Running QuickBooks 2009 Premier Editions Kathy Ivens CPA911 Publishing, LLC Philadelphia PA
Running QuickBooks 2009 Premier Editions ISBN Number 10-digit: 1-932925-04-X 13-digit: 978-1-93-292504-3 Published by CPA911 Publishing, LLC November 2008 Copyright 2008-2009 CPA911 Publishing, LLC CPA911 is a Registered Trademark of CPA911 Publishing, LLC. All rights reserved. No portion of the contents of this book may be reproduced in any form or by any means without the written permission of the publisher. The publisher and author have used their best efforts to make sure the information in this book is reliable and complete. They make no representations or warranties for the accuracy or completeness of the contents of this book, and specifically disclaim any implied warranties. The publisher and author disclaim any responsibility for errors or ommissions or the results obtained from the use of the information in this book. QuickBooks is a registered trademark of Intuit Inc., and is used with permission. Screen shots reprinted by permission of Intuit Inc. Windows, Microsoft Excel and Microsoft Word are registered trademarks of Microsoft Corporation, and are used with permission. Screen shots reprinted by permission from Microsoft Corporation.
Table of Contents Acknowledgments...v Chapter 1: Getting Started...1 Installation Tips...2 Change the Default Install Settings...2 Upgrading QuickBooks...2 Restoring a Backup File...3 Chart of Accounts...4 Designing a Chart of Accounts...4 Using Account Numbers...5 Account Naming Protocols...10 Creating Accounts...11 Select From Examples...12 Automatically Created Accounts...14 Special Accounts in All Company Files...15 Feature-based Special Accounts...15 Using Multiple A/R and A/P Accounts...17 Inventory Special Accounts...18 Don t Enter Opening Balances...20 Using Subaccounts...20 Using Subaccounts for Easier Tax Preparation...21 Editing Accounts...22 Deleting Accounts...23 Hiding Accounts...24 Merging Accounts...26 Importing the Chart of Accounts...27 Multiple Currencies...27 Select the Currencies You Need...28 Tracking Exchange Rates...29 Linking Customers and Vendors to Currencies...29 Assigning Currency to New Customers and Vendors...31
viii Running QuickBooks 2009 Premier Editions Chart of Accounts for Multicurrency Transactions...31 Creating Transactions in Other Currencies...31 Creating Reports on Multicurrency Transactions...32 Opening Trial Balance...33 Understanding the Opening Trial Balance...33 Entering Historic Transactions...34 Entering Open Payables...39 Entering Inventory...39 Creating the Trial Balance for Last Year...40 Checking the Results...44 Generating the Trial Balance for the Current Year...44 Managing Company Files...44 Versions Vs. Editions...45 Copying and Deleting Company Files...46 Chapter 2: Lists and Classes...51 Setting Up Your Lists...52 Customer & Vendor Profile Lists...53 Customers & Jobs List...58 Vendor List...60 Fixed Asset Item List...62 Price Level List...64 Applying Price Levels to Customers in Batches...69 Per Item Price Levels...74 Billing Rate Level List...80 Item List...84 Manipulating List Data...88 Using a Hidden List Component in Transactions...88 List Limits...89 Creating Custom Fields In Lists...91 Adding Custom Fields to Transaction Forms...95 Classes...98 Chapter 3: Premier Sales Features...103 Easier Invoicing for Time and Expenses...104 Enabling the List of Time & Expenses...104 Opening the List of Time & Expenses...105 Creating Invoices from the Time & Expenses List...108
Table of Contents ix Internal Costs Reimbursements...110 Setting Up Internal Cost Tracking...110 Creating Reimbursable Charges for Internal Costs...111 Internal Costs Job Costing...112 Sales Orders...112 Enabling Sales Orders...113 Enabling Warnings about Inventory Stock Status...113 Creating Sales Orders...115 Sales Order Templates...116 Turning Sales Orders into Invoices...117 Creating the Invoice...118 Managing Backorders...126 Creating Transactions Automatically...129 Automatic Purchase Orders From Sales Orders...130 Automatic Sales Orders from Estimates...134 Chapter 4: Premier-Only Accounting Functions...135 Journal Entries...136 Adding a JE Icon to the Toolbar...137 AutoFill Memos in Journal Entries...137 Auto Reversing Journal Entries...138 Adjusting Journal Entries...139 History and Reports in the JGE Window...140 Allocating Overhead Expenses to Jobs...142 JE Source and Target: Solving the Mystery...143 Allocating Overhead Expenses to Classes...145 Auto-calculating by Percentage...146 Previous Bank Reconciliation Reports...147 Choosing the Type of Reconciliation Report...148 Resolving Reconciliation Problems...150 Chapter 5: Reporting and Planning Tools...153 Exporting Reports as Templates...154 Customizing Reports...154 Exporting a Template...157 Sending a Template...158 Importing a Report Template...158
x Running QuickBooks 2009 Premier Editions Creating Groups of Memorized Reports...158 Exporting a Memorized Reports Group...159 Importing a Memorized Reports Group...160 Closing Date Exception Report...160 QuickBooks Closing Date Procedures...161 Setting a Closing Date...161 Password Protection Doesn't Always Work...164 Generating the Closing Date Exception Report...166 Interpreting the Closing Date Exception Report...166 Forecasting...168 Creating a Forecast...169 Setting the Criteria for a Forecast...169 Choosing the Method for Obtaining Data...169 Entering Data Manually...170 Editing the Forecast...173 Creating Reports on Forecasts...174 Business Planner...174 Entering Company Information...176 Income Projection...179 Using the Projection Wizard...180 Entering Income Data Manually...184 Expenses Projection...185 Interview Section...186 Writing Your Business Plan...190 Previewing Your Business Plan...192 Print the Business Plan...194 Export the Business Plan...194 Backing Up the Business Plan...195 Chapter 6: Inventory Tips...197 Understanding Inventory...198 Cost of Goods Sold...198 Inventory Adjustment Accounts...199 Creating an Inventory Item Properly...201 QuickBooks Average Costing...203 Tracking the Real Cost of Inventory...204 Inbound Shipping Costs...205
Table of Contents xi Work in Process Inventory...205 Cost of Improving Inventory...207 Units of Measure...208 Enabling Units of Measure...209 Creating a Single Unit of Measure...210 Creating Multiple Units of Measure...214 Changing or Removing the U/M for an Item...217 Managing Units of Measurement...217 Inventory Assemblies...219 Creating an Assembly...219 Understanding the Cost of an Assembly...221 Building an Assembly...226 Managing Pending Builds...228 Disassembling an Assembly...230 Chapter 7: Payroll and 1099 Tips...231 Keeping Payroll Information Secure...232 Configuring Vendors For Payroll Liabilities...232 Social Security Numbers on Pay Stubs...234 Paystubs Generated for Clients...235 Using a PDF Printer...236 Using the Microsoft Office Document Image Writer...237 File Security...238 Re-issuing a Lost Paycheck...238 Payroll Deductions for Employee Repayments...239 Setting Up Employee Repayment Elements...240 Creating an Employee Loan or Paycheck Advance...240 Creating an Employee Purchase Transaction...240 Deducting Payment from the Paycheck...241 Tracking Multiple Employee Repayment Accounts...242 Garnishments...242 Liability Account for Garnishments...243 Garnishment Vendors...244 Payroll Item for a Garnishment...245 Assigning a Garnishment Deduction to an Employee...246 Viewing and Editing Garnishment Paycheck Deductions...246 Remitting Garnishment Deductions...247
xii Running QuickBooks 2009 Premier Editions Tracking and Reporting Tips...248 Creating an Account for Tracking Tips...248 Adding Tips to Sales Transactions...249 Creating a Sales Item for Tips...249 Creating Payroll Items for Tips...250 Adding Tips to Paychecks...251 Tips and IRA Plans...252 Tracking Outsourced Payroll...252 Entering Payroll as a Journal Entry...252 Net To Gross Paycheck Calculation...256 1099s...257 Reimbursing 1099 Vendor Expenses...257 1099 Backup Withholding...258 Chapter 8: Sales and Use Tax...261 Enabling the Sales Tax Feature...262 Understanding Tax Codes and Tax Items...264 Sales Tax Codes...265 Creating Sales Tax Codes...266 Sales Tax Items...268 Creating Sales Tax Items...268 Sales Tax Groups...271 Creating Sales Tax Groups...272 Assigning Tax Items to Customers...273 Sales Tax Rates that Differ by Item...274 Creating Items for Item-Based Tax Rates...274 Creating a Multi-rate Sales Transaction...276 On Premises Vs. Off Premises Tax Rates...277 Incremental Sales Tax...278 Remitting Sales Tax...279 Manage Sales Tax Dialog...280 Sales Tax Reports...281 Remitting the Sales Tax...282 Use Tax...284 Use Tax for Purchases...285 Use Tax for Inventory Used in Your Business...288
Table of Contents xiii Remitting Use Tax...290 Chapter 9: Accountant Edition Features...291 All QuickBooks Editions Included...292 Running Your Practice...292 Company Data File...293 Configuring Customers and Jobs...295 Managing Items...297 Using Price Levels...297 Using Billing Rate Levels...298 Client Support Tools...298 Predefined Company Files...299 Creating IIF Import Files...303 Industry Specific Reports...305 Working Trial Balance...306 Accountant s Copy...307 Creating a Company File from a Transfer File...310 Using a Portable Company File...310 Client Data Review...313 Client Data Review Tools...314 Working in the CDR Center...322 Customizing the CDR Center...324 Completing the Review...325 External Accountant...325 Fixed Asset Manager...326 Client Troubleshooting Tips...335 Managing Outside Sales Reps...343 Bartering...346 Updating Lists with Import Files...349 Creating Import Files to Update Existing Lists...350 Adding and Modifying Data...351 Working With Custom Fields...353 Saving the Import File...353 Importing Updated Data into QuickBooks...354 Property Management...354 Recovering From an Interrupted Online Banking Session...355 Online Bill Payments: How They Work...356
xiv Running QuickBooks 2009 Premier Editions Free Direct Deposit and Vendor E-Payment Services...359 Remote Access for Client Support...361 Chapter 10: Contractor Edition...363 Contractor Company Files...364 Classes for Contractors...365 Customer Types for Contractors...369 Job Types for Contractors...371 Vendor Types for Contractors...372 Items for Contractors...372 Managing the Sale of Materials and Parts...373 Applying Units of Measure to Materials...374 Handling Customer Deposits...375 Elements for Tracking Customer Deposits...375 Receiving a Customer Deposit...376 Applying the Customer Deposit to an Invoice...377 Reporting on Customer Deposits...378 Deposits that are Just Payments in Advance...380 Transferring Deposits Held to Operating Funds...390 Job Costing...392 Items and Job Costing...392 Linking Expenses to Jobs...394 Tracking Material That Isn't Job-Specific...394 Estimates...396 Change Orders...396 Creating a Change Order...397 Making Additional Changes to an Estimate...398 Managing Retainage...399 Configuring QuickBooks for Retainage...400 Creating a Retainage Account...400 Creating Retainage Items...400 Using the Retainage Item in Sales Forms...401 Holding Retainage for Subcontractors...402 Configuring QuickBooks for Retainage Payable...402 Depositing Checks with Two Payees...404 Chapter 11: Manufacturing and Wholesale Edition...407
Table of Contents xv Stock Status Information for Sales Orders...408 Stock Status Configuration Options...409 Out of Stock Warnings...410 Insufficient Stock Warnings...411 Checking Stock Status Details...411 Modifying Sales Orders to Obtain Promised Stock...413 Sales Order Fulfillment Worksheet...414 Customizing Purchase Orders...417 Duplicating a Template...418 Customizing the Purchase Order Template...419 Adding Purchase Order Info to the Items List...421 Units of Measure...422 Customer RMAs...422 Creating RMAs...422 Processing Customer Returns of Inventory...424 Returning Products to a Vendor...427 Voiding or Modifying a Purchase Order...427 Voiding or Modifying a Receipt of Items...428 Voiding or Modifying a Receipt of Items and Bill...428 Entering a Vendor Credit for a Paid Bill...428 Entering a Vendor Refund...429 Creating a Non-Conforming Material Report...431 Tracking Damaged and Missing Products...432 Manufacturing and Wholesale Reports...434 Chapter 12: Nonprofit Edition...435 Unified Chart of Accounts (UCOA)...436 Renaming Accounts...437 Importing the UCOA...437 Accounts Receivable...438 Using Multiple A/R Accounts...438 Using A/R Accounts in Invoice Transactions...439 Reporting on Receivables...439 Using Classes...440 Customers and Jobs...442 Equity Accounts...442
xvi Running QuickBooks 2009 Premier Editions Customized Templates for Transactions...444 Pledges (Invoices)...444 Using Pledges Efficiently...445 Receiving Payments on Generic Pledges...448 Donations (Sales Receipts)...449 Avoid Data Entry Shortcuts...451 Memorized Reports for Nonprofits...452 Chapter 13: Professional Services Edition...453 Company File...454 Lists...454 Customers and Jobs List...455 Items...455 Customer and Vendor Types...456 Billing Rate Levels...456 Classes...457 Allocating Overhead to Classes...457 Managing Retainers...458 Liability Accounts for Retainers...459 Retainer Items...460 Virtual Bank Accounts for Retainers...460 Applying Retainers to Invoices...466 Tracking Retainer Balances...467 Postings for Applying Retainer Funds...468 Moving Retainer Funds to the Operating Bank Account...469 Managing Upfront Deposits...470 Creating Accounts for Upfront Deposits...470 Creating Items for Upfront Deposits...471 Receiving Upfront Deposits...471 Applying an Upfront Deposit to an Invoice...472 Upfront Deposits that are Just Payments in Advance...473 Managing Escrow...474 Receiving Funds into an Escrow Account...475 Disbursing Funds from an Escrow Account...476 Customized Templates...479 Customized Invoice Templates...479 Customized Proposal Template...480
Table of Contents xvii Customized Reports...481 Chapter 14: Retail Edition...483 Company File Elements...484 Chart of Accounts...484 Inventory...485 Items...486 Customers...486 Payment Methods...487 Handling Over and Short...488 Recording Sales...489 Recording Individual Sales...490 Recording Sales in Batches...491 Upfront Deposits...495 Managing Upfront Deposits as Liabilities...495 Managing Upfront Deposits as Regular Payments...497 Layaways...498 Using Sales Orders for Layaways...498 Using Invoices for Layaways...499 Service Charges for Undelivered Layaways...499 Gift Certificates...499 Selling Gift Certificates...501 Redeeming Gift Certificates...501 Consignment Sales...502 Configuring QuickBooks for Consignment Sales...502 Consigned Products as Inventory Parts...504 Consigned Products as Non-inventory Parts...506 Customizing Templates for Consignment Sales...507 Selling Consigned Items...507 Tracking Consigned Item Sales...508 Paying Consignors...508 Traveler s Checks...509 Point of Sale Add-ons...511 QuickBooks POS...511 Third Party POS Applications...512 Appendix A: Importing Excel and CSV Files...513
xviii Running QuickBooks 2009 Premier Editions Importing Excel or CSV Files...514 Configuring an Excel or CSV File as an Import File...514 Selecting the Import File...516 Mapping the Data Categories...518 Setting Preferences for Importing Data...521 Previewing the Import...524 Managing Preview Errors...524 Importing the File...526 Viewing the Import Error Log...526 Re-using Mappings...527 Keywords for Excel/CSV Import Files...528 Chart of Accounts Excel/CSV Headings...528 Account Type Keywords for Excel/CSV Files...529 Customer:Job Headings for Excel/CSV Files...532 Customer:Job Data Mappings for Excel/CSV Files...534 Job Keywords for Excel/CSV Files...535 Vendor Headings for Excel/CSV Files...536 Vendor Data Keywords for Excel/CSV Files...536 Item Headings for Excel/CSV Files...538 Item Type Keywords for Excel/CSV Files...540 Appendix B: Importing IIF Files...543 About IIF Import Files...544 Accountants and IIF Files...545 Format of an IIF File...545 Exporting Data into an IIF File...547 Creating Multiple Lists in One IIF File...547 Importing an IIF File...548 IIF File Keywords for Lists...548 Profile Lists Import Files...549 Customer Type List Import File...549 Vendor Type List Import File...549 Job Type List Import File...550 Sales Rep List Import File...550 Ship Method List Import File...550 Terms List Import File...551
Table of Contents xix Standard Lists Import Files...551 Chart of Accounts Import File...552 Customer:Job List Import File...554 Importing Jobs...556 Vendor List Import File...557 Items List Import File...557 Employee List Import File...560 Other Names List Import File...561 Price Level List Import File...562 Sales Tax Code List Import File...562 Class List Import File...563 Summary of List Headings...563
Chapter 1 Getting Started Installation Chart of accounts Multiple currencies Opening balances Managing company files
2 Running QuickBooks 2009 Premier Editions In this chapter I'll go over some of the tips and shortcuts for setting up QuickBooks and your company file. Like most of the discussions in this book, the contents of this chapter assume you're not new to QuickBooks, and you know the basics. Installation Tips You can find detailed instructions for installing QuickBooks 2009 in the Troubleshooting QuickBooks section of www.cpa911.com. Those instructions are easier to follow, and more complete, than the installation instructions that come with the software. In addition, the following sections provide some installation tips that give you some insights into creating the most advantageous installation process. Change the Default Install Settings I, like many computer professionals, prefer to install software into a folder created for that software, not into a subfolder under Program Files. Creating discrete folders for each software application makes it much easier to troubleshoot problems. During installation, QuickBooks provides a way to change the default location for installing the software. Use that option to install QuickBooks into its own folder, e.g. C:\QB2009. If you haven't created that folder before beginning installation, the QuickBooks install program will create it for you after you enter that path into the Install To location field. Upgrading QuickBooks If you're upgrading to QuickBooks 2009 from an earlier version, it's not a good idea to install an upgrade over an existing version of the software. By default, when you upgrade, QuickBooks automatically overwrites and replaces the existing version. Instead, install the new version in addition to (not in place of) the old version by changing the installation folder to C:\QB2009 during the install process. This leaves your current version of QuickBooks in place, in case you encounter any problems working with your company file in
Chapter 1 Getting Started 3 the new version. When everything is working properly you can remove the older version in the Add/Remove Programs applet of Control Panel. Create another folder for storing your 2009 company files, e.g. C:\QB2009CompanyFiles. Creating a discrete location for your 2009 files prevents QuickBooks from storing files from multiple versions in the same folder. Copy your existing company files to the new company file folder; don't open a company file from its current location in QuickBooks 2009. Opening an Existing Company File If you installed QuickBooks 2009 Premier in the same folder that held your previous version of QuickBooks, the first time you launch QuickBooks the software opens the company file that was open when you last closed QuickBooks in the previous version. Then the system begins the process of updating the file to Premier 2009. If you installed QuickBooks 2009 Premier in a new folder in order to preserve the previous version, no existing company file opens when you first launch QuickBooks Premier. If you already have a previous version of QuickBooks, and you installed QuickBooks 2009 in a new folder, you should copy existing company files to your new QuickBooks 2009 company file data folder. Then select File Open or Restore Company. Follow the prompts in the wizard, locate the copy of the file (not the original file from the older version of QuickBooks, open it, and let QuickBooks begin updating it. This is a good way to install QuickBooks, because it lets you learn the new version without permanently updating your company file from the older version. If something goes wrong with QuickBooks 2009, you can continue to get your work done in the older version. Restoring a Backup File If you have a backup of your company file that you want to restore in order to update it to QuickBooks 2009, copy that file to the folder you created to hold your QuickBooks 2009 company files.
4 Running QuickBooks 2009 Premier Editions Choose File Open or Restore Company. Select the option Restore a Backup Copy and click Next. Follow the prompts to select the copy of the backup file (in your new QuickBooks 2009 company file folder), restore it, and have QuickBooks update it automatically. Chart of Accounts The most important step in your company setup is the creation of your chart of accounts. QuickBooks may have created some accounts for you during the initial setup of your company file, but you ll need many additional accounts in order to keep books accurately. In this chapter, I ll discuss creating the chart of accounts, as well the various ways in which you can manipulate the accounts you ve created. It s easier to configure your company file if you create the chart of accounts before you create the other lists you need in QuickBooks. Some of the lists you work with require you to link the list elements you create to accounts. For example, most Items are linked to income accounts. Designing a Chart of Accounts If you re designing your own chart of accounts, be sure to do so carefully, because you have to live with the results every time you use QuickBooks. Discuss the design with your accountant, who can help you devise a scheme that works for the types of transactions you have to enter, and the reports you need. You have several decisions to make about the general format you ll use for your chart of accounts. You need to decide whether to use numbered accounts, and if so, how many digits to use for each account. You should also design a system for the use of subaccounts. Subaccounts make it possible to post transactions in a way that makes it easier to identify the specific categories you re tracking. In addition, you must create a protocol for account naming, and make sure everyone who works with the QuickBooks data files understands the protocol and applies it.
Chapter 1 Getting Started 5 Using Account Numbers By default, QuickBooks does not assign numbers to accounts, and you should switch your QuickBooks configuration options to correct that oversight. A chart of accounts with numbers is easier to design, and easier to work with. Numbered accounts also have account names, of course, but you can categorize accounts by number, which makes the chart of accounts easier to work with. The advantage of using numbers is that you can arrange each section of the chart of accounts by category and subcategory. Within each type of account QuickBooks displays your chart of accounts in numerical order (without numbers, QuickBooks displays each section of your chart of accounts in alphabetical order). For example, if accounts of the type Expense are arranged numerically instead of alphabetically, you can list related expense accounts contiguously. This means you can export reports to Excel and insert subtotals for related categories, which makes it easier to analyze where you re spending your money. You can also use subaccounts in a numbered chart of accounts to provide subtotals for expenses or income right on your QuickBooks reports, without the need to export the report to Excel in order to perform calculations. Numbered accounts have proved to be useful in avoiding data entry errors when using a bank account. It s best if your main (most commonly used) bank account is at the top of the drop-down list. If your money market account is named for the bank (AlfaSavings), or even if you name the account Money Market, an alphabetic listing puts that account at the top of the bank account list when your operating account is named OperatingAccount, or it s named for the bank, which might be RiversideBank. My experience with clients shows that this became extremely important when companies changed banks. Suppose the people who enter data in your company file have gotten used to selecting the second account on
6 Running QuickBooks 2009 Premier Editions the list (because that s where your general operating account sits in alphabetic order), and your new account is now the third account on a drop-down list (or the first account, depending on the alphabetical sort and whether you made the old bank account inactive so it doesn t appear at all). By the time everyone notices, figures out, and gets used to, the new bank list, you ll have a lot of research to do, followed by a lot of journal entries. You ll discover this when you try to reconcile your bank accounts. If you use numbered accounts, you can make sure the bank accounts always appear in the most convenient order. Even if your old bank was number 10000, and you want your new bank to use that number, it s a simple task to edit the original bank number to 14990 (moving it to the bottom of the list) and give the new bank the 10000 number to keep it at the top of the list. Enabling Account Numbers To switch to a number format for your accounts, you have to change the QuickBooks preferences as follows: 1. Choose Edit Preferences from the menu bar to open the Preferences dialog. 2. Select the Accounting icon in the left pane. 3. Click the Company Preferences tab. 4. Select the Use Account Numbers check box. All the accounts included in the chart of accounts you selected during company file setup are automatically switched to numbered accounts. These numbers are built in by QuickBooks and you can change them to match the order of accounts you prefer (see Editing Accounts later in this chapter). When you select the option to use account numbers, the option Show Lowest Subaccount Only becomes accessible (it s grayed out if you haven t opted for account numbers). This option tells QuickBooks to display only the subaccount on transaction windows instead of both the parent account and the subaccount, making it easier to find the account you need in the narrow field of a drop-down list. (Subaccounts are discussed later in this chapter in the section Using Subaccounts. )
Chapter 1 Getting Started 7 QuickBooks does not automatically number accounts you added manually, so you must edit those accounts to add a number to each account record. If some accounts lack numbers, when you select Show Lowest Subaccount Only, QuickBooks displays an error message that you cannot enable this option until all your accounts have numbers assigned. After you ve added account numbers to all accounts, you can return to this preferences dialog and enable the option. Designing the Number Scheme After you ve converted your chart of accounts to numbered accounts, you must use the numbers intelligently as you create or edit accounts. It s best to assign ranges of numbers to account types. You should check with your accountant before finalizing the way you use the numbers, but the example I present here is a common approach. This scheme uses five-digit numbers, because that s the default in QuickBooks 2009, and the starting digit represents the beginning of a range: NOTE: You can have as many as seven numbers (plus the account name) for each account. 1xxxx Assets 2xxxx Liabilities 3xxxx Equity 4xxxx Income 5xxxx Expenses (of a specific type) 6xxxx Expenses (of a specific type) 7xxxx Expenses (of a specific type) 8xxxx Expenses (of a specific type) 9xxxx Other Income and Expenses You can, if you wish, have a variety of expense types and reserve the starting number for specific types. Many companies, for example, use 5xxxx for sales expenses (they even separate the payroll postings between the sales people and the rest of the employees), then use 60000 through
8 Running QuickBooks 2009 Premier Editions 79999 for general operating expenses, and 8xxxx for other specific expenses that should appear together in reports (such as taxes). Some companies that track inventory use 5xxxx for Cost of Goods Sold and begin grouping expenses with 6xxxx. Other inventorybased companies start the Cost of Goods Sold accounts in the 45xxx range (since most companies don t have a large number of income accounts, the number range 40000 to 44999 is sufficient for income). Some companies use one range of expense accounts, such as 70000 through 79999 for expenses that fall into the overhead category. This is useful if you want to track overhead expenses so you can apportion them to appropriate classes or jobs. Also, think about the breakdown of assets. You might use 10000 through 10999 for cash accounts and 11000 through 11999 for receivables and other current assets, then use 12000 through 12999 for tracking fixed assets such as equipment, furniture, and so on. Follow the same pattern for liabilities, starting with current liabilities and moving to long term. It s also a good idea to keep all the payroll withholding liabilities together. Usually, as you create new accounts, you should increase the previous account number by 100, so that if your first bank account is 10000, the next bank account is 10100, and so on. These intervals give you room to create additional accounts that belong in the same general area of your chart of accounts. Accounts Sort Order You have to create a numbering scheme that conforms to the QuickBooks account types because QuickBooks sorts your chart of accounts by account type (and uses your account numbers within each account type). If you have contiguous numbers that vary by account type, your reports won't be in the order you expect. QuickBooks uses the following sort order for the chart of accounts:
Chapter 1 Getting Started 9 Assets: Bank Accounts Receivable Other Current Asset Fixed Asset Other Asset Liabilities Equity Income Accounts Payable Credit Card Other Current Liability Long-Term Liability Cost Of Goods Sold Expense Other Income Other Expense Non-Posting Accounts Non-posting accounts don t post financial amounts to the general ledger. They are created automatically by QuickBooks when you enable features that use those account types, such as Estimates, Purchase Orders, Sales Orders, etc. You can open the account register of non-posting accounts to see the transactions that fall into the appropriate account category, but you don t have to worry about any amounts impacting your financials. Displaying Accounts Alphabetically in Reports As convenient as it is for you (and your accountant) to have numbered accounts so you can track your finances by category and subcategory, suppose you have to submit financial reports to a bank because that s part of the requirements of your line of credit? Your bankers have certain
10 Running QuickBooks 2009 Premier Editions financial categories they look at first, and it s easier for them if your accounts, especially your expenses, are in alphabetical order. To produce reports without account numbers, putting each account type list back into alphabetical order, turn off the account number feature by deselecting the option in the Preferences dialog. Print the reports, and then turn the feature on again to restore the numbered order. Account Naming Protocols You need to devise protocols for naming accounts, whether you plan to use numbered accounts, or only use account names. When you re posting transactions to the general ledger, the only way to know which account should be used for posting is to have easy-to-understand account names. Your protocol must be clear so that when everyone follows the rules, the account naming convention is consistent. This is important because without rules it s common to have multiple accounts for the same use. For example, I frequently find expense accounts named Telephone, Tele, and Tel in client systems, and all of those accounts have balances. Users guess at account names, and if they don t find the account the way they would have entered the name, they invent a new account (using a name that seems logical to them). Avoid all of those errors by establishing protocols about creating account names, and then make sure everyone searches the account list before applying a transaction. Here are a few suggested protocols you can amend them to fit your own situation, or invent different protocols that meet your comfort level. The important thing is to make sure you have absolute rules so you can achieve consistency. Avoid apostrophes Set the number of characters for abbreviations. For example, if you permit four characters, telephone is abbreviated tele, a three-character rule produces tel. Decide whether to use the ampersand (&) or a hyphen. For example, is it Repairs & Maintenance or Repairs - Maintenance? Do you want spaces before and after the ampersand or hyphen?
Chapter 1 Getting Started 11 Creating Accounts After you ve done your homework, made your decisions, designed your protocols, and checked with your accountant, you re ready to create accounts. Start by pressing Ctrl-A to open the Chart of Accounts List. Press Ctrl-N to open the Choose Account Type dialog (see Figure 1-1), and select the type of account you want to create. The major (most used) account types are listed on the dialog. Accounts that are less frequently created by users are listed in the drop-down list you can view when you select Other Account Types. Figure 1-1: Creating an account starts by selecting the type of account. After you select the account type, click Continue to open the Add New Account dialog. The dialog for creating a new account changes its appearance depending on the account type you select, because each account type contains particular fields to hold relevant information. Figure 1-2 shows the New Account dialog for an expense account.