- Choosing a Chart of Accounts
- QuickBooks Gives You a Standard List of Accounts
- Numbering Your Chart of Accounts
- Printing a Chart of Accounts List
- Troubleshooting
- CPA Tip: Creating a Chart of Accounts
This chapter is from the book
This chapter is from the book
This chapter is from the book
QuickBooks Gives You a Standard List of Accounts
One of the biggest advantages to using the EasyStep interview rather than trying to set up your company from the ground up is that QuickBooks assigns a standard list of accounts to your company, based on the company description that you provide.
ë For more information about setting up a company with the EasyStep interview, see Chapter 6, "The EasyStep Interview," Chapter 7, "Setting Up Accounts, Inventory, Fixed Assets, and Payroll,"
This standard list of accounts includes accounts of all of the types described in Chapter 2: assets, liabilities, equity, income, and expense. When you choose the QuickBooks standard Chart of Accounts, a basic list of accounts is assigned by QuickBooks and is geared to your type of company, based on the information you entered in the EasyStep interview.
You have the option in the EasyStep interview to not accept this standard list of accounts and to create your own accounts instead after the interview has finished. I recommend accepting the standard list and then deleting the accounts you don't need and adding new accounts (the process for deleting and adding accounts is explained in the next two sections). You will save a lot of time by using the standard account list as a starting point.
Adding Accounts
Whether you choose the standard list of accounts for your company or decide to start from scratch, you no doubt will have to add some accounts so that all your company's financial transactions can be properly classified. As time passes and your company grows and changes, you will find many opportunities to add to and further customize your chart of accounts. Use the following steps to add a new account.
Tip
You can add several accounts at once by clicking the Next button after each addition, or you can add one account at a time, as your business changes.
Choose Lists, Chart of Accounts (or you can press Ctrl+A), or click the Chart of Accounts button on the Company Navigator screen. The Chart of Accounts window appears listing all account names currently available to your business.
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Click the Account button at the bottom of the window, as shown in Figure 3.1, and a menu appears.
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Choose New. The New Account window appears (see Figure 3.2).
In the Type field, select the type of account.
Enter the name you want to use for this account. This is the name that appears on your company financial statements and other reports.
If this account is to appear as a subaccount of another—for example, Room Additions might be a subaccount of New Construction—check the check box and fill in the account of which this is a subaccount (the total of all subaccounts adds up to the total of the main account).
Enter an optional description of the account in the designated field. You might also see a field for a note about the account, or a bank number. These fields are optional and are designed to allow you to describe the kind of information you want to include in this account and any customer numbers or other pertinent information.
In the Tax Line field, choose the line of your tax return on which this account will be entered, if you plan to use QuickBooks to help you organize your tax information.
In the Opening Balance field, enter the balance (if any) in this account as of your start date. (The opening balance and start date fields only appear if the account is an asset, liability, or equity account.)
Verify that the date in the as of date field is correct. The date to enter here is the date on which you start recording your information in QuickBooks relating to this account.
Click Next to add another account, or OK to close the New Account window.
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Note
When viewing the Chart of Accounts list, use the shortcut Ctrl+N to open the New Account window.
Figure 3.1 Examine your entire list of accounts in the Chart of Accounts window.
Figure 3.2 Enter all the information about your new account here.
Deleting Accounts
You might find that the standard list of accounts provided by QuickBooks includes some account names that you don't want to use. It's easy to delete an account that you haven't used yet.
Choose Lists, Chart of Accounts. The Chart of Accounts window appears.
Click the name of an account that you are certain you no longer need.
Click the Account button at the bottom of the window. A menu appears.
Choose Delete. A dialog box appears asking if you are sure you want to delete this account. Click OK, and the account is removed from your Chart of Accounts.
Note
When viewing the Chart of Accounts list, click the name of the account that you want to delete (or scroll down to it), and then use the shortcut Ctrl+D to delete the account.
Deactivating an Account That Has Been Used
An account that has a balance in it (notice the balances across from the account names in Figure 3.3) cannot be deleted. You can't remove accounts that have balances associated with them—that throws off the total company balances on your financial statements.
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Figure 3.3 Accounts with balances cannot be deleted.
If the balance is zero, it seems as if you ought to be able to remove the account from your records. This is not necessarily the case. If any transactions have ever been recorded in the account, QuickBooks requires that the account stay on your Chart of Accounts list, even if you don't expect to use the account again.
For example, I charged my Rubbish Removal expense account with a $20 purchase of office supplies, and then realized my mistake and reclassified the $20 to the correct account. My Rubbish Removal account now has a zero balance. I realize I'm not going to need that Rubbish Removal account after all because the property taxes my company pays cover the cost of rubbish removal. I would like to delete the Rubbish Removal account.
Because there has been some activity in the Rubbish Removal account, when I try to delete the account, I get the message you see in Figure 3.4.
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Figure 3.4 Warning from QuickBooks: You can't delete an account that has had transactions in it.
If I really want to get rid of that account, I have two choices. The first choice is to make the account inactive. Making the account inactive doesn't remove it from my Chart of Accounts list. Inactive status does, however, hide the account so that the account no longer appears on my list.
Note
Inactive status applies only to the way accounts are listed in the Chart of Accounts window; inactive accounts can still be used.
You can make the account inactive by clicking the Make Inactive button in the window that appears when you try to delete the account. If you want to make an account inactive without trying to delete the account first, follow these steps:
With the Chart of Accounts window in view, click the name of the account that you want to make inactive.
Click the Account button.
From the resulting menu, choose Make Inactive. The unwanted account disappears from the Chart of Accounts list.
You can view inactive accounts on the Chart of Accounts list by checking the Show All box at the bottom of the Chart of Accounts window. Inactive accounts appear with a gray X to the left of the account name.
To make an inactive account active again, click the account name, click the Account button in the Chart of Accounts window, and then choose Make Active.
Note
If you attempt to use an inactive account while entering a transaction in QuickBooks, you will be asked if you want to use the account just once, in which case the account will remain inactive, or if you want to reactivate the account. You must select one of these choices before you can use the account in your transaction.
Deleting (Merging) an Account That Has Been Used
Earlier in this chapter, I indicated that QuickBooks doesn't want you to delete any accounts in which there has been activity, even if the balance in the account is zero. Although this is a true statement, you can get around this dilemma if you are bound and determined to delete an account.
The way to delete an account that has had transactions in the past is to merge the account into another account. By merging an account into another account, you transfer all the transactions from the original account into the new account, essentially combining the two accounts into one. During the merge process, QuickBooks automatically deletes the old account.
Before you begin merging an account, have in mind the exact names of the two accounts you use in this operation: the account you want to remove from the list and the account that will absorb the transactions in the deleted account.
Accounts that are being merged must be at the same level in the Chart of Accounts and must be the same type of account. If one of the accounts being merged is an Other Current Asset, the other account must also be an Other Current Asset. If one account is a subaccount, the other account must be a subaccount, too. The two accounts, however, do not need to be subaccounts of the same major account. Use the following steps to merge accounts.
Tip
You can easily move the level of an account from subaccount up to major account, from major account to subaccount, from subaccount to sub-subaccount, and so on. With the Chart of Accounts window onscreen, drag the little diamond that appears to the left of the account name. If you drag to the right or left, the hierarchical level of the account changes accordingly. If you drag up or down, you can move the account to a new location (such as under a different major account) in the list.
From the Lists menu, choose Chart of Accounts (or press Ctrl+A). The Chart of Accounts window appears.
Click once on the account that you want to delete.
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Click the Account button, and then choose Edit (or press Ctrl+E). The Edit Account window appears (see Figure 3.5).
Change the name of the account that you no longer want to the exact name of the account into which its transactions are to be merged. Make sure that you spell the name of the new account correctly, and make sure that you indicate the same subaccount level as that of the new account.
Click OK. You see a message that reads, "This name is already being used. Would you like to merge them?" Answer Yes.
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Figure 3.5 The name of the old account appears in the Name section. Replace this with the name of the account into which you want to merge the transactions of the old account.
All transactions of the original account are now a part of the account into which you merged. The original account has been deleted.