Quickbooks, Bookkeeping and Accounting Blog

Adding accounts to your Chart of Accounts in QuickBooks is easy. However, I strongly recommend that you only add accounts if absolutely necessary. People often add lots of accounts thinking that it will be useful to break their spending out into very specific categories. Instead, having too many accounts tends to make it harder to learn anything from your data. Therefore, I recommend thinking twice before adding accounts. A good general rule is never to add accounts when entering bills or performing other routine tasks. Instead, only add them if you decide in a budget meeting that you need additional detail in a certain existing category. The exception to this rule is accounts that need to be added for accounting purposes, such as asset and liability accounts.

To add an account, open your chart of accounts, click on Account and select New.

Choose the type of account and then click Continue. Note that QuickBooks provides helpful information about each account type in the box at the right.

There are a few things to fill out in the Add New Account form:

• First, you have the option of changing the type of account. Given that you chose the type of account, you can probably just skip over this.
• Second, if you number your chart of accounts, then add an appropriate number. What constitutes an appropriate number depends on how your chart of accounts is organized. My preference is to organize the chart of accounts based on type of expense, so that human resources are grouped together, sales and marketing expenses are grouped together, etc. This makes it easy to choose the proper account when entering transactions into QuickBooks.
• Third, name the new account.
• Fourth, decide if this will be a subaccount and, if so, of what parent account. Some organizations have as few as 3 parent expense accounts (usually HR, S&M, G&A) while others use almost no sub-accounts. Either way is fine, but it is important to keep your chart of accounts organized by following the established pattern.
• Fifth, add a description and/or note if you want. I almost always leave these blank.
• Sixth, if you intend to export your tax information into an income-tax preparation software tool such as Intuit’s TurboTax or TurboTax Business, then assign a Tax-Line. Otherwise, you can ignore this.
• Finally, click Save & Close.