This video tutorial provides a comprehensive guide to using QuickBooks Desktop software. The tutorial covers setting up a new QuickBooks file, including chart of accounts configuration and initial data entry. It then details the workflows for managing customers and vendors, including creating estimates, invoices, purchase orders, and bills. The video also explains how to manage bank accounts and reconcile transactions, emphasizing the importance of accurate record-keeping. Finally, it introduces basic reporting functionalities within QuickBooks, focusing on profit and loss statements.

QuickBooks Study Guide

Quiz

1. What is the significance of choosing a fiscal year start month in QuickBooks setup? The fiscal year start month determines the accounting period for your business. Most businesses use a January-December calendar year, but some may have a different fiscal year (e.g., July-June). The start month affects how tax returns are filed, as most corporations use March 15.
2. When setting up QuickBooks, where is it recommended to save the company file and why? It is not recommended to save the company file on the desktop because it can be easily deleted or misplaced, instead, the file should be saved in a dedicated folder, such as in ‘Documents’. In a multi-user environment, the file should be placed on the server, with assistance from IT.
3. What are the three options for what you sell in QuickBooks setup and how do you know which to pick? The three options are “products,” “services,” or “both.” Choose “products” if you sell physical goods, “services” if your business provides labor or rentals, and “both” if you sell both physical products and services.
4. Explain what “progress invoicing” means in the context of QuickBooks. Progress invoicing is used for long-term projects, such as construction. It allows you to bill your client in installments, or milestones, according to the completion of specific phases of the project rather than just billing for the entire project at once.
5. What is the difference between tracking inventory and not tracking it in QuickBooks? Tracking inventory means you maintain a count of the products you buy, stock, and sell, and account for discrepancies. Not tracking inventory means you may charge for goods but not record individual items. If a business resells materials without keeping them in stock, it may not be necessary to track inventory.
6. What is the purpose of the “open window list” in QuickBooks? The “open window list” is a navigational tool that displays all the windows that are currently open. This makes it easy to switch between different screens like invoices, bills, and estimates, without having to minimize or search through many open pages.
7. How can you access QuickBooks functions that do not have a control key shortcut? You can access almost every function by using the Alt key. For example, to open the Item List, press Alt + L, then I. The underlined letter on the menu is the letter you press after Alt.
8. Why is it important to enter opening balances when creating new accounts in QuickBooks? If you are setting up QuickBooks for a company that has been operating prior to the start of the QuickBooks file, you need to enter opening balances for each balance sheet account to have a clear financial picture at the start date of your QuickBooks file. This accurately sets the beginning balances for assets, liabilities, and equity.
9. When setting up a new chart of accounts, what is the difference between income/expense accounts and balance sheet accounts? Balance sheet accounts (e.g., assets, liabilities, equity) carry opening balances and reflect a company’s financial position. Income and expense accounts do not carry opening balances and are used to track revenue and costs during the accounting period. Balance sheet accounts are “point in time” accounts, while income and expense accounts are “period of time” accounts.
10. How do you merge two redundant accounts in the Chart of Accounts and why would you do this? To merge two accounts, edit the name of the account you want to eliminate and change the name to match the account you want to keep. Quickbooks will ask if you want to merge the accounts. This is useful when you have created similar accounts for the same purpose. This allows you to create consolidated reports for better financial tracking.

Essay Questions

1. Discuss the importance of setting up QuickBooks correctly for a small business. What decisions must the business owner make, and why do these decisions matter?
2. Explain the relationship between the chart of accounts and the items list in QuickBooks. How do these lists work together to create accurate transactions?
3. Describe the steps involved in the workflow from a customer requesting an estimate to receiving payment in QuickBooks.
4. Compare and contrast the use of ‘Enter Bills’ and ‘Write Checks’ in QuickBooks. What are the circumstances when you should use each option?
5. Explain how to use the various financial reports in QuickBooks, including the profit and loss, balance sheet, and statement of cash flows. How do these reports work together to give a business a clear financial picture?

Glossary of Key Terms

Accounts Payable: Money owed to vendors for goods or services purchased on credit.

Accounts Receivable: Money owed to a business by its customers for goods or services sold on credit.

Accrual Basis Accounting: An accounting method that recognizes revenue when earned and expenses when incurred, regardless of when cash is received or paid.

Administrative Password: A password that gives access to change settings and control the QuickBooks company file.

Balance Sheet: A financial statement that provides a snapshot of a company’s assets, liabilities, and equity at a specific point in time.

Bill: A document from a vendor that states what is owed for goods or services.

Book Value: The net value of an asset calculated by subtracting the accumulated depreciation from the asset’s original cost.

Cash Basis Accounting: An accounting method that recognizes revenue when cash is received and expenses when cash is paid.

Chart of Accounts: A list of all the financial categories used by a business to categorize all financial transactions.

Cost of Goods Sold (COGS): The direct costs associated with producing goods or services that are sold by a business.

Credit Card Register: A ledger that tracks all credit card transactions for a business.

Customer Center: A central area in QuickBooks for managing customer information and transactions.

Depreciation: The decrease in value of an asset over time due to use, wear and tear, or obsolescence.

Estimate: A non-binding quote or proposal given to a customer for work to be done.

Fiscal Year: The 12-month period that a company uses for accounting purposes.

Fixed Assets: Long-term tangible pieces of property that are not easily turned into cash.

Item List: A list of the products and services that a business buys or sells.

Item Receipt: A document that verifies inventory has been received from a vendor and is not tied to an invoice.

Job: A subcategory of a customer that is used to track specific projects.

Markup: A percentage or dollar amount added to a product’s cost to arrive at a sales price.

Non-Inventory Part: An item that is bought and sold but not tracked as inventory.

On the Positive Funds: A temporary holding account in QuickBooks for customer payments before they are deposited into a bank account.

Opening Balance: The initial balance of an account at the start of a new QuickBooks file.

Other Charge: An item for miscellaneous fees or charges that are not part of the main business income.

Pay Bills: A feature in QuickBooks that is used to pay bills that have been entered using the ‘Enter Bills’ function.

Purchase Order (PO): A document sent to a vendor requesting goods or services.

QuickReport: A detailed history of an item in Quickbooks.

Register: A ledger that tracks all financial transactions for a particular account, typically a bank or credit card account.

Sales Order: A document that records a customer order and is used to track inventory and fulfill orders.

Service Item: An item that represents a service that is provided by the business.

Statement of Cash Flows: A financial statement that reports on a company’s cash inflows and outflows over a specific period.

Sub-Account: A smaller category nested under a larger, primary account.

Subtotal: An item used to calculate the total amount of multiple items.

Vendor: A person or business that provides goods or services to a company.

Vendor Center: A central area in QuickBooks for managing vendor information and transactions.

QuickBooks Setup and Navigation Guide

Okay, here is a detailed briefing document summarizing the key themes and ideas from the provided text excerpts.

Briefing Document: QuickBooks Setup and Navigation

Overview:

This document summarizes the key concepts and procedures detailed in the provided text excerpts related to setting up a new QuickBooks file, basic navigation within the software, managing the chart of accounts, working with items, creating customers and vendors, and handling various customer and vendor transactions. The sources appear to be transcripts of instructional videos or guides for QuickBooks users.

I. Initial QuickBooks Setup:

• Business Structure: The user is guided to select the appropriate business structure, with the S-corporation being highlighted as a typical choice for small companies.
• Quote: “…i’m gonna go ahead and pick uh s-corporation which is uh tends to be one of the most uh typical ones here for a small company…”
• Fiscal Year: Users must specify their fiscal year start month (typically January). They’re also instructed to alter this setting if their fiscal year does not align with the calendar year.
• Quote: “…if you’re a regular calendar year company where you start january and december… you’re going to leave january there but if you happen to close your year let’s say june 30th…then you’re gonna pick my fiscal year starts july…”
• Administrative Password: Setting an administrative password is crucial for security.
• File Location: The importance of saving the QuickBooks file in an appropriate location (not the desktop) is emphasized, especially in multi-user environments.
• Quote: “…don’t put it in the desktop because typically in the desktop you’ll be sort of inclined to put it in the trash can or something like that…” It is also recommended to consult with an IT professional to determine the correct location when in a multi user environment.
• Company Customization: QuickBooks asks a series of questions to tailor the software to the user’s specific needs.
• Sales Type: The software requests information on whether the company sells products, services, or both.
• Quote: “First question is what do you sell products services or both”
• Sales Tax: The system prompts the user to indicate if they charge sales tax and if needed, to seek advice from an accountant regarding the taxability of their products.
• Estimates: Users are asked whether they create estimates for clients.
• Quote: “…if you want to give somebody a quote a proposal basically like a pre-invoice very organized with a total then you want to pick yes there for estimate…”
• Customer Orders: The setup asks if the user tracks customer orders. It is mentioned that for basic use, sales orders might not be necessary but that those who work with QuickBooks premier, accountant or enterprise, and have inventory, and who take orders for things not in stock will need the sales order.
• Quote: “…if you are working with quickbooks premier accountant or enterprise and you have inventory and you take orders for things you don’t have in stock yet and you want to take that order and then sort of remind you and have a mechanism to go order the product through your vendor that’s what a sales order will be…”
• Billing Statements: The system inquires about the use of billing statements for clients.
• Quote: “…basically you want to give a client a statement monthly quarterly that shows all the payments all the invoices it’s like an invoice of invoices…”
• Progress Invoicing: It asks if the user utilizes progress invoicing, commonly used in construction or project-based billing.
• Quote: “…if you are in the construction industry if you sell projects that are sort of long term if your contract says you know the whole thing’s a hundred thousand and if you meet condition a b and c you can build your first 25 percent and then if you hit meet condition c d and f then you can build another 30 percent that sort of building is called progress invoicing…”
• Bill Management: The system asks if users want to track bills they owe to vendors for future payments.
• Quote: “…do you want to track accounts payable do you want uh to put vendor bills that you want to pay later set them in quickbooks now recognize the expense now pay them later track how much money you owe in the future that would be a bill…”
• Inventory Tracking: The system prompts users to indicate if they track inventory.
• Quote: “…if you purchase product you stock it you put it in the warehouse you maintain it you make sure that it doesn’t break you make sure you don’t lose it you count it… then you do track inventory…”
• Time Tracking: The user is asked if they track time for employees and billing purposes.
• Quote: “…if i’m gonna have time sheets and those timesheets are gonna be used to understand how much our employees time is worth uh in each project or maybe i want to generate a paycheck with it or maybe i just want to bill my client the hours that i spent on the project…”
• Employees & Subcontractors: The user is asked about having employees or subcontractors and if using 1099 subcontractors, the option should be selected.
• Start Date: The user is prompted for their start date for accounting and that ideally it should be at the start of the fiscal year but that it is possible to start in the middle of a fiscal year with no issues.
• Quote: “The question essentially is do you want to start your accounting at the beginning of this fiscal year…very very common but you don’t have to…”
• Suggested Accounts: The software suggests income and expense accounts based on the user’s previous answers to the setup questions.

II. Basic Navigation:

• Open Window List: A key navigation tool that allows users to easily switch between multiple open windows within QuickBooks. It provides an alternative to manually managing overlapping windows.
• Quote: “…this open window list here on the left when it makes it really easy because you can just quickly go to the window you want…”
• Left Icon Bar: An alternative method for accessing open windows.
• Escape Key: The escape key is used to close active windows. A “close all” option can close every single window.
• Quote: “…the escape key in quickbooks will close a window…”
• Keyboard Shortcuts: Menus and transactions show keyboard shortcuts (e.g., Ctrl+R for “Use Register,” Ctrl+F for “Find”). The “Alt” key can also be used to access many functions using underlined letters in menus (e.g., Alt+L+I for “Item List”).
• Quote: “…you actually can access almost every not every but almost every function in quickbooks using the alt key…”

III. Chart of Accounts:

• Account Types: The source material discusses setting up various types of accounts, including bank accounts, fixed assets, loans, income, and expenses.
• Opening Balances: For balance sheet accounts, it’s emphasized that when setting up a new QuickBooks file with a starting date in the middle of a fiscal year, you will need to enter opening balances from the previous year.
• Quote: “…because I’m setting up quickbooks for the first time and there was in fact activity or there was accounting before we started this fiscal year I have to put every single uh balance sheet account that i create i have to put opening balance…”
• Bank Account Setup: The account setup emphasizes using explicit account names. Also the inclusion of the last four digits of an account is suggested as good practice for identifying multiple bank accounts.
• Quote: “…i’m gonna call this one wells fargo maybe i put the word checking and then the last four digits of the account…that could be a good use for that…”
• Fixed Asset and Depreciation: The process includes creating accounts for fixed assets and accumulated depreciation.
• Loan Account Setup: The text guides the user through creating a loan account, including the opening balance of the loan.
• Income & Expense Categories: The setup process involves creating income and expense categories, also including sub-categories of accounts for further clarification.
• Account Customization: Users can rename, edit, and create new accounts. They can also create sub-accounts.
• Hiding Accounts Accounts can be made inactive and hidden from view without deleting them permanently.
• Deleting Accounts: Accounts can be deleted if they have no prior transactions and when trying to delete an account that does have transactions, it can only be made inactive.
• Merging Accounts: Redundant accounts can be merged to consolidate data.
• Quote: “…if i hit yes it will merge them together as if no separate accounts ever existed…”

IV. Item List:

• Connection to Chart of Accounts: The close relationship between the item list and the chart of accounts is noted.
• Item Types: Various item types are discussed, including service, inventory part, non-inventory part, other charge, subtotal, group, discount, and payment.
• Service Items: Creating service items with descriptions and rates is covered.
• Non-Inventory Parts: Non-inventory parts, such as cables, can be set up with both sales and purchase prices.
• Other Charges: Items for miscellaneous charges, such as delivery fees, can be created.
• Inventory Parts: The creation of inventory parts, with details such as purchase description, cost, sales description, sales price, and reorder points are detailed.
• Quote: “You will notice immediately that there’s no like little weird checkbox asking me to expand or collapse the items to be double or single sided automatically because they’re inventory part you are forced to have an expense site and a sales side all right…”
• Double-Sided Items: Some items can be used for both sales and purchases.
• Markup and Margin: The text notes that a feature to show markup and margin is only available in QuickBooks Enterprise.
• Import and Export: Items can be imported from Excel. (not explicitly stated in source but implied and included for completeness)

V. Customers and Vendors:

• Customer Center: The Customer Center is used to create new customers, jobs, and manage customer information.
• Creating Customers: The creation process includes storing contact information, billing details, payment terms, and other pertinent data.
• Customer Jobs: Jobs are sub-categories of customers, used to track specific projects, and it is noted that jobs should be used when a customer has multiple locations and projects. Jobs are also often used when payment for a project is separate than for a customer in general.
• Moving Customers & Jobs: The user can move a customer from a job to a customer by dragging and dropping the diamond symbol on the record.
• Quick Customer/Job Creation: A customer/job can be created on the fly through an invoice by typing a colon after the customer name.
• Vendor Center: Similar to the Customer Center, the Vendor Center manages all vendor-related information.
• Creating Vendors: This involves inputting contact information, payment terms, and 1099 eligibility.
• Vendor Types: Vendors can be grouped into categories.
• Open Balance: It is noted that opening balances for vendors should be avoided.
• Renaming and Deleting Vendors: Vendors can be renamed or made inactive. Vendors cannot be deleted after having been used in a transaction.
• Quote: “…however because of accounting i can’t just delete the vendor because it’s been used in a transaction…”

VI. Customer Transactions:

• Estimates: The process of creating estimates for customers using items is explained. It’s pointed out that estimates can contain a mixture of both products and services.
• Estimate Layout: Estimates can be modified using a variety of templates that display more or less detailed information.
• Duplicating Estimates: Estimates can be duplicated for ease of creation.
• Estimates to Invoices: The document discusses converting estimates to invoices and it also mentions the possibility of receiving payments prior to creating an invoice for a customer and that such payments will be treated as a deposit for that customer.
• Partial Payments: It is noted that partial payment can also be received.
• Customer Payments: Methods of receiving payments, including recording customer payments and making bank deposits are detailed.
• Undeposited Funds: The use of undeposited funds for handling payments prior to bank deposits is covered.
• Prepayments: When prepayments are made, they are applied to the customer account.

VII. Vendor Transactions:

• Purchase Orders: Creating purchase orders to buy products from vendors is described. Purchase orders can include both inventory items and other items such as shipping.
• PO Customer Job Customers jobs can be added to a line of a PO in order to track specific purchases for specific customers.
• Line Item Operations: Users are instructed on how to add, copy, paste, and delete lines in a purchase order.
• Shipping Costs: Adding shipping costs to purchase orders is explained.
• Attaching Files: It is noted that files can be attached to a purchase order and sent to the vendor.
• Item Receipts: Receiving inventory using item receipts is detailed, and it is noted that it is possible to receive inventory from multiple POs on one item receipt.
• Billable Item: It is mentioned that products can be marked as billable when they are received and assigned to a customer. It is stressed that this feature should not be used if a estimate or sales order has already been created.
• Converting Item Receipts to Bills: The process of turning item receipts into bills is noted.
• Bills (No PO): Creating bills for expenses not linked to purchase orders is discussed, emphasizing the use of the “Expenses” tab rather than “Items.”
• Paying Bills: The process of paying vendor bills is detailed, showing how to manage and print checks or record other forms of payment.
• Quote: “…this is a screen used for for me to print the check and if I don’t print checks if I write checks by hand then I want to make sure that if I write a check by hand that I’m also recording it in quickbooks…”
• Pay Bills Screen: Users are instructed on how to use the Pay Bills window, filtering, and sorting options.

VIII. Check Register:

• Accessing Register: The Check Register can be accessed through multiple methods, including a home screen button, banking menu, and keyboard shortcut.
• Entering Transactions: Manually entering transactions, such as withdrawals, debit card charges, and checks in the check register, is explained.
• Reference Numbers: The use of reference numbers and memo fields in the register is clarified.
• Debit Card Transactions: It is noted that when using debit card transactions, check numbers should not be used to ensure accuracy.
• Printing Checks: It is noted that checks can be printed directly from the Right Check screen.
• Batch Printing Checks: Checks can be marked to print later and printed in batch.

IX. Financial Reports

• Balance Sheet: The balance sheet report shows the assets, liabilities, and equity of the company at a specific point in time.
• Profit and Loss Statement: The profit and loss statement is also known as the income statement and shows the revenues and expenses of the company over a period of time.
• Statement of Cash Flows: The statement of cash flows details the movement of cash within the company.
• Cash vs. Accrual Basis: The concepts of cash and accrual accounting methods for the financial reports are detailed.

Conclusion:

These excerpts provide a foundational understanding of how to set up and navigate QuickBooks, manage financial records, and execute various transactions. The information is presented in a step-by-step manner with explanations of key concepts and functions, emphasizing the importance of accuracy, and data integrity. This document serves as a guide to navigating the initial steps of using QuickBooks.

QuickBooks Setup and Navigation Guide

QuickBooks Setup & Basics

• What is an S-corporation and why is it a common choice for small businesses? An S-corporation is a specific type of business structure that allows profits and losses to be passed through directly to the owners’ personal income, avoiding corporate level income tax. It is a typical structure chosen by small business owners for its tax benefits and relative ease of setup compared to other forms of incorporation.
• How do you determine your fiscal year start month in QuickBooks? Your fiscal year start month is typically January if you operate on a calendar year (January to December). If your company closes its accounting year on a different date (e.g., June 30th), then you would select the appropriate start month, such as July. Most companies operate on a standard January to December calendar year.
• Why is it important to choose the right save location when setting up a new QuickBooks file? Choosing the right save location is critical to ensure your QuickBooks file works correctly, especially in a multi-user network environment. Avoid saving it on the desktop where it might accidentally be deleted. It’s recommended to save it within a dedicated folder in a location that makes sense, such as within the documents folder. It’s best to consult with IT personnel when using multi-user server environments.
• What are the main questions QuickBooks asks during setup, and why are they important? QuickBooks asks several questions during setup to tailor the software to your specific business needs. These questions include: whether you sell products, services, or both; whether you charge sales tax; if you create estimates; if you track customer orders; if you use billing statements; if you use progress invoicing; if you manage bills you owe; if you track inventory; if you track time; and if you have employees or subcontractors. These options help set up the correct accounting workflows and features, which helps to tailor QuickBooks functionality specific to your business.

QuickBooks Navigation & Chart of Accounts

• How can you effectively manage multiple open windows in QuickBooks? QuickBooks offers several ways to manage multiple open windows. The “Open Window List” on the left side allows you to easily switch between different open windows. Additionally, the “Left Icon Bar” can be expanded to also view the open windows. You can also use the escape key to close windows one by one or “Window->Close All” to close all windows at once.
• What keyboard shortcuts can help with QuickBooks navigation? QuickBooks has many keyboard shortcuts that can help speed up your work. Common shortcuts include “Ctrl + R” to open the register, “Ctrl + F” to find transactions, and “Ctrl + A” for the chart of accounts. Many menu items display keyboard shortcuts next to them in the menus, such as “Ctrl + I” for invoice creation. Additionally, you can use the “Alt” key to access any function in the menus by hitting Alt, then the underlined letter in the menu and then the underlined letter of the menu option (e.g., Alt+L+I opens the item list).
• What is the importance of entering opening balances for balance sheet accounts in QuickBooks and how is it done? Opening balances for balance sheet accounts are necessary for ensuring that your QuickBooks file is accurate from the start, especially if you are setting it up mid-year. When creating a balance sheet account in QuickBooks, you use the “Enter Opening Balance” feature and obtain the balance from prior balance sheets or bank statements as of the day before your QuickBooks start date, and enter them in the screen. The date and amount are the actual balance of the prior financial statements.
• How can you customize the Chart of Accounts in QuickBooks, and why is that important? You can customize the chart of accounts by creating new accounts, editing existing ones, creating sub-accounts and merging duplicate accounts. It’s also possible to make them inactive, rename them, or delete if there have been no transactions. The Chart of Accounts is the foundation for proper financial reporting, so having categories for different types of income, expense, assets, and liabilities that fit your particular business operations is essential. For instance, you may need multiple income accounts to track different revenue streams such as “Training Services”, add insurance sub-categories like “Life insurance for key persons,” or create additional accounts for different types of auto expenses such as, “fuel,” “parking,” and “auto maintenance”.

QuickBooks Company Setup Guide

To set up QuickBooks, it is recommended to use the detail start or advanced setup, as this will guide you step by step with questions to match your business and industry. The express start option only asks for your company name, industry, and business type.

Here are the steps involved in setting up a new company file in QuickBooks:

• Company Name and Address: You will need to enter your company name and address. You can also include a tax ID, phone number, email, and website, but these are not required.
• Industry: Choose the industry that best matches your business. QuickBooks will customize your chart of accounts and the types of transactions you work with based on your industry. If you can’t find your specific industry, you can choose a general product-based or service-based option.
• Company Organization: You will need to specify how your company is organized for tax purposes, such as a sole proprietorship, partnership, LLC, or corporation. If you are unsure, consult your accountant or lawyer.
• Fiscal Year: Select your company’s fiscal year start month. Most companies operate on a January to December calendar year.
• Administrator Password: Create a password for the administrator account. If you are setting up the company for the first time, you will likely be the administrator.
• Save Location: Choose a location on your computer to save the company file. It is recommended not to save it on the desktop. If you are working in a multi-user environment, consult your IT person.
• Customization: After saving, QuickBooks will ask a series of questions to further customize the setup. These questions include:
• What you sell: products, services, or both
• Whether you charge sales tax
• Whether you create estimates
• Whether you track customer orders
• Whether you use billing statements
• Whether you use progress invoicing
• Whether you manage bills you owe
• Whether you track inventory
• Whether you track time
• Whether you have employees or subcontractors
• Start Date: You will need to choose a start date for your accounting. You can choose the beginning of the fiscal year or any other date. Keep in mind you will need to enter all beginning balances as of that date.
• Chart of Accounts: QuickBooks will suggest a chart of accounts based on the options selected. You can select or deselect categories or sub-accounts as needed. If you are unsure, you can select the “Ask My Accountant” option.

Once the initial setup is complete, a QuickBooks setup screen will appear, but you won’t see it again. You can then start working on setting up customers, products, and bank accounts.

The chart of accounts is the heart of your accounting system, and it categorizes every transaction. It is accessed through the List menu, the home page, or by using the Ctrl+A keyboard shortcut. There are two major types of accounts, balance sheet accounts and profit and loss accounts. Balance sheet accounts have a running balance and appear on the balance sheet, while profit and loss accounts show up on the profit and loss statement.

QuickBooks Sales Transactions

Sales transactions in QuickBooks involve several steps, beginning with an estimate, proceeding to an invoice, and concluding with receiving payment.

Here is a breakdown of the sales transaction process:

• Estimates:
• Estimates are used to provide a formal written price quote for a product or service to a customer.
• They serve as a record of the prices offered to customers.
• Estimates can include internal cost rates and markups, which can be hidden from the customer.
• When creating an estimate, you can choose items from your item list, and the descriptions and prices will populate automatically.
• You can modify the item descriptions on the estimate, and you can also add a quantity for each item.
• If you are using an hourly service item, the quantity should be in hours.
• You can use different templates to modify what information is visible to the customer on the estimate [2, 4].
• You can create an estimate by clicking on the “Estimates” icon on the home page or by selecting “Estimates” from the “Customers” menu [1].
• You can create an estimate for a specific customer and job [3].
• If a customer approves the estimate, you can convert it into an invoice [5].
• Invoices:
• Invoices are created after the product is delivered or the service is completed [1].
• The purpose of an invoice is to notify a client that they owe money for work completed or goods provided [1].
• When you create an invoice from an estimate, the information from the estimate (item descriptions, quantities, prices) will transfer to the invoice [5].
• Invoices can include terms, which specify the number of days a customer has to pay [6].
• You can print or email invoices to clients [6].
• You can create an invoice by clicking on the “Create Invoices” icon on the home page or by selecting “Create Invoices” from the “Customers” menu [1].
• If you do not want to use an estimate, you can create an invoice from scratch, but this requires re-entering all the information [5].
• If you are managing inventory, you should not invoice items that you do not have in stock, as this will create a negative inventory transaction [7].
• Sales Receipts:
• A sales receipt is used when a customer pays at the same time the work is performed or the product is delivered [6].
• A sales receipt combines the invoice and the payment into a single transaction [6].
• It is an alternative to the invoice payment workflow [6].
• Customer Payments:
• Customer payments are recorded separately from invoicing, and this is for when payments are received after the work or service is complete [1].
• When you receive a payment, QuickBooks will ask you where to deposit the payment [1].
• You can record payments in cash, check, credit/debit card, or other payment methods, such as wire transfers [8].
• If a customer pays by check, it is recommended to record the check number in QuickBooks [8].
• If a customer makes a partial payment you can record that [6].
• QuickBooks Payments is a service that allows clients to pay electronically [8].
• Payments are typically deposited into a temporary account called “undeposited funds” before being deposited into a bank account [9].
• A deposit is recorded when the money is transferred from the undeposited funds account to a bank account [9].
• To record a payment, click the “Receive Payments” icon on the home page or select “Receive Payments” from the “Customers” menu [1, 6].
• To record a deposit, click the “Record Deposits” icon on the home page [9].

It is important to keep track of all estimates and invoices in your records and understand the difference between cash and accrual accounting. Accrual accounting recognizes income and expenses when they are incurred, whereas cash accounting only records income when payment is received and expenses when payment is made [10, 11].

QuickBooks Vendor Transaction Workflow

Vendor transactions in QuickBooks involve a workflow that begins with a purchase order, may include an item receipt, continues to a bill, and ends with paying the bill [1].

Here’s a detailed breakdown of the vendor transaction process:

• Purchase Orders:A purchase order is created when a business orders products or services from a vendor [1].
• Purchase orders can be created from scratch for inventory, or based on a sales transaction like an estimate or sales order [1].
• To create a purchase order, you can click the “Purchase Order” icon on the home page, select “Create Purchase Order” from the “Vendors” menu, or use the keyboard shortcut Alt + O + U [2]. You can also access purchase orders in the vendor center [2].
• You will need to select a vendor, and you can add a new vendor on the fly if needed [3].
• You can specify a “drop ship to” location, which is the customer’s address if the vendor is shipping directly to the customer [3].
• The purchase order number is automatically generated by QuickBooks and should not be manually changed [3].
• You can add a memo to the purchase order, such as a sales order or estimate number, that caused the need for the purchase order [4].
• You can add items to the purchase order, including quantity, description, and customer job for internal purposes [4, 5].
• If you know the shipping cost, you can add a freight or shipping line to the purchase order using the “other charge” item type [5, 6].
• Purchase orders can be printed, emailed, or saved with attachments [7, 8].
• Receiving Inventory:When the vendor ships the order, you can either receive the inventory with a bill or receive it without a bill [8].
• If you choose to receive inventory without a bill, it creates an item receipt, which is essentially a bill that doesn’t post to the “Pay Bills” window [8, 9].
• You can access the item receipt screen by clicking on “Receive Inventory” on the home page [8].
• When receiving inventory, you can select a vendor, which will prompt QuickBooks to show you any outstanding purchase orders from that vendor [9].
• You can choose to receive all or some of the items from a purchase order, and you can select multiple purchase orders to be included in a single item receipt [9].
• The items tab will display the items, quantity, and price from the purchase order, and you can specify a customer job associated with the item [10].
• If an item was ordered for a specific customer but you do not have an estimate or sales order, you can mark it as billable so that QuickBooks reminds you to bill the customer [10].
• You will also need to include the reference number, which is typically the invoice number from your vendor [10].
• The item receipt will update your inventory levels [11].
• You can convert an item receipt to a bill by checking the box labeled “Bill Received” at the top of the screen [8, 9].
• Alternatively, you can create a bill later based on an item receipt [12].
• If you choose to receive inventory with a bill, this skips the item receipt step, and goes directly to creating a bill from the purchase order [12].
• Bills:A bill is created when you receive an invoice from a vendor for goods or services [13].
• Bills can be created from an item receipt or a purchase order, or they can be created for expenses that do not involve a purchase order, such as utilities or rent [11, 13].
• To create a bill, you can click on the “Enter Bills” icon on the home page or select “Enter Bills” from the “Vendors” menu [13].
• You will need to select a vendor, and you can add a new vendor on the fly if needed [13].
• Bills that are related to items purchased or received are entered in the Items tab, while expenses that are not related to inventory are entered in the expenses tab [13].
• When entering a bill, you should include the vendor’s invoice number in the reference number field [13].
• Paying Bills:To pay bills, you can click on the “Pay Bills” icon on the home page or select “Pay Bills” from the “Vendors” menu [14].
• You can filter the bills you want to pay by due date, vendor, or reference number [15].
• The “Pay Bills” screen is used to record the payment, whether by check, credit card, wire transfer, or other method [16].
• You can sort the bills by date, vendor name, and other fields [15].
• You can see your bank balance in the “Pay Bills” window, which will be reduced by paying the selected bills [15].
• You can choose to pay bills with a check, which you can print from Quickbooks or write by hand; and if you write a check by hand, you will still need to record it in the “Pay Bills” window [16]. You can record the check number from the physical check in this window [16].
• If you pay by credit card or wire transfer, you will still use the “Pay Bills” window and select check as the payment method [16].
• You can pay selected bills, and choose which bank account the payment comes from [16].
• You can also pay bills using a debit card [17].
• Using the “Write Checks” function is not recommended for paying bills, because it does not properly link to accounts payable [14]. This can cause problems with your bank balance and with managing your payables [14]. The “Write Checks” function should only be used to pay a vendor or supplier in cases where you do not want to use the accounts payable feature [17].

It is important to note that the “Pay Bills” screen is used for recording the payment, not actually making the payment [16]. The actual payment is made through your bank, credit card company, etc.

QuickBooks Chart of Accounts

The chart of accounts is a fundamental part of QuickBooks, serving as the heart of the accounting system [1]. It is where all financial transactions are categorized [1].

Here’s a breakdown of key aspects of the chart of accounts:

• Purpose: The chart of accounts is a list of all the categories or financial accounts used to organize every transaction [1]. Each transaction is recorded under one of these categories [1].
• Accessing the Chart of Accounts:
• The chart of accounts can be accessed through the “List” menu, then “Chart of Accounts” [1].
• The keyboard shortcut to access the chart of accounts is Ctrl + A [1].
• If the home page is open, the chart of accounts can be accessed by clicking on the “Chart of Accounts” icon in the company section [1].
• Types of Accounts: The chart of accounts has two major types of account categories [1]:
• Balance Sheet Accounts: These accounts appear on the balance sheet financial statement [1]. They track what the company owns (assets), what it owes (liabilities), and the owner’s equity [2-4]. Balance sheet accounts have a running balance [1]. Examples of balance sheet accounts include:
• Assets: bank accounts, fixed assets (like trucks and equipment), accounts receivable [2].
• Liabilities: loans, credit cards, accounts payable [2].
• Equity: opening balance equity, retained earnings [2].
• Profit and Loss (Income Statement) Accounts: These accounts appear on the profit and loss statement (also known as the income statement) [1]. They track income, cost of goods sold, and expenses [1, 3, 5]. Profit and loss accounts do not carry opening balances [6]. Examples include:
• Income: consulting income, sales of hardware, training services [6].
• Cost of Goods Sold: subcontracted services, purchases of hardware [6].
• Expenses: insurance, automobile, travel, utilities, rent [7].
• Creating New Accounts:
• To create a new account, right-click within the chart of accounts and select “New” [2]. You can also click on the “Account” button at the bottom and select “New”, or use the shortcut Ctrl + N [2, 8].
• When creating a new account, you will need to select the account type (income, expense, bank, fixed asset, etc.) [2].
• Bank Accounts: When creating a new bank account, provide a name that easily identifies the account (e.g., “Wells Fargo Checking,” “Chase Savings”) [2]. You will need to enter an opening balance from the bank statement as of the day before the QuickBooks start date [9].
• When setting up a new account, it’s important to set the appropriate opening balance if there were prior transactions before the QuickBooks start date [9].
• When entering an opening balance for an asset, QuickBooks will automatically create a counterbalancing entry in the “Opening Balance Equity” account [10].
• Subaccounts: Accounts can have subaccounts, which provide further categorization. For example, “Insurance Expense” may have subaccounts for “General Liability” and “Health Insurance” [11].
• Editing and Managing Accounts:
• To edit an account, right-click on it and select “Edit” [7].
• To rename an account, edit the name, and save [12].
• To delete an account, right-click on it and select “Delete Account” [13].
• You can only delete an account if it has no transactions associated with it [13].
• To hide an account, right-click on it and select “Make Account Inactive” [13]. This does not erase the history [13].
• Inactive accounts can be viewed by checking the “Include Inactive” box [14].
• Inactive accounts can be reactivated by right-clicking and selecting “Make Account Active” or clicking on the “x” next to the account [14].
• Merging Accounts: If you have duplicate or redundant accounts, you can merge them by editing the name of the account you want to get rid of to match the name of the account you want to keep. QuickBooks will then prompt you to merge the two accounts [12].
• Linking Accounts to Items: It is important to understand the link between the chart of accounts and the item list. Income accounts and cost of goods sold accounts in the chart of accounts are essential for setting up items, particularly inventory items [8]. Each item (service, inventory part, etc.) needs to be linked to an appropriate income and/or expense account from your chart of accounts [15].
• Using the “Select from Examples” Button: When creating a new expense account, you can click the “Select from examples” button to select from a list of categories that you didn’t choose when setting up the company file [13].

Understanding the chart of accounts is crucial because it provides the structure for organizing all financial information in QuickBooks [1].

QuickBooks Financial Reporting

Financial reports in QuickBooks provide insights into a company’s financial performance and position [1]. Here’s a breakdown of key financial reports:

• Profit and Loss (Income Statement):
• The profit and loss statement (also known as the income statement) shows a company’s income, cost of goods sold, and expenses over a specific period [1, 2].
• It helps assess a company’s profitability [3].
• The report can be accessed through “Reports” menu, then “Company Financial,” then “Profit & Loss Standard” [1].
• The report can be customized by date range (today, this week, this month, this year, last year, or custom date range) [1].
• The report can be sorted by total amount or by default (alphabetical order of the account names) [1].
• The profit and loss report includes income statement accounts from the chart of accounts: income, cost of goods sold, and expenses [4].
• By default, QuickBooks only shows accounts with activity, but you can customize the report to show all accounts, even those with zero balances [4].
• Balance Sheet:
• The balance sheet shows a company’s assets, liabilities, and equity at a specific point in time [2, 4].
• It helps assess a company’s financial position [2].
• The report can be accessed through “Reports” menu, then “Company Financial,” then “Balance Sheet Standard” [4].
• The balance sheet includes balance sheet accounts from the chart of accounts: assets, liabilities, and equity [2, 4].
• The balance sheet is a more complete report than the profit and loss, because it includes the summary result of the profit and loss and additional information [3].
• Statement of Cash Flows:The statement of cash flows shows the movement of cash in and out of a company over a specific period [3].
• It explains the difference between net income and the actual money in the bank [5].
• The report can be accessed through “Reports” menu, then “Company Financial,” then “Statement of Cash Flows” [3].
• Accrual vs. Cash Basis:
• Financial reports can be generated using either the accrual basis or the cash basis [5].
• Accrual Basis:Accrual basis reports include all income and expenses, regardless of whether payment has been received or made [5, 6].
• Accrual reports will show accounts receivable (money owed by customers) and accounts payable (money owed to vendors) [6].
• Cash Basis:Cash basis reports only include income when payments have been received and expenses when payments have been made [6].
• Cash basis reports do not include outstanding invoices or bills [6].
• You can switch between accrual and cash basis by clicking on “Customize Report” and choosing the accounting method [6].
• It is important to use the same accounting method (either cash or accrual) for all reports to ensure the numbers tie together [6].
• Net Income:
• The net income from the profit and loss statement is linked to the balance sheet. The balance sheet includes the summary result of the profit and loss [3].
• The net income or loss from the profit and loss report is reflected in the equity section of the balance sheet [3].
• If the profit and loss and the balance sheet are viewed for the same period, the net income on both reports should match, whether on a cash or accrual basis [3, 6].

These reports can be customized by date range and other criteria [1]. It’s important to understand the differences between cash and accrual accounting methods and to choose the one that’s most appropriate for your business [6]. It is recommended to view the profit and loss statement in conjunction with the balance sheet rather than separately because they provide different perspectives of a company’s financial condition [6].

By Amjad Izhar
Contact: amjad.izhar@gmail.com
https://amjadizhar.blog

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