TIP 1: ENTRY OF DAILY SUMMARY SALES REPORT FROM CASH REGISTER OR OTHER DAILY SALES LOG
QuickBooks is often used as a financial accounting tool and is incorporated into the sales process when daily transactions are summarized and entered. Many businesses use cash registers or other daily sales logs and enter their sales into QuickBooks on a daily basis. It is relatively simple to create a Memorized Sales Receipt template to record daily sales. This process also allows for the tracking of departmental sales with or without the use of class tracking.
Be sure to use a Sales Receipt template instead of an Invoice template. Sales Receipts record the payment of the sales at the time that the sale is made, whereas an Invoice is the form for sales that will be paid sometime in the future.
1.Customize and rename a Sales Receipt template to Daily Sales Summary and memorize it for daily or weekly use.
2.Create a customer named Daily Sales or Cash Register.
3.You will also need to create several new items in your Item List. Create Non-inventory parts for the items you will be recording. The easiest is to use Total Taxable Sales and Total Non-Taxable Sales as the item names. However, you may want to track sales by departments so you would create items for Sales by Department 1, 2, 3, etc, setting the sales tax code appropriately for any that are nontaxable. Enter the appropriate Income account in the Account field of each item. These items and their complexity depend on the desired detail level for reporting.
4.If you need, create new items with the Item type set to Payment for each of your standard payment methods that will clear together. (MasterCard/Visa, Discover, Debit Card, American Express, Cash, Checks). In the setup of these Payment Items, select Group with other Undeposited Funds. This list and these procedures will vary with each company's merchant service company and deposit procedures, especially if the merchant service company deducts its fees from each deposit.
5.Create new items with the Item type set to Other Charge for Over/Shorts, payouts, and refunds.
6.Create a new Sales Tax Code named ADJ Summary as Taxable or Non-Taxable Sales.
7.ter the items in the same order that the cash register or your daily log produces in its daily printed report. Sales will be entered first; then payment methods; payouts, refunds, and finally any over/short amounts at the bottom. The Sales Items increase the Total shown at the bottom of the template; whereas your payments received will decrease the Total.
8.It is very easy to check for your Over/Short amount by looking at the Totalshown in the bottom right corner. If the cash drawer is short (not enough payments), the Total will show a positive number. If the cash drawer is over (too many payments) the number will be negative.
To correct a payment overage, offset your receipt with a positive adjustment. To correct a payment shortage, offset your receipt with a negative adjustment.
IMPORTANT NOTE: Make sure that your Sales Tax is correctly calculated. On occasion, the cash register and QuickBooks sales tax amounts have been set differentlyperhaps off by a fraction of a percentage. The Sales Tax Total at the bottom of the Daily Summary will show a discrepancy immediately.
Whereas Payments will post to Undeposited Funds. Make sure that the preference to Use Undeposited Funds as a Default Deposit to Account is enabled. All payments, regardless of the type, are now in Undeposited Funds waiting for you to direct them to the appropriate account when you Make a Deposit.
9. Record Deposits. If you deposit cash and checks together on the same deposit slip, select those two payment types and Deposit to the appropriate Bank account. Create separate Deposits for credit card deposits as they are batched into the bank account. They are shown separately from your cash and checks deposit on the bank statement. Most merchant services account batches Visa and MasterCard transactions together, so combine them into one Deposit.
Depending on how your merchant service fees are calculated and collected, you may wish to enter an estimate of the fees for them on the Make Deposits window. This keeps your bank balance from being overstated while waiting for the monthly statement to reconcile. Some merchant service accounts provide detailed information regarding the fees charged to each These estimates may be edited when you reconcile; or you could create an adjusting entry for the difference in total fees when you reconcile.
NOTE: You can usually call your merchant service provider and request that the fees are deducted in one large sum. It is preferable to have them removed once a month, but some clients want the deductions made from each daily transaction.
NOTE: If you use online banking to download the transactions as they occur, then you can enter the applicable fees upon downloading.
TIP 2: HIDE ITEM DETAILS ON SALES FORMS
There are four reasons to include an Item on a sales form:
To display the details of a sale on the printed Invoice for the Customer to see To track Item-level sales information for detailed sales reports
To reduce the stock status of the inventory parts (if applicable)
To calculate Sales Tax and to accrue the sales tax liability (if applicable)
The Primary Issue that Requires a Trick: If you need all or some of the tracking and calculating benefits of 2 through 4 above, but you do not want the customer to see the detail, there is no print setting to hide the data from your Customer. For example, a construction company may quote a flat rate amount to install a new door. They want the Customer to see includes the quoted price. However, for internal reporting and for inventory tracking the company needs to include all the Inventory parts used to replace the door as well as the number of hours worked.
The Strategy Behind the Trick: QuickBooks Group Items allow you to show or hide information on the printed Invoice. To take advantage of this option, all of the information will need to be contained in a Group Item.
Perform the following steps to hide Invoice detail by inserting it into a Group Item:
1. Create a new Other Charge Item . Type the words Enter Invoice Details Here in the description field and link the Item to any income Account. You will never leave this Item on a saved transaction so the income Account you select is irrelevant.
2. Create a new Group Item called Hidden Detail. Type the words Enter Sales Description Here in the description field.
Leave the box to Print Items in Group unchecked.
3.When recording an Estimate, a Sales Order, an Invoice, a Sales Receipt or a Credit Memo, start the data entry process by selecting the Hidden Group Item above.
4..CTRL+Insert to add additional blank lines within the group Item.
5.Enter parts and labor Items just as you would on any Invoice. If you need additional lines create more by pressing CTRL+Insert .CTRL+Delete.
6.Type a description for the sale that you want the Customer to see on the printed Invoice. Only the description for the Group Item will show on the printed Invoice so use that line.
7.Since the quoted price for the replacement of the door was $400, you need to edit the amounts for the labor and parts as appropriate. You can adjust the margin for both the material and the labor, or you can adjust the amount of labor or materials only. Either way, you need to make the total of the group agree to the quoted price. Each business will decide the best option for the way they want to track margins on materials and labor.
NOTE: Some QuickBooks users will insert an Other Charge type Item into the Group Item and will enter a positive or negative number on the separate line to make the group price agree to the quoted price. However, doing so is not the best way to track the margins for the actual labor and materials you sell. Instead, the margins will all post to this separate Other Charge type Item on reports like Sales by Item Summary and Sales by Item Detail.
When you print the Invoice, the Customer sees only the Description and the sales amount.
NOTE: If you use a hidden Item to Invoice a Customer based on a flat rate quote, you may prefer to set the Item column, Quantity column and Rate column so they do not print. If you do print those Invoice. If you are using this method to hide detailed Item information because of a flat rate price, you should never need to print a quantity and rate for the Customer.
TIP 3: REPURPOSE QUICKBOOKS FIELDS AND LISTS
Many QuickBooks users need to combine the standard fields in the QuickBooks program with one or more custom fields. In QuickBooks you can add custom fields to the Customer, Vendor, Employee and Item setup windows and have that information automatically populate on QuickBooks sales forms and Purchase Orders.
The Primary Issue that Requires a Trick: When you create custom reports based on custom field information, the reports could lose integrity if each user does not use the exact wording you used when filtering the custom report. For example, if a veterinary office uses a custom Customer field called Pet Type, they could include the Pet Type field on a customized Invoice template and then filter sales reports for Customers with certain types of pets.
However, since the Pet Type field is a text field, the report could lose integrity if a user misspelled the pet type (e.g. Parott instead of Parrot).
Also, the text-only custom field does not allow you to filter for multiple selections on the same report.
The Strategy Behind the Trick: The propensity to misspell custom field information would be eliminated if the user selected the pet type from a drop down menu. Since QuickBooks custom fields do not allow you to create a drop down menu with a corresponding list, you can alternatively repurpose fields that already contain a drop down menu supported by a list.
The most popular field to repurpose is the Ship Via field and corresponding list. It has drop down capabilities and you can easily replace the Ship Via list with a Customer custom field. However, for the choice of any list to be logical the information you need to track would have to be:
Broader in choices: For example, if you use two different shipping carriers and 15 different pet types, using the Ship Via list to track pet types would be a better use of the list, or
More Significant Reporting Criteria: For example, if a report showing the sales by pet type is a more important management report than sales by shipping carrier, using the Ship Via list to track pet types would be a better use of the list.
Other lists that you might consider re-purposing so you can support your custom field with a list and drop down menu are:
The Class List: This list is designed beautifully for this Trick. QuickBooks built a very powerful custom field called Class into almost every window in the program. It is a very powerful tracking tool that you can customize for use in almost any business model. Because the Class field is so global and powerful, you want to use this field to track the most important management criteria. However, this Trick assumes the Class List is already in use and since it is not advisable to use the Class List to track two different wholly unrelated types of information, you need to find another list.
NOTE: You cannot set a default Class in the Customer setup window. You have to select the Class as you record each sale, making proper training of your staff a vital step.
Sales Rep List: You can only include three characters on the Sales Rep List drop down menu, but those three letters can be codes representing information. For example, you could use the etc.
NOTE: If you use the Sales Rep list to track information, you will have to setup a name on the Other Names list as well. The Sales Rep could be the three letter code and the name on the Other Names list could be the complete word.
NOTE: You can have only one Sales Rep per sale.
Customer Type: You can segregate Customers into different types based on the type of pet they own. However, consider that you can have only one Customer type per Customer record. If the Customer has two different types of pets you cannot override the Customer type in the
Note: You can filter reports based on the Customer type, but you cannot make the Customer type display on printed sales forms.
Job Type: For Customers with more than one pet type, you can create a Job for each pet type. For example, John Smith could be the Customer and John Smith:Dog and John Smith:Cat could be the different pets. You can then assign the Job type: Dog and the Job type:Cat to each of the Jobs. For that matter, a Veterinarian could use Jobs for all of the Customers, where the Job is the name of the pet. For example: John Smith:Fido with a Job type: Dog
Note: You can filter reports based on the Job type, but you cannot get the Job type to show on printed sales forms. You can display the Job name on the Invoice by adding a Project field, but you cannot display the Job type.
Terms List: You can only use the Terms list to track custom field information if you do not want QuickBooks to age any receivables or payables. Therefore, this field only works for the trick if your client records Sales Receipts for sales and uses Checks and Credit Card Charges (no Bill Payments) to pay Bills. If you will ever potentially use Invoices and/or Bills in the future, you should avoid the use of this list. This list is perhaps a last resort option.
Ship Via List: As described above, the Ship Via list is perhaps the best field to repurpose because you can include the entire pet type on the sales form (unlike the abbreviated Sales Rep heavily used as other lists and if you do need to track the shipping carrier you can do so with a Customer custom field.
Note: There is only one drawback to repurposing the Ship Via field. You cannot set a default entry for the Ship Via list in the Customer setup window. You have to select the Pet Type from the drop down menu for each and every sale.
Perform the following steps to repurpose a list and to include the information on sales reports and sales forms.
NOTE: This example will use the Ship Via list but the steps work the same for all lists except the Customer type and Job type. For the Customer type and Job type you simply type the information into the Customer or Job setup window.
1.Open the list to be repurposed from the Lists drop down menu --> Customer and Vendor Profile Lists, (in this example: the Ship Via List.)
2.If the list contains information perhaps because QuickBooks automatically populated the list with information delete the list entries. If the list entries cannot be deleted because they are included in a transaction or are linked to another list, make them inactive.
3. Populate the list with the information to be tracked.
4.Rename the Ship Via list using the Forms Template Customization window. Make sure the list at least shows on the screen. Optionally the list information can be printed as well. The Layout Designer should be used to position the field where desired on the printed Invoice.
5.Select the Pet Type on each Sales Form as it is recorded.
TIP 4: CLEARING UNDEPOSITED FUNDS FROM MULTIPLE OR PREVIOUS YEARS
QuickBooks uses the Undeposited Funds account to hold payments and receipts until you are ready to Deposit them into your Bank account. It is one of the most misunderstood accounts in QuickBooks; and one that will make your life much simplerwhen used correctly.
QuickBooks provides two ways to deposit Sales Receipts and Payments received. One way is to post Sales Receipts and Payments to the Bank account on the actual transaction. The second choice is to collect the receipts and payments in Undeposited Funds; then ultimately make the Deposit to Bank account. The first method works fine as long as you make a deposit to the bank every time that you process a payment or receipt. However, most businesses collect a number of payments prior to creating one deposit slip for the bank. Often these payments and receipts are kept in a blue bank bag or the cash drawer. Consider your Undeposited Funds account to be what is in the blue bank bag or drawer.
When we use the Undeposited Funds account properly in QuickBooks, a deposit is entered with multiple items included. Upon reconciling the bank statement, the deposit in QuickBooks is exactly the same as the Deposit taken to the bank. Undeposited Funds shows on your Balance Sheet as a current asset. When you make the deposit, those funds are transferred to the bank balance.
The Primary Issue that Requires a Trick: Unfortunately, some users do not realize how the program is intended to work and manually enter a Deposit transaction to the Bank account in addition to the Sales Receipt or Receive Payments featureswithout ever using the Record Deposits feature. This allows Undeposited Funds to accumulate for months, if not years; and the Income and Assets are overstated for those periods.
What NOT to do: It is absolutely essential to clear the Undeposited Funds account to have accurate financial reports; however, it is important to do so properly. Some online forums offer a suggestion to delete the payment, thus deleting it from your Undeposited Funds. Unfortunately, this approach leaves an
Another suggestion is to make the Deposit; then delete/void the original deposit. This is difficult and time consuming as you must track each one individually. You will also be voiding/deleting reconciled deposits in your Bank accounts which can lead to multiple errors in reconciling the account.
The Strategy Behind the Trick: The used properly is to use the Make/Record Deposits window to eliminate the duplication of income. Record Deposits is the term used on the Home Page icon. Make Deposits is the term used in the drop down menu under banking. Perform the following steps to record a Deposit and clear the Undeposited Funds account when the feature has not been used:
1.From the Banking menu, select Make Deposits. QuickBooks displays a list of all the items to be deposited.
2.Click the Select All button and then OK.
3.Scroll down to the first blank line under the last line item on the Deposit screen.
4.In the From Account column, enter the Income account to which the deposits were originally
posted, and then enter in the Amount column the total of the deposit as a negative value.
After entering this line item, the total Deposit amount is zero, and the overstated income has been reduced.
For example, if deposits have been posted manually to Design Income, the correcting Deposit entry will reflect Design Income in the From Account column with a negative value. This reduces the Income account properly. With a zero amount on the deposit, the Bank account balance is not affected. You can include as many items as you need on one Depositif they all lead to the same Income account. You will need to clear the $0 deposit(s) during the next bank reconciliation.
If multiple Income accounts are affected, you may wish to make several Deposits so that you can adjust each Income account properly. Or, you can make one entry and use multiple negative line items to different income accounts.
A serious challenge arises when a user has not only months, but years of accumulated Undeposited Funds. Income has been doubled for those periods, and the Assets on the Balance Sheet are overstated by the same amount in Undeposited Funds.
To remove multiple years of Undeposited Funds, we are going to make very similar Deposit entries with a couple of major changes. Each year requires its own Deposit, and it needs to be dated with the ending date for that year. For instance, we will create a Deposit for 12/31/x06, x07, x08, etc. until all the items in Undeposited Funds have been cleared. However, instead of the negative amount posting to an Income account, it must be posted to Retained Earnings.
When making an entry for each year, you can Sort payments in the Deposit Window by Date or Payment Method. This feature truly simplifies the process.
At the end of each fiscal year, income and expense accounts close to Retained Earnings. Therefore, when we are adjusting Income deposits for previous years, we must post to the Retained Earnings to Be sure to see Tip 9 with discussion of tracking changes to Retained Earnings. In some cases, if the changes are material, the business owner must consider whether to file amended income tax returns. New reports need to be generated for those years and reviewed by a tax professional.
Because of the potential for serious consequences, it is imperative to use Undeposited Funds properly and to make sure that it is cleared each time a deposit is made to the bank. Issues with Undeposited Funds should be a red flag that there may be additional problems with the way QuickBooks is being used. Tackle this issue immediately, making sure to fix it as soon as you see it.
TIP 5: TRACKING OWNER-PAID BUSINESS EXPENSES
The Primary Issue that Requires a Trick: Owners often purchase inventory and pay vendors with their own money instead of with the business funds. It is important to encourage business owners to strictly separate their business and personal funds, and to obtain separate business credit cards and bank accounts for purchases. unting professionals need to implement strict accounting procedures to ensure accurate records since it is typically unacceptable to add the owner's personal checking or credit card accounts to the Chart of Accounts.
Many accounting professionals will use journal entries to enter these amounts as either loan payable to the owner, or as equity investmentsdepending on the business. However, journal entries do not allow for Inventory Items to be purchased or for more than one Accounts Payable vendor to be paid with This tip shows a way to easily account for these purchases without an extraordinary number of journal entries.
The Strategy behind the Trick: Since QuickBooks only allows a bill to be paid with a Check or a Credit Card, creating a new account to track owner-paid expenses is the best way to treat all these purchases consistently.
Perform the following steps to implement these procedures.
1.Create a new Credit Card account named Purchases by Owner.
2.When paying a vendor's bill with personal funds, use this new credit card to pay the bill as if it was any other company credit card.
OR
When entering expenses paid with personal funds but not tracked on a Bill, use the Enter Credit Card Charges screen (or the new account's register) to track these charges.
3. By using this account to record purchases made by the business owner with personal funds, we are able to track the total amount purchased (and reimbursed) throughout the year.
This account is displayed in the Liabilities section of the Balance Sheet.
4. At the end of month, quarter, or fiscal year, this account may be adjusted by transferring the -term liability of your choosing. The balance may also be left as an outstanding balance in the credit card account.
5. Reimbursements can be made to the owner by writing a check payable to the owner, using this new account on the Expense tab of the check. Be sure to consult with an accounting/tax professional to determine how they want this displayed.
When reading our upcoming discussion regarding the use of an Adjusting Journal Entries bank account, you might be tempted to use a bank account and Check to make these entries in QuickBooks. Although a check allows for the purchase of items and expenses, thus posting properly to Inventory, it is not the preferable method to handle these transactions for two reasons. First, Bills and Items Received via Purchase Order should be paid using the Pay Bills screen. Second, and more importantly, if a bank account is used for these purchases, the Balance Sheet carries a negative balance in the Assets section until an adjusting entry is made. Therefore, it is advised to use a credit card account to track these purchases as a liability on the Balance Sheet.
TIP 6: MISSING AND DUPLICATE INVOICE REPORT
It is important to assign a unique Invoice number to each Invoice you send to your customers. This invoice and also helps you to assign the payment from the customer to the correct account and invoice.
The Primary Issue that Requires a Trick: Invoice number duplications and numbering sequence gaps (missing numbers) are important for any small business to quickly locate because it could indicate data entry errors or fraud in some cases. Gaps in invoice numbers can be created when an invoice is deleted and duplicates occur when invoice numbers are entered or changed manually. QuickBooks includes a report that allows you to quickly locate missing and duplicate Check numbers but not missing Invoice numbers.
The Strategy Behind the Trick: Since QuickBooks has a report programmed to show you missing and duplicate Check numbers, modifying the existing report to show missing and duplicate invoice numbers is the best way to get the information you need.
Perform the following Steps to create a Missing and Duplicate Invoice Number report.
1.Create a Missing Checks report by selecting the Reports menu, selecting Banking and then
selecting Missing Checks.
2.Enter Accounts Receivable in the Account field instead of a bank Account.
3. QuickBooks creates a report of Invoices in numerical order and the report notes any missing and/or duplicate Invoice numbers. Modify the report and change the title of the report; then memorize the report for future use. When you memorize reports, the report template is created, but the dates are not memorized. You should only have one Missing Invoice Report Template in your Memorized Report List
TIP 7: TYING THE P&L BY JOB REPORT TO THE P&L
The Profit & Loss by Job report shows all of the income and expenses you have assigned to Jobs on Checks, Bills, Invoices and other transactions, and it will not tie to the Profit & Loss report unless every transaction posted to income and expense refers to a Customer or Job.
The Primary Issue that Requires a Trick: If you do not assign every transaction posted to income and expense to a Customer or Job, QuickBooks does not display the income or expense on the Profit & Loss by Job report. This causes the Profit & Loss by Job report to show different totals than the Profit & Loss report. For businesses focused on job costing and job profitability it is important for these two reports to agree.
Some businesses are only interested in making the Income and Cost of Goods Sold agree on the Profit & Loss by Job and the Profit & Loss reports. This tip section assumes that you want all of the balances on these two reports to tie, including operating expenses.
The Strategies Behind the Trick: If you use the P&L by Job report in your company, create a Customer name called Overhead. Use the Overhead Job name for expenses that are not tied to a specific Job like Office Supplies and Administrative Salaries. By doing so it is much easier to identify the incorrectly entered transactions with no Job name.
You will need to edit the P&L by Job if you want to:
Locate transactions that should have been applied to Jobs AND edit them so they include the Job information.
Include overhead transactions that you never assigned to Jobs so that the total of the P&L by Job report will agree to the P&L.
To create reports that will help you edit the transactions, you need to total the Profit & Loss by filtering criteria that shows the columns for the Customers/Jobs and also includes transactions not posted to a Customer or Job.
OPTION 1: USE THE EXPENSES NOT ASSIGNED TO JOBS REPORT
QuickBooks Accountant Edition, QuickBooks Premier: Contractor Edition, and QuickBooks Enterprise Solutions: Contractor Edition include a report called Expenses Not Assigned to Jobs. You cannot create this report if you use QuickBooks Pro or QuickBooks Premier for any edition other than Contractor Edition and the Accountant Edition. If this is the case, use Option 2 below. By default this report includes purchase forms only (e.g. Bills, Check, Credit Card Charges). If you need to track income not assigned to jobs as well, you can modify this report as follows to show income as well:
1.Remove the Transaction Type filter
2.Filter the report by account for All Income/Expense Accounts.
NOTE: Even if the modified Expenses not Assigned to Jobs report shows no activity, you can still show a discrepancy between the Profit & Loss by Job and the Profit & Loss. There are two possible reasons:
If the top line of a Journal Entry posts to income, cost of goods sold or expense type accounts and if that top line does not include a Customer:Job name, the transaction will not show on the modified Expenses not Assigned to Jobs report. If this post to income, cost of goods sold or expenses is on the second or subsequent line of the Journal Entry the post will show on this report. You can use Option 2 below to find these Journal Entries.
If Paychecks do not include job information, the payroll expenses not assigned to jobs (e.g., gross wages, payroll taxes, SUTA expense, FUTA expense, etc.) will not show on this report. As a result, Net Income on the Profit & Loss by Job may be significantly different from Net Income on the Profit & Loss by Job. You can use Option 2 below to find these transactions.
OPTION 2: USE A MODIFIED PROFIT & LOSS REPORT
Perform the following steps to create a Profit & Loss report showing transactions not assigned to jobs:
1.Create a Profit & Loss Standard report.
2.From the Columns Option at the top of the Report Window, select Customer:Job.
3.QuickBooks displays a No name column in the far right column of the report, just to the left of the total. Double-click each amount in the No name column and correctly assign the transaction(s) to a Customer:Job name. Each incorrectly posted transaction needs to be edited and corrected to flow to the proper Customer:Job.
NOTEer or job name. The steps below address this issue.
4.From the Columns Option at the top of the Report Window, select Payee.
5.Filter the report by Name for All Vendors.
NOTE: When you total by Payee, transactions without a Job name show by the Vendor record you used on the those transactions not assigned to a job name. Though it is counter-intuitive, when you assign a job name, QuickBooks will remove the amount from this report even though the report is totaled by Payee instead of Customer:Job.
6. Double-click on amount that shows in the Payee columns and assign the appropriate Customer or Job name. If the expense is overhead, use a Customer called Overhead.
NOTE: Discounts on Bill Payments do not allow you to assign a Job. To assign these discounts to the applicable Job, create a Journal Entry to Credit the Discounts Taken contra income Account or to debit the Discounts Taken Cost of Goods Sold Account (depending on which Account type you use). Enter this entry on the top line of the Journal Entry and do not include a Job name. Then, use the same Discounts Taken on the second line of the Journal Entry and enter the applicable Jobs (or overhead). The expense will still show in the show in the appropriate Job column.
TIP: If there are numerous transactions not assigned to Jobs, you could use the Journal Entry method in the note above to assign balances to various Jobs as of the adjustment date (e.g. 12/31). However, it is best to edit each individual transaction to include a Customer or Job name so the Job cost reports will be accurate throughout the y these transactions to Jobs.
7.Filter the report by name for All Other Names, and repeat Step 6 above for any amounts that show on the report.
8.Filter the report by name for All Employees and repeat Step 6 above for any amounts that show on the report.
TIP: Payroll Expenses like Gross Wages, Payroll Taxes, Federal Unemployment and State Unemployment will show in employee columns if the Paycheck does not include a Customer or Job name. The most common cause is administrative salaries for administrative employees for whom you do not use timesheet detail.
9. After editing all transactions without a Job name, total the report by Job and confirm that the total of the report agrees to the Profit & Loss.
TIP 8: RESTRICTING CHANGES TO THE CHART OF ACCOUNTS BY USING THE 1099 SETUP
The Primary Issue that Requires a Trick: Any user with security authorization to create or modify t of Accounts. Although these changes are made with the best of intentions, the results are not always optimal.
The Strategy Behind the Trick: You can prevent unapproved changes to the Chart of Accounts by using the 1099 Company Preference. Users with full rights or the administrator rights can still make changes. By following this 1099 setup, users will be unable to delete an account or change the type of account for any accounts you choose. Likewise, they will be unable to merge accounts. When trouble-shooting this issue, you can reverse a change in account type, however, merging accounts is permanent.
affect all previous years.
Use the 1099 setup feature by selecting the Edit menu, selecting Preferences, selecting Tax:1099, and then selecting the Company tab. QuickBooks displays the list of possible 1099 categories. Select a 1099 Category that you will not be using in the normal course of business. For instance, if you never send Select the middle column, with the heading titled Account. Click on the drop-down arrow next to the category you have chosen, QuickBooks displays the Chart of Accounts. Select Multiple Accounts and then manually selec
NOTE: You may only assign an account to one 1099 Box. If an account has already been added in your 1099 setup, then that account is already protected.
Inactive Accounts do not show up in this selection window. You do not need to select Accounts Receivable and Accounts Payable as these accounts do not allow changes of types and/or merging. If a new account is added that we want to protect, then it has to also be added to the multiple accounts selected in the 1099 Preferences.
NOTE: If you would ever like to merge an account that is protected using this method, you can simply return to this preference screen and deselect those specific accounts prior to making any changes.
TIP 9: TRACKING CHANGES MADE TO PRIOR YEARS USING YOUR RETAINED EARNINGS ACCOUNT
Retained Earnings account. QuickBooks adjusts income and expense accounts at year-end to zero them. The Net Income shown as of 12/31/X1 will transfer into Retained Earnings as the date rolls to 1/1/X2. Retained Earnings is the account used to accumulate Net Income and Net Loss over the life of the business. Each new fiscal year starts with a net income of zero.
The Primary Issue that Requires a Trick: This automatic close is a soft close and does not prevent accounting changes to made to the file. These changes can be made appropriately by professionals, but they are many times created improperly by inexperienced users. It is a recommended practice to use the Closing Date and Password feature to prevent unauthorized changes to transactions in previously closed periods. However, the Closing Date does not prevent merging accounts (see discussion in Chapter X), and often the Closing Date is not set.
The Strategy Behind the Trick: The name of the Retained Earnings account that is used automatically by QuickBooks can be changed and a new account added. Any unauthorized changes will then be clearly visible in the Balance Sheet.
Use the Retained Earnings account to easily track changes made to prior years using the following steps:
1.Change the name of the existing Retained Earnings account to Retained Earnings Clearing.
2.Create a new Equity account called Retained Earnings.
3.After year-end adjusting entries are made create a Balance Sheet report for the year (accrual basis).
4.Enter a journal entry for the Net Income. If you are posting a Net Loss, then your debit and credit should be reversed when you make the journal entry.
When you post to Retained Earnings in QuickBooks a message informs you that Retained Earnings is normally automatically generated. This is a work-around trick that allows you to post directly to R/E.
On the end-of-year Balance Sheet, Net Income and Retained Earnings Clearing will cancel.
If an unauthorized change is made which affects the previous closed years, QuickBooks will show the change as a balance in the Retained Earnings Clearing accountin the current period. You can easily review these changes.
NOTE: The Closing Date Exception Report is meant to assist accounting professionals locate changes made to the QuickBooks file, however, it only works when a Closing Date is used.
TIP 10: ADJUSTING THE GL BY ITEM AND ACCOUNT
QuickBooks reports are largely based on two different lists Accounts and Items. QuickBooks uses the Chart of Accounts and the Trial Balance balances to generate financial reports like the Balance Sheet and Profit & Loss. QuickBooks also uses the Chart of Accounts for the General Ledger and other standard financial reports like those found in any accounting software product.
QuickBooks uses Items to create sales reports like the Sales by Item Summary report and to calculate taxable and non-taxable sales on sales tax reports. For accounting professionals (e.g. tax preparers and CPAs) the interest is mostly related to the Chart of Accounts and the Account balances that QuickBooks uses to create standard financial reports. However, most small businesses lean heavily on the Item- based reports to manage their businesses and also to file sales tax returns.
When entering adjustments to the General Ledger, you will many times need to also adjust one or more Items on the Item list as well. Otherwise the Account-based reports will not tie to the Item-based reports.
The first step is to determine if you can adjust the Trial Balance only using a Journal Entry or if your adjustment should also include an adjustment for an Item from the Item List.
There is a simple litmus test for this determination. If the Account you are adjusting is included in the Item setup window with one or more Items, you must adjust both the Item and the associated GL Account. GL Accounts with an Income and/or Cost of Goods Sold Account type are usually linked to one or more Items. Balance Sheet Accounts, Expense Accounts, Other Expense Accounts and Other Income Accounts are usually not associated with an Item. However, it is always prudent to check before you enter any Journal Entries.
The Primary Issue that Requires a Trick: The Journal Entry window does not have an Item column. You cannot use a Journal Entry to adjust both the Account and the associated Item(s).
The Strategy Behind the Trick: Since the Journal Entry window does not include an Item column, the trick is to use another form template in QuickBooks that does include an Item column. Since every transaction in QuickBooks posts debits and credits to the General Ledger you can repurpose any form template in QuickBooks to act as a de facto Journal Entry.
DO YOU NEED TO ADJUST BOTH THE ACCOUNT AND AN ITEM?
Perform the following steps to determine if an Account is linked to one or more Items and to adjust the Account and Item as necessary.
1.Create an Item Listing report.
2.Filter the report to include both active and inactive items.
3.Filter the report by Account for the Account(s) you need to adjust. If the report shows any Items, you know the Account you are adjusting is linked to the Item list.
NOTE: Even if the Account is linked to one or more Items you may technically be able to use a Journal Entry if:
You have not used any of the Items linked to the Account you want to adjust in either the current fiscal year or in the year that you are adjusting, and
You do not intend to the use the Item(s) in the future, and
You do not intend to link the account to a new item in the future
ENTERING ADJUSTING ENTRIES THAT IMPACT ITEMS
Since you cannot use a Journal Entry to adjust the Item, you need to post the same debit(s) and credit(s) to the General Ledger that you would have entered on the Journal Entry, but you have to use another QuickBooks template form that allows you to adjust one or more Items as well. You will use different forms in different circumstances.
NOTE: Adjusting both the Item and the Account requires the repurposing of transactions to serve as Journal Entries and there are several steps involved. However, if you first set up the additional Accounts and Items, the process to adjust both the Item and the Account is not as time consuming. These additional Accounts, Items and form templates need to be created by you.
Adjusting Income Accounts
When you adjust Income, you almost always need to adjust one or more Items. Items are used most often to record detailed sales information on Invoices, Sales Receipts and Credit Memos. As a result, Income Accounts are almost always included in at least one Item on the Item list.
For purposes of this example, the company has an existing Non-Inventory Part Item called "Counter" which is mapped to the Materials Income account for sales transactions. The accounting professional intends to make the following year-end adjustment to the General Ledger:
-Inventory Part Item:
1. Create an Other Current Asset Account called Adjustment Clearing.
NOTE: Although you can make the clearing Account any type of Account you wish, it is best to use a Balance Sheet Account type so you can see all of the account details using the account register and easily verify that the account balance is zero.
2.Create an Other Charge Item called Adjustment Clearing and link this Item to the Adjustment Clearing Account you created in Step 1 above.
3.Optional and Highly Recommended Create a Bank Type Account called Journal Entries.
NOTE: This Journal Entries Bank Account is required when you adjust Cost of Goods Sold and/or Expense Accounts that are linked to Items. See the section entitled Adjusting Cost of Goods Sold and Expense Accounts later in this section for more information.
TIP: It is best to include this Journal Entries Account on every adjustment you enter, regardless of the form you use including the Make General Journal Entry window.
4. Optional and Highly Recommended Create an Other Charge Item called Journal Entries and link it to the Journal Entries Bank Account.
5. Open the Enter Sales Receipt window and enter the Items and Accounts. Make sure the total amount of the Sales Receipt is 0.00.
Enter the applicable class as you would do on the Enter Journal Entry Window.
Enter the number of the new Journal Entry that you will create.
6. Save the Sales Receipt. Then, reopen the Sales Receipt, and with it displayed, press CTRL+Y to create a Transaction Journal to confirm the correct GL postings and to retain a copy of the adjustment for your files.
7. If the client uses Sales Receipts, make sure to reset the numerical sequence after you save this transaction. Determine the Sales No. that should be next in the sequence and enter it. This will reset the automatic numbering system.
NOTE: The Sales Receipt posts the Journal Entry. Notice the line with the credit to Income shows both the Materials Income Account and the Counter Non-Inventory Part Item. In terms of the impact on QuickBooks reports, the Sales Receipt is a Journal Entry with an Item column.
NOTE: For on-going use, you can create a new Sales Receipt template and title the printed form Journal Entry. This allows you to print these Journal Entries and store them with the corresponding back-end journal entry that QuickBooks will generate for you (see Step 6 above).
8. Create a regular Journal Entry to clear the balance in the Adjustment Clearing Account and to adjust other GL Accounts that are not linked to Items.
WARNING: Do not use Inventory Items with the method in the steps above because if you use an Inventory Item on the Sales R quantity in the Quantity column), and QuickBooks will also adjust the Inventory Asset and Cost of Goods Sold accounts. If you need to adjust an Income Account that is linked to one or more Inventory Items, create an Item called Income Adjustment and link that Item to the Income Account you need to adjust. Use this Income Adjustment item to then make the adjustment necessary.
NOTE: If you need to use more than one class on the Sales Receipt used for such adjustments, edit the template to include a Class column.
column and impacts both the Account-based and Item-based reports.
NOTE: If you need to adjust both income and sales tax payable, you can make the Counter Item taxable. Make sure that you increase the amount on the Adjustment Clearing line to zero the Sales Receipt.
Adjusting Cost of Goods Sold and Expense Accounts
For this example, the accounting professional intends to make the following year-end adjustment to the General Ledger:
In the example above, the Job Materials Account (Cost of Goods Sold Type) is linked to several non- inventory parts (Flooring, Appliance, and Lighting), and the Job Materials (Expense Type) is not linked to any items.
1.Create a Bank type GL Account called Journal Entries.
2.Open the Write Checks window and enter the Journal Entries Bank Account in the Bank
Account field.
3.On the Item tab, select the non-inventory part Item or Items you wish to debit and enter the
amounts. For this example the total debits for all non-inventory parts is $6,000.00.
4.On the Expenses tab select the Tools and Machinery Account and enter a negative amount for $6,000 to zero the Check. The Tools and Machinery Expense Account is not linked to any Items so you should post to the Account only.
Note the JE number in the No. field
5. Save the Check. When you save the check, it is no longer displayed. Reopen it and with the Check displayed press CTRL+Y to create and print a Transaction Journal.
NOTE: Unlike the Sales Receipt, when you use a Check, there is no need to follow this with an additional Journal Entry. This is because the Expenses tab allows you to debit and/or credit Accounts directly as you would do on a Journal Entry.
NOTE: Since there are Item and Expense tabs on the Check, the Check window seems on the surface like the perfect alternative transaction for all types of Item/Account adjustments. However, the Check transaction affects the Account in the Cost field of the Item setup window, not the Account in the Income Account field. If an Item setup does not have a Cost field, the Check will impact the Account in the Income Account field. However, even though the Check would post to both the Item and the Income Account, the adjustment will not show on Item-based sales reports. For information to show on Item-based sales reports you must use a Sales Item on a sales form (Invoice, Sales Receipt or Credit Memo). So, to adjust the Account in the Income Account field, use a Sales Receipt as described on earlier and not with a check from the Journal Entries account..
WARNING: Do not use Inventory Items in the steps above. If you need to adjust a Cost of Goods Sold type GL on to enter a quantity in the Quantity column), and QuickBooks will also adjust Inventory Asset. Inventory quantities and value will be overstated and Cost of Goods Sold the Account you are trying to adjust will be unaffected.
The debit the Account and these Items.
Viewing a List of Adjustments
If you include a Journal Entry Bank Account line as recommended above for all types of adjustments (e.g. Sales Receipts, Credit Memos, Checks and Journal Entries), you can use the account register for the Journal Entries Bank Account to view a list of adjustments. You can also create a report of the Journal Entries.
Perform the following steps to create a General Journal that includes all of the transactions you used to
1.Include the Journal Entries Bank Account on every adjustment you enter, regardless of the form you use, as described above.
2.Use the Register for the Journal Entries Bank Account to review a list of the Journal Entries. Highlight any entries you want to view in more detail and click Edit Transaction to display the full transaction view.
3.Alternatively, you can run a Journal Report under Reports > Accountant & Taxes > Journal and filter on the Journal Entries Bank Account as the Account. Include splits. This will generate a report of all transactions booked to the Journal Entries Bank Account (effectively your Journal of Adjustments.) This is another reason to include the Journal Entries Bank Account on every adjustment entry you enter.
Courtesy of Inuit Academy:Top Ten QuickBooks Tips, Tricks and Techniques by Inuit Inc.
