Home » Standard Chart of Accounts & Account Types
- Hector Garcia
- August 6, 2021
First, If you need to setup a free trial of QuickBooks Online use this link:
If you keep the account, you will get 30% off for 12 months, best deal out there!
Second, if you want an IMPORTABLE chart of accounts for QuickBooks, you can purchase my kit for my customized “Ultimate Chart of Accounts” for Online or Desktop that I setup for my clients, here:
Third, I do have a free google sheets (downloadable to excel) spreadsheet with a complete list of accounts by industry and company type:
My “Ultimate” P&L Chart of Accounts with 6 basic parent accounts sample: https://hectorgarcia.com/ultimatecoasample
Many clients ask me about how to “standardize” a chart of accounts or make the chart if account comply with generally accepted principles…Well hereare standard Chart of Accounts number ranges:
1000 – 1999 Assets
2000 – 2999 Liabilities
3000 – 3999 Equity
4000 – 4999 Income or Revenue
5000 – 5999 Job Costs/Cost of Goods Sold
6000 – 6999 Overhead Costs or Expenses
7000 – 7999 Other Income
8000 – 8999 Other Expense
What is the Chart of accounts?
The chart of accounts is a listing of all accounts used in the general ledger of an organization. The chart is used by the accounting software to aggregate information into an entity’s financial statements.The chart is usually sorted in order by account number, to ease the task of locating specific accounts. The accounts are usually numeric, but can also be alphabetic or alphanumeric.
The Chart of Accounts is the backbone of your accounting system. That’s why it is so important to understand how it works. Think of a chart of accounts as a file cabinet, with a file for each type of accounting information you want to track. For example, if you need to know how much money you spend on postage, you can set up a file (an account in the Chart of Accounts) for Postage Expense
Accounts are usually listed in order of their appearance in the financial statements, starting with the balance sheet and continuing with the income statement. Thus, the chart of accounts begins with cash, proceeds through liabilities and shareholders’ equity, and then continues with accounts for revenues and then expenses. Many organizations structure their chart of accounts so that expense information is separately compiled by department; thus, the sales department, engineering department, and accounting department all have the same set of expense accounts.
Assets are things your company owns. They are usually divided into two groups: current assets and fixed assets. Current Assets are assets that you can easily turn into cash, such as checking accounts, savings accounts, money market and CD accounts, accounts receivable, and inventory. Current assets are normallynumbered from 1000 to 1499. So, you might want to use account number 1100 for your company checking account because a checking account is a current asset.
Fixed assets are usually numbered from 1500 to 1999. These are items with a minimum cost (for example, $500) that you would have to sell to generate cash. Automobiles, equipment, and land are examples of fixed assets. For example, suppose last year your company bought a new computer system for $1,100. Since the cost of the system was more than $500, the purchase was entered to an asset account rather than to an expense account. Consult your accountant or tax preparer to determine the actual minimum cost you should use to determine fixed assets.
Liabilities are funds your company owes. For example, say your company borrowed $20,000 from the bank. When the $20,000 loan was deposited to the checking account, the deposit was entered in the liability account Bank Loans, not an income account.
Example, Payroll Liabilities:
The Payroll Liability account is a current liability account that QuickBooks automatically adds to your chart of account when you turn on payroll.The Payroll Liabilities account tracks taxes that you deduct from employee’s paychecks and hold temporarily until you turn them over to the government. These include federal and state income withholding taxes, local taxes, and the employee-paid portion of taxes such as Social Security and Medicare.
Your capital account structure depends on whether your company is organized as a sole proprietorship, partnership, or corporation.
If your company is a sole proprietorship, you need a Capital account and an Owner’s Drawing account. Use the Capital account to keep track of the total amount of money you have invested since starting the business, plus or minus the net profit or loss each year since you started the business. Use the Owner’s Drawing account for money you take out of the business for personal use, such as checks to the grocery store or dry cleaners, ATM transactions, your salary, and any money that gets deposited into your personal accounts.
It is important to keep in mind that the owner of a sole proprietorship doesn’t get a regular employee paycheck with money deducted for payroll taxes. Instead you pay quarterly estimated taxes, which you should always allocate to the Owner’s Drawing account.
If your company is a partnership or LLP (Limited Liability Partnership), you need to set up Capital and Drawing accounts for each partner.If your company is an S or C corporation or an LLC corporation, it should have a Common Stock account and sometimes a Preferred Stock account. Common stock and preferred stock represent the total sum of stock the company has issued. An LLC might have Member stock if there is more than one person who owns stock.
Income or Revenue
Income or revenue is the income you get from your normal day-to-day business tasks, such as professional fees, income for services rendered, reimbursable expenses, or products you sell.
Cost of Goods Sold
Cost of Goods Sold includes the cost of raw materials, freight charges for getting raw material to a warehouse, labor for building the finished goods, and freight charges for getting the goods to the customer. For manufacturing businesses, the Cost of Goods Sold includes the costs incurred in producing or building a product. For a wholesale business, Cost of Goods Sold are the costs of the goods you purchase for resale. For a distributor business, Cost of Goods Sold are the costs to purchase and distribute goods to the customer.
Expenses or Overhead Costs
Overhead Costs, or Expenses, are fixed costs you have even if you run out of work. Examples include rent, telephone, insurance, and utilities.
For example. Payroll Expense:
The Payroll Expenses account tracks payroll items that are an expense to your company. These include salaries, wages, bonuses, commissions, company contributions such as a company-paid health plan, and the company-paid portion of taxes such as Social Security and Medicare.
Other Income is income you earn outside the normal way you do business, including interest income, gain on the sale of an asset, insurance settlement, a stock sale, or rents from buildings you own.
Other Expense is an expense that is outside of your normal business, such as a loss on the sale of an asset or stockbroker fees.
Here is a SAMPLE chart of accounts for the P&L accounts:
|4000||Product Sales Income|
|4100||Service Sales Income|
|Cost of Goods Sold|
|5000||Cost of Goods Sold|
|5010||Purchases of Product|
|5210||Freight In Costs|
|5220||Freight Out / Shipping to Clients|
|5500||Subcontracted Direct Labor|
|5600||Commisions & Refferral Fees|
|6009||Other / Bonus|
|6050||Rent/Lease Equipment (NonVehicle)|
|6060||Repairs & Maintenance (NonVehicle)|
|6072||Car Payment / Lease|
|6074||Parking & Tools|
|6100||Advertising, Promotion, and Marketing|
|6103||News, Magazine, Radio, TV|
|6105||Other Marketing & CRM Expenses|
|6110||Postage, Shipping, & Printing|
|6201||Bad Debt Expense|
|6230||Software & Small Equipment|
|6250||Bank Service Charges|
|6260||Merchant Processing Fees|
|6270||Janitorial & Cleaning Expense|
|6280||Training & Continued Education|
|6300||Insurance for Business|
|6301||General Liability Insurance|
|6303||Malpractice / Erros & Ommission|
|6501||Telephone – Lan|
|6502||Telephone – Cel|
|6504||Other Telecomunication Services|
|6505||TV / Satellite|
|6601||Licences, Permits, and Local Taxes|
|6602||Fines & Penalties|
|6603||Dues & Subscriptions|
|6702||Hotel & Lodging|
|6703||Vehicle Rental & Transportation|
|6704||Meals while Traveling|
|6705||Misc Travel Entertaiment|
|6720||Meals & Entertainment|
|6721||M&E With Clients|
|6722||M&E Officers Only|
|6723||M&E for Employees & Meetings|
|6801||Bookkeeping & Admin|
|6802||CPA & Tax Planning|
|6803||Attorneys & Legal Fees|
|6804||Business & Management Consultant|
|6811||Subcontracted Services (Other)|
|6902||Depreciation & Amortization|
|6911||Misc & Other Expenses|
|6990||Ask My Accountant / To Review|
|Other Income and Expenses|
|8020||Other Non-Operating Income|
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- Hector Garcia
- 8:00 am
- 3 Comments
You forgot the NET INCOME Account
I sell at farmers markets. What account would I file their fees?
Rent or transaction fees
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