(Why) Should I use account numbers in my QuickBooks company file?

QuickBooks, unlike some other accounting software, does not require you to assign numbers to your chart of accounts, and doesn't add them by default. I have no opinion whether your contracting business should use account numbers in QuickBooks. Your CPA may care, however, so check with her/him. If you decide for whatever reason to assign numbers to your chart of accounts, be sure to do it right.

First of all, the use of account numbers in QuickBooks is controlled by a Preference setting (Edit > Preferences… > Accounting > Company Preferences > Accounts > Use account numbers). Once you have checked this box, QuickBooks will add numbers to your existing accounts, and add a Number blank to the Add New Account and Edit Account screens. Now these numbers will show up in your Chart of Accounts list, in all Account fields (for example, when you are creating a new Item), and in Reports & Graphs.

You might notice that QuickBooks adds five-digit numbers, and if you are very observant you may notice one other thing: the first digit of the account number is tied to the type of account.

The number of digits is up to you; I've seen as few as three and as many as six. Just remember that you will want to leave room between the numbers to add new accounts, because they will be sorted on your QuickBooks reports by type of account and then by the number you assign. Five digits is probably enough for a small construction business chart of accounts.

As far as the first digit, it is standard in the United States to assign account numbers according to the following custom. My Google search yielded inconsistent results as to whether Generally Accepted Accounting Principles require this conventional numbering system, and remember I am not a CPA, so I have no official personal opinion on the subject.

Here's the QuickBooks account numbering system using five digits:

Non-Posting accounts in QuickBooks include Estimates and Purchase Orders, if you have enabled them in your Preferences. In non-QuickBooks world, you will see the 9xxxx accounts used for Income Taxes, and there are lots of variations on 6xxxx-8xxxx, but the above is standard in QuickBooks world, and that, after all, is where we live.