Get Off to a Great Start in 2022: Organize Your Books and Records

Date January 26, 2022
Article Authors
Michael SpagnoloAleigha Withrow
HBK CPAs & Consultants

Your New Year’s resolutions for your business could include starting and maintaining better-organized books and records. Keeping your company’s books organized and updated will help you make informed decisions in real-time. Following are a few easy ways, using Quickbooks, to maintain accurate and available information on your business’s performance throughout your fiscal year.

Reconcile bank statements and credit cards monthly. Knowing how much cash and credit you have readily available is a critical to conducting business. For up-to-date records of balances, perform bank and credit card reconciliations monthly with Quickbook’s Account Balances feature, then reconcile them with your bank’s balances at month-end.

Not only will reconciling ensure the balances on your books match the bank’s, but the Balance Sheet accumulates and summarizes all your cash and credit card totals. Importing, categorizing, and reconciling these transactions each month will greatly improve the accuracy of not only your Balance Sheet but your Income Statement, so long as the transactions are coded correctly. For more information on reconciling, check out:

Organize a relevant numbered Chart of Accounts. To properly import and categorize your transactions, it is vital that you have a clean chart of accounts (COA)—that is, the accounts you use on the Balance Sheet and Income Statement are organized, relevant, and properly set up. Your accounts should also be numbered.

While you might employ many accounts, to be sure that you are starting or assembling your records properly, list each under one of five Quickbooks account Types: Assets, Liabilities, Equity, Revenues, Expenses. As you set up your accounts under these Types, create Parent and Subaccounts to help group your accounts on the Balance Sheet and Income Statement for a more harmonious order of accounts, which will make it easier for you to assess your business’s financial health.

To get started you might adopt the following list of commonly used numbered accounts:

Balance Sheet:

  • 1001 Checking Account
  • 1002 Savings Account
  • 1101 Accounts Receivable
  • 1201 Equipment
  • 1202 Accumulated Depreciation
  • 2001 Accounts Payable
  • 2101 Credit Card
  • 3001 Draws
  • 3101 Retained Earnings

Income Statement:

  • 4001 Income
  • 4010 Other Income
  • 5001 Cost of Goods Sold (COGS): individual COG categories can be listed separately in the 5000 series
  • 6001 Payroll
  • 6002 Payroll Taxes
  • 6003 Meals
  • 6004 Entertainment
  • 6005 Job Supplies
  • 6006 Utilities
  • 6007 Bank Charges
  • 6008 Depreciation Expense
  • 6009 Other Expense

Every company will have a different COA structure of individual accounts, but overall, your COA should be cohesive and formatted for ease of gathering and assessing financial performance as well as for benchmarking your performance to other similar businesses. Quickbooks allows you to modify pre-existing COA accounts. You can merge two accounts or deactivate pre-existing accounts. You can also edit the names and numbers of accounts you are already using. For more information on the Quickbooks COA, visit:

Your Meals and Entertainment account serves as an example of why you should update and keep your COA current. Prior to the passage of the Tax Cuts and Jobs Act and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, 50 percent of your Meals and Entertainment expenditure was tax-deductible. Entertainment is no longer deductible for tax purposes. However, business meals provided by restaurants in 2021 and 2022 are fully deductible, and business-related meals not provided by a restaurant remain 50 percent deductible. Setting up separate accounts for these expenses will be helpful.

Lock your books. An easy step often forgotten in the bookkeeping and accounting process consists of locking your books by using a passcode to restrict access to entering information that precedes a certain date. For example, if you are finished entering information for December 2021, and you believe it is accurate, placing a passcode on your Quickbooks file dated December 30, 2021, will prevent mistakes in January, such as accidentally entering an invoice with a December date, from affecting your December accounting. In such a case, you would be prompted to enter the passcode, a friendly warning to keep you from rendering your December data incorrect. For more information on locking your books, go to:

Getting your books and records organized is one way to get your business off to a good start in 2022. Accurate, up-to-date accounting will serve to relieve stress throughout the year. If you have questions or would like help getting better organized and structured, we’re here to help. Contact an HBK professional at 724-934-5300.

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