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How To Clean Up Your Chart Of Accounts

Have you looked at your Chart of Accounts in your QuickBooks file lately? Whether you have been using QuickBooks for a month or for five years, a Chart of Accounts can sometimes be confusing and messy – especially if you do not know what it is or how to utilize it.

A Chart of Accounts is exactly what it sounds like – it lays out all the different types of accounts set up in your QuickBooks file that help track your everyday transactions. These account types include your income and expense accounts that show up on your Profit and Loss, as well as the asset and liability accounts that are on your Balance Sheet.

The beginning of a new year is the perfect time to look through your Chart of Accounts in QuickBooks and make some updates. You may have old expense accounts that are no longer applicable to your business or operation, or you may have duplicated some different types of accounts and need to merge them together to have a cleaner set of financials.

First, locate your Chart of Accounts. On a PC or Mac version of QuickBooks, it can usually be located in the upper right hand corner of the Home Page. If you are using QuickBooks Online you can simply click on your company name in the top right corner of the browser page and choose Chart of Accounts under the “Settings” column.

Once you have your Chart of Accounts open you will notice a few different columns. Going from left to right, you will have the Name Column for your account, the Type of Account, and then the Balance Total – if applicable. Most Chart of Accounts will list the type of accounts as follows:

  • Bank
  • Assets (Fixed Assets, Current Assets, Accounts Receivable)
  • Credit Cards
  • Liabilities (Accounts Payable, Long Term Liabilities, Current Liabilities)
  • Equity
  • Income
  • Cost of Goods Sold
  • Expenses
  • Other Income/Other Expenses

One of the most common things you may see when cleaning up your Chart of Accounts is duplicated expense accounts – such as “Dues and Subscriptions” and “Dues & Subscriptions.” These can easily be merged together. Please note that two accounts can only be merged if they are the same account type. In this example, to merge the two accounts you simply need to right click the account name you don’t want to use, choose Edit, and change the account name so it matches the account you’re merging it with. When you hit Save & Close a pop up will ask you to confirm that you want to merge the two accounts.

Another common item is an account that has historical transactions but that you no longer plan to use in the future. You cannot simply delete this account as it was in use at some point, but you can mark it inactive so it no longer shows up in your Chart of Accounts listing. To do so you simply right click on the account in question and choose the “Make Account Inactive” option. If you ever need to see it again, you can simply click the “Account” button at the bottom of the Chart of Account page and choose “Show Inactive Accounts.”

Lastly, you may want to create new accounts or subaccounts to use in the following year so your financial statements have more detail for the coming year. To add a new account, you can click the “Account” button on the bottom of the Chart of Accounts page and choose “New.” A pop up will ask you to choose what type of account it is – expense, income, bank, credit card, or so on. Once you choose the type you will be allowed to name the account and add a description if necessary. If it is to be a subaccount of an already existing account you can check mark the “subaccount of” area and choose which existing account it is to be linked to. Once you hit save and close your new account will appear in your Chart of Accounts.

Larson & Company is always happy to assist you with any questions you may have concerning your Chart of Accounts and QuickBooks. We want to help you, so please contact us at any of our offices today.