Setting Up Your Chart of Accounts

Your Chart of Accounts (CoA) is the backbone of your bookkeeping, it is the list of categories your bookkeeper uses to sort every dollar that comes in or goes out. Setting it up correctly from the start saves significant cleanup time later.

What You Will Need

Access to a bookkeeping platform (we will be talking about QBO)
Your confirmed business structure (sole proprietorship or corporation, some accounts differ)
Your Mesa CPA bookkeeping team (they will typically configure this for you)

Normal Procedure

QBO generates a default Chart of Accounts when you create a new company file. Your bookkeeping team will customize it to fit your business. Below is the standard starting template for a Canadian small business.

How to view and edit the Chart of Accounts in QBO

Go to Settings (gear icon) > Chart of Accounts.
To add a new account: click New, fill in the account type, detail type, and name, then Save and Close.
To edit an existing account: click the dropdown arrow next to the account and select Edit.
To remove an account you do not need: click the dropdown arrow and select Make inactive.

Starting template

Assets, what your business owns

Account Name	Type	Notes
Chequing Account	Bank	Your main operating account
Savings Account	Bank	Add if applicable
Accounts Receivable	Accounts Receivable	Outstanding customer invoices
Inventory	Other Current Asset	Only if you hold physical inventory
GST/HST Receivable	Other Current Asset	Input tax credits you are owed

Liabilities, what your business owes

Account Name	Type	Notes
Accounts Payable	Accounts Payable	Unpaid supplier bills
GST/HST Payable	Other Current Liability	Sales tax collected, not yet remitted
Payroll Liabilities	Other Current Liability	CPP, EI, and income tax withheld from employees
Business Credit Card	Credit Card	Add if applicable
Business Loan	Long-Term Liability	Bank loan principal balance
Shareholder Loan	Other Current Liability	Corporations only, money owed to or from shareholders

Equity, your ownership stake in the business

Account Name	Type	Notes
Retained Earnings	Retained Earnings	Auto-created by QBO
Owner's Drawings	Owner's Equity	Sole proprietors, money withdrawn from the business
Shareholder Contributions	Owner's Equity	Corporations, capital put into the business

Revenue, money coming in

Account Name	Type	Notes
Revenue	Income	Your primary income stream
Other Income	Other Income	Non-operating income (e.g., interest earned)

Expenses, money going out

Account Name	Type	Notes
Advertising and Marketing	Expense
Bank Charges and Fees	Expense
Cost of Goods Sold	Cost of Goods Sold	Only if you sell products
Insurance	Expense
Meals and Entertainment	Expense	Track separately, only 50% tax deductible
Office Supplies	Expense
Professional Fees	Expense	Legal, accounting, consulting
Rent	Expense
Salaries and Wages	Expense
Software and Subscriptions	Expense
Telephone and Internet	Expense
Travel	Expense
Vehicle Expenses	Expense

Abnormal Procedures

You inherited a messy Chart of Accounts from a previous bookkeeper.

Do not delete accounts that already have transactions, QBO will not allow it, and even deactivating them loses the history context. Flag the problem accounts to your Mesa CPA team. They will merge, reclassify, or deactivate them as appropriate.

You added an account and it is showing up in the wrong section of your reports.

This is usually an account type mismatch. Go back and edit the account, the "Account Type" and "Detail Type" fields control where it appears in financial statements. Your bookkeeping team can correct this.

You are not sure whether something needs its own account.

General rule: if it is a separate line on your corporate tax return, give it its own account. If it is a minor subcategory of a larger expense, it can usually be combined. When in doubt, ask your Mesa CPA bookkeeper before creating it.

FAQ

Does QBO set up a Chart of Accounts automatically?

Yes. When you create a new QBO file, it generates a default list based on your industry selection. Your Mesa CPA team will clean it up and add what is missing for your business.

Can I add my own accounts?

Yes. Add new accounts any time through Settings > Chart of Accounts > New. If you are unsure where something belongs, ask your bookkeeper first, duplicate or miscategorized accounts are harder to untangle later.

Should I use account numbers?

Not required, but helpful for larger businesses. The standard Canadian numbering convention: 1000s = Assets, 2000s = Liabilities, 3000s = Equity, 4000s = Revenue, 5000s+ = Expenses. Your Mesa CPA team will apply numbering if it makes sense for your setup.

How often does the Chart of Accounts need to change?

Rarely, once it is properly set up. You might add accounts as your business grows, new revenue streams, new expense categories, but the core structure typically stays stable for years.