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.

Thursday, May 7, 2009

Fine-Tuning QuickBooks

You can specify how QuickBooks works for you by setting preferences. In fact, just so you know, much of what you do when you run the QuickBooks EasyStep Interview (when you set up QuickBooks) is provide information that QuickBooks uses to set your preferences. For example, if you indicate that you charge customers sales tax, the EasyStep Interview describes how sales tax should work for your business by using the sales tax preferences.

Because these preferences have so much effect on how QuickBooks works and on how a particular user works with QuickBooks. None of this material is particularly complicated, but because QuickBooks provides you with a rich set of preferences options, I cover quite a bit of material. Simply use it as a reference when you have a question about how to change the way QuickBooks works in a particular area.

Accessing the Preferences Settings

You can set preferences within QuickBooks in two ways:

  • During the EasyStep Interview: You actually set all the preferences, or at least all the starting preferences for QuickBooks, when you run the EasyStep Interview. Most of the time, the preferences that the EasyStep Interview sets are correct. The EasyStep Interview is very smart about the way it asks questions and translates your answers into preferences settings. But if your business changes, or if you make a mistake during the setup interview, or if someone else in your office ran the EasyStep Interview for you, you may still need to check and fiddle-faddle with these preferences.

  • By manually changing the preferences: You can manually change the preferences by choosing the Edit ð Preferences command. QuickBooks displays the Preferences dialog box, as shown in Figure 1. QuickBooks groups categories of preferences. For example, QuickBooks groups all the accounting preferences into an accounting preference set. QuickBooks groups all the checking account preferences into a checking preference set. If you look closely at Figure 1, you see that along the left edge of the Preferences dialog box, QuickBooks displays a list of icons. The first icon is Accounting. The second icon is Checking. To see the preferences within one of these groups, you click that preference's icon.

    Figure 1: The Preferences dialog box

One other item to note about the Preferences dialog box is that it supplies, in general, two tabs of preferences for each preference set. Preferences that are specific to an individual user appear on the My Preferences tab, shown in Figure 1. Preferences that are tied to the company data file appear on the Company Preferences tab, shown in Figure 2.

Figure 2: Company Preferences tab of the Preferences dialog box

Not every My Preferences tab gives you options for changing the way that QuickBooks works. Sometimes a particular set of preferences gives personal options; sometimes it doesn't.

For example, the My Preferences tab of the Accounting set of preferences provides no personalized options. In other words, you can't tell QuickBooks that a firm's accounting works differently for a particular person. This makes sense, right? Accounting needs to work the same way for every user within a firm. However, with other preferences settings, QuickBooks may allow different options for different users. You'll see this as I discuss the various sets of preferences in the remainder of this chapter.

And now, I'm just going to walk you through a discussion of each of these preferences sets. I talk both about the My Preferences option (if available) and the Company Preferences option.

Tuesday, May 5, 2009

Setting up the Profile Lists

If you choose the Lists ð Customer & Vendor Profile List command, QuickBooks displays a submenu of commands that you use to create some of the mini-lists that QuickBooks uses to ease your bookkeeping and accounting. The Profile Lists include lists of sales reps, customer types, vendor types, job types, payment terms, customer messages, payment methods, shipping methods, and vehicles.

Most of the Profile Lists are pretty darn simple to use. For example, if you choose the Sales Rep List command, QuickBooks displays the Sales Rep List window. You then click the Sales Rep button and choose New. QuickBooks displays the New Sales Rep window, as shown in Figure 1. I bet you can figure out how to use this window.

Figure 1: The New Sales Rep window

In case you're still experiencing a certain amount of accounting anxiety, let me just point out that you enter the name of the sales representative into the Sales Rep Name box. Then, throwing caution to the wind, you enter the sales rep's initials into the Sales Rep Initials box. When you click OK, QuickBooks adds the sales rep to your Sales Rep List.

The other Profile Lists work in the same, simple, scaled-down fashion. You choose the Profile List in the submenu, click the Profile List button, and choose New. When QuickBooks displays a window, you use one or two boxes to describe the new Profile List.

Just to prove to you that this really is as easy as I've said here, take a look at the New Customer Message window shown in Figure 2 (accessible from the Customer Message List). This is the window that you use to create a new customer message. You can place customer messages at the bottom of customer invoices and credit memos.

Figure 2: The New Customer Message window


If you want to track vehicle mileage within QuickBooks — and note that you usually must track business vehicle mileage in order to claim business vehicle expenses as a tax deduction — you can maintain a list of business vehicles using the Vehicle List. This list then lets you easily track your business vehicles — something you do by using the Company ð Enter Vehicle Mileage command.

Sunday, May 3, 2009

Setting up a Fixed Assets List

If you choose the Lists ð Fixed Asset Item List command, QuickBooks displays the Fixed Asset Item List window. You can use this window to see a list of the fixed assets — furniture, equipment, machinery, vehicles, and so forth — that you've purchased. Or at least you can after you click the Item button, choose New from the menu, and fill in the New Item window for each fixed asset. Figure 1 shows the New Item window you use to describe each fixed asset.

Figure 1: You describe each fixed asset using the New Item window

Let me make a couple of comments about the QuickBooks Fixed Asset Item List. The Fixed Asset List doesn't really integrate with the QuickBooks general ledger. You record the purchase or disposal of fixed assets using regular old QuickBooks transactions. For example, you might record the purchase of a particular fixed asset simply by entering a check in the usual fashion. And you might record the disposal of a fixed asset by entering a general ledger journal entry.

The Fixed Assets Item List, then, just acts as a standalone list that lets you keep track of the fixed assets you purchased. Because the list is so standalone-ish, I'm not going to spend much time talking about it in the books of this reference. Let me also say that your CPA probably — no, surely — maintains a list of your fixed assets because she needs that list in order to correctly include depreciation on your tax return and in your financial statements (if you get CPA help to prepare those). For this reason, some people — including me — see the fixed asset item list as a little bit redundant.

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