The most helpful item that QuickBooks has to offer is that it structures your Chart of Accounts in a way that greatly helps your accountant when it comes to tax time. But what is the Chart of Accounts? Well, it is exactly what it says. It is a list of all accounts you have in your books. Each time you accept a transaction within QuickBooks (or any other software) you are using accounts out of the Chart of Accounts.
Chart Of Account Reports
Before I get into the importance of how you structure your Chart of Accounts, I want to talk a little bit more about its uses. For example, if you want to know how much you have spent on automobile expenses, you can go to your Chart of Accounts and run a report. This report will show you every transaction that has been marked as “Automobile Expense” and it will show you a total. You will also be able to set a date range that you can customize.
How Detailed Should I Be?
The biggest question I have noticed regarding the Chart of Accounts is “How specific should I be?” It all comes down to whoever is reading the financial statements. Each account in the Chart of Accounts ends up on a financial statement at the end of the specified period. If the financial statements do not end up giving a clear enough picture for the reader, you may miss out on a loan or a grant.
However, this does not mean that you need to be extremely detailed in your Chart of Accounts. You do not need to be so specific that each Vendor has an account with their name. Grouping together similar types of transactions help your financial statements be more understandable and concise.
There are some accounts that will be beneficial to your company no matter what type of business you are running. Having an account for “Meals and Entertainment”, for example, is helpful for determining what can be partially or fully deductible when it comes time to file taxes. Having an account for “Charitable Contributions” is another example of what can potentially be fully deductible when it comes to tax time. These types of accounts should be included in everyone’s Chart of Accounts to make sure they are easily identifiable for your tax preparer so you can take advantage of the wonderful benefits.
Contact Our Office
All in all, your Chart of Accounts will be as unique as you are. It should give a good reflection of what your business is, and how it operates. Though, if you need help structuring your Chart of Accounts, give Pooley Accounting Services a call (314)-260-7808. We would be more than happy to help you.
