How to customize a Chart of Accounts for optimal financial reporting

A chart of accounts is the structural framework for any business accounting system.  It is analogous to a filing system.  If you wanted to, you could dump all your documents into one giant file in your filing cabinet (or a file folder on your computer).  Of course, if you did do it this way, you would likely have a hard time locating your documents.  Alternatively, you could create a series of folders, based on an organization system that makes sense for you and your business.  This type of structure would make it much easier and (as long as you remember your system), much more efficient to find what you are looking for.  The more precise your system, the more time you save and the easier your documents become to access.  Similarly, a chart of accounts is a type of categorization arrangement for your financial data. You slot everything into a category with the ultimate goal of getting financial reports such as your balance sheet and profit-loss statement that provides valuable info to the business owner as well as the other other stakeholders of the business.  It should be noted that while each chart of accounts has commonalities and some specific conventions that should be followed, there is no one size fits all.  Consequently, it is important to spend some time thinking about a chart of accounts that fits the profile of your business.  If you are using Quickbooks Online, you can read this in conjunction with our article on setting up QBO for the first time and watch my video on working with chart of accounts in QuickBooks Online.