How to Set Up a Chart of Accounts for a Real Estate Company in QBO

STRATAFOLIO
Apr 22, 2018 · 10 min read

Today we are walking through a step-by-step process on how to set up a chart of accounts for a real estate company using QuickBooks Online. Get your free copy of a sample chart of accounts for a real estate company at the bottom of the blog.

Amy-Heinen-Quick-Action-Accounting
Amy-Heinen-Quick-Action-Accounting

We had the opportunity to sit down once again with Amy Heinen from Quick Action Accounting. Amy is a local favorite and a go-to person for answering both accounting and QuickBooks questions. As an experienced accountant, Amy has seen her share of poorly organized charts of accounts and the resulting issues this causes for owners. It is because of this that Amy spends so much time early in her relationships with clients to get the chart of accounts piece right. We worked with Amy previously on setting up a chart of accounts for a real estate company using QuickBooks desktop and on how to properly set up escrow accounts.

We are going to cover five things in this blog:

  1. The importance of Setting up a Chart of Accounts
  2. Enabling the account settings
  3. Prepping to import a Chart of Accounts
  4. Importing the file
  5. Customization

Couple Important Notes:

  • You can also access this same content in the companion video on YouTube.
  • Access the sample chart of accounts for a real estate company at the bottom of the blog.

Importance of Setting up a Chart of Accounts

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Enabling Account Settings

Once you are in Account and Settings, select Advanced.

Next click on Enable account numbers by selecting the pencil on the far right-hand side of the screen.

From here, click the box that says Enable account numbers and then click Save and exit.

The purpose of establishing account numbers is to help organize how you want your chart of accounts to appear. The first two digits are used to identify if the account type: asset, liability, equity, revenue, or expense account. The third digit might be used to distinguish property types. For instance, you might number your retail and office differently. The fourth and fifth digits distinguish sub-accounts.

Structure-of-number-schema
Structure-of-number-schema

Prepping to Import a Chart of Accounts

If the numbering is not showing, go the right-hand-side of the chart of accounts, click on the small gear button, select Number to show in the columns.

Next, delete all the unnecessary accounts. There are five accounts you will not be able to delete because QuickBooks Online will not allow it because they are default accounts for importing transactions. The five accounts you will not be able to delete are:

  • Uncategorized Asset
  • Retained Earnings
  • Sales
  • Uncategorized Income
  • Uncategorized Expenses

Delete all the other accounts to eliminate duplicate accounts when you import the sample chart of accounts.

To delete an account, go to the right-hand side of the chart of accounts in the action column, select the account you want to delete, select View register, then click Delete.

Once you select delete, a box will pop up that asks you if you are sure you want to delete the account. Select Yes.

If you select an account that you cannot delete, QuickBooks Online will give you the following warning/error that says something like this:

It is a bit of a slow process to delete all these accounts, but it is best practice to eliminate all the duplicates prior to importing the file. Let’s begin the import process.

Importing the Chart of Accounts

At this point, QuickBooks Online will walk you through a simple 3-step process to import the file. Begin clicking on Browse and locating the Excel Sample Real Estate Chart of Accounts file you placed on your desktop or where ever you placed the file. QuickBooks Online will take either a CSV or Excel file format. QuickBooks Online cannot currently accept an IIF file format. The IIF file format is used strictly for QuickBooks desktop version. If you are taking a chart of accounts format from an existing desktop chart of accounts and importing it into QuickBooks Online, you must convert it to a CSV or Excel file format before importing.

Then, select Next in the bottom right-hand corner of your screen. This will take you to step 2 in the importing process. At this step, QuickBooks will ask you to map your fields.

Our sample chart of accounts for a real estate company file was already mapped to the QuickBooks fields so you can simply click Next in the bottom right-hand corner and move onto the 3rd step. If you are importing from elsewhere, you will need to align your fields with each of the QuickBooks Online fields.

Time to Import

After you click Import, you will be prompted alerting you to any duplicate accounts that will look like this:

In this case, there was one duplicate account called Undeposited Funds. At this point, you have the option to change the Account Name to something else and then import. We are going to close out of this menu since we are not going to change anything. To do that, click the X in the upper right-hand corner of the screen.

There is one final question that QuickBooks Online will ask during this process and that is, “Do you want to leave without saving?” You will click yes.

That is it. You have imported your sample real estate chart of accounts.

Customize the Import

  • Edit some accounts that are missing account numbers (these were the accounts that QuickBooks Online would not allow us to delete)
  • Establish sub-accounts for certain expenses
  • Add additional accounts
  • Setting up sub-accounts for any fixed assets
  • Setting up sub-accounts for escrow

Editing Accounts with Missing Account Numbers

In this case, we are editing Retained Earnings and giving it an account number of 32000. Then select Save and Close.

Unclassified transactions appear in the Uncategorized Asset account, Uncategorized Income, and Undeposited Fund accounts after import. If you have something in those accounts, go in and edit the transaction anyway and put it in its correct account. Services income will eventually be deleted once your income accounts are properly set up for your business. It is a personal choice if you want to add numbers to these accounts. We prefer to keep them unnumbered as any balance will be more noticeable to us.

Establishing Sub-Accounts for Expenses

  • Legal Fees
  • Accounting Fees
  • Consulting Fees

Creating sub-accounts gives you the opportunity to see certain expense types totaled in your reports. Sub-accounts also show up indented on the chart of accounts.

In this sample, Legal Fees should be a part of Professional Fees as a sub-category. Edit the account Legal Fees and check the box for sub-account and select Professional Fees and then select Save and Close. Complete the same actions for Accounting Fees and Consulting Fees or any other accounts you prefer to be sub-accounts.

Add additional Accounts

A new Account box will pop up. Select Bank from Account Type and select Checking from Detail Type. Then add the Number. If you want to make it a sub-account of another account, you make that selection now. Once you are done, click Save and Close.

Setting up Fixed-Assets

  • Dwelling
  • Land
  • Property Improvements
  • Mortgages

The account type will be Fixed Assets for each of these. Select the correct Detail Type for each account, Name the property, give it a Number, then select the appropriate account it will be a sub-account for. The click Save and Close. We name our properties by the street address, but find a method that works for you. Keep the numbering for Property A consistent across all the fixed asset sub-categories. We will use the “10” for each of these fixed asset types.

Use the following detail types for each of your fixed assets:

  • For Dwelling, use detail type Buildings
  • For Land, use detail type Land
  • For Property Improvements, use detail type Buildings
  • For Mortgages, use detail type Notes Payable

Setting up Escrow

Final Words on Setting up a Chart of Accounts for a Real Estate Company

And, remember, QuickBooks Online is very forgivable. If over time, you find you need to see your income or expenses differently, change it. It may require some work. But if that works helps you better manage your business, it is time well spent.

If you liked this blog, please share it with a friend. And, if you want to receive regular articles to help with your asset management, subscribe here.

Download a copy of the free Excel Sample Chart of Accounts for a Real Estate Company file here.

Jeri

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Originally published at STRATAFOLIO.

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STRATAFOLIO is an online software solution that provides real-time data analytics for commercial real estate portfolios in an intuitively designed dashboard.