When running a business, you likely have a lot of different financial data to manage, including your ultimate chart accounts. Whether you’re using QuickBooks Desktop or QuickBooks Online, it’s crucial to keep track of every account type so you can create accurate financial statements and make informed decisions about your assets, liabilities, and equity. QuickBooks is designed to make it easier to keep a list of accounts, but it can still get complicated if you’re not sure which account type to select for each transaction.
We’re here to break down each QuickBooks account type for you, showing how QuickBooks chart accounts are organized. We’ll explain their meaning and how they can improve your business’s accounting, helping you better understand your cost sold, income revenue, and income expenses.
Common Account Types
Here are the most common types of accounts business owners use in QuickBooks. Understanding these accounts and how they interact with liabilities equity income will ensure that your financial statements remain accurate.
Assets
The asset section of QuickBooks account types covers anything you purchase for your business. This can be split into three categories: current assets, fixed assets, and other assets. Monitoring assets liabilities equity across all categories is critical for determining the net worth of your business.
Current Assets
Current assets are items your business owns that can be liquidated to cash quickly. Managing this part of your chart accounts QuickBooks is essential for a clear picture of available resources.
Cash and Cash Equivalents
These categories encompass all money that is already accessible for your business, including:
- Cash on hand
- Checking accounts
- Money market accounts
- Rents held in trust
- Saving accounts
- Trust accounts
- Undeposited funds
Having an organized accounts chart here is the key to keeping your cash readily available and accounted for.
Loans
While loans are usually seen as a liability, when they are under current assets, they represent loans your business gave to others. Maintaining these in your accounts QuickBooks online setup ensures you can track and collect payments when needed. Typically, asset loans include:
- Employee cash advances:
- This is when you give an employee wages earlier than usual.
- Loan to officers:
- If your business is a corporation, this is a loan to officers of your business.
- Loans to shareholders:
- This is when your business loans money to its shareholders.
- Other loans:
- This category is for any loans you give out that don’t fit into the other categories.
Inventory
Your business’s inventory is considered a current asset due to the ability to sell the stock if needed. Keeping an eye on this part of your assets current category helps you effectively plan for potential sales, ensuring your income statement remains accurate.
Fixed Assets
Fixed assets are for long-term or intangible assets of your business, such as:
- Buildings
- Equipment
- Computers
- Furniture
- Machinery
- Office equipment
- Phones
- Software
- Tools
- Intangible Assets
- Copyrights
- Customer lists
- Goodwill
- Licenses
- Patents
- Trademarks
- Land
- Leasehold improvements
- Vehicles
Recording fixed assets under your chart of accounts helps maintain a clear record of these valuable resources. Over time, you’ll need to track depreciation amortization for these assets to keep your financial statements accurate.
Other Assets
This QuickBooks account type is for any other asset your business owns that doesn’t fit into the current or fixed category:
- Allowance for bad debts
- Bonds
- Investments
- Lease buyout
- Prepaid expenses
- Security deposits
- Stocks
- Tax-exempt securities
By including these other assets in your ultimate chart accounts, you can maintain a complete list accounts breakdown. This ensures you fully understand all items contributing to your assets liabilities balance.
Liabilities
This type of QuickBooks account is for money you owe to other parties. Liabilities equity is a major part of a properly managed financial system. Liabilities can be split into two categories: current liabilities and long-term liabilities.
Current Liabilities
Current liabilities are money you owe that needs to be paid in a short amount of time, typically within a year. These types of QuickBooks chart accounts include:
- Accounts payable
- Credit card debt
- Insurance
- Payroll taxes
- Sales tax
- Security deposits
- Short-term loans
- Trust accounts
Maintaining a clear view of your current liabilities ensures you stay on top of your debt obligations and preserve healthy cash flow. Having these recorded in accounts QuickBooks online can also help you forecast future payments.
Long-Term Liabilities
These types of liabilities are exactly what they sound like—money owed over a long period. They include:
- Bonds payable
- Long-term loans
- Shareholder notes payable
Accurate tracking of long-term liabilities is central to managing assets liabilities equity. Over time, it helps you remain in compliance with any repayment obligations outlined in your financial statements.
Equity
Equity is the net worth of your business, which is the difference between your assets and liabilities. In many cases, equity income refers to certain gains that increase the value of the company. Equity comes in several forms:
- Ordinary shares
- Owner’s equity
- Paid-in capital
- Partner contribution
- Partner’s equity
- Prepaid taxes
- Personal income
- Retained earnings
- Share capital
- Treasury shares
Keeping these entries properly categorized in QuickBooks chart helps you see your overall financial position, factoring in liabilities equity income as well as other types QuickBooks online.
Income
This type of QuickBooks account is for transactions and payments within your business. Carefully monitoring income revenue is essential for a solid understanding of your income statement and overall performance.
Sales and Revenue
Sales and revenue come in many forms, including:
- Discounts
- Refunds
- Sales revenue
- Service fees
These categories are often the largest part of your income statement. Ensuring accurate record-keeping of these accounts in QuickBooks can help you spot opportunities to grow your income revenue.
Other Income
This category is for income that doesn’t necessarily fit into your direct business operations, but your business still benefits from:
- Dividend income
- Investment income
- Rental income
- Interest income
By including other income in your chart accounts QuickBooks structure, you gain a clearer picture of all possible streams of equity income that support your business.
Expenses
Expenses are the money your business spends while performing business operations. Understanding your cost sold, payroll expenses, and other everyday outlays is crucial for controlling costs and maintaining profitability. There are three categories of expenses: cost of goods sold, operating expenses, and other expenses.
Cost of Goods Sold (COGS)
The cost of goods sold is the cost of anything needed to create and sell your business’s products, such as:
- Labor
- Materials
- Shipping costs
- Transportation
Recording COGS helps you see how resources are allocated in the process of generating income revenue. This is a significant element in your account type select process when adding new expenses to QuickBooks.
Operating Expenses
With a focus on the cost of operating your business, these expenses include:
- Auto expenses
- Bad debts
- Equipment rental
- Insurance
- Interest paid
- Legal or professional fees
- Meals/entertainment
- Office supplies
- Rent
- Salaries
- Travel expenses
- Taxes paid
- Unapplied bill payments
- Utilities
Some operating expenses, such as repairs maintenance, help keep your business’s fixed assets in good working condition. Properly categorizing each of these items in your accounts QuickBooks online system helps you generate accurate financial statements.
Other Expenses
All the expenses that don’t fit in the cost of goods sold or operating expenses categories go under other expenses:
- Advertising
- Amortization
- Depreciation
- Home office expenses
- Marketing
- Penalties
- Settlements
Monitoring other expenses ensures you have a complete view of all outgoing cash that doesn’t fit your daily operational or cost sold categories.
Specialized Account Types
QuickBooks also has specialized accounts available to use. These accounts often cross over many types QuickBooks online. Including them in your accounts chart accounts framework can simplify how you categorize and track transactions.
Accounts Receivable and Accounts Payable
Accounts receivable is a report of all customers that have yet to pay you. By setting up this type of account in QuickBooks Online, you always know which invoices remain outstanding.
Accounts payable is a report of the bills your business needs to pay. You can set up payments to other parties directly within these accounts, ensuring you accurately manage your liabilities equity.
Inventory Accounts
This type of QuickBooks account allows you to track and update your business’s inventory. By updating these records, you can see real-time changes in stock levels, which in turn affects your cost sold calculations.
Payroll Accounts
QuickBooks payroll accounts encompass payroll expenses, taxes, and benefits. This ensures your salaries and other employee-related costs remain organized. Effective payroll tracking is key for a reliable income statement.
Tax Accounts
Every business needs a way to handle taxes—this specialized tax account helps you manage sales taxes and federal or state tax obligations. By utilizing tax accounts, you can streamline tax preparation and simplify the process of generating financial statements.
Loan and Interest Accounts
If your business has multiple loans, keeping them organized and up to date is vital. QuickBooks understands that and offers a loan and interest account to track and pay off loan obligations, as well as monitor interest-related expenses.
Depreciation and Amortization Accounts
Depreciation amortization must be tracked over long periods, which makes it easy for them to fall through the cracks. QuickBooks helps you create an account type select approach to track depreciation and amortization properly, ensuring that all assets are accurately represented on your financial statements.
Receive the Best Accounting Guidance from Fourlane
Accounting can be complicated, and finding the right balance of assets liabilities can be challenging. When you partner with Fourlane, you get access to QuickBooks experts who can guide you through all the accounting tools at your fingertips, including mastering accounts chart and setting up your ultimate chart accounts. We’ll show you how to maximize QuickBooks Online or QuickBooks Desktop for your business, so you can seamlessly track income revenue, liabilities equity income, and more.
Contact us today to learn about our QuickBooks consulting services and discover how to manage your chart accounts QuickBooks setup effectively. We will help you understand your income statement, manage meals entertainment costs, and track repairs maintenance, so that you can have complete control over your finances.
