Turn on suggestions
Auto-suggest helps you quickly narrow down your search results by suggesting possible matches as you type.
Showing results for
0
0
2827
on Updated - last edited by
LisaNullar
Assets? Liabilities? What does it all mean or where does it all fit in? I’m glad you found this article. Today, I’m going to give you a crash course on how to organize your chart of accounts in QuickBooks Online.
Reminder: While reading articles is great when you need information fast, all of us can benefit from hands on learning. Join our upcoming webinar to learn more about this topic and and a few other basic accounting tips.
You’ll learn how to:
- Organize your chart of accounts
- Sort your transactions into the right accounts
- Create and understand key financial statements
- Edit journal entries to fix errors
- Find and work with an accountant
Register for the Accounting 101 webinar here.
Now let’s get back to the chart of accounts! First, let’s define exactly what the chart of accounts (COA) is. Simply put, it is an index of every accounting, or ledger account in QuickBooks Online. Each account is either recording money going in, or money going out. The entries in the chart of accounts are used to produce profit & loss statements and balance sheets. Keeping these ledger accounts organized will help to ensure accuracy for your books and financial reports.
The four primary account types in the chart of accounts:
- Assets: a record of purchases for things like vehicles, equipment, buildings, and other assets used for business.
- Liabilities: a record of money you owe but haven't yet paid like loans, mortgages, and lines of credit.
- Income: transactions and payments related to your normal day-to-day business, such as sales revenue or income for services rendered.
- Expenses: a record of money you spend on expenses related to normal business operations, such as advertising and promotion, office supplies, and rent.
Let’s take a closer look at each of these types.
Assets
Anything that your business owns is an asset. There are two types of assets; fixed assets and liquid assets. Some examples of fixed assets are:
- Owned property
- Company vehicles
- Inventory
Some examples of liquid assets are:
- Money in the bank
- Accounts receivables
- Mutual funds
Liabilities
In layman’s terms, liabilities are transactions or records in which your business is financially responsible for. Here are some examples of liability accounts:
- Bank loans
- Mortgages
- Taxes
- Bills
Income
Income is the money your business receives in exchange for products or services offered. Many business owners try to keep things simple with two income categories; products and services. However, this won’t give you a complete picture of your business. With QuickBooks Online, you can split your income line into each product or service your business offers. This makes it easier to see exactly which parts of your business generate the most revenue.
Tip: Be sure to use clear and descriptive titles when creating your chart of accounts to avoid confusion later down the road.
Expenses
And finally, your expense accounts represent money that is spent operating your business, or money out. When creating an expense account, consider creating subaccounts. This will provide you with greater detail to potentially identify savings, which increases your profits.
There you have it! That was a basic overview of organizing your chart of accounts. To learn more about the chart of account, check out this help article below.
I hope we catch you at our upcoming webinar. See you there! I’ll drop that link one more time in case you need it, here.
