Sunday, December 6, 2009

Reconciling the Bank Account

You can reconcile a bank account with surprising speed in QuickBooks. To reconcile the bank account, choose the Banking ð Reconcile command. QuickBooks displays the Begin Reconciliation dialog box, shown in Figure 1.

Figure 1: The Begin Reconciliation dialog box

To begin reconciling your account, follow these steps:

  1. Select the account that you want to reconcile from the Account dropdown list.

  2. Use the Statement Date box to identify the ending date of the bank statement that you're using in your reconciliation.

    As is always the case with date fields in QuickBooks, you enter the date in the mm/dd/yyyy date format or you click the calendar button and use it to select the correct date.

  3. Enter the ending balance shown on your bank account statement in the Ending Balance box.

  4. Use the Service Charge boxes and the Interest Earned boxes to identify the amount of any service charge or of any interest, the date of any such transaction, and the account that you use to track those charges.

    For example, if your bank statement shows a service charge, enter the service charge amount into the first Service Charge box. Enter the date of the service charge transaction into the Service Charge Date box. Finally, enter an appropriate expense account for tracking service charges into the Service Charge Account drop-down list. (Bank charges, for example, is a good account to track service charges.)

    In a similar fashion, use the Interest Earned boxes to describe any interest earned on a business account.

  5. Review the statement information.

    After you enter information about the bank account, the statement date, the ending balance, and any service charge or interest earned information, take a moment to review the information and confirm that it is correct. You'll have a whale of a time reconciling an account if the amount that you're trying to reconcile to is incorrect.

  6. After you make sure that everything is hunky-dory, click the Continue button.

    QuickBooks displays the Reconcile window, as shown in Figure 2.

    Figure 2: The Reconcile window

  7. To identify checks and payments transactions that have cleared your bank account, click the transactions that have cleared.

    The Reconcile window displays two lists of transactions: a list of checks and payments, which appears on the left, and a list of deposits and other credits, which appears on the right. When you click a transaction, QuickBooks marks the transaction with a check mark. The check mark indicates that a transaction has cleared. You can mark all the transactions on a list as cleared by clicking the Mark All button. You can unmark all the transactions on a list as uncleared by clicking the Unmark All button.

    Use the Deposits and Other Credits list to identify those deposit transactions that have cleared the bank account. You identify a cleared deposit transaction in the same way that you identify a cleared check or payment transaction. You can click a transaction, which causes QuickBooks to mark the transaction as cleared. You can also use the Mark All and Unmark All buttons to mark or unmark all the deposits and other credit transactions at one time.


    Tip

    If you realize that, as part of the reconciliation, you've incorrectly entered the service charge, interest earned, ending balance, or any other information, click the Modify button. QuickBooks redisplays the Begin Reconciliation dialog box (refer to Figure 1). Make the necessary changes and click Continue to return to the Reconcile window.

  8. Verify that the cleared balance equals the ending balance.

    If you have provided correct information in the Begin Reconciliation dialog box (refer to Figure 1) and you correctly identified all the transactions that have cleared your account, the ending balance should equal the cleared balance, as shown in Figure 3.

    Figure 3: The Reconcile window after the reconcilation is complete

  9. When the ending balance equals the cleared balance, click the Reconcile Now button.

    QuickBooks permanently records your cleared transactions as cleared and redisplays the Register window. If you can't reconcile an account, you can click the Leave button. QuickBooks then saves your half-completed reconciliation so that you can come back later and finish it.


Tip

Can I interject a couple of tangential comments here? Good. If you want, you can print a little report that summarizes your reconciliation after you click the Reconcile Now button. (QuickBooks gives you this option in a dialog box that it displays.) You can also click the Previous Reports button to display a dialog box that lets you print other old reconciliation reports. You can click the Discrepancy Report button to produce a report that lists transactions that have been edited since you last reconciled the account. Finally, you can click the column headings used in the Reconciliation window to sort and resort the bank account information.

Saturday, October 31, 2009

Transferring Money between Bank Accounts

To use the Transfer Funds Between Accounts window, follow these steps:

  1. Use the Date field to identify the transfer date.

    You can enter the date in mm/dd/yyyy format, or you can click the small calendar button that appears to the right of the Date field. When QuickBooks displays the calendar, click the day that corresponds to the date you want to enter into the Date field.

  2. Use the Transfer Funds From drop-down list to select the bank account from which you're moving funds.

    You can enter the bank account name into the box or you can click the drop-down arrow at the right end of the box and select a bank account from the list that QuickBooks supplies.

  3. Use the Transfer Funds To drop-down list to identify the bank account that receives the transferred funds.

    The Transfer Funds To box works like the Transfer Funds From box.

  4. Use the Transfer Amount box to identify the amount of the transfer.

    For example, if you transfer $100 from your checking to your savings account, the transfer amount is $100.

  5. (Optional) Provide a memo description for the transfer transaction.

    If you want (and this is no big deal), you can use the Memo box to provide some brief memo description of the funds transfer.

  6. Save the transfer transaction.

    To save your transfer transaction, click either the Save & Close or the Save & New button. Alternatively, if you don't want to save the transfer transaction, click the Clear button.


Figure 1: The Transfer Funds Between Accounts window

Tuesday, October 27, 2009

Inventory in a Manufacturing Firm

Tracking inventory in a manufacturing firm is more difficult than in other types of businesses. When you boil everything down to its essence, the problem stems from a couple of tricky accounting requirements:

  • In a manufacturing environment, the manufacturer combines raw materials items into finished goods items. This means—and this is the challenging part—that the manufacturing process reduces the inventory count and value for some items (the raw materials or the components) while at the same time it increases the count and value of the other, finished goods items.

  • In a manufacturing environment, the rules say that you don't just count the value of items in the finished goods item inventory values. You also count the cost of labor and factory overhead used in manufacturing the items.

QuickBooks solves the first problem related to manufacturing inventory; however, QuickBooks doesn't solve or address the second problem. Fortunately, as long as you're a small manufacturer, you probably don't need to worry too much about the second problem. You should ask your CPA about this. But don't worry—Congress and the Internal Revenue Service have provided a bunch of loopholes for making the accounting easier for the small guys.

Manufactured Inventory the Simple Way

If you're using QuickBooks Pro or some earlier versions of QuickBooks Premier, you don't have the capability to account for the manufacture of inventory in QuickBooks. The best that you can do is to use group items to combine into individual items on a customer's invoice. This approach sounds sloppy, but it isn't quite as bad as you may think at first blush. You can choose to show only the group item on a customer invoice. This means—getting back to the example of the florist selling red roses and vases—that the florist can "manufacture" a crystal vase of a dozen red roses and then show the manufactured item as a group item on the customer's invoice.

The one thing that's problematic about the "just use a group item" approach is that it doesn't give you a way to track the finished goods' inventory values.

Inventory Accounting in QuickBooks Premier

To account for the manufacture of inventory in QuickBooks Premier, you add inventory assembly items to the Item list for those items that you manufacture. You also record the manufacture of items as you, well, manufacture them.

For example, suppose that Pine Lake Porcelain mostly just buys and resells coffee mugs and other porcelain doodads. But also suppose that once a year, Pine Lake Porcelain assembles a collection of red coffee mugs into a boxed St. Valentine's Day gift set. In this case, QuickBooks can record the assembly of a boxed gift set that combines, for example, four red coffee mugs, a cardboard box, and some tissue wrapping paper.

Adding Inventory Assembly Items

To describe manufactured items, follow these steps:

  1. Choose Lists ð Item List.

    QuickBooks displays the Item List window.

  2. Click the Item button in the Item List window and select New from the drop-down list.

    QuickBooks displays the New Item window.

  3. Select the Inventory Assembly item from the Type drop-down list.

    QuickBooks displays the Inventory Assembly version of the New Item window, as shown below.

    The Inventory Assembly version of the New Item window

  4. Specify the account to use for tracking this item's cost when you sell it.

    QuickBooks suggests the Cost of Goods Sold account. If you've created other accounts for your COGS, however, select the other appropriate account.

  5. Describe the manufactured item.

    Type in a description of the item that you want to appear on documents, such as invoices and so on, that your customers see. (QuickBooks suggests the same description that you used in the Description on Purchase Transactions text box as a default.)

  6. Enter the amount that you charge for the item into the Sales Price box.

  7. Indicate whether the manufactured item is subject to sales tax using the Tax Code box.

  8. Use the Income Account box to specify the account that you want QuickBooks to use for tracking the income from the sale of the item.

  9. Identify the components that go into the finished item.

    Use the Components Needed list to identify the individual component items and the quantities needed to make the inventory assembly. Each component item goes on a separate line in the list. Not to be too redundant, but do note that you both identify the component item and the number of component items needed.

  10. Identify the Asset Account.

    Specify the other current asset account that you want QuickBooks to use for tracking this inventory item's value.

  11. Select a Build Point.

    Use the Build Point box to specify the lowest inventory quantity of this item that can remain before you manufacture more. When the inventory level drops to this quantity, QuickBooks adds a Reminder to the Reminders list, notifying you that you need to make more of the item.

  12. Ignore the On Hand and the Total Value boxes.

    See that On Hand box? Leave it set to zero. To enter a number now is to record an uncategorized transaction, and you don't want to do that. Go ahead and leave the Total Value field set to zero, too. You can also leave the As Of box empty, or you can enter the current date here. It doesn't matter.

Recording Manufacture or Assembly of Items

To build some assembly, choose the Vendors ð Inventory Activities ð Build Assemblies command. QuickBooks displays the Build Assemblies window, as shown. All you do is select the thing that you want to build from the Assembly Item drop-down list and then the quantity that you (or some hapless co-worker) have built in the Quantity to Build box. (In Figure 1, I've created an assembly—ValentineBox—which consists of some colorful coffee mugs, an attractive gift box, and some scented tissue paper.) Then you click either the Build & Close or Build & New button. (Click the Build & New button if you want to record the assembly of some other items.)

Figure 1: The Build Assemblies version of the New Item window

While I'm on the subject, let me make a handful of observations about the Build Assemblies window and the Build Assemblies command:

  • In the top-right corner of the window, QuickBooks shows the quantities of the assembly that you have on hand and for which customers have placed orders. That's pretty useful information to have, so, hey, remember that it's there.

  • A table in the Build Assemblies window shows you what goes into your product. Not that you care, but this is a bill of materials.

  • At the bottom of the bill of materials list, QuickBooks shows you the maximum number of assemblies that you can make, given your current inventory holdings.

  • When you build an item, QuickBooks adjusts the inventory item counts. For example, in the case where you make boxed gift sets, each with four red coffee mugs and two wrapping tissues, QuickBooks reduces the item counts of red coffee mugs and wrapping tissues and increases the item counts of the boxed gift sets when you record building the assembly.

Some of the components used in an assembly may not be inventory items. You can use non-inventory parts in an assembly.

Saturday, October 24, 2009

Adjusting Physical Counts and Inventory Values

Inventory shrinkage, spoilage, and, unfortunately, theft all combine to reduce the inventory that you physically have. In order to record these inventory reductions, you periodically physically count your inventory and then update your QuickBooks records with the results of your physical counts.



Figure 1: The Adjust Quantity/Value on Hand window

To use the Adjust Quantity/Value on Hand window, follow these steps:

  1. Use the Adjustment Date box to record the date of your physical count.

    In other words, you want to adjust your quantities as of the day you took or completed the physical inventory count.

  2. Use the Adjustment Account drop-down list to identify the expense account that you want to use to track your inventory shrinkage expense.

  3. (Optional) Identify the customer:job and class.

    If it's appropriate, and in many cases it won't be, use the Customer:Job box to identify the customer:job associated with this inventory shrinkage. In a similar fashion, if appropriate, use the Class box to identify the class that you want to use for tracking this inventory shrinkage.

  4. Supply the correct inventory quantities.

    The Item, Description, and Current Qty columns of the Adjust Quantity/ Value on Hand window identify the inventory items that you are holding and the current quantity counts. Use the New Qty column to provide the correct physical count quantity of the item. After you've entered the new quantity, QuickBooks calculates the quantity difference and shows this value in the Qty Difference column.


    Tip

    You can actually enter a value into either the New Qty column or the Qty Difference column. QuickBooks calculates the other quantity by using the current quantity information that you supply. For example, if you enter the new quantity, QuickBooks calculates the quantity difference by subtracting the new quantity from the current quantity. If you enter the quantity difference, QuickBooks calculates the new quantity by adjusting the current quantity for the quantity difference.

  5. Adjust the value.

    This window lets you enter both the correct physical count quantity and the updated value for the inventory item. You enter the physical count quantity, obviously, in the New Qty column. You enter the new updated value in the New Value column. You probably use this version of the Adjust Quantity/Value on Hand window only if you're using a lower-of-cost or market inventory valuation method. For example, both financial accounting standards and tax accounting rules allow you to mark down your inventory to the lower of its original cost or its fair market value. If you're doing this-and how you do this is beyond the scope of this book-you enter the new inventory value in the New Value column.


    Figure 2: The expanded version of the Adjust Quantity/ Value on Hand window


    Tip

    Essentially, using the lower-of-cost or market inventory evaluation method just means you do what it says. You keep your inventory valued at either its original cost or, if its value is less than its original cost, at its new value. Obviously, assessing the value of your inventory is a little tricky. But if you have questions, you can ask your CPA for help. One thing to keep in mind, however, is that you can't go changing your accounting methods willy-nilly without permission from the Internal Revenue Service. And changing your inventory valuation method from cost, say, to lower-of-cost or market is a change in accounting method.

  6. Provide a memo description.

    If you want to further describe the quantity or value adjustment, use the Memo box for this purpose. For example, you may want to reference the physical count worksheets, the people performing the physical count, or the documentation that explains the valuation adjustment.

  7. Save the adjustment.

    After you've used the Adjust Quantity/Value on Hand window to describe the quantity changes or value changes in your inventory, click either the Save & Close button or the Save & New button to save the adjustment transaction. As you probably know at this point in your life, Save & Close saves the transaction and closes the window. Save & New saves the transaction but leaves the window open in case you want to make additional changes.

Friday, September 4, 2009

Tracking Inventory and Items

If you've worked with QuickBooks, you won't be surprised to hear that the Item list is a key piece of your QuickBooks accounting system. The Item list identifies each of the things that you sell. The Item list also identifies other things that appear on your invoices and—if you use them—on your purchase orders.

I talk about how you work with the QuickBooks Item list: more specifically, how you look at and use the information on the Item list. I explain how to add information to the list and how to edit information already on the list. What's more, I talk about three accounting tasks that are related to your Item list: adjusting physical inventory accounts for inventory shrinkage or spoilage; adjusting price levels of your inventory items; and if you manufacture inventory, how the new version of QuickBooks handles manufactured goods.

Looking at Your Item List

QuickBooks provides a bunch of different ways to see the information that you've stored in your Item list. You may already know some of this stuff if you've worked with QuickBooks a bit. Some of it may be new to you. In any case, the next sections review the half-dozen ways that you can see the items on your Item list.

Using the Item Column

One important point to consider as you look at the Item column and Item drop-down list in Figure 1 is space. Note that the Item drop-down list is pretty narrow. Note also that the Item drop-down list in Figure 1provides the item code (the left column), the item type, and an item description. The item description—if the description is lengthy—is cut off. You'll want to remember this seemingly trivial but important point as you work with your Item file. You want descriptive item codes and, if possible, brief descriptions.

Figure 1: The Item drop-down list on the Create Invoices window


Tip

I'm using pretty self-explanatory item codes in this reference, as you can see from Figure 1. In real life, your codes may be far more cryptic.

Using the Item List Window

If you choose the Lists ð Item List command, QuickBooks displays the Item List window, as shown in Figure 2. The Item List window identifies the item code or name, the description, the type of item , the account that gets credited when you sell some of the items, and the inventory stocking and pricing information (if you supply that).

Figure 2: The Item List window

The Item list provides a good way to quickly see what items you can put on invoices and purchase orders. The Item list also provides a quick and convenient way to see the stocking levels and prices.

If you want more information about an item shown in the Item List window, you can double-click the item. When you double-click the item, QuickBooks displays the Edit Item window, as shown in Figure 3. Essentially, the Edit Item window displays all the information available about a particular item. You can use the Edit Item window to change bits of item information.

Figure 3: The Edit Item window

Using the Inventory Reports

I mention one other thing because it's so darn useful. As you would expect, QuickBooks supplies several interesting, useful inventory reports. If you choose the Reports ð Inventory command, for example, QuickBooks displays a submenu of inventory reports. The submenu provides reports that give inventory valuations, inventory stock levels, and a worksheet that you can use to go out and physically count the inventory on store shelves or in the warehouse.

Wednesday, September 2, 2009

Reviewing the other Vendor Menu Commands

I talk about the most important commands on the Vendor menu. Nevertheless, before I wrap up this little dog and pony show, I will quickly review for you the other commands and what they do.

Vendor Center

The Vendor Center window, shown in Figure 1, displays a list of vendors and detailed vendor information for the selected vendor. To use it, select from the Vendors drop-down list the vendor for which you want to see detailed information. The Vendor Center shows a bunch of information for a vendor. This information all comes from the Vendor List, by the way.

Figure 1: The Vendor Center

Tip

If you keep records of your vendors, including information such as their telephone numbers, about the best place to store that information, in my humble opinion, is in the Vendor List. You have to maintain the Vendor List in order for QuickBooks to work. So why not also go to a little bit of extra effort and keep all your vendor information there? If you adopt this approach, the Vendor Detail Center window is the window that you can use to quickly look up things such as the vendor's phone or fax number.

Sales Tax Menu Commands

The Sales Tax command displays a submenu of commands that pay sales tax amounts you've collected to the appropriate tax agency; adjust the sales tax liability due; and produce reports on the sales tax liability you owe, the sales tax revenue you've generated, and the sales tax codes you've set up.

To pay the sales taxes you owe, simply choose the Vendors ð Sales Tax ð Pay Sales Tax command. When QuickBooks displays the Pay Sales Tax dialog box (which lists the amounts you owe various sales tax collection agencies), you select the agencies you want to pay or click the Pay All Tax button. QuickBooks then records checks into the bank account register, and you print the checks in the usual way.

To adjust the amount that QuickBooks thinks you owe a sales tax collection agency, you can choose the Vendors ð Sales Tax ð Adjust Sales Tax Due command. When QuickBooks displays the Sales Tax Adjustment dialog box, select a sales tax agency from the Sales Tax Vendor box and an appropriate expense or income account from the Adjustment Account box. Next, you select the appropriate button (either Increase Sales Tax By or Decrease Sales Tax By) and enter the adjustment amount into the Amount box.

To print one of the sales tax reports, simply select the command that corresponds with the report. For example, to print the Sales Tax Liability report, choose the Vendors ð Sales Tax ð Sales Tax Liability command.

The Manage Sales Tax command displays a window with buttons and clickable hyperlinks that you can use to get sales tax information and perform some of the tasks described in the preceding paragraphs.

Inventory Activities

The Inventory Activities menu displays a submenu of commands you use to work with QuickBooks inventory features and with the related Item list. I am not going to discuss this stuff here.

Print 1099s/1096

The Print 1099s command displays the Printing 1099-MISC and 1096 Forms dialog box, which lets you print 1099-MISC forms for a selected calendar year. You can select the year for which you need to print 1099 forms by selecting a date range description from the drop-down list. Initially, for example, the drop-down list shows Last Calendar Year. Alternatively, you can use the From and To boxes to specify the starting and ending point for the year. After you identify the year for which you want to print 1099 forms, click OK. QuickBooks then creates 1099 forms for any vendors who need them, provided that your 1099 preferences are set up correctly and the vendor is marked as a 1099 recipient in the Vendor List.

You typically send 1099 forms to vendors to whom you pay more than $600 in a year. You can control the actual threshold amount — it varies from year to year because of inflation and type of payment — by choosing the Edit ð Preferences command, clicking the Tax: 1099 icon, and then clicking the Company Preferences tab. For more information about how to set tax 1099 preferences.

Item List

The Vendors ð Item command displays the Item List window.

Monday, August 31, 2009

Paying Bills

If you use QuickBooks to keep track of the bills that you owe, you don't use the Write Checks window to record the bills that you want to pay. Rather, you tell QuickBooks to display a list of these unpaid bills that you've already recorded — and then you pick and choose which bills QuickBooks should pay and the bank account from which QuickBooks should write the check.

Follow these steps to pay bills in this manner:

  1. Choose the Vendors ð Pay Bills command.

    QuickBooks displays the Pay Bills window, shown in Figure 1. You use the Pay Bills window to describe the payment that you want to make.

    Figure 1: The Pay Bills window

  2. Describe which bills you want to pay.

    Use the Show Bills radio buttons at the top of the Pay Bills window to identify what you want to see. Select the Due On or Before radio button to show only those bills that are due on or before the specified date. To specify the date, enter the date into the Due On or Before date box. To see a list of all the bills that you have to pay, select the Show All Bills radio button.


    Tip

    You can use the Sort Bills By drop-down list to select the order that QuickBooks uses for listing your bills. For example, you can sort bills by due date, discount date, vendor, and amount due.

  3. Select the bills that you want to pay.

    To select bills that you want to pay, click the check column. The check column is the leftmost column in the list of unpaid bills — it's headed by a check mark. When you click the check column, QuickBooks marks the bill with a check mark. The check mark tells QuickBooks that you want to pay that bill. To deselect a bill, click the check column again. QuickBooks removes the check mark.

  4. (Optional) Review a specific bill.

    You can review detailed information about a specific bill by first clicking the bill to highlight it in the list and then by clicking the Go To Bill button. When you do this, QuickBooks displays the Enter Bills window with the bill information. To close the Enter Bills window, click the Close button.

  5. Set the discount and credit.

    If you click the Set Discount button, QuickBooks displays the Discount tab of the Discount and Credits window, as shown in Figure 2. You can use the Discount tab to enter a discount amount for the bill. If you enter a discount amount for the bill, you also enter the discount account. This is the account that gets credited for the reduction — the discount — in the correct amount.

    Figure 2: The Discount tab of the Discount and Credits dialog box

    If you click the Set Credits button, QuickBooks displays the Credits tab of the Discount and Credits dialog box, shown in Figure 3. The Credit tab lists any credit memos from this vendor. To apply a credit memo to the amount due a vendor, click the Set Credits button. QuickBooks marks applied credits by placing a check mark in the marked column.

    Figure 3: The Credits tab of the Discount and Credits dialog box

    When you complete your work with the Discounts and Credits dialog box, click the Done button to close the dialog box and return to the Pay Bills window.


    Tip

    Click the Clear button in the Discount and Credits dialog box to clear the applied credits shown on the Credits tab.

  6. Use the Payment Account drop-down list to select the bank account to be used for making payments.

    The ending balance for the bank account shows the Payment Account drop-down list.

  7. Use the Payment Method drop-down list to select the payment method.

    If you want to pay your bills by check, for example, select Check. Assuming that you'll print the checks in QuickBooks, select the To Be Printed radio button (otherwise, select the Assign Check No. radio button to have QuickBooks assign the next consecutive check number). You can also pay bills by other methods, such as by credit card and by online payment (if you're set up for online payment or online banking).

  8. Use the Payment Date drop-down list to record the payment date that you want.

    The payment date entry interacts with the payment method entry. The payment date that you set, for example, affects when an online payment gets made. The payment date also corresponds to the check date that is shown on printed checks.

  9. After you select the bills that you want to pay and describe how you want to pay them, click Pay Selected Bills to pay the selected bills.

    QuickBooks records the payment transactions in the bank account to pay the selected bills. QuickBooks also closes the Pay Bills window.

  10. Complete your task.

    You still need to print any unprinted checks necessary to pay bills if you are using checks to pay the bills. You also need to transmit any online payment instructions necessary to pay the bills if that's how you've chosen to pay the bills. If you're going to hand-write checks, you obviously need to hand-write the checks and then mail them out. In other words, all QuickBooks does at this point is record in the QuickBooks data file the payment transactions. It hasn't yet affected the transactions. You need to print the checks, send the online payment instructions, or hand-write the checks?

Tuesday, August 11, 2009

Entering a Bill | Paying Vendors

If you told QuickBooks during the setup process that you want to track unpaid bills, also known as accounts payable, you can enter bills as you receive them. As you do this, QuickBooks keeps track of the unpaid bills.


Tip

Good, accurate recordkeeping of unpaid bills, or accounts payable, is essential if you want to do good accrual-basis accounting. Accrual-basis accounting produces more accurate financial statements than other methods.

If You haven't Previously Recorded an Item Receipt

To enter a bill, you follow one of two sequences of steps. If you're entering a bill for which you haven't previously recorded an item receipt, you follow these steps:

  1. Choose the Vendors ð Enter Bills command.

    QuickBooks displays the Enter Bills window, shown in Figure 1. You'll use this window to describe the bills that you later need to pay.

    Figure 1: The Enter Bills window. Again

  2. Use the Vendor drop-down list to identify the vendor.

  3. Use the Date, Amount Due, and Bill Due fields to describe the invoice date, the invoice due date, and the invoice amount.

    Optionally, use the Terms drop-down list to identify the payment terms and the Ref. No. box to identify the vendor's reference number. Next, if you want to, go ahead and provide a memo description for the bill by using the Memo box.

  4. Identify the expenses billed.

    Use the Expenses tab of the Enter Bills window to identify the expenses that the bill represents. To identify expenses, you supply the account number that should be debited, the amount, and, optionally, the memo, customer:job, and class information. The Expenses tab of the Write Checks window works the same way as the Expenses tab of the Enter Bills window.

  5. Identify the items billed in the Items tab.

    Use the Items tab of the Enter Bills window to describe any items for which the vendor bills you. For example, use the Item column to identify the thing that you purchased. Then use the Qty, Cost, and Amount columns to identify what the item cost. You can also use the Customer:Job column if you're tracking bills by customers. If you have questions about how to work with the Items tab, be aware that the Items tab of the Enter Bills window works in the same way that Items tabs of other QuickBooks windows work.


Tip

The buttons at the bottom of the Enter Bills window — Select PO, Receive All, Show PO, Clear Splits, Recalculate, and Clear — work the same way as the similarly titled command buttons located at the bottom of the Create Item Receipts window

If You Have Previously Recorded an Item Receipt

To enter a bill when you've already recorded the receipt of the item for which the bill invoices you, follow these steps:

  1. Choose the Vendors ð Enter Bill for Received Items command.

    QuickBooks displays the Select Item Receipt window, shown in Figure 2.

    Figure 2: The Select Item Receipt dialog box

  2. To identify the item receipt for which you're now recording a bill, select the vendor from the Vendor drop-down list.

    Then, when QuickBooks displays a list of item receipts for the vendor, click the item receipt that corresponds to your bill. Next, click OK. QuickBooks displays the Enter Bills window for the item. QuickBooks fills out much of the Enter Bills window by using the information from the item receipt, as shown in Figure 3.

    Figure 3: The Enter Bills window. Yet Again


    Tip

    You may be able to skip Steps 3, 4, and 5 if your item receipt information correctly and completely fills the Enter Bills window.

  3. Use the Date, Amount Due, and Bill Due fields to describe the invoice date, the invoice due date, and the invoice amount.

    Optionally, use the Terms drop-down list to identify the payment terms and the Ref. No. box to identify the vendor's reference number. Next, if you want to, go ahead and provide a memo description for the bill by using the Memo box.

  4. Use the Expenses tab of the Enter Bills window to identify the expenses that the bill represents.

    To identify expenses, you supply the account number that should be debited, the amount, and, optionally, the memo, customer:job, and class information. The Expenses tab of the Write Checks window works the same way as the Expenses tab of the Enter Bills window.

  5. Use the Items tab of the Enter Bills window to describe any items for which the vendor bills you.

For example, use the Item column to identify the thing that you purchased. Then use the Qty, Cost, and Amount columns to identify what the item cost. You can also use the Customer:Job column if you're tracking bills by customers. If you have questions about how to work with the Items tab, be aware that the Items tab of the Enter Bills window works in the same way that Items tabs of other QuickBooks windows work.

Recording a Credit Memo

You record credit memos from vendors by using the Enter Bills window, too. The only difference in recording a credit memo is that you mark the Credit button.

Saturday, August 8, 2009

Simultaneously Recording the Receipt and the Bill

You can record a bill for items that you receive at the same time that you record the receipt of the items. You can do this simply by selecting the Bill Received check box that appears near the top of the Create Item Receipts window.

If you know that you're going to record a bill at the same time as you record the receipt of items, you can also choose the Vendors ð Receive Items and Enter Bill command. In other words, rather than choosing the Receive Items command from the Vendors menu, you choose the Receive Items and Enter Bill command. When you do this, QuickBooks displays the Enter Bills window, shown in Figure 1. Essentially, the Enter Bills window is just another version of the Create Item Receipts window except that the Bill Received check box is already selected. To simultaneously record items that you've received and enter a bill, you follow the same steps as you do to record the receipt of the items.

Figure 1: The Enter Bills window

One item worth noting about simultaneously recording bills and the receipt of items, however, is this: When you enter a bill, you need to be very precise about the charges of the vendor. For example, in all probability, you won't pay just for the ordered items. You may also pay certain shipping and handling fees. These amounts won't necessarily get recorded on the Items tab. They will probably be recorded on the Expenses tab.

Thursday, August 6, 2009

Recording the Receipt of Items | Paying Vendors

When you receive items from a vendor, you can record the receipt. You typically do this when you want to record the receipt of an item even before you receive a bill for the item. For example, in any business with inventory, you want to know exactly how much inventory you have in your warehouse or on your store floor. You don't want to wait to adjust your inventory records for these purchases until you receive the invoice from the vendor. In this scenario, you record when you receive items.

To record item receipts, follow these steps:

  1. Choose the Vendors ð Receive Items command.

    QuickBooks displays the Create Item Receipts window, as shown in Figure 1.

    Figure 1: The Create Item Receipts window

  2. 2. Select the vendor from whom you're receiving items from the Vendor drop-down list.

  3. Select any P.O.s that you're receiving items on.

    If open purchase orders exist for the vendor, QuickBooks displays a Message box. The Message box asks whether you want to receive items against one of the open purchase orders. If the items that you receive are items that you set up on a purchase order, click Yes. When Quick Books displays the Open Purchase Orders dialog box — the dialog box just lists open purchase orders — select the one that ordered the items you are now receiving and then click OK. QuickBooks fills out the Items tab of the Create Item Receipts window by using the information from the purchase order. This automatic data entry of purchase order information should save you time if the items that you're receiving match items on the purchase order.

  4. Confirm the receipt date.

    Use the Date field to confirm the date of receipt. As with the Date field in other places in QuickBooks, enter the date in mm/dd/yyyy format. Or, you can click the Calendar button that appears to the right of the Date field and choose the date from the pop-up calendar that QuickBooks displays.

  5. Use the Total box to identify the total value of the order received, if available.

    QuickBooks calculates this total for you by adding up the individual item costs, so you can wait until later.

  6. (Optional) Use a reference number.

    You can use the Ref. No. field to provide a reference number. For example, you may want to reference the vendor's order number.

  7. (Optional) Provide a memo description.

  8. Describe the items received.

    Use the Items tab to identify the items that you've received. The Items tab of the Create Item Receipts window resembles and works like the Items tab of the Create Purchase Order window. For this reason, I don't discuss how you enter, for example, item codes in the Item column.

  9. Describe any related expenses.

    The Expenses tab of the Create Item Receipts window works like the Expenses tab of the Write Checks window. If you have questions about how the Expenses tab works.

  10. Click either the Save & Close or Save & New button to save the receipt item.

    If you click the Save & Close button, QuickBooks saves your item receipt information and closes the Create Item Receipts window. If you click the Save & New button, QuickBooks saves the item receipt information and redisplays a fresh, clean, cleared version of the Create Item Receipts window. You can then use the window to describe the receipts of some other set of items.

That's about all you need to know to work with the Create Item Receipts window. Nevertheless, let me just quickly describe the half-dozen command buttons located at the bottom of the Create Item Receipts window that I haven't referenced in the earlier discussions:

  • Select PO: This command button displays the Open Purchase Orders dialog box. The Open Purchase Orders dialog box lists the purchase orders open for the selected vendor. By selecting a listed purchase order, you tell QuickBooks to fill out the Item tab with the information from that purchase order or orders.

  • Receive All/Clear Qtys: When labeled Receive All, this button says you've received all the items ordered on some purchase order; or when it's labeled Clear Qtys, it clears the received quantities shown in the Items tab if you've specified a purchase order. When you click this button, it changes from Receive All, into Clear Qtys, into Receive All, and so on.

  • Show P.O.: This button shows the selected purchase order.

  • Clear Splits: This button erases any expense or item information that you've entered in the Expenses tab or Items tab. In effect, the Clear Splits button lets you start over in recording the receipt of some item or items.

  • Recalculate: This button recalculates the total amount by using the information that you've entered onto the Expenses tab and the Items tab.

  • Clear: This button clears all the information that you've entered in the Create Item Receipts window, including the Expenses tab information, the Items tab information, and the vendor information shown at the top of the window.

  • Time: This button opens the Select Time Period dialog box, shown in Figure 2, which you use to specify the date range of the work for which you're paying.

    Figure 2: The Select Time Period dialog box

Thursday, June 25, 2009

Paying Vendors

You can make the process of tracking vendor information as simple or as sophisticated as you like. In this chapter, I assume that you're going for sophisticated. However, you can make vendor management simpler by not using purchase orders or an accounts payable system.

Tip

You decide whether to use purchase orders and whether to track accounts payable (amounts that you owe vendors) as part of setting up QuickBooks. You can also later change your decision about using purchase orders or accounts payables. To do this, you choose the Edit ð Preferences command.

Creating a Purchase Order

A purchase order serves a simple purpose: It tells some vendor that you want to purchase some item. In fact, a purchase order is a contract to purchase.

Many small businesses don't use purchase orders. But when they grow to a certain size, many businesses decide to use them because purchase orders become permanent records of items that you've ordered. What's more, using purchase orders often formalizes the purchasing process in a company. For example, you may decide that nobody in your firm can purchase anything that costs more than $100 unless he gets a purchase order. If only you can issue purchase orders, you've effectively controlled purchasing activities through this procedure.

A Real Purchase Order

To use QuickBooks to create purchase orders, follow these steps:

  1. Tell QuickBooks that you want to create a purchase order by choosing Vendors ð Create Purchase Orders.

    QuickBooks displays the window shown in Figure 1.



  1. Figure 2-1: The Create Purchase Orders window


    Tip

    If the Vendors menu doesn't supply a Create Purchase Orders command, QuickBooks doesn't know that you want to create purchase orders.

  2. Use the Vendor menu drop-down list to identify the vendor from whom you want to purchase the item.

    The Vendor drop-down list lists each of the vendors in your Vendor List.

  3. (Optional) Classify the purchase using the Class drop-down list.

  4. (Optional) Provide a different Ship To address in the Ship To drop down list.

    The Ship To drop-down list displays a list of all your customers, vendors, and employees. You select the Ship To address by selecting one of these other names. After you select an entry from the Ship To list, QuickBooks fills in the Ship To address box with the appropriate information.


    Tip

    The Create Purchase Orders window supplies some standard and, I hope, familiar buttons and boxes: Previous, Next, Print, Find, Spelling, History, and Template.

  5. Confirm the purchase order date.

    Initially, QuickBooks puts the current system date into the Date box. You should, however, confirm that the date that QuickBooks enters as the purchase order date is correct. This is the contract date. Often, the date sets contractual terms — such as the number of days within which the item is to be shipped.

  6. Confirm the purchase order number.

    The purchase order number, or P.O. number, uniquely identifies the purchase order document. QuickBooks sequentially numbers purchase orders for you and places the appropriate number into the P.O. No. box. The guess that QuickBooks makes about the right purchase order number is usually correct. If it isn't correct, you can enter a replacement number.

  7. Confirm the vendor and ship to information.

    The Vendor block and the Ship To block identify the vendor from whom you're purchasing the item and the address to which you want the vendor to send the shipment. This information should be correct if your vendor list is up to date and you've correctly used the Ship To drop-down list to identify, if necessary, an alternative Ship To address. Nevertheless, confirm that the information shown in these two address blocks is correct. If the information isn't correct, of course, fix it. You can edit address block information by selecting the incorrect information and then retyping whatever should be shown.

  8. Describe each item that you want to order.

    You use the columns of the Create Purchase Orders window to describe in detail each item that you want to order as part of the purchase. Each item goes on its own row. To describe an item that you want to purchase from the vendor, you provide the following bits of information:

    • Item: The Item column is where you record the unique item number for the item that you want to buy. Remember that items need to be entered, or described, in the Item List. The main thing to know about the Item List is that anything that you want to show on the invoice — or, for that matter, on a purchase order — must be described in the item file.

    • Description: In the Description column, you describe the item that you select. You can also edit the Description field so that it makes sense to customers or vendors.

    • Qty: The Qty column specifies the quantity of the item that you want. Obviously, you enter the number of items that you want in this field.

    • Rate: The Rate column specifies the price per unit or rate per unit for the item. Note that QuickBooks uses different labels for this column depending on the type of business that you've set up.

    • Customer: The Customer column identifies the customer for whom the item is being purchased.

    • Amount: The Amount column shows the total expended for the item. QuickBooks will calculate the amount for you by multiplying the quantity by the rate (or price). You can also edit the column amount. In this case, QuickBooks adjusts the rate (or price) so that quantity times rate always equals the amount.

    • Class: In the Class column, you classify purchase order items at the item level rather than at the purchase order level.

    You enter a description of each item that should be included on the purchase order. This means, for example, that if you want to order six items from a vendor, your purchase order should include six lines of information.

  9. Print the purchase order.

    The purpose of recording a purchase order into QuickBooks is to create a formal record of a purchase. You almost always want to transmit this purchase order to the vendor. The purchase order tells the vendor exactly what you want to purchase and the price that you are willing to pay. To print the purchase order, you can click the Print button. You can also print purchase orders later in a batch; to do so, save all the purchase orders that you want to create, and then choose the File ð Print Forms ð Purchase Orders command.

  10. Save the purchase order.

    To save your purchase order, click either the Save & Close button or the Save & New button. If you click the Save & New button, QuickBooks saves that purchase order and redisplays an empty version of the Create Purchase Orders window so you can record another purchase order.

Purchase Order Tips and Tricks

I want to make a few more important observations:

  • Not every purchase deserves a purchase order. If you're not used to working with purchase orders, it's easy to go overboard when you first start using this handy tool. Nevertheless, keep in mind that not all purchases warrant purchase orders.

  • Use purchase orders to manage buying. Typically, businesses use purchase orders as a way to control and document purchases. In fact, many purchases don't really require a purchase order. Amounts that you've agreed to purchase that are documented through standard contracts, such as bills from the telephone company, the gas company, and your landlord, don't need purchase orders, obviously. In addition, modest purchases like office supplies often don't need purchase orders, either. You definitely do need a way to control these expenditures, but purchase orders are probably not the way to go.

  • Consider other complementary control tools. Other budgetary controls such as "approval from the supervisor" or a simple budget often work just as well.


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