Quickbooks is an immensely popular accounting tool among small-business owners for its affordability, user-friendliness, and comprehensive functionalities. However, government contractors face more specialized accounting requirements due to DCAA’s compliance standards. The question arises whether Quickbooks can be used as a government contractor and still remain DCAA compliant. The answer is yes, but it requires specific configuration and understanding of DCAA standards. Let’s explore further:

The Short Answer:

Yes, Quickbooks can be made DCAA compliant, but it is not automatically set up to meet DCAA standards. Some configurations are necessary to ensure DCAA compliance and pass the DCAA audit. This process may require expertise, so seeking professional assistance is advisable. Here’s a basic look at the key aspects that need to be configured:

Chart of Accounts:

The chart of accounts in Quickbooks must align with DCAA standards, ensuring proper separation of direct and indirect costs, accumulation of costs under general ledger control, exclusion of costs not allowable per FAR 31, and adherence to GAAP principles. This foundation is vital for building a DCAA-compliant accounting system.

Contract Data:

Quickbooks allows capturing billing and cost information on the customer level. However, DCAA mandates segregating this information by contract, not just by customer. Quickbooks must be configured to segregate contracts adequately for a successful DCAA audit.


Quickbooks may lack a fully DCAA-compliant timesheet system. All employees associated with a government contract, directly or indirectly, must maintain timesheets recording their daily working hours and specific work performed on the contract. Supplementing Quickbooks with a dedicated timekeeping system may be necessary for DCAA compliance.

Payroll Items:

For those using a third-party payroll service, a new payroll journal entry in Quickbooks should be developed to interface correctly with the labor distribution process and generate the labor distribution report. This report is essential for the DCAA audit, requiring proper setup of payroll items in Quickbooks.

Understanding the DCAA Compliance Checklist:

Various aspects of Quickbooks need to be configured, and specific processes must be followed to ensure DCAA compliance. Familiarity with the DCAA audit list (SF 1408) is crucial for evaluating your system correctly. If you don’t comprehend the items on the checklist, it indicates a potential issue with passing the DCAA audit.

Seek Professional Assistance:

While Quickbooks can be brought up to DCAA compliance standards, the process involves significant effort and a margin for error. To ensure a smooth DCAA audit and maintain proper accounting practices, it is highly recommended to work with a professional accountant who can offer expertise and guidance.

In conclusion, Quickbooks can be made DCAA compliant with the right configurations and expertise. Given the complexity and importance of DCAA compliance, partnering with a professional accountant ensures a higher chance of successfully passing the DCAA audit and maintaining impeccable accounting practices.