QuickBooks Chart of Accounts - Liability and EquityScott Gregory
September 2, 2008 — 2,585 views
Keep that CPA visor on for just a while longer! In my previous post, I explained the difference between the various types of accounts withing the asset section of the QuickBooks chart of accounts. This post will give you some additional insight on the liabilities and equity section.
Accounts Payable - Just like the accounts receivable section, unless your business has really, really specific needs, you will only have one account in your chart of accounts with a type of Accounts Payable. This is the account that tracks how much you owe to your vendors and suppliers.
Credit Card - If you use a Visa, MasterCard or other credit card to purchase supplies, products or for any other expenses of the business, you'll create this type of account. By setting up an account as this type, it then allows you to use the "Enter Credit Card Charge" feature of QuickBooks. That is a great way to simplify your credit card tracking.
Other Current Liability - Any account of this type in your chart of accounts relates to a debt your business has that is due to be paid off in less than a year. A great example of an "other current liability" is the Sales Tax Payable account. That is definitely due within a year!
Long Term Liability - The direct opposite of an "other current liability". Any account of this type should be for a debt the business owes that is due in more than one year. Example - your SBA loan that is a five year loan. This would be a "long term liability".
Equity - Keep in mind that the traditional "accounting equation" (sorry - had to pull that phrase out of the accounting 101 textbook) is assets - liabilities = equity. Equity is what is left over - the owners share of the business. QuickBooks provides several accounts of type "equity" when you created your data file for the first time. Retained Earnings and Opening Balance Equity are two accounts that appear as "equity" accounts. Your best bet is to consult your tax preparer to see if there are other equity accounts that need to be created for your business.
Scott Gregory is a QuickBooks Specialist, QuickBooks Enterprise Specialist and CPA. He has been helping businesses gain a better understanding of QuickBooks software and improve their accounting systems for over twenty years. Scott has trained hundreds of QuickBooks users as an instructor at his local community college. Prior to forming Bottom Line Accounting Solutions, Scott was the CFO for a manufacturing company, with direct oversight of the accounting, IT, inventory control, purchasing and HR departments. Contact Scott today at www.BetterBottomLine.com.