Introduction:

QuickBooks Online uses various accounts to manage income and accounting information about your company. Below are the definition and differences between the mostly used accounts in QuickBooks Online.

Income Account

Income account is used to categorize money coming into your company.

In QuickBooks Online, each product/service you sell is represented as an item. Each item is associated with an income account. Each time you make a sale, you create an invoice or sales receipt that includes the items that you sold and the amount you sold them for. QuickBooks increases the balance in the appropriate income account to correspond to the value of the item(s) sold.

Expense Account

Expense account is used to categorize the money going out of your company.

To allocate expenses to the correct accounts, each time you enter or import a bill, you will be prompted to associate the charge with an expense account. Categorizing expenses correctly helps you get every tax deduction that you're entitled to. When it's time to do your taxes, QuickBooks shows you what your total expenses were for expenses that are tax-deductible—like mortgage interest or state taxes paid.

Inventory Asset Account:

This account tracks the current value of your inventory.

Most businesses use just one asset account for tracking inventory value. However, if it makes sense for you to track the value of different types of inventory in different asset accounts, you can create additional accounts of the type Other Current Asset and select them as you create new inventory items.

In QuickBooks Online, it automatically adds the Inventory Asset account to your Chart of Accounts the first time you create an inventory item. Each time you create an inventory part item or inventory assembly item, QuickBooks online pre-selects Inventory Asset as the asset account for the new item.

QuickBooks Online pulls information from the Inventory Asset account (and any other asset accounts you may create and assign to inventory items) to generate the Inventory Valuation Summary report and the Inventory Valuation Detail report.