QuickBooks - Adjusting the Chart of Accounts

As a new tutor with WyzAnt I have noticed that there a number of potential students requesting assistance in setting up QuickBooks, and this is often in addition to receiving help in learning how to use the software. Although Intuit markets QuickBooks as a bookkeeping application that even amateurs can use, there are many features that cannot be used effectively without some knowledge of bookkeeping and training. Therefore, I have decided to start a blog that will address some of the issues in setting up and using QuickBooks.

In this first blog I would like to address the Chart of Accounts. As every bookkeeper knows, how a business reports its income, expenses, and financial condition is dependent on the accounts included in the Chart of Accounts and how they are structured. QuickBooks will provide a default Chart of Accounts, and the user has some control when installing the software because he has to choose what type of business he will be using the software for. However, the default Chart of Accounts may not reflect the legal structure of the business.

Each type of business must file income tax returns based on its legal structure. For instance, a sole proprietor reports income and expenses on a Schedule C attached to his Form 1040, a Corporation files Form 1120, an S-Corporation files Form 1120S, and a partnership uses Form 1065. The categories for reporting income and expenses on each of these returns is different, and some corporation returns require that a balance sheet be included as well. The default list of categories in QuickBooks is simply an alphabetical list that does not reflect the categories on any income tax return, and many of the accounts may not even be needed for the business. Unnecessary accounts can either be deleted or hidden so that the user only has to deal with the accounts he needs for his business.

Over the years in every company that I have worked for as an employee, a temporary employee, or a consultant, I have restructured the Chart of Accounts to reflect the business's tax return requirements. Accounts in QuickBooks Chart of Accounts can easily be reordered, and subcategories can be created to reflect tax return requirements. In addition, QuickBooks has the ability to link each account to a specific line on a tax return. Once these assignments have been made, reports can be generated that will exactly match where amounts are reported on the tax return.

Restructuring the Chart of Accounts in QuickBooks can be a time-consuming task, but it only has to be done once, and the benefits will be long-lasting. In addition, by structuring the Chart of Accounts to match tax reporting requirements, it will enable students to gain a better understanding of how QuickBooks tracks financial transactions and help them to master its use more fully.


I also am seeing a trend of a large increase of QuickBooks tutor requests. I think that most small business owners are having a hard time with switching from the desktop to the Online version. I just read today that as of May 2017, QuickBooks has 2.2 million customers.


Robert D.

Retired Bookkeeper (Specializing in QuickBooks) & Tax Preparer

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