Saturday, May 9, 2009

Setting the Accounting Preferences

The My Preferences tab of the Accounting Preferences set provides a single option: You can tell QuickBooks you want it to autofill information when recording a general journal entry.

Don't get irritated with the lack of personalization, however. This almost total lack of individually personalized preferences makes sense, if you think about it. Accounting for a business needs to work the same way for Jane as it does for Joe and for Susan.

However, you do have the option to set several company preferences for accounting. This makes sense, again, if you think about it. Different companies run their accounting systems in different ways. Figure 1 shows the Company Preferences tab for the Accounting Preferences set.

Figure 1: The Company Preferences tab of the Accounting Preferences dialog box

Using Account Numbers

By default, QuickBooks lets you use names to identify accounts on the Chart of Accounts or in the accounts list. For example, the account that you use to track wages expense may be known as "wages." However, you can select the Use Account Numbers check box to tell QuickBooks that you want to use account numbers rather than account names for identifying accounts. Larger businesses and businesses with very lengthy lists of accounts often use account numbers. You can more easily control both the ordering of accounts on a financial statement and the insertion of new accounts into the Chart of Accounts if you're using numbers.

The Show Lowest Subaccount Only check box lets you tell QuickBooks that it should display the lowest subaccount rather than the higher parent account on financial statements. QuickBooks allows you to create subaccounts, which are accounts within accounts. You can also create sub-subaccounts, which are accounts within subaccounts. You use subaccounts to more finely track assets, liabilities, equity amounts, revenues, and expenses.

General Accounting Options

The Company Preferences tab provides the following five general accounting check boxes as well as closing date settings. (These check boxes are probably self-explanatory to anybody who has done a bit of accounting with QuickBooks, but for new QuickBooks users, I provide a brief description of what each one does.)

  • Use Account Numbers: The Use Account Numbers check box, if selected, enables you to enter an account number for a transaction. The associated check box, Show Lowest Subaccount Only, tells QuickBooks to display only the name and account number of a subaccount (if you're using one) instead of the full heritage of the account. If you use a lot of levels of subaccounts, this option can really clean up views, making it easier to tell what account you're looking at.

  • Require Accounts: The Require Accounts check box, if selected, tells QuickBooks that you must specify an account for a transaction. This makes sense. If you aren't using account numbers to track the amounts that flow into and out of the business, you aren't really doing accounting. It would never make sense, in my humble opinion, to deselect the Require Accounts check box.

  • Use Class Tracking: The Use Class Tracking check box lets you tell QuickBooks that you want to use not only accounts to track your financial information but also classes. Classes let you split account level information in another way. This sounds complicated, but it's really quite simple. The account list, for example, lets you track revenue and expenses by categories of revenue and expense. You may track expenses by using categories such as wages, rent, and supplies. Classes, therefore, provide you with a way to track this information in another dimension. For example, you can split wages expense into those wages spent for two different locations of your business. A restaurateur with two restaurants may want to do this.

  • Automatically Assign General Journal Entry Number: This check box tells QuickBooks to assign numbers to the general journal entries that you enter by using the Make Journal Entry command. You want to leave this check box selected. General journal entries, by the way, are typically entered by your CPA or your professional on-staff accountant.

  • Closing Date settings: The Closing Date box lets you identify a date before which your QuickBooks data file can't be changed. In other words, if you set the closing date to December 31, 2008, you're telling QuickBooks that you don't want any changes made to the QuickBooks data file before this date. This means that someone can't modify a transaction that's dated before your closing date without getting a scary warning message. It also means that someone can't enter a transaction by using a date before this closing date. You can also click the Set Password button to display a dialog box that lets you create a password, which is required if someone wants to add an old transaction or modify an old transaction.


Past versions of QuickBooks also let you turn on and off an audit trail feature by using the Company Preferences tab of the Accounting Preferences. However, since 2007, QuickBooks provides an always-on audit trail, so you don't see an Audit Trail check box accounting preference any more. An audit trail, by the way, simply keeps a list of who makes which changes to transactions. Accountants, predictably, love audit trails. Audit trails enable someone, such as your CPA, to come in after the fact and figure out why an account balance is what it is.

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