QuickBooks is a complete business accounting

Transcription

1 Quick Insights and Program Overview QuickBooks is a complete business accounting system designed to accommodate nearly two dozen types of industries, ranging from small servicebased firms to large retail and manufacturing companies. For each type of company, QuickBooks offers a preselected Chart of Accounts that will automatically set up most of the accounts necessary to run a particular enterprise. When you record a business transaction, QuickBooks instantly adjusts the balances of all affected accounts and can generate reports summarizing the updated financial information for your company at any time with a click of your mouse. QuickBooks offers several tools to help you organize and manage complex accounting data, including lists, items, registers, forms, and reports. This chapter provides an overview of these powerful program features. QuickBooks Program Philosophy and Design COPYRIGHTED MATERIAL QuickBooks is marketed as a program for small and home-based service and retail businesses. But this shouldn t lead you to believe that it is in any sense a program of limited scope or capability. QuickBooks is a powerful electronic accounting program that is adequate for the needs of many high-volume and sophisticated businesses. Nonaccountants who need to manage and record the day-to-day financial transactions of a business have helped create the program design. The Windows-based graphical user interface (GUI) makes 1 C H A P T E R In This Chapter The QuickBooks program philosophy and design The QuickBooks Chart of Accounts Registers the basic documentation file created by QuickBooks Lists the QuickBooks answer to database management Items the QuickBooks indexing system Reports for analysis and budgeting

2 4 Part I The QuickBooks System the processing of transactions intuitive. With QuickBooks, you can generate sophisticated reports even if you don t have any prior accounting experience. It s assumed, however, that these reports will be submitted to your CPA for review and income tax preparation. QuickBooks facilitates the preparation of income tax returns by maintaining accurate, readily available information that can be transferred directly to your tax return form, but it is not a tax preparation program. It is unlikely that QuickBooks will replace your accountant. It will, however, minimize the cost of professional services by enabling you to directly access financial information about your business without using your accountant as an intermediary. The QuickBooks Chart of Accounts: The Starting Point The framework for recording information about your business is the Chart of Accounts. Chart of Accounts refers to a complete list of all the accounts in which you record information about the activities of your business. Every business has its own customized Chart of Accounts. The types of accounts and their names vary, as does the type of information in each account. Some businesses maintain very detailed Charts of Accounts where many different accounts are used to track highly specific types of information (for example, sales or expenses associated with each type of product or service). Other businesses find it more convenient to maintain a chart with fewer, more general accounts that track less detail but that may also be easier to maintain. Accounting Jargon Accounts are named and identified according to their type for example, Office Expense, Payroll Tax Account equipment. Many businesses have a hundred or more accounts, which compose their Chart of Accounts. The topics of setting up and customizing your Chart of Accounts are discussed in Chapters 5 and 6. As business transactions are recorded, QuickBooks automatically adjusts the balances of all affected accounts. A register (discussed in the following section) contains a chronological list of all transactions affecting an account balance for a particular account. Each asset and liability account has its own register. Registers reflect what your business owns and what it owes. It is important to establish appropriate accounts for your business at the outset to ensure accurate and logical recording of information. Companies differ greatly as to their individual Chart of Accounts. There are three main types of enterprises service companies, retail companies, and manufacturing companies and understanding the differences between them provides insight as to the makeup of their individual Chart of Accounts. Service-based companies As the name indicates, service companies derive their revenue from fees charged for services such as consulting. Service companies often do not maintain any inventory accounts tracking goods on hand for use or sale to customers.

3 Chapter 1 Quick Insights and Program Overview 5 Similarly, service companies may not be required to pay sales tax. For example, a Chart of Accounts for an accounting firm, such as mine, generally has few or no inventory accounts and has no sales tax account. (There are exceptions for example, I may decide to maintain an inventory of copies of this book to press upon my clients.) Product-based companies Product-based companies include both retail and manufacturing companies. Retail companies Retail companies must maintain both sales tax accounts and inventory accounts reflecting goods for resale. Figure 1-1 is a Chart of Accounts for a retail business. Figure 1-1: This Chart of Accounts window for a retail business shows accounts to record inventory, sales discounts, cost of goods sold, and sales tax liability. Manufacturing companies Manufacturing companies derive revenue from manufacturing or producing goods for wholesale. Generally, these companies do not sell goods directly to the public, and thus they are not required to pay sales tax. QuickBooks Premier QuickBooks and QuickBooks Pro do not offer the extensive inventory costing and tracking capabilities needed by a large manufacturing plant. However, the QuickBooks Premier edition contains more extensive inventory-tracking features that allow larger manufacturing operations to track inventory components

4 6 Part I The QuickBooks System used in various phases of the manufacturing process and to build assemblies. This Premier version also allows you to assign minimum inventory reorder points to alert you when it s time to reorder. It also offers a special Manufacturing & Wholesale Chart of Accounts that is especially helpful in setting up manufacturing businesses. Creating Your Chart of Accounts Fortunately, with QuickBooks, you don t need to know very much about accounting to set up your Chart of Accounts. Most of the accounts will be automatically created when you create a new company using the dialog box shown in Figure 1-2. This dialog box appears on-screen the first time you open the QuickBooks program. Click here to begin creating a chart of accounts for your new company Figure 1-2: This screen appears, with a button for you to Create a New Company the first time you open QuickBooks. Click the Create a New Company button to begin the QuickBooks EasyStep Interview. This unique feature asks you questions about your business relevant to setting up your Chart of Accounts. The dialog box that appears to take you through the EasyStep Interview appears in Figure 1-3. Some standard accounts, such as Accounts Receivable, are automatically created for all new companies. Other accounts, such as sales tax or inventory accounts, are created as needed by your particular business based on your answers to the questions on the EasyStep Interview. In addition to saving time, the preselected standard charts offer the benefit of added professional expertise. Sophisticated accountants with specialized industry knowledge have developed each chart the same people who would normally charge you exorbitant hourly rates to come to your office and help you set up an accounting system.

5 Chapter 1 Quick Insights and Program Overview 7 Figure 1-3: The EasyStep interview prompts you for all information needed to set up your basic Chart of Accounts. Registers: Tracking Your Asset and Liability Accounts A register is a chronological list of transactions for each asset and liability account maintained by a company. Each asset and liability account has its own register. The register shows you all the transactions that affect the balance in the account. A QuickBooks register is conceptually identical to your checkbook register, which records the activity in your checking account. Asset and liability accounts, as their name implies, track the assets and liabilities of your company. In other words, they tell you what the company owns (including cash balances) and what it owes. Asset and liability accounts are reported on your company s balance sheet, as discussed in more detail in Chapters 28 and 29. By viewing the account register, you can review all the transactions that have affected the balance in the account since the beginning of the accounting period (the start date). For example, the window for your Accounts Receivable register will display information about invoices, customer payments, returns, finance charges, and credit memos (see Figure 1-4). QuickBooks automatically updates the account balance shown in the register after each accounts receivable transaction. Chapter 19 includes a detailed discussion of registers.

6 8 Part I The QuickBooks System Figure 1-4: This Accounts Receivable Register window reveals the transactions that affect the account and its current balance. In addition to viewing the information in a register, you may make adjustments to previously recorded transactions, directly record transactions, and void transactions. You can also generate useful reports from information contained in the register. Organizing with Lists Lists are the QuickBooks answer to database management. Using lists, you can easily maintain databases of customers, vendors, employees, and jobs. Figure 1-5 shows a list of vendors used by a QuickBooks company. All the list windows follow the same general format and have three important menu buttons located at the bottom for accessing drop-down menus. The first menu button is labeled with the same name as the list itself; in the case of Figure 1-5, the button is labeled Vendor. Use this button to update and change the list (such as add or delete a vendor) by clicking the button in the bottom left corner of the window. Use the second button, labeled Activities, to perform transactions related to the information on the list such as recording receipts, payments, and so on. Use the third button, labeled Reports, to access information about the entry (such as the contact information for vendors) and historical transactions that pertain to each list entry.

7 Chapter 1 Quick Insights and Program Overview 9 Figure 1-5: QuickBooks uses lists, such as this list of vendors, as a database management tool. Each list has three buttons that allow you to access pop-up menus for information and transactions related to each item on the list. Likewise, a Customer List contains historical and billing information about each customer, similar to a Rolodex or cabinet containing paper files on customers. Your Customer List might include, for example, names, addresses, and billing information. Similarly, an Employee List contains the names of personnel and all of the information necessary for preparing payroll checks and withholding payroll taxes. A Customer List can be used in conjunction with the QuickBooks mail merge feature to create a mailing list by clicking on the Reports button as shown in Figure 1-6. (These features are further discussed in Chapter 9.) Custom fields identify the specific information that will be maintained on each customer, employee, vendor, or job. You might, for example, decide to include these custom fields for each employee included on your list: Name Address Social Security number Date of birth Date of hire Job title Date of termination

8 10 Part I The QuickBooks System Customer reports can be used to create mailing lists Figure 1-6: The information maintained in a Customer List can be used to produce a mailing list for a sales promotion. You can add customers, vendors, and employees to the list by clicking the button that appears in the lower left corner of any of the list windows, as shown in Figure 1-7. This button is labeled Customer, Job, Employees, Vendor, and so forth, depending on which list you are using. You can easily add and customize the information maintained in each list by right-clicking a list item to access the pop-up menu shown in Figure 1-7. Chapter 8 explains how to create, edit, organize, and maintain lists. Additionally, Chapter 22 contains specific information about Employee Lists.

9 Chapter 1 Quick Insights and Program Overview 11 Figure 1-7: You can customize the columns of information maintained in your lists. Indexing with Items Items are the indexing system used for tracking the services and products that you regularly sell, resell, or purchase for use in your business. You can also use Items to standardize recurring calculations such as discounts or sales taxes imposed by various locales. When you are completing an invoice for a customer, you can quickly enter each service or product by accessing a drop-down menu. Each Item selected from the list contains additional information about the product. You can also access any applicable discounts or taxes from the Items menu. QuickBooks automatically calculates an amount due based on the cost of the Item and the quantity entered. Figure 1-8 is a list of Items maintained by a construction company. Chapter 10 explains the types and uses of QuickBooks Items. Figure 1-9 shows the window that appears when a sample item (a cabinet pull) is right-clicked from the list shown in Figure 1-8. When you choose an Item from a drop-down list accessed directly from the sales form, QuickBooks automatically enters all relevant descriptive information on the form. QuickBooks also uses previously entered information about the Item to automatically adjust the balances in the appropriate income, expense, and inventory accounts, which can be adjusted as shown in Figure 1-9.

10 12 Part I The QuickBooks System Figure 1-8: A sample list of items. Figure 1-9: This Edit window for cabinet pulls allows you to edit information for transactions in which this Item is used.

11 Chapter 1 Quick Insights and Program Overview 13 Reports and graphs, discussed in Chapter 30, can provide additional insight as to which service and product Items are most profitable for your business. Figure 1-10 shows a QuickReport for the Inventory Item, cabinet pulls, which is accessed by clicking the Reports button on the bottom of the Item screen and selecting QuickReport:Cabinet Pulls or by pressing Ctrl+Q. Figure 1-10: A sample QuickReport for an Item. Using Forms You can use QuickBooks to create custom forms for your business. The forms contain blanks to be filled in, such as for names or inventory. Pop-up menus will prompt you for the information to be entered on the form. For example, the Item blank on an invoice will cause the Item List to appear so that you can simply select an Item from the list rather than typing it. Appropriate accounts are instantly updated and recalculated to reflect relevant transactions as they are entered into the system. Additionally, as you fill in the standard form fields with a name from a list or an Item, QuickBooks automatically enters other information such as the billing address, price, or description. This not only saves time but also ensures accuracy and consistency. The custom forms that you create and save are called templates. QuickBooks also comes with standard form templates, which you can modify and save as your business needs dictate. Figure 1-11 shows the available standard templates.

12 14 Part I The QuickBooks System List menu Figure 1-11: To access the standard templates, choose Templates from the Lists menu. Chapter 5 tells you, in depth, how to create, edit, and use QuickBooks forms to document your business transactions. Time-Saving Features QuickBooks has a number of features designed to record and document the daily transactions of a business and to make it fast and easy to do so. For example, convenient drop-down menus for lists and Items make it easy to find information. QuickBooks has a number of features that you can use to minimize data entry on your forms and provide instant access to routinely needed information. These features are discussed in the following sections. Quick Add Quick Add is a handy feature that enables you to add customer, employee, vendor, and job information on the fly. For example, if you are completing a form for a new customer whose name does not appear on your Customer List, QuickBooks prompts you to add that customer information now. Figure 1-12 shows the prompt screen that appears.

13 Chapter 1 Quick Insights and Program Overview 15 Figure 1-12: This screen appears if a name entered isn t on a list. The appearance of the prompt screen showing the Quick Add and Set Up options is a reminder to ensure that Customer, Vendor, and Employee Lists are kept current. If you want to enter only a name on the list, you would choose Quick Add. To enter additional relevant information, such as an address and billing information, choose the Set Up option. Quick Fill You may be familiar with this feature from other Windows-based programs. In QuickBooks, if you type the first few letters of a name or Item, QuickBooks automatically fills in the rest of the word and other stored information, such as the customer name or address or the price of an Item. Quick Recall When activated by a Preference menu command, automatic recall fills in data from the last transaction, such as the recording of a sale or a check. This is useful, for example, if you are processing a number of customer rebate checks or identical employee bonus checks. You can still change individual fields when this function is activated, but you don t need to enter recurring data.

14 16 Part I The QuickBooks System Quick Math To make basic calculations, you can perform a simple Quick Math calculation in any numeric field. This very simple, but extremely useful, function is often overlooked. Take note of it now. You will use it often. To use Quick Math to calculate a transaction, follow these steps: 1. Click in the field where you want to make the calculation. 2. Type a number followed by one of these operators: =,, +, *, or /. 3. Continue typing numbers and mathematical operators to complete the desired calculation. An image of a paper adding machine tape appears showing the numbers you have entered, as shown in Figure Press Tab or Enter to display the result of the calculation in your numeric field. 5. Press C to clear the calculation when you are finished. Figure 1-13: Calculate changes in numeric fields by entering standard arithmetic symbols.

15 QuickBooks calculator Chapter 1 Quick Insights and Program Overview 17 Quick Math doesn t perform some of the more complicated calculations that the Windows calculator does. For example, Quick Math doesn t calculate percentages. QuickBooks makes it easy to access the Windows calculator for those calculations. To use the Windows calculator from QuickBooks, follow these steps: 1. Access the Other Activities menu. 2. Select Other. 3. Select Use Calculator. The Find function You can use Find at any point in the QuickBooks program to access information about specific transactions. QuickBooks displays all transactions that meet your search filter criteria. Figure 1-14 shows the QuickBooks Find window, which is accessed through the Edit menu. Figure 1-14: You can search for specific transactions using the QuickBooks Find window. To use the Find option, follow these steps: 1. Choose Find from the Edit menu. 2. Select one of the filter criteria displayed on the Find window using the Filter scroll box and indicate the criterion for your search. 3. Click Find. 4. Select the transactions that you want to see from among those meeting your search criterion. To see the original form where the transaction was entered, you can double-click any transaction that appears on the list. 5. Click Reset if you want to enter additional criteria or Close if you are finished and want to close the screen.

16 18 Part I The QuickBooks System Memorized transactions You can memorize recurring transactions, such as the monthly rent for your office or a recurring monthly billing for a regular customer. Memorized transactions are discussed in Chapter 14. Reports and Graphs QuickBooks generates over 50 types of standard reports and graphs to help you analyze the performance of your company. You can generate them directly without the benefit of an accountant or professional financial advisor. You can access this data at any time, but typically you would review and compare your company s performance over a set period of time such as a weekly, monthly, or quarterly cycle. This section provides a brief sampling of the many available types of reports and graphs. Standard reports Reports organize and summarize the data from the transactions you enter. These reports give you a snapshot of your business s profitability and value. The Profit and Loss Statement The Profit and Loss Statement shows the profitability of your business for the relevant period by summarizing all of the data entered in the income and expense accounts. The information on the statement is updated instantly each time a transaction is entered, and you can view year-to-date information at any time. Figure 1-15 shows a sample QuickBooks Profit and Loss Statement. The Balance Sheet The Balance Sheet shows the value of your business as of a certain date. It is sometimes called a statement of financial position because it depicts a snapshot of a company s financial position as of the report date. It displays and summarizes the balances of all of the asset and liability accounts. Figure 1-16 shows a sample QuickBooks Balance Sheet. The sales report by Item The sales report is a breakdown of your company s sales. It reveals the percentage of total sales and gross profit attributable to each Item that your business sells. Sales reports can be generated in several different formats, such as by Item or by customer. An analysis of a sales report by Item enables you to identify your most profitable products. Figure 1-17 shows a sample sales report presented by Item.

17 Chapter 1 Quick Insights and Program Overview 19 Figure 1-15: The Profit and Loss Statement is also referred to as the Income Statement.

18 20 Part I The QuickBooks System Figure 1-16: The Balance Sheet summarizes the assets and liabilities of your business.

19 Chapter 1 Quick Insights and Program Overview 21 Figure 1-17: This sales report presented by Item shows which products have the highest percentage of sales.

20 22 Part I The QuickBooks System Generating QuickReports QuickReports are useful summaries of information contained in the account registers. You can access the QuickReports function whenever you display a list, an account register, or a form with a name field. Simply click the QuickReports button on the list, register, or form to create summaries of account activity (such as receivables or payables) or customer and vendor histories. Figure 1-18 shows a QuickReport of a customer history. Figure 1-18: QuickReport of customer history. Analyzing information with graphs QuickBooks generates several kinds of graphs. Graphs give you an immediate picture of the relationships among various pieces of information. QuickBooks provides graphs showing (1) Income and Expenses, (2) Sales, (3) Accounts Receivable, (4) Net Worth, (5) Budget vs. Actual, and (6) Accounts Payable. Figure 1-19 shows a graphic representation of sales for a sample company. Budgeting with QuickBooks QuickBooks enables you to set up a budget showing your projected income and account balances. You can then compare your company s actual performance with the anticipated amounts shown in your budget. Chapter 31 explores the process of setting up a budget.

21 Chapter 1 Quick Insights and Program Overview 23 Figure 1-19: Create graphical representations of reports. Summary QuickBooks is a complete accounting system that enables nonaccountants and accountants to record, process, and analyze accounting data. Nonaccountants can use QuickBooks without the ongoing assistance of an accountant or financial professional. A few of the QuickBooks features that you learned about in this chapter include the following: How to create a Chart of Accounts to meet the needs of any business entity. Lists perform convenient database functions for products, customers, and other information essential to your business. The Items menu makes it easy to index and standardize information about products, inventory, and services. Standardized forms streamline business documentation.

22 24 Part I The QuickBooks System QuickBooks has several easy-to-use, time-saving features, such as Quick Add, Quick Fill, Quick Recall, and Quick Math. Registers maintain up-to-date account balances and historical information for individual asset and liability accounts. With a click of your mouse, you can create graphical representations of financial information contained in reports. The QuickBooks budgeting feature allows you to compare the actual performance of your business to the projected performance.