How do I set up a chart of accounts for my small business, and what accounts should it contain?

What a chart of accounts is, and the classes an account can belong to

A chart of accounts is a listing of the names of the accounts a company has identified and made available for recording transactions in its general ledger. (jurisdiction: United States, entity_scope: companies generally)

“A chart of accounts is a listing of the names of the accounts that a company has identified and made available for recording transactions in its general ledger .”

Accounting software uses the chart of accounts to aggregate information into the entity's financial statements. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“The chart is used by the accounting software to aggregate information into an entity's financial statements .”

The small-company sample chart of accounts is grouped into asset accounts, liability accounts, owner's equity accounts, operating revenue accounts, operating expense accounts, and non-operating revenues and expenses, gains and losses. (jurisdiction: United States, entity_scope: companies generally, conditions: sample chart of accounts for a small company)

“Asset Accounts Liability Accounts Owner’s Equity Accounts Operating Revenue Accounts Operating Expense Accounts Non-Operating Revenues and Expenses, Gains, and Losses”

The standard (traditional) format orders accounts sequentially by account type - assets, liabilities, equity, revenue, expenses - and is described as suitable for small businesses with straightforward accounting needs. (jurisdiction: not stated in the document, entity_scope: small businesses with straightforward accounting needs)

“Organized sequentially by account type: assets, liabilities, equity, revenue, and expenses. This format is suitable for small businesses with straightforward accounting needs.”

Accounts are usually listed in the order they appear in the financial statements, beginning with the balance sheet and continuing with the income statement. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“Accounts are usually listed in order of their appearance in the financial statements, starting with the balance sheet and continuing with the income statement .”

FASB Concepts Statement 8, Chapter 4 defines ten elements of financial statements: assets, liabilities, equity (net assets), investments by owners, distributions to owners, comprehensive income, revenues, expenses, gains and losses. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“This chapter defines the following 10 elements of financial statements: a. Assets b. Liabilities c. Equity (net assets) d. Investments by owners e. Distributions to owners f. Comprehensive income g. Revenues h. Expenses i. Gains j. Losses.”

An asset is a present right of an entity to an economic benefit. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“An asset is a present right of an entity to an economic benefit.”

A liability is a present obligation of an entity to transfer an economic benefit. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“A liability is a present obligation of an entity to transfer an economic benefit.”

Equity, or net assets, is the residual interest in an entity's assets remaining after deducting its liabilities. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“The terms equity or net assets represent the residual interest in the assets of an entity that remains after deducting its liabilities.”

Revenues are inflows or other enhancements of assets, or settlements of liabilities, from delivering or producing goods, rendering services, or carrying out other activities. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“Revenues are inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities.”

Expenses are outflows or other using up of assets, or incurrences of liabilities, from delivering or producing goods, rendering services, or carrying out other activities. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“Expenses are outflows or other using up of assets of an entity or incurrences of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or carrying out other activities.”

Financial statements normally include a statement of financial position, a statement of operations, a statement of changes in equity (which may be disclosed in the notes or as part of another financial statement), and a statement of cash flows. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Financial statements normally include a statement of finan- cial position, a statement of operations, a statement of changes in equity (changes in equity may be disclosed in the notes to the financial state- ments or as part of another financial statement), and a statement of cash flows.”

If a classified statement of financial position is presented, management should distinguish current assets, long-term assets, total assets, current liabilities, long-term liabilities, total liabilities, equity, and total liabilities and equity. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status; if a classified statement of financial position is presented)

“If a classified statement of financial position is presented, man- agement should distinguish the following: a. Current assets (see chapter 5, “Current Assets and Current Liabilities”) b. Long-term assets c. Total assets d. Current liabilities (see chapter 5) e. Long-term liabilities f. Total liabilities g. Equity h. Total liabilities and equity”

The statement of operations should distinguish income or loss before discontinued operations, results of discontinued operations, and net income or loss for the period; and when arriving at income or loss before discontinued operations it should present major elements such as revenue, cost of goods sold, operating expenses, other revenues and gains, and other expenses and losses. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“The statement of operations should distinguish the following: a. Income or loss before discontinued operations b. Results of discontinued operations (see chapter 15, “Disposal of Long-Lived Assets and Discontinued Operations”) c. Net income or loss for the period When arriving at the income or loss before discontinued operations, the statement of operations should present major elements, such as revenue, cost of goods sold, operating expenses, other revenues and gains, and other expenses and losses.”

Partly established. Established: the account classes a chart contains (S003, S004). Missing: what belongs in each class; which financial statement each class reports on.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference.

Each class, what belongs in it, and which statement it reports on

See A chart of accounts is a listing of the names of the accounts a company has identified and made available for recording transactions in its general ledger.

See Accounting software uses the chart of accounts to aggregate information into the entity's financial statements.

See The small-company sample chart of accounts is grouped into asset accounts, liability accounts, owner's equity accounts, operating revenue accounts, operating expense accounts, and non-operating revenues and expenses, gains and losses.

See The standard (traditional) format orders accounts sequentially by account type - assets, liabilities, equity, revenue, expenses - and is described as suitable for small businesses with straightforward accounting needs.

See Accounts are usually listed in the order they appear in the financial statements, beginning with the balance sheet and continuing with the income statement.

See FASB Concepts Statement 8, Chapter 4 defines ten elements of financial statements: assets, liabilities, equity (net assets), investments by owners, distributions to owners, comprehensive income, revenues, expenses, gains and losses.

See An asset is a present right of an entity to an economic benefit.

See A liability is a present obligation of an entity to transfer an economic benefit.

See Equity, or net assets, is the residual interest in an entity's assets remaining after deducting its liabilities.

See Revenues are inflows or other enhancements of assets, or settlements of liabilities, from delivering or producing goods, rendering services, or carrying out other activities.

See Expenses are outflows or other using up of assets, or incurrences of liabilities, from delivering or producing goods, rendering services, or carrying out other activities.

Amounts owed to owners in a nonowner role — wages due, products or services due, accounts payable — are liabilities, not equity. (jurisdiction: United States, entity_scope: business entities)

“Wages due, products or services due, accounts payable due, and other amounts due to owners in their roles as employees, customers, suppliers, and the like are liabilities and not part of equity.”

Owners of a business entity are variously called stockholders, partners or proprietors, and business-entity equity is correspondingly known by names such as owners' equity, stockholders' equity, equity capital, partners' capital and proprietorship. (jurisdiction: United States, entity_scope: business entities)

“Other entities with proprietary or ownership interests in a business entity are commonly known by specialized names, such as stockholders, partners, and proprietors, and by more general names, such as investors, but all are owners. Equity of business entities is thus commonly known by several names, such as owners’ equity, stockholders’ equity, ownership, equity capital, partners’ capital, and proprietorship.”

Investments by owners are increases in equity from transfers of something valuable to the entity to obtain or increase ownership interests; they are most commonly assets but may also take the form of services provided or liabilities satisfied or converted. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“Investments by owners are increases in equity of an entity resulting from transfers to the entity from other entities of something valuable to obtain or increase ownership interests (or equity) in the entity. Assets are the most common form of investments by owners, but owners’ investments also may take the form of providing services or satisfying or converting liabilities of the entity.”

Distributions to owners are decreases in equity resulting from the entity transferring assets, rendering services or incurring liabilities to owners, and they decrease ownership interest. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“Distributions to owners are decreases in equity of an entity resulting from transferring assets, rendering services, or incurring liabilities by the entity to owners. Distributions to owners decrease ownership interest (or equity) in an entity.”

See Financial statements normally include a statement of financial position, a statement of operations, a statement of changes in equity (which may be disclosed in the notes or as part of another financial statement), and a statement of cash flows.

See If a classified statement of financial position is presented, management should distinguish current assets, long-term assets, total assets, current liabilities, long-term liabilities, total liabilities, equity, and total liabilities and equity.

See The statement of operations should distinguish income or loss before discontinued operations, results of discontinued operations, and net income or loss for the period; and when arriving at income or loss before discontinued operations it should present major elements such as revenue, cost of goods sold, operating expenses, other revenues and gains, and other expenses and losses.

Equity is the ownership interest in the assets of an entity after deducting its liabilities; although total equity is a residual, it includes specific categories of items (for example types of capital stock, additional paid-in capital and retained earnings), and in this framework the term retained earnings also refers to owners' capital accounts depending on the nature of the entity. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Equity is the ownership interest in the assets of an entity after deducting its liabilities. Although equity of an entity in total is a residual, it includes specific categories of items (for example, types of capital stock, additional paid-in capital, and retained earnings). As used in the FRF for SMEs accounting framework, the term retained earnings also refers to owners’ capital accounts, depending on the nature of the entity.”

The financial statements of unincorporated businesses and partnerships should include a statement detailing the changes in the owners' equity during the period, detailing separately contributions of capital, income or losses, and withdrawals. (jurisdiction: United States, entity_scope: unincorporated businesses and partnerships using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“The financial statements of unincorporated businesses and partnerships should include a statement detailing the changes in the own- ers’ equity during the period, and this statement should detail separately contributions of capital, income or losses, and withdrawals.”

The equity section in the statement of financial position of a limited liability entity should be titled “Owners’ (or Members’) Equity”, and if more than one class of members exists with varying rights, preferences and privileges, the entity is encouraged to report the equity of each class separately within the equity section. (jurisdiction: United States, entity_scope: limited liability entities using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“The equity section in the statement of financial position of a limited liability entity should be titled “Owners’ (or Members’) Equity.” If more than one class of members exists, each having varying rights, prefer- ences, and privileges, the limited liability entity is encouraged to report the equity of each class separately within the equity section.”

For a corporation filing Form 1120, the owner-equity captions on the per-books balance sheet are capital stock split into preferred stock and common stock, additional paid-in capital, retained earnings appropriated, retained earnings unappropriated, adjustments to shareholders' equity, and less cost of treasury stock. (jurisdiction: United States, entity_scope: Corporation filing Form 1120, effective_from: tax year 2025)

“22 Capital stock: a Preferred stock . . . . b Common stock . . . . 23 Additional paid-in capital . . . . . . . 24 Retained earnings—Appropriated (attach statement) 25 Retained earnings—Unappropriated . . . 26 Adjustments to shareholders’ equity (attach statement) 27 Less cost of treasury stock”

For an S corporation filing Form 1120-S, the owner-equity captions on the per-books balance sheet are capital stock, additional paid-in capital, retained earnings, adjustments to shareholders' equity, and less cost of treasury stock. (jurisdiction: United States, entity_scope: S corporation filing Form 1120-S, effective_from: tax year 2025)

“22 Capital stock . . . . . . . . . . . 23 Additional paid-in capital . . . . . . . 24 Retained earnings . . . . . . . . . 25 Adjustments to shareholders’ equity (attach statement) 26 Less cost of treasury stock”

The configuration of a chart of accounts is determined by the individual business's own needs. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“The exact configuration of the chart of accounts will be based on the needs of the individual business.”

The listed accounts are stated to be adequate for compiling an income statement and a balance sheet under a double-entry bookkeeping system. (jurisdiction: not stated in the document, entity_scope: smaller firms, accounting_basis: double entry bookkeeping system)

“The following list of accounts should be adequate for compiling an income statement and balance sheet under a double entry bookkeeping system.”

The basic small-business asset accounts given are cash (all checking and savings balances), accounts receivable (all trade receivables), inventory (raw materials, work-in-process and finished goods), fixed assets and accumulated depreciation. (jurisdiction: not stated in the document, entity_scope: small companies, accounting_basis: double entry bookkeeping system)

“Assets Cash . Includes the balances in all checking and savings accounts. Accounts receivable . Includes all trade receivables. It may be necessary to also have an "Other Receivables" account for other types of receivables, such as advances to employees. Inventory . Includes raw materials, work-in-process, and finished goods inventory. Fixed assets . Can be subdivided into multiple additional accounts, such as machinery, equipment, land, buildings, and furniture. Accumulated depreciation . One account is generally used to compile the accumulated depreciation for all types of fixed assets.”

The basic small-business liability accounts given are accounts payable (trade payables due to suppliers), accrued expenses (accrued liabilities such as wages and taxes), sales taxes payable (sales taxes billed to customers and remittable to local governments) and notes payable (the remaining balance on all loans payable). (jurisdiction: not stated in the document, entity_scope: small companies, accounting_basis: double entry bookkeeping system)

“Liabilities Accounts payable . Includes all trade payables due to suppliers. Accrued expenses . Includes all accrued liabilities, such as for wages and taxes. Sales taxes payable . Includes all sales taxes billed to customers, and to be remitted to the applicable local governments. Notes payable . Includes the remaining balance on all loans payable. For tracking purposes, it may be easier to create a separate account for each loan payable.”

The equity accounts given - common stock (the amount originally paid by shareholders for their stock) and retained earnings (cash retained in the business from profits and not distributed to shareholders) - are stated on the assumption that the entity is a corporation. (jurisdiction: not stated in the document, entity_scope: a small company that is a corporation, conditions: the equity heading states 'assumes a corporation')

“Equity (assumes a corporation) Common stock . Includes the amount originally paid by shareholders for their stock. Retained earnings . Includes all cash retained in the business from profits, which have not been distributed to shareholders.”

The revenue accounts given are split by revenue stream: service revenues (sales from providing services), product revenues (sales of products) and repair revenues (sales from repair work and spare parts). (jurisdiction: not stated in the document, entity_scope: small companies)

“Revenue Service revenues . Includes all sales related to the provision of services to customers. Product revenues . Includes all sales of products to customers. Repair revenues . Includes sales generated by repair work and the sale of spare parts to customers.”

A separate non-operating group is given, holding interest income, interest expense, gain on sale of assets and loss on sale of assets. (jurisdiction: not stated in the document, entity_scope: small companies)

“Non-Operating Revenues and Expenses Interest income . Includes income on all invested funds. Interest expense . Includes interest paid and accrued on debts owed by the company to lenders. Gain on sale of assets . Includes any gains on the sale of assets. Loss on sale of assets . Includes any losses on the sale of assets.”

One accumulated depreciation account is generally used to compile accumulated depreciation for all types of fixed asset. (jurisdiction: not stated in the document, entity_scope: small companies)

“Accumulated depreciation . One account is generally used to compile the accumulated depreciation for all types of fixed assets.”

Partly established. Established: the account classes a chart of accounts contains (S003, S004); which owner-equity accounts the legal form the business takes calls for within the equity class (S023, S024, S026, S027, S062). Missing: what belongs in each account class; which financial statement each class reports on.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, primary regulator or government.

Why the account's type, not its name, decides where the balance shows up

An account type determines how QuickBooks tracks money for that account and which financial report - Balance Sheet or Profit & Loss - displays its data. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Online Accountant, QuickBooks Ledger, Intuit Enterprise Suite, Intuit Accountant Suite)

“Determine how QuickBooks tracks money and which financial reports (Balance Sheet or Profit & Loss) display the account data.”

Intuit states the account type is the most critical selection because it dictates how QuickBooks classifies the company's data for financial reporting. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Online Accountant, QuickBooks Ledger, Intuit Enterprise Suite, Intuit Accountant Suite)

“The account type is the most critical selection because it dictates how QuickBooks classifies your data for financial reporting.”

Balance Sheet account types track what the company owns and what it owes. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Online Accountant, QuickBooks Ledger, Intuit Enterprise Suite, Intuit Accountant Suite)

“**Balance Sheet accounts:** These track what you own and what you owe.”

Profit & Loss account types track money coming in and going out. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Online Accountant, QuickBooks Ledger, Intuit Enterprise Suite, Intuit Accountant Suite)

“**Profit & Loss accounts:** These track money coming in and going out.”

Detail types affect neither the accounting nor which report an account's data appears on; they exist primarily for the user's own organisation and clarity. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Online Accountant, QuickBooks Ledger, Intuit Enterprise Suite, Intuit Accountant Suite)

“Detail types do not affect the accounting or which report the data appears on. They are primarily for your own organization and clarity.”

Partly established. Established: an account's type controls where its balance is reported (S028, S029). Missing: an account's type controls what it can be used for; what a mistyped account does to the statements.

Required authority: authoritative professional or accounting standard, official platform documentation. Highest achieved: official platform documentation.

What your accounting software controls: types, defaults, subaccounts, numbers, and what happens to an account you stop using

See An account type determines how QuickBooks tracks money for that account and which financial report - Balance Sheet or Profit & Loss - displays its data.

See Balance Sheet account types track what the company owns and what it owes.

See Profit & Loss account types track money coming in and going out.

See Detail types affect neither the accounting nor which report an account's data appears on; they exist primarily for the user's own organisation and clarity.

QuickBooks Online offers an Assets account type, described as money spent on vehicles, equipment, buildings or other assets used for business. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“Money spent on vehicles, equipment, buildings, or other assets used for business.”

QuickBooks Online offers a Liabilities account type, described as money owed but not yet paid, such as loans, mortgages or lines of credit. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“Money you owe but haven't yet paid, such as loans, mortgages, or lines of credit.”

QuickBooks Online offers an Income account type, described as money earned or gained from normal day-to-day business, such as sales revenue or income from services. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“Money earned or gained from normal day-to-day business, such as sales revenue or income from services.”

QuickBooks Online offers an Expenses account type, described as money spent on daily operations, such as advertising, office supplies or rent. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“Money spent on daily operations, such as advertising, office supplies, or rent.”

The chart of accounts can be customised to fit the business's needs. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“You can customize the chart of accounts to fit your business needs.”

Opening Balance Equity is a default QuickBooks Online account that represents the company's starting balance before company assets and liabilities are entered. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“Represents your starting balance before entering company assets and liabilities.”

Retained Earnings is a default account holding profits from earlier periods not distributed to owners, and QuickBooks automatically transfers net income into it at the start of the fiscal year. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“Tracks all profits from earlier periods not distributed to owners. QuickBooks automatically transfers net income to this account at the start of the fiscal year.”

Uncategorized Expense is a default account that tracks spending still needing to be categorised. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“Tracks spending that needs to be categorized.”

Uncategorized Income is a default account that tracks earnings still needing to be categorised. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Ledger, Intuit Enterprise Suite, QuickBooks Solopreneur Plus)

“Tracks earnings that need to be categorized.”

QuickBooks Online creates specific default accounts in the chart of accounts when a company is created, determined by the business entity selected, and creates other special accounts when certain actions are taken or features are turned on in settings. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“When you create your company in QuickBooks Online, specific default accounts in your chart of accounts are created for you depending on the business entity you selected. Other special accounts are created when certain actions are taken or features are turned on in your QuickBookssettings.”

Some of the default accounts QuickBooks Online creates cannot be changed. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“In the chart of accounts, it’s important to understand that some of these default accounts can’t be changed.”

Services is the default income account in QuickBooks Online; it functions the same as any other income account, but neither it nor the corresponding Product/Service item can be deleted, while the names of both can be edited. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“Services : This is the default income account in QuickBooks Online. It functions the same as any other income account, but neither it nor the corresponding Product/Service item can be deleted. However, you can edit the names of both to reflect your main income type.”

QuickBooks Online directs a user who needs to remove an account from the chart of accounts to deactivate accounts that are no longer used. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“Note : If you need to remove an account from your chart of accounts, learn how to deactivate accounts you no longer use .”

QuickBooks Online instructs users to make accounts inactive instead of deleting them. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“Make accounts inactive instead of deleting them.”

In QuickBooks Online an account cannot be deleted; it can only be made inactive or merged with another account. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“You can’t delete an account, you can only make it inactive or merge it with another .”

Making an account inactive in QuickBooks Online does not remove the transactions posted to it. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“When you make accounts inactive, you won’t remove their transactions.”

Before a balance sheet account is made inactive its balance should be zero; if it is not, QuickBooks Online creates an automatic adjustment entry to zero it out and adds it to the Opening Balance Equity account, which can affect balances and sales tax reports. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“Also, before you make a balance sheet account inactive, make sure its balance is zero. If not, QuickBooks Online creates an automatic adjustment entry to zero it out and adds it to the Opening Balance Equity account. This can affect balances and sales tax reports.”

Default accounts cannot be made inactive in QuickBooks Online, because QuickBooks uses certain accounts as default accounts for features. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“You can't make default accounts inactive. QuickBooks uses certain accounts as default accounts for features .”

An account that has subaccounts cannot be made inactive until the subaccounts are moved to a different account on the chart of accounts. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“If the account has subaccounts, you can’t make them inactive. To do so, you can move the subaccounts to a different account on your chart of accounts .”

In QuickBooks Online, merging two chart-of-accounts accounts moves all past transactions of the duplicate into the account that is kept and sets the duplicate account to inactive. (jurisdiction: not stated, entity_scope: QuickBooks Online users, platform: QuickBooks Online)

“The merge moves all past transactions into the account you keep and makes the duplicate account inactive.”

After a merge the merged-away account loses its reconciliation history, while its transactions remain in the file and retain their reconciled status. (jurisdiction: not stated, entity_scope: QuickBooks Online users, platform: QuickBooks Online)

“That account loses its reconciliation history after the merge, but its transactions remain and stay reconciled.”

A successful merge in QuickBooks Online requires both accounts to have identical name, account type and detail type beforehand. (jurisdiction: not stated, entity_scope: QuickBooks Online users, platform: QuickBooks Online)

“Both accounts must have the exact same name, account type, and detail type before you can merge them successfully.”

An account associated with any transactions cannot be deleted; the transactions must first be updated to use another account or deleted individually. (jurisdiction: not stated in the document, entity_scope: Zoho Books organizations (businesses using Zoho Books), platform: Zoho Books)

“Prerequisite: You cannot delete an account if it’s associated with any transactions in Zoho Books. Either update the transactions to use another account or delete the transactions individually before you proceed with the deletion.”

An account's Account Code must be unique and may be up to 50 characters long. (jurisdiction: not stated in the document, entity_scope: Zoho Books organizations (businesses using Zoho Books), platform: Zoho Books)

“Account Code: Enter a unique code (up to 50 characters).”

Subaccounts in the QuickBooks Online chart of accounts help keep the chart organised and allow more detailed reports. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Ledger, Intuit Enterprise Suite)

“Learn how to create subaccounts in your chart of accounts in QuickBooks Online. This helps you keep your chart of accounts organized and create more detailed reports.”

QuickBooks Online allows up to five subaccounts to be created under one parent account. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Ledger, Intuit Enterprise Suite)

“You can create up to five subaccounts under one parent account.”

Where subaccounts track different categories under one parent account, Intuit suggests locking the parent account so transactions can only post to the appropriate subaccounts, which helps keep reports and tax mapping accurate. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Ledger, Intuit Enterprise Suite, conditions: subaccounts used to track different categories under one parent account)

“If you use subaccounts to track different categories under one parent account, consider locking the parent account so transactions can only be posted to the appropriate subaccounts. This helps keep reports and tax mapping accurate.”

Accounts that are no longer used should be made inactive. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Ledger, Intuit Enterprise Suite, conditions: account no longer used)

“If there are accounts you no longer use, make them inactive”

Account numbers are recommended where the chart of accounts is extensive. (jurisdiction: United States, entity_scope: QuickBooks Online company files (small business), platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Online Essentials, QuickBooks Ledger, Intuit Enterprise Suite, conditions: extensive chart of accounts)

“Use account numbers if you have an extensive chart of accounts”

Transaction Description is listed as a searchable field in Global Search, Full Page Search and Advanced Transactions Search. (jurisdiction: not stated, entity_scope: QuickBooks Online users, platform: QuickBooks Online)

“| Transaction Description | ✅ | ✅ | ✅ |”

In QuickBooks Online, assigning account numbers is stated to help organise the chart of accounts and categorise transactions, and to allow accounts to be grouped by type such as assets, liabilities or expenses. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“Assigning account numbers in QuickBooks Online helps you organize your chart of accounts and categorize financial transactions more effectively. This system allows you to group accounts by type (such as assets, liabilities, or expenses), making your financial records easier to navigate and reference.”

The account numbers feature in QuickBooks Online is disabled by default. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“By default, the account numbers feature is disabled. Follow these steps to enable it.”

QuickBooks Online allows account numbers to be assigned individually or in batches, and states that any numbering system may be used while recommending that Generally Accepted Accounting Principles be followed for consistency. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“You can assign numbers to your accounts individually or in batches. While you can use any numbering system, following Generally Accepted Accounting Principles (GAAP) is recommended for consistency.”

QuickBooks Online publishes a recommended set of account-number ranges allocated by account type: 10000-19999 Assets, 20000-29999 Liabilities, 30000-39999 Equity, 40000-49999 Income or Revenue, 50000-59999 Job Costs or Cost of Goods Sold, 60000-69999 Expenses or Overhead Costs, 70000-79999 Other Income, 80000-89999 Other Expenses. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“Recommended Number Ranges (GAAP): Number Range Account Type 10000 - 19999 Assets 20000 - 29999 Liabilities 30000 - 39999 Equity 40000 - 49999 Income or Revenue 50000 - 59999 Job Costs or Cost of Goods Sold 60000 - 69999 Expenses or Overhead Costs 70000 - 79999 Other Income 80000 - 89999 Other Expenses”

QuickBooks Online Free and QuickBooks Online Lite include only three standard reports: Profit and Loss, Balance Sheet and Account list. (jurisdiction: not stated, entity_scope: QuickBooks Online Free and QuickBooks Online Lite subscribers, platform: QuickBooks Online, platform_edition: Free; Lite)

“QuickBooks Online Free and QuickBooks Online Lite only have the Profit and Loss, Balance Sheet and the Account list Standard Reports.”

Partly established. Established: what a type controls once chosen (S028); what limits apply to subaccount depth (S095); what limits apply to account numbering (S057); whether an account that already carries posted transactions can be deleted, made inactive or merged (S048). Missing: what account types mainstream small-business accounting software offers; whether a type can be changed later; what the default chart of a newly created company file contains; any industry-specific variant of the default chart the platform supplies; what becomes of that posted history; whether payee, item and description fields let activity be reported without an account being created for it.

Building the account list from what your business actually does

See Investments by owners are increases in equity from transfers of something valuable to the entity to obtain or increase ownership interests; they are most commonly assets but may also take the form of services provided or liabilities satisfied or converted.

See Distributions to owners are decreases in equity resulting from the entity transferring assets, rendering services or incurring liabilities to owners, and they decrease ownership interest.

See The financial statements of unincorporated businesses and partnerships should include a statement detailing the changes in the owners' equity during the period, detailing separately contributions of capital, income or losses, and withdrawals.

See The configuration of a chart of accounts is determined by the individual business's own needs.

See The listed accounts are stated to be adequate for compiling an income statement and a balance sheet under a double-entry bookkeeping system.

See The basic small-business asset accounts given are cash (all checking and savings balances), accounts receivable (all trade receivables), inventory (raw materials, work-in-process and finished goods), fixed assets and accumulated depreciation.

See The basic small-business liability accounts given are accounts payable (trade payables due to suppliers), accrued expenses (accrued liabilities such as wages and taxes), sales taxes payable (sales taxes billed to customers and remittable to local governments) and notes payable (the remaining balance on all loans payable).

See The equity accounts given - common stock (the amount originally paid by shareholders for their stock) and retained earnings (cash retained in the business from profits and not distributed to shareholders) - are stated on the assumption that the entity is a corporation.

See The revenue accounts given are split by revenue stream: service revenues (sales from providing services), product revenues (sales of products) and repair revenues (sales from repair work and spare parts).

See A separate non-operating group is given, holding interest income, interest expense, gain on sale of assets and loss on sale of assets.

A smaller firm can leave out the more specialised accounts and use an abbreviated chart of accounts instead. (jurisdiction: not stated in the document, entity_scope: smaller firms)

“A smaller firm can dispense with the more specialized accounts and instead use an abbreviated chart of accounts.”

Some industries nearly always use special accounts that this list does not mention. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“However, please note that there are nearly always special accounts used in some industries, which are not mentioned in the following list.”

Updates to the chart are also needed when the business adds new products, services or reporting requirements. (jurisdiction: not stated in the document, entity_scope: small businesses)

“Updates are also needed when the business adds new products, services, or reporting requirements.”

The fixed assets account can be subdivided into further accounts such as machinery, equipment, land, buildings and furniture. (jurisdiction: not stated in the document, entity_scope: small companies)

“Fixed assets . Can be subdivided into multiple additional accounts, such as machinery, equipment, land, buildings, and furniture.”

It may be easier for tracking to create a separate notes payable account for each loan payable. (jurisdiction: not stated in the document, entity_scope: small companies)

“For tracking purposes, it may be easier to create a separate account for each loan payable.”

Not established from an authoritative source.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference.

Direct cost of what you sell versus the cost of running the business

See The statement of operations should distinguish income or loss before discontinued operations, results of discontinued operations, and net income or loss for the period; and when arriving at income or loss before discontinued operations it should present major elements such as revenue, cost of goods sold, operating expenses, other revenues and gains, and other expenses and losses.

Cost of goods sold is the total of all costs used to create a product or service that has been sold. (jurisdiction: not stated, entity_scope: business generally)

“Cost of goods sold is the total of all costs used to create a product or service, which has been sold.”

Cost of goods sold relates to expenses used to create a product or service that has been sold, while operating expenses are incurred to run all non-production activities such as selling, general and administrative activities. (jurisdiction: not stated, entity_scope: business generally)

“As we have just described, the cost of goods sold relates to those expenses used to create a product or service, which has been sold. Operating expenses are incurred to run all non-production activities, such as selling, general and administrative activities.”

In a service business, cost of goods sold is considered to be the labor, payroll taxes and benefits of the people who generate billable hours, and the term may be changed to cost of services. (jurisdiction: not stated, entity_scope: service businesses)

“In a service business, the cost of goods sold is considered to be the labor, payroll taxes , and benefits of those people who generate billable hours (though the term may be changed to "cost of services").”

In a retail or wholesale business, cost of goods sold is likely to be merchandise bought from a manufacturer. (jurisdiction: not stated, entity_scope: retail or wholesale businesses)

“In a retail or wholesale business, the cost of goods sold is likely to be merchandise that was bought from a manufacturer.”

In income statement presentation, cost of goods sold is subtracted from net sales to arrive at the gross margin. (jurisdiction: not stated, entity_scope: business generally)

“In the income statement presentation, the cost of goods sold is subtracted from net sales to arrive at the gross margin of a business.”

Cost of goods sold is presented immediately after the revenue line items in the income statement, and operating expenses are presented after it. (jurisdiction: not stated, entity_scope: business generally)

“The cost of goods sold is presented immediately after the revenue line items in the income statement, after which operating expenses are presented.”

Many expenses are not directly related to particular revenues; they are related to a period by transactions or events in that period or by allocation, and are deducted from revenues by being recognized in the same period. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities, accounting_basis: accrual)

“Many expenses, however, are not related directly to particular revenues but can be related to a period on the basis of transactions or events occurring in that period or by allocation. Recognition of those expenses is largely independent of recognition of particular revenues, but they are deducted from particular revenues by being recognized in the same period.”

Assigning manufacturing costs to production departments or cost centers and thence to units of product to determine 'product cost' is given as a common example of an allocation. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities, accounting_basis: accrual)

“Common examples of allocations include (a) assigning manufacturing costs to production departments or cost centers and thence to units of product to determine “product cost,” (b) apportioning the cost of a “basket purchase” to the individual assets acquired on the basis of their relative market values, and (c) spreading the cost of an insurance policy or a building to”

Examples of costs excluded from the cost of inventories and recognized as expenses in the period incurred are abnormal amounts of wasted materials, labor or other production costs; storage costs unless necessary in the production process before a further production stage; administrative overheads that do not contribute to bringing inventories to their present location and condition; and selling costs. (jurisdiction: United States, entity_scope: entities with inventories using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Examples of costs excluded from the cost of inventories and rec- ognized as expenses in the period in which they are incurred are a. abnormal amounts of wasted materials, labor, or other produc- tion costs; b. storage costs, unless those costs are necessary in the production process before a further production stage; c. administrative overheads that do not contribute to bringing in- ventories to their present location and condition; and d. selling costs.”

A business need not figure cost of goods sold if the sale of merchandise is not an income-producing factor for it; its gross profit is the same as its net receipts, and most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way. (jurisdiction: United States, entity_scope: Self-employed individual or statutory employee filing Schedule C (Form 1040), effective_from: 2025 returns, conditions: Applies where the sale of merchandise is not an income-producing factor for the business)

“Businesses that sell services. You don’t have to figure materials, supplies you use in production, and merchan- the cost of goods sold if the sale of merchandise is not an dise you purchase for sale are all part of cost of goods income-producing factor for your business. Your gross sold. profit is the same as your net receipts (gross receipts 30 Chapter 7 Figuring Gross Profit Publication 334 (2025) minus any refunds, rebates, or other allowances). Most Inventory at end of year. Check to make sure your pro- professions and businesses that sell services rather than cedures for taking inventory are adequate. These proce- products can figure gross profit directly from net receipts dures should ensure all items have been included in in- in this way.”

Business expenses are the costs of operating the business that a taxpayer does not have to capitalize or include in the cost of goods sold and can instead deduct in the current year. (jurisdiction: United States, entity_scope: Self-employed individual or statutory employee filing Schedule C (Form 1040), effective_from: 2025 returns)

“These costs are known as business expenses. These are costs you don’t have to capitalize or include in the cost of either for the year the deduction is claimed or for a prior goods sold but can deduct in the current year.”

For a business that sells products, gross profit is figured by first subtracting returns and allowances from gross receipts to give net receipts, and then subtracting cost of goods sold from net receipts; returns and allowances include cash or credit refunds to customers, rebates, and other allowances off the actual sales price. (jurisdiction: United States, entity_scope: Self-employed individual or statutory employee filing Schedule C (Form 1040), effective_from: 2025 returns)

“Businesses that sell products. Figure your gross profit Examples of other costs incurred in a manufacturing or by first figuring your net receipts. Figure net receipts mining process that you charge to your cost of goods sold (line 3) on Schedule C (Form 1040) by subtracting any re- are as follows. turns and allowances (line 2) from gross receipts (line 1). Returns and allowances include cash or credit refunds you Containers. Containers and packages that are an inte- make to customers, rebates, and other allowances off the gral part of the product manufactured are a part of your actual sales price. cost of goods sold. If they are not an integral part of the Next, subtract the cost of goods sold (line 4) from net manufactured product, their costs are shipping or selling receipts (line 3). The result is the gross profit from your expenses. business.”

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, primary regulator or government.

What decides which side a cost falls on, and how the margin shows up

See The statement of operations should distinguish income or loss before discontinued operations, results of discontinued operations, and net income or loss for the period; and when arriving at income or loss before discontinued operations it should present major elements such as revenue, cost of goods sold, operating expenses, other revenues and gains, and other expenses and losses.

See Cost of goods sold is the total of all costs used to create a product or service that has been sold.

See Cost of goods sold relates to expenses used to create a product or service that has been sold, while operating expenses are incurred to run all non-production activities such as selling, general and administrative activities.

See In a service business, cost of goods sold is considered to be the labor, payroll taxes and benefits of the people who generate billable hours, and the term may be changed to cost of services.

See In a retail or wholesale business, cost of goods sold is likely to be merchandise bought from a manufacturer.

See In income statement presentation, cost of goods sold is subtracted from net sales to arrive at the gross margin.

See Cost of goods sold is presented immediately after the revenue line items in the income statement, and operating expenses are presented after it.

See Many expenses are not directly related to particular revenues; they are related to a period by transactions or events in that period or by allocation, and are deducted from revenues by being recognized in the same period.

See Assigning manufacturing costs to production departments or cost centers and thence to units of product to determine 'product cost' is given as a common example of an allocation.

See Examples of costs excluded from the cost of inventories and recognized as expenses in the period incurred are abnormal amounts of wasted materials, labor or other production costs; storage costs unless necessary in the production process before a further production stage; administrative overheads that do not contribute to bringing inventories to their present location and condition; and selling costs.

See A business need not figure cost of goods sold if the sale of merchandise is not an income-producing factor for it; its gross profit is the same as its net receipts, and most professions and businesses that sell services rather than products can figure gross profit directly from net receipts in this way.

See Business expenses are the costs of operating the business that a taxpayer does not have to capitalize or include in the cost of goods sold and can instead deduct in the current year.

See For a business that sells products, gross profit is figured by first subtracting returns and allowances from gross receipts to give net receipts, and then subtracting cost of goods sold from net receipts; returns and allowances include cash or credit refunds to customers, rebates, and other allowances off the actual sales price.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, primary regulator or government.

How much detail: its own account, a subaccount, or no account at all

A large chart of accounts leads to incorrect account usage, immaterial account balances, extensive accountant training, higher audit costs and incorrect financial statements. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“Having a large chart of accounts leads to issues with incorrect account usage, immaterial account balances, extensive accountant training, higher audit costs, and incorrect financial statements .”

A small number of additional accounts may be needed where information must be aggregated for tax reporting or other specialised purposes, such as entertainment expenses. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“In addition, there may be a need for a small number of accounts in which information is aggregated for tax reporting or other specialized purposes, such as entertainment expenses.”

Use of miscellaneous or other accounts should be limited, to prevent loss of detail. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“Include a “miscellaneous” account sparingly . Limit the use of miscellaneous or other accounts to prevent loss of detail.”

See The fixed assets account can be subdivided into further accounts such as machinery, equipment, land, buildings and furniture.

See One accumulated depreciation account is generally used to compile accumulated depreciation for all types of fixed asset.

See It may be easier for tracking to create a separate notes payable account for each loan payable.

See Subaccounts in the QuickBooks Online chart of accounts help keep the chart organised and allow more detailed reports.

See QuickBooks Online allows up to five subaccounts to be created under one parent account.

See Where subaccounts track different categories under one parent account, Intuit suggests locking the parent account so transactions can only post to the appropriate subaccounts, which helps keep reports and tax mapping accurate.

See Accounts that are no longer used should be made inactive.

See Account numbers are recommended where the chart of accounts is extensive.

The hierarchical format organises accounts in a tree of main (parent) accounts and sub-accounts (children), described as useful for complex businesses needing detailed breakdowns. (jurisdiction: not stated in the document, entity_scope: complex businesses needing detailed breakdowns)

“Organized in a tree structure with main (parent) accounts and sub-accounts (children). This format is useful for complex businesses needing detailed breakdowns.”

The hierarchical example nests sub-accounts inside a parent by extending the parent's number: 5000 Expenses, 5100 Marketing Expenses, 5110 Digital Marketing, 5120 Print Advertising. (jurisdiction: not stated in the document, entity_scope: organizations generally, conditions: given as example numbering)

“5000 Expenses 5100 Marketing Expenses 5110 Digital Marketing 5120 Print Advertising”

See Transaction Description is listed as a searchable field in Global Search, Full Page Search and Advanced Transactions Search.

Partly established. Established: what makes a separate account worthwhile (S088). Missing: what should be a subaccount; what should be captured by payee, item or a description instead of by creating an account.

How much detail a small-business chart should carry

See The listed accounts are stated to be adequate for compiling an income statement and a balance sheet under a double-entry bookkeeping system.

See A smaller firm can leave out the more specialised accounts and use an abbreviated chart of accounts instead.

See Some industries nearly always use special accounts that this list does not mention.

See Updates to the chart are also needed when the business adds new products, services or reporting requirements.

See A large chart of accounts leads to incorrect account usage, immaterial account balances, extensive accountant training, higher audit costs and incorrect financial statements.

See A small number of additional accounts may be needed where information must be aggregated for tax reporting or other specialised purposes, such as entertainment expenses.

See Use of miscellaneous or other accounts should be limited, to prevent loss of detail.

See The fixed assets account can be subdivided into further accounts such as machinery, equipment, land, buildings and furniture.

See One accumulated depreciation account is generally used to compile accumulated depreciation for all types of fixed asset.

See It may be easier for tracking to create a separate notes payable account for each loan payable.

A small business should review its chart of accounts at least once a year to check it still reflects current operations. (jurisdiction: not stated in the document, entity_scope: small businesses)

“A small business should review its chart of accounts at least once a year to ensure it still reflects current operations.”

A company is expected to expand and/or modify a software-supplied sample chart of accounts so that its own specific needs are met. (jurisdiction: United States, entity_scope: companies generally)

“It is expected that a company will expand and/or modify these sample charts of accounts so that the specific needs of the company are met.”

Partly established. Established: what makes an activity or a cost worth an account of its own (S088); on what basis an account supplied by a software default or an industry template is kept or removed (S065, S122). Missing: what belongs beneath a parent account instead; what is better captured by payee, item or description than by a new account.

Numbering and ordering the accounts

See The small-company sample chart of accounts is grouped into asset accounts, liability accounts, owner's equity accounts, operating revenue accounts, operating expense accounts, and non-operating revenues and expenses, gains and losses.

See The standard (traditional) format orders accounts sequentially by account type - assets, liabilities, equity, revenue, expenses - and is described as suitable for small businesses with straightforward accounting needs.

See Accounts are usually listed in the order they appear in the financial statements, beginning with the balance sheet and continuing with the income statement.

See Account numbers are recommended where the chart of accounts is extensive.

See The hierarchical format organises accounts in a tree of main (parent) accounts and sub-accounts (children), described as useful for complex businesses needing detailed breakdowns.

See The hierarchical example nests sub-accounts inside a parent by extending the parent's number: 5000 Expenses, 5100 Marketing Expenses, 5110 Digital Marketing, 5120 Print Advertising.

Chart of accounts numbering means setting up the structure of the accounts to be used and assigning specific codes to the individual general ledger accounts. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“Chart of accounts numbering involves setting up the structure of the accounts to be used, as well as assigning specific codes to the different general ledger accounts .”

The account code is usually a three-digit segment that describes the account itself, such as fixed assets, revenue or supplies expense - a segment distinct from the division and department segments. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“Account code - This is usually a three digit code that describes the account itself, such as fixed assets , revenue , or supplies expense .”

As the example given, a smaller business with no departments can use just the three-digit account code, xxx. (jurisdiction: not stated in the document, entity_scope: smaller businesses with no departments, conditions: given as an example)

“As a final example, a smaller business with no departments at all could just use the three digit code assigned to its accounts, which is: xxx”

A company can use any account numbering system it wants; no approach is mandated. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“A company can use any numbering system that it wants; there is no mandated approach.”

The common three-digit coding scheme given allocates 100-199 to assets, 200-299 to liabilities, 300-399 to equity accounts, 400-499 to revenues and 500-599 to expenses. (jurisdiction: not stated in the document, entity_scope: organizations generally, conditions: described as a common scheme, not a mandated one)

“However, a common coding scheme is as follows: Assets - Account codes 100-199 Liabilities - 200-299 Equity accounts - 300-399 Revenues - 400-499 Expenses - 500-599”

The chart is usually sorted by account number, which eases locating specific accounts. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“The chart is usually sorted in order by account number, to ease the task of locating specific accounts.”

The example numbering given for the standard format allocates 1000-1999 to assets, 2000-2999 to liabilities, 3000-3999 to equity, 4000-4999 to revenue and 5000-5999 to expenses. (jurisdiction: not stated in the document, entity_scope: organizations generally, conditions: given as example numbering)

“1000–1999: Assets 2000–2999: Liabilities 3000–3999: Equity 4000–4999: Revenue 5000–5999: Expenses”

Each account in the chart of accounts is typically assigned both a name and a unique identifying number. (jurisdiction: United States, entity_scope: companies generally)

“Each account in the chart of accounts is typically assigned a name and a unique number by which it can be identified.”

Software used by some small businesses may not require account numbers at all. (jurisdiction: United States, entity_scope: companies generally)

“(Software for some small businesses may not require account numbers.)”

Leaving gaps between assigned account numbers allows further accounts to be added later. (jurisdiction: United States, entity_scope: companies generally)

“A gap between account numbers allows for adding accounts in the future.”

A structured, consistent account numbering system should be implemented, leaving gaps between account numbers for future additions. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“Use a logical numbering system . Implement a structured and consistent numbering system for accounts, and leave gaps between account numbers for future additions.”

See In QuickBooks Online, assigning account numbers is stated to help organise the chart of accounts and categorise transactions, and to allow accounts to be grouped by type such as assets, liabilities or expenses.

See The account numbers feature in QuickBooks Online is disabled by default.

See QuickBooks Online allows account numbers to be assigned individually or in batches, and states that any numbering system may be used while recommending that Generally Accepted Accounting Principles be followed for consistency.

See QuickBooks Online publishes a recommended set of account-number ranges allocated by account type: 10000-19999 Assets, 20000-29999 Liabilities, 30000-39999 Equity, 40000-49999 Income or Revenue, 50000-59999 Job Costs or Cost of Goods Sold, 60000-69999 Expenses or Overhead Costs, 70000-79999 Other Income, 80000-89999 Other Expenses.

Partly established. Established: how ranges are used to group accounts by class (S108, S110, S120); what the reader gains from a numbering scheme versus alphabetical ordering (S109, S117). Missing: the ordering and numbering conventions available.

Recognised numbering, ranges and naming conventions

See The standard (traditional) format orders accounts sequentially by account type - assets, liabilities, equity, revenue, expenses - and is described as suitable for small businesses with straightforward accounting needs.

See Accounts are usually listed in the order they appear in the financial statements, beginning with the balance sheet and continuing with the income statement.

See The hierarchical format organises accounts in a tree of main (parent) accounts and sub-accounts (children), described as useful for complex businesses needing detailed breakdowns.

See The hierarchical example nests sub-accounts inside a parent by extending the parent's number: 5000 Expenses, 5100 Marketing Expenses, 5110 Digital Marketing, 5120 Print Advertising.

See Chart of accounts numbering means setting up the structure of the accounts to be used and assigning specific codes to the individual general ledger accounts.

See The account code is usually a three-digit segment that describes the account itself, such as fixed assets, revenue or supplies expense - a segment distinct from the division and department segments.

See As the example given, a smaller business with no departments can use just the three-digit account code, xxx.

See A company can use any account numbering system it wants; no approach is mandated.

See The common three-digit coding scheme given allocates 100-199 to assets, 200-299 to liabilities, 300-399 to equity accounts, 400-499 to revenues and 500-599 to expenses.

See The chart is usually sorted by account number, which eases locating specific accounts.

See The example numbering given for the standard format allocates 1000-1999 to assets, 2000-2999 to liabilities, 3000-3999 to equity, 4000-4999 to revenue and 5000-5999 to expenses.

See Each account in the chart of accounts is typically assigned both a name and a unique identifying number.

See Software used by some small businesses may not require account numbers at all.

See Leaving gaps between assigned account numbers allows further accounts to be added later.

See A structured, consistent account numbering system should be implemented, leaving gaps between account numbers for future additions.

Account names and numbering conventions should be standardised across the organization. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“Maintain consistency . Standardize account names and numbering conventions across the organization.”

The sample chart also carries a description column for each account, to assist in selecting the most appropriate account. (jurisdiction: United States, entity_scope: companies generally, conditions: sample chart of accounts for a small company)

“This sample chart of accounts also includes a column containing a description of each account in order to assist in the selection of the most appropriate account.”

Partly established. Established: the recognised conventions for numbering and ordering accounts (S004, S005, S099, S105, S108, S110, S111, S114); how ranges are conventionally allocated across the account classes (S108, S110); the recognised conventions for naming accounts (S115). Missing: what a numbering scheme gives a business that alphabetical ordering does not.

Starting from the software's default chart or an industry template

See QuickBooks Online creates specific default accounts in the chart of accounts when a company is created, determined by the business entity selected, and creates other special accounts when certain actions are taken or features are turned on in settings.

See Some of the default accounts QuickBooks Online creates cannot be changed.

See Services is the default income account in QuickBooks Online; it functions the same as any other income account, but neither it nor the corresponding Product/Service item can be deleted, while the names of both can be edited.

See QuickBooks Online directs a user who needs to remove an account from the chart of accounts to deactivate accounts that are no longer used.

See Before a balance sheet account is made inactive its balance should be zero; if it is not, QuickBooks Online creates an automatic adjustment entry to zero it out and adds it to the Opening Balance Equity account, which can affect balances and sales tax reports.

See An account associated with any transactions cannot be deleted; the transactions must first be updated to use another account or deleted individually.

See Some industries nearly always use special accounts that this list does not mention.

Accounting software frequently ships sample charts of accounts for various types of business. (jurisdiction: United States, entity_scope: companies generally)

“Accounting software frequently includes sample charts of accounts for various types of businesses.”

See A company is expected to expand and/or modify a software-supplied sample chart of accounts so that its own specific needs are met.

Partly established. Established: why removing later is harder than removing now (S050, S056). Missing: what to keep from a software default chart or an industry template; what to remove before any history is posted.

Keeping the structure from degrading once it is in use

See QuickBooks Online instructs users to make accounts inactive instead of deleting them.

See Default accounts cannot be made inactive in QuickBooks Online, because QuickBooks uses certain accounts as default accounts for features.

See Updates to the chart are also needed when the business adds new products, services or reporting requirements.

See A small business should review its chart of accounts at least once a year to check it still reflects current operations.

See Accounts that are no longer used should be made inactive.

See Leaving gaps between assigned account numbers allows further accounts to be added later.

See A structured, consistent account numbering system should be implemented, leaving gaps between account numbers for future additions.

See Account names and numbering conventions should be standardised across the organization.

See The sample chart also carries a description column for each account, to assist in selecting the most appropriate account.

Once a business is operating and recording transactions routinely, it may add further accounts or delete accounts that are never used. (jurisdiction: United States, entity_scope: companies generally)

“Once a business is up and running and transactions are routinely being recorded, the company may add more accounts or delete accounts that are never used.”

Regular audits of the chart of accounts should be conducted to identify outdated or unused accounts. (jurisdiction: not stated in the document, entity_scope: organizations generally)

“Periodically review and update . Conduct regular audits of the chart of accounts to identify outdated or unused accounts.”

Inactive accounts and their transactions still appear when reports are run in QuickBooks Online; reports can be customized to hide inactive accounts, but doing so may affect accuracy. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Plus, Simple Start, Essentials; QuickBooks Ledger; Intuit Enterprise Suite; QuickBooks Solopreneur Plus)

“Note : When you run reports, you’ll still see inactive accounts and their transactions. You can customize reports to hide inactive accounts, but this may affect accuracy.”

In QuickBooks Online, roles are assigned to people on the plan to define what they can see and do with the company data, and every email address on the plan is assigned a role. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Essentials, Plus, Simple Start, Free, Lite, Solopreneur Plus, GoPayment and QuickBooks Online Payroll Core/Elite/Premium (article's stated applicability list))

“Assign roles to people on your QuickBooks Online plan roles to define what they can see and do with to your company data. Each email address on your plan is assigned a role.”

A user with the Standard all access role can add, edit and delete accounts. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Essentials, Plus, Simple Start, Free, Lite, Solopreneur Plus, GoPayment and QuickBooks Online Payroll Core/Elite/Premium (article's stated applicability list))

“Add, edit, and delete accounts”

A user with the Accounts receivable manager role cannot add, edit or delete accounts and inventory. (jurisdiction: United States, entity_scope: businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced, Essentials, Plus, Simple Start, Free, Lite, Solopreneur Plus, GoPayment and QuickBooks Online Payroll Core/Elite/Premium (article's stated applicability list))

“Add, edit, and delete accounts and inventory”

Partly established. Established: naming conventions that keep the structure from degrading (S115); what happens to accounts that fall out of use (S047, S097, S123, S125). Missing: who is permitted to add an account.

The check before you post history: run the statements and read them

See Uncategorized Expense is a default account that tracks spending still needing to be categorised.

See Uncategorized Income is a default account that tracks earnings still needing to be categorised.

See Use of miscellaneous or other accounts should be limited, to prevent loss of detail.

See QuickBooks Online Free and QuickBooks Online Lite include only three standard reports: Profit and Loss, Balance Sheet and Account list.

Not established from an authoritative source.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.

Does anyone outside the business dictate your account structure?

Except in a few cases, federal tax law does not require a business to keep any specific kind of records. (jurisdiction: United States (federal tax law, as administered by the IRS), entity_scope: a person in business for federal tax purposes)

“Except in a few cases, the law does not require any specific kind of records.”

The business may choose any recordkeeping system suited to it, provided the system clearly shows its income and expenses. (jurisdiction: United States (federal tax law, as administered by the IRS), entity_scope: a person in business for federal tax purposes, conditions: the system clearly shows income and expenses)

“You can choose any recordkeeping system suited to your business that clearly shows your income and expenses.”

The recordkeeping system should include a summary of business transactions, ordinarily made in the books such as accounting journals and ledgers, and the books must show gross income, deductions and credits. (jurisdiction: United States (federal tax law, as administered by the IRS), entity_scope: a person in business for federal tax purposes)

“Your recordkeeping system should include a summary of your business transactions. This summary is ordinarily made in your books (for example, accounting journals and ledgers). Your books must show your gross income, as well as your deductions and credits.”

The choice between a single-entry and a double-entry bookkeeping system is the business's own decision. (jurisdiction: United States (federal tax law, as administered by the IRS), entity_scope: a person in business for federal tax purposes)

“You must decide whether to use a single-entry or a double-entry bookkeeping system.”

A person subject to tax under subtitle A of the Code, or required to file a return of information with respect to income, is required to keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits or other matters required to be shown in that return; the requirement is stated as a sufficiency standard measured against what the return must show, and applies except as provided in paragraph (b). (jurisdiction: United States (federal), entity_scope: Any person subject to tax under subtitle A of the Code, or required to file a return of information with respect to income, conditions: Except as provided in paragraph (b) of this section)

“Except as provided in paragraph (b) of this section, any person subject to tax under subtitle A of the Code (including a qualified State individual income tax which is treated pursuant to section 6361(a) as if it were imposed by chapter 1 of subtitle A), or any person required to file a return of information with respect to income, shall keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown by such person in any return of such tax or information.”

A Schedule C filer must use the same accounting method to figure taxable income and to keep the books, and must use an accounting method that clearly shows income. (jurisdiction: United States, entity_scope: Self-employed individual or statutory employee filing Schedule C (Form 1040), effective_from: 2025 returns)

“You must use the same accounting method to figure At their request, they were not paid until January 2026. your taxable income and to keep your books. Also, you They must include this payment in their 2025 income be- must use an accounting method that clearly shows your cause it was constructively received in 2025. income.”

A taxpayer's method of accounting for Virginia income tax under Chapter 3 must be the same as its method of accounting for federal income tax purposes. (jurisdiction: Virginia, United States, entity_scope: taxpayers under Title 58.1, Chapter 3 (Income Tax), accounting_basis: the taxpayer's federal income tax method of accounting)

“C. A taxpayer's method of accounting under this chapter shall be the same as his method of accounting for federal income tax purposes.”

What federal and state authorities actually require of your books

See Except in a few cases, federal tax law does not require a business to keep any specific kind of records.

See The business may choose any recordkeeping system suited to it, provided the system clearly shows its income and expenses.

See The recordkeeping system should include a summary of business transactions, ordinarily made in the books such as accounting journals and ledgers, and the books must show gross income, deductions and credits.

See The choice between a single-entry and a double-entry bookkeeping system is the business's own decision.

See A person subject to tax under subtitle A of the Code, or required to file a return of information with respect to income, is required to keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits or other matters required to be shown in that return; the requirement is stated as a sufficiency standard measured against what the return must show, and applies except as provided in paragraph (b).

See A Schedule C filer must use the same accounting method to figure taxable income and to keep the books, and must use an accounting method that clearly shows income.

See A taxpayer's method of accounting for Virginia income tax under Chapter 3 must be the same as its method of accounting for federal income tax purposes.

Not established from an authoritative source.