QuickBooks 2011: The Missing Manual

Before You Create Your Company File

If you’ve just started a business and want to inaugurate your books with QuickBooks, your prep work will be a snap. On the other hand, if you have existing books for your business, you have a few small tasks to complete before you jump into QuickBooks’ setup. Whether your books are paper ledgers or electronic files in another program, gather your company information before you open QuickBooks. That way, you can hunker down in front of your computer and crank out a company file in record time. This section explains what you need to create your company file in QuickBooks.

Start Date

To keep your entire financial history at your fingertips, you need to put every transaction and speck of financial information in your QuickBooks company file. But you have better things to do than enter years’ worth of checks, invoices, and deposits, so the comprehensive approach is practical only if you just recently started your company.

The more realistic approach is to enter your financial state as of a specific date and, from then on, add all new transactions in QuickBooks. The date you choose is called the start date, and you shouldn’t choose it randomly. Here are your start date options and the ramifications of each one:

• The last day of the previous fiscal year. The best choice is to fill in your records for the entire year. Choose the last day of your company’s previous fiscal year as the company file start date. That way, the account balances on your start date are like the ending balances on a bank statement, and you’re ready to start bookkeeping fresh on the first day of the fiscal year.

  Yes, you have to enter checks, credit card charges, invoices, and other transactions that happened since the beginning of the year, but that won’t take as much time as you think. And you’ll regain those hours when tax time rolls around, as you nimbly generate the reports you need to complete your tax returns.

  If more than half of the year has already passed, the best approach is to be patient and postpone your QuickBooks setup until the next fiscal year. Intuit releases new versions of QuickBooks in October or November each year for just that reason. But waiting until next year isn’t always an option, particularly if your old accounting system vendor wants a truckload of cash for an upgrade. In cases like that, go with the next start-date option.

  Tip

  For practice, you can set the start date for your company file to the starting date from the bank statement closest to your company start date. Then you can enter transactions for the month and try reconciling your bank account to those transactions.

• The last day of the previous fiscal period. The next best start date is the last day of the previous fiscal quarter (or fiscal month at the very least). Starting in the middle of a fiscal year makes the entire year’s accounting more difficult. Since your company file doesn’t contain a full year’s worth of detail, you’ll have to switch between QuickBooks and your old filing cabinets to prepare your tax returns and look up financial information. Starting just before a fiscal period mitigates this hassle but doesn’t eliminate it.

Account Balances and Transactions

Unless you begin using QuickBooks when you start your business, you need to know your account balances as of your selected start date to get things rolling. For example, if your checking account has $342 at the end of the year, that value goes into QuickBooks during setup. You also need every transaction that’s happened since the start date—sales you’ve made, expenses you’ve incurred, payroll and tax transactions, and so on—to establish your asset, liability, equity, income, and expense accounts. So dig that information out of your existing accounting system (or shoebox). Here are the balances and transactions you need and where you can find them in your records:

• Cash balances. For each bank account you use in your business (checking, savings, money market, petty cash, and so on), find the bank statements with statement dates as close to—but earlier than—the start date for your QuickBooks file.

  Gather deposit slips and your checkbook register to identify the transactions that haven’t yet cleared; you’ll need them to enter transactions, unless you download transactions from your bank (Online Banking Using Side-by-side Mode). If you have petty cash lying around, count it and use that number to set up your petty cash account (Tracking Petty Cash).

  Tip

  The balance sheet that you included with your previous year’s tax return is a great starting point for your account balances. Your tax return also shows your Federal Tax ID number, which you’ll need, too.

• Customer balances. If customers owe you money, pull the paper copy of every unpaid invoice or statement out of your filing cabinet so you can give QuickBooks what it needs to calculate your Accounts Receivable balance. If you didn’t keep copies, ask your customers for copies of the invoices they haven’t paid or simply create invoices in QuickBooks to match the payments you receive.

• Vendor balances. If your company thinks handing out cash before you have to is more painful than data entry, find the bills you haven’t yet paid and get ready to enter them in QuickBooks so you can generate your Accounts Payable balance. (To reduce the number of transactions you have to enter, simply pay those outstanding bills and record the payments in QuickBooks.)

• Asset values. When you own assets such as buildings or equipment, the value of those assets depreciates over time. If you’ve filed a tax return for your company, you can find asset values and accumulated depreciation on your most recent tax return (yet another reason to start using QuickBooks at the beginning of the year). If you haven’t filed a tax return for your company yet, the asset value is typically the price you paid for the asset.

• Liability balances. Find the current balances you owe on any loans or mortgages.

• Inventory. For each product you stock, you need to know how many items you had in stock as of the start date, how much you paid for them, and what you expect to sell them for.

  Tip

  The basic QuickBooks editions like QuickBooks Pro and QuickBooks Premier aren’t very good at working with inventory that you assemble from components or raw materials. See Product Items to learn how to track such inventory.

• Payroll. Payroll services are a great value for the money, which you’ll grow to appreciate as you collect the info you need for payroll (including salaries and wages, tax deductions, benefits, pensions, 401(k) deductions, and other stray payroll deductions you might have). You also need to know who receives withholdings, such as tax agencies or the company handling your 401(k) plan. Oh yeah—and you need payroll details for each employee. Chapter 14 explains the ins and outs of payroll in QuickBooks.

Tip

If you have outstanding payroll withholdings such as employee payroll taxes, send in the payments so you don’t have to enter those open transactions in QuickBooks.