QuickBooks released a new standard chart of accounts that is a great way to start for most small businesses. It contains:
- 6x main Income accounts
- 1x main Cost of Goods Sold account
- 20x main Expense accounts
- 1x main Other Income account
- 3x main Other Expense account
- 66x sub-accounts under those main categories mentioned above
- 38x Balance Sheet accounts (assets, liabilities, equity); but those are not important anyway, as those are mostly personalized to the specific business
With this standard chart of accounts, you can collapse all the accounts, and fit a 6-month P&L monthly report and fit into one portrait printout: download PDF sample and if you expand the P&L fully (and have transactions in ALL accounts) it would be about a 4-page printout: download PDF sample here ; which is not necessarily a good thing… Ideally P&L reports should fit into a single page or 2 at most. But remember that this standard chart of accounts might include many accounts you do not need, so you can delete them prior to import them (in the excel file) or make them inactive once they are in QuickBooks.
But one really cool thing about this account format, is that it fits into a Schedule C (for sole proprietors and single member LLC’s) tax return, which should make things easier at tax time. Just make sure you do not create or use new parent/main accounts, because then you lose that benefit.
There are some really interesting notes I want to add about this specific chart of accounts:
- Home Office is setup as an “Other Expense” account, because these are not straight forward expenses from a tax deductibility point of view (see my Home Office calculation video) – So you might be booking expenses in there all year long, but will definitely need to make an adjustment at least once a year to make it comply with tax rules, as some of the categories int here such as “Mortgage Interest” are technically mostly personal expenses, but business expenses.
- Vehicle Expense is setup as an “Other Expense” account, because most small businesses do not really own all the vehicles used by the business, and almost always there is a personal vehicle belonging to the business owner(s) and it will require some additional calculations or adjustments to make sure only the business portion actually gets deducted
- There is an equity (balance sheet) category called Personal Expenses which is meant to track expenses that were made by the business but SHOULDN’T have; but that happens often, so that needs to be “equity” because it’s technically a personal distributions indirectly paid to the business owner(s), and should not be in the Profit & Loss report
- This chart of accounts, does NOT have account numbers. Not a big deal to most small businesses, but some accounts freak out when they don’t see the numbers
Anyway, if you want to download the chart of accounts to import into your own QuickBooks Online, here it is:
PS: This is a basic chart of accounts, and is FREE. However, I built a more advanced chart of accounts, designed to give you deeper collapsed multi-period or multi-column analysis (such as P&L by Class or P&L by Location), I sell that chart of accounts for $48 and have both versions QuickBooks Online and Desktop, if you want to learn more about that, go here: https://qbkaccounting.com/ultimate-chart-of-accounts-for-quickbooks-desktop/
PPS: Remember that importing any chart of accounts into an EXISTING company file with historical data can become a hot mess! because QuickBooks is not going to magically rearrange the old accounts to fit into the new chart of accounts, so you need to accept two things if you do this 1) you need to STOP using the old accounts by making them inactive, 2) any reports that contain old transactions and new transactions (after deleting the old accounts) are going to look jacked up.
The alternative to this, is to take ALL the old accounts that you are not going to use any more, and make them a SUB-ACCOUNT of one of the new accounts, which will fixed your collapsed report with old and new transactions, but will change retroactively the structure of your historical financial statements… If done right, your Net Income should not be affected, which is the most important thing.