Chart of Accounts

by Maarten Verwey
(Apple Valley Ca USA)

Is the Department of Motor Vehicles (DMV) expence a fee or automobile expence?

The payment made for DMV registration is an automobile expense.

Chart of Accts. Cash vs. Owners Equity

by Steve H
(Anchorage, Alaska)

For a sole proprietorship, do I need to set up a cash account/capitol account or is owner's equity basically the same thing? They both equity accounts correct?

IE: My quickbooks program doesn't have a cash account or capitol account listed in the chart of accounts (I can add one if needed). The chart of accounts does have owners equity listed.

Thanks, Steve

Hi Steve,

Thanks for your question. You should have a cash account set up, but it would be an Asset Account.

You should also have both Opening Balance Equity and Retained Earnings Capitol Accounts, in addition to the Owners Equity Account.

The owners equity account might also have two subcategories called Owners Draw and Owners Contributions.

The Chart of Accounts

by Donna
(Patchogue, NY)

My company just purchased a Gym. We took out a mortgage on the building/property. How do I classify it in the chart of accounts for my mortgage payments?

Thank you.

Hi Donna,

Thank you for your question.

The mortgage on the building/property should be classified as a long-term liability on the chart of accounts. You would accomplish this by first Debiting the Building Asset account and Crediting the Mortgage Payable long-term liability account.

Then when you make a mortgage payment, you will Credit your Bank Asset account and Debit the principal portion of the payment to your Mortgage Payable long-term liablity account and Debit the interest portion of the payment to your Mortgage Interest expense account.

What is the Chart of Accounts?

Exactly what is the Chart of Accounts used for?

The Chart of Accounts is a complete list of all the general ledger accounts used to post amounts to. The chart of accounts is a useful tool when trying to identify the best account to use when recording transactions.

Typically, the chart of accounts will begin with balance sheet accounts then profit and loss accounts. The accounts will normally be in the same order as they will be found on the the two financial statements.

Click here to learn more about the chart of accounts.