From the course: QuickBooks Pro 2020 Essential Training

Work with the chart of accounts - QuickBooks Pro Tutorial

From the course: QuickBooks Pro 2020 Essential Training

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Work with the chart of accounts

- [Instructor] When I set my new company up, I showed you how to choose an industry that's close to the one 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 let's do that now. 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 and you do need QuickBooks installed on your computer first. I'll go ahead and select the chart of accounts on the right hand side. Here, I can see a list of starting accounts that you have in the company file that we created. These accounts are created so that you can match a line item transaction, such as 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 one is credited. The 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 account, and the balance. You can have things like fixed assets. These are items, such as furniture and equipment. You can also have liability accounts. These are accounts that contain money you're 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 have money that you put toward 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. And you can have multiple account types. For example, here, you can see that I have lots of different expense accounts. You can also have lots of different income accounts. These are other ways that you'll get money towards your business. Once you start sending out invoices to clients and entering bills to vendors, you'll see new accounts here 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 here called accounts receivable. 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've sent. Over this course, as we create invoices and add products and services, you will become very familiar with these accounts and how you interact with them on a day-to-day basis. Let's add an account. To add one, click account all the way on the bottom left hand side of the screen and choose new, all the way at the top. You can also use the keyboard shortcut, Control + N. The first thing we need to decide is what type of account it is. Is it an income or expense account or an asset and liability account, such as a loan or credit card? In this case, I'll choose expense. I'll click the blue continue button, and now I want to create an account to track my conference fee when I attend conferences. So here's where I can give my account a name. This is for my reference only. It isn't used in any official capacity, so I'll call it conference fee. I don't need to make this a sub account of anything, but if I wanted to, I could. For example, I can place a check mark here and make it a sub account of travel expenses. I could put in a description, if I wanted to, for my reference and I can also use a tax-line mapping. In this case, for tax-line mapping, I'll choose schedule C travel. I could click save and close if I'm done, but I want to create one more, so I'll click save and new. This time, I'm going to change the account type. All the way at the top of the screen, I'll click the dropdown and I'm going to create a new income account. Two Trees Olive Oil is an olive oil shop. We also do a lot of tasting parties. It's a service that we offer and this is an income account because I'm going to be getting paid for this service and these parties. I want to track them, so that's why I'll create an account. And in the account name, I'm going to call it a tasting party. I'm not going to make it a sub account of anything, and in the tax-line mapping, I'm going to 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's my tasting party and down at the bottom, here's my conference fee, which is a sub account of travel expenses.

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