Quickbooks by default uses just the naming system in the chart of accounts however from a usability point of view, seeing just the chart of accounts names can make it difficult to choose the right chart of account especially if you have accounts in other areas that are named similarly. For example you might have names in the Assets section of the chart of account to the income area. Whilst its certainly not recommended, it can happen.
In quickbooks we recommend trying to use the Australian numbering system for Chart of Accounts over the system used by Quickbooks. I have noticed in the Version 19 that the numbering system reverted to a more corporate numbering system than what has been used traditionally in Australian Small business accounting systems.
For example the recommended number program should include:
Number Range Account Type
1000 – 1999 Assets
2000 – 2999 Liabilities
3000 – 3999 Equity
4000 – 4999 Income
5000 – 5999 Cost of Sales
6000 – 6999 Expenses
8000 – 8999 Other Income
9000 – 9999 Other Expenses
Ultimately when you are setting up your chart of account numbers you should always talk to your accountant to ensure that your chart of accounts will give you the information that you need to effectively manage your business.
The whole point of using the chart of account numbers is to lesson the chance that you or your staff will misallocate a charge to the wrong chart of account. By using the number system above you are ensuring that at least you are getting it into the right type.
For example if you are allocating an amount of income to a chart of account and you choose a one account then you know you have made a mistake because it should have been a 4 account.
When you are developing your Chart of Accounts ensure that you leave enough space between your Summary Accounts and Sub-accounts so that if you ever need to add additional chart accounts you have the numbering space available. You also need to ensure that you remove any chart of accounts that you aren’t using. We have found that misallocations will occur if you leave every chart of account in the list.
Whilst chart of account numbering may not seem like a big issue, this one function can make the different between a well managed chart of accounts or one that sabotages your business success.
Chris Le Roy