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    Setting Up Accounts


I wish I could provide a customized ready to use chart of accounts.  However, since everyone has completely different accounts and business activities, there really is no such thing as a "one size fits all."  What I have found most effective is to start with the standard chart of accounts that QuickBooks has for your type of business.

To keep the list from becoming too large, you should delete the things that you will never see, such as the Canadian types of accounts.  For corporations, you can delete the personal types of accounts that are never used, such as Wage, Pension and Gift Income.

The income and expense accounts should be set up to mirror as closely as possible the line items on your tax return, including the same groupings (i.e. supplies with sub accounts for various kinds of supplies).

One modification that must be made to the basic QB chart is to separate meals from travel. Meals are only 50% deductible, while travel is 100%.  What I like to do is have an expense account called "MealsEnt" with a sub-account for "Meals" and another one for "Entertainment."  Travel should have sub-accounts for "Lodging," "Airfare" and "Rental Cars."

Whenever you have an expenditure that doesn’t fit properly into one of the already established categories, set up a new one. You will have much more useful information if you have more detailed categories. It is also true that the more detailed information you report on your tax return, the less likely you are to be selected for an audit by the IRS. There is no maximum number of income or expense categories that you can report on a paper tax return. Combining too many items under one heading, such as "Office Expense" gives the appearance of less accurate books, as well as generates much larger numbers. IRS screeners focus on the larger dollar amounts when deciding which tax returns to audit. Likewise, do not use suspicious or overly generic sounding category names. Miscellaneous, Other, Business Expenses and Sundry are magnets for suspicious auditors.

Using sub-accounts is a good way to break out each kind of expense, and also have a subtotal for the main category. Many real estate brokers set up a sub-account for each of their agents to whom they pay commissions.

However, try not to use a lot of sub-accounts when the Classes will do the job, such as with property taxes & insurance.


Fixed Assets

In regard to Fixed Asset accounts for anyone, I would like to keep the number of accounts to a minimum. One of my pet peeves with how too many people set up their accounts is that they set up a new account for each individual item and another one for its depreciation. This makes the chart of accounts far too long and unwieldy.

I prefer to have just one account for all accumulated depreciation.

I prefer to have Fixed Asset accounts set up for each category of asset, much like the types used in Lacerte: Vehicles, Equipment, Furniture & Fixtures, Buildings, Land, etc. Each item posted to those accounts should have a good description in the memo section of the register so that we will know what to enter into the depreciation schedule in Lacerte.  Set up assets with original purchase dates, not with date you set up the QB account.



Set up an Income account called "Suspense." Post anything that you aren't sure about to this. Do not leave uncategorized or it will look like you overlooked it completely.



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This page was last updated:
Sunday, January 29, 2012


Kerry M. Kerstetter
11802 Deer Road
Harrison, AR  72601
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