How to Set Up a Chart of Accounts for a Real Estate Company in QuickBooks Online

How to Set Up a Chart of Accounts for a Real Estate Company in QuickBooks Online
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    Welcome today is all about
    QuickBooks Online and setting up a chart of accounts for a real estate company we're gonna
    Talk about 5 different things during this conversation
    1st - We're going to talk about what the importance is of setting up a chart of account
    2nd - Next we're going to talk about enabling the account settings. 3rd - we're going to talk about
    Prepping to import a chart of accounts. 4 - importing that file, and 5 - the customization that needs to happen
    So with that said, I am Jerry Frank
    I'm CEO of strata folio, and I am here with Amy Heinen from Quick Action Accounting. Hi Jerry,
    This is a great opportunity to help business owners get off on the right foot with their chart of accounts
    Which is the first step in setting up your whole accounting system.
    So, what if you don't set it up right? What's the problem?
    Imagine you have a map that's just roads. Nothing is labeled. There's no
    destinations, there's no cities landmarks, and you're driving along following this map
    Taking turns hoping that you end up at the right destination
    Well I like to set up the chart of accounts so that
    the business can record all their transactions strategically and
    use the reports it generates throughout the year to steer their business
    into the right directions sometimes just a slight adjustment or change in your
    procedures and business model
    can give you a completely different end result.
    Okay, well I think that's really important because it is all about making those little improvements to have a really good business.
    So with that said, what is the function of a Chart of Accounts let's talk about that
    A business needs to know where their money came from, where their money went, and how much money they still have on hand
    your chart of accounts is that tool that structure mm-hmm where you can record everything and then report everything and
    share
    That data with your lenders
    accountants
    Okay great
    With that said are we ready to get started? I think so. All right
    Let's get started then on getting the start of account set up
    We're using QuickBooks Online
    today with this video
    And the first thing we need to do on this sample company that we just set up is
    To go into the accountant settings so if you click on the gear icon in the upper right corner mm-hmm click on account settings
    We're going to go into the advanced settings and turn on or enable the account numbers
    So if I click there we can just enable it and save it
    The account numbers are used
    for multiple reasons, mostly it's just to help organize it in the order you want your Chart of Accounts to look like
    I use a five digit account number so
    the
    First two digits are used mostly for
    What type of account whether it's an asset liability equity
    Income account or an expense account okay, and then the third number
    Can be used if you're trying to track things for different departments
    or
    divisions of your business and the last two can be used
    for account specifics, and if you have Sub-Accounts, ok
    Back in QuickBooks online
    To find that chart of accounts you click on the side menu, you click on accounting
    Which brings up the chart of accounts.
    Now we enabled the account numbers
    and they're not showing up, so the setting this little small gear icon over here brings up your settings, and
    we can pick which columns we want to show ok, so I'm going to turn that column on
    And...
    We're going to go ahead and close this box. There's lots of popups in QuickBooks Online intended to help
    You had already gone in the template
    Chart of accounts has numerous accounts that we just want to remove as many accounts as we can mm-hmm
    That won't be needed that way when we import. We don't get duplicates
    so to delete an account you hit the drop down arrow and just click delete and
    Then yes
    There are a few accounts that are default for importing
    Transactions that it won't allow you to delete on categorized assets is one of them
    So we're gonna try to
    get through some of these others quickly.
    Undeposited funds is another one, so if you try to delete one you're not gonna break quickbooks. It won't let you if it
    Is good to know that I cannot break the system.
    It's very forgivable
    After deleting we have the accounts that
    Quickbooks won't let us delete okay
    Now we're going to import the
    template
    chart of accounts so
    this drop-down
    By new which is to set up a new account, it will allows you to import
    We have that loaded. It's on our desktop, yep there it is. Okay.
    Go ahead open and we'll click the next
    Then we route.
    There already set up on the right format and our
    Files so we can just hit next
    It brings up all of the accounts that it's going to
    Go ahead and import
    So if there were any edits, you knew you were going to want or you
    thought of an account that you didn't think you were ever going to use you could go ahead and
    Not it bring it over. Okay, I
    Don't
    So that my way click import
    It's showing us here that it imported 51 of the 52 accounts
    It looks like the undeposited funds, which if you recall when we were deleting I attempted to delete that one, and it wouldn't let me
    but
    It didn't duplicate it. It just shows you that it didn't import that one
    Okay, so we can go ahead and close out of this menu. Do we want to import it first?
    Well that would import deposit funds. We don't. I see. It already did the others. Okay.
    Want to leave without saving, Yes
    So now our chart of accounts has grown. WooHoo! they are all there!
    Then we have
    Everything in here with the account numbers except for the
    Accounts that were already listed
    That didn't have an account, so we can go in and edit those and add an account number, okay
    To edit one of them, say retained earnings
    You can just hit the drop down arrow and click edit, go to the number field and put in
    The right number
    Now if we go back to equity
    Here was opening balance equity is
    an account that QuickBooks will use when you're
    Initially importing transactions that there was an opening balance in a bank account. It will use that to offset initially. Okay
    It's not an account. You'll have a balance and down the road, okay, so
    It did not have that in the chart of accounts so you may
    after you import all of a sudden have a duplicate so
    Equity, which is the standard is the same number as opening balance equity?
    So we can just change
    By editing and clean, there's always just a little bit of cleanup, but not near as much time as when you
    start from scratch
    And then we can get rid of the asterisk that it added
    And it added it because? You can only use each number one time. Okay
    For the most part there isn't a lot. The uncategorized asset account, mm-hmm
    It's set up for
    when you import transactions if you don't classify an
    Transaction it'll automatically put them in the uncategorized accounts
    So, if you get something in those accounts you probably need to go in and edit the transaction anyway
    so, you could just leave them unnumbered because they won't actually be used in your reports, and
    should it have numbers like
    3900, 3900, again, or 39,000, 39,000? No
    did it?
    I see them. Oh here? that's just how it's showing it
    It doesn't actually have it anywhere, that's just so if we didn't show
    If we didn't have this column
    Then it still shows you the account number. Okay.
    All right now that this file has imported, what do we do next?
    We can go in and add any missing account numbers on the accounts that were already set up
    Like undeposited funds I believe on our template
    We have it numbered 12,000
    And then save and close that
    Some of the accounts like I'm categorized asset they are
    In the chart of accounts as the default account that QuickBooks uses when you import
    Transactions if you don't categorize something it'll go to one of the Uncategorized accounts. Okay, when you review your
    Reports if you see something in them you probably need to edit the transaction and fix it anyway
    So I might leave those unnumbered okay, just so they stand out a little more, right
    This services income
    Eventually, we can delete that once we have
    sales items set up that lead to the
    Income account we want to use, okay. So, for now I would just leave it. Okay
    But the rest is good to go. The other edit that needs done though
    is if any of the accounts should be a sub-account, and I think in our
    Template we have professional services
    Which is 65,000
    and we want legal fees accounting fees and consulting fees to be sub-accounts of professional fees
    You cannot import them as a sub-account, so this is
    the time to go ahead and set that up, so
    If you go ahead and hit the drop down arrow again and edit
    If it's a sub-account
    You just check it there, and then you put in your parent account which is professional fees
    And then save and close
    Now, in the Chart of Accounts any sub-accounts show up indented. That kind of helps you see your structure
    So if we go ahead and edit this one
    And then the last one
    This feels like a really smooth easy process to me
    Definitely saves time over setting them all up individually
    Now if there were any accounts that you want to add that aren't
    In our template that are unique for your business, if you want to add them in QuickBooks Online
    At the top of the Chart of Accounts. There's this new, you just select new
    Maybe you have
    two different banks
    So then we would want to set up another bank account
    And then we would number it
    So then you would have a second checking account listed
    You could set up numerous if you had a checking a savings a money market as sub accounts of your bank accounts as well
    Okay
    The other
    Customization that
    We did in our desktop example was to set up sub accounts for each property since this is a real estate business
    It's good to track your fixed assets
    buy property. Right
    So, before when we've talked about fixed assets you said we needed to set up sub accounts for those. It's helpful for your
    organization down the road to see the value between
    building and land and improvements
    for each property okay, and then if you sell any properties you can just
    Get a little more clarity
    So, each property is distinct within dwelling land property improvements. Right. Okay.
    We can set up additional accounts as sub accounts to each of them, okay, so we set up new
    And those are fixed assets
    And
    Dwelling is our first one
    So it'll be a sub-account of the dwelling account
    And we'll call that
    Property A
    Okay some people will list
    addresses or if it's a commercial building you might put the name of the building if it has. Okay that
    that makes sense and
    the account number will use
    14,000 is your dwelling account
    So this is where we'll use the last two digits to add the sub okay, and then we'll be consistent
    throughout the chart of accounts that
    this sub-account 10 is property A. Okay, and
    Then instead of save and close, I'm gonna do save and new
    And go in fixed assets
    And for the land once again we want property A
    The land is 16,000 so this would be 16,010
    Sub-account land
    It's nice you can just type in the letters to get there too. Right, you don't have to memorize the account numbers and
    It would be nice if it would remember I'm doing all fixed assets right now, but
    So then
    Back under here under the property improvements
    Which is the 17,000 they're going to have property A
    Let's go ahead and close it, so we can see what we did
    So now your chart of accounts should show
    Property A under each of the fixed assets we can also
    Track accumulated depreciation by property if you want, or you can just have a total
    It depends if your goal is to hold on to your property for many many years
    Then it might not be as important is showing it by property. It'll make if you're selling properties
    It'll make it simpler if you've kept track of the accumulated depreciation for each property
    Okay
    Then we can also keep with each property
    Usually is a mortgage so we can keep that consistency.
    As we went back to the chart of accounts to see the results, we can see those sub-accounts. If we had multiple properties, we could
    Just continue setting them up mm-hmm
    Some people may want to go ahead and set up sub-accounts for accumulated depreciation
    You also would be depreciating your furniture and equipment
    so you'd have to have a unique sub-account under there, or I'll set up a second account just for
    Accumulated depreciation of your furniture and equipment separate. Ok. This might be more of like office furniture new equipment, okay?
    The other
    accounts
    That come along with a owning one property might be or most likely would be a mortgage. Most likely, yes
    So we would go ahead now and set up a sub-account of real estate mortgages for that property, okay
    And once again we'd follow the same pattern where property A was going to... Right, to have that same..., so in this instance
    Though your mortgage is a liability, not a fixed asset, okay
    And that is a long-term one. Unfortunately you that's usually the case
    So here's our real estate mortgage account
    Which gives me that account number.
    So, I'm going to keep consistent and use 10 and just put property A up here again
    Save and close that
    Along with the mortgage there's often an escrow account where the lender pulls
    funds to pay the property taxes and insurance
    So, under the escrow account which we treat is a bank account because it has expenses payout of those funds, which are technically yours though
    We should also set up the sub-account so you're tracking each escrow account on its own
    You can reconcile them and keep them in balance. Okay.
    So we're going to go ahead and set up a sub-account
    Which is a checking account, a bank account.
    Treated just like a checking for property A
    And
    We will keep the same last two digits for property A or 10
    make it a sub-account of
    Escrow
    That works. Awesome!
    So, any final words on setting up a chart of accounts?
    Don't be afraid to customize your chart of accounts for your business. If one of the names
    on an account doesn't make sense to you to go ahead and
    customize it, so that it makes sense for your business
    Because ultimately it is about you looking at those reports and making the most sense out of them.
    Right, and the chart of accounts that you're using will help a profit and loss statement
    Tell you the story of how you got to that bottom line. Okay.
    Well this has been
    Once again, incredibly helpful. Our previous videos have gone over very well, and I think this one will too
    Thank you so much and for our viewers out there. You can also find us on Twitter Facebook
    Google+ and YouTube, so we would appreciate the Likes, and we appreciate the comments, and keep the suggestions coming.
    Thank you very much
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