Ok, put your bean counter hat on for just a microsecond and get a better understanding of the asset section of the QuickBooks chart of accounts. Remember: assets are things your business owns.
The chart of accounts is nothing more than a big digital filing cabinet that is used to store copies of your QuickBooks transactions (checks, invoices, etc.) When you create a financial report such as the profit and loss in QuickBooks, it rifles through the filing cabinet to put together the appropriate transactions for the report from the filing cabinet.
Click Lists in your menu bar, then Chart of Accounts to access it. When you click the "Account" box in the lower left hand corner and then "New", and you can choose from:
- Bank account - not much guesswork here. Your checking and savings accounts would be "bank" accounts in QuickBooks.
- Accounts Receivable - unless your business is quite unique, you will only have one account in the chart of accounts called Accounts Receivable. This is the money your customers owe you when you sell to them on credit.
- Other Current Asset - something you own that you hope to convert into cash within the next 12 months (or sooner). The classic example of an "other current asset" is inventory. You certainly want your investment in inventory to convert into your checking account in less than a year!
- Fixed Asset - used to track your investment in significant items that have a lifespan of more than one year. Examples here are: machinery, computers, buildings, etc. Be sure to check with your CPA on anything classified as a fixed asset in QuickBooks.
- Other Asset - the easiest way to remember this is that it is for anything that doesn't fit in any of the other categories above!
Correct setup and usage of your chart of accounts is critical to your success with QuickBooks. Unsure if yours needs help? Contact me for a review - it is one of the best QuickBooks investments you'll ever make.