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QUICKBOOKSTIPS:CustomerDepositsorPrepayments(UsingCustomerEstimates/Bids)

HerearethestepsforrecordingaCustomerDeposit/Prepayment&thenthefullpaymentwhenthe invoiceiscreated: CreateCustomerDeposit/PrepaymentorsomethingsimilarasanewaccountintheChartof Accounts.TheaccounttypewillbeOtherCurrentLiability. InyourItemList(ListsItemList),createanitemcalledCustomerDeposit.Theitemtype willbeserviceorothercharge.Theprice/amountcanbeblank.ChooseCustomerDepositas theaccount. CreateanEstimateforthefullamountofthecustomerbill.Theitemusedshouldbelinkedtoa Sales/IncomeAccount. Theneachtimeyouacceptadeposit/prepayment,followthesesteps: 1. FromthehomescreenchooseCreateSalesReceipts. 2. ChoosethecustomerorclickAddNewandaddthem. 3. Selectthedateyoureceivedthedeposit. 4. UnderItemchooseCustomerDeposit. 5. UnderAmount,puttheamountyoureceived. 6. SaveandClose. 7. FromthehomescreenchooseRecordDeposits. 8. Findthatdepositamount,checkitanddepositit.Makesureitmatcheswithwhatyouactually depositedatthebank. Atthispoint,yourBalanceSheetwillshowtheamountofthedepositinyourcheckingaccountandthe amountofthedepositinCustomerDepositstheothercurrentliability Then,whenyoucreatethefullcustomerinvoice/salesreceipt: 1. GotoEdit>Findandfindtheestimatethatwascreatedforthiscustomer.Atthetopofthe estimate,clickonCreateInvoice.Thefirstlineonthenewlycreatedinvoicewillbethefull amountoftheestimate. 2. Online2,chooseCustomerDepositastheitemandintheamountcolumnputintheamount oftheirdepositasanegative.(ThiswilltakeitoutoftheOtherCurrentLiabilityaccount.) 3. Theremainingcustomerbalancewillcalculateontheinvoice.

Providedby:JenniferPontinen,ProfessionalBusinessConsultant UMDCenterforEconomicDevelopmentNEMNSmallBusinessDevelopmentCenter jpontinen@umdced.com/218.749.7752

QUICKBOOKSTIPS:CustomerDepositsorPrepayments(withoutEstimates/Bids)
HerearethestepsforrecordingaCustomerDeposit/Prepayment&thenthefullpaymentwhenthe invoiceiscreated: CreateCustomerDeposit/PrepaymentorsomethingsimilarasanewaccountintheChartof Accounts.TheaccounttypewillbeOtherCurrentLiability. InyourItemList(ListsItemList),createanitemcalledCustomerDeposit.Theitemtype willbeserviceorothercharge.Theprice/amountcanbeblank.ChooseCustomerDepositas theaccount. Theneachtimeyouacceptadeposit/prepayment,followthesesteps: 1. FromthehomescreenchooseCreateSalesReceipts. 2. ChoosethecustomerorclickAddNewandaddthem. 3. Selectthedateyoureceivedthedeposit. 4. UnderItemchooseCustomerDeposit. 5. UnderAmount,puttheamountyoureceived. 6. SaveandClose. 7. FromthehomescreenchooseRecordDeposits. 8. Findthatdepositamount,checkitanddepositit.Makesureitmatcheswithwhatyouactually depositedatthebank. Atthispoint,yourBalanceSheetwillshowtheamountofthedepositinyourcheckingaccountandthe amountofthedepositinCustomerDepositstheothercurrentliability. Then,whenyoucreatethefullcustomerinvoice/salesreceipt: 1. FromthehomescreenchooseCreateInvoicesorCreateSalesReceipts. 2. Online1,putinthequantityandchoosetheitempurchased. 3. Online2,chooseCustomerDepositastheitemandintheamountcolumnputintheamount oftheirdepositasanegative.(ThiswilltakeitoutoftheOtherCurrentLiabilityaccount.) 4. Theremainingcustomerbalancewillcalculateontheinvoice.

Providedby:JenniferPontinen,ProfessionalBusinessConsultant UMDCenterforEconomicDevelopmentNEMNSmallBusinessDevelopmentCenter jpontinen@umdced.com/218.749.7752

QuickBooks Tips: ACCOUNT TYPES


Income Statement Accounts
Income: The income received from business activity selling the companys products and/or services. It is also known as Revenue or Sales. Cost of Goods Sold: The direct costs incurred in selling a product or service. For example, in a retail store, the cost of the products for sale is a direct cost. Or, in a manufacturing business, the cost of the raw materials, the cost of the labor to manufacture the product, and the operational costs of the equipment could all be considered cost of goods sold. Expense: A cost of doing business, not including Cost of Goods Sold. Included here are expenses that cannot be directly traced to the manufacture or sale of the companys product. This includes things like advertising, office supplies, bank charges, etc. Other Income/Expense: Income or Expenses that are not associated with normal business operations or do not occur in the normal course of business. This may include things like Interest Expense or Interest Income.

Balance Sheet Accounts


Asset: Anything the company OWNS. There are two main categories of Assets. Current Assets are those that are easily converted to cash or will be used up in one year or less. This includes things such as Checking Accounts, Savings Accounts, Accounts Receivable, and Inventory. Fixed Assets have a useful life of more than one year such as buildings, equipment and vehicles. Their cost is recorded on the Balance Sheet and each year, a portion of that cost is deducted as depreciation. Depreciation reduces the value of the asset on the Balance Sheet and shows on the Income Statement as Depreciation Expense. Depreciation Expense reduces the companys profit which, in turn, reduces the companys income tax liability. Assets can also be classified as tangible and intangible. Tangible Assets are physical assets the companys fixed assets. Intangible Assets consist of things such as patents, goodwill, and startup costs. These things do not have a physical presence but they do have value. Like fixed assets, the value of intangible assets is reduced over time in the form of Amortization. Liability: Anything the company OWES. Like assets, liabilities are also split into Current Liabilities (come due in one year or less) and Long-Term Liabilities (come due in more than one year). Current Liabilities include Accounts Payable, Lines of Credit, Business Credit Cards, and the portion of long-term debt that will be paid within the upcoming year. Long-Term Liabilities include things like Installment Loans, Business Real Estate Mortgages, and Loans from Shareholders. Equity: The difference between Assets and Liabilities. Equity accumulates over time but is not cash. It is made up of the owners initial and ongoing personal contributions to the business and profits that the company has made over time that have been reinvested in the business. This equity could be found in various places throughout the business. It may be in a checking or savings account, it may be tied up in Accounts Receivable, it may have been used to purchase Inventory, or it may be invested in vehicles, equipment and buildings.

Providedby:JenniferPontinen,ProfessionalBusinessConsultant UMDCenterforEconomicDevelopmentNEMNSmallBusinessDevelopmentCenter jpontine@d.umn.edu/218.749.7752

QuickBooks Tips: Advance Payments to Vendors There are two ways to handle this: Negative Payable 1. Write a check from your bank account made out to the vendor. For the expense account select "Accounts Payable" and for the customer name select the vendor name. 2. When you receive the merchandise go to the "Enter Bills" window and select the vendor. Enter the Full Amount of the transaction without the discount for the advance 3. On the Pay Bills window select the vendor as well as the invoice and hit the button that says apply credits. This will apply the vendor deposit to the balance of the payable. Vendor Deposit Asset Account 1. Create an "other current asset" account called vendor deposits 2. Write a check using the "Write checks" window and select the account Vendor deposits that you created 3. When the inventory is received go to the "Enter bills" and enter the full amount. For the expenses side select the account "vendor deposit" and input the amount of the deposit as a NEGATIVE number, this will reduce the balance in the asset and show whatever you owe to the vendor

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: Bad Checks, Bad Check Fees & Collection Costs
First, you will need to create some items and accounts. This is just once. Go to Lists then Items and at the bottom left select Item and New. Create an Other Charge in the dropdown list. Call it Bounced Check. Choose Non-tax and make the account your checking account. Click Ok Go to your Chart of Accounts and create two expense accounts one is Bad Check Fees and one is Collection Costs. When you get a notice of a bad check, go into Write Checks and write a check to the bank. The check number should be debit or something like that. On the bottom of the page, choose the Bad Check Fees account. Then choose the customer that it should be charged to. You may have to create each customer as it occurs (just hit add new under customer and enter their name and address). The Billable? column will have a check mark. Choose the class and hit save. On the home screen, go to Enter Bills and enter a bill for the collection company. Choose the Collection Costs account. Also, select the customer it should be charged to. Then, go into Create Invoices on the home screen. When you select the customer, a box should pop up saying there are unbilled charges. Select that you want to enter those on this invoice. Then in the next pop-up box, you will find both the bad check fee and collection fee under the Expense tab. Put a check mark by both and hit done or ok. Both will show up on the invoice. On a separate line on the invoice, add the Bounced Check item and put the amount of the check under amount. You should then have a total invoice for them. If you want, you can print and mail this invoice to them. QuickBooks also has a bounced check letter to go with it. I am sure your collection company takes care of that, but you can do that if needed. When you get paid, go to Receive Payments on the home screen and select that customer. You can then accept the amount of the payment and apply it to that invoice so the invoice shows as paid. At the end of the year, the unpaid invoices will be sitting out there and you can determine if you are going to write them off or not. Then we would do a journal entry to clear out the invoice and charge it to Bad Debt Expense. If you do not use a Collection Agency for bad checks, you can simply eliminate that step.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: BUSINESS CREDIT CARDS


Credit Cards that are in the business name should be included in QuickBooks. First, create a new account for each credit card. This is actually a liability account, but QuickBooks does have an account type called Credit Card - use this account type. Once this account is created, a new icon will be placed on your QuickBooks home screen called Enter Credit Card Charges. You may also need to create an Expense account called Credit Card Finance Charges. Each time you use the business credit card, the receipt/charge should be entered under Enter Credit Card Charges and categorized in the appropriate expense category (ex. Office Supplies Expense, Repairs & Maintenance Expense, etc.). When you get the end-of-month credit card statement, go to Reconcile on the home screen and choose to reconcile the Credit Card account. Check off charges and payments just like you would when reconciling your checking account. Enter any finance charges that have accrued these will post to Credit Card Finance Charges (debit). Once all transactions are matched and the account is reconciled, QuickBooks will ask if you would like to write a check for the statement amount or if you would like to enter a bill to be paid later. Choose what you would like to do. Enter the name of the credit card company as the vendor to pay; however, DO NOT change the account (Credit Card) listed under the expense tab toward the middle/bottom of your screen.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QB Tips: Creating a New Company File a.k.a Starting Over


The first part to create your data file without information is easy. Go to File New Company and follow the screens to select the appropriate preferences for your type of company. In 5 minutes or less, you have a new company file to work with. Next you need to import and export vendors, customers, chart of accounts, etc. Go back to the OLD company file. Go to File Utilities Export. Choose Accounts, Items, Customers, Vendors, Employees, and any other list you would like to bring over. Save these lists somewhere on your computer. To make it easier to find them, I suggest saving them to your desktop. They will be saved in iif format. Go to the NEW company file. Go to File Utilities Import. Search for the lists stored in iif format. Select them and bring them into the new company. Clean up the old data by deleting unused vendors, customers, etc. (Yes, import the old data first and then delete the unwanted items.) You now have a file with all the bones of your company but still no data. To export Custom Templates, in the OLD company file, go to Lists Templates. Highlight the template you wish to export, then click Templates on the bottom left of the screen. Click Export and save it on your desktop as an iif file. Follow the Import directions above to bring it into the NEW company. Run a trial balance from the OLD company file by going to Reports Accountant & Taxes Trial Balance. If the Balance Sheet of your OLD company file is inaccurate, this Trial Balance will also be inaccurate. To ensure that your NEW file starts with accurate opening balances, collect the following data which will be included in an opening balance journal entry: Bank account statements from the previous month and the previous 12/31/xx. Loan balances as of the most recent payment and the previous 12/31/xx. Business credit card balances as of the most recent payment and the previous 12/31/xx. Line of credit balances as of the previous month and the previous 12/31/xx. Fixed asset (buildings, equipment, vehicles, furniture, etc.) values as of the previous 12/31/xx. Make the opening balance journal entry as of 12/31 of the previous year by going to Company Make General Journal Entries. In order to ensure proper future entries, also have available: Loan documents that show the original amount, maturity date and interest rate. Depreciation schedule for fixed assets (from prior year tax return typically CPA prepared). Input accounts receivable and accounts payable outstanding balances by rebilling invoices and re-entering outstanding bills you owe. DO NOT include these amounts in the journal entry. Gather the following information for this step: Invoices billed to customers in the current year. Invoices billed to customers in the previous year which are not yet paid. Checks written to pay bills in the current year. Checks written to pay bills in the prior year which have not yet cleared the bank. Begin using your company file.

Provided by: Jennifer Pontinen Business Consultant UMD Center for Economic Development NE MN Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: Customer Invoices & Payments


Be sure to follow this three step process in order to record customer payments correctly. 1. From the home screen, click Create Invoices and create an invoice for each individual customer, choosing items from your item list. This creates an Accounts Receivable balance for each customer with an invoice that has not been paid. 2. When each customer pays you, click on Receive Payments. On this screen, you will enter the payment amount and method of payment and you will also place a checkmark by the invoice the payment will be applied against. The payments received will be cleared out of Accounts Receivable and placed into an account called Undeposited Funds. 3. Once you deposit the checks, you will click on Record Deposits. A screen will pop up and you will be able to mark which checks will be included in that particular deposit. Once the deposit is recorded in QuickBooks, your checking account balance in QuickBooks will include that amount.

If you do not invoice your customers, then this is simplified into a two step process. 1. Record the sale and payment by choosing Create Sales Receipts from the home screen. The payment received will be placed in Undeposited Funds. 2. Follow Step #3, above.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: Employee Advances


First, you will need to create a couple accounts. This is only necessary once. Go to Chart of Accounts. Create an Other Current Asset account called Employee Advances. Go to Payroll Item List. Create a deduction payroll item called Employee Advances Repayment or something similar. This item should not have any tax treatment. For the liability account that it is linked to, use Employee Advances that you just created above.

When an employee requests an advance, go to Write Checks from the QuickBooks Home Screen. Write the employee the check for the appropriate amount and use the Employee Advances Current Asset Account as the account. In order to deduct the repayment of the advance from the employees check, enter the payroll deduction Employee Advances Repayment under Additions, Deductions, etc. on the employee paycheck detail. As long as this deduction is set up with the correct tax treatment (see above), taxes will still be withheld on the total (gross) employee pay, but the net amount given to the employee will be reduced by the amount of the advance.

Provided by: Jennifer Pontinen Business Consultant UMD Center for Economic Development NE MN Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooksTips:EnteringSecurityDepositsAcceptedandRefundingSecurityDepositsReturned InyourItemList,createanOtherChargecalledSecurityDeposit.Theaccountthatthisgoestowould betheOtherCurrentLiabilitycalledSecurityDepositNameofTenant.Eachtimeyoureceivea deposit,enteraSalesReceiptandchoosethatitem.Itwillthenincreasetheliabilityandoncedeposited increaseyourcheckingaccountbalance.Then,whenyourefundit,justreversethattransactiontoclear outtheliabilityandreduceyourcheckingaccountbalance.Ofcourse,ifpartofthedepositwillnotbe refunded,createachecktothetenantforthecorrectamount.Theaccountusedonthecheckwillbe theOtherCurrentLiabilityaccountthatwasusedintheoriginaltransaction.Then,createajournalentry bygoingtoCompany>MakeGeneralJournalEntries.TheentrywilldebittheOtherCurrentLiability AccountthatwasoriginallyusedandcreditanincomeaccountsuchasSales,FeeIncome,OtherIncome, etc.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QUICKBOOKS TIPS: Entering Sales from Your Daily/Weekly/Monthly Sales Reports


(with Accounts Receivable tracking)

Create a new customer called Sales Summary. (First time only) Go to Create Invoices on the Home Screen. Customer Sales Summary Class Choose Class Date End of week or month Line 1: Item Sales Summary Enter total amount of customer sales

Save & Close

Go to Receive Payments on the Home Screen. Received from Sales Summary Amount Total amount received In the bottom left corner it will ask what you want to do. Select Leave as underpayment. That amount will show up in Accounts Receivable. Every time you do this process after the first time, you will want to make sure to first check the invoice listed in the middle that has the oldest date, then the next oldest, then the next, etc. Save & Close

Go to Record Deposits on the Home Screen. Place a check-mark in front of the payment we just created. Deposit it to the checking account.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: FINANCIAL STATEMENTS


Although QuickBooks can generate many different reports, not all reports will be useful to all companies. However, at a minimum, there are two reports that EVERY business should run on no less than a MONTHLY BASIS: the Income Statement and the Balance Sheet. Income Statement Reports the activity of the business during a specific period of time No more than a year (Calendar or Fiscal) Includes the following broad categories Revenues/Sales - Cost of Goods Sold = Gross Profit - Operating Expenses = Operating Profit - Other Income and Expenses = Net Profit (Loss) The Net Profit (Loss) at the end of each year moves over to Retained Earnings (Equity Account) on the Balance Sheet. Balance Sheet Reports the cumulative record of business activity since the business opened Shows the financial position of the business at one point in time. The Balance Sheet equation is Assets = Liability + Net Worth/Equity. In other words, company Assets are financed in one of two ways. They are either financed by debt (liabilities) or financed by the companys capital (equity). Assets Current Assets Liabilities and Net Worth/Equity Current Liabilities

Use within one year


+ Fixed Assets

Payable within one year


+ Long Term Liabilities = Total Liabilities + Net Worth/Equity

At cost less any depreciation

Owners capital Retained earnings


= Total Assets = Total Liabilities and Net Worth/Equity

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: INITIAL COMPANY SET-UP


If you recently installed QuickBooks, you will have the option to follow QuickBooks Easy Step Interview. I recommend going through this process. Otherwise, you can customize QuickBooks to your company, as follows: 1. Company Company Information enter general company information. 2. Lists Chart of Accounts (or Chart of Accounts from the Home Screen) Ask your CPA for a list of accounts they would like your business to track. These should include, at a minimum, Asset, Liability, Equity, Income & Expense Accounts. Set up your Chart of Accounts with these accounts and delete others that QuickBooks may have created by default if you will not use them. 3. Company Set Up Users & Passwords Set Up Users if multiple people will have access to the company QuickBooks file, set each up with their own username and password. Here, the Administrator can also set the areas of QuickBooks that each user has access to. 4. Edit Preferences go through each of the categories and set up Company Preferences. 5. Lists Item List input inventory, service items, and other items used on customer invoices and sales receipts. 6. Customers consider entering your customers by creating a spreadsheet in Microsoft Excel. This can be created by going to File Utilities Import Excel Files. Or, you can simply enter each customer as they are needed. 7. Vendors consider entering your vendors by following the same process above, or simply enter each as needed.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: Inventory Assembly Items and Tracking Labor & Overhead in COGS
In your Chart of Accounts, set up a Cost of Goods Sold account called Direct Labor Applied and one called Factory Overhead Applied. Make these sub-accounts of Cost of Goods Sold. Create another sub-account of Cost of Goods Sold called COGS. First, make sure all of your Raw Materials are set up as inventory Parts. Choose COGS as the Cost of Goods Sold Account and the appropriate Sales Account as the Income Account. Under the Asset Account, you can create Raw Materials as a sub-account of Inventory if you would like to track Raw Materials and Finished Goods separately. Otherwise, just choose Inventory. Enter the re-order point and number on hand. Next, in your Item List, set up an Other Charge called Direct Labor. Check the box that says This item is used in assemblies or is a reimbursable charge. Make the cost $1.00 and the Expense Account will be Direct Labor Applied. Make the sale price $1.00 and use Sales as the Income Account. Create another Other Charge called Factory Overhead and do the same as above, except use Factory Overhead Applied as the Expense Account. Create your Inventory Assemblies. In the Bill of Materials, select the various Inventory Parts and the quantity of each needed. Select Direct Labor and Factory Overhead and input the appropriate quantity so it calculates correctly. (example .40 for Labor) In the middle of the page, where it says Cost, put the total from the Bill of Materials. Choose COGS as the COGS Account. Input the sale price and choose the appropriate Sales Account. Choose the appropriate asset account. If you are tracking inventory types separately, this would be Finished Goods - a sub-account of Inventory. (You can also enter the number on-hand here, but I had trouble making the direct labor and factory overhead apply correctly if I did that.) The appropriate sequence to get the Items from Raw Materials to Finished Goods is to use the Build Assemblies feature. So, once your inventory parts are all entered. Go to Build Assemblies and build the appropriate number. This will reduce your Raw Materials Inventory and increase your Finished Goods Inventory.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

Inventory Assembly Items (continued)


When you sell your product (the assemblies), this is what will happen: Finished Goods Inventory will be reduced. COGS will be debited (charged) for the total amount of the cost this includes materials, labor and overhead. Direct Labor Applied will be credited (reduced) the amount of the COGS that actually is Direct Labor. Factory Overhead Applied will be credited (reduced) the amount of the COGS that actually is Factory Overhead. This way, you are able to see what was actually applied to Direct Labor and Overhead and compare it to what you actually paid in your various expense categories (payroll, utilities, rent, etc.)

Other tips: Any labor costs that are direct costs of manufacturing could be tracked in a sub-account of Cost of Goods Sold called Cost of Labor or something similar. To record scrap/waste, enter an Inventory Adjustment for the amount of the scrap by the appropriate item in the unit of measure used for that item. The Adjustment Account will be Scrap/Waste or something like that and be a sub-account of COGS. QuickBooks does not have a way to account for it in a specific job. We could try increasing the price on a customer invoice to account for it. In order to change prices on all items at once, go to Customers Change Item Prices. Here you can mark-up all items at a set amount above the unit cost.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: ITEMS


In QuickBooks, items are anything that goes on an invoice or sales receipt. Used correctly, items will allow you to easily create customer invoices, determine the amount and value of your inventory, and create useful, detailed financial statements. There are 11 different item types in QuickBooks. 1. Service used for services you charge for such as labor, consulting hours, professional fees, etc. 2. Inventory Part used for goods you purchase, track as inventory, and resell. Any items entered here will show up on the Balance Sheet as Inventory Asset. You will need to specify the Sales account and the Cost of Goods Sold account that each Inventory Part is associated with. You will also enter a sale price and your cost to purchase the item. Once an inventory part is sold, QuickBooks handles the transaction as follows: a. Balance Sheet - Decrease (Credit) Inventory Asset b. Balance Sheet - Increase (Debit) another Asset such as Accounts Receivable, Undeposited Funds or Checking Account. c. Income Statement - Increase (Credit) Sales d. Income Statement - Increase (Debit) Cost of Goods Sold 3. Inventory Assembly used for inventory items that are combined to make an inventory part that is then sold. 4. Non-Inventory Part used for items you purchase but dont track in inventory, for example, parts for one specific job. 5. Other Charge used for miscellaneous fees such as shipping fees or service charges that are passed on to the customer. 6. Subtotal used to total all lines before it on an invoice/sales receipt. This is useful when you would like to apply a discount to the entire invoice/sales receipt. 7. Group used to group various items together For example, an automotive repair shop may make a group that includes 4 - 5W-30 Motor Oil (Inventory Part) and .5 hours of Labor (Service). 8. Discount used to provide a dollar or percentage discount on a customer invoice/sales receipt, 9. Payment used to record a partial payment or down payment made at the time of the sale. This payment typically will be placed in Undeposited Funds and can then be combined with other payments in a bank deposit. 10. Sales Tax Item used to track sales tax due on each sale. You must choose the tax treatment of the following items: Service, Inventory Part, Inventory Assembly, Non-Inventory Part, Other Charge, and Discount. Some services are subject to sales tax, while others are not. Most sales of physical goods are taxable, yet there are circumstances when they may not be. Consult the Minnesota Department of Revenue website at www.taxes.state.mn.us to determine when you should be charging sales tax and for the rules and regulations of sales tax collection. 11. Sales Tax Group used to group together multiple sales tax items. For example, businesses in the City of Duluth charge Minnesota State Sales Tax of 6.875% plus they charge a City of Duluth Sales Tax of 0.50%. These would be set up as individual Sales Tax Items and then grouped together. If your business charges multiple sales taxes, this Sales Tax Group would be chosen as the Most common sales tax item under Edit Preferences Sales Tax Company Preferences.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: LOAN PAYMENTS


Installment Loans These are loans where you make regular principal and interest payments each month, such as a vehicle loan, real estate mortgage, or equipment loan. When you first enter this loan in QuickBooks, you will need to create two new accounts for your Balance Sheet: the Asset account (ex. 2010 Ford Truck) and the Liability account (ex. Ford Truck Loan). The amount of the loan will be the opening balance (credit) in the liability account. The value of the vehicle will be the opening balance (debit) in the asset account. If the loan is for more than the value of the asset, that difference should be posted (debit) to another asset account (ex. Checking Account). If the loan is for less than the value of the asset, the difference could be posted (credit) to an Equity account on your Balance Sheet or, if you paid a down payment out of your checking account, it would be posted (credit) against your checking account. If it is an equity account, check with your CPA to determine exactly what this account will be. On your Income Statement, you should already have an Expense account called Interest Expense. If you do not, you will need to create this, as well. Each monthly payment will need to be split into the principal portion and the interest portion. In order to do this, ask your bank for the loan amortization, or go to http://office.microsoft.com/enus/templates/results.aspx?qu=loan+amortization&av=TPL000 and download a Microsoft Excel Loan Amortization Template to create your own. You will need: the original loan amount, number of years, and the interest rate. This will be close to, but possibly not the exact loan amortization. The principal portion of the payment will be posted to the liability account and the interest portion will be posted to Interest Expense. Lines of Credit A line of credit allows you to draw money from it as needed and pay it back when you are able to. Typically, monthly interest payments are required. You will need to create a Liability account called Line of Credit. Use Write Checks to post the monthly interest payments. Typically, it would be a withdrawal (credit) from your checking account and it would post to Interest Expense (debit). When you draw on the line of credit, only your Balance Sheet is used. These advances DO NOT show on the Income Statement. Simply use Transfer Funds under the Banking menu to transfer from the Line of Credit liability account to your Checking Account. When you make a principal payment on the line of credit again use Transfer Funds to move the money from your Checking Account to the Line of Credit.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: MANUAL PAYROLL


First, in your chart of accounts, make sure you have Payroll Liabilities other current liability account and Payroll Expenses expense account. Make a sub-account of Payroll Expenses called Wages & Payroll Taxes (or something like that), another called FICA Employer, another called FUTA and another called SUTA. For the employees check, enter the dollar amount of the check. Then, in the detail below, choose Wages & Payroll Taxes and put the net pay plus taxes withheld here. Then, on the next line, choose Payroll Liabilities and put the taxes withheld here as a NEGATIVE number. Then, the check amount and total on the bottom should match. When you pay the payroll liabilities, write the check for the total and choose Payroll Liabilities for the employee portion that you withheld from the check and choose FICA, (expense) for the employers portion. You will also write checks for Unemployment Tax (assuming you pay in) and use FUTA, or SUTA for the accounts here. When you are writing the checks, you will get an error message saying something like it looks like you are paying payroll liabilities, what do you want to do? Just choose cancel and continue with your transaction each time.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

Manufacturing Overhead (OH) Calculation


The formula for computing a predetermined overhead rate is:

Predetermined = Estimated total manufacturing overhead cost overhead rate Estimated total amount of the allocation base
Many companies apply overhead costs to jobs on the basis of direct labor hours. In that case, direct labor hours would be the allocation base. For example, at the beginning of the year a company estimated that it would incur $320,000 in manufacturing overhead costs and would work 40,000 direct labor hours. The companys predetermined overhead rate is:

$320,000 = $8 per DLH 40,000 DLHs


The process of assigning overhead to jobs is known as applying overhead. If Job X required 27 direct laborhours, then $216 of overhead cost will be applied to the job as follows: Predetermined overhead rate........................................... Direct labor-hours required for Job X ............................. Overhead applied to Job X .............................................. $8 per DLH 27 DLHs $216

This article has more detailed information on the calculation of an overhead rate when taking into account both fixed and variable manufacturing costs: http://www.accountingformanagement.com/overhead_standard_and_variances.htm

Provided by: Jennifer Pontinen Business Consultant QuickBooks Certified ProAdvisor

UMD Center for Economic Development NE MN Small Business Development Center jpontine@d.umn.edu / 218.749.7752

How to Allocate Manufacturing Overhead (OH) in QuickBooks


OPTION 1: Using a predetermined overhead rate based on direct labor hours
ONE TIME: Go to Reports > Custom Summary Report Create the report as follows: Click on Modify Report Change the dates to This Month or Last Month
(Your choice depends on your preference to do this allocation on the last day of the existing month or the first day of the next month.)

Click on the Filters tab. Under Account, click on the drop-down menu and choose Multiple Accounts. Then, select (place a check-mark) by each of the expense accounts that will be allocated as overhead. Memorize this report as Overhead Allocation. Create an Other Expense Account called Job Unallocated Overhead and an Other Current Asset Account called Overhead Allocation.

EACH MONTH: Set a policy that on the last day of the month or the first day of the next month, you will manually allocate OH to jobs. Determine the amount of OH applicable to each job conducted that month by taking the number of direct labor hours attributed to each job multiplied by the OH Rate. (Find direct labor hours attributed to each job at Reports > Jobs, Time & Mileage > Time by Job Summary.) Create a general journal entry dated the last day of the just-completed month as follows: CREDIT Job Unallocated Overhead - $TOTAL Amount of OH Expenses for the month DEBIT Job Unallocated Overhead - $Amount of Overhead applicable to a specific job. **In the Name column, choose the customer/job name. Uncheck the billable box. DEBIT Job Unallocated Overhead for each individual job that OH must be allocated toward that month. Be sure to assign the appropriate customer/job name to each line and uncheck the billable box. DEBIT or CREDIT Overhead Allocation the difference necessary to balance the transaction.

Provided by: Jennifer Pontinen Business Consultant QuickBooks Certified ProAdvisor

UMD Center for Economic Development NE MN Small Business Development Center jpontine@d.umn.edu / 218.749.7752

EACH MONTH OR AT THE END OF THE FISCAL YEAR: Review your Balance Sheet to determine if Overhead Allocation has a balance. A balance in this account represents the difference between your estimated overhead rate and actual overhead costs. If it is positive, then your actual costs are more than your anticipated costs, so the overhead rate is calculating too low. If it is negative, your actual costs are lower than your anticipated costs. By the end of the fiscal year, this balance must either be allocated to customers/jobs OR cleared out through one of the following entries: If Overhead Allocation has a positive balance: DEBIT Job Unallocated Overhead CREDIT Overhead Allocation *Do not assign customer/job names on either line. If Overhead Allocation has a negative balance: DEBIT Overhead Allocation CREDIT Job Unallocated Overhead *Do not assign customer/job names on either line.

Provided by: Jennifer Pontinen Business Consultant QuickBooks Certified ProAdvisor

UMD Center for Economic Development NE MN Small Business Development Center jpontine@d.umn.edu / 218.749.7752

OPTION 2: Allocating the actual overhead expensed each month based on direct labor hours for each job conducted
ONE TIME: Create the Custom Summary Report explained above. Create an Other Expense Account called Job Unallocated Overhead. EACH MONTH: Set a policy that on the last day of the month or the first day of the next month, you will manually allocate OH to jobs. Determine the OH rate for the given month by taking the total overhead expensed for the month divided by the total number of hours allocated to jobs that month. Determine the amount of OH applicable to each job conducted that month by taking the number of direct labor hours attributed to each job multiplied by that months OH Rate. (Find direct labor hour totals and hours attributed to each job at Reports > Jobs, Time & Mileage > Time by Job Summary.) Create a general journal entry dated the last day of the just-completed month as follows: CREDIT Job Unallocated Overhead - $TOTAL Amount of OH Expenses for the month DEBIT Job Unallocated Overhead - $Amount of Overhead applicable to a specific job. **In the Name column, choose the customer/job name. Uncheck the billable box. DEBIT Job Unallocated Overhead for each individual job that OH must be allocated toward that month. Be sure to assign the appropriate customer/job name to each line and uncheck the billable box. **This entry must balance.

Provided by: Jennifer Pontinen Business Consultant QuickBooks Certified ProAdvisor

UMD Center for Economic Development NE MN Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: MANAGING & PAYING SALES TAX AND PAYROLL LIABILITIES
While regular bills can be paid through either Write Checks or the Enter Bills Pay Bills process, when you are collecting tax for another entity, QuickBooks has separate systems in which to collect, keep track of, and pay these liabilities. Sales Tax Collecting Sales Tax starts with setting up the Sales Tax item in your item list. Once set up and assigned to each taxable product or service your company sells, QuickBooks will automatically calculate the tax and accumulate it. This accumulated amount will show up on your Balance Sheet as Sales Tax Payable (a liability). To pay Sales Tax, click Manage Sales Tax from the QuickBooks Home Screen. Click Pay Sales Tax. Make sure you are viewing Sales Tax owing through the correct date. If you need to adjust the numbers, you have the ability to do that here. Check the ones you would like to pay, either check To be printed or assign the first check number, and click ok. A check will be generated and your Sales Tax Payable will be reduced. Payroll Liabilities In order to have QuickBooks calculate payroll taxes, you must purchase the QuickBooks payroll subscription. QuickBooks will calculate the income tax, Social Security tax, and Medicare tax that must be withheld from the employees checks. It will also calculate the employers contribution to Social Security and Medicare. As the federal and state withholding tax tables change, QuickBooks updates their software. It is your responsibility to download these software updates. Do this periodically by going to Employees Get Payroll Updates. QuickBooks will also calculate other payroll items such as Federal and State Unemployment, Workers Compensation, Health Insurance, and Retirement Contributions. Go to Lists Payroll Items List to view, manage and create the Payroll Items for your company. Payroll Taxes that are withheld from employees checks will show up on your Balance Sheet as Payroll Liabilities. The employers contribution will show here as well. However, when you pay your Payroll Taxes, the employees and employers amounts affect your financial statements differently. First, make sure that each Payroll Item is set up correctly. QuickBooks walks you through the steps to set up a new Payroll Item, or if you have Payroll Items already set up, you can select and edit each one to set them up. Correct set-up includes entering your account number (if applicable) with each entity, and assigning appropriate Liability and Expense accounts. Items withheld from employees checks will only have a liability account (typically Payroll Liabilities) while the employers contribution will have a liability account (typically Payroll Liabilities) and an expense account (typically Payroll Expense). Once set up, your Payroll Liabilities will show in the Payroll Center under Pay Scheduled Liabilities. To pay each one, simply check it and click View/Pay. A check can be generated or you can enter something like ACH in the check number field if they are paid electronically. Paying your Payroll Liabilities through this method then reduces Payroll Liabilities (Liability account) on the Balance Sheet, records the employers contribution as Payroll Expense on the Income Statement, and reduces the Checking Account by the amount of the payment.
Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: PAYING VENDORS


The only way you create Accounts Payable is by using "Enter Bills." These bills will stay in accounts payable until you choose "Pay Bills." There are two different ways to pay your vendors. Either through Enter Bills --> Pay Bills or through Write Checks. You can use both, but it is important to understand that they work differently and separately. If you usually enter a bill from your vendor and pay it at the same time (print the check or write the check) then just use "Write Checks" - it enters the bill and pays it all in one step. If you typically enter your bills into QuickBooks immediately when you get them and then pay them later (maybe closer to the due date), then you can use Enter Bills --> Pay Bills. By doing this, you can run Accounts Payable reports to see what you have outstanding and you can also set reminders to have QB remind you to print out or write out the check. When you do actually print or write the check, then you select "Pay Bills" and it clears out of the Accounts Payable balance. If these are transactions that were paid in the past, maybe they were entered both ways. Or, maybe they were entered in "Enter Bills" but then are still sitting and waiting to be paid in "Pay Bills." And, in the meantime, you went in to "Write Checks" and paid the same bill that way. Just remember, if they are put in under "Enter Bills" to clear out the Accounts Payable, you need to use "Pay Bills." If you paid a bill that was entered under "Enter Bills" by using "Write Checks" then simply go into the bill (under "Enter Bills") and delete it.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: Payroll Liabilities Correcting Entries for Liabilities paid through Write Checks or Pay Bills
When paychecks are issued, the following transactions are created by QuickBooks: DEBIT Gross Wages Expense CREDIT Payroll Liabilities CREDIT Checking Account DEBIT Payroll Taxes Expense CREDIT Payroll Liabilities Net Pay + Employee Withholding Amounts Employee Withholding Amounts Net Pay Employer portion of Social Security & Medicare, Employer-paid Unemployment & Workers Compensation SAME

When Payroll Liabilities are paid, the following transaction is created by QuickBooks: DEBIT Payroll Liabilities CREDIT Checking Account Payroll Liabilities MUST be paid through the Payroll Center at Pay Scheduled Liabilities. They cannot be paid by writing a check or through the Enter Bills/Pay Bills process. If done incorrectly, Payroll Liabilities will not reflect accurate totals. The following correcting entries ensure that liabilities entered incorrectly are not double-entered. get rid of the red amounts on your list, start with the first one. Click on Related Payment Activities then Adjust Payroll Liabilities Date of the adjustment is the through date of the liabilities. Account is the correct Payroll Liabilities (Federal Withholding, State Withholding, Unemployment, Social Security, Medicare, etc.) 4. Looking in your check register, find the amount that was paid and, if there is a difference, put the difference (either positive or negative) in the Amount field. 5. Click on Accounts affected and make sure affect liability and expense accounts is checked. 6. When you return to the Payroll screen, the correct amount should be showing for the amount owing in red on the first line. 7. Check that one and select View/Pay. 8. Change the date to the date it was actually paid. 9. Uncheck To print and type DEBIT in all caps in the check number field. 10. Click Save and Close and then Cancel on the next screen. 11. Go to your check register. 12. Go to the original check/debit used to pay the liability. Delete the original check/debit. It will give you a bunch of warnings just say ok. Make sure you dont delete the one you just entered delete the original one only. 13. Keep track of this amount because your next reconciliation opening balance will be off by this amount (and the other adjustments you will be doing) so you will have to check these transactions in the next reconciliation to actually clear them and then everything should match just fine. 14. Repeat these steps to clear each liability. To 1. 2. 3.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: Progress Invoicing


In order to use Progress Invoicing, you need to first create an estimate for the job. Then, once the customer has awarded the job to you and it is time to bill them for it, you create an invoice. Up in the top right corner of the invoice screen, there is a place to select the template. Click on the drop down menu and select Progress Invoice it should already be created. Then, when you select the customer, a screen will pop up telling you there are estimates already created for this customer. You select the estimate you want to use and then you have choices. You can create an invoice for the entire amount of the estimate, for a percentage of each item on the estimate, or for a certain dollar amount of each item on the estimate. You select which one you want and then fill in the amounts or percentages for each item. On the invoice, it will show how much you are billing and the percentage of the job that is being billed. On subsequent invoices, it will show the prior invoice amount/% and will add to the percentage of the job that has been billed until it is at 100%.

Provided by: Jennifer Pontinen, Business Consultant UMD Center for Economic Development NE Minnesota Small Business Development Center jpontine@d.umn.edu / 218.749.7752

QuickBooks Tips: Trade Accounts


To track Trade Accounts: In the Chart of Accounts, set up a bank account called Clearing Account. When you have a bill to pay a vendor that you are going to pay using their A/R, enter the bill in Enter Bills. Use the appropriate expense account (Advertising Expense, or something like that). Then go to Pay Bills and select this bill use Clearing Account as the payment account. In Receive Payments, enter the amount as the total to be applied against the A/R. In Record Deposits, select that payment amount and deposit it to the Clearing Account.

The Clearing Account will keep a running total of activity for you.

Provided by: Jennifer Pontinen, Business Consultant jpontine@d.umn.edu / 218.749.7752