by China Yadlapalli
Chart of Accounts is list of all accounts in your file. Accounts are of different types, reflecting different nature of transactions. Accounts segregate the transactions like money borrowed, money spent, money generated etc.,(loans, expenses, revenue etc). Whenever you enter a transaction in QuickBooks file, two of these accounts are affected. That is called double entry system in the accounting parlance. Don’t bother too much if this sounds confusing. The below example should help…
The business entity borrowed a loan of $50,000 from Universal Lenders and the check is deposited in the bank account and is entered in QuickBooks file. QuickBooks does the following.
Increases Bank Account Balance by $50,000
Increases/creates the Loan a/c (Liability for the Business Entity) by $50,000
Bank A/c. Dr $50,000
Loan from Universal Lenders CR $50,000
While there is no specification as to number of accounts it is logical to keep the chart of accounts same/unchanged so that, year to year comparisons will be meaningful. If more detailed accounting is desired QuickBooks provides for ‘SUB ACCOUNT’ concept which will allow for more detailed accounting while ‘COLLAPSE’ concept enables comparisons meaningful. A thoughtful customization of Chart of Accounts at the time of creating the file will go a long way to keep it stable.
Chart of Accounts is the skeleton for QuickBooks file which tracks all the money coming in, money going out, obligations to pay etc. It groups all the accounts depending on the classification of each account
QuickBooks can be enabled to number all the accounts. The numbers appear before account names based on account type and within ranges based on Generally Accepted Accounting Principles. Account numbers can be changed by editing the particular account.
NO NUMBERS FOR BANK A/cs:
Please note Numbers are not allotted to Bank Accounts.
HOW TO ENABLE NUMBERING:
To enable QuickBooks automatically number the accounts, goto Edit>Preferences>Accounting >Company Preferences and check ‘Use Account Numbers’ box
QuickBooks by default allots numbers to each account to indicate the class to which it belongs: For example all Equity accounts start with 3, Income accounts with 4, Cost of Goods start with 5 etc. Next digits in the account number indicates the sub-class of the account like 1000-1499 for Current Assets. Thus first digit of sub accounts start with the same number just like its parent account.