QuickBooks Online (QBO) "Accounts"

The term “account” in QuickBooks Online (QBO) can have many meanings: checking account, savings account, Chart of Accounts, payment/merchant services account, a customer or vendor account and more.

Most likely you’ll work with all of these while working with QuickBooks Online (QBO), except perhaps one: the Chart of Accounts. Even though the site allows you to modify the Chart of Accounts by adding, deleting, or renaming accounts, please talk to us at Small Business Solutions (SBS) 256-337-5200 if you feel a change is in order. The Chart of Accounts forms the framework of your company, and altering it could have adverse effects on your entire accounting operation.

Set-Up

When you created your company, you probably created at least one bank account, checking. You can set this up without connecting to a bank site; however, that defeats the purpose of QBO, which is to have access to your web-based account. Setting up a connection to your online bank, credit card, or other online financial service like PayPal is easy.

June 2015 QBO Figure 1

Figure 1: QuickBooks Online’s home page displays balances for all of the accounts you’ve connected.

On the home page or the Transactions | Banking page, click the Add account button in the upper right. QuickBooks will display logos for some of the most popular financial institutions. If yours isn’t there, enter its name or URL in the box at the top.

QBO will then create a link between itself and your account, and it will download the most recent transactions (usually 90 days’ worth). Now when you click on Transactions | Banking, you’ll see all of your activity in table form with columns labeled Date, Description, Payee, Category or Match, Spent, Received and Action.

Most of these are self-explanatory; they just provide information about the transaction. You may be unfamiliar, though, with Category or Match and Action (Add). Call SBS at 256-337-5200 so we can guide you step-by-step the first time you launch and work with a transaction download. It’s very important that transactions are classified correctly.

Chart of Accounts Settings

The Chart of Accounts, which is a standard, required element of any double-entry accounting system, is a very different set of accounts. To display it, you’d click on your company name in the upper right corner, then Settings | Chart of Accounts. You’ll see a mini-spreadsheet that lists all of your accounts. QBO selected these based on the information you provided when you were first setting up your company on the site.

Each account is assigned a Type that describes its accounting function.

June 2015 QBO Figure 2

Figure 2: Every transaction that represents money you spend on Advertising/Promotional  activities should be assigned to this Expense in the Chart of Accounts.

Category Types are used by all businesses for classification purposes. There are only a few of them, such as:

  • Expenses (Bad Debts, Bank Charges, Insurance, Job Materials, etc.)
  • Income (Billable Expense Income, Gross Receipts, Markup, etc.)
  • Cost of Goods Sold (Cost of Labor, Freight & Delivery, etc.)

You don’t have to do anything with your Chart of Accounts. In fact, we suggest you don’t try. As we’ve said, if we see a reason in your bookkeeping to add, edit, or delete an account, we’ll be happy to do it for you.

But you will encounter these accounts in numerous QBO activities. Sometimes they’ll be pre-selected for you by the site, but other times you’ll need to make a choice. For example, when you create a Product or Service, there will be three account fields that will already be populated. They are:

  • Inventory Asset Account = Inventory Asset
  • Income Account = Sales of Product Income
  • Expense Account = Cost of Goods Sold

The word “account” is used in so many different ways that it can get confusing. For example, if you wrote a check at the UPS Store for some shipping charges, you’ll be asked for the Account when you enter this in QBO. It’s an Expense, but one of its more specific sub-categories.

June 2015 QBO Figure 3

Figure 3: QuickBooks Online provides the correct drop-down list in form and record fields.

QBO takes care of a lot of the background work of double-entry accounting, but it exposes you to the concept of accounts. We’re here to help if this causes confusion in your daily bookkeeping. Call SBS at 256-337-5200 to assist you or to inquire about moving your business to QuickBooks Online.

The “QB Bob” Team