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

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