Mastering the Basics: A Guide to Using Chart of Accounts for Your Business

how to use the chart of accounts

Feb 18, 2023

A chart of accounts is a list of all the accounts used by a business to record its financial transactions. It helps organize and categorize financial transactions for easy recording, reporting, and analysis.

In summary, a chart of accounts is a critical tool for proper bookkeeping and accounting. By understanding the purpose of a chart of accounts and the account categories, assigning account codes, and using the chart of accounts to record transactions and generate financial reports, you can ensure accurate and consistent accounting practices. Here’s a step-by-step manual on how to use a chart of accounts:

  1. The first step in using a chart of accounts is to set it up. This involves creating account categories and assigning account numbers. Common account categories include assets, liabilities, equity, revenue, and expenses.
  2. Assign account numbers: Each account in the chart of accounts should have a unique account number. These numbers can be numeric or alphanumeric and should be assigned in a logical order that makes it easy to find and use them.
  3. Record transactions: Once the chart of accounts is set up, you can start recording financial transactions. Each transaction should be recorded in the appropriate account. For example, if you receive payment from a customer, you would record the transaction in the revenue account. Be consistent: Use consistent account names and numbers across all transactions and financial reports.
  4. Review and reconcile accounts: Regularly review and reconcile accounts to ensure that they are accurate and up-to-date. This involves checking that the balances in the accounts match the actual amounts and investigating any discrepancies.
  5. Generate financial reports: The chart of accounts can be used to generate a wide range of financial reports, such as income statements, balance sheets, and cash flow statements. These reports help you understand your business’s financial health and make informed decisions. You can also use the chart of accounts to identify areas where the organization is spending too much money or not generating enough revenue.

Tips for using a chart of accounts:

Keep it simple: A chart of accounts can be as simple or complex as you need it to be. However, it’s important to keep it simple and straightforward so that it’s easy to use and maintain.

Once you have completed the chart of accounts, you can either add each of the  accounts or import them to Quickbooks.

chart of accounts

Chart of accounts & Quickbooks 

Add a new account

  1. Go to Settings ⚙ and select Chart of accounts.
  2. Select New. Depending on your account view, you’ll either see a panel labeled New account or New category. Select the option you see below for next steps.

Create a new account in the New account panel

  1. Select the Save account under ▼ dropdown to choose an account type. To narrow the scope of account types, you can select one of the account type buttons above the dropdown.
    Note: Subaccounts appear indented in this dropdown menu, while parent accounts aren’t. Learn more about parent accounts and subaccounts.
  2. In the Tax form section ▼ dropdown, select the detail type that best fits the transactions you want to track. Learn more about detail types.
  3. Enter a name in the Account name Tip: Use the detail type description to create a name that describes what you’re tracking.
  4. Optionally, enter a description in the Description
  5. If you choose a Bank, Asset, Credit card, Liabilities, or Equity account, make sure your account in QuickBooks matches your actual bank or credit card account. In the Starting date and opening balance section, use the dropdown to choose a date to start tracking this account in QuickBooks.
  6. Enter an opening balance in the Account balance
  7. When you’re done, select Save.

If you see the New category panel, you’re creating a subaccount under a premade parent account. If you need to create a new account type, switch to accountant view.

  1. In the Category name field, enter a name for the category (subaccount).
  2. Select the Select category This is where you will choose the parent account that this category (subaccount) belongs to.
  3. Select the type of account that you’re creating the subaccount under.  For example, if it’s money that your business earns, select Income, or if it’s a bank account, select Bank & credit cards.
  4. Select Next.
  5. Select the account that the new subaccount fits under. Your options will vary depending on what you selected in step 3.
    • If you selected Bank & credit cards, select the ▼ dropdown in the Account type field and select the account type. Then enter the date you want to start tracking the account in QuickBooks and enter the opening balance as of that date.
    • If you selected any other category, you’ll see several options for adding more detail about the type of account. If you see an arrow > next to a category, select it to see even more detailed categories.
  6. Select Save to save a bank or credit card account, or Select for all other account types.

Import your chart of accounts to QuickBooks Online

Step 1: Format your spreadsheet

You can import your chart of accounts using a spreadsheet in Excel, Google Sheets, or a CSV file. Here’s how to format your spreadsheet so you can import it to QuickBooks.

  1. Open your existing spreadsheet of accounts or create a new one. Or, export your chart of accounts from another QuickBooks company.
  2. Make sure you have these columns in your spreadsheet:
    • Account Name
    • Type
    • Detail Type
    • Number
  3. If you organize your accounts by number, add an Account Number column. Or skip this if you don’t use account numbers.
  4. If you have a sub-account, add it in the Account Name column in this format: Main account: sub-account. For example, Utilities: Gas. See the table below for more examples of how to format sub-accounts.
  5. If it looks correct, save your spreadsheet in Google Sheets, Excel, or CSV format.

Here’s a sample of how your spreadsheet should look. You can also download our sample spreadsheet if you need more examples.

 Account Number  Account Name  Type Detail Type
 112720 Checking Account – Bank of America Bank Checking
  Money Market – First National Bank Bank Money Market
 63200 Utilities: Gas  Expenses  Utilities
 68100 Utilities: Telephone  Expenses Utilities

Step 2: Upload your spreadsheet

  1. Sign in to QuickBooks Online.
  2. Select Settings ⚙. Then select Import Data.
  3. Select Chart of Accounts.
  4. To upload a file from your computer, select Browse and choose the file. Then select Open.
  5. Or, to upload from Google Sheets, select Connect to sign into your Google account. Choose the correct file, and then Select.
  6. Select Next.

Step 3: Map your spreadsheet fields to QuickBooks fields

Once you upload your spreadsheet, map your accounts so they import correctly.

  1. In the Your Field column, select the small arrow ▼ icon and match the names to the QuickBooks Online field for:
    • Detail Type
    • Account Name
    • Account number
    • Type
  2. With the exception for Account Name, you can select No Match if there’s a field that doesn’t have a matching column in your spreadsheet. For example, if you don’t use account numbers.
  3. Select Next.

Step 4: Import your chart of accounts

You’re almost finished. Check everything one last time before you import your accounts.

  1. If you haven’t yet, be sure to add types and detail types.
    Tip: Focus on getting the account types right first. Then, select the detail types that fit the transactions you want to track.
  2. If you see a field highlighted in red, hover over the highlighted field to see what you need to fix.
  3. Uncheck any account you don’t want to save.
  4. If everything looks good, select Import.

Step 5: Enter opening balances for accounts

Once all your accounts are in QuickBooks, you’ll need to enter your opening balances for bank, credit card, and other accounts. An opening balance is the starting point for the account you create in QuickBooks. Here’s how to enter your opening balance:

  1. Go to Settings ⚙ and then Chart of Accounts.
  2. Find your bank or credit card account.
  3. In the Action column, select the small arrow ▼ Then select Edit.
  4. Select the small arrow ▼ icon under When do you want to start tracking your finances from this account in QuickBooks? Then, choose the date you want to start tracking your finances for the account.
  5. In the Account Balance field, enter the account balance for the date you selected. Learn more about opening balances.
  6. Select Save and Close.

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