Hi, everyone. I'm Astrid Daniella Galvez, and I count for a living.
I live and breathe accounting.
I know, I know. Not all small business owners feel the same.
That's why I partner with Quickbooks to help you unpack the fundamentals
of accounting and help you running your business a lot easier.
Today, we'll go over the chart of accounts.
Trust me, you're going to want to watch this one all the way through.
If you do your chart of accounts right,
you'll be able to keep your accounting error free and fairly straightforward.
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The chart of accounts is all about being accurate.
It's like a balancing act, making sure that assets and liabilities match up.
It's almost as cool as catching a wave.
But hey, that's just me, because I love to surf.
But seriously, it's all about creating
an accurate picture of your business's financial standing.
The last thing you want is to wipe out.
It can be tricky to do.
However, it's become a lot easier thanks to accounting software like Quickbooks.
To put it simply, the chart of accounts
is the index of all the accounts and the general nature of IT business.
It includes all the account numbers and names that are relevant to your business.
The entries in the chart of accounts
are then used to produce profit and loss statements and balance sheets
in the standard chart of accounts There are four primary groups
asset accounts, liability accounts,
income accounts and expense accounts.
Now let's look at each of these groups to explain what's included.
Anything of value that your business owns becomes a line in the asset account.
This includes fixed assets like property, vehicles or inventory.
This also include liquid assets such as money in the bank
and accounts receivables.
The confusion of asset accounts usually comes when depreciating
the value of fixed assets as they get older.
For example, think of how your car the devalues in the first months
of ownership. Liability
accounts include bank loans, mortgages,
taxes to be paid and bills.
Business owners sometimes find it difficult to understand
that the money to repay a loan is split in two.
Part to pay off the capital and the other part to pay off the interest.
This, too, must be accounted for separately.
Next up, let's look at income accounts
or money in many business owners, try to keep the income accounts
simple with two categories goods and services.
But this doesn't give you the full picture of how your business operates.
With Quickbooks you can split your income
line into each product and service your business offers.
It is then easier to identify which parts of your business
generates the most revenue to make decisions accordingly.
And finally, let's talk about expense accounts.
These accounts show the money that's being spent
operating your business or money out when creating your expense accounts.
Consider subcategories.
For instance, if you use multiple shippers to get your goods to your customers,
looking into the details of each may help you identify potential savings,
therefore generating profit for your business.
As you get set up and keep a record of your accounts, keep the following in mind.
Use clear and descriptive titles when creating your chart of accounts.
Too many line items can clutter your books.
So use sub accounts instead to keep things more organized.
A bookkeeper, like a Quickbooks
live expert can help you set up your chart of accounts properly.
So you are set up for success.
Phew, I hope you got all that.
I know it might take a while for you
to break through all these accounting fundamentals, but once you've mastered
them, it'll be a satisfying as catching that perfect way.
If you found this video helpful,
hit that like button and to find more videos like this one.
Be sure to subscribe to the Quickbooks Channel.
See you next time.