Introduction To QuickBooks

 

Thousands of small companies and nonprofit organizations turn to Quick- Books to keep their finances on track.  QuickBooks isn’t hard to learn. Many of the features that you’re familiar with from other programs work just as well in QuickBooks—windows, dialog boxes, dropdown lists, and keyboard shortcuts, to name a few. And with each new version, Intuit has added enhancements and

new features to make your workflow smoother and faster. The challenge is knowing what to do according to accounting rules, and how to do it in QuickBooks.  

Choosing the Right Edition of QuickBooks

 QuickBooks comes in a gamut of editions, offering options for organizations at both ends of the small-business spectrum. QuickBooks Simple Start and Online Edition cover the basic needs of very small operations. Enterprise Solutions, on the other hand, are the most robust and powerful editions of QuickBooks, boasting enhanced features and speed for the biggest of small businesses.

This course focuses on QuickBooks Pro because its balance of features and price make it the most popular edition. Throughout this course, you’ll also find notes about features offered in the Premier edition, which is one step up from Pro. (Whether you’re willing to pay for these advanced features is up to you.) Here’s an overview of what each edition does:

• QuickBooks Simple Start is mainly a marketing tool, because you’ll quickly outgrow its limitations. (At that point, you can move your data to QuickBooks Pro or QuickBooks Online.) But it’s a low-cost option for small businesses with simple accounting needs and only one person running QuickBooks at a time. It’s easy to set up and use, but it doesn’t handle features like inventory, downloading transactions from your bank, tracking time, or sharing your company file with your accountant.

• QuickBooks Online Edition has most of the features of QuickBooks Pro, but you access it via the Web instead of running it on your PC. It lets you use Quick- Books anywhere, on any computer, so it’s ideal for consultants who are always on the go.

 • QuickBooks Pro is the workhorse edition. It lets up to five people work in a company file at a time; you can purchase licenses in single- or five-user packs. QuickBooks Pro includes features for tasks such as invoicing; entering and paying bills; job costing; creating estimates; saving and distributing reports and forms as email attachments; creating budgets automatically; projecting cash flow; tracking mileage; customizing forms; customizing prices with price levels; printing shipping labels for FedEx and UPS; and integrating with Word, Excel, and hundreds of other programs. QuickBooks Pro’s name lists—customers, vendors, employees, and so on—can include up to a combined total of 14,500 entries. Other lists like the Chart of Accounts can have up to 10,000 entries.

• QuickBooks Premier is another multi-user edition. For business owners, its big claim to fame is handling inventory items assembled from other items and components. In addition, Premier can generate purchase orders from sales orders and estimates, and apply price levels to individual items. You can also track employee info and get to your data remotely. This edition also includes a few extra features that typically interest only accountants, like reversing general journal entries. When you purchase QuickBooks Premier, you can choose from six different industry-specific flavors (see the next section). Like the Pro edition, Premier can handle a combined total of up to 14,500 list entries.

• Enterprise Solutions 10.0 is the edition for larger operations. It’s faster, bigger, and more robust than its siblings. Up to 30 people can access a company file at the same time, and this simultaneous access is at least twice as fast as in the Pro or Premier edition. The database can handle lots more names in its customer, vendor, employee, and other name lists (1,000,000 versus 14,500 for Pro and Premier). You can have multiple company files, work in several locations, and produce combined reports for those companies and locations. And because more people can be in your company file, this edition has features such as an enhanced audit trail, more options for assigning or limiting user permissions, and the ability to delegate administrative functions to the other people using the program.

Note: Accountant Edition is designed to help professional accountants and bookkeepers deliver services to their clients. It lets you run any QuickBooks edition (that is, Pro, or any of the Premier versions). In addition to being compatible with all other editions of QuickBooks, it lets you design financial statements and other documents, process payroll for clients, reconcile clients’ bank accounts, calculate depreciation, and prepare clients’ tax returns.

• The General Business version has all the goodies of the Premier Edition like per-item price levels, sales orders, and so on. It also has more built-in reports than QuickBooks Pro, sales and expense forecasting, and a business plan feature (although, if you’re using QuickBooks to keep your books, you may already have a business plan).

• The Contractor version includes special features near and dear to construction contractors’ hearts: job-cost and other contractor-specific reports, the ability to set different billing rates by employee, and tools for managing change orders.

• Manufacturing & Wholesale is targeted to companies that manufacture products. It includes a chart of accounts and menus customized for manufacturing and wholesale operations. You can manage inventory assembled from components and track customer return materials authorizations (RMAs) and damaged goods.

• If you run a nonprofit organization, you know that several things work differently in the nonprofit world, as the box above details. The Nonprofit version of QuickBooks includes features such as a chart of accounts customized for nonprofits, forms and letters targeted to donors and pledges, info about using QuickBooks for a nonprofit, and the ability to generate the “Statement of Functional Expenses 990” form.

• The Professional Services version (not to be confused with QuickBooks Pro) is designed for companies that deliver services to their clients. Unique features include project-costing reports, templates for proposals and invoices, billing rates that you can customize by client or employee, and professional service–specific reports and help.

• The Retail version customizes much of QuickBooks to work for retail operations. It includes a specialized chart of accounts, menus, reports, forms, and help. Intuit offers companion products that you can integrate with this edition to support all aspects of your retail operation. For example, QuickBooks Point of Sale tracks sales, customers, and inventory as you ring up sales, and it shoots the information over to your QuickBooks company file.   UP TO SPEED

Accounting Basics—The Important Stuff

Intuit claims that you don’t need to understand most accounting concepts to use QuickBooks. However, you’ll be more productive and have more accurate books if you understand the following concepts and terms:

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Double-entry accounting is the standard method for tracking where your money comes from and where it goes. Following the old saw that money doesn’t grow on trees, money always comes from somewhere when you use double-entry accounting. For example, as shown in Table I-1, when you sell something to a customer, the money on your invoice comes in as income and goes into your Accounts Receivable account. Then, when you deposit the payment, the money comes out of the Accounts Receivable account and goes into your checking account.

Note:

Each side of a double-entry transaction has a name: debit or credit. As you can see in Table I-1, when you sell products or services, you credit your income account (since you increase your income when you sell something), but debit the Accounts Receivable account (because selling something also increases how much customers owe you). You’ll see examples throughout the course of how transactions translate to account debits and credits

 Transaction Account Debit Credit

 • Chart of Accounts. In bookkeeping, an account is a place to store money, just like your checking account is a place to store your ready cash. The difference is that you need an account for each kind of income, expense, asset, and liability you have..)The chart of accounts is simply a list of all the accounts you use to keep track of money in your company

 • Cash vs. Accrual Accounting. Cash and accrual are the two different ways companies can document how much they make and spend. Cash accounting is the choice of many small companies because it’s easy: You don’t show income until you’ve received a payment (regardless of when that happens), and you don’t show expenses until you’ve paid your bills. The accrual method, on the other hand, follows something known as the matching principle, which matches revenue with the corresponding expenses. This approach keeps income and expenses linked to the period in which they happened, no matter when cash comes in or goes out. The advantage of this accrual method is that it provides a better picture of profitability because income and its corresponding expenses appear in the same period. With accrual accounting, you recognize income as soon as you record an invoice, even if you’ll receive payment during the next fiscal year. For example, if you pay employees in January for work they did in December, those wages are part of the previous fiscal year.

• Financial Reports. You need three reports to evaluate the health of your company

The income statement, which QuickBooks calls a Profit & Loss report, shows how much income you’ve brought in and how much you’ve spent over a period of time. This QuickBooks report gets its name from the difference between the income and expenses, which results in your profit (or loss) for that period.

The balance sheet is a snapshot of how much you own and how much you owe. Assets are things you own that have value, such as buildings, equipment, and brand names. Liabilities consist of the money you owe to others (like money you borrowed to buy one of your assets, say). The between your assets and liabilities is the equity in the company—like the equity you have in your house when the house is worth more than you owe on the mortgage.

The Statement of Cash Flows tells you how much hard cash you have. You might think that the Profit & Loss report would tell you that, but noncash transactions—such as depreciation—prevent it from doing so. The statement of cash flows removes all noncash transactions and shows the money generated or spent operating the company, investing in the company, or financing.   

About the Outline

This Course is divided into four parts, each containing several chapters:

• Part One: Getting Started covers everything you have to do to set up Quick- Books based on your organization’s needs. These chapters explain how to create and manage a company file; set up accounts, customers, jobs, invoice items, and other lists; and manage QuickBooks files.

• Part Two: Bookkeeping follows the money from the moment you rack up time and expenses for your customers and add charges to a customer’s invoice to the tasks you have to perform at the end of the year to satisfy the IRS and other interested parties. These chapters describe how to track time and expenses, pay for things you buy, bill customers, manage the money that your customers owe you, pay for expenses, run payroll, manage your bank accounts, and perform other bookkeeping tasks.

• Part Three: Managing Your Business delves into the features that can help you make your company a success—or even more successful than it was before. These chapters explain how to keep your inventory at just the right level, build budgets, and use QuickBooks’ reports to evaluate every aspect of your enterprise.

• Part Four: QuickBooks Power helps you take your copy of the program to the next level. You’ll learn how to save time and prevent errors by downloading transactions electronically; boost your productivity by setting QuickBooks’ preferences to the way you like to work and integrating QuickBooks with other programs; customize QuickBooks’ components to look the way you want; and—most important—set up QuickBooks so your financial data is secure.

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