QuickBooks: How to Add an Account

Your chart of accounts

A company’s “chart of accounts” is a list of the general ledger accounts it uses to record and track transactions and other accounting entries. Once you or your accountant have set up your chart of accounts, it can sometimes go on for months or years without changes. However, sometimes you need to add a new account. Examples of reasons to add a new account include:

• You open a new bank account. A new QuickBooks account is necessary so you can perform monthly bank reconciliations.
• You obtain a new loan or credit card. An additional account is helpful so you can see the outstanding balance on each loan.
• You add a new product or service to your business which you want to track separately from other sales.
• You incur a new type of expense.

TIP:  Don’t go overboard adding accounts. Too many accounts can slow down data entry and make reports unwieldy. For example, if you don’t need to track water and electric bills separately, you can combine them into one “Utilities” account. If you later want to see what you’re paying for electricity, you can still do so using vendor reports.

How to add a new account

We’ll be using QuickBooks 2012 for this discussion, but other versions of QuickBooks should work similarly. To add a new account, you should first access your chart of accounts, which can be done several ways:

• From the home page, under Company, click on Chart of Accounts.
• Go to the Lists menu and click Chart of Accounts.
• Press Ctrl+A on your keyboard.

Note that the Chart of Accounts screen shows account names (and account numbers if you’re using them), account types, and for balance sheet accounts shows the current balance.

There are two ways to access the Add New Account dialogue:

• At the lower left of the Chart of Accounts window, click on Account, then click on New.
• Press Ctrl+N on your keyboard. This only works if the Chart of Accounts window is open and active.

TIP:  You can also access the Add New Account dialogue from any screen in which you need to select an account, for instance when you’re entering a bill or making a deposit. Just click on <Add New> at the top of the account list drop-down box.

The first screen in the Add New Account dialogue asks you to choose an account type. The types you can select from are:

• Income: use for a new service, product line, or other revenue-generating item.
• Expense: use for a new expense type, like gasoline, office supplies, or professional fees.
• Fixed Asset (major purchases): select this type for purchases of furniture, fixtures, equipment, vehicles, and other long-lived assets.
• Bank: use for bank accounts. This account type lets you use the bank reconciliation feature.
• Loan: select for bank loans, vehicle loans, lines of credit, etc.
• Credit Card: select this type for a new credit card. This account type allows you to enter detail from your credit card statements. Some users prefer to use Other Current Liability (see below) for credit cards. This option allows simpler data entry, but doesn’t capture as much information as the Credit Card type. Consider using Other Current Liability for a credit card which is only used for one purpose, such as gasoline purchases or meals and entertainment.
• Equity: used for owner contributions and distributions. New accounts may be necessary if an owner retires or a new owner is admitted. Consult your QuickBooks advisor before adding or changing equity accounts.

The last selection, Other Account Types, opens a drop-down box with these account types:

• Accounts Receivable: used for billing customers. Most small businesses only need one Accounts Receivable account.
• Other Current Asset: used for assets that are usually short-term, such as employee advances and prepaid expenses.
• Other Asset: select this type for long-term assets other than Fixed Assets, like security deposits or loans to related companies.
• Accounts Payable: used for entering bills you receive from vendors. Most small businesses only need one Accounts Payable account.
• Other Current Liability: used for liabilities that are short-term in nature, like accrued expenses or payroll withholdings – also see Credit Card above.
• Long Term Liability: select this option for long-term liabilities other than bank loans, like loans from owners or related companies.
• Cost of Goods Sold: used for purchasing products which you sell to your customers.
• Other Income: select this type for income items which are not derived from your normal business operations, such as interest income.
• Other expense: used for expenses which are not part of your normal business operations, such as interest expense.

Suppose for this example that we need to enter a bill from a consultant and don’t have an appropriate account. We click on the Expense radio button, then click Continue. The second screen of the dialogue opens.

The fields on this screen are:

• Account Type: this is already filled based on the selection on the prior screen.
• Account Name: enter an account name. In this case we’ll use Consultant Fees.

• Subaccount of: Click this box if the account will be a subaccount. For example, we could have an account called Professional Fees, with subaccounts for Legal Fees, Accounting Fees, and Consultant Fees. In this example the account is not a subaccount and the box is left unchecked.
• For balance sheet accounts, there will also be a field for opening balance. Enter the balance if you know it. If you don’t, leave it blank – you can come back to it at a later date.
• Account Number: this field will be available if your company uses account numbers.
• TIP: By default, QuickBooks reports order accounts first by account type, then by account number. Consider where you’d like the account to appear on your financial statements when selecting an account number.
• Optional: You can enter a description of the account or a note regarding the account, but these are not necessary.  Descriptions and notes can be helpful if several different people will be entering data into QuickBooks.
• Optional: If you use Tax-Line Mapping, consult your QuickBooks or tax advisor to determine the proper entry for this field.

If this is the only account you’re adding, click Save & Close, and you’re finished! If you have more accounts to add, click Save & New and you’ll be taken to the beginning of the dialogue to start a new account.