Setting Up Your Chart of Accounts

Your Chart of Accounts (CoA) is the backbone of your bookkeeping — it's the list of categories your bookkeeper uses to sort every dollar that comes in or goes out. Setting it up correctly from the start saves significant cleanup time later.

What You'll Need

Access to a bookkeeping platform (QBO)
Your confirmed business structure (sole proprietorship, LLC, S-Corp, or C-Corp)
Your NCO bookkeeping team (we will typically configure this for you)

Normal Procedure

How to view and edit the Chart of Accounts in QBO

Go to Settings (gear icon) > Chart of Accounts.
To add a new account: click New, fill in the account type, detail type, and name, then Save and Close.
To edit an existing account: click the dropdown arrow next to the account and select Edit.
To remove an account you don't need: click the dropdown arrow and select Make inactive.

Starting Template

Assets — what your business owns

Account Name	Type	Notes
Checking Account	Bank	Your main operating account
Savings Account	Bank	Add if applicable
Accounts Receivable	Accounts Receivable	Outstanding customer invoices
Inventory	Other Current Asset	Only if you hold physical inventory
Sales Tax Receivable	Other Current Asset	Overpaid sales tax you're owed back

Liabilities — what your business owes

Account Name	Type	Notes
Accounts Payable	Accounts Payable	Unpaid supplier bills
Sales Tax Payable	Other Current Liability	Sales tax collected, not yet remitted to the CDTFA
Business Credit Card	Credit Card	Add if applicable
Business Loan	Long-Term Liability	Bank loan principal balance
Shareholder Loan	Other Current Liability	Corporations only — money owed to or from shareholders

Equity — your ownership stake in the business

Account Name	Type	Notes
Retained Earnings	Retained Earnings	Auto-created by QBO
Owner's Draw	Owner's Equity	Sole proprietors and single-member LLCs — money withdrawn from the business
Shareholder Contributions	Owner's Equity	Corporations — capital put into the business

Revenue — money coming in

Account Name	Type	Notes
Revenue	Income	Your primary income stream
Other Income	Other Income	Non-operating income (e.g., credit card rewards; interest earned)

Expenses — money going out

Account Name	Type	Notes
Advertising & Marketing	Expense
Bank Charges & Fees	Expense
Cost of Goods Sold	Cost of Goods Sold	Only if you sell products
Insurance	Expense
Meals & Entertainment	Expense	Track separately — only 50% tax deductible
Office Supplies	Expense
Professional Fees	Expense	Legal, accounting, consulting
Rent	Expense
Salaries & Wages	Expense
Software & Subscriptions	Expense
Telephone & Internet	Expense
Travel	Expense
Vehicle Expenses	Expense

Abnormal Procedures

You inherited a messy Chart of Accounts from a previous bookkeeper.

Don't delete accounts that already have transactions — QBO won't allow it, and even deactivating them loses the history context. Flag the problem accounts to your NCO team. They'll merge, reclassify, or deactivate them as appropriate.

You added an account and it's showing up in the wrong section of your reports.

This is usually an account type mismatch. Go back and edit the account — the "Account Type" and "Detail Type" fields control where it appears in financial statements. Your bookkeeping team can correct this.

You're not sure whether something needs its own account.

General rule: if it's a separate line on your business tax return, give it its own account. If it's a minor subcategory of a larger expense, it can usually be combined. When in doubt, ask your NCO bookkeeper before creating it.

FAQ

Does QBO set up a Chart of Accounts automatically?

Yes. When you create a new QBO file, it generates a default list based on your industry selection. Your NCO team will clean it up and add what's missing for your business.

Can I add my own accounts?

Yes. Add new accounts any time through Settings > Chart of Accounts > New. If you're unsure where something belongs, ask your bookkeeper first — duplicate or miscategorized accounts are harder to untangle later.

Should I use account numbers?

Not required, but helpful for larger businesses. The standard US numbering convention: 1000s = Assets, 2000s = Liabilities, 3000s = Equity, 4000s = Revenue, 5000s+ = Expenses. Your NCO team will apply numbering if it makes sense for your setup.

How often does the Chart of Accounts need to change?

Rarely, once it's properly set up. You might add accounts as your business grows — new revenue streams, new expense categories — but the core structure typically stays stable for years.