--- title: 5 Things You Should Know About the Chart of Accounts in QuickBooks Online description: Some people refer to the Chart of Accounts as the backbone of your company file. All transactions flow to it. image: https://blog.tarabyte.com/hubfs/thumbnail_large-11.jpg --- [![TaraByte 239 x 120 ](https://blog.tarabyte.com/hs-fs/hubfs/TaraByte%20239%20x%20120%20.png?width=239&name=TaraByte%20239%20x%20120%20.png)](https://www.tarabyte.com/) - About ⌄ - [Our Story](https://www.tarabyte.com/about-us/) - [Services](https://www.tarabyte.com/our-services/) - Fishbowl ⌄ - [About Fishbowl Inventory](https://www.tarabyte.com/fishbowl-inventory/) - [Fishbowl Accounting Basics For QuickBooks](https://info.tarabyte.com/fishbowl-accounting-basics-for-quickbooks-desktop-quickbooks-online) - [Advance Fishbowl Chart of Accounts Guide](https://info.tarabyte.com/advance-fishbowl-chart-of-accounts-guide) - [Custom Fishbowl Reports](https://www.tarabyte.com/fishbowl-inventory/custom-fishbowl-reports/) - [Controller's Toolbox](https://tarabyte.com/fishbowl-inventory/fishbowl-accounting-controllers-toolbox/) - [Custom Programming](https://www.tarabyte.com/fishbowl-inventory/custom-fishbowl-programming/) - 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Still, there are concepts you should understand.* You probably didn't expect you'd have to become an accounting expert when you started your business. You knew you'd have to deal with recording income and expenses - maybe track your inventory and process a payroll. But you may not have understood just how complex financial bookkeeping could be. That's why you decided to use QuickBooks Online, or are at least considering it. The service *is* an expert on accounting, and it simplifies the process. It knows exactly how you have to document transactions to stay compliant with the rules that accountants and other businesses follow. This is good practice, and it's absolutely necessary if, for example, you ever have to apply for financing. One of the features of accounting systems you should understand is the **Chart of Accounts**. You won't have to alter it in any way-in fact, we strongly advise against it-but you'll encounter it when you work with transactions. Here are five things you should know about it. **What is it?** **![5 Things You Should Know About the Chart of Accounts in QuickBooks Online 1](https://blog.tarabyte.com/hs-fs/hubfs/5%20Things%20You%20Should%20Know%20About%20the%20Chart%20of%20Accounts%20in%20QuickBooks%20Online%201.jpg?width=796&name=5%20Things%20You%20Should%20Know%20About%20the%20Chart%20of%20Accounts%20in%20QuickBooks%20Online%201.jpg)***These three columns from QuickBooks Online's **Chart of Accounts** display account **Names**, **Types**, and **Detail Types**.* QuickBooks Online's **Chart of Accounts** is a list of financial categories that are used to classify your company's transactions when you record them. If you were doing your accounting manually, you would have to create your own Chart of Accounts. But QuickBooks Online builds one for you based on the company type and industry you choose when you're setting up the site.   **Why is the Chart of Accounts important?** Some people refer to the Chart of Accounts as the "backbone" of your company file. All transactions flow to it. Its primary importance can be summed up in one word: reports. Your reports will not be accurate if your Chart of Accounts is poorly constructed or if you categorize transactions incorrectly. This becomes as issue when you want to: - Prepare taxes. Your income tax return will not reflect your reportable income and deductible expenses if transactions are not assigned to the right classifications. - Apply for financing, take on an investor, sell your company, etc. - Monitor your finances. You won't get a true picture of your income and expenses, which makes it difficult to analyze your company's fiscal health and plan for the future.   **What's in the Chart of Accounts?** There are two types of accounts. One contains information that's used in the **Balance Sheet** report. These accounts will have a number in the **QuickBooks Balance** column that's based on all transactions up to the current date. They include **Assets** (bank accounts, accounts receivable, inventory, etc.), **Liabilities** (unpaid bills, credit cards, payroll and sales taxes, loans, etc.), and **Equity**. The remainder of the accounts are used in the **Profit and Loss** report, otherwise known as the **Income Statement**. They're divided into **Income** (sales, discounts given, etc.), **Cost of Goods Sold** (labor, shipping, materials and supplies, etc.), **Expenses** (advertising, insurance, payroll, etc.), **Other Income**, and **Other Expense**. You won't see a number in the **QuickBooks Balance** column for these accounts because the **Profit and Loss** report changes based on the date range selected.   **Should I ever make any modifications to my Chart of Accounts?** **![5 Things You Should Know About the Chart of Accounts in QuickBooks Online 2](https://blog.tarabyte.com/hs-fs/hubfs/5%20Things%20You%20Should%20Know%20About%20the%20Chart%20of%20Accounts%20in%20QuickBooks%20Online%202.jpg?width=549&name=5%20Things%20You%20Should%20Know%20About%20the%20Chart%20of%20Accounts%20in%20QuickBooks%20Online%202.jpg)** *You can set up bank and credit card accounts in QuickBooks Online's **Chart of Accounts**.* As we stated earlier, we strongly recommend that you never modify your Chart of Accounts without consulting us. However, there are two exceptions to this. You'll want to create entries for your bank and credit card accounts. To do this, first open the Chart of Accounts by clicking the gear icon in the upper right and selecting **Chart of Accounts** under **Your Company**. When it opens, click **New** in the upper right corner. Choose **Bank** or **Credit Card** and fill in the blanks.   **Do I need to use account numbers in the Chart of Accounts?** Generally, the smaller the business, the less need there is for this. If your business is big enough that you have dedicated A/P and A/R individuals, you may want to post transactions to account numbers.   **Understanding Reports** **QuickBooks Online makes it possible for you to view the Chart of Accounts and those two critical reports, Balance Sheet and Profit & Loss. Customizing and analyzing them, though, is something you should do under professional supervision. We're happy to help here and in other advanced areas of the site. Contact us for a consultation.**   ![Untitled design (1)](https://blog.tarabyte.com/hubfs/Untitled%20design%20(1).png "Untitled design (1)") ### **Jeanne Tarazevits** **CPA, QuickBooks Maven, Fishbowl Guru** As a Top 100 QuickBooks ProAdvisor and Fishbowl Inventory Super Hero, Jeanne helps businesses change the way they do business by getting their inventory management, accounting and manufacturing systems all working together seamlessly. In providing these services Jeanne draws upon her knowledge as a CPA, her previous experience as an Auditor with Ernst & Young and long-time CFO of a publicly-traded medical device manufacturer, and the expertise gained in the 10+ years she has been working with Fishbowl Inventory. #### Related Posts ### Recent Posts ### Posts by Tag - [Fishbowl Inventory (32)](https://blog.tarabyte.com/blog/tag/fishbowl-inventory) - [QuickBooks (29)](https://blog.tarabyte.com/blog/tag/quickbooks) - [Inventory Management (14)](https://blog.tarabyte.com/blog/tag/inventory-management) - [Accounting (11)](https://blog.tarabyte.com/blog/tag/accounting) - [Our Partners (4)](https://blog.tarabyte.com/blog/tag/our-partners) - [QuickBooks Online (2)](https://blog.tarabyte.com/blog/tag/quickbooks-online) - [netstock (2)](https://blog.tarabyte.com/blog/tag/netstock) - [Food Manufacturing (1)](https://blog.tarabyte.com/blog/tag/food-manufacturing) - [Payable (1)](https://blog.tarabyte.com/blog/tag/payable) - [Payables (1)](https://blog.tarabyte.com/blog/tag/payables) - [Purchase Orders (1)](https://blog.tarabyte.com/blog/tag/purchase-orders) - [Uncategorized (1)](https://blog.tarabyte.com/blog/tag/uncategorized) See all [![New Call-to-action](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/5606425/15e03d41-fea1-404a-b70e-3b0b87f5bdce.png)](https://hubspot-cta-redirect-na2-prod.s3.amazonaws.com/cta/redirect/5606425/15e03d41-fea1-404a-b70e-3b0b87f5bdce) ![TaraByte-Logo-Wht](https://blog.tarabyte.com/hs-fs/hubfs/TaraByte-Logo-Wht.png?width=250&height=43&name=TaraByte-Logo-Wht.png) TaraByte Solutions has been providing expert QuickBooks consulting and accounting services to small and mid-market firms since 2001. 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