Setting Up Your Chart of Accounts

There are five different types of accounts:

1) Asset Accounts are your main accounts that track the money deposited and withdrawn from your bank or cash accounts. Checking, Savings, and Petty Cash accounts have already been added for you. You can change the account names to something more meaningful by clicking inside each box.  You can add as many asset accounts as you need, and remove any that you do not use.

2) Liability Accounts are used to keep track of the debts and obligations that your business owes to other businesses or individuals.  These should be reported on your balance sheet if you are using modified cash basis or accrual basis. A Sales Tax Collected account has already been added, and you can add more as needed.  If you use Patriot to run payroll, you will need to use Modified Cash basis and create a liability account with the Sub Account Type of “Current Liabilities” to track your payroll taxes that you will be paying to tax agencies (if you are a Basic Payroll customer), and deductions/contributions that you will be paying to benefit providers.

3) Equity Accounts are created to track owner investment in the business, owner withdrawals, and any net income or loss incurred.  Equity can also be calculated by subtracting assets minus liabilities.  We have added a default account, “Owners Equity,” for you to use in equity transactions, but you can rename or create additional accounts as needed.

4) Income accounts keep track of incoming money, such as product sales. Commonly-used income accounts have already been added. You can rename an income account, add a new one, or remove these accounts as needed.

5) Expense accounts keep track of the types of outgoing money, such as payroll expenses. A list of commonly used expense accounts has already been added. You can rename an expense account, add a new one, or remove any that you do not use.