See How to document #390 for information on setting up accounts and account types.
The account type determines how a transaction is recorded for financial purposes. It is critical that the account types match the account’s intent. Account types are: Capital Equity, Capital Reserve, Current assets, Current liabilities, Equity, Expenses, Fixed assets, Income, Long term liabilities, Other assets, Other expenses, Other income, Taxable income. Account types are used when calculating the owner’s Operating and Cash.
Note: Bank accounts should have an account type of Current Assets. An account type of Taxable Income should be assigned to any account that should be reported on a 1099 – and only to those accounts.
Assets section on Balance Sheet
transactions posted to asset accounts do not affect the owners balance
Current Assets
Fixed Assets
Other Assets
Liabilities section on Balance Sheet
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transactions posted to long term liability accounts do not affect the owners Operating but do affect Cash (except when calculating Available Cash for disbursement)..
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current liability account types do not affect the Operating but will affect the Cash.
special liabilities are added to income for reporting purposes so they affect the Operating as well as Cash
Current
Liabilities
Long Term Liabilities
Special Liabilities
Income section on Balance Sheet
(part of Prior Year Earnings for past accounting years)
Income
Taxable Income - used to calculate 1099 income for IRS
Other Income
Expense section on Revenue & Expense
(part of Prior Year Earnings for past accounting years)
Expenses
Other Expenses
Equity section of Balance Sheet
Equity (part of Prior Year Earnings for past accounting years)
Capital Reserve (not part of Prior Year Earnings)
*Transactions posted to capital reserve do not affect the owners operating balance. Those funds will be reflected in the Reserve box in GL History but will not show on an owner statement.
Capital Equity (not part of Prior Year Earnings)
*Transactions posted to capital equity will be reflected in the owners operating balance and will show on an owner statement. These accounts will appear separate from Retained Earnings on a Balance Sheet so it can be used to track shareholder equity.
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