Archive for the 'Accounting' Category

Translating QuickBooks-Speak

Monday, December 5th, 2011

A Guide to QuickBooks Terminology

Quite a bit of the terminology QuickBooks uses on menus, dialogs and wizard windows needs translation. The phrases are created by people inside Intuit who have agreed among themselves what the words mean, but their concurrence on these terms doesn't always take the English language into consideration. They've created "insider jargon", which almost never works well when taken "outside". Anyone with a minimum understanding of the English language can make serious mistakes in QuickBooks by applying a logical interpretation of the words and phrases presented in the software.

Accountants and professional bookkeepers who train and support users need to look at the QuickBooks terminology they see on the screen with a fresh eye. Read it as if it were English, and forget that you know what it means in QuickBooks-Speak. That makes it easier to train users properly, and saves you the migraine you get trying to figure out why reports don't make sense.


Running QuickBooks 2012 Premier Editions Excerpt – Chapter 4

Wednesday, November 30th, 2011

QuickBooks Premier-Only Accounting Functions


The QuickBooks Premier editions include features that provide efficiency, power, and added value to your accounting tasks. These features, which are unique to the Premier editions, are the subject of this chapter.

Some of these features are only available in certain Premier editions, and We’ll note those restrictions when discussing those features.

Journal Entries

Journal entries provide a quick and efficient way to create transactions directly in the general ledger (such as depreciation entries), and to fine tune existing account balances (for job costing, class assignments, or allocation across classes). The Premier editions offer some nifty features that add convenience and power when you're creating journal entries.

If you're tracking classes, you can use a journal entry to post existing transactions to a class. All you have to do is journalize the appropriate totals by moving amounts in and out of the original accounts, and adding the class information to each line of the JE. This is a great way to allocate overhead expenses to the divisions, departments, or programs (in nonprofit organizations) for which you established classes.

Similarly, journal entries provide a way to add job costs to existing account totals; merely create a JE that applies a customer or job against existing postings.

Entering a single JE transaction to include class or job information to multiple previous postings is faster than editing each original transaction to add the class or job.

However, we frequently hear from business owners and accountants about JEs created for job costing that don't seem to work. The job costing reports don't reflect the information that was entered in the JE.

Fine-tuning your account balances with JEs can be a trip down a rabbit hole if you don't understand the way QuickBooks stores information contained in JEs (see the section " JE Source and Target: Solving the Mystery ").

NOTE: We use the term journal entry, and abbreviate it JE, out of habit. QuickBooks call this transaction type a General Journal Entry, and uses the abbreviation GJE.

Adding a JE Icon to the Icon Bar or Favorites Menu

If you use journal entries frequently, add an icon to the icon bar, using the following steps:

                   1.  Choose Company | Make General Journal Entries to open a blank GJE window.

                   2.  On the QuickBooks menu bar choose View | Add "Make General Journal Entries" to the Icon Bar.

                   3.  In the Add Window To Icon Bar dialog you can change the default Label or Description text, and also change the default graphic for the icon.

                   4.  Click OK to place the icon on your icon bar.

The text in the Label field represents the text that displays under the icon on the icon bar. The text in the Description field is the text you see when you hover your mouse over the icon (also called a tooltip).

If you prefer to use the Favorites menu instead of the icon bar, use the following steps:

                   1.  If the Favorites menu isn’t on the Menu Bar, add it by choosing View | Favorites Menu.

                   2.  When the Favorites menu appears, choose Favorites | Customize Favorites, which opens the Customize Your Menus dialog.

                   3.  In the left pane (labeled Available Menu Items), select Make General Journal Entries.

                   4.  Click Add to move your selection to the right pane (labeled Chosen Menu Items).

                   5.  Click OK to add this command to your Favorites menu.

AutoFill Memos in Journal Entries

In QuickBooks Pro, the text you enter in the memo field of any line in a journal entry stays with that entry line. This means you see your comments when you open the register for the account that entry line posted to.

For example, if you are entering a journal entry for a correction your accountant told you to make, you could enter the comment “Bob’s Memo-5/4/13” (assuming your accountant’s name is Bob).

Most people enter memo text only in the first line of the journal entry. Later, if they view the register of one of the accounts involved in the JE (the accounts below the first line) there’s no text in the memo field. You don’t see any explanation for the transaction unless you open the original transaction. To avoid that problem, some users enter (or copy and paste) the text in the memo field  manually, on each line of the General Journal Entry. That’s extra work!

QuickBooks Premier editions offer a clever feature called AutoFill Memo In Journal Entry. This means that the text you enter in the Memo field on the first line of the transaction is automatically entered on all lines of the transaction. When you view the register of any account  involved in the journal entry, the memo text is available to help you  remember or understand the reason for the transaction.

This feature is enabled by default in the Preferences dialog, on the My Preferences tab of the Accounting section. If your memo text isn’t repeated on the second line of your JE, somebody disabled the feature. Choose Edit | Preferences, select the Accounting section of the  Preferences dialog, and enable it.

TIP FOR ACCOUNTANTS: For your clients who aren’t using one of the QuickBooks Premier Editions, you might want to pass along the suggestion to copy and paste memo text to every line of a JE. This means you’ll know the reason for the JE when you see it in an account register. Without the memo, you have to open the original transaction to see the memo that appeared only on the first line.

Auto Reversing Journal Entries

To create an auto reversing journal entry, open the Make General Journal Entries window by choosing Company | Make General Journal Entries.

While the Help files declare that only the QuickBooks Premier Accountant and Enterprise Editions provide the ability to reverse journal entries, the feature is actually available in all Premier editions, including the new Professional Bookkeeper Edition.

To create a reversing journal entry follow these steps:

                   1.  Enter the data for the journal entry.

                   2.  Click the Reverse icon (instead of clicking Save & Close, or Save & New).

                   3.  QuickBooks displays the Recording Transaction dialog to tell you that you haven’t recorded your entry, and offers to save it. Click Yes to record the entry.

                   4.  The GJE window displays the reversing entry (don’t worry, the original entry was saved, click Previous to see it if you don’t believe me).

                   5.  Click Save & Close if you’re finished with the GJE window; click Save & New to enter another journal entry.

The Reversing Entry is automatically dated the first day of the following month, but you can change the date. If you’re using automatic numbering for GJE transactions, the reversing entry number has the format xxxR, where xxx is the number of the original journal entry.

Adjusting Journal Entries

Available only in QuickBooks Premier Accountant Edition, this feature lets you specify a journal entry as “Adjusting”. The GJE window includes a check box labeled Adjusting Entry, which is enabled by default.

The way QuickBooks reports on adjusting entries, compared to  journal entries that aren’t designated “adjusting”, is inconsistent. After you create an adjusting entry, when you view the registers of the affected accounts, the transaction type is GENJRNL. That’s the same transaction type that QuickBooks records for a journal entry that’s not configured as an adjusting entry.

QuickBooks has a built-in report of adjusting entries that you can see by choosing Reports | Accountant & Taxes | Adjusting Journal Entries. This report, like the feature, is only available in Premier Accountant  Edition. Also available in Premier Accountant is the Show List Of Entries features. Click the Show List button on the Main tab to see a list of GJEs to which you can apply a date filter.

Discussing adjusting entries always makes me want to ask, "What's the difference between an adjusting entry and any other type of journal entry; aren't all JEs adjustments?" So, I literally asked the question of my own accounting firm, and the answers I received indicate that the difference is subtle, but apparently understood by all accountants. One of the accountants replied, "It's really a distinction without a difference; an adjusting journal entry is posted to correct or update an account in the general ledger." Another accountant added, "Often when referring to an adjusting entry, the term is used in the sense of preparing a financial statement and not as a permanent entry; it's often reversed the next  day".

Send GJEs

A potentially handy feature for accountants has been added to the Premier Accountant Edition (and only the Accountant Edition) called Send GJEs. The concept is fairly straightforward. Much of the work done in client files is journal entries. This feature allows you to create journal entries in your copy of the client’s file while the client is still working in his, and then send the new journal entries to the client for import. There’s no need for an Accountant’s Copy and its inherent restrictions.

Using the feature is also quite simple. You have two ways to access the Send General Journal Entries window:

                    •  Use the Make General Journal Entries command (Accountant | Make General Journal Entries). When you need to create a new JE to send to the client use this command. After you create the GJE(s) click the Send GJEs command to open the Send General Journal Entries window (see Figure 4-1).

                    •  Use the Send General Journal Entries command. If you want to send existing journal entries go directly to the Send General Journal Entries window by choosing Accountant | Send General Journal Entries.


Figure 4-1: Choose the existing JEs to send

Once in you’re in the Send General Journal Entries window it’s a simple mater of locating the appropriate journal entries, checking them off, and either e-mailing them as attachments or saving them as files to be sent later. When the client receives the file all she has to do is import it.

TIP: If your client is savvy enough to make decisions about which journal entries to import, you can check the Allow Recipient To Select Which GJEs To Post To File option. It is not checked by default, which means the client will be forced to import all or none unless you enable the option.

When the client receives the file, all she has to do is select File | Utilities | Import General Journal Entries to locate the file, and open it in the Add General Journal Entries To Your File window. From there she can review and add the GJEs.

Writing Off Old Unpaid Invoices in QuickBooks

Monday, November 28th, 2011

How to Write Off Unpaid QuickBooks Invoices

We frequently receive queries from QuickBooks users about the process involved in writing off old A/R balances. Some users want to create a credit with the date of the open invoice; other users ask whether they should use the current date. Some users ask whether they have to use the same item used on the original invoice.

For the question about dates, the rule is simple. NEVER enter a QuickBooks transaction dated in a previous tax year. Your books match your tax return so the numbers can’t be changed.

For the question about the item to use, I prefer to create a QuickBooks item named Writeoffs and link it to an Income account named Writeoffs or Prior Year Writeoffs (posting credits to this account produces a negative income total, and your accountant may prefer to make this account an Expense account). The advantage of this is that it makes it easy to track and report on your write-offs. If you’re writing off receivables that are several years old, the amount may be substantial. Since this lowers your net profit, your accountant (or the IRS) may want to know why this year’s net profit is lower than previous years. The ability to isolate the write-offs (with an Item report or a report on the Write-offs Income account) makes what you did quite clear.

After you create the credits, you have to use Receive Payments to apply the credits to the open invoices. If you don’t, the old invoices will continue to appear on QuickBooks aging reports, even though the customer now has a zero balance.

Remember that write-offs are not the same as Bad Debts. If you file taxes on a cash basis, you don’t have bad debts. Consult your accountant about the way to proceed before you decide to write off overdue amounts in QuickBooks.

Excel for Accountants 2nd Edition Excerpt – Chapter 5

Friday, November 25th, 2011

Excel Tools for Accountants

I’m on the phone with Frank while I’m driving on the 405. (I’m not breaking the law, because the state legislature thinks it’s distracting to hold a cell phone but not to speak via Bluetooth.) Frank, who does all the accounting for my company, has some strong opinions about Excel. He uses it frequently at his clients’ sites, where he pulls data together from various sources to construct cost and income analyses. Sometimes he does this as part of an audit, sometimes simply as a matter of making a point he wants the client’s managers to appreciate.

What Tools do Accountants Need?

That, says Frank, is why he uses Excel. The formatting that he can get into the reports, and the charts that he can create, are so good that his clients aren’t distracted by lousy appearance. Instead, they concentrate on the message that Frank’s trying to get across.

Frank tells me that he’s faithfully taken courses in Excel every time a new version comes out. He feels duty bound to do that, but by now he’s really questioning how much benefit he’s gotten from those courses – even when all the Microsoft Office applications switched from the traditional menu structure to the Ribbon. The courses teach him how to format a working capital analysis, how to create a chart of budget variances, and where to go for a page-break preview of a worksheet.

But the courses never seem to get to tools that would really make his on-site time more effective. It’s ridiculous, Frank says, but he seems to have to type the names of the months and quarters into worksheets every time he visits a client. Same thing with a chart of accounts. Ditto repetitive formulas and statement footings.

I explain to Frank that he can get Excel to do those things automatically. I also ignore him muttering, “This is so cool,” as I walk him through automatically getting month names onto a worksheet. Frank wants more, but it occurs to me that I’m not absolutely certain he’s off the clock, so I say goodbye and concentrate on avoiding a swarm of SUVs as I merge onto the 5. I try not to dwell on a news story that California drivers carry more guns in their glove compartments than insurance policies.

And I resolve to start writing a chapter when I get home. The chapter will discuss some tools that those Excel courses never seem to get around to.

Accounting Savvy for Business Owners – Excerpt Chapter 4

Friday, November 25th, 2011

Petty Cash Expenses

Accountants frequently receive questions about how to handle cash layouts for business expenses. Usually, the questions involve one of the following scenarios:

  • Someone used cash or a personal credit card to buy something for the company and that person needs to be reimbursed.
  • Someone used the debit card for the business account to withdraw cash and didn’t use all of that cash for a business expense; the remaining cash needs to be tracked.
  • Someone is going to be traveling for the company and needs cash in advance (and will need to return unspent cash).

There are other scenarios similar to these, but the ultimate question is, “How do I manage cash transactions that fall outside of the usual data entry for vendor bills and payments”?