QuickBooks Online 2021 how accounts are sorted without account numbers. Let’s get into it with Intuit QuickBooks Online 2021. Here we are in our QuickBooks Online account numbers, practice file and prior presentations, we set up the practice file and then we’re taking a look at our chart of accounts on the left hand side. And then we set up our account numbers. But we have not added any account numbers at this point, I’m going to close up the hamburger.
00:28
Now in order to understand the account numbers better, it’s good to first think about well, how are the accounts sorted without account numbers? And then what will the account numbers do what kind of added functionality will the account numbers have? So we in essence, have our chart of accounts without account numbers, except for we added this one 6000 down here, we’ll probably change that later. But that’ll give us a good example of what we have thus far.
00:51
So first, you want to be thinking about the order of accounts. And you want to first think about the order of accounts by account type. And with regards to QuickBooks terminology, or you want to think about it in terms of basically the balance sheet on top of the income statement, that will be the case that will be the primary sorting of the chart of accounts, whether you have account numbers on or off, and then the account numbers can add some added level of sorting within that categorization. Now, note that the default here will be to sort by account type.
01:23
Now you might say, Well, yeah, but I can’t sort by name, I could sort by account number if I want to, and you could, but you want to kind of think about it in terms of the account type. There’s a reason it’s sorted by account type, because that’s how the financial statements are grouped balance sheet on top of the income statement. So although you can sort on the chart of accounts by account number or by name, that the chart of accounts, in practice will still be an order by basically account type, because they’re going to be used to create the financial statements, which are an order by account type, meaning balance sheet, and then the income statement.
01:57
So how you first want to think about it is balance sheet on top of the income statement, the balance sheet includes assets than liabilities, then the equity section, assets, liabilities, and then equity and then the income statement, which is income, and Expense Type of accounts. Then within those categories, we have more detailed categories, including cash, then accounts receivable, then other current assets, and so on. So let’s go through it and just add a couple of the of the gaps here. So we have an example of each kind of account type category.
02:28
So we don’t have a cash account yet. So I’m just going to add some of these as we go, I’m going to say let’s add another account, let’s call it the bank account, it’s going to be a checking account, that’ll be our standard checking. And I’ll add this and this is an asset type of account standard checking type of account, I’m not going to add the numbers yet, we’ll just add those in our grouping.
02:46
Notice where it adds that right up on top, that’ll be our first account because not only is it cash, but it’s the most liquid account, then we’ll typically have an accounts receivable type of account. It has a separate type not for financial account accounting normally, but for QuickBooks, it does because it has an added level of functionality necessary to create sub ledgers for it meaning reports that are grouped by customer.
03:08
So if I go back up top and say let’s add like another type of account, notice the order that we have up top, we got the bank account, we got the other current assets, we have accounts receivable, fixed assets, and then other assets, accounts payable, credit card, liabilities, and so on, and then income and expense and so on down below, I’m going to add an accounts receivable type of account. Normally, we just have one of those one accounts receivable type.
03:34
And you might have an allowance account as well. So notice it’s right underneath the cache, because it’s a little less liquid, but still up top, and then we’ve got the inventory. This is an other current assets type of account kind of a special other current asset, because we’re tracking, you know, our inventory items, we might have something like pre payments up top like prepaid insurance, let’s just add one of those just for just for the fun of it, we’re gonna say we might have a prepaid type of asset that’s going to be an other current asset type of account. And I’m going to call it a prepayment of some kind.
04:09
So we’re going to say this is a crude or prepaid, so we’ll say prepaid expense here, and I’m going to say okay, prepaid expense. And so now we’ve got the prepayment. Notice that that the inventory items here are in order, we’re in order by type other current assets. So inventory is going to be before the prepaid because now we’re talking in the same category it being ordered in alphabetical order within the category. In other words, note that the accounts receivable is not above the checking account.
04:41
And that’s how it’s going to be on the balance sheet too, even though they’re both asset type of accounts. Because the checking account is an account type that’s going to be more liquid. So it’s going to be the checking account asset type, then accounts receivable, then with the other current assets accounts, it’s in order of, of alphabetical order within that categorization. Then we have another categorized assets undeposited funds, other current asset type of accounts, let’s add a fixed asset type of account.
05:06
So let’s say okay, let’s add a fixed asset type of account, we’re gonna say now this is going to be a long term type of asset, depreciable, assets, property, plant and equipment type of assets. And we could say, let’s say it’s going to be furniture, fixed asset furniture, let’s say fixed asset, other tools and equipment, let’s go with the furniture. So I’m going to say save it. So now we’ve got the fixed asset that will be included in here, again, it’s another asset included an order by type, we might have accumulated depreciation related to it as well, let’s add another fixed asset, which would be typical fixed asset, we’re gonna say accumulated depreciation, adding that item.
05:49
So now we’ve got two fixed assets type of accounts. And then we might have some kind of other assets we saw. Notice, within here, it’s still in alphabetical order. And this is one of the problems because these are both in alphabetical order, but it put accumulated depreciation on top because within that category, then the a of course, is is first in alphabetical order, even though we would like it to be in the reverse order. And that’s where the account numbers can basically help us out, that’s where we would have control.
06:14
So let’s go up top again, let’s add another one and say let’s add than an other asset not not as often use, and we’re just gonna say that the other asset acute, let’s say goodwill, and we’ll say, save it. So it’s not a current asset. But now in other asset down here, under the fixed assets, then let’s add some liability type of accounts. So I’m going to go liability type of account. second category on the income statement, in general, the big categories. Now, the current liability, or the big liability account is accounts payable. So we’ll say accounts payable, it is a current liability, but like accounts receivable, it has like a special need within QuickBooks to have a sub ledger, therefore, it’s got its own categorization.
06:57
And that’s usually the first account the first liability account. If I add another one, we’re gonna say then we typically have other current liabilities. And other current liabilities could include things like a loan that could be accrued or accrued interest or something like that. So let’s say we have a loan payable. Well, a loan payable could be current or long term, let’s say it’s like sales tax payable or something like that. Sales tax payable, add that. So now we got an other current liability, that’s going to be an order.
07:32
So now we got accounts payable, and the other current liability in order by type. And then if I go back up top again and said, Okay, let’s do another one. Let’s say we have a long term liability now. And let’s say this is notes payable, notes payable, notes payable could be current or long term, if it’s over a year, something over a year, that’s going to be do over a year that it’s going to be long term, you could have a current and long term portion to a notes payable. And we may talk a little bit more about how to deal with that in the chart of accounts.
08:01
Because but in any case, there it is long term. And then we’ve got the equity accounts. Now we’re on the on the balance sheet, last section, we got the opening balance, and then the owners investment, and the owners pay and then the retained earnings. Now the retained earnings is going to be something that might be the term if you were to be using a corporation, they start off with retained earnings no matter what because that’s the earnings that are retained in the business.
08:27
But if it was a sole proprietorship you may edit, edit it and say instead of calling it retained earnings, you might call it like owner’s equity or possibly a capital account, owner’s equity or maybe a capital type of account. owner’s equity. I sometimes like to just call it the capital account. But owner’s equity is probably more common for a sole proprietorship type of account. And then and then then you have the income statement.
08:59
So now we got the income statement below that income type of accounts sales being one of the common income statement, if you sell inventory items, or sale of product income, sale of product income here, I’m not sure why we need multiple accounts for that. If you do have multiple accounts, you could say I want to I want to remove some of those accounts, maybe I don’t need to sell a product accounts. So you might go back on over here and say make inactive so I’m going to make it inactive and say okay, so now we’re going to go down and say we got an income account.
09:31
So we’ve got billable income, I’m maybe I don’t need this billable item either. I’m gonna say let’s make that inactive. I would scroll back down and say another billable item we’re gonna say make that inactive. Make it inactive. And then now we’ve got the sales and sale of product income. We got the uncategorized income that’s kind of their default item cost of goods sold is going to be the next category. This is basically an expense but it’s going to be First before all other expenses, because that’s the expense related to a selling inventory.
10:05
And then we have all the expenses down below. Now the expenses are the longest category of types of things that we typically will have. And this is where the account numbers have a lot of control on the expense categorization because within this category, you can order it by account number as we can see up top. And that’ll, that can give us a lot more control over that long, you know, grouping of accounts, which all have the same account type. Let’s go ahead and just add a couple things to our numbers. Now let’s add some data.
10:34
So if I were in the chart of accounts now, so I went into the chart of accounts, I’m going to add a deposit. So we’re just going to add some numbers into it as of Oh 101. to zero, we’ll add a deposit. And I’m just going to do this fairly quickly, just so we have some numbers that we can sort in the report. So I’m going to say that deposits 100,000. Other side, I’m going to put into the equity account, which is a balance sheet type account, I’m basically making then our our income statements, I’m going to call this owner’s equity, so the owner’s equity account. So let’s add that that’ll increase the cash and increase the equity. Now let’s add some Expense Type forms. And this will be decreases to the checking account. So I’ll make this on on January 5.
11:17
And I’m not going to put the the vendors because I’m just going to do this fairly quickly. Let’s say we had one for one, let’s say, let’s say 1075. And let’s add an account here, I’m going to go to the expense accounts, let’s say that was utilities. So then I’m going to say save it. And we’ll just add a couple more. And let’s say that the next one is going to be advertising. And let’s say that was 6000, or 6000. For the advertising, we could do 6000. And then I’m going to save that. And let’s do another one and just add some of these items, I’m going to say this is going to be asked my account, no bank charges, bank charges, let’s make that as 191 90, we’re going to save that.
12:13
And then we’ll do another one and say that the account will be the car and truck, let’s make that 12,000 Car and Truck saving that. Do another one here. And we’re going to say that this is going to be contractors, let’s make that 25,000 for the contractors saving that. And then we’ll make another one. And this is going to be for the insurance. Let’s make that’s three for 3400. And then we’ll do another one. And this is going to be for interest, we’ll make this 120. Saving that. And we’ll do another one here and this is going to be for the interest job supplies.
13:05
Okay, we’ll make that 19 five job supplies, saving that. And then we’re going to say that we have another one for a legal and professional 570. Let’s put another zero there. And we’ll say save that. And then we have legal and professional meals and entertainment. We’re going to say 7800 on the meals and entertainment. And then let’s do the next one meals and entertainment we have then office supplies 12,000 saving that next one we’re going to go on down to other business expense, purchases purchases reimbursement, let’s say rental, I’m going to say that is 31,000 for the rental saving that and then we’ll say next item rental and then repairs and maintenance.
14:12
Let’s say that that’s going to be for 800 saving that we’re in the negative now here so I’m going to say next item on the rental. So let’s say rental repairs and maintenance taxes and licensees I’m gonna say that’s gonna be that and we’ll save that and then we’ve got taxes and license and uncategorized Okay, there we have it now on the accounts receivable, we might make an invoice to hit that inventory assets. We could we could add that but let’s add that directly. Now normally you would if you’re tracking this within the system You would be using an inventory account and using a perpetual inventory system, but I’m just going to add this for now. Inventory.
15:10
And then let’s see what else we can just populate our accounts here. We got inventory prepaid, let’s do the prepaid items 12,000. All right. And then what else do we have here, we got prepaid uncategorized, undeposited, accumulated amortization, the fixed asset, let’s say the furniture and fixture, let’s say that is 18,000. That’s the fixed asset account. And then we’ve got furniture goodwill, let’s add that at, let’s say that’s 20,000. goodwill, that probably wouldn’t come out of the checking account here, maybe, but anyways, goodwill, and then accounts payable, sales tax payable, sales tax payable, let’s just add that here. To put it on the books.
16:10
This will generally come from an invoice or sales receipt, but we’ll put it on the books just to have something in there. On the sales tax. note payable, let’s put that on the books. The note payable should be going the other way, I’m going to cancel this, I’m going to say that this is going to be a deposit. This time for a note payable, let’s make that for 150,000. And this is going to be notes payable notes payable. So we’ll save that. So there we have that, I’m also going to add an invoice in a bill to populate account the accounts receivable and accounts payable.
16:50
So I’ll add an invoice here. Just to put something in the accounts receivable, and we’re just going to call it customer one. So this is going to go to customer one, customer one. So we’ll set that up, I’m going to say the date is going to be Oh 115 to zero. And then this I’m going to set up an item item one tab, and it’s going to be a non inventory, let’s make it a service item, just going to be called item one. So item one, I’m not going to put a sales price here, the sales account is going to be the other side. And so now we’re going to increase the sales account. So that’s fine.
17:35
And I’m going to say save it. And let’s say and I’m going to make this quite large, I’m going to say this was for 100,000 for the sales, and then we’ll say save, save and new. And let’s make another one for a customer to now. So customer two. So now I’m gonna say customer number two, and then save that. And we’ll make this on the 16th. This is going to be inventory item. So I’m not going to track the inventory. But I’m going to make it a non inventory item, meaning we’re not doing a perpetual inventory system. And then I’m going to put this into sale of product.
18:19
And we’ll save that and let’s make this for 75,000. And we’ll save that. And then I’m going to add a bill so that we have something in accounts payable. So let’s go to the new, I’m going to say bill. And we’ll add a vendor here, I’m just going to call it Vin door one, Vin door one. Saving that. And we’ll put this down here is going to be the category of we’re going to say category down below. It’s going to be some type of expense typically, or maybe we buy more inventory.
19:01
I already have a lot of inventory on there, didn’t I? So let’s just say that it’s going to be other or miscellaneous, expense, miscellaneous expense, we’ll add another one. And this is going to be miscellaneous. Other business expense, miscellaneous, save it. And let’s say that this is going to be for the amount of 15,000. Okay, and then we’re going to say save that, Save and Close. Now let’s take a look at our reports and see what we have on them. At this point. I’m going to say let’s duplicate this tab, right click on it and duplicate it. I’m going to do it two more times, right click Duplicate and then right click and duplicate.
19:48
And we’ll just basically open it up our reports now so that we just have some numbers in it, looking at the major reports, balance sheet income statement, and then possibly the trial balances the other report that I think Think is useful to look at. Let’s actually start with that one. Well, let’s start with the balance sheet on the first tab here, I’ll go to the to the reports on the left hand side, we’ll open up the good old balance sheet, it should be up here in the favorite reports. So we’ll open up the balance sheet report, changing the dates up top from a 10120 to 1231 to zero, run that report, close the hamburger.
20:24
And now we’ve got our information populated here we can see our numbers populated and how that’s formatted. Then if we go to the next tab on over, we’re going to open up the income statement. So we’re going to the reports down below. And then open up the good old income statement the profit and loss, and this is going to be from a 101 to zero to 1231 to zero, run that report. Next tab on over let’s open up the chart, or the trial balance.
20:52
This is a less less common report used often by accountants, but it really gives you an idea of the ordering of the accounts, it’ll look a lot like the chart of accounts, same date range up top, oh 101 to zero to 1231 to zero, run that report, closing the hamburger. Now you want to think about this balance sheet on top of the income statement. So if I look at the balance sheet, here we have it and notice every little drop down category that is is based on these drop downs.
21:21
That’s the account type. So we have the banking account drop down category, then the accounts receivable, and then other current assets, and then the fixed assets down here. And then the other assets that gives us our total assets, top part of the balance sheet, then liabilities by account type account type of accounts payable, then other current liabilities, then long term liabilities, that’s all the liabilities. Then we get to the equity. Last part of the balance sheet, and these are the accounts in the equity section.
21:53
Then we have the income statement, income statement includes income, and then the expense categories. Now Cost of Goods Sold would be one of the major expenses, we didn’t add a cost of goods sold yet. So we should have we should put one there but cost of goods sold. And then all other expenses usually be in the long category. This is where you have a lot of control with the account numbers.
22:13
And then if you go to the chart of account to the trial balance, you can see this gets rid of all the subtotals and if you can understand this report, it’s a lot easier to look at where you have the balance sheet assets and then liabilities and then equity on top of the income statement, income and expense in the same report.