services.
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salvage value
The amount that an asset is worth after it has been fully depreciated.
Accounting Glossary
statement of cash flows
A financial statement that summarizes a business’s cash inflows and outflows during an accounting period.
Accounting Glossary
transactions
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Accounting Glossary
worker’s compensation insurance
A type of insurance carried by employers that covers its employees in case they are injured on the job.
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