The Proper Use of Sub-Accounts in QuickBooks

The Proper Use of Sub-Accounts in QuickBooks

Jul 10, 2021, 10:20:40 AM Business

It's that tiny box below the new account you only entered. The box is labelled 'subaccount of' and provides you the chance to make a more organized chart of accounts. Hardly anyone ever uses it though. When may be a blast to use it? this text will address that issue.

On Fixed Assets

The creation of a hard and fast asset account involves sometimes as many as five different accounts for an equivalent item. employing a vehicle as an example we'll check out what subaccounts to make. First, create an account for the vehicle; it's a hard and fast asset so name the primary one Vehicle Value as your main account.

Next create a subaccount thereunder main one and call it 'Vehicle Cost', the start balance of that account is going to be the quantity you purchased the vehicle, not counting any deposit or trade amounts. for instance, it is a $20,000 vehicle that might be the balance on the 'vehicle cost' subaccount.

Next, create a subaccount under 'vehicle value' and name it 'Accumulated Depreciation - Vehicle' (you may need to abbreviate). the start balance on this may be zero within the first year but it's recorded within the negative. So, after the primary year, there'll be a - $5000 during this subaccount. once you subtract the value from the accumulated depreciation, the vehicle value is now at $15000. so as to record this negative amount you would like a travel and entertainment account to require it from. Create a subaccount of Depreciation Expense and call it 'Vehicle' any subsequent fixed assets with depreciation expenses are going to be subaccounts under the Depreciation Expense category with the entire of all of them showing on the most Depreciation Expense category.

Most companies though don't pay for a vehicle in order that they use financing. to try to to this, you would like to make an extended Term Liability account for the vehicle during which the opening balance is that the amount of the loan wants to purchase the vehicle. This amount could differ from the worth therein the worth doesn't take these deposits or trade ins under consideration.

Create a subaccount under future liability; name it 'vehicle loan'. Create yet one more subaccount under expense and name it 'Vehicle Interest'. once you receive the primary bill, the monthly payment amount should be divided between the 'vehicle interest' and therefore the 'vehicle loan' categories. Assigning the entire payment to the loan will end in QuickBooks showing a debt that's paid off that hasn't been.

If there's quite one vehicle, it's good to possess a separate expense category for every one so you'll have an accurate picture of what you're spending on each vehicle. Under the Auto Maintenance account, create the subaccount 'Fuel - vehicle 1' and 'Maintenance - vehicle 1' (As well as vehicle interest 1, vehicle loan 1, etc.)

Other Expense Accounts

There is a general catch all category called 'utilities'. Create subaccounts for 'telephone', 'water', 'power' etc and make 'utilities' the parent category. this may assist you break down individual utilities to more carefully manage your spending.

Income Accounts

If your business features a two- or three-pronged revenue stream, you'll want to make separate subaccounts under sales income. for instance, a lawn maintenance company may have income from simple lawn maintenance, sprinkler installations, pest control, etc. A separate subaccount for every will assists you with this example. With just one account for revenue, it makes it difficult to make a decision if you would like to specialise in the foremost profitable aspects of your business.

Conclusion

A word of caution about using subaccounts. If you didn't start out using them and you've got several years' worth of income and expenses that are tied to what would be parent accounts, you'd got to back track and assign each of these to the new subaccounts. this is often why it's important to urge those accounts right from the start and have some help installing your QuickBooks software.

Published by nobledavid

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