Archive for February, 2012

Re-issuing a Lost Paycheck in QuickBooks

Wednesday, February 29th, 2012

How to Re-issue a Lost QuickBooks Paycheck

A bookkeeper wrote to tell us that an employee accidentally destroyed a paycheck. To make it more complicated, the paycheck was the last paycheck for the quarter, and the liabilities for the month and quarter had already been paid. The bookkeeper voided the original paycheck in QuickBooks, and created a new one for the original date. Now, the liabilities are showing up again, awaiting payment.

You can't manage the replacement of paychecks in QuickBooks the same way you manage the replacement of lost or destroyed vendor checks. It's more complicated than that, but if you follow these step- by-step instructions, it's easy to accomplish this task.

  1. Don't void the original QuickBooks paycheck.
  2. Create the employee as an Other Name. You have to use a variation of the name in the Name field, because QuickBooks won't allow duplicate names in your company file.
  3. Use the QuickBooks Write Checks function to write a check for the NET amount to the Other Name entry. Post the check to any expense account (e.g. Misc expenses).
  4. Print the check, write down the check number, and give it to the employee.
  5. Open the bank register and find the original check (the one that was lost). Write down the check number. Edit that original check so it has the same check number as the one you just issued. When QuickBooks asks if it's OK to have duplicate check numbers, say Yes.
  6. Edit the check you just wrote to the Other Name. Change its number to the old check number (the check that was lost or destroyed).
  7. Now that the new check has the old number, void it.

Your records account for the used check number in the voided check, the correct check number for the check that the employee will deposit, your liabilities haven't changed, the W-2 will be correct, the Other Name listing and the expense account you used does not show a balance for this transaction in QuickBooks.



No Bad Debt Write-off in QuickBooks Cash Method Accounting

Monday, February 27th, 2012

How to Write Off Bad Debt in QuickBooks

We've had quite a few readers write to us to complain that their year end cash basis Balance Sheets and Trial Balances were out of balance. When we asked them to search for a transaction in an amount equal to the difference, all of them replied that the amount was a bad debt write-off. All of them said they followed the instructions in the QuickBooks Help Files to write off the unpaid amount as a bad debt. All of them also told us that their accountants told them to use a bad debt write-off (accountants who advertise themselves as supporting QuickBooks should know better, but unfortunately we hear about these things quite often).

If you report on cash basis instead of accrual, there's not really any such thing as a bad debt. After all, you don't recognize the income from the unpaid invoice, so if the income doesn't exist how can you have a bad debt?

The QuickBooks Help files outline the correct steps for posting a bad debt; however, they should contain text that warns you that you cannot take these steps if your business is cash-based (perhaps that text should be bold, or in color, or flashing on your screen – anything to get your attention).

Editor's Note: Help files in recent versions of QuickBooks contain a "Bad Debt Overview" that does mention (but without emphasis or further explanation) accrual accounting. If you want to write off an unpaid receivable in a cash based business, create a Credit Memo and apply it to the unpaid invoice(s). You also have to void the transaction you created to apply the balance as a bad debt. To accomplish this, open the account register for the expense account you created for bad debts, void the transaction(s) and then delete that account.


Tracking Subcontractor Rates in QuickBooks

Thursday, February 23rd, 2012

How to Track Subcontractor Rates in QuickBooks

A reader explained that he had many subcontractors, and each contractor has an hourly rate. He wanted to know how to track the rates easily, and would really like the correct rate to come up automatically when he's writing checks in QuickBooks.

If you need the correct rate to appear automatically, you have to use QuickBooks Items instead of posting the check to an expense account. Set up a Service Item for each contractor. Actually, it's best to create a Service Item named Subcontractors and make each subcontractor's rate a subitem (e.g. Smith, Jones, etc), so they appear contiguously in the drop-down list when you write a check. Otherwise, you have to search for each name alphabetically in your Items list. Make sure the item is linked to the expense account you use for 1099 reporting (usually "Subcontractors" or "Outside Services").

Another method is to rename the contractor to include the rate, such as Smith-50 if subcontractor Smith charges you $50.00/hour. Remember that vendor names don't have to be the Payee name, because QuickBooks lets you specify the Payee name in the vendor record (use the Print On Check As field on the Address Info tab). While this doesn't automatically enter the rate in the line item, it puts the data in front of you and you can easily fill out the check using the Accounts tab instead of moving to the Items tab. This is useful if you sometimes pay the subcontractor for hours (reported on the 1099) and also reimburse the contractor for materials (which is posted to the appropriate expense using the Accounts tab).


Changing Account Numbers in QuickBooks

Tuesday, February 21st, 2012

How to Modify QuickBooks Account Numbers

Readers frequently write to ask us how to increase the number of digits in their account numbers. Usually, they want more digits so they can fine-tune their chart of accounts and they’re running out of numbers. Many of these readers have figured out that the way to increase the number of digits is to open each account and type in a new number (you can use up to seven digits, and many readers have company files that have been in use since early versions of QuickBooks, when the default number of digits was four).

Changing QuickBooks account numbers one at a time is onerous, time consuming, and exceedingly annoying. Here’s a better way.

From the QuickBooks menu bar, choose Files | Utilities | Export | Lists To IIF Files, and select the Chart of Accounts as the list to be exported. Open that file in Excel and change the account numbers in the ACCNUM column. You can use Excel’s shortcut functions to automate this process.

For example, let’s say your Insurance Expenses are currently numbered 6100 for Insurance (the parent account) and you have subaccounts numbered 6110-Automobile, 6120-Building, 6130-Liability, 6140-Workers Comp, and so on. You want to move to a six-digit account number in QuickBooks. In Excel, change 6100 to 610000, and change 6110 to 610100. Select both cells and drag down to see that Excel will follow this pattern, numbering the next account 610200, and continuing the pattern.

Even if you’re going to enter the new account numbers manually, it’s faster in Excel than in QuickBooks, where you have to select each account, press Ctrl-E to edit the account, enter the new number, and click OK.

Save the Excel file as an IIF file (which is really a delimited text file) and import it back into your QuickBooks company file (Files | Utilities | Import | IIF Files).


Mystery QuickBooks Credit Balances

Sunday, February 19th, 2012

How to Record QuickBooks Cash Sales Correctly

Several times each week we receive a query that reads something like this: "Many of my customers have credit balances, and I've never used the QuickBooks Credit Memo function. What is going on?" When we write back and ask if they ever collect payment at the time of the sale (a cash sale), they respond in the affirmative.

What's the problem?

Here's the answer:

When this happens, it's almost always due to the fact that the user is selecting Receive Payments from the QuickBooks Customers menu or the Home Page. The Receive Payments transaction is for receiving payment on an existing invoice, and automatically posts a credit to Accounts Receivable. When you have a cash sale, you must use the Sales Receipt transaction. (There are other ways to create an unwanted credit accidentally, but 90% of the time, the problem is caused by using Receive Payments when no invoice exists.)