In this instructional video, Linda Artesani of Artesani Bookkeeping walks viewers through practical steps for cleaning up and organizing a Chart of Accounts (COA) in QuickBooks Online (QBO). She begins by explaining why a well‑structured COA matters for new business owners and bookkeepers, then demonstrates how to reorder bank and credit‑card accounts on the dashboard for visual clarity. Linda highlights common pitfalls such as mis‑classifying credit‑card accounts as bank accounts and creating unnecessary parent accounts for banks. She shows how to create meaningful parent‑subaccount hierarchies for income (e.g., grouping legal services under a Sales parent) and expense categories, emphasizing the removal of duplicate or ambiguous accounts. The tutorial covers proper handling of loans versus expense accounts, the use of a “question” or miscellaneous account for transactions that lack a clear category, and best‑practice naming conventions for common expense types (e.g., insurance, meals, office supplies). Throughout, she stresses keeping the COA manageable, avoiding over‑categorization, and ensuring that every transaction maps to a logical account. The video concludes with an invitation for viewers to ask questions and seek further help.
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Hi there, Linda Artesani, Artesani Bookkeeping. So I thought I'd do a short video today, just a little bit on the chart of accounts. I think some of the videos I'm going to do now for the next few weeks are going to be more on, on like bookkeeping and accounting, general principles of how to have a proper chart of accounts set up. It's something that I do a lot when I get a new customer. I I've seen some pretty interesting charts of accounts in my years and done some significant cleanup on some. And I think it's a good topic because I think it's a topic that obviously people don't learn in school. And if you're a new business owner just starting out, a lot of times it's confusing. And if you're, you know, making jewelry, for an example, you're not a bookkeeper, you're not an accountant, but maybe you're a startup and you need that help. So I'm here to help you. So as you see, I've got my partner in crime over here behind me. This is Meep. He's my little buddy. He's a good kitty. He's my favorite. He's a little bit wimpy. He gets beat up by the other cats. Speaking of which, Simba, he's underneath my desk. My mascot for my business is Simba. So let's get to the chart of accounts. So I'm in my sample company here, and this is actually not as bad as I've seen on some accounts. Some things like this, you've got your bank accounts here and you've got several bank accounts. Some are hooked up to the bank feed, so there's quite a few bank accounts. So if you come over to the dashboard, actually come over to the banking page, they might not be in the order you want, right? So you can come to the dashboard and there's a little pencil here and you can see all my checking accounts and maybe I want them in a different order. And this is not going to change the chart of accounts, but it might just change how— So maybe your Bank of America is the top account. And then maybe Chase is the next, and maybe your interest checking, you want to keep the Bank of Americas together. And the barter is just used for bartering transactions. And the Chase checking, maybe you want to have that up higher than the Chase credit card and just keep all of the bank accounts together, right? So we want to keep them all together. There's quite a few on this account. PayPal's a bank account, and then you've got the credit cards together. So I like that. I like to keep my, my desktop clean like that. So let's go back to the chart of accounts and see what we got happening here. So bank account, this is obviously alphabetical, right? So you have bank account, Bank of America, barter, BOA, interest checking, and these are just here. I mean, this is fine. You want to see your bank accounts all listed. Try to avoid— some people make like a bank account as a parent account and then the other ones, all the bank accounts, subaccounts. It just— I wouldn't do that. I don't recommend it unless you have a need for it. Unless you're a nonprofit, maybe you want to group your operating accounts and separate them from your escrow accounts if you have more than one, or your reserve accounts, I should say, if you have more than one. So we've got the credit cards, you've got the bank accounts. This credit card, first of all, I can see there's an issue here. This Chase credit card is hooked up as a bank account. So it's probably pulling in the transactions backwards because if you don't set up a Chase checking, a credit card like a credit card, it will have a problem. So that's first thing you would want to address with your customer, or if you see that, if it's a credit card, you want to see the credit card account type there. So let's get down here and you can see here's American Express credit card, which is perfect. Florida Department of Revenue sales tax, perfect. This is a This file is fairly new, so it's got the new sales tax, which is why you'll see that out-of-scope agency payable. That's part of the default system of the sales tax. This particular company is a sole proprietorship, so it has owner's equity with investments and withdrawals that kind of roll up into owner's equity. Retained earnings is just a default account in QuickBooks. It's pretty much the account that everything gets swept up into at the end of the year. So if you had a loss at the end of the year, it gets swept up. You get fresh zeros on all your income and expense accounts on the following year. So that's the account that gets— So now I've got my income accounts here and I've got billable expense income, commission income. So Uncategorized is part of the online banking feature, so you cannot get rid of that. But how can we group this better? So this is a law firm, so How can we group these to be in a better way? So they sell services, they don't sell products. So I'm just going to come in here and just take this one, edit it, and I'm going to change it to just sales. So I'm going to leave it sales and service fee income, and I'm just going to make it sales. I'm going to make a parent account here and Put that there, and then I'm going to come over to— maybe we have commission, I'm not sure. So I'm going to edit the commission account. I'm going to make it part of the sales account that we just created as a parent. I'm going to come over to services, and maybe I want to call it legal service income, right? Because it's for the law firm. So legal, maybe just call it legal services. And also make it a subaccount under the sales account. So you can see I'm starting to group my accounts so that they look— they're grouped and easier to find when you're trying to go through them. When you're putting the accounts towards them, you want to really kind of group all the incomes together. And maybe they have billable expense income, which by the way is not what I said it was. That was unapplied cash payment income. Billable expense income is— and law firms may have this— where they pay for maybe some fees for the For the client and they get reimbursed for it. So you would put this under that sales account again so that it's there. So now you can see it's starting to look a little bit better. So I've got my income kind of lumped together. I'm not going to— I don't want to ever see anything in this unapplied cash payment income account. That's the one that you will see that has the post the predated payment. So I'm just gonna leave that there. Uncategorized income, part of the online banking. I don't want to stick that under my category. I want to really keep this to what I have for my business. So under here we get advertising. It's definitely an account you could use. And this, this file doesn't need a cost of goods sold, but the cost of goods sold account is good to have for a lot of different businesses. And it's nice to group those just like I did with the income. If you have cost of goods sold, it's kind of nice to have the cost of goods sold category, and then under that Maybe materials or subcontractors or whatever it is that you have that you need to use to create the products that you sell. So advertising, auto— auto is a good one. Bank fees, that's a good one. You definitely want to have that in yours. How about borrowed from Uncle Louie? That is not an expense account. If you borrowed money from somebody and you're paying them back, that would be a loan. So I'm going to remove the borrowed from Uncle Louie, and then if there's any money in the borrowed from Uncle Louie account, I'm going to make sure that that gets put into a proper loan, and if it's a sole proprietorship, they probably won't have loans. Let's get down here. So charitable donations, client gifts, computer and internet, definitely a category. Continuing education, dues and subscriptions— these are these boilerplate ones that you have. Insurance is one that I like to have a parent account insurance and then like sub-account insurance liabilities. They've got medical. We can put medical insurance underneath parent account of insurance. I can do Save and New. They probably have liability insurance, so— and that is a category you can pick from. And then again, I'm going to call it Liability. If they have employees, they could have workers' comp insurance. So these are all things that you'd want to have the subcategory, parent account subcategory So that's a good one that I see often, and it's nice to see if it's grouped in this fashion. You never post any transactions to the parent account. They only flow under the ones below it. Legal and professional is fine. Licenses, loan payment expense, it's the same thing. It's like loan from Uncle Louie. It's not an expense. A loan payment is never an expense. So if there's transactions in there, you want to move them to the proper loan account and get that off the screen. I see that one a lot. Materials, you know, for a law firm, probably not. Probably call them supplies. Meals and entertainment. I've been renaming that one because we no longer get entertainment expense, and I usually rename it 50% deduction. So you see that on the profit and loss at year end, and then you're aware of that when you look at the final numbers. number at the bottom. You're going to divide that meals and entertainment— meals expense down by half because you're only allowed to write off half. Office expense or office general administrative expenses? I would say office expense is a good name. I don't like to group things so generically as to general administrative. I would rather have more categories than that. A little fly in here. So I'm going to just remove the duplication and leave Office. And then if anything else comes up that I need to add, I'll add it. Let's see what else we have. Post Digital Delivery, Printing and Reproduction, Purchases, Supplies and Materials. So you got Materials, Purchases, and Supplies and Materials. Really don't need all 3 of that— 3 of those. I am going to remove Purchases because that's one I don't like the name of, and I'm going to remove Materials as well. So we're fine-tuning this, cleaning it down so that it's more specific and no duplication. So that's the key. We just don't want duplication. You want to keep your chart of accounts so that it's manageable, right? You don't want to make it so that it's so large that you can't manage it. And this is a good size. So taxes paid, you can keep that. I noticed there was no— it was licenses. So licenses, I like licenses and fees on that one to be the name, licenses and fees. Depending on the business, you could have taxes paid. A lot of times if it's a sole proprietorship, it's maybe a prepaid— you're prepaying your estimated taxes, so that wouldn't really go in the expense category. But so you can have that taxes paid, maybe it's property tax, whatever it is to your business. Telephone, I don't see that one as much anymore, but you can certainly have that. Travel, you can have travel expense. Unapplied cash bill payment expense, which is why I got the other one mixed up. That is for if you pay a bill before the bill is entered, right? Same thing as like the invoice and then the payment. You just want to make sure that the dates are correct. Uncategorized expense, you have to have. It's required part of the banking feature, so you just can keep that there. Uniforms, If you have that in your business, an attorney or a law office would not. Other miscellaneous expense. Oh, I don't like that one. I guess it's okay for that oddball thing, but CPAs don't want to see things in a miscellaneous expense, right? They— and sometimes I go into that account, it's just gigantic, full of anything you didn't know where it would go in the category. You just dump it in there. So those all have to get put into an account. What I generally do for my customers is I will create an expense account And I will call this expense account. I know they have Ask My Account, and I don't really use that one. I like to call mine, and it's actually I make it an other expense. So I want this to sit like a sore thumb at the bottom of the profit and loss, or miscellaneous expense. And then I'm just going to call it question account. So now I've got this question account. It's going to sit way down on the chart of accounts. So when you have that miscellaneous thing that you don't know where it goes. We're going to remove this other miscellaneous, and I'm just going to have that there at the very bottom. So any transaction that if I'm doing the bank feeds, you don't— I don't know where it goes, it's something not typical, I put it there. And if you were having somebody work on it, maybe you've got an engagement with somebody who does their own bank feeds. I've got several clients that want to do their own. If they have a question on where something goes instead of calling me or emailing me, and— or if they're doing this late in the evening, I just have them put it in there, and then we address the questions once a month. So that's basically how I would clean up a chart of accounts, and that was actually a very light example. I've had many, many, many other things that have showed up in the chart of accounts with a customer, and there's a lot of cleanup. Generally, that's one of my biggest steps when I take on a client with a cleanup file to clean up. One of my first steps anyway. So I hope that was helpful. I hope it gave you some education on a proper chart of accounts. Obviously, if you have any questions, comments, feel free to reach out to me. I am more than happy to help you. Thank you for watching. Bye now.
