Whenever a company wants to record a transaction, it must associate the transaction with a particular account. Transactions on these accounts are listed in the general ledger, which is used for creating financial statements like the balance sheet, profit and loss statement, etc. The Charts of Accounts lists all the accounts that a company has identified.
On the basis of this definition, it is clear that the chart of accounts will depend on the type of industry a company is related to. Therefore, it is important for users to have the flexibility to customize charts of accounts according to their own preferences.
Although such flexibility is available in QuickBooks, many users fail to utilize it because of a lack of knowledge.
For users, the best way to set up charts of accounts according to industry needs is to let QuickBooks automatically configure the settings. We highly recommend that you start off with a new company file, which will make it easier for you to configure the accounts and understand how they’re listed.
With better understanding of how charts of accounts work, you can add, delete, or edit accounts according to your preferences in your existing company file.
Create a Company File
A new company file in QuickBooks will enable you to view the customization options available in the accounting software. A chart of accounts customized automatically by QuickBooks is easier to use. Once you’ve learned the basics, you can edit the accounts in your existing company file.
You can create a new company file in QuickBooks by following the steps provided below:
- Go to the File menu.
- Click on New Company.
- Click on Express Start.
- Select one of the Predefined Industries.
Customize Your Company’s Accounts
When you’ve created the company file, all the accounts will be set up according to the selected industry.
|Accounting & Bookkeeping|
|For accounting and bookkeeping companies, the accounts are almost always based on the service industry. To set up a proper chart of accounts, you need to look at:
Cash Flow Analysis
This isn’t a complete list. There are many other considerations that may go into setting up accounts, especially if you’re selling products to your clients. However, settings up accounts properly will depend on the kind of services provided by your company.
We also recommend that you create individual income accounts for all the types of remunerations you’re receiving from your clients.
|Advertisement and Public Relations|
|In QuickBooks, you can find a default sales account. This account can be broken down into smaller accounts to suit your preferences. Advertisement and public relations companies can create sub accounts to record specific types of incomes and categorize them according to the service type.
|Agriculture and Farming|
|Agriculture firms need to create an expense account for the following items:
Fuel and Oil usage
There are a lot of expenses in the agriculture industry. Recording all the costs properly can help you in minimizing them.
Farmers usually receive a lot of subsidies from the government. To record specific types of subsidies and incomes like tax credits, you can create specific income accounts.
|Many artists like painters, copywriters, and photographers have different types of skills. For each skill, they usually charge a different amount. For instance, a writer may charge different amounts for content writing, copywriting, and editing. So the best way to record each type of income is to create different income accounts.
Different expense accounts will also be required. For instance, a photographer will have expenses of travelling, scouting for locations, hiring models, etc.
|Automotive Sales and Repair|
|An automotive repair company provides services such as engine or break repair, oil change, bodywork, etc. The amount of work is debilitating and companies seldom have time to record the income and expenses on their own. In such a case, you can either rely on a professional accountant, or use QuickBooks to configure the accounts for you.
Religious organizations often choose to record incomes in different accounts. The types of income include:
Further, money is often raised for different causes. For instance, you may be taking donations for cancer charity, or to help disabled people. For each benevolent cause, you need to create a new income and expense account. Other accounts may be related to earning from events such as bar mitzvahs, funerals, and marriages.
Professionals working in construction trades like plumbind, landscaping, carpentering, etc. don’t have much complex accounting needs. Having a single income account for all the contracts and jobs is a most recommended option. Professionals managing different income accounts find it more tedious to manage their accounts.
Accounts related to Cost of Goods Sold (COGS) can be very important for people in the construction trades. Here are a few accounts which you’d want to create in QuickBooks:
Compensation for Workers
Small Equipment Charges
Although the income accounts are homogenous, the expense accounts for different professions in construction trades differ by a lot. You need to set these accounts according to the types of expenses incurred by your business.
|Architecture and Engineering|
This often includes designing, construction plan and the actual construction of buildings. For the same, there are many types of services that you may be providing individually or in a bundle. Different services in this field often include Computer Aided Drawing, Detailing, 3D rendering, etc. With so many different services and combos, it can become difficult to ascertain which types of accounts to create.
This is why we highly recommend that you simply create an income account for each type of service provided. This keeps everything simple and manageable. Many users find it useful to simply create two different types of income accounts: design income and consulting income.
The expense accounts which you create will often revolve around things like inspection cost, design review, software license cost, etc. This is why you can find saved templates for accounts related to expenses of architecture and engineering firms.
Other than accounting and bookkeeping, financial service companies provide services like debt consolidation, insurance, portfolio management, and financial planning. This is why the charts of accounts are widely different than the ones for accounting and bookkeeping companies.
Such companies often need to record incomes earned from provided services and commissions from other businesses. Expenses will often include the costs of hiring professionals, broker fee, software license, etc.
Any IT company needs to rely on hosting, software, and professionals. The costs of these need to be included in the expenses. The different services that you provide, for instance network engineering, software design and development, web development, etc. will bring in the revenue. This revenue must be recorded as income.
Since IT companies purchase and sell software, the requirements are very similar. So, you can rely on the inbuilt template for IT companies.
|Brokers and Insurers|
An insurance agency provides the insurance plan, and a broker is the middle man between the client and the agency. It is recommended that insurance agencies rely on a single account for all the revenue they generate from different incomes. Brokers on the other hand require a separate income account to record commissions earned.
If the agency sells multiple types of insurance, then an income account for each must be created. Expenses related to the agency can include costs of:
Meal and Travel Expenses for employees and brokers
Cost of settling the claims
The primary task of any landscaper is to provide lawn related services. This can include installing different types of plans and managing the lawn. All different services provided should have their separate income accounts. The installation charges should be recorded separately from the charge for the product.
All the costs associated with a particular job should be recorded in appropriate expense accounts.
|Law and Legal Services|
Since the number of services provided by lawyers is often limited, you can record all the revenues in a single income account. Tracking income in more details can be enabled by creating new items. These items can track both the revenue and expense associated with a job.
Although revenues can be recorded in a single income account, expenses need to be recorded in appropriate accounts. This means that for different expense types, you must create different expense accounts.
The only case in which you need multiple income accounts is if you’re also selling food, laundry services, etc. to your customers. However, if you host events, then several types of income sources can be generated. If types of income generated differ, you should create individual income accounts.
Costs on advertising, obtaining permits, housekeeping, and maintenance can be recorded in separate accounts particularly created for each.
|Manufacturing and Representatives|
Manufacturers produce goods and the representatives, also known as agents, sell the goods to wholesalers or retailers. Both the manufacturer and their representatives need to create relevant income and expense accounts.
Manufacturers will require multiple accounts for tracking each. The cost of obtaining different raw materials, hiring professionals, purchasing fixed assets, etc. must also be recorded properly. However, revenue can be recorded in a single income account if you’re selling a single good.
If you’re a single person clinic, then revenue and costs can be recorded in single income and expense accounts. However, hospitals need to create multiple accounts to cater to their own preferences. This can be a highly technical process, if you’re a rapidly growing medical service company.
Non profits usually focus on a single cause. If that’s the case, then you can create a single income account to record all the donations coming in; however if you’re focusing on different causes, then donations need to be recorded in the appropriate income accounts. Similarly, create a separate expense account for each type of expense.
|Property and Estate Management|
The three main types of accounts which a property manager has to deal with are commission account, escrow checking account, and normal checking account. For recording incomes from these sources, you can create three different asset accounts. We recommend that you name each account with the following formula: type of account + last four digits for the account.
Since the types of revenue generated are limited, a single income account can handle all the revenues for your business. Further, you should only create a limited number of expense accounts to avoid complexity.
Before the tech revolution, food providers like restaurants and bars only needed to record income from a single source. However now, they must also record the profits from food delivery.
Expenses can be widely different. Thus, appropriate expense accounts must be created.
|Retailers and Ecommerce Businesses|
All the retailers and ecommerce businesses need to record the revenue generated from selling an item into an income account. The cost incurred in procuring the product can be entered in an expense account. On the basis of this, you can create a profit and loss statement to assess the amount of profit generated. For each product type, you should create a separate account.
If you’re a sales agency or an independent sales agent, then you need to record your income and commission. For each, you can create a separate income account. The expenses are often trivial and personal, so you can record them with a single expense account.
Transport companies often deliver goods from one place to another. Thus, the revenue source is often single which can be recorded in a single income account. The expense for drivers, transports, and fuel can be recorded in different expense accounts.
|Wholesalers and Distributors|
Just like retailers, you need different income accounts for different product types. Same goes for the expense accounts. Since you’ll buy and sell products in bulk, tracking inventory will be important. You can turn on inventory tracking in QuickBooks.
To know more about Customized and Industry Specific Charts of Accounts in QuickBooks, you can get in touch with our QuickBooks Desktop Support experts.