Welcome to the FitSmallBusiness QuickBooks Online training course! In this lesson, we’re going to cover how to add, delete and modify the chart of accounts list.
You can follow along on your own QuickBooks Online account. If you don’t have one already, click here to sign up for a free 30-day trial and follow along below.
To complete this lesson, you can watch the video below, read through the step-by-step instructions or do both. If you’d rather save your time and hire a local bookkeeper to set this up for you, click here for access to hundreds of QuickBooks Certified ProAdvisors.
If you’d like to learn more about managing income, expenses and reporting in QuickBooks, download our free 39-course QuickBooks tutorial here.
The Importance of Setting Up the Chart of Accounts
The Chart of Accounts is the backbone of your bookkeeping and accounting system. All of the transactions that you enter into QuickBooks are categorized behind the scenes using the Chart of Accounts so that financial statements, such as your profit & loss statement or income statement, can be generated.
What Accounts QuickBooks will Create for You
QuickBooks Online will create a chart of accounts list based on the industry that you selected when you set up your account.
Below is a list of accounts that QuickBooks will automatically create for you:
Review Your QuickBooks Chart of Accounts List
If you want to keep track of something that is not on the default QuickBooks chart of accounts list, you will need to create a new account. For example, let’s say that you provide training to customers and you want to track group workshops separately from one-on-one training sessions. You would need to add new accounts to the chart of accounts to do this.
Here are some things to consider when deciding if you need a new account:
- What items would you like to track that are not currently on your QuickBooks chart of accounts list? For example, if you want to keep a close eye on the fees that your bank charges you, then you could set up an expense account for bank service charges.
- What accounts are on the list that you know you will never use? For example, if you don’t sell products, then you would have no use for an account that tracks shipping and delivery fees.
Once you have decided what accounts you would like to add or delete, you are ready to make the necessary changes in QuickBooks. We will use our fictitious business, Paul’s Plumbing to walk through how to add, delete or modify the QuickBooks chart of accounts list.
Chart of Accounts Quick Reference Chart
Below, you will find a quick reference chart to assist you with setting up new accounts and to give you the big picture of what’s happening “behind the scenes” in QuickBooks. The first column is a list of the categories you can choose from when setting up an account. The second column is examples of accounts that you would set up in QuickBooks Online. The last column is the financial statement that the account will appear on in QuickBooks.
Example: Paul would like to track the income that he makes from his residential customers separate from the income that he makes from commercial customers.
Let’s create these two accounts for Paul’s Plumbing:
Step 1 – Display the Chart of Accounts List
To navigate to your chart of accounts, click on the gear icon as indicated below and Chart of Accounts is listed below the Your Company column as indicated below.
Step 2 – Click the New Button as Indicated Below:
Step 3 – Complete the Fields Below:
Here are the fields of information that need to be completed for a new account:
- Account type: Typically you will select Sales of Product Income if you sell products or service and fee income if you sell services.
- Detail type: Based on which category type you selected, QuickBooks will provide you with a brief explanation of when to use this account type. This can be very helpful if you are unsure about how to categorize a new account.
- Detail type explanation: This field explains the detail type selected in Step 2.
- Name: This is the name of the account that will appear on your chart of accounts list
- Description: This is where you can put any additional description about this account. If you don’t have anything additional to add, just put the same info here that you entered in the Name field.
To gain a better understanding of how the chart of accounts works and how the impact your financial statements, check out our Chart of Accounts webinar.
Step 4 – Save the New Account
Click the Save and New button and repeat steps 1 through 3 to set up another account.
Once both accounts have been set up, the new accounts will appear on the chart of accounts list, as indicated below:
How to Delete an Account from the Chart of Accounts List
You should delete accounts that you do not plan to use. This can be helpful for a couple of reasons:
- The account won’t accidentally be used in transactions
- It makes your Chart of Accounts list much more manageable
A word of caution: You should never delete an account that you have already used in a transaction.
Step 1 – Display the Chart of Accounts in QuickBooks
To navigate to your chart of accounts, click on the Gear icon as indicated below and the Chart of Accounts is listed below the Your Company column.
Step 2 – Delete Account
Once you have the Chart of Accounts list on your screen, scroll down to the account that you would like to delete. Click on the drop-down arrow in the far right column next to that account and select Delete, as indicated below.
Step 3 – Confirm Delete Action
In the next screen, you will have the option to proceed with deleting the account or canceling it, as indicated below.
A word of caution: Once you select delete, there is no automatic undo button. If you accidentally delete an account, you will have to add it back again.
How to Modify an Account from the Chart of Accounts List
Listed below are the steps to follow to edit an account that was previously created:
Step 1 – Select the Account
In QuickBooks, you can modify accounts at any time. From the Chart of Accounts, scroll down to the account that you want to make changes to and click the drop arrow next to Run Report, select Edit as indicated below:
Step 2 – Make Modifications to the Account
The following window should open where you can make changes to the Account Name and Account Description fields as indicated below.
Important: Do not change the Category Type if you have already entered transactions using this account. If you do so, it could impact your financial statements.
Step 3 – Save & Close
Don’t forget to save your changes before exiting your account; otherwise, you will lose your work.
That wraps up the section on Setting Up the Chart of Accounts. The next lesson in our QuickBooks Online Training Course will be How to Set Up Products & Services List Setup in QuickBooks Online. In this lesson, we’ll explain how to track inventory in QuickBooks Online.
To access this tutorial or any other video tutorial, you can download the entire course here.