Question

QuickBooks Online Question:

On the Chart of Accounts, why are the category and detail type selections important? To explain the category and detail types, use 3 accounts – one asset, one liability, and one expense account. Identify the Category Type, Detail Type, Name, Number and financial statement.

Here are some examples of accounts the textbook shows:

Detail Type Name Prepaid Expenses Prepaid Rent Number 123 Category Type Other Current Assets Other Current Liabilities Loan Payable Loan Payable 205 Income 403 Service/Fee Income Professional Fees *Name Number Category Type Other Current *Detail Type Other Current Assets Uncategorized Asset 133 Assets Income Uncategorized Income 455 Service/Fee Income (Yes to changing the detail type.) Travel Expenses 604 Expenses Conventions Uncategorized Expense Other Miscellaneous Service Cost 701

Answer 1

The category and detail type selections are very important so that the Transactions are recorded properly without any Errors.

In the 9 steps of accounting cycle the first step involves Identifying and Analyzing Business Transactions and then Recording it to the proper ledger accounts as Transactions are grouped and sorted to their respective accounts which then leads to the financial statements which are Balanced as per the double entry system of accounting.

For Example : Category Type Detail Type   Name     financial statement

1 Income Fees/ Charges Professional fees Income summary

2. Assets Fixed Assets Building Balance sheet

3 Expenses Indirect Expenses Electricity charges Income and expenses summary

4 Liability Unsecured loan Loan from relatives Balance sheet.