This is perhaps the most important part of your QuickBooks setup. It’s normally done by your accountant, not yourself. The chart of accounts is a list of the accounts you use to record business transactions. Some people may call it the general ledger.

For example, you want to keep track of all of the transactions in your business, and each time you pay for a delivery you want to write it down, regardless of the exact company who did the delivery. Think categories. Let’s call this delivery expense. This could be provided by several suppliers such as the post office, a the UPS courier and so on. We want to record it correctly, but those two would use the Delivery Expense account in the chart of accounts.

We have types of accounts in the chart of accounts. We have income, expenses, assets, liabilities and owner’s equity. We also have sub-types for each of these. How these are set up depends on the type of business you are running and the opinion of you and your accountant.

In QuickBooks, we need the include three pieces of information create an account: Name, Type and Detail Type. Name can be anything you want. You just type it in. What you type in shows up on the reports. In the Udemy course, the instructor suggests using all capital letters when you are creating you own account names so that they are differentiated from the accounts that QuickBooks provides automatically.

The account type determines what kinds of transactions you can put into that account. The account type also determines where the accounts in that type appear on the financial statements.

The Detail Type is the third piece of information. It’s also called the Tax Mapping. The Detail Type is really for the accountant at tax time when he/she fills out the tax forms. In your day-to-day operations of the business, the tax type will not affect you.

QBO has already added a huge number of accounts to your chart of accounts. That’s okay. We can leave those for now. Those extra ones are for your accountant to deal with. This is just a post on bookkeeping, not accounting.

Opening the Chart of Accounts

You can use the Cog Wheel, Chart of accounts (under YOUR COMPANY), or go to the left panel and choose Transactions, Chart of accounts. If its the first time, click the button See your chart of accounts.

In the above screenshot you can see that I have already added several accounts. I used capital letter to name them. I also applied a filter to the list so that only the ones I created are shown.

Creating a New Account

Click the New button. Fill in a the three required fields. The screenshot below just show the top part of the window. There is a Save button below for when you are ready to save it.

You can edit an existing account. For Accounts Receivable you can find it in the list, slide over to the right side, click the pull down and click Edit. In our example, we just change the name (at the top) to capital letters. It’s in capitals because it’s easier for our eyes to see when we are learning. If you are entering EQUIPMENT as an account you may notice, depending on your version of QBO, that the Account Type will either be Long-Term Assets or Fixed Assets.

If you changed Accounts Receivable and Accounts Payable by editing them and changing them to capital letters, will they show up when you filter the list and choose Created by You? No. But they are there, just the same.