Friday, April 24, 2009

Loading the Master File Lists

Setting up QuickBooks, as a practical matter, requires that you take two steps: Run the EasyStep Interview, and load the master file lists. The master file lists store information that you can use and reuse. For example, one of the master file lists describes each of your customers. And this master file of customer information includes the customer's name and address, contact information, account numbers, and so on.

One important note: You don't need to completely fill your master files before you start doing anything. If you enter your active customers into the customer master file, your active vendors into the vendor master file, and so forth, that amount of information may be all you need to get started. With the information you entered through the EasyStep Interview and the addition of a few more entries into key master files, you may be able to add everything else on the fly. QuickBooks enables you to add entries to the various master files as you work with windows and dialog boxes that reference master file information.

Setting up the Chart of Accounts List

The Chart of Accounts List is a list of accounts that you use to categorize your income, expense, assets, liabilities, and owner's equity amounts. If you want to see a particular line item of financial data on a report, you need an account for that line item. If you want to budget by a particular line item, you need an account for that budget amount. If you want to report some bit of financial information on your tax returns, you need an account to collect that specific data.

Fortunately, the steps for creating new accounts are quite straightforward. To set up a new account within your Chart of Accounts List, follow these steps:

  1. Choose the Lists ð Chart of Accounts command.

    QuickBooks displays the Chart of Accounts window shown in Figure 1.

    Figure 1: The Chart of Accounts window

  2. Click the Account button at the bottom of the window.

    QuickBooks displays the Account menu. One of the Account menu options is New, which is the command that you use to add a new account.

  3. Add a new account by choosing the New command from the Account menu.

    QuickBooks displays the first Add New Account window, as shown in Figure 2.

    Figure 2: The first Add New Account window

  4. Use the Type buttons to identify the type of account that you're adding.

    QuickBooks supplies the following account types: Income, Expense, Fixed Assets, Bank, Loan, Credit Card, Equity, and, if you mark the Other Accounts Type and open the Other Accounts Type drop-down list, Accounts Receivable, Other Current Asset, Other Asset, Accounts Payable, Other Current Liability, Long Term Liability, Cost of Goods Sold, Other Income, and Other Expense. If you have a question about which account type your new account fits into which describes how financial statements work. These account groups essentially tell QuickBooks in which area of a financial statement account data gets reported. Note, too, that the first Add New Account window shows examples of the selected account type in the box above the Continue and Cancel command buttons.

  5. Click Continue.

    QuickBooks displays the second Add New Account window, as shown in Figure 3.

    Figure 3: The second Add New Account window

  6. Use the Name box to give your new account a unique name.

    The name that you give the account will appear on your financial statements.

  7. If the account you're adding is a subaccount underneath a parent account, identify the parent account by selecting the Subaccount Of check box.

    After you select the Subaccount Of check box, name the parent account by using the Subaccount Of drop-down list.

  8. (Optional) Provide a description for the new account.

    You don't need to provide a description. Without a description, QuickBooks can still use the account name on financial statements. If you want a more descriptive label placed on accounting reports, however, use the Description box for this purpose.

  9. Provide other account information.

    The Add New Account window shown in Figure 3 includes a Bank Acct. No. box that lets you record the bank account number for a particular bank account. Other account types may have similar boxes for storing related account information. For example, the credit card account type version of the Add New Account window lets you store the card number.

    If you do have another box or two in which to store account information, go ahead and use that, if necessary, to collect the bits and pieces of data that you want to save.

  10. Identify the tax line on which the account information is to be reported by selecting a tax form and tax line from the Tax-Line Mapping drop-down list.

    You may not need to assign a particular account to a tax line if that account data isn't reported on the business's tax return. For example, cash account balances aren't reported on a sole proprietor's tax return. So a bank account for a sole proprietor doesn't have any required tax line data. Cash account balances are recorded on a tax return of a corporation, however. So if you're adding a bank account for a corporation, you use the Tax-Line Mapping drop-down list to identify the tax line on which the bank account information gets reported.

  11. (Optional but dangerous) Consider recording an opening balance for the account.

    Typically, you shouldn't supply an opening account balance for an account. But the second Add New Account window does let you do so. For example, in the dialog box shown in Figure 3, you can click the Enter Opening Balance command button. When you click this button, QuickBooks displays another dialog box that you can use to set a starting account balance. All this sounds rather innocuous. But, seriously, this is something you rarely do. However, if you know something I don't, you can use this capability to set the starting balance for the account as of some date. One last caution, however. My accounting professors taught me two things that would suggest that this approach to setting account balances is crazy:

    • Debits are supposed to equal credits. (If you're setting the opening balance for an account as part of setting up the new account, you're only recording half of the accounting transaction.)

    • Entering the opening balance as part of setting up a new account means no audit trail exists for the transaction. (Rather than having an invoice associated with a transaction or a check, or even a general journal entry, you're just setting balances on the fly. But hey, maybe you know something I don't)

After you describe the new account that you want to set up, you can click OK to save the new account to the Chart of Accounts List. You can also click the Next button to save the account information and then redisplay the Add New Account window so that you can add another account.


If you look closely at Figure 3, note some boxes and buttons and even a hyperlink that I haven't talked about. QuickBooks does supply other fields for collecting account information. And, occasionally, QuickBooks also provides clickable hyperlinks and buttons that you can use to do special tasks associated with the particular type of account. For example, in the case of a bank account, QuickBooks supplies an Order Checks hyperlink that you can click to start the process of ordering check forms for the new account.

And that's almost everything you need to know about adding accounts. The one other thing I should mention is that the Account menu — this is the menu of commands that QuickBooks displays when you click the Account button available on the Chart of Accounts window — provides several other useful commands for working with accounts. The menu provides a Delete command that you use to delete the selected account (as long as you haven't already used the account). The menu provides an Edit button that you can use to make any changes to the selected account information (by using a window that looks very much like the New Account window shown in Figure 3). The Account menu also provides other commands that you can use to work with the Chart of Accounts List. Fortunately, most use self-descriptive command names: Print List, Make Inactive, and so on.


The Activities button, which appears at the bottom of the Chart of Accounts window, displays a menu of commands that you can use to write checks, make deposits, enter credit card charges, transfer funds, make journal entries, reconcile a bank account, and use a register. The Reports button displays a menu of commands that you can use to print reports containing account information.

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