I’m going to tell you something about what is the chart of accounts in QuickBooks. Firstly, we have to know about what is the Charts of Accounts. In this, we make a record of all the assets, liability, expenses, equity, the income of the company. And it should be done on a daily basis. We easily make a record only by using this QuickBooks Chart of Accounts software. In other words, we can say that this software puts all the assets into a category in which we can easily find which assets are more convertible.
For example, you have your own company and you hire a person who makes a record of your assets. One handles your expenses and so on. But if we give you software who do all these things that you require then are you agree with that so. In other words, I only want to tell you that this software is very beneficial for you and your company also.
In short, this bookkeeping software is more beneficial for your business
How to open Chart of Accounts in QuickBooks?
If you want to open the Chart of Accounts in QB, then implement these steps such as:
In QuickBooks Online:
To open Chart of Accounts in QBO, follow these steps like:
- First of all, you have to click on the Settings ⚙ icon.
- Then select Chart of Accounts from the drop-down menu.
In QuickBooks Desktop:
When you want to open Chart of Accounts in QB Desktop, then follow these steps such as:
- Firstly, select Chart of Accounts from the following QB menu.
- For an Accountant version, items are Company, Lists, or Accountant.
Types of the Chart of Accounts:
Here is a list of several account numbers and names so that it is relevant to the company. There are six types of accounts for tracking financial business activities. They are as follows:
- Assets Accounts
- Liabilities Accounts
- Expenses Accounts
- Equity Accounts
- Cost of goods sold
- Income Accounts
Something that we buy the past and can be helpful in the future. As it makes benefits for the economic growth of our company is called Assets. It makes us economically strong in the market. An asset represents an economic resource for a company or represents access that other individuals or firms do not have. In other words, we can say that QB put these assets into a category and in an order in which we can tell how convertible assets are they. It means how quickly you can turn your assets into cash.
Assets categorize itself into current assets, fixed assets, financial investments, and intangible assets. Let’s discuss these assets in detail:
- Current Assets: This account type has short-term economic resources that expect to convert into cash within one year. Current assets are cash and cash equivalents, accounts receivable, inventory, and various prepaid expenses.
- Fixed Assets: These are long term resources such as plants, buildings, firms. The debug for the loss of long term of the fixed assets had a periodic charge called depreciation. Which may, or may not reflect the loss of earning the power of fixed assets.
- Financial Assets: These assets represent investments in the assets and securities of other institutions. The value of financial assets depends on how the investment has to be categorized and the motive behind it.
- Intangible Assets: Those assets that had not physically present known as intangible assets. E.g. Patents, copyright, trademark, goodwill, etc.
Liabilities that define duties or obligations or something that you owe somebody else. In companies, liabilities that had legal financial debts or obligations can generate due to transfers of business operations. They have limited or unlimited. Liabilities can be settled on the passage of the time through transfers of money, products, and services. Liabilities are written on the right side of the balance sheet.
E.g. Loans, account payables, mortgage, deferred revenues, accrued expenses.
However, expense Accounts are defined as the reimbursement of money spent by employees of the company for the company work.
Here is some common example of expenses account such as:
- Management expenses
- Debt redemption expenses
- Bad debt expenses
- Cost of goods sold
- Depreciation expenses
- Income tax expenses
- Insurance expenses
- Interest expenses
- Loss on disposal of firm assets
- Maintenance expenses
- Rent expenses
- Salaries of the employees
- Wages expenses
- Selling and purchasing expenses
- Supplies expenses and utility expenses
Above all are the common example of the expenses account.
Equity is defined as shareholder equality. In short, we can say that it represents the amount of money that would be returning to the shareholder when all the assets turn into cash, and all the debt of the company was paid off. You can find it on the balance sheet of the company. It is the most common financial metrics analyzed by the analysts for observing the financial health of the company.
Cost of Goods sold:
It is also known as the cost of sales. It is defined as the cost that is directly proportional to the goods and services sold by the company. In other words, we can say if the cost of goods and services sold then they increase the cost of sales. This amount is the cost of the raw material used in for creating the goods and labor costs used to produce the goods or services to the customer. It does not include indirect expenses like distribution costs and sales force costs
The formula for calculating the COGS:
COGS= Beginning Inventory+P-Ending Inventory
P= Purchases during the given period
Inventory: It refers to the sold and sales shows in the income statement under the COGS.
Beginning Inventory: It refers to the inventory that remains from the previous year that means the inventory which was not sold last year.
Importance of COGS:
It is a very important metric for the financial statement. Because it subtracted from the company’s revenue to calculate the gross profit of the company. Gross profit is an important facet of the company that tells us how well-organized the company managing its labor, and supplies in the productions.
Income Accounts referred to as the money earned from the sale of the products or services. The company might have one account or more than one account for the income source, depending on the need for financial analysis. Income from the interests is also an example of another income source. A debit from the income reduced the amount from the business has earned. But a credit from the income also increased the amount from the business has earned. Income account appears on the business profit and loss account.
From the above explanation about the Chart of Accounts in QuickBooks, we conclude that QB represents and organizes the accounts of the company. In which we can also find out about the assets, liabilities, expenses, income, shareholders, gross profit of the company. By reading this blog we can understand the chart of accounts from the QB. However, you can find out the expenses, income, and calculate the gross profit by calculating the COGS.
In short, I hope this post will help you to understand the topic, you can get detailed information on this topic by our professionals at toll-free QuickBooks support phone number.