Accy231 QuickBooks Guide

Part I: Basic Setup

1. Setup a new company called Emirates Fashion. The company contact information is the
following:

Emirates Fashion
Sheikh Zayed Rd, Al Barsha, Al Barsha 1
Dubai, UAE
P.O. Box 20183

• To edit the company setting: Gear -> Account and Settings-> Company

2. Add the company logo to QuickBooks Online.

• Add the above picture to your invoice & company page
• Setting -> Company
3. You have registered the business and has provided you the Business Number.
• Enter the following business number in QuickBooks: 111234567891234
4. Use the calendar year as your fiscal year. Enter this in QuickBooks.
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 • Setting -> Advanced

5. Add David Solomon (your friend) as a user with no access rights to financial reports, payroll,
time, or budgets.
• Setting -> Manage users -> In house accountant
o Users added to this role can access all bookkeeping transactions and tools. They can't
access company financial reports, payroll, time, or budgets.

6. Enter the list of suppliers into QuickBooks.

• Enter the list of suppliers either manually or import the list of suppliers in Excel.
• Expenses -> Suppliers

Supplier Street no. City Country Email Phone

Name
1 Kevin 288, Ras Al Khor Dubai UAE Kevin@gmail.com +971543241137
Supplies road
2 John Ltd 222 Sheikh Zayed Abu UAE John@yahoo.com +971543241136
Rd, Al Barsha Dhabi
3 Emirates 289, Ras Al Khor Dubai UAE Emirates +971543241135
Insurance road @gmail.com

7. Enter the list of customers into QuickBooks.

• Enter the list of customers either manually or import the list of customers in Excel.
• Sales -> Customers

Customer Street no. City Country Email Phone

Name
1 Ahmad 508 Al Mina Dubai UAE Ahmad@gmail.com +971543241135
Muhammed Road
2 MMM Ltd 111 Sheikh Abu UAE John@yahoo.com +971543241136
Zayed Rd, Al Dhabi
Barsha
3 Kedijha 288, Ras Al Dubai UAE Kevin@gmail.com +971543241137
Fashion Khor road

8. Add the owner of Emirates Fashion as a customer

Owner Name Street no. City Country Email Phone

1 Abdu Doha 508 Al Mina Dubai UAE Abdu@gmail.com +971543241139

Road

9. Enter the list of Products and Services (Inventories) into QuickBooks.

• Enter the list of Products and Services either manually or import the list of Products and Services
in Excel (Note: for merchandising business, you have inventories, not services)

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 Name Description Price Tax Purchase Reorder Initial Quantity
Price Point on Hand

1 Baby Shirt Baby Shirt $20 Taxable $10 2 0

2 Hoodie Hoodie $50 Taxable $40 7 0
3 Women’s Women’s $550 Taxable $510 5 0
Wedding Wedding
Dress Dress
4 Men’s Coat Men’s Coat $450 Taxable $400 10 0
o Reorder Point: is a minimum amount of an item which a firm holds in stock,
such that, when stock falls to this amount, the item must be reordered.

10. Add the following Employee

Customer Street no. City Country Email Phone

Name
1 Ms Mahek 504 Al Dubai UAE Mahek@gmail.com +971543241131
Surju Mina Road

Employee->

11. VAT setup

Edit Setting:

Tax agency: Federal Tax Authority

Start of tax period: January
Filing Frequency: Quarterly
TRN: 111234567891234
If the system is busy, switch to another company or sign out and sign in again.

Edit Rate:
Keep the tax rate as it is.

NOTE: your Tax on Sales and Tax on Purchases should be 5%. It’s automatically built in the system.
For Tax on Sales , if your sales are from Dubai, you need to use DXB. For Tax on Purchases, use SR
Standard Rated (common for every emirates). If the Sales are exempt supplies, use Exempt and if the
Sales are Zero-rated supplies, use Zero-Rated.

If the input VAT is higher than the output VAT, the business may have the right to the repayment of this
VAT through a VAT refund from the government.

(for detailed UAE VAT explanation, refer to Appendix B).

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Part II

1. Set up Chart of Accounts

o Clean business’s Chart of Accounts
▪ Remove: all unnecessary accounting items.
▪ Add:
o Sales Revenue
o Cost of Goods Sold
o Emirates Current Account
o Rename Share Capital to Abdu’s Capital (use Deposit for Capital contribution)
o Generate Abdu’s Drawing (use Transfer for drawings)
o Rename Prepaid Expense to Prepaid Insurance
o Remove Supplies (Expense) & generate Supplies (Current Asset)
o Rename PPE to Office Equipment
o Rename Rent or lease payments to Rent Expense

2. Record transactions:
Requirements:
• Record the total amount of transactions as “Exclusive of Tax”.
• Use perpetual inventory system (for detailed explanation, refer to Appendix A).

TRANSACTIONS:

i. Owner deposited money to business’s bank account

June 1, 2024. The owner deposited AED 50,000 into the business bank account. (Consider it as
outside the scope of the VAT regime).

ii. Create a Purchase order and receive the inventory against the PO
June 2, 2024. Create a Purchase Order (Baby Shirt: 1000 units x AED10) for Kevin Supplies on
the 1st of June. Receive the inventory against the PO for Kevin Supplies in full on the 2nd of
June. Use the bill form to receive the PO. (subject to VAT at the standard rate of 5%).

iii. Pay the bills

June 5, 2024. Pay the bills in full for Kevin Supplies.

iv. Create estimate and invoice

June 7, 2024. Create estimate/Quotes (Baby Shirt: 100 units x AED20) for Ahmad Muhammad
on the 6th of June and create an invoice for Ahmad Muhammad on the 7th of June
2024. (subject to VAT at the standard rate of 5%).

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 Note:
▪ An estimate is a document that helps you present a quote to a customer. An estimate
helps you show a customer a breakdown of what you expect to charge them if they
decide to work with your business.
▪ An invoice is a formal document that shows an amount owed by your customer after they
have done business with you.

v. Receive the payment

June 10, 2024. Received the full payment from Ahmad Muhammad on the 10th of this month
and deposit the amount directly to the Emirates checking account. He paid with cheque #1242.

vi. Other transactions during June:

June 11. Purchased an insurance policy for the year for AED2,400 cash from Emirates
Insurance. Prepaid Insurance expired for one-month. (subject to VAT at the standard rate of
5%).

June 13. Purchased supplies on credit from John Ltd, AED600. At the end of the month, the
supplies on hand is AED317. (subject to VAT at the standard rate of 5%).

June 14. Paid employee salaries, AED1,400. Ms Mahek Surju is your only employee. (Consider
it as outside the scope of the VAT regime).

June 14. Purchased AED6,000 worth of office equipment from John Ltd. Emirates Fashion paid
AED6,000 in cash. The useful life of the equipment is 5 years and the business utilizes straight
line depreciation method. (subject to VAT at the standard rate of 5%).

June 15. Emirates Fashion took a AED2,000, 6-months short term loan from the ADCB bank.
The loan will incur a 12% annual interest, which needs to be paid when the loan term is ended.
Interest for the short-term loan for June is accrued. (Consider it as outside the scope of
the VAT regime).

June 22. Received a cash payment of AED8,000 plus VAT for the 400 units of Baby Shirt sales
made to Kedijha Fashion on Jan 22 (subject to VAT at the standard rate of 5%).

June 30. Paid the current month's rent, AED3,000 to John Ltd (subject to VAT at the standard
rate of 5%).

June 30. The owner withdrew AED600 from the business bank account for personal use.
(Consider it as outside the scope of the VAT regime).
• New-> Bank transfer
June 30. Received an invoice for AED400 for telephone and internet charges for the month from
Du telecom. (subject to VAT at the standard rate of 5%).

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June 30. Record QuickBooks Online monthly subscription AED 50 as recurring expenses. The
subscription costs of AED 50 have not been paid for or recorded at 30 June 2024. (subject to
VAT at the standard rate of 5%).
• Transactions -> Recurring Transactions
• Rename “Dues and subscriptions” to QuickBooks subscription expense.

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JOURNAL ENTRIES

Date Accounts Dr Cr Note (VAT)

Jun 1 Cash 50,000
Abdu’s Capital 50,000

2 Jun Merchandise Inventory 10,000 Yes

VAT Receivable (Control) 500
Acct Payable 10,500

5 Jun Acct Payable 10,500 -

Cash 10,500

7 Jun Accounts Receivable 2,100 Yes

Sales Revenue 2,000
VAT Payable (Control) 100

Cost of Goods Sold 1000 No

Merchandise Inventory 1000

10 Jun Cash 2,100 -

Accounts Receivable 2,100

Jun 11 Prepaid insurance 2400 Yes

VAT Receivable (Control) 120
Cash 2520

Jun 13 Supplies 600 Yes

VAT Receivable (Control) 30
Acct Payable 630

Jun 14 Salaries expense 1400 -

Cash 1,400

Jun 14 Office Equipment 6,000 Yes

VAT Receivable (Control) 300
Cash 6,300

Jun 15 Cash 2,000 VAT

exempted
Short-term Loan 2,000

Jun 22 Cash 8,400

Sales Revenue 8,000
VAT Payable (Control) 400

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 Cost of Goods Sold 2,000 No
Merchandise Inventory 2,000

31 Jun Rent Expense 3,000 Yes

VAT Receivable (Control) 150
Cash 3,150

31 Jun Abdu Drawings 600 outside the

scope of VAT
Cash 600

31 Jun Telephone and internet expense 400 Yes

VAT Receivable (Control) 20
Accounts Payable 420

3. Prepare Adjust entries

Adjusting Entries
Date Account Title Dr Cr
Jun 31 Insurance Expense 200
Prepaid Insurance 200
Jun 31 Supplies Expense 283
Supplies 283
Jun 31 Depreciation Expense 100
Accumulated 100
Depreciation
Jun 31 Interest Expense 10
Interest Payable 10
(2000*12%*1/12*1/2 ….
Interest annualized and loan
borrowed middle of the month)
Jun 31 QuickBooks subscription 50
expense
Acct Payable 50

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4. Additional information:

• To remind customers of outstanding invoices, send a reminder email to all customers with
outstanding balances.
o Gear -> Accounts and Setting -> Sales -> Reminders -> Turn on Automatic invoice reminder (3
days before due date, on due date, and 3 days before due date)

• Your manager wants to receive weekly reports mailed to him every Monday morning. Setup a
group of reports listed above (e.g., income statement, balance sheet) and schedule them to be sent
to your manager every week.

o Report -> income statement -> Customize - > Save Customize Report
o Reports -> Custom Reports -> Turn on Set email schedule -> Repeat Weekly
o
• Create a VAT Summary report, file Sales Taxes for the June and pay your Sales Taxes for the filed
period. You may have to receive a sales tax refund.

o To generate VAT Summary report: Report-> VAT Summary Report -> Apr – June 2024
o To file tax: VAT -> Prepare Return -> Mark as Filed
o To receive tax refund: Record refund. Then check “Payment”, which is next to “Payments”.

• How to sell bundle:

o First buy 20 unites of hoodies from John Ltd on account on 25th of June.
▪ New->Bill
o Create EmiratesBundle with the following items and quantities: 15 hoodies & 5 Baby Shirt. Sell
this bundle to Kedijha Fashion on 28th of June.
▪ New->invoice

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• Because of some leakages, 2 of your inventories (Hoodies) were damaged. They cannot be sold and will
need to be disposed of. You need to write off the inventory as of the last day of the first month. Make the
inventory adjustment to account for the damaged goods. You are asked to use an Inventory Write-Off
expense account (Inventory Shrinkage).

o Chart of Accounts -> generate “Inventory Write-Off expense” account.

o New->Inventory qty Adjustment. For inventory adjustment account, use “Inventory Write-
Off expense”.

5. Prepare financial reports as of June 30, 2024.

• Profit and Loss statement
• Balance sheet
• Journal Report
• Account Receivable Ageing Summary Report
• VAT Summary Report
• Management Report
o In the management’s report, include the following as executive
summary:
▪ This report includes Emirates Fashion's monthly income statement and
balance sheet.

▪ In comparison to last month, the company's earnings has increased

dramatically this month.

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Appendix A: Perpetual vs Periodic inventory System

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Appendix B: UAE VAT Explanation

VAT structure

How VAT is computed in UAE?

Example 1:

Businesses should keep track of their sales purchase and expenses including the tax paid on the same. The tax
payable by for a particular taxpayer is equal to tax collected on output (sales) - tax paid on input (purchases).
Let’s look at an example of how to calculate output and input VAT.

Suppose you own a coffee shop and spend 100,000 AED towards obtaining raw materials. The input tax rate is
5%, so the input tax you pay is 5% of 100,000 AED = 5,000 AED.

Now after selling coffee using the purchased raw materials, you make sales of 200,000 AED. Supposing 5% is
the output tax, the output tax you pay is 10,000 AED. So, final (net) VAT payable by you will be 10,000 AED -
5,000 AED = 5,000 AED.

Example 2.

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 Retailer
Manufacturer Wholesaler Price = $2000
Price = $1,500 Cost = $1,575
Price = $1,000
VAT= 5%
Cost = $1,050
VAT= 5%(2000) Customer
VAT= 5% (1500)
Price = $2,100

VAT Payable= $75-

VAT Payable= $50
50=> $25 VAT Payable=
$100-75=> $25

Example 3 (Standard rated vs Zero-rated vs Exempt from VAT):

The following are the sales transactions of Emirates Fashion.

Type of Supplies Input Value Input VAT Output Value Output VAT VAT Liability Input Tax is
(AED) (AED) (AED) (AED) recoverable?
Standard rated 20,000 1,000 70,000 70k*0.05= 3,500 3,500-1,000= Yes
supplies 2,500
(Fashion training)
Zero-rated Supplies 2,000 100 10,000 10k*0%= 0 0-100 = (100) Yes
(Charitable building
supplies)
Exempt Supplies 4,000 200 20,000 - 200 No
(Services of
transporting fashion
students from home to
the educational
institution)
Total 26,000 1,300 100,000 3,500 2,600

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Example 4. Explain why when a business pays VAT on the purchase of goods or services it records this
as VAT Receivable and an asset. When a business provides goods or services which are
taxable it records the VAT component of the transaction as VAT Payable, a liability.

• When a business pays VAT on purchasing goods or services it is allowed to offset this against and
VAT it owes to the Federal Taxation Authority (FTA). The amount is called VAT Receivable as it is
either receivable from the FTA if the amount of VAT paid exceeds the amount that the business
receives from its customers or it at least reduces the amount of VAT it has to pay to the FTA. The
future economic benefit controlled by the entity that makes VAT Receivable an asset is a reduction in
future cash outflows to the FTA by reducing the amount of VAT it has to forward to the FTA.

• When a business provides goods and services which are taxable under the VAT legislation it is in
effect collecting tax on behalf of the FTA which it is then liable to forward to the FTA. This is why
this VAT is called VAT Payable and is a liability as it will result in a future cash outflow to the FTA.

Example 5. What is reverse charge?

• In a typical business, the supplier supplies goods and collects VAT on behalf of the customers,
which is later paid to the government. Under reverse charge mechanism, the buyer or end customer
pays the tax directly to the government.

• The supplier does not have to pay VAT on import items, so the obligation of reporting a VAT
transaction is shifted from the seller to the recipient. The recipient will have to record the VAT on
purchases (input VAT) and the VAT on sales (output VAT) in their VAT return each quarter.

What is the need for reverse charge?

• If the supplier does not have a business in the UAE, tracking their business transactions and ensuring
VAT compliance becomes tedious for the FTA. Hence, recipients who are residents of the UAE are
made to pay VAT on reverse charge basis. The reverse charge mechanism is mainly used for cross-
border transactions. It relieves non-resident suppliers of the burden of registering and accounting for
VAT in their buyers’ location.

When is reverse charge applicable?

Reverse charge is applicable in the following cases:

• Import of goods/services from other GCC and non-GCC countries. The supplier of these
goods/services must be located in another country and they may or may not have a business in the
UAE.
• Purchase of goods from a designated zone
• Supply of gold and diamonds
• Purchase of gold and diamonds for resale or further production/manufacture
• Supply of hydrocarbons for resale by a registered supplier to a registered recipient in the UAE
• Supply of crude/refined oil by a registered supplier to a registered recipient in the UAE

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How does reverse charge mechanism work?

• To understand the mechanism better, let’s look at an example using an imported service:
▪ Mr. Abdul is a VAT-registered person in the UAE, but he uses the services of a bookkeeper
named Sam, who is based in Italy. As Sam is not registered in the UAE, he does not have
to file any UAE returns or pay UAE tax. Because Mr. Abdul has acquired services from a
non-UAE-based supplier, he will have to record the reverse charge on his relevant VAT
return. In this example, because the recipient accounts for the VAT under the reverse
charge mechanism, the place of supply for VAT purposes is the UAE.

Example 5. VAT control vs VAT suspense?

What is VAT control?
• The VAT control account is the default account in QuickBooks Online. VAT from transactions that
have not yet been filed with FTA will post to this account. This is where all of the VAT that makes up
the return is stored.
• The amount in this account will be used to calculate your VAT return on the applicable dates. Any
transactions (such as journals) that post to the VAT control account without VAT will not appear on the
VAT return.
What is VAT suspense?
• The VAT suspense account contains the amount that has been submitted to FTA but has not yet been
collected or refunded. This is where the VAT filing is kept once it is marked as filed in QuickBooks
Online.
• When you submit the VAT return to FTA or mark the period as filed in QuickBooks, the filed amount
will be moved from the VAT control account and into the VAT suspense account. The amount is held
here until you submit your payment to FTA.
• The amount will be taken from the VAT suspense account and the linked bank account.

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