a. qb lesson 5

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COMPUTER ACCOUNTING WITH

QUICKBOOKSLesson 5

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USING OTHER ACCOUNTS INQUICKBOOKS

Credit card accountsUsed to track transactions you pay for with a credit card.

Asset accounts

Used to track both current assets (those assetsyoure likely to convert to cash or use up within one year,such as inventory on hand) and fixed assets (such aslong-term notes receivable and depreciable assets your

business owns that arent liquid, such as equipment,furniture, or a building).

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Other account types in QuickBooks

Liability accountsUsed to track both current liabilities (those liabilities

scheduled to be paid within one year, such as sales tax,payroll taxes, and short-term loans) and long-termliabilities (such as loans or mortgages scheduled to bepaid over terms longer than one year).

Equity accounts

Used to track owners equity, including capitalinvestment, draws, and retained earnings.

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Tracking credit card transactions

Many businesses pay for expenses with acredit card rather than a check. For travelexpenses especially, a credit card is invaluablebecause it gives a detailed listing of each charge.You can track credit card transactions in

QuickBooks just as easily as you track expensesyou pay for by check.

You should set up a QuickBooks credit

card account for each credit card you use inyour business. Like any QuickBooks account,a credit card account has its own register.

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Entering credit card charges

QuickBooks lets you choose when you enteryour credit card charges.

You can enter credit card charges when youcharge an item or when you receive the bill. Yourchoice depends on whether you like to enterinformation into QuickBooks incrementally or all atonce.

The advantage to entering charges whenyou charge an item is that you can keep close

track of how much you owe. In addition, if thecharge is for a particular job, you can keep trackof how much youre spending on that job.

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To enter a credit card charge:

The form you use is the Enter Credit CardCharges form.

From the Banking menu, choose Enter Credit Card

Charges.

QuickBooks displays the Enter Credit CardCharges window

After you record credit card charge,QuickBooks adds the transaction to the creditcard account register

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Reconciling a credit cardstatement

Just as we reconciled a bank account in theprevious lesson, you should compare yourcredit card receipts with your statement andreconcile your credit card statement.Reconciling a credit card account is almost

identical to reconciling a bank account.

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To Reconciling a credit cardstatement

Go to chart of account Select credit card

Click the Activities menu button, and then chooseReconcile Credit Card.

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In the Beginning Balance field, QuickBooksdisplays the balance of all cleared transactions inthe credit card register.

To reconcile a credit card statement, all you haveto do is enter the ending balance and check offeach transaction listed on your statement.

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QuickBooks displays the Reconcile Credit Cardwindow.

MARKING CLEARED TRANSACTIONS

In the Charges and Cash Advances section of the

window, select charges and in In the Payments

and Credits section of the window.

QuickBooks places a checkmark in the column to

the left of each transaction you select.

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To Reconciling a credit cardstatementWhen youve finished reconciling a credit

card account, QuickBooks gives you achance to pay part or all of the balance due

on your credit card.

QuickBooks has already filled in the amount of the payment for

you, and has assigned the expense to the Credit Card

account. (If you change your mind and decide you only want to

make a partial payment, you can change the amount)

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Working with asset accounts

QuickBooks has two account types for tracking thevalue of your short- and long-term assets:

An Other Current Asset account tracks assets that

are likely to be converted to cash or used upwithin one year. Other current assets mightinclude treasury bills, certificates of deposit,prepaid expenses (amounts already paid forservices your business has yet to receive),

prepaid deposits (which will be returned to you ata later date), reimbursable expenses, and notesreceivable (if due within one year).

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A Fixed Asset account tracks assets yourbusiness owns that are not likely to be convertedinto cash within a year. A fixed asset is usuallysomething necessary for the operation of yourbusiness, like a truck, cash register, computer, or

photocopier.

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Some additional examples of other current assetsare accounts receivable, bank accounts, andcash. QuickBooks provides three types of currentasset accounts for you to use as you create assetaccounts for your company: bank account (to

track each bank account), accounts receivable (totrack money owed to your business), and othercurrent asset.

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Setting up asset accounts to trackdepreciation

Fixed assets are equipment or property yourbusiness owns that are not for sale. Since theylast a long time, you dont completely charge theircost to the year in which you buy them.

Instead, you spread their cost over several

years. But because fixed assets wear out orbecome obsolete, their value declines constantlyfrom the day you purchase them. The amount ofthis decline in value is called depreciation.

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Entering depreciation transactions

When it's time to enter depreciation for an asset,you can use the register for the assetsaccumulated depreciation account.

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Entering depreciation transactions

When you record the transaction, QuickBooks doesthe following:

Subtracts the depreciation amount from thecurrent value of the asset in the assets fixedasset account. Enters the depreciation amount as

an increase to your company's depreciationexpense in the expense account that tracksdepreciation.

When you purchase an asset and pay for itwith a company check or credit card, you shouldenter the purchase in the Write Checks or EnterCredit Card Charges window. Then, in the

Account field, choose the account for the asset.

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Working with liability accounts

QuickBooks has two account types for tracking thevalue of your short- and long-term liabilities:

An Other Current Liability account tracks liabilities

that your company expects to pay within a year.Other current liabilities might include short-termloans or a line of credit.

A Long-term Liability account tracks debts thatyour business is not likely to pay offwithin a year.

The most common long-term liabilities are loansthat you expect to pay off in more than one year.

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Working with liability accounts

Some additional examples of other currentliabilities are accounts payable, credit cardaccounts, accrued sales tax, and accrued payroll.QuickBooks provides three types of currentliability accounts for you to use as you create

liability accounts for your company: credit card (totrack credit card charges and payments),accounts payable (to track money owed by yourbusiness), and other current liability.

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Recording a payment on a loan

When it's time to make a payment on a loan, usethe Write Checks window to record a check toyour lender. Youll want to assign part of thepayment to a loan interest expense and theremainder to loan principal.

When you record the transaction, QuickBooksautomatically updates the accounts affected bythis transaction.

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Understanding equity accounts

Equity is the difference between what youhave (your assets) and what you owe (yourliabilities).

If you sold all your assets today and paid offyour liabilities using the money received from the

sale of your assets, the money youd have leftwould be your equity.

A balance sheet shows your companyassets, liabilities, and equity on a particular date.Because equity is the difference between totalassets and total liabilities, its also true that totalassets equal the sum of total liabilities and equity.

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As you enter the opening balances of yourassets and liabilities, QuickBooks calculates theamount of equity and records it in an equityaccount called Opening Bal Equity.

In addition to the Opening Bal Equity

account, QuickBooks sets up another type ofequity account for you called Retained Earnings.This account tracks your companys net incomefrom previous fiscal years. QuickBooksautomatically transfers your profit (or loss) to

Retained Earnings at the end of each fiscal year.

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If your company is a sole proprietorship (anunincorporated company with only one owner),you dont have to add any more equity accountsto your chart of accounts. All the equity belongs tothe companys sole owner.

You can get as involved in tracking equity asyou wish. Some people like to track ownerinvestments, owners draws, and retainedearnings prior to their QuickBooks start date byputting them in separate equity accounts. If your

business is a partnership, youll probably want toset up separate equity accounts for each partner.

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A common use of an equity account is torecord an owners draw (a payment you make toyourself). To record an owners draw, use theWrite Checks window to make out a check toyourself. In the detail area of the check, assign

the amount of the check to the equity account youuse to record owner draws.

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