Your Chart of Accounts (COA) is the foundation of your bookkeeping system.

It organizes all your financial transactions and impacts your financial reports’ clarity and usefulness.

But if your COA is cluttered, overly detailed, or filled with old, unused accounts, it can make bookkeeping harder than it needs to be.

This guide will walk you through the Chart of Accounts, explain why it matters, and show you how to clean it up so your QuickBooks setup works for you—not against you.

What is the Chart of Accounts in QuickBooks?

The Chart of Accounts is a list of all financial accounts in your bookkeeping system. Every account falls into one of five main categories:

The Main Account Types in QuickBooks

💰 Assets – What your business owns (bank accounts, inventory, equipment).
💳 Liabilities – What your business owes (loans, credit cards, payroll taxes).
📊 Equity – Owner contributions, withdrawals, and retained earnings.
📈 Income – Revenue from sales or services.
🛠 Expenses – The costs of running your business (rent, payroll, software).
🛍️ Cost of Goods Sold (COGS) – Direct costs tied to what you sell (wholesale price of goods before resale).

Each time you record a transaction, it’s assigned to one of these accounts.

Why a Clean Chart of Accounts Matters

If your Chart of Accounts is too detailed or messy, your financial reports become confusing and less useful.

Common Issues from a Cluttered Chart of Accounts:

• Duplicate accounts that make reports harder to read.
• Unused accounts cluttering your system.
• Too many similar accounts (e.g., “Office Supplies” vs. “Office Expenses”).
• Inconsistent categorization that leads to errors in tax reporting.

A well-organized COA helps you:

• Make faster financial decisions by understanding your reports.
• Simplify tax filing and compliance.
• Reduce errors and confusion when categorizing transactions.

How to Clean Up Your Chart of Accounts in QuickBooks

1. Review & Inactivate Old Accounts

Unused accounts clutter up your reports. If you haven’t used an account in years, it’s time to inactivate it.

How to Inactivate Accounts in QuickBooks:

1. Go to the Chart of Accounts (Transactions → Chart of accounts).
2. Find the account you no longer use.
3. Click the dropdown under Action → Make inactive.

💡 Good to Know: Inactivating an account doesn’t delete past data—it simply hides it from future reports.

2. Simplify Income & Expense Categories

Overly detailed categories make bookkeeping harder. Use subaccounts instead of creating dozens of separate categories.

Example:

• Instead of tracking every product separately (Muffins, Croissants, Bagels).
• Use one account for “Baked Goods” with optional details on the products and services list.

📌 Tip: Keep the categories simple but meaningful.

3. Use Subaccounts Wisely

Subaccounts help organize information without overcomplicating your COA.

When to Use Subaccounts:

• Tracking different income streams (e.g., bookkeeping and training).
• Breaking down major expenses (e.g., “Marketing” → “Online Ads” and “Print Ads”).

📌 Tip: Don’t overuse subaccounts—they should add clarity, not complexity.

4. Don’t Change Your Chart of Accounts Too Often

Your Chart of Accounts should be stable, not something you adjust every few months.

Why consistency matters:

• Frequent changes make past reports harder to compare.
• Inconsistent categorization leads to tax filing headaches.

Make adjustments when needed—but not constantly.

5. The Coco Chanel Rule: Simplify Before You Finish

Coco Chanel famously said:
“Before you leave the house, look in the mirror and take one thing off.”

Apply this to QuickBooks:
“Before finalizing your Chart of Accounts, remove one unnecessary account.”

A simpler COA = easier bookkeeping.

How to Set Up a Smart Chart of Accounts from the Start

If you’re setting up QuickBooks for the first time (or reworking an old setup), follow these tips:

Start with the default Chart of Accounts

• QuickBooks suggests a basic structure based on your industry but it often comes with a lot of extra accounts that you don’t need.
  • Go through the list and remove what you don’t think you need.
  • Only add accounts you actually need.
  • Group similar accounts using subaccounts.
  • Keep it simple—don’t add details you won’t use.

Final Thoughts: Keep Your Chart of Accounts Clean & Simple

A well-organized Chart of Accounts helps you understand your financials, file taxes easily, and avoid bookkeeping headaches.

Key Takeaways:

• Your COA organizes every financial transaction into categories.
• Simplify income and expense categories—don’t overcomplicate them.
• Inactivate old accounts to keep your books clean.
• Use subaccounts only when they add clarity.

If you haven’t reviewed your Chart of Accounts lately, take 10 minutes today to clean it up!

Need help streamlining your Chart of Accounts? Book a one-on-one QuickBooks training session, and let’s review your Chart of Accounts together!

Check out the video below for a walkthrough of how to edit your Chart of Accounts: