How do I encumber money to an expense account (i.e., I want to set aside money to the account that is used for paying salaries)

Equity and petty cash accounts can be established for the encumbered funds, treasurer. I'll explain the differences between these accounts and help you in creating them.

If the allocated funds are intended for an asset, you have the option to create an equity account to track the funds designated for payroll expenses. To achieve this, please follow the instructions outlined below:

1. Navigate to the Settings menu and select Chart of Accounts (Take me there).
2. Then, select New.
3. Next in the Account Type dropdown choose Equity.
4. From the Detail Type dropdown select Owner's Equity or Partner's Equity depending on your situation.
5. When finished, click Save and Close.

However, if funds need to be allocated for employee reimbursements, you can create a petty cash account. Petty cash is a small amount of cash a company keeps on hand to cover small expenses.

Here's how:

1. Go to Settings ⚙ and select Chart of accounts (Take me there).
2. Select New.
3. Click the Save account under dropdown and choose Bank Accounts.
4. In the Tax form section dropdown, pick Cash on hand.
5. Enter Petty Cash in the Account name field.
6. The opening balance will be created when you move money from the checking account by writing a check or transferring funds. If you already have money to use for petty cash, enter the amount in the Starting date and opening balance field and choose the as-of date.
7. Click Save.

Upon sharing the steps above, I still recommend reaching out to your accountant to further guide you in setting up these accounts. They can also advise you on how you can record and track the money correctly. If you don't have one, you can use our Find-an-Accountant tool to look for an expert near you.

Feel free to read these resources about managing your COA and understanding which accounts can be deleted, edited, or merged:

• Learn about the chart of accounts in QuickBooks Online
• Manage default and special accounts in your QuickBooks Online chart of accounts

Please keep in touch whenever you have other concerns about managing accounts or any QuickBooks-related concerns. I'll get back to you right away to assist you further.