With almost every new client I visit I find there is a lack of knowledge in what parent/child accounts are and how they are meant to be used.

First, let me explain what I am discussing. This topic specifically involves the Chart of Accounts within QuickBooks. I say “Specifically” because there are other lists in which parent and child accounts apply. The “Parent” account is simply the top level account. It’s the one in charge, so to speak. The “Child” account is a sub-account of the parent. You should understand that “Child” or “Sub” accounts mean the same thing as they relate to this discussion.

For instance, the example below shows the parent account (6200) with four child accounts (6210, 6220, 6230, 6240) beneath.

6200 - Auto & Truck Expenses
       6210 - Auto & Truck Insurance
       6220 - Auto Maintenance & Repairs
       6230 - Gas/Fuel
       6240 - Vehicle Registration & Tax

What is the purpose of this structure? It’s really quiet simple. The “Parent” account sums the individual “Child” accounts. As a result, you should never post anything to the parent account. Rather, ALL transactions should be posted to the proper child account. When viewing various reports (e.g., Profit & Loss, Balance Sheet), if you notice an account with “- Other”, there is a VERY good chance someone has posted a transaction(s) to the parent account.

To resolve such an instance, simply drill down into the “- Other” account and re-select the proper child account. If you discover the available child accounts do not lend themselves to posting this transaction, then you should create a new child account.

If you have questions or comments on the above, feel free to leave a comment and I’ll respond.

#ilm