Chapter 12
Working with Bank and Credit Card Accounts
In this chapter:
• Make deposits that aren’t customer payments
• Transfer funds between accounts
• Manage petty cash
• Maintain and track credit card balances
Most deposits and withdrawals are easy to enter in bank accounts, because the routine transaction windows you use take care of adding or removing funds automatically. But there are times when money is deposited or withdrawn outside of the usual transaction windows. This chapter covers what you need to know about how to account for these situations in QuickBooks.
Deposit Money That Isn’t from Customers
Even though QuickBooks takes care of recording the deposits into your bank account when you receive money from customers (covered in Chapter 10), there are times when you receive money that’s unconnected to a customer payment. Some of the most common of these deposits are
• Rebate checks from manufacturers or stores
• Checks from vendors with whom you have a credit balance and requested a check
• Infusion of capital from an owner or partner
• Loan from an owner, partner, officer, or bank
You can use one of two ways to deposit noncustomer payments into your bank account. If the deposit is the only deposit you’re making and it will appear on your statement as an individual deposit, you can record the deposit directly in the bank account register. If you’re going to deposit the check along with other checks, use the Make Deposits window.
Using the Account Register for Deposits
To work directly in the bank account register, open the register by choosing Banking | Use Register, and then select the appropriate bank account. When the account register window opens, the next available transaction line is highlighted and the current date is displayed. Follow these steps to record the deposit directly into the bank account:
1. Change the date if necessary, and then press TAB to move to the Number field.
2. Delete the check number if one automatically appears (or wait until you enter the amount in the Deposit column, at which point QuickBooks deletes the check number).
3. Press TAB to move past the next three columns to get to the Deposit column, or click in the Deposit column to move there immediately. (See “Assigning a Payee to a Noncustomer Deposit” later in this section to learn about your options when tracking a payee for this type of deposit.)
4. Enter the amount of the deposit.
5. Move to the next field (Account) and assign the deposit to the appropriate account. (See “Assigning Accounts to Noncustomer Deposits” later in this section for guidelines.)
6. Use the Memo field to enter an explanation in case your accountant asks you about the deposit.
7. Click the Record button.
Using the Make Deposits Window
Sometimes it’s better to use the Make Deposits window for a deposit that’s not related to a customer payment (such as a rebate from a vendor), because you’re planning to deposit the check along with other checks, and you want your deposit records to match the bank statement. In this case, follow these steps:
1. Choose Banking | Make Deposits to open the Payments To Deposit window.
2. Select the deposits you’re taking to the bank. Note that the check you want to deposit (for a noncustomer payment) is not listed here, because the window shows only the money you’ve received through customer payment transactions.
3. Click OK to move to the Make Deposits window.
4. Click either in the From Account column of the blank line under the last entry or in the Received From column if you need to track the payee (which is optional).
5. Select the account to which you want this deposit to be posted (in Figure 12-1, it’s Office Equipment).
FIGURE 12-1 |
Record the deposit of a rebate check, along with a customer payment. |
6. Optionally, enter data in the Memo, Chk No., and Pmt Meth. columns. (Don’t forget the Class field if you’re tracking classes.)
7. Enter the amount.
Your check is added to the total of the deposit you’re making (see Figure 12-1).
Assigning a Payee to a Noncustomer Deposit
You can, if necessary, enter a payee name in the Received From column, but QuickBooks doesn’t require that. Most of the time, a payee isn’t needed. For example, if you’re depositing a rebate on a purchase you made, there’s a good chance the company that wrote the check doesn’t exist in your QuickBooks system, and there’s no point in adding a name you don’t need to produce reports about.
If the money is from an owner or partner, the name should exist in your system in the Other Names list. If the money is from a corporate officer, that officer probably exists as an employee, but you should not use the employee name for this transaction. Instead, create the name in the Other Names list to track this deposit. Because you can’t have duplicate names in QuickBooks, most users will append an extra letter or symbol to the existing name.
If you’re depositing the proceeds of a bank loan, you’ll need a vendor, because you’ll be writing checks to pay back the principal and interest.
If you type a payee name that doesn’t exist in any of your name lists, QuickBooks displays a Name Not Found message offering you the following selections:
• Quick Add Lets you enter the name only after choosing a Name Type (Vendor, Customer, or Employee, for example)
• Set Up Lets you create a new name using the regular New Name window
• Cancel Returns you to the original window you were working in so you can either choose another name or delete the name of the nonexistent payee
If you select Quick Add or Set Up, you’re asked which type of name you’re adding: Vendor, Customer, Employee, or Other. Unless this payee will become a vendor or customer, choose Other.
Assigning Accounts to Noncustomer Deposits
If you’re depositing your own money into the business and the business is a proprietorship or partnership, that’s capital and you should post the deposit from a capital account, which is an equity account. If you’re depositing the proceeds of a loan—from either yourself as a corporate officer or from a bank—post the deposit from the liability account for the loan. Keep in mind that you may have to create this liability account. If you’re making a deposit that’s a refund from a vendor, you can post the amount to the expense account that was used for the original expense.
When in doubt, post the amount to the most logical place and ask your accountant for verification, or post the amount to the Ask My Accountant account (if you have one) or some other “suspense” account. You can always edit the transaction later or make a journal entry to post the amount to the appropriate account.
Transfer Funds Between Accounts
Moving money between bank accounts is a common practice in business. If you have a bank account for payroll, you have to move money out of your operating account into your payroll account every payday. Some people deposit all the customer payments into an interest-bearing money market or savings account and then transfer the necessary funds to an operating account when it’s time to pay bills. Others do it the other way around, moving money not immediately needed from the business operating account to a money market account. Lawyers, agents, real estate brokers, and other professionals have to maintain escrow accounts and move money between them and the operating account.
You can use either of two methods to transfer funds between bank accounts:
• Use the QuickBooks Transfer Funds Between Accounts transaction window.
• Post a check from the sending bank to a transfer account and then bring the funds into the receiving account from the funds transfer account.
Both methods are quite easy and are covered in the following section.
Using the Transfer Funds Transaction Window
QuickBooks offers a Transfer Funds feature, which is the best solution to record a “noncheck” transfer of funds between bank accounts that are held either by the same or different banks. But the Transfer Funds feature also works if you prefer to write a check, either because the bank accounts are in separate banks or because you want to have a check as a record of the transfer. If you don’t mind the fact that a check number from one bank account appears in the deposit column of another bank account, then the Transfer Funds feature is still an easy method for transferring funds.
To transfer money between accounts using the Transfer Funds transaction window, follow these steps:
1. Choose Banking | Transfer Funds from the menu bar to open the Transfer Funds Between Accounts dialog.
2. Fill out the fields.
3. Click Save & Close (or Save & New if you have another transfer to make).
QuickBooks posts the transaction (you’ll see it marked as TRANSFR in both bank accounts if you open their registers) without affecting any totals in your financial reports. All the work is done on the balance sheet, but the bottom line of your balance sheet doesn’t change because money was neither added nor removed from your company.
If you wrote a check from one account and took it to the bank to effect the transfer, open the register of the sending bank, select the transaction line, enter the check number in the Number field, and click Record. QuickBooks displays a dialog asking you to confirm the fact that you’re changing the transaction (click Yes). That number is also recorded on the transaction line in the receiving bank register, and you cannot remove it.
Handle a Returned Check
When you receive and deposit a check from a customer for payment on an open invoice, QuickBooks performs two tasks for you. First, it reduces your accounts receivable account (on the day you post that check), and second, it increases your bank account in the same amount. A week later, when your bank notifies you that your customer’s check has been returned, you also need to record that event in QuickBooks to keep both your accounts receivable and bank balances up to date.
You may also need to record a returned check taken on a sales receipt (cash sale) or for a deposit that was recorded directly in your bank account register. QuickBooks handles the recording of these events differently, and each method is covered in this section.
Recording a Returned Customer Invoice Payment
When you receive notification of a returned customer payment (a “bounced” payment), your first step (after you call the customer to notify him or her of that fact) is to locate the original Receive Payments transaction in QuickBooks. If it is a fairly recent transaction, you could open the Receive Payments window by selecting Customers | Receive Payments and click the left-pointing blue arrow until you see the payment. Or you can use the Find button located on the Main tab of the Receive Payments window and search for the payment by customer name, payment amount, or date.
Once you’ve located the bounced payment, follow these steps:
1. Click the Record Bounced Check button located on the Main tab to open The Manage Bounced Check dialog:
2. Enter the date and the fee that your bank has assessed you for the returned check.
3. Confirm the expense account to which QuickBooks will post the bank fee.
4. If you’re using class tracking, you can assign a class (which should be the same class that was used on the invoice transaction that this payment relates to).
5. Enter the fee that you want to charge your customer. When determining this fee, consider the extra time and effort you or your staff are expending on behalf of this customer. Then click Next.
6. Review the Bounced Check Summary that confirms the following for you:
• The original invoice(s) that will now be marked as unpaid
• The amounts that QuickBooks will deduct from your bank account to account for both the amount of the bounced check and the returned check fee your bank assessed you
• That an invoice will be created by QuickBooks for the amount of the returned check fee you want to charge your customer
7. Click Finish to accept the transactions and complete the process. The original customer payment window will now have a “Bounced Check!” watermark.
ProAdvisor Tip: If your customer directs you to redeposit the original check, you should create a new Receive Payments transaction (with the date of the redeposit) so that you’re treating it the same way as if it were a new replacement check. This method will help you keep your record keeping straight and maintain better detail when running customer statements and balance detail reports.
Recording a Returned Cash Receipt Payment
Recording a returned check taken on a sales receipt (cash sale) or for a deposit that was recorded directly in your bank account register or in the Make Deposits window requires a different approach. For these transactions, you’ll need to create special items and then manually create a new invoice transaction to record the amount of the bounced check as well as the fees you owe your bank and those you want to charge to your customer.
1. Create a new item and name it “NSF Check.” This should be an Other Charge type that’s used to capture the amount of the check that bounced. Leave the Amount Or % field blank, select Non for the Tax Code, and link this item to your bank account (whichever account you deposit your checks into).
2. Create a new item for Your NSF Charge to Your Customer (name it “NSF Service Charge,” for example). Again using the Other Charge type, this will be a nontaxable item, and you can either fill in the amount that you want to charge when you create the item or you can leave the amount field blank and enter the charge amount when you list it on an invoice. This item can be linked to your bank service charge expense account.
3. Create an invoice that includes the special items you just created to handle bounced checks (see Figure 12-2). Be sure the date reflects the date that your customer’s payment was returned. When (or if) the payment arrives, you’ll use the Receive Payments window to record the customer’s payment.
FIGURE 12-2 |
Use special items on an invoice to take care of all the entries you need to account for a bounced check accepted on a sales receipt or recorded directly into your bank account. |
When you enter the NSF item on the invoice, it credits the bank account, which, in effect, reverses the amount of the original deposit of the check. It also provides both transactions in the Reconcile window when your statement arrives so you can reconcile each entry.
Recording Your Bank’s NSF Charge to You
As a final step, don’t forget to record the fee that your bank is charging you for your customer’s bounced check. The easiest way to record this fee is directly in your bank account register. Simply enter the date and the amount of the fee in the Payment column with a note about the NSF charge in the Memo field. And although you don’t need to designate a check number or payee, you’ll want to be sure you attribute this fee to your customer. To do this while in the register, click the Splits button to open additional fields for the transaction.
Then, in the Customer:Job column, use the drop-down arrow to select the customer to whom the NSF fee applies.
Void a Check
Sometimes you have to void a check that you’ve written. Perhaps you decided not to send it for some reason, or perhaps it was lost in the mail. Whatever the reason, if a check isn’t going to clear your bank, you should void it. Deleting (versus voiding) a check removes all history of the transaction from your register. This is not a good way to keep financial records—especially in the event of an audit. Voiding a check keeps the check number but sets the amount to zero.
The way QuickBooks completes the process of voiding a check can differ based on whether the check was used to record an expense or it was used to record the purchase of an asset, such as new inventory or furniture for your office. The process starts the same way, however, by opening the bank account register and selecting the disbursement that you want to void. Next, right-click to open the shortcut menu and choose Void Check. In the first case—when you record the voiding of an expense-related check from a closed period—QuickBooks will give you the option of allowing the program to automatically create two journal entries for you. Selecting Yes will ensure that the voiding of this check does not affect any of your prior accounting periods. If the check to be voided is not from a closed period, the offer for the automatic journal entries is not made.
Selecting No keeps the check number along with its current date and then simply sets the amount of the check to zero without making any adjustments to a prior period.
In the second case—when you’re voiding a check that is posted to an asset or liability account—the offer for the automatic journal entries is not made. The check is simply adjusted to zero along with the amounts posted to the other balance sheet accounts. Click Record to save the transaction.
Track Cash Disbursements
Virtually every business, whether large or small, makes purchases with cash. Because the amount of the expense is usually small (or “petty”), these minor expenses are often difficult to keep track of. In fact, it’s not uncommon for receipts to get lost or for cash that the business has on hand to disappear, unaccounted for.
Whether the cash you use in your business is from a petty cash box or from an ATM machine, QuickBooks can help you keep track of every penny of it.
Keeping a Petty Cash Box
Many businesses keep a petty cash box (or even cash in a desk drawer) in order to have money on hand to cover such things as buying lunch for employees or a quick trip to the office supply store. If you decide to keep cash on hand, the first thing you’ll do is put money in to fund your petty cash. Next, you’ll need to keep track of how the cash that’s taken is spent. And, last, you’ll have to put more money into the box to replace what’s been spent.
When you put money in the cash box, you tell QuickBooks about it by recording a deposit transaction into your petty cash account. If you don’t yet have a petty cash account in your chart of accounts, create one using the following guidelines:
• The account type is Bank.
• If you number your accounts, use a number that places your new petty cash account among the other bank accounts in your chart of accounts.
• Leave the opening balance of the petty cash account at zero. You’ll record the beginning balance when you make your first deposit into this account.
Putting Money into Petty Cash
When you put money into your petty cash box (or drawer), you have to tell QuickBooks where it came from. Most of the time, you’ll write a check for petty cash from your bank account. Use these steps as a guideline:
1. Create the name “Petty Cash” in the Other Names list (which you can open from the Lists menu).
2. Write a check from your bank account and post it to the petty cash account. You can use the Write Checks window to do this, or enter the deposit directly in the petty cash account register. Be sure to enter the check number you used in the number field.
Recording Petty Cash Expenses
Next, you’ll need to tell QuickBooks about what you (or your employees) bought with the cash taken from petty cash. Open the Write Checks window and select the petty cash bank account. You can delete the check number QuickBooks automatically places in the Number field, or you can leave the number there (you’ll never get a statement that you have to reconcile, so it doesn’t matter). You can also skip the Payee field or you can just use Petty Cash as the payee.
The advantage of using the Write Checks window (and not the petty cash register) is that you can use the fields at the bottom of the window to tie an expense to a customer or a class for job-costing purposes if you need to.
It’s important to note that the steps described in this section allow you to record accurately the money being spent from petty cash, which is not always the same amount as the money being taken from petty cash. If you spend less than the amount of cash taken out, it’s a good idea to put what’s left over back into the box so it’s available the next time cash is needed. It’s also a really good idea to keep a log of who has taken out cash (and when) and to require that all employees turn in a receipt for each and every cash purchase they make.
ProAdvisor Tip: When you open the Write Checks window, QuickBooks uses the same bank account that you worked in the last time you wrote a check. A common mistake is not noticing that when you are trying to write a real check you’re using the petty cash account instead of your actual checking account. To help prevent you or a member of your staff from inadvertently posting a check to the wrong bank account, consider changing the onscreen account color of the petty cash account so it has a different color than your regular checking account. To do this, with your petty cash account check register open, choose Edit | Change Account Color. Choose a standard color or create one of your own.
Replacing the Cash Spent
As you take or spend money from petty cash, you need to replace it. The usual method is to bring it back to its original balance. Use the same steps you used to write the first check to petty cash, and use the total amount of funds spent thus far as the amount of the check.
Tracking Other Cash Withdrawals
Many businesses use ATM and debit cards in their day-to-day transactions. Recording these transactions is essentially the same as recording a check. However, ATM/debit card transactions can differ from checks in that often the amount withdrawn doesn’t have a specific expense attached to it at the time it’s withdrawn. To track these amounts, use your petty cash account (bank account type) to post to when recording the withdrawal from your bank account. Then, as the person who made the withdrawal begins handing in receipts, you can debit the appropriate expense account directly from this account’s register.
Manage Credit Card Transactions
When you use a credit card to make purchases for your business, you have two choices about the way you can enter and manage those transactions in QuickBooks: create a credit card account or treat the credit card as a bill.
Create a Credit Card Account
With this option, you create a credit card account on your balance sheet that has its own register and to which you’ll post individual transactions. The advantage of this method is that, as with your bank account, you can perform a reconciliation of this account (refer to Chapter 13 for details on how to reconcile a bank account) and use online banking to download transactions from your credit card company.
To create a credit card account, follow these steps:
1. With the chart of accounts list open, press CTRL-N to open the Add New Account window.
2. Select Credit Card as the account type and click Continue.
3. Enter the name of the credit card (usually the issuer’s name).
4. Enter an account number if you’re using account numbers.
5. Optionally, enter a credit card number (this is required if you’ll be using online banking, which is covered in Chapter 16).
6. Click Save & Close.
You can now enter individual transactions into your account in one of two ways: select Banking | Enter Credit Card Charges to enter your transactions in the Enter Credit Card Charges window (see Figure 12-3), or you can enter them directly into the credit card account register.
FIGURE 12-3 |
Use the Enter Credit Card Charges window to track individual credit card charges. |
There are several fields to fill out when you use the Enter Credit Card Charges window.
1. Use the drop-down menu in the Credit Card field to select the credit card to which you want to post transactions.
2. Select either the Purchase/Charge or Refund/Credit option.
3. In the Purchased From field, you can enter the name of the establishment where the card was used. If it’s not important for you to track that information, you can leave that field blank, which can help keep your Vendors list from growing too large.
4. Enter the date of the transaction.
5. Optionally, fill in the Ref No. field with the reference number found on the credit card statement.
6. Fill in the amount of the charge.
7. Use the Expenses tab for general expenses, or use the Items tab if the transaction was for the purchase of an item for inventory or for a customer.
8. If you track classes, assign the transaction to the appropriate class.
When it’s time to make a payment on this card, you’ll use the Write Checks window and fill in the Pay To The Order Of field with the credit card company name. In the Account column (on the Expenses tab), select the credit card account from your chart of accounts.
Treat the Credit Card as a Bill
The second way to manage your credit card is to enter the charges on the statement just as you would a bill from a vendor. Select Vendors | Enter Bills, and then list each transaction that appears on the statement (including any finance charges) in the Expenses tab for general expenses (see Figure 12-4), or use the Items tab if the transaction was for the purchase of an inventory item. The advantage of this method is that in addition to your charges being posted to the appropriate expense account as you enter the bill, any amount outstanding on the card is included as part of your accounts payable and listed on your reports as such. The drawback of this method, however, is that if you wait for your credit card bill to come in the mail, you could be posting these individual credit card charges a month or even two months after they were actually incurred. This may become an issue if the charges you made were in December, for example, and your statement arrives in January, the start of a new tax year. Be aware of the timing of when these expenses show on your Profit & Loss statement, and be sure to consult with your accountant if you choose to employ this method.
FIGURE 12-4 |
You can enter your credit card statement just as you would any other vendor bill. |
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