Setting up the Chart of Accounts is particularly important. This creates the backbone of the accounting system, which affects how report data is grouped and displayed.
Working with a new or existing client reviewing the Chart of Accounts on a semi-regular basis will help you keep the accounting system backbone up to date.
Managing your Existing Clients
Part of the monthly or quarterly review process should include maintaining the existing and new Chart of Accounts. It’s common for a client to add new accounts on the fly while they are entering data. Some of the examples I have seen are accounts created when clients do not have bookkeeping experience. An area many clients get confused about is refunds. Instead of returning the funds to the original account used to record the expense, clients create separate refund income accounts.
Working with Clean Up Clients
Sometimes a proper clean-up is necessary for clients with existing QuickBooks files. These clients often find an accounting professional when the end of year taxes or bank reporting is needed, and they know there are issues with the bookkeeping. This is also an opportunity to give the accounting file a tune-up.
Review the Chart of Accounts to ensure accuracy. A common issue is too many materials and supplies accounts. Tune-up clients often create their Chart of Accounts and have misspellings or duplicate accounts which need to be edited and merged.
New QBO clients
Getting the Chart of Accounts right from the beginning is a benefit new business owners’ have if working with a professional.
There are several ways to control the number and name of accounts when starting a new QuickBooks file. During the setup stage, the QuickBooks setup wizard, will ask a series of questions to determine the proper and most commonly used accounts. These commonly used accounts are specific to the industry served and the type of business structure. For example, if during setup, you specify construction as the business industry, work in progress, sales income, cost of sale, and draw accounts are typical accounts which will be automatically generated.
Chart of Account Templates
What if you want to control the name and number of accounts? It’s possible to create a template for the Chart of Accounts and upload it into QuickBooks.
Chart of account templates are helpful if accountants are working in a specific industry. In the scenario of a construction accountant, the firm might have a preferred set of accounts.
The only time I suggest uploading the Chart of Accounts templates is for new clients. Otherwise, if you want to change the names, I would either merge or edit the existing accounts.
First, you must remove the existing Chart of Accounts so they can be replaced with a new set of accounts. Accounts can be removed manually, meaning you make each account inactive (except for the necessary default accounts), or they can be removed with a data utility tool. (Data utility tools are the powerhouse tools accounting professionals can use to make mass edits and changes to the accounting data)
My favorite method for removing the existing Chart of Accounts is to use a data utility tool such as Transaction Pro to delete the Chart of Accounts.
Next, you will need to determine your preferred Chart of Account list and create a template. Afterward, you can upload the new Chart of Accounts. If you are looking for a fast way to create a template, I suggest exporting the Chart of Accounts for a data file you like.
Export Chart of Accounts
1) Log into the QBO you wish to export the Chart of Accounts from
2) Gear Icon > All Lists > Chart of Accounts
3) Run Report
4) Export to Excel
5) From Excel edit the list create the desired template
6) Save
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Once the unwanted Chart of Accounts have been removed, there are several options for importing the new preferred Chart of Accounts. QuickBooks Online has a built-in tool for importing lists.
Make sure you are happy with the Chart of Accounts before importing the template.
Import Chart of Accounts
1) Log into the QBO you wish to import the Chart of Account to
2) Gear Icon > Tools > Import data
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3) Next, choose the created Chart of Accounts template to import, Map Data
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4) Once everything looks good, choose import
5) At this point, you can customize the Chart of Accounts further if necessary
If you are a professional accountant working with one specific industry, I suggest creating an industry template. If your firm works with many industries, you may prefer to have several industry-specific templates for working with new clients.