Lesson 1 – Understanding QuickBooks Organization Date: January 10, 2012 (1:00 EST, 12:00 CDT, 11:00 MDT 10:00 PDT) Time: 1.5 hours Presented by: Vickie Ayres

The Countess of QuickBooks & Tech Support Specialist for QuickBooks & Quoting Note: This webinar is being demonstrated with QuickBooks Premier 2011, installed as Contractors Edition. The basic concepts are the same in all versions of QuickBooks even if some screens or features appear differently in your version of QuickBooks.

If you are a brand new QuickBooks user you will need to create a new company file. You can have many company files and only own one

version of QuickBooks. If you already have a QuickBooks company file, you might want to start a new company a “Fresh Start”. You

might want to rearrange your information or business practices or if your accounting is not accurate it might be easier to start over than to

repair everything. Even if you start a new company you will be able to access your old company file for information and reports. You can

even import your vendors and/or customers into a new company file, so that you don’t have to re-enter contact info and account

numbers.

QuickBooks has a handy wizard called the “Easy Step Interview” that will help you create a new company file. I am going to lead you

through the setup of your company file without using the Interview. By not using the Interview you will learn more about what all the

different parts and pieces in QuickBooks, how they work and how they are linked to each other. This layer of understanding of

QuickBooks will be invaluable to you.

I am demonstrating using QuickBooks Premier 2011. You should be working with QuickBooks 2009 or newer. You can use Pro or

Premier, this is a great opportunity to see the features in Premier that make it different from Pro. You will need to have QuickBooks

installed on your computer and registered, in order to follow the instructions and complete the Lesson 1 project. The first step is to open

QuickBooks and it will take you to the last company file you had open. This information about creating a new company file is for use at

a later date if needed. In order to start a new company file you will need to choose File > New Company > Skip Interview

NOTE: For your Lesson 1 Project you will use the sample

company file I will send to you today after our class.

Starting a new Company completely from scratch is a LOT

of work. I want you to start working right away with the

concepts and features in QuickBooks instead of spending

hours creating a Chart of Accounts and a complete Item

List perfectly linked to that Chart of Accounts.

Here is where you enter your company name, address, etc… If you are creating a practice company file give it a fictional name; you don’t

want to confuse a practice company file with your current working company file.

Note: If your company entity is an LLC, you will need to know if it is a single or multi member entity. Check with your accountant.

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Your fiscal year is typically the same as the calendar year, even if your company was opened in the middle of the year.

Resist the urge to choose an industry…..QuickBooks will automatically create a lot of accounts for you that you may or may not need.

You can create accounts all at once or as you need them.

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QuickBooks wants to know where you would like to store your QuickBooks data file and the associated files that go with it. Even though

QuickBooks recommends to store all of the files and folders in its own folder it won’t create it for you. I recommend that you browse to

your Document folder and create a “QuickBooks Data” folder. Inside of that folder create a folder with your company name and a year-

designating the year this data file was created.

The default folder QuickBooks will toss your files and folders into is buried pretty deep and can be hard to locate later. By creating your

own folder and keeping it in the Document folder you will know right where it is if you need to work with the files and folders later. By

putting your "QuickBooks company file" in the Document folder you increase the odds that global backups will capture it and be

included in backup processes.

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TaDa!

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In 2011, the next screen that opens walks you through setting up Vendors, Items and Bank Accounts. Its kind of nice as it lets you enter

them in a table that feels like an Excel Spreadsheet. However we are going to use the regular dialog screens within QuickBooks to create

ours. Everyone is on different versions and years of QuickBooks in the class, this will be more universal for everyone. It also helps you

learn more about QuickBooks and its linkage.

Let's set the Open Window List up so that you can see what screens you have open and you can toggle to any of them easily.

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Preferences:

Let's take a look at your Preferences in QuickBooks Edit >Preferences. These are all pretty self explanatory, however, if you are

wondering what something means, just click on the Help button in the screen.

At the end of the year or a financial reporting period, you might want to add a closing date and password. That would require someone to

enter a password for transactions prior to the closing date. It can still be changed but it will might make you think twice before changing

information in an accounting period that is closed. Note: QuickBooks 2011 lets you use Estimates and PO from a “closed” accounting

period.

Not all preferences have choices on each tab; click both tabs to view available options.

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We can’t select default accounts here as we haven’t set them up yet. If you have a special account to escrow sales tax or payroll liabilities,

you will want to return here to choose these defaults.

This tab in Checking sets a warning, lets your account number swith vendors print on the memo line, if you decide to print checks and

sets Payroll Default accounts. We also have some Online Banking settings here. I use Online banking and recommend it. To look at my

balance, pay bills, do quick reconciliations off cycle, etc… However, I think that the “dumping” of transactions directly into your

QuickBooks company file is an advanced skill and often creates more work than it saves. People think it is the “Easy Button for

accounting, but that is not often the case. You have to understand what happens when you download transactions in the background, you

have to do a considerable amount of mapping to make sure it doesn’t create hundreds of duplicate vendors for you over the course of

time. Get your feet wet and then get some good advice before trying this feature. It is best especially if your company is small to medium

size, to just enter your transactions one at a time and control where they go.

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Notice, I have changed my background colors, we are designers, so we need designer backgrounds…..

One Window means every screen opens in a maximized position. It isn’t necessary to close your screens all the time. It is likely you will

want to come back to it and you can use the “Open Window List” to get back to them quickly. Place a check mark in “Don’t save the

desktop” and uncheck the “Show Live Community”, this will help QuickBooks open more quickly. If you want a specific area to open

every time you open QuickBooks, make sure it is open on the screen before you open this prefernce setting, then choose “Save Current”.

For example I like to have the snapshot open every time I start QuickBooks, so opened the snapshot, then opened this preference setting,

clicked Ok and closed QuickBooks. Now every time I open QuickBooks, my Snapshot opens, Love That!

Setting up Finance Charges: It's important to set up your finance charges in advance, even if you don’t expect to use them. You will

need an income account to keep track of how much money you earn from Finance Charges. When you type in the account name

“Finance Charge Income” QuickBooks will tell you that you don’t have one and you can choose to set it up right now “on the fly.”

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Follow the screen prompts creating the account as an “Other Income” account. It isn’t a regular income account because this is not the

principal source of income for your company.

Your invoices should contain notification text indicating what your finance charge policies and rates are, we will cover how to put that in

the footer in an upcoming lesson. The law in your state is what counts. This information will be available online or you could check with

your attorney or accountant. I have included a screen shot of the Indiana website that gives me the rules for what I can and cannot do

about finance charges. As a part of your project for Lesson 1, I would like you to find out what the rules are in your state and decide what

your policy and rates will be.

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Important Preference: You will want to set up items that have default descriptions. You will want to change the default text to specifics

when working in an estimate and you don’t want QuickBooks to forbid you from editing or asking you if its “OK” every time you try it.

You want to turn on the Inventory and Purchase Order function here. In Lesson 2, we will learn all about Inventory vs. Non-Inventory

Items.

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You can edit the default wording for how you refer to projects if you like. I will show you where you can use this but I personally find

this feature more trouble than it's worth.

NOTE: This screen will not appear in earlier versions. In 2008 these settings are in Sales & Customers. We won’t be covering using

Credit Card Merchant Service in the group lessons. These are the settings for this sample company file. There are so many different CC

processing services it would make it difficult to cover every situation in the group lesson. I can help you in your private session if you need

to work on this. Minutes Matter and I personally use Intuits service and LOVE it. It makes posting payments and fees from Intuit really

seamless.

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I really like to have the Reminders page load every time I open QuickBooks. These settings let me know if something needs my attention.

This setting is on the My Preferences tab.

This setting makes Cash the default setting for reports. It is the most common way to use reports. For this sample company file we will

default to Cash basis but if your accountant advises you to use accrual, you should of course follow their advice.

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This setting allows you to make time and costs “Billable” so that QuickBooks will ask you at the time of the invoice if you want to add any

of these billable items to the invoice.

Even if you are doing wholesale work, we recommend that you get setup with your state to charge sales tax. Most states require you to

file and report “Non-Taxable income even if you are strictly wholesale. Set it up in QuickBooks just in case the odd occasion arises where

you need to collect sales tax. This screen shot shows setting up a “Sales Tax Item” on the fly. In the middle of the Item setup we can

setup a Sales Tax Vendor at the same time.

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I recommend setting up and using Microsoft Outlook so that you can send your emailed forms through it, especially if your QuickBooks

year/version is 2010 or older. It automatically saves a copy of the email in the sent email file so you have some verification of emails sent.

That is not available through the QuickBooks Email service. If you use QuickBooks email service make sure and bcc yourself so you can

get a copy in your email account to file away. 2011 QuickBooks allows you to use your web based email, Hotmail, yahoo, etc…

See the bcc field? You can enter your email here to receive a copy delivered to your email every time you send something to your client.

You can edit all of the defaults for each type of transaction.

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You can check off any of these that seem pertinent to you. The more you check off the fewer spelling errors will be flagged.

I love the 1099 feature in QuickBooks. In order for QuickBooks to generate a 1099 for a vendor, three things must be true.

They have to be setup as a 1099 vendor (second tab in vendor setup) Don’t forget to collect tax numbers with a W-9 form from your

vendors every year

The thing you pay them for must be associated with a potential 1099 account (the screen above is where you do that mapping)

They have to be paid more than the threshold indicated. Set this up and at the end of the year, print your own 1099’s without

making an appointment with your accountant.

Even if you do not want to print and send them yourself, at the very least with a click of your mouse you can send a 1099 report to your

accountant, that you know is correct.

NOTE: Stay informed about 1099’s with your accontant, the rules are changing and making this more difficult every year. For example

new in 2011 reporting, if you paid the 1099’able vendor with a credit card, it can not be included in the 1099 you send to them. Cred it

Card companies are sending them separate 1099’s for that income. They will not be happy if they get that same income on two separate

1099’s.

TIP: When that spelling dialog box comes up read it!

Begin adding words to the dictionary, to prevent

QuickBooks from spell checking the same words or

abbreviations repeatedly.

2011 QuickBooks allows you to manage the words you

have added to your QuickBooks dictionary

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This preference setting will allow us to track time.

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Setting Up Accounts and Opening Balances

Bank Accts - Checking? Savings? Money Market?

Type Name Ending/Opening Balance

Date Acct number *1234

Bank Citibank Checking 1245.67 12-31 *1234

Loan Citibank Line of Credit 1053.44 12-29 *4456

Credit Card VISA *7865 2012.66 12-28 *7865

Note: As you create accounts QuickBooks will ask you if you want to use on-line banking to download transactions. I recommend not

downloading transactions until you are very comfortable with QuickBooks.

1 - Lists > Chart of Accounts – right click anyplace on the list and choose New

2 - Choose the type of account you want to set up and choose Continue

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The screen shots below show the setup for the Credit Account and the Loan account.

Setup credit cards accounts for what you owe in the same way that you did the Bank accounts.

Create Opening Balances in the same way also, use the ending balance from the last statement received prior to the Start Date for

this company file.

I personally like to enter the last four digits

for account numbers. I travel with my laptop

and don’t want all that info out in the world.

You have one shot at creating an opening

balance. There is a special trick to add an

Opening Balance later, but it is easier to do

it at this point.

VERY IMPORTANT:

The Opening Balance is the Ending balance

from the last statement you receive on your

account, before the start date for this

company file. If you don’t use the balance

from the statement you will not be able to

reconcile later.

Enter the Statement Date here.

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This loan is setup as an Other Current Liability instead of a Long Term Liability because it is assumed it will be paid in the short

term vs. over a long period of time. A Building mortgage would be a Long Term Liability.

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Setting Up Vendors with Opening Balances:

Vendor Acct number Balance Due

Fabricut *20-3678 1512.44

Minutes Matter 349.00

This process will automatically create an account in your Chart of Accounts for Accounts Payable, accumulating all of the vendor

balances you owe at the time of this new company file setup.

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Setup Customers with Opening Balances:

Customer:Job(Project) Balance Due

ABC Design Firm:Phillips, Stone:Miller LR 515.33

Adams, Amy:LR 2012.00

Customers can be setup on the fly in an Estimate or from the Customer Center.

This is a setup screen for the Customer:

Your Customer Center will have one Customer in it. Lets add a Project for this Customer. Choose New Customer & Job and

then choose Add Job from the menu.

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By creating Customers and Jobs under those customers you will start creating your Customer list. The opening balances need to

be entered for each job/project, not under the customer level. This will create an Accounts Receivable account in your Chart of

Accounts. It is critical that you set up Opening Balances for Customers here, THAT HAVE ALREADY HAD SALES

TAX REPORTED AND PAID TO THE GOVERNMENT IN PRIOR ACCOUNTING PERIODS OR COMPANY

FILES. If Sales Tax has not been reported and/or paid on a job, you should enter an Invoice for them in this new

company file. The Invoice will create new sales tax in the company file to be reported and paid.

When you add the Customer ABC Design Firm, that will be your Customer, you will add a job for the Designer within the firm.

When you have more than one designer within a firm you will add a sub-job under that designer. Notice how I used the client

name and room in that level. You don’t want to create levels more than three deep. Your Customer List in the Customer Center

is displayed below.

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Let's take a look at your Chart of Accounts. Your company file is starting to represent what your company really looked like at a

point in time. Notice how your opening balances created some Accounts Payable and Accounts Receivable?

Note: Make any Payroll Accounts inactive if they are in the Chart of Account. Right-click on them and choose “Make Inactive”.

Now we need to bring all of the registers up to date for those bank and credit card accounts we created. For example, when you

receive your statement from the bank sometimes it is missing a check that has not been cashed or there may be a deposit that

won’t show up until next month's statement. These are outstanding transactions, and they need to be entered into the company

file so your accounts reflect how much money you REALLY have, your Real & True Balance.

Let's look at the check register: Lists > Chart of Accounts double-click on the Checking account to open register.

We are going to enter some outstanding transactions. Even though QuickBooks will allow you to enter these in the “Register

View” we don’t recommend you do it that way. It is better to use the proper screen and make that process a habit. The Register

View only allows you to choose accounts, Cost of Goods and Expense accounts. You need to choose accounts sometimes and

Items sometimes. These are the outstanding transactions we will be doing.

a check to pay down a credit card

a check to pay sales tax due from last year

a check we paid to our installer that is not cashed yet

a deposit that did not show up on the statement

Equity Accounts – At the end of every

accounting period (defined by your fiscal year)

QuickBooks will calculate how much profit

your company earned. That does not

necessarily mean how much money you have

left in the checking account. When you pay

down principal that creates profit or income.

Other transactions can do the same thing. So

even if all the money is gone…. you can still

show a profit. QuickBooks keeps track of how

much profit is left in the Equity type accounts.

Check with your accountant to find out what

kind of General Journal Entries need to be

made to bring your equity accounts up to date.

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Under the menu Banking > Make Deposits create a deposit slip indicate the Customer:Job and indicate what kind of

sale/income that it was. Done is better than Perfect…We know some sales are combinations of fabric, lining, labor, etc…For

historical entry, you can

create a “summary sale”

that indicates the kind of

sale it was.

Hold down your Ctrl key and the “W” key at the same time, this will open up the check writing screen. You can create vendors

and expense accounts on the fly while in a transaction. Your expense accounts and sales tax vendor have been created in your

sample company file.

NOTE: This is the only

time you would ever create a

check this way to pay Sales

Tax Liabilities. In a later

lesson we will show the

proper way to generate Sales

Tax payment checks.

This vendor was created for

you.

New Expense Account –

Sales Tax Expense

Uncheck the To Be Printed

box, you won’t be printing

historical transactions

Creating this deposit will require

creating a

Sales account (income)

and a sub-account Window

Treatments (income)

You can do it right here “on the

fly”

Your sample company file

already has these created for

you.

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This check is a little different from the others. We have used an Item on the Item tab.

Let's talk about Items, we will be creating them in the Item List. If you go to the grocery, someplace in the store they have a list

of everything they sell on a list with prices that they expect to pay when buying it and the price they plan to sell it for. The Item

List in QuickBooks is what you can sell in your store/business. It has a cost and a selling price, these are set for your most

common selling situation. If you are primarily wholesale to the trade set your selling price to your wholesale pricing. If you do an

occasional retail job, you can always edit your pricing on the fly on the Estimate. If you are primarily selling to the public or

Retail, set your selling price up with Retail pricing. When you occasionally sell something with a trade discount, you can do that

on the fly on the Estimate.

Note: We sell Items, We buy Items and the Chart of Accounts keeps track of how much we buy and sell. The same account in

the COA can be linked to multiple items. For example, we could have an Item for Vases, and one for Mirrors. The purchase

and sale of both of those items can be tracked with an Accessories income account and an Accessories expense/Cost of Goods

account. A Cost of Goods account is just an expense account with a fancy name.

New Vendor - Visa

Credit Cards must be setup in two places, in the

Chart of Accounts and in the Vendor List, we

need an account to track our transactions and

we need a Vendor so we can pay them.

“VISA *7865” is not a new account in the

Chart of Accounts, we created it as our Credit

Card account earlier.

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Lets look at our Item list: List>Item List. Below is the setup screen for the Flat Rate installation item. This item has been set up to

be a sub-item, of 600 SUB-CONTRACTORS. This creates hierarchy in your list.

We can create items by scratch or Duplicate them. Duplicating Items is available in 2010 and newer. Duplicating an item already

in your Item List, means you have a “template” for doing it properly. Right-click on the item you want to duplicate and choose

“Duplicate Item”. How simple could that be?

What else do you want to sell in your company? For now let's setup one Service and one Non-Inventory Parts.

Item Name Description Cost Expense Account under COG:

Selling Price

Income Account under Sales:

Create each one as an Item in your Item List and we will use them next week to create Estimates for our customers.

This is a service item, labor for

installing. There are several other

types of items.

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Your new Right Start company file Chart of Accounts looks like this:

When we added vendors with opening balances it created an Accounts Payable account.

Lesson 1 Project

Set your View for Open Window List and One Window

Review your Preferences Edit>Preferences

Finance Charges

o Investigate the rules for Finance Charges in your state and decide what your policy and rates will be. Setup your

Finance Charges using Edit>Preferences>Finance Charges

Set up a Bank, Credit Card and Loan Account using information from the table

Set up two Vendors with opening balances using information from the table

Set up two Customers with one job/project each using the information from table

Enter the four outstanding transactions listed

Create two new Items from table information

We added:

Checking account

The Customers we added with Opening

Balances created an Accounts Receivable

account

Credit Card account

Loan