Are you a small business owner looking to stay on top of your finances? Anorganized Chart of Accounts in your accounting software can be the difference betweenunderstanding your financials and being completely confused. The Quickbooksdefaultchart of accounts can add complexity to your balance sheet and income statement, andit’s not something I ever like to review. The QBO default can seem cluttering to somepeople (like me). A trusted bookkeeper can help you to reorganize your chart ofaccounts so that it is easier to read and less cluttered. There are several differentmethods of organizing your COA, and each one is customizable to your preferences.Here are a few examples:

1️⃣ Numeric Order:This is the easiest way to arrange and re-arrange your accounts inQBO. By turning on QBO numbering system, you can use your own judgement toorganize your income statement. General accounting practice use a systematic methodfor categorizing assets as 1000 accounts, liabilities as 2000 account, equity is in the 3000range. The income statement begins with the 4000 range for revenues and COGS,salaries would fall into the 5000 range, with expenses landing in the 6000 range. If youhaver Other Income and Expense that you would like to remove from generaloperations, these accounts would fall into the 7000 range, and they would be placed atthe bottom of the income statement, so that you can easily identify direct business costsand separate them from costs that are not directly related to the business This methodensures a logical sequence for easy reference and streamlined reporting.

2️⃣ Nature of Expense: Quickbooks default COA adds a lot of complexity to reading theincome statement. It’s not something I like to visually try to filter my brain around. Itadds subtotal for Advertising, or Legal & Professional, and the choppy nature of theincome statements just detracts from really seeing what is happening in the business. Itend to use the numbering system & alphabetically account labeling tokeep thingsorganized, with the occasional subtotal where it is actually helpful.

3️⃣ Functional Order: Group accounts by their function within the business, such as sales,expenses, or assets. This method provides a clear understanding of how differentaspects of the business contribute to overall financial health, aiding in decision-makingand analysis.

By implementing an organized Chart of Accounts tailored to your business needs, youcan effectively track financial transactions, monitor performance, and make informeddecisions. Stay organized, stay on track!#SmallBusinessTips #Accounting#ChartOfAccounts #FinancialManagement