Hey there.
We’re working in module 3 and we’re talking about customizing the QuickBooks environment.
We’re all the way down now to section 3 where we’re talking about the Chart of Accounts.
The Chart of Accounts is the most important part of QuickBooks because everything you
do relates back to it somehow.
Think about if you spent some money.
You’d have to tell QuickBooks what did you spend the money for?
Was it a meal for the business?
Was it office supplies?
If you received money was it income for the business?
Those types of things.
If you don’t have the chart of accounts set up correctly you will run reports and
they will not look right and you won’t know why.
So spend a lot of time in this particular section.
There are two parts to this so make sure you watch both of these before you move on.
Let’s go ahead and move over to QuickBooks and we’re going to start working with our
Chart of Accounts.
The way you’re going to get to the Chart of Accounts is from your Home screen you’ll
see a button here that says Chart of Accounts.
The first thing I want to point out is that your Chart of Accounts is set up by type.
So you’ll see the different types over here on this column.
If you’ve got a type like an expense where there’s multiple items then you’ll notice
they’re set up either numerically or alphabetically.
If I didn’t have the numbers turned on they would just be alphabetical.
Remember if you don’t want the numbers or you do, either one, the way you turn those
on or off is go back to the Edit option, down to Preferences.
You want to make sure you’re under the Accounting option on the left and then the Company Preferences
tab.
And here’s where you can check or uncheck Use Account Numbers.
So this is what they look like when the numbers are not on.
You can see they’re alphabetical.
You’re going to need to set up a lot of these accounts to start with.
So for example notice there are no bank accounts.
So if you wanted to write a check right now you couldn’t because you don’t even have
a bank account set up.
So we’re going to go through the different types and I’m going to show you which ones
you need to set up.
Keep in mind you’re not going to get them all the first time you sit down to do this.
You might work for a couple of months and realize there’s a new one you need.
But at least if you can get started you’ll be good to go.
Let’s start with our bank accounts.
A bank account would be a checking account, a savings account, a money market account,
any type of account you have actually at the bank.
Some businesses have the little cashbox where they have $100 and they give the employee
the cash, the employee brings the receipt back.
You may want to track it through a bank account.
Also some really small businesses might have a lot of cash expenditures.
That means that maybe you go out and have a business meal and you pay for it with cash
or maybe you pick up some supplies for the business and you pay for it with cash.
If that’s the case there’s no way that cash expenditure would get in QuickBooks unless
you create an account for that.
I would create something like cash expenditures.
It’ll always run in negative because you never put money in there but it just tracks
all your cash that you spend for business items.
Also if you accept any form of PayPal, maybe you accept Square, Bitcoin, any of those,
those are just bank accounts.
You need to set each one of those up separately.
So let me show you how to set up any new account.
Now yes you can right click and it doesn’t matter on which one of these you right click
but you’ll see the New, Edit, Delete options right here.
But let me show you where you actually find those if you don’t right click.
Notice at the bottom here it says Account and when you click the arrow there’s your
New, Edit, Delete.
Let me point out this one that says Make Inactive.
What that’s there for is if you have some account that you don’t use anymore, maybe
it’s an old checking account that you closed out.
You can actually make it inactive and it will hide it from this list.
The numbers still pull into reports.
It just hides it from the list.
I’m going to go ahead and choose New because we’re going to set up our checking account.
Notice it asks you what type of account you’d like to set up.
We’re going to be setting up a bank account.
And each time you pick one of these options it’ll give you a little example of what
that option would be if you chose it.
But I’m going to click Continue.
If you pick the wrong type from the previous screen notice you can still go back up to
Account and change it at this point.
Now you can call the account anything you want.
Some people might call it Operating Account or Payroll Account, you might call it your
bank name.
As long as you know what the account represents then you’re okay.
This is not a subaccount of another one.
We’ll talk about subaccounts a little bit later.
And then notice these options are optional.
So description totally optional.
I would not put the bank account and the routing number in here.
That’s just more information for someone to get hold of.
You do need an opening balance, however.
If you don’t put one in it will assume a zero.
The way you find your opening balance is as of the start date of your company file go
ahead and get the last bank statement and then plugin that number.
So if you’re starting the beginning of October get September’s bank statement, its ending
number is October’s beginning number, and then plug that in.
Let’s say that we have $3,000.
You’ll notice I didn’t type the dollar sign or the comma.
It will actually beep at you if you do that.
Statement ending date.
I could say October 1st or September 30th.
Either one is certainly okay.
It just needs a date to start with.
And I’ll click OK and you’ll see there’s my $3,000 as of 10/1.
Down here if you want QuickBooks to pop up when you get down to a certain check number
and remind you to order checks it will do that.
It will also pop up and say Would you like to buy checks from us?
And remember you can buy your checks anywhere you want.
You do not have to buy them from Intuit.
You can get them from the bank, you can order them online.
That is totally up to you.
Now you’re going to see these buttons throughout QuickBooks.
You have Save and Close which will save this window and show me the window behind it.
Save and New would save this and put me on another blank screen just like this and of
course there’s Cancel.
I’ll just Save and Close and you’ll probably get this message often as well.
It wants you to set up your bank feeds.
We’re going to talk about that in a later module so just tell it No for now when you
get that.
And now you’ll see you have a checking account.
Notice the type of the bank account and you have a balance of $3,000.
One of the ways to access the checking register is to double click anywhere on the line and
now you’re in the register.
We’ll be talking about the register in a later module as well but I just wanted you
to know that is one way to get into the register.
I’m going to go ahead and close it.
I’m going to use the X in the top right, but make sure you don’t use the very top
one, use the one right below it to close that window.
Any of these that have a balance you’ll be able to double click and see the register.
I’m going to set up one more.
I’m going to set up PayPal just to show you what it would look like.
It’s actually the exact same way.
I’ll just right click this time and choose New.
It’s going to be a bank account.
I’m going to call it PayPal and I’m going to go ahead and put a penny in there because
I really don’t know what the balance is.
I could change it later.
And of course I’ll pick the same starting date or ending date and I’ll click OK.
Once I save and close you’re going to see there’s PayPal back there and there’s
a balance of a penny.
Alright the next type we need to talk about are these assets right here.
Now an asset is something your business owns that makes it more valuable.
Your business owns vehicles, it might own furniture and fixtures, maybe equipment.
Typically when you see asset accounts you want big buckets.
And what I mean by that is you don’t want one for every single vehicle or every piece
of furniture the business owns.
You want just some general categories.
Usually seven to ten are good.
I wouldn’t get too many more than that.
What’s going to happen is if you have an asset you’re going to be able to open up
the account like I showed you with checking you just double click on it and you’re going
to be able to put in the increase or decrease of each asset.
So if it’s a vehicle, for example, you will get with your accountant because you will
not know the numbers to plug in here.
But the accountant will ask you things like how many vehicles does the business own, make,
model, mileage, things like that and you’ll come up with a value of the total of the vehicles
and that will go on the increase side here.
What’ll happen is as each year goes by and the assets depreciate or appreciate, either
one, again the accountant will help you determine that number and the depreciation will go on
the decrease side whereas the appreciation goes on the increase side because land would
appreciate.
That’s a good example of that.
So this is the one place, like I said, where you won’t know the numbers to plug in.
The accountant will have to help you with that.
You want to have your asset account set up because if you go to the bank to get a loan
for the business, for example, they’re going to want to know if the business has any assets
and this will be a way to show your assets.
Now I skipped over one up here, this Accounts Receivable.
You will not have to set this one up.
It will be here automatically.
This is any invoices you’ve created that have not yet been paid.
They will show up in the balance here.
That’s called your Accounts Receivable.
If by chance this account is not in here when you create your company file don’t worry
about it because QuickBooks will automatically create it for you once you create your first
invoice.
The same thing with this Accounts Payable.
This is just the opposite.
This would be any bills you’ve entered that you have not yet paid.
Again if you don’t see it here as soon as you enter your first bill QuickBooks will
put it in for you.
The next one you’re going to see are your liabilities.
In QuickBooks here you have two that say Other Current Liability.
Now let me explain what a liability is.
A liability is something the business owes.
It could be a loan, it might be like you see in this case there’s payroll and sales tax.
You collect those.
You have to forward those.
In accounting you have two types of liabilities.
You have short term.
Those are things you’re going to pay off in twelve or thirteen months.
And you also have long term liabilities.
That’s going to be your five year car note, the 30 year mortgage, those types of things.
You’ll need to set up a separate liability account for each loan that you have.
Now what I’d like to do right now is we’re about ten-and-a-half minutes into the video
here.
Let’s go ahead and shut this one down and I want you to go over to part 2 of section
3 here and let’s finish up talking about the Chart of Accounts.
I’ll see you shortly.