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How to Modify the Chart of Accounts in QuickBooks

· 8 min read
Debits

Introduction​

The Chart of Accounts in QuickBooks serves as the backbone of your financial tracking system. It is a structured list of all the accounts used to categorize income, expenses, assets, liabilities, and equity in your business. Whether you're using QuickBooks Online or QuickBooks Desktop, modifying the Chart of Accounts allows you to tailor the account structure to fit your business needs, ensuring accurate and efficient financial management.

In this guide, we’ll walk you through how to modify, edit, add, or delete accounts in the Chart of Accounts in both QuickBooks Online and QuickBooks Desktop.

Why Modify the Chart of Accounts?​

  1. Business-Specific Categories: Tailoring the Chart of Accounts to reflect the specific categories relevant to your business ensures that your financial reports are clear and accurate.
  2. Accurate Reporting: Modifying accounts ensures that transactions are properly categorized, providing you with more accurate Profit and Loss statements, Balance Sheets, and Cash Flow reports.
  3. Simplify Record-Keeping: By removing unnecessary accounts and consolidating redundant categories, you can simplify the accounting process, making it easier to manage and understand your financials.

Step 1: Modify the Chart of Accounts in QuickBooks Online​

1.1: Access the Chart of Accounts​

  1. Log into QuickBooks Online: Open QuickBooks Online and use your credentials to log in to your account.
  2. Go to Settings (Gear Icon): In the upper right corner, click on the Gear Icon.
  3. Select Chart of Accounts: From the dropdown menu, select Chart of Accounts. This will display a list of all your current accounts.

1.2: Edit an Existing Account​

If you want to change an account’s name, type, or other details, you can easily edit it.

  1. Locate the Account: In the Chart of Accounts list, find the account you want to modify.
  2. Click the Dropdown Arrow: Next to the account name, click the small dropdown arrow and select Edit.
  3. Update Account Information: You can now modify the account name, account type, and description.
    • Account Type: Change the account type (e.g., income, expense, asset, liability) to better reflect its use.
    • Name: You can rename the account to something more meaningful or specific.
    • Detail Type: Ensure the correct detail type is selected for more precise categorization.
  4. Save Changes: Once you’ve made the necessary updates, click Save and Close.

1.3: Add a New Account​

If your business needs a new category for tracking financial data, you can create a new account.

  1. Click New: At the top-right corner of the Chart of Accounts page, click on the New button.
  2. Choose Account Type: Select the appropriate account type (e.g., Income, Expense, Asset, Liability, Equity) based on the nature of the account you are creating.
  3. Select Detail Type: Choose the detail type that best describes the account.
  4. Enter Account Name: Name the account. Make sure the name is descriptive so you can easily identify its purpose.
  5. Add Description (Optional): You can add a description to provide more details about the account's purpose.
  6. Click Save and Close: Once all details are entered, click Save and Close to add the new account.

1.4: Make an Account Inactive​

If you no longer need an account but don’t want to delete it permanently, you can make it inactive.

  1. Find the Account: Locate the account you want to make inactive.
  2. Select Make Inactive: Click the dropdown arrow next to the account and select Make Inactive. The account will no longer appear in your active Chart of Accounts list but will remain in QuickBooks for historical purposes.
  3. Confirm Inactivation: QuickBooks will ask you to confirm. Click Yes to proceed.

1.5: Delete an Account​

While making an account inactive is recommended for retaining historical data, you can permanently delete an account if it's no longer needed.

  1. Find the Account: In the Chart of Accounts list, locate the account you wish to delete.
  2. Click the Dropdown: Click the dropdown arrow next to the account and select Delete.
  3. Confirm Deletion: QuickBooks will prompt you to confirm the deletion. Click Yes to permanently remove the account.

Note: Deleting an account will not remove the transactions associated with it, but you will lose the ability to track them under that account. Inactive accounts retain the transaction history.

Step 2: Modify the Chart of Accounts in QuickBooks Desktop​

2.1: Access the Chart of Accounts​

  1. Open QuickBooks Desktop: Ensure you are logged into the correct company file.
  2. Go to the Lists Menu: In the top navigation bar, click on Lists.
  3. Select Chart of Accounts: From the dropdown, select Chart of Accounts. This will open the list of all accounts currently in use.

2.2: Edit an Existing Account​

  1. Locate the Account: In the Chart of Accounts, find the account you want to modify.
  2. Right-Click and Select Edit Account: Right-click on the account and select Edit Account from the context menu.
  3. Update Account Details: You can now update the account name, type, and other details.
    • Account Name: Update the account name to reflect any changes in its purpose.
    • Account Type: Adjust the account type if necessary (e.g., changing an account from a liability to an expense).
  4. Save Changes: Once you've made your changes, click Save & Close.

2.3: Add a New Account​

  1. Click Account at the Bottom of the List: At the bottom of the Chart of Accounts window, click the Account button and select New.
  2. Choose Account Type: Select the appropriate account type, such as Income, Expense, Asset, or Liability.
  3. Enter Account Name and Details: Provide an account name, description, and any additional details.
  4. Click Save & Close: Once the new account is set up, click Save & Close to add it to your Chart of Accounts.

2.4: Make an Account Inactive​

  1. Right-Click on the Account: Find the account you want to deactivate and right-click on it.
  2. Select Make Account Inactive: From the dropdown, select Make Account Inactive.
  3. Confirm: The account will now be removed from the active list, though its historical transactions will still be retained.

2.5: Delete an Account​

  1. Right-Click on the Account: Locate the account you want to delete and right-click on it.
  2. Select Delete Account: From the dropdown, select Delete Account.
  3. Confirm Deletion: QuickBooks will ask for confirmation before deleting the account. Click Yes to proceed.

Step 3: Best Practices for Modifying the Chart of Accounts​

3.1: Review Your Accounts Regularly​

It's important to review your Chart of Accounts periodically to ensure it still reflects your business’s current operations. Remove unused accounts, add new ones as your business grows, and ensure that all accounts are properly categorized.

3.2: Avoid Creating Too Many Accounts​

While it's important to have enough accounts to categorize your financial data properly, avoid overcomplicating your Chart of Accounts with too many specific categories. A simple, streamlined Chart of Accounts will make it easier to manage and review your financial data.

3.3: Use Account Numbers (Optional)​

QuickBooks allows you to assign numbers to your accounts. This can make it easier to organize and locate accounts, especially if your Chart of Accounts is extensive.

  1. Enable Account Numbers in QuickBooks Online: Go to Settings > Advanced > Chart of Accounts and enable account numbers.
  2. Enable Account Numbers in QuickBooks Desktop: Go to Edit > Preferences > Accounting > Company Preferences and check the Use Account Numbers box.

3.4: Reconcile Your Accounts After Modifications​

After making changes to your Chart of Accounts, it’s a good idea to reconcile your accounts to ensure that all transactions are properly categorized and your books remain balanced.

Step 4: Troubleshooting Common Issues​

4.1: Account Already Exists Error​

  • Issue: You receive an error saying the account already exists when trying to create a new one.
  • Solution: Check if the account is inactive or hidden. If so, make it active again by searching for inactive accounts in the Chart of Accounts.

4.2: Inactive Account Still Appears in Reports​

  • Issue: An inactive account still shows up in your financial reports.
  • Solution: This may happen if there are still transactions linked to the inactive account. These transactions will continue to appear in reports. If you no longer want them to appear, transfer the transactions to a different account.

4.3: Wrong Account Type​

  • Issue: Transactions are being incorrectly categorized due to the wrong account type.
  • Solution: Edit the account type to ensure it reflects the correct categorization (e.g., Income, Expense, Asset).

Conclusion​

Modifying the Chart of Accounts in QuickBooks is an essential part of keeping your financial data organized and accurate. Whether you’re renaming accounts, adding new categories, or deactivating unused accounts, maintaining a well-structured Chart of Accounts helps improve your financial reporting and business insights. By following the steps outlined in this guide, you can easily tailor your Chart of Accounts to meet your business's evolving needs.