In my last post, I covered How to Set Up Chart of Accounts Part 1 . Just as a reminder, the chart of accounts is the foundation of everything you do in QBO. It’s important to set up the chart of accounts correctly so that you don’t have problems later. In this post, Setting Up the Charts of Accounts: How to Set Up Chart of Accounts Part 2, you will learn the following:
- How to add accounts to the chart of accounts
- Best practices when setting up the chart of accounts
How to add an account to the chart of accounts in QBO
Click on the gear located on the upper right side
Select “Chart of Accounts”
From the top right click “New”
You will see this window
Choose the “Category Type” – in most cases, you will be adding Income or Expense type accounts.
Choose the Detail Type that best matches the account name that you want. Make your best guess – it won’t hurt anything if you get it wrong.
Change the account Name on the right side. Enter a Description if you need to.
How to set up a sub-account in the chart of accounts
Follow the same steps for adding a new account to the chart of accounts (as shows above).
Check “is sub-account“, then choose the parent account for the list. For example, if you want to add Hotel expense as a sub account of Travel expense:
- Add an account for Hotel Expense
- Check “is sub-account“
- Select Travel expense from the list
Best Practices When Setting Up the chart of accounts
How do you know when you’re adding too many sub-accounts?
If you want to track travel expenses using sub accounts like Airfare, Auto, Hotel and Travel Meals, will that be reasonable? YES.
If you want to track office expenses using sub accounts like Paperclips, Pens, Paper, Toner, Binders, Notebooks, etc., those are too many sub accounts and you don’t really need them.
Hint: Avoid getting overly detailed – don’t add so many accounts – the chart of accounts will become long and cluttered.
This concludes our series – Setting Up the Charts of Accounts: How to Set Up Chart of Accounts Part 2. I highly recommend that you spend time setting up and customizing your chart of accounts. As I said, everything in QBO builds on the chart of accounts. When you set up the chart of accounts correctly in QuickBooks Online you’ll be well on your way to doing 5 Minute Bookkeeping!
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