How to Set Up the Chart of Accounts in QuickBooks 2019 – Part 1

Watch QuickBooks 2019 video tutorial. Learn about the different types of accounts such as bank accounts, assets, accounts receivable and accounts payable. We will also show you how to set up a new bank account.

 

FREE QuickBooks 2019 Video Course
 

Welcome back. We’re working in module three and we’re down now to section three. Now, we’re going to talk about the Chart of Accounts. There are two parts to this particular section so make sure you watch both parts. It’s very, very important!

The most important thing about QuickBooks is the Chart of Accounts. If your accounting is not set up correctly, then, you’re going to get reports that aren’t accurate. And you’re going to wonder why!

I want to go through each of these with you. I’ll talk to you a little bit about the ones that you have to set up. And make sure they’re set up correctly. So that, you have a good start when you actually start working with your QuickBooks.

The Chart of Accounts is the most important part of QuickBooks. Remember, I told you that you will find an icon for it right here! See your Home screen.

Now, if you don’t know what the Chart of Accounts is. Basically, every single thing in QuickBooks relates back to something on this list. Every time you spend money, you’re going to have to tell QuickBooks what that money was for.

Did you buy a meal for someone for the business? Did you buy some office supplies? Maybe you had to get a license or a permit.

When you received money was it from a sale for the business? Maybe it was something being reimbursed to you. Every single thing in QuickBooks will relate back to this. So it’s so important that you have it set up correctly.

Let’s go down this list and we’re going to look at the different types that you see over in this column here. And I’m going to show you the ones that you’ll need to set up and how to set up some of these correctly so that you don’t have problems later on down the road.

The first type I’d like to talk to you about are what they call Bank Accounts. A bank account would be a checking account, a savings account, a money market account, any kind of banking type account that you might have.

Right now if you wanted to actually make a deposit you have no bank account to put the money into. Let’s go ahead and set one up so you’ll see how this works.

I’m going to right-click and choose the New option from the list. And by the way that’s the exact same thing as coming to the very bottom left-hand side of your screen where you see this button that says Account.

And if you click there you’ll see the same options: New, Edit, Delete, and Make Inactive. New is obviously for a new account like we’re creating.

I can always edit one, meaning the name of the account or other information. And deleting. You can delete an account if you’ve never used it. But if you have used it once you cannot delete it.

If you’ve got an account that you’d like to just hide from the list, maybe it’s an old bank account that you don’t use anymore, you can just make it inactive.

The numbers will still pull onto reports. They just won’t be in this list when you’re using to pick an item.

I’m going to go ahead and right click and choose New and the first thing it asks is what type of account is this. This is a bank account. And I just mentioned that bank accounts were one of these types of accounts right here.

Let me also mention if you accept PayPal or Square, Bitcoin, any of those other types of monies, those are all set up as bank accounts as well because they’re just online bank accounts. That’s all they are.

Your business may also have a little petty cash drawer and maybe you want to track the money in and out. You could set that up as a bank account.

The other one that you might want to consider is if you’re a small business owner, and you spend cash for business-type items then you may want to set up an account in here the same way and call it Cash Expenditures, and just put all those cash receipts in there.

It’ll always run a negative but it’s just there to track those particular types of items.

I’m going to make sure I’ve clicked on Bank over here and I’m going to hit Continue. If you picked the wrong type on the previous screen you’ll see you get another chance to pick the correct type up here.

Here’s where you can name your account. I’m just going to say Checking but you could call it the name of your bank. If you’ve got two accounts at the same bank you might call one Operating Account, one Payroll Account. It really doesn’t matter, but every checking account gets set up separately.

This is not a subaccount of another. We’ll talk about subaccounts a little bit later.

I could put in a description if I wanted to. That is totally optional. I do not need the bank account or the routing number for any reason.

I will need an opening balance though. If you do not put an opening balance it will assume zero.

FREE QuickBooks 2019 Video Course
 
Now let’s talk about where you get this number from. You need to decide on your start date.

Are you starting at the beginning of your fiscal year or are you starting with the last bank statement that you have? Either way, you’re going to get out that bank statement and it’s beginning number is the number you’re going to plug in here.

I’m going to go ahead and plug in the ending balance. Let’s say it was $2,569.36. And I’m going to go ahead and plug in an ending date. And since I’m starting at the beginning of my fiscal year I’m going to go all the way back to January 1.

Now it says Statement End Date. You could put on December 31 which would technically be the statement end date but January 1 would have the same beginning number. I’m going to go ahead and click OK and now you can see the opening balance right here.

Now if you didn’t know what it was or you couldn’t find your statement you can always plug in a penny and go back and change it later.

Kind of a neat little feature right here is QuickBooks will remind you when you get down to a certain check number that you plug in over here to order checks.

And that would be if you order checks from them or anywhere. What will happen is it’ll pop up and say Time to order checks and then you just go ahead and order them wherever you’d like to.

You’re going to see in QuickBooks everywhere Save & Close, Save & New, and Cancel. Save & Close means save the screen that I’m on and then close it and I’ll see the screen behind it.

Save & New actually means save the screen I’m on and take me to a new blank one just like this. I’m going to hit Save & Close and if your transaction is over 90 days old it will pop up and just warn you.

If this becomes a real pain you can go into the Preferences and turn it off and it shows you right here where to do that. I’m going to go ahead and say Yes and then it’ll show me my checking account in the background here.

Now, this message will pop up often. It’s just letting you know that you might be able to do online banking and associate it with this particular account.

I’m going to go ahead and say No right here and that’ll close that window and now you’ll see my checking account with a balance of $2,569.36.

If I wanted to open that register and I’m in this window I can double click on Checking and it’ll pop up and there is my register. And you can see my opening balance here that I just plugged in.

Alright, let me go ahead and close that.

Let me go ahead and set up a savings account. I’m going to do the same exact thing. Right-click and New. It will be a bank account.

I’m going to hit Continue and this time I’m just going to call it Savings and I’m going to say the opening balance is $5,000. Notice I’m not putting any dollar signs. I’m not putting in commas.

And this time I will type the date instead of actually picking it from the dropdown. I’m going to click OK and Save & Close and again it will prompt me to let me know that my transaction is more than 90 days in the past.

I’ll go ahead and say Yes and save it there and say No to the set up the banking fees. And there it is! You’ll see I have a checking and a savings account.

The next type of accounts I’d like to mention is your asset accounts. You’ll see there are a couple here already set up. They have Furniture & Equipment and Accumulated Depreciation.

Just to tell you what an asset is, an asset makes your company more valuable. You’re going to have things like chairs, desks, lamps, vehicles. You might have buildings, equipment.

Those types of things are what we call fixed assets because you plan to keep those long-term. A liquid asset is something that you plan to actually sell and get rid of like inventory is a great example.

I might be worth a lot more because I have all this inventory in the backroom but my goal is to sell it and get it out the door.

Typically when you set up asset accounts you’re going to set up big buckets. That means you’re not going to have one for each vehicle that you own.

You’re going to have one for vehicles, for example. Or you’ll notice in their case they have Furniture & Equipment, which would actually account for all the furniture in the building. That type of thing.

This is where your accountant will be very helpful to you because you may not know which ones to set up. And he or she can help you come up with a value of the asset at the particular time that you set it up.

The other thing to know is QuickBooks does not do depreciation. You would actually want to set up an account like they did for accumulated depreciation but the accountant will help you figure out what those numbers are.

So if you think about your vehicles that depreciate over time, at the end of the year you’ll get with the accountant and he’ll help you plug the numbers in.

The next one you see on the list here says Accounts Payable. You do not have to set up the Accounts Payable account. That will be set up automatically as soon as you actually create a bill. I don’t know if you remember earlier but I clicked on the Enter Bills option when we set up Carol as a user and that prompted QuickBooks to set up this account for me.

The number that you see in this account over here should always be the total of all the bills that you’ve entered in QuickBooks that you owe. Once they’re paid they will come out of this account.

Now notice there is another account very similar that you don’t see on the list and that’s Accounts Receivable. Accounts Receivable is created as soon as you enter an invoice to get paid.

You will see QuickBooks set that up for you and again the total you would see in that account would be the amount of all the invoices that have not been paid. So that would be what you owe as far as invoices.

Let’s go ahead and stop the video right here and I want you to go over to part two and let’s keep talking about setting up this Chart of Accounts.

FREE QuickBooks 2019 Video Course