Accounting is a very important part of every business; without accurate accounting processes in place, it would be almost impossible to know the true state of a business’s finances. While many people think of accounting as keeping a track of the money moving into and out of your business, the true value of accounting comes in when it allows businesses to understand where it gets most of their money from, and where it is spending most of its profits. Being able to view these transactions at a glance, can be done via a Chart of Accounts (COA).
What is a COA?
A COA is a breakdown of all accounts and transactions in the general ledger of a company and organizing them into subcategories. Separating transactions according to whether they are considered assets or liabilities also help to achieve this at some level and ensures that a company’s financial statements comply with GAAP standards. Within a Chart of Accounts, a business would have a listing of all their accounts with accounts receivable and accounts payable information listed. This means that at a glance, businesses will be able to know the state of their accounts. Having an accurate and up-to-date COA will not only keep your business finances organized to give you insights that allow you to act swiftly when your business might be hitting a low patch, but it will also give potential investors a view of the financial health of your business.
Creating your Chart of Accounts within Quickbooks
Because a COA acts as a good foundation for the accounting side of any business, it is important to have this feature added when setting up your accounting software. Quickbooks Online accounting software allows you to categorize accounts as assets, liabilities, income, or expenses. The accounting software allows you to monitor accounts payable, accounts receivable, opening balance equity, payroll-related expenses, tax payable on sales, undeposited funds, and other account status markings within the COA. These can be customized according to the needs of your business, with the software also offering the functionality to make accounts inactive once they have lapsed.
Having an up-to-date view of accounts will benefit your business in terms of giving everyone in your business a detailed update on accounts and the financial state of your business at the click of a button. Not only will it streamline communication between departments within your organization, but it will aid tax filing too. The only challenge with this feature is that it has to be set up correctly. An incorrect accounting setup can have the exact opposite effect of showing your business in a positive light, it can actually create a mess in your accounting and affect the credibility of your business, not to mention, taint your business relationships with clients.
Imagine having the wrong information listed on a client’s account – it could either frustrate the client if your setup hasn’t captured their payments, or it could cost your business money if it is not noting accounts that need to be paid. While Quickbooks accounting software is a reliable one, it is advisable to consult with an expert when setting up your software or when adding on to the initial features you set up for your business.
We offer this service at Fusion. Our CPAs are skilled at software integration and can offer your business the peace of mind it needs to run its accounting accurately and independently.
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This blog article is not intended to be the rendering of legal, accounting, tax advice or other professional services. Articles are based on current or proposed tax rules at the time they are written and older posts are not updated for tax rule changes. We expressly disclaim all liability in regard to actions taken or not taken based on the contents of this blog as well as the use or interpretation of this information. Information provided on this website is not all-inclusive and such information should not be relied upon as being all-inclusive.