QuickBooks Training Post:

Many clients ask me about how to “standardize” a chart of accounts or make the chart if account comply with generally accepted principles… Well here are standard Chart of Accounts number ranges:

1000 – 1999 Assets
2000 – 2999 Liabilities
3000 – 3999 Equity
4000 – 4999 Income or Revenue
5000 – 5999 Job Costs/Cost of Goods Sold
6000 – 6999 Overhead Costs or Expenses
7000 – 7999 Other Income
8000 – 8999 Other Expense

If you want to download a spreadsheet with the entire chart of accounts for all industries created by QuickBooks, see this post 

What is the Chart of accounts?

The chart of accounts is a listing of all accounts used in the general ledger of an organization. The chart is used by the accounting software to aggregate information into an entity’s financial statements. The chart is usually sorted in order by account number, to ease the task of locating specific accounts. The accounts are usually numeric, but can also be alphabetic or alphanumeric.

The Chart of Accounts is the backbone of your accounting system. That’s why it is so important to understand how it works. Think of a chart of accounts as a file cabinet, with a file for each type of accounting information you want to track. For example, if you need to know how much money you spend on postage, you can set up a file (an account in the Chart of Accounts) for Postage Expense

Accounts are usually listed in order of their appearance in the financial statements, starting with the balance sheet and continuing with the income statement. Thus, the chart of accounts begins with cash, proceeds through liabilities and shareholders’ equity, and then continues with accounts for revenues and then expenses. Many organizations structure their chart of accounts so that expense information is separately compiled by department; thus, the sales department, engineering department, and accounting department all have the same set of expense accounts.

Account Types

Assets

Assets are things your company owns. They are usually divided into two groups: current assets and fixed assets.  Current Assets are assets that you can easily turn into cash, such as checking accounts, savings accounts, money market and CD accounts, accounts receivable, and inventory. Current assets are normally  numbered from 1000 to 1499. So, you might want to use account number 1100 for your company checking account because a checking account is a current asset.

Fixed assets are usually numbered from 1500 to 1999. These are items with a minimum cost (for example, $500) that you would have to sell to generate cash. Automobiles, equipment, and land are examples of fixed assets. For example, suppose last year your company bought a new computer system for $1,100. Since the cost of the system was more than $500, the purchase was entered to an asset account rather than to an expense account. Consult your accountant or tax preparer to determine the actual minimum cost you should use to determine fixed assets.

Liabilities

Liabilities are funds your company owes. For example, say your company borrowed $20,000 from the bank. When the $20,000 loan was deposited to the checking account, the deposit was entered in the liability account Bank Loans, not an income account.

Example, Payroll Liabilities:
The Payroll Liability account is a current liability account that QuickBooks automatically adds to your chart of account when you turn on payroll. The Payroll Liabilities account tracks taxes that you deduct from employee’s paychecks and hold temporarily until you turn them over to the government. These include federal and state income withholding taxes, local taxes, and the employee-paid portion of taxes such as Social Security and Medicare.

Capital/Equity

Your capital account structure depends on whether your company is organized as a sole proprietorship, partnership, or corporation.

If your company is a sole proprietorship, you need a Capital account and an Owner’s Drawing account. Use the Capital account to keep track of the total amount of money you have invested since starting the business, plus or minus the net profit or loss each year since you started the business. Use the Owner’s Drawing account for money you take out of the business for personal use, such as checks to the grocery store or dry cleaners, ATM transactions, your salary, and any money that gets deposited into your personal accounts.

It is important to keep in mind that the owner of a sole proprietorship doesn’t get a regular employee paycheck with money deducted for payroll taxes. Instead you pay quarterly estimated taxes, which you should always allocate to the Owner’s Drawing account.

If your company is a partnership or LLP (Limited Liability Partnership), you need to set up Capital and Drawing accounts for each partner. If your company is an S or C corporation or an LLC corporation, it should have a Common Stock account and sometimes a Preferred Stock account. Common stock and preferred stock represent the total sum of stock the company has issued. An LLC might have Member stock if there is more than one person who owns stock.

Income or Revenue

Income or revenue is the income you get from your normal day-to-day business tasks, such as professional fees, income for services rendered, reimbursable expenses, or products you sell.

Cost of Goods Sold

Cost of Goods Sold includes the cost of raw materials, freight charges for getting raw material to a warehouse, labor for building the finished goods, and freight charges for getting the goods to the customer. For manufacturing businesses, the Cost of Goods Sold includes the costs incurred in producing or building a product. For a wholesale business, Cost of Goods Sold are the costs of the goods you purchase for resale. For a distributor business, Cost of Goods Sold are the costs to purchase and distribute goods to the customer.

Expenses or Overhead Costs

Overhead Costs, or Expenses, are fixed costs you have even if you run out of work. Examples include rent, telephone, insurance, and utilities.

For example. Payroll Expense:
The Payroll Expenses account tracks payroll items that are an expense to your company. These include salaries, wages, bonuses, commissions, company contributions such as a company-paid health plan, and the company-paid portion of taxes such as Social Security and Medicare.

Other Income

Other Income is income you earn outside the normal way you do business, including interest income, gain on the sale of an asset, insurance settlement, a stock sale, or rents from buildings you own.

Other Expense

Other Expense is an expense that is outside of your normal business, such as a loss on the sale of an asset or stockbroker fees.
Here is a SAMPLE chart of accounts for the P&L accounts:
Income
4000 Product Sales Income
4100 Service Sales Income
4700 Shipping Income
4800 Other Income
4990 Sales Returns
4980 Sales Discounts
Cost of Goods Sold
5000 Cost of Goods Sold
5010 Purchases of Product
5210 Freight In Costs
5220 Freight Out / Shipping to Clients
5500 Subcontracted Direct Labor
5600 Commisions & Refferral Fees
5990 Purchase Discounts
Expenses
6000 Officer Salary
6001 Regular Pay
6002 Taxes
6009 Other / Bonus
6010 Employee Salary
6011 Regular Pay
6012 Taxes
6019 Other/ Bonus
6040 Rent/Lease Office
6050 Rent/Lease Equipment (NonVehicle)
6060 Repairs & Maintenance (NonVehicle)
6070 Vehicle Expenses
6071 Gas
6072 Car Payment / Lease
6073 Vehicle Maintenace
6074 Parking & Tools
6075 Vehicle Insurance
6100 Advertising, Promotion, and Marketing
6101 Printed Materials
6102 Web Related
6103 News, Magazine, Radio,   TV
6104 Business Gifts
6105 Other Marketing & CRM Expenses
6110 Postage, Shipping, & Printing
6120 Office Supplies
6201 Bad Debt Expense
6220 Charitable Contributions
6230 Software & Small Equipment
6250 Bank Service Charges
6260 Merchant Processing Fees
6270 Janitorial & Cleaning Expense
6280 Training & Continued Education
6300 Insurance for Business
6301 General Liability Insurance
6302 Workmen’s Comp
6303 Malpractice / Erros & Ommission
6304 Other Insurance
6500 Communications
6501 Telephone – Lan
6502 Telephone – Cel
6503 Internet Access
6504 Other Telecomunication Services
6505 TV / Satellite
6510 Utilitties
6511 Water
6512 Electricity
6513 Other Utilities
6601 Licences, Permits, and Local Taxes
6602 Fines & Penalties
6603 Dues & Subscriptions
6700 Travel
6701 Airfare
6702 Hotel & Lodging
6703 Vehicle Rental & Transportation
6704 Meals while Traveling
6705 Misc Travel Entertaiment
6720 Meals & Entertainment
6721 M&E With Clients
6722 M&E Officers Only
6723 M&E for Employees & Meetings
6800 Professional Fees
6801 Bookkeeping & Admin
6802 CPA & Tax Planning
6803 Attorneys & Legal Fees
6804 Business & Management Consultant
6811 Subcontracted Services (Other)
6901 Interest Expense
6902 Depreciation & Amortization
6911 Misc & Other Expenses
6990 Ask My Accountant / To Review
Other Income and Expenses
8010 Interest Income
8020 Other Non-Operating Income
8030 Capital Gains
9020 Other Expenses
9030 Capital Losses

The post Standard Chart of Accounts & Account Types appeared first on QuickBooks Training & QuickBooks Consulting. Best rated in Miami & Broward.

Source: Hector\’s QuickBooks Blog

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