Accounting software's advantage is most of your financial information is all in one place. Most of the information you need will already be at your fingertips when you need it. It takes less time for an accountant to scan a general ledger and send you revisions than it does to sort and add papers to create your books from scratch, and if your accountant is like my firm, they charge by the hour. Another advantage is that in case of an audit, the information will still be accessible, and you'll just need to provide forms, contracts, receipts or cancelled checks to prove what's there.
Session I introduces basic QuickBooks navigation and file management. It assumes no prior knowledge of the program.
Session I introduces basic QuickBooks navigation and file management. It assumes no prior knowledge of the program.
Learning goals for this session:
- basic accounting principles for small business owners
- opening, closing, backing up, and restoring your company file
- navigating and using QB lists
- tracking time and mileage
- managing contacts
- accessing financial information
- working with your accountant/bookkeeper
Accounting Light
Even though this isn't an accounting class, you should know that everything in accounting revolves around one basic equation, the Basic Accounting Equation:
assets = liabilities + equity
It says your stake in your business (equity) reflects what you own (assets) versus what you owe (liabilities). Equity is influenced by what you contribute to, and draw from your company, and longer term, by your retained earnings (basically, income versus expenses). So, expanding the equation would look like:
assets = liabilities + capital contributed + beginning retained earnings - draws + revenue - expenses
This is the basis for every entry in the standard, double-entry system of record management. In this system, there's a "left" (debit) and "right" (credit) side to every transaction. The total lefts (debits) must equal total rights (credits), and they all balance out around this equation.
In an accounting transaction, assets, liabilities and equity increase or decrease depending on where they are in the equation. Assets increase on the debit side and decrease on the credit side. Liabilities and equity increase on the credit side and decrease on the debit side. Notice expenses and draws are negative on the right. They increase as debits in transactions but will be negative numbers on the right in the equation due to their direct relationship to retained earnings.
You pay $5000 down on a truck and finance $15,000. You decrease your cash asset by $5000, increase your loan liability by $15,000, and increase a $20,000 truck asset.
- debit truck asset for $20,000
- credit loan liability for $15,000
- credit cash for $5,000
- debit loan liability for principal amount paid
- debit interest expense for interest paid
- credit cash for total amount paid
But this isn't an accounting class, and other than a journal entry here and there from your accountant, you probably won't have to worry much about entering accounting transactions in the standard way, because QuickBooks does much of that for you behind the scenes. So, let's look at QuickBooks itself.
File Management
On startup, QB opens the last company file used, or lists recently used company file. If your file isn't listed:
- File > Open or Restore Company...
- Open a company file
- Restore a backup copy
- Restore a portable file
- Convert an Accountant's Copy Transfer File
- File > Open Previous Company
File Backups (File menu)
- Standard Backup: File > Backup / File > Create Copy
- regular data backups
- Portable Company File: file > Create Copy
- can't add/change data until returned
- Accountant's Copy: file > Accountant's Copy
- can add/change transactions after a cut-off date you set
- there are restrictions on what data can be added or changed while the files are split into user and accountant versions
Restoring Files
- File > Open or Restore
- Restoring backup or portable file requires restoration to clean directory
- Restoring accountant's changes appends to your working file
QuickBooks Lists
 |
| Accounts (ctrl-a), Memorized Transactions (ctrl-t) and Items (lists > item list) |
- Accounts Lists > Chart of Accounts (or ctrl-a): account types & uses
- Assets
- Cash & other short-term
- Long-Term
- Liabilities
- Credit cards & other short-term
- Long-Term
- Equity
- Capital Contributions - money you put into your business
- Draws - money you take out of the business for personal use
- Expenses & Other Expenses
- Expenses -- direct business expenses
- Other Expenses -- income taxes
- Income & Other Income
- Regular income -- gross receipts
- Other Income -- bank interest
- Items Lists > Item List: item types & uses; matching items to accounts
- generally used to match expense to corresponding income via invoiceable item
- fixed asset items
- Classes Lists > Class List (may need to activate in preferences)
- used primarily if you have different locations or divisions, or to separate different portions of your business from general and administrative functions, such as renovation, repairs, and g&a
Pass Throughs
You can associate expenses with particular customers - you can also choose to pass those expenses on to them.
- Mileage Company > Enter Vehicle Mileage
- Employee Time Employees > Enter Time
- Billed Items - check the Billable box to pass these through to your invoices
Contact Management
- Vendors > Vendor center
- Customers > Customer Center
- Employees > Employee Center
Accessing Financial Information
- Bank Register Banking > Use Register
- Report Center Reports > Report Center
Banking
Banking functions covered in this session include: recording deposits and matching funds received to those deposits; account reconciliation and review.
Deposits
Banking > Make Deposits: a list of undeposited funds should pop up. Select the applicable funds and continue to the next screen.
If you have not recorded payment receipts, or have funds included in the deposit that weren't on the first list, you can add them on the next screen.
Reconciliations
While you can add, delete and edit transactions once the reconciliation process has started, I recommend checking the transactions on your books and other statements (credit card & payroll vendors, for example) versus those on the bank statement beforehand, so that the reconciliation process is mostly just a matching process. If the numbers you have on your books don't match the bank statement, dig up the original transaction records. If your books are correct and the bank is wrong, enter the transaction the way the bank has it to do the reconciliation and then do a separate correcting journal entry to true up your books.
Banking > Reconcile > select account to reconcile in the drop-down, then fill in the Statement Date, Ending Balance, and dates and amounts of service charges and/or interest. For service charges, the account will be an Expense. For interest, the account will be Income. Click Continue.
The next screen lists deposits on one side and withdrawals on the other. Click transactions that match those on your bank statement. If there is a discrepancy in your ending balance, check total deposits and total withdrawals against those on your statement to narrow down where to look, then look for transactions matching the amount of the difference. When everything matches up, click the Reconcile button at the bottom of the window to finish the reconciliation.
Banking > Reconcile > select account to reconcile in the drop-down, then fill in the Statement Date, Ending Balance, and dates and amounts of service charges and/or interest. For service charges, the account will be an Expense. For interest, the account will be Income. Click Continue.
The next screen lists deposits on one side and withdrawals on the other. Click transactions that match those on your bank statement. If there is a discrepancy in your ending balance, check total deposits and total withdrawals against those on your statement to narrow down where to look, then look for transactions matching the amount of the difference. When everything matches up, click the Reconcile button at the bottom of the window to finish the reconciliation.
Reviewing reconciliations
QuickBooks generates two reconciliation reports. The Summary Report shows totals only for cleared and uncleared transactions. The Detail Report lists individual cleared and uncleared transactions. It’s always good to review uncleared transactions on the detail report, particularly if specific items haven’t cleared within a few months.
If, after you've checked on outstanding items, you find that they won't clear, make a reversing to offset the original entry dated the day after the last reconciliation. You can then clear the original entry and the adjusting entry against each-other during the next reconciliation.
Reversing entries: if the non-clearing transaction was a check, you can reverse it with a deposit of the same amount and account. If the non-clearing transaction was a deposit, reverse with a check in the same amount and account. In the memo line, make note of which transaction you're reversing (check #xxxx, deposit dated ddmmyy, etc).
If, after you've checked on outstanding items, you find that they won't clear, make a reversing to offset the original entry dated the day after the last reconciliation. You can then clear the original entry and the adjusting entry against each-other during the next reconciliation.
Reversing entries: if the non-clearing transaction was a check, you can reverse it with a deposit of the same amount and account. If the non-clearing transaction was a deposit, reverse with a check in the same amount and account. In the memo line, make note of which transaction you're reversing (check #xxxx, deposit dated ddmmyy, etc).
Working With Your Accountant
- Journal Entries: usually adjustments received from your accountant to enter into QuickBooks to properly reflect things like
- Before you delete that transaction! Some transactions need to be reversed in a subsequent period to prevent having to re-file financial statements or tax returns. To be sure the transaction in question isn't one of those, be sure to consult your bookkeeper or accountant first. With checks, you may want to void, rather than delete.
- Bank Statement Reconciliations While not on our original outline, we did discuss the importance of having each transaction you are reconciling be an exact match with your bank statement. The exception I mentioned was for businesses that record such a high volume of deposits, as with credit cards, that they are "batched". In this case, it is better to check the bank statement against your credit card merchant statements (and double-check those against your credit card sales) and do an adjusting entry to make the deposits balance. We also discussed reconciling reversing entries in a separate reconciliation so you can be sure deposits and withdrawals match your statement.
Question brought up during session
MS Project Integration
Brian Ebert, the certified QuickBooks Online consultant says there are two approaches to integrating Project and QB. "One is to shift to a non-Project project management module already integrated with QB. The other is to do a custom interface from Project itself to QB." I'm guessing that either approach will require some tweaking.
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