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QuickBooks 2011: The Missing Manual by Bonnie Biafore

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Introduction

Thousands of small companies and nonprofit organizations turn to QuickBooks to keep their finances on track. And over the years, Intuit has introduced various editions of QuickBooks to satisfy the needs of different types of companies. Back when milk was simply milk, you either used QuickBooks or you didn’t. But now, when you can choose milk from soy beans as well as cows, and five different levels of fat, it’s no surprise that QuickBooks comes in Simple Start, Pro, Premier, Online, and Enterprise editions (which, in some cases, are dramatically different from their siblings), as well as six industry-specific editions. From the smallest of sole proprietorships to burgeoning enterprises, one of these editions is likely to meet your organization’s needs and budget.

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, drop-down 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.

What’s New in QuickBooks 2011

Despite the fluctuating size of the tax code, accounting and bookkeeping practices don’t change much each year. The changes in QuickBooks 2011 are mostly small tweaks and subtle improvements, but a few additions might be just what you’ve been waiting for:

  • The EasyStep Interview has been streamlined. Even better, it no longer confronts you with sales pitches for add-on services that cost extra.

  • The QuickBooks Setup window (Beginning to Use QuickBooks) now opens after you finish creating a new company file. The window steps you through setting up customers, vendors, employees, items you sell, and bank accounts.

  • The Company Snapshot window now includes a Customer tab (Company) that lets you review the status and recent transactions of your customers.

  • Transaction windows like Create Invoices and Enter Bills include a new panel with a summary of the customer’s or vendor’s account status and a list of recent transactions (Entering Bills).

  • QuickBooks now offers separate preferences to automatically apply discounts and credits (Modifying Payment Amounts).

  • You can set up a batch of invoices (Creating Batch Invoices) for the same items and amounts and then send them to as many of your customers as you want. In addition, you can add all the customers that receive the same invoice to a billing group and then choose that group to send the invoice to each customer in it.

  • QuickBooks can now use Web-based email accounts (Send Forms), such as Gmail or Yahoo.

  • The new “Balance sheet by class” report lets you prepare a balance sheet for each class you track—perfect for keeping tabs on the performance of different business units or locations.

When QuickBooks May Not Be the Answer

When you run a business (or a nonprofit), you track company finances for two reasons: to keep your business running smoothly and to generate the reports required by the IRS, SEC, and anyone else you have to answer to. QuickBooks helps you perform basic financial tasks, track your financial situation, and manage your business to make it even better. But before you read any further, here are a few things you shouldn’t try to do with QuickBooks:

  • Work with more than 14,500 unique inventory items or 14,500 contact names. QuickBooks Pro and Premier company files can hold up to 14,500 inventory items and a combined total of up to 14,500 customer, vendor, employee, and other (Other Names list) names. (QuickBooks Enterprise Solutions version 7.0 and later increases these limits to 1,000,000.)

  • Track personal finances. Even if you’re a company of one, keeping your personal finances separate from your business finances is a good move, particularly when it comes to tax reporting. In addition to opening a separate checking account for your business, track your personal finances somewhere else (like in Quicken). If you do decide to use QuickBooks, at least create a separate company file for your personal financial info.

  • Track the performance of stocks and bonds. QuickBooks isn’t meant to keep track of the capital gains and dividends you earn from investments such as stocks and bonds. But companies have investments, too, of course. A machine that costs hundreds of thousands of dollars is an investment that you hope will generate lots of income, and you should track it in QuickBooks. However, in QuickBooks, these types of investments show up as assets of the company (Ship Via List).

  • Manage customer relationships. Lots of information goes into keeping customers happy. With QuickBooks, you can stay on top of customer activities with features like To Do items, Reminders, and Memorized Transactions. But for tracking details like memberships, items sold on consignment, project progress, and scheduled events, another program like Microsoft Excel or Access would be a better solution.

Note

Some third-party customer-management programs integrate with QuickBooks (Exporting QuickBooks Data).

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.

Warning

QuickBooks for Mac differs significantly from the Windows version, and unfortunately you won’t find help with the Mac version of the program in this book.

This book focuses on QuickBooks Pro because its balance of features and price make it the most popular edition. Throughout this book, 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 QuickBooks 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.

The QuickBooks Premier Choices

If you work in one of the industries covered by QuickBooks Premier, you can get additional features unique to your industry—for about $150 more than QuickBooks Pro. (When you install QuickBooks Premier, you choose the industry version you want to run. If your business is in an industry other than one of the five industry-specific versions, choose General Business.) Some people swear that these customizations are worth every extra penny. Others say the additional features don’t warrant the Premier price. On the QuickBooks website (http://quickbooks.intuit.com), you can tour the Premier features to decide for yourself. Or, you can purchase the Accountant edition, which can run any QuickBooks edition, from QuickBooks Pro to the gamut of Premier’s industry-specific versions. Here are the industries that have their own Premier editions:

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.

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:

  • 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 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. (See Chapter 16 for more about double-entry accounting and journal entries.)

    Note

    Each side of a double-entry transaction has a name: debit or credit. As you can see in Table 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 book of how transactions translate to account debits and credits.

    Table 1. Following the money through accounts

    Transaction

    Account

    Debit

    Credit

    Sell products or services

    Service Income

     

    $1,000

    Sell products or services

    Accounts Receivable

    $1,000

     

    Receive payment

    Accounts Receivable

     

    $1,000

    Receive payment

    Checking Account

    $1,000

     

    Pay for expense

    Checking Account

     

    $500

    Pay for expense

    Office Supplies

    $500

     
  • 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. (See Chapter 3 to learn about all the different types of accounts you might use.) 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 (described in detail in Chapter 17):

    • 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 difference 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 This Book

These days, QuickBooks Help gives more in the way of accounting background and troubleshooting tips than it used to, although useful examples are still in short supply. The problem is finding the topics you want. If the Relevant Topics feature (QuickBooks Help) doesn’t answer your question, the Live Community—which lets you ask your peers and experts for answers (Live Community)—offers no assistance, and searching with keywords doesn’t produce the answer you’re looking for; then QuickBooks Help can’t help you. In addition, QuickBooks Help doesn’t let you mark your place, underline key points, jot notes in the margin, or read about QuickBooks while sitting in the sun; this book does.

This book takes the place of the manual that should have accompanied QuickBooks 2011. It applies to the Windows version of QuickBooks Pro and Premier. (Because the Mac version of the program differs significantly from the Windows one, this book won’t be of much help if you have QuickBooks for Mac.)

In these pages, you’ll find step-by-step instructions for using every QuickBooks Pro feature, including those you might not quite understand: progress invoicing (Comparing Estimates to Actuals), making general journal entries (Creating General Journal Entries), customizing forms (Working with Form Designs), writing off losses (Transferring Funds), and so on. If you’re just starting out with QuickBooks, you can read the first few chapters as you set up your company file. After that, go ahead and jump from topic to topic depending on the bookkeeping task at hand. As mentioned earlier, you’ll learn about some of the extra bells and whistles in the QuickBooks Premier edition, as well. (All of the features in QuickBooks Pro—and in this book—are also in Premier.) To keep you productive, this book also includes evaluations of features to help you figure out which ones are useful and when to use them.

Note

Although each version of QuickBooks introduces new features and enhancements, you can still use this book if you’re keeping your company books with earlier versions of QuickBooks. Of course, the older your version of the program, the more discrepancies you’ll run across.

QuickBooks 2011: The Missing Manual is designed to accommodate readers at every technical level. The primary discussions are written for people with advanced-beginner or intermediate QuickBooks skills. But if you’re using QuickBooks for the first time, special boxes titled “Up To Speed” provide the introductory info you need to understand the current topic. On the other hand, people with advanced skills should watch for similar boxes labeled “Power Users’ Clinic,” which cover more technical tips, tricks, and shortcuts for experienced QuickBooks fans.

About the Outline

This book is divided into five parts, each containing several chapters:

  • Part I covers everything you have to do to set up QuickBooks 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 II 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 III 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 IV 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.

  • Part V provides a guide to installing and upgrading QuickBooks and a reference to help resources.

Note

You can find three bonus appendixes online at www.missingmanuals.com/cds: Keyboard Shortcuts, Tracking Time with the Standalone Timer, and Advanced Form Customization.

The Very Basics

To use this book (and QuickBooks), you need to know a few basics. This book assumes that you’re familiar with the following terms and concepts:

  • Clicking. This book includes instructions that require you to use your computer’s mouse or trackpad. To click means to point your cursor (the arrow pointer) at something on the screen and then—without moving the cursor at all—press and release the left button on the mouse (or laptop trackpad). To right-click means the same thing, but pressing the right mouse button instead. (Usually, clicking selects an onscreen element or presses an onscreen button, whereas right-clicking typically reveals a shortcut menu, which lists some common tasks specific to whatever you’re right-clicking.) To double-click, of course, means to click twice in rapid succession, again without moving the pointer at all. And to drag means to move the cursor while holding down the (left) mouse button the entire time. To right-drag means to do the same thing but holding down the right mouse button.

    When you’re told to Shift-click something, you click while pressing the Shift key. Related procedures, like Ctrl-clicking, work the same way—just click while pressing the corresponding key.

  • Menus. The menus are the words at the top of your screen: File, Edit, and so on. Click one to make a list of commands appear, as though they’re written on a window shade you’ve just pulled down. Some people click to open a menu and then release the mouse button; after reading the menu command choices, they click the command they want. Other people like to press the mouse button continuously as they click the menu title and drag down the list to the desired command; only then do they release the mouse button. Both methods work, so use whichever one you prefer.

  • Keyboard shortcuts. Nothing is faster than keeping your fingers on your keyboard to enter data, choose names, trigger commands, and so on—without losing time by grabbing the mouse, carefully positioning it, and then choosing a command or list entry. That’s why many experienced QuickBooks fans prefer to trigger commands by pressing combinations of keys on the keyboard. For example, in most word processors, you can press Ctrl+B to produce a boldface word. In this book, when you read an instruction like “Press Ctrl+A to open the Chart of Accounts window,” start by pressing the Ctrl key; while it’s down, type the letter A; and then release both keys.

About→These→Arrows

Throughout this book, and throughout the Missing Manual series, you’ll find sentences like this one: Choose Lists→Customer & Vendor Profile Lists→Customer Type List. That’s shorthand for a much longer instruction that directs you to navigate three nested menus in sequence, like this: “Choose Lists. On the Lists menu, point to the Customer & Vendor Profile Lists menu item. On the submenu that appears, choose Customer Type List.” Figure I-1 shows the menus this sequence opens.

Similarly, this arrow shorthand also simplifies the instructions for opening nested folders, such as Program Files→QuickBooks→Export Files.

Instead of filling pages with long and hard-to-follow instructions for navigating through nested menus and nested folders, the arrow notation is concise, but just as informative. For example, choosing Lists→Customer & Vendor Profile Lists→Customer Type List takes you to the menu shown here.
Figure 1. Instead of filling pages with long and hard-to-follow instructions for navigating through nested menus and nested folders, the arrow notation is concise, but just as informative. For example, choosing Lists→Customer & Vendor Profile Lists→Customer Type List takes you to the menu shown here.

About MissingManuals.com

At www.missingmanuals.com, you’ll find articles, tips, and updates to this book. In fact, we invite and encourage you to submit such corrections and updates yourself. In an effort to keep the book as up-to-date and accurate as possible, each time we print more copies of this book, we’ll make any confirmed corrections you’ve suggested. We’ll also note such changes on the website, so that you can mark important corrections into your own copy of the book, if you like. (Go to www.missingmanuals.com/library.html, click this book’s name, and then click the “View/Submit Errata” link of the left side of the page to see the changes.)

We’d love to hear your suggestions for new books in the Missing Manual line. There’s a place for that on missingmanuals.com, too. And while you’re online, you can also register this book at http://www.oreilly.com (you can jump directly to the registration page by going here: http://tinyurl.com/yo82k3). Registering means we can send you updates about this book, and you’ll be eligible for special offers like discounts on future editions of QuickBooks 2011: The Missing Manual.

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