Quick Books Setup Made Simply Easy
These basic ones can be adapted to other variations of business but follow these general guidelines- 100 for assets, 200 for liabilities, 300 for equity, 400 for sales, 500 for COGS or normal expenses, 600 for overhead expenses, 700 for other expense, 800 for other income. Within each, use the nice even numbers for your main things, like 100 for your main operating checking account, 110 for A/R, 150 for building or equipment, 200 for A/P, 250 for loan, write out your main accounts first leaving gaps between, then go back and fill in the secondary accounts. For accumulated depreciation, use the next number so it’s an odd number and will always appear immediately after, like Building 150, A/D Building 151 QuickBooks tool hub .
The Chart Of Accounts (COA) should list everything in order from nearness to cash and from short term to long term for the balance sheet items 100-399. Nearness to cash means petty cash if you have it should be first, checking second, savings third, CD forth, receivables 5th, note receivable 6th, inventory 7th, supplies, then equipment, then realty. In other words, the harder it would be to sell, the farther it is from being cash. Current assets are those that will hopefully be converted to cash within 1 year. Inventory is current, Note Receivable is not. Current liabilities would be paid within a year, like A/P, Mortgage would be long term. It should list Income and then expenses by COGS, materials, labor, tooling, equipment rental, then overhead- rent, utilities, insurance, things that can not be traced back to specific jobs.
Things having nothing to do with the normal operation of the business should be last 700-999. An example is the business received a settlement for insurance. In the income and expenses, use your even, easy to remember numbers for your main accounts. Use increments of 5 between account numbers 500, 505, 510… makes it easier to deal with and remember. Leave gaps between your main accounts, write first, last, main ones in the middle and then space out and fill in gaps. Even when your done leave gaps if you can for future account additions.
But a word of caution, keep it simple. I’ve seen some people add accounts for everything and they end up bogged down in a quagmire of confusing minutiae with a COA so complicated and long, it defeats the purpose of providing useful information. Another caution, do not add accounts based on specific customers or specific vendors, keep it very general. You will always be able to “drill down” and get specific answers. Also, if you can group the income and expenses of the business into classes, like different locations, or different lines of business, or different properties if you are a landlord, you’ll want to use classes in QuickBooks. So you will not be creating separate COA accounts for these “divisions”. Always boil the COA down to the simplest one possible. Do not have accounts in there that you don’t use, just get rid of them. The simpler the better. I once saw a contractor who literally had hundreds of accounts, his bookkeeper had things so convoluted and in talking with them, she didn’t think anything was wrong and he couldn’t make sense of anything but was afraid to contradict his bookkeeper, what a mess!