In This Chapter
Adding items to the Item list
Adding employees to the Employee list
Adding new customers and jobs
Adding new vendors
Understanding and using the other lists
Dealing with the chart of accounts list
The EasyStep Interview (which I discuss at some length in Chapter 2) doesn't actually get QuickBooks completely ready to use. You also need to enter the names of all your products, employees, customers, and vendors (and a handful of other items) into lists. In this chapter, I describe how you create and work with these lists. I also describe how you clean up some of the accounting messiness created when you enter information into these lists.
The first QuickBooks list you need to set up is the Item list — the list of stuff you buy and sell. Before you start adding to your Item list, however, I need to tell you that QuickBooks isn't very smart about its view of what you buy and sell. It thinks that anything you stick on a sales invoice or a purchase order is something you're selling.
If you sell colorful coffee mugs, for example, you probably figure (and correctly so) that you need to add descriptions of each of these items to the Item list. However, if you add freight charges to an invoice, QuickBooks thinks that you're adding another mug. And if you add sales tax to an invoice, well, guess what? QuickBooks again thinks that you're adding another mug.
This wacky definition of items is confusing at first. But just remember one thing, and you'll be okay: You aren't the one who's stupid; QuickBooks is. No, I'm not saying that QuickBooks is a bad program. It's a wonderful accounting program and a great tool. What I'm saying is that QuickBooks is only a dumb computer program; it isn't an artificial-intelligence program. It doesn't pick up on the little subtleties of business — such as the fact that even though you charge customers for freight, you aren't really in the shipping business.
Each entry on the invoice or purchase order — the mugs that you sell, the subtotal, the discount, the freight charges, and the sales tax — is an item. Yes, I know this setup is weird, but getting used to the wackiness now makes the discussions that follow much easier to understand.
If you want to see a sample invoice, take a peek at Figure 3-1. Just so you're not confused, to make more room for the invoice window, I removed the QuickBooks Navigation bar that typically appears along the left edge of the QuickBooks window.
Do you see those first three items: Rainbow Mugs, Yellow Mugs, and Blue Mugs? You can see the sense of calling them items, right? These mugs are things that you sell.
But then suppose that you give frequent buyers of your merchandise a 10 percent discount. To include this discount in your accounting, you need to add a Subtotal item to tally the sale and then a Discount item to calculate the discount. Figure 3-1 also shows this. See it? Kind of weird, eh?
Then look at the Shipping and Handling item, which charges the customer $50 for freight. Yep, that's right — another item. In sum, everything that appears on an invoice or a purchase order is an item that you need to describe in your Item list.
Just above the invoice total, if you look closely, you can see another item for including sales tax on your invoices — and that's really an item, too.
To add invoice or purchase-order items to the Item list, follow these steps:
Choose Lists
Item List.
QuickBooks, with restrained but obvious enthusiasm, displays the Item List window, as shown in Figure 3-2.
Click the Item button at the bottom of the Item List window and then choose New from the drop-down list.
QuickBooks displays the New Item window, as shown in Figure 3-3.
Categorize the item.
Select an item type from the Type drop-down list. The Item list that you see is dependent on the type of business you told QuickBooks you were in when you set up the program, so use the following as a sample — the amount and type of items that you need depend on the business you're in. Select one of the following item types by clicking the name in the list:
Service: Select this type if you charge for a service — such as an hour of labor or a repair job.
Inventory Part: Select this type if what you sell is something that you buy from someone else, and you want to track your holdings of the item. If you sell thingamajigs that you purchase from the manufacturer Thingamajigs Amalgamated, for example, you specify the item type as Inventory Part. (For more information on using QuickBooks to track inventory, see Chapter 7.)
Inventory Assembly: Select this type if what you sell is something that you make from other Inventory items. In other words, if you buy raw materials or other components and then assemble these things to create your finished product, the finished product is an Inventory Assembly item.
Non-Inventory Part: Select this type if what you sell is something that you don't want to track as inventory. (You usually don't use this item type for products that you sell, by the way. Instead, you use it for items that you buy for the business and need to include on purchase orders.)
Other Charge: Select this item type for things such as freight and handling charges that you include on invoices.
Subtotal: This item type adds everything before you subtract any discount, add the sales tax, and so on.
Group: Use this item type to enter a bunch of items (which are already on the list) at one time. This item is a nice timesaver. For example, if you commonly sell sets of items, you don't have to specify those items individually every time you write an invoice.
Discount: This item type calculates an amount to be subtracted from a subtotal.
Payment: This option is wacky, but if your invoice sometimes includes an entry that reduces the invoice total — customer deposits at the time of sale, for example — select this item type. If this item type confuses you, just ignore it.
Sales Tax Item: Select this item type for the sales tax that you include on the invoice.
Sales Tax Group: This item type is similar to the Group item type, but you use it only for sales taxes that are collected in one transaction and owed to multiple agencies.
Type an item number or name.
Press the Tab key or use your mouse to click the Item Name/Number text box below the Type drop-down list. Then type a short description of the item.
(Optional) Make the item a subitem.
If you want to work with subitems — items that appear within other items — select the Subitem Of check box and use the corresponding drop-down list to specify the parent item to which a subitem belongs.
Tip
If you set up a parent item for coffee mugs and subitems for blue, yellow, and rainbow mugs, for example, you can produce reports that show parent items (such as mugs) and subitems (such as the differently colored mugs). Subitems are just an extra complexity, so if you're new to this QuickBooks stuff, I suggest that you keep things simple by avoiding them.
Describe the item in more detail.
Move the cursor to the Description text box and type a description. This description then appears on the invoice. Note that if you specified the item type as Inventory Part in Step 3, you see two description text boxes: Description on Purchase Transactions and Description on Sales Transactions. The purchase description appears on purchase orders, and the sales description appears on sales invoices.
If the item type is Service, Non-Inventory Part, or Other Charge, tell QuickBooks how much to charge for the item, whether the item is subject to sales tax, and which income account to use for tracking the income that you receive from selling the item.
For a Service type, use the Rate text box to specify the price you charge for one unit of the service. If you charge by the hour, for example, the rate is the charge for an hour of service. If you charge for a job — such as a repair job or the completion of a specific task — the rate is the charge for the job or task.
For a Non-Inventory Part type, use the Price text box to specify the amount you charge for the item.
For an Other Charge type, use the Amount or % text box, which replaces the Rate text box, to specify the amount you charge for the item. You can type an amount, such as 20 for $20.00, or you can type a percentage. If you type a percentage, QuickBooks calculates the Other Charge Amount as the percentage multiplied by the preceding item shown on the invoice. (You usually put in an Other Charge after using a Subtotal item — something I talk about in the "Creating other wacky items for invoices" section, later in this chapter.)
For all three types, use the Account drop-down list to specify which income account you want to use to track the income that you receive from the sale of this item.
If the item type is Inventory Part, tell QuickBooks how much to charge for the inventory part, how much the inventory part costs, and which income account to use for tracking the product sales income.
For an Inventory Part item type, QuickBooks displays the New Item window, as shown in Figure 3-4.
You use the extra fields that this special version of the window displays to record the following information:
Description on Purchase Transactions: Describe the part. This description appears on the documents (such as purchase orders) that you use when you buy items for your inventory.
Cost: Specify the average cost per unit of the items that you currently have. This field acts as the default rate when you enter the item on a purchase transaction.
COGS (Cost of Goods Sold) Account: Specify the account that you want QuickBooks 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, select the appropriate account.)
Preferred Vendor: Specify your first choice when ordering the item for your business. (If the vendor isn't on your Vendor list, QuickBooks asks you to add it. If you say, "Yeah, I do want to add it," QuickBooks displays the Add Vendor window, which you can then use to describe the vendor.)
Description on Sales Transactions: Type 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.)
Sales Price: Enter the amount that you charge for the item.
Tax Code: Indicate whether the item is taxed.
Income Account: Specify the account that you want QuickBooks to use for tracking the income from the sale of the part. This is probably the Resale Income or Sales account. You typically use the Resale Income account to track wholesale (nontaxable) sales and the Sales account to track retail (taxable) sales.
Asset Account: Specify the other current asset account that you want QuickBooks to use for tracking this Inventory item's value.
Reorder Point: Specify the lowest inventory quantity of this item that can remain before you order more. When the inventory level drops to this quantity, QuickBooks adds a Reminder to the Reminders list, notifying you that you need to reorder the item. (To see the Reminders list, choose Lists
On Hand: Set this field to the physical count for the item at the conversion date if you're setting up an item for the first time as part of setting up QuickBooks. Otherwise, leave this field set to zero.
Total Value: Leave this field at zero, too.
As Of: Enter the current date.
If the item type is Inventory Assembly, tell QuickBooks which cost-of-goods-sold and income account to use for tracking the item, how much to charge for the inventory assembly, and how to build the item from other component inventory items.
Note: The Inventory Assembly item is available in QuickBooks Premier and Enterprise but is not in Simple Start or QuickBooks Pro.
For an Inventory Assembly item type, QuickBooks displays the New Item window.
You use the extra fields that this special version of the window displays to record the following information:
COGS (Cost of Goods Sold) Account: Specify the account that you want QuickBooks 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, select the appropriate account.)
Description: Type a description of the item that you want to appear on documents that your customers see, such as invoices.
Sales Price: Enter the amount that you charge for the item.
Tax Code: Indicate whether the item is taxed.
Income Account: Specify the account that you want QuickBooks to use for tracking the income from the sale of the part. This is probably the Resale Income or Sales account. You typically use the Resale Income account to track wholesale (nontaxable) sales and the Sales account to track retail (taxable) sales.
Bill of Materials: Use the Bill of Materials list box to identify the component items and the quantities needed to make the inventory assembly.
Asset Account: Specify the other current asset account that you want QuickBooks to use for tracking this inventory item's value.
Build Point: 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.
On Hand: Set this field to the physical count for the item at the conversion date if you're setting up an item for the first time as part of setting up QuickBooks. Otherwise, leave this field set to zero.
Total Value: If you enter a value other than zero into the On Hand field, set the total value amount as the cost of the items you're holding. Otherwise, leave this field at zero.
As Of: Enter the conversion date into the As Of text box if you're describing some item as part of getting QuickBooks set up. Otherwise, just enter the current date.
If the item type is Sales Tax Item, tell QuickBooks what sales tax rate to charge and what government agency to pay.
Note: The Sales Tax Item version of the New Item window looks a little different from the window shown earlier in Figure 3-4. This is straightforward stuff, though. Enter the sales tax rate into the appropriate box and the state (or the city or other tax agency name) into the appropriate box:
Sales Tax Name and Description: Specify further details for later identification.
Tax Rate: Specify the sales tax rate as a percentage.
Tax Agency: Name the state or local tax agency that collects all the loot that you remit. If the tax agency isn't on the list, you can add it by selecting Add New from the drop-down list.
If the item type is Payment, describe the payment method and how you want QuickBooks to handle the payment.
You use payment items to record a down payment made when the invoice is created to reduce the final balance due from the customer later. Note: Retainers and Advance Deposits are handled differently.
Note
The Payment Item version of the New Item window looks a little different from the window shown in Figure 3-4.
Use the Payment Method drop-down list to specify the method of payment for a Payment item. QuickBooks provides a starting list of several of the usual payment methods. You can easily add more payment types by choosing Add New from the drop-down list. When you choose this entry, QuickBooks displays the New Payment Method dialog box. In the dialog box's only text box, identify the payment method: cows, beads, shells, or some other what-have-you.
When you're finished, use the area in the lower-left corner of the New Item window to either group the payment with other undeposited funds or, if you use the drop-down list, deposit the payment to a specific account.
Click OK or Next when you're finished.
When you finish describing one item, click OK to add the item to the list and return to the Item List window. Click Next to add the item to the list and keep the New Item window onscreen so that you can add more items.
If you added a new Inventory item, record the purchase of the item.
After you finish describing any new inventory items, you need to make another transaction in order to categorize the purchase of the items (unless they just showed up one morning on your doorstep). For an explanation of these transactions, turn to Chapter 7.
Note
In the preceding section, I don't describe all the items that you can add. For example, you can create a Subtotal item to calculate the subtotal of the items you list on an invoice. (You usually need this subtotal when you want to calculate a sales tax on the invoice's items.) You might want to create other wacky items for your invoices as well, such as discounts. I describe these special types of items in the next few sections.
You need to add a Subtotal item if you ever want to apply a discount to a series of items on an invoice. (I show a Subtotal item on the invoice shown in Figure 3-1.) To add a Subtotal item to your Item list, choose Lists
Note
When you want to subtotal items on an invoice, all you do is stick this Subtotal item on the invoice after the items you want to subtotal. Keep in mind, though, that QuickBooks doesn't set up a subtotal feature automatically. You have to add a Subtotal item; otherwise, you can apply a Discount item that you create only to the single item that immediately precedes the discount. A Discount item, by the way, calculates a discount on an invoice.
You can create an item that puts one line on an invoice that's actually a combination of several other items. To add a Group item, display the New Item window and specify the item type as Group. QuickBooks displays the New Item window, as shown in Figure 3-5.
Tip
For example, if you sell three items — say, blue mugs, yellow mugs, and rainbow mugs — but sometimes sell the items together in a set, you can create an item that groups the three items. Note that when you create a group, you continue to track the group member inventories individually and don't track the inventory of the group as a new item.
In the New Item window, use the Item/Description/Qty list box to list each item included in the group. When you click an item line in the Item/Description/Qty list box, QuickBooks places a down arrow at the right end of the Item column. You click this arrow to open a drop-down list of items. (If the list is longer than can be shown, you can use the scroll bar on the right to move up and down the list.) If you select the Print Items in Group check box, QuickBooks lists all the items in the group on invoices. (In the case of the mugs, invoices list the individual blue, rainbow, and yellow mugs instead of just listing the group name, such as Mug Set.)
You can create an item that calculates a discount and sticks the discount on an invoice as another line item. (I show a Discount item on the invoice that appears in Figure 3-1.) To add a Discount item to the list, display the New Item window, specify the item type as Discount, and provide an item name or number and a description.
Use the Amount or % text box to specify how the discount is calculated. If the discount is a set amount (such as $50.00), type the amount. If the discount is calculated as a percentage, enter the percentage, including the percent symbol. When you enter a percentage, QuickBooks calculates the discount amount as the percentage multiplied by the preceding item shown on the invoice. (If you want to apply the discount to a group of items, you need to use a Subtotal item and follow it with the discount, as Figure 3-2 shows.)
Use the Account drop-down list to specify the expense account that you want to use to track the cost of the discounts you offer.
Use the Tax Code drop-down list box to specify whether the discount gets calculated before or after any sales taxes are calculated. (This option appears only if you indicated in the EasyStep Interview that you charge sales tax.)
Tip
You probably want to check with your local sales tax revenue agency to determine whether sales tax should be calculated before or after the discount.
If you need to collect sales tax, and you didn't set up this function in the EasyStep Interview, follow these steps:
Choose Edit
Preferences.The Preferences dialog box appears.
Click the Sales Tax icon in the list on the left, click the Company Preferences tab, and then select the Yes option button in the Do You Charge Sales Tax area.
Add the Sales Tax item(s) to your Item list.
Sales Tax Groups enable you to batch several sales taxes that you're supposed to charge as one tax so that they appear as a single sales tax on the invoice. Combining the taxes is necessary — or at least possible — when you're supposed to charge, say, a 6.5 percent state sales tax, a 1.7 percent county sales tax, and a 0.4 percent city sales tax, but you want to show one all-encompassing 8.6 percent sales tax on the invoice.
To add a Sales Tax Group item, display the New Item window and then specify the item type as Sales Tax Group. QuickBooks displays the New Item window, as shown in Figure 3-6. Use the Tax Item/Rate/Tax Agency/Description list box to list the other sales tax items that you want to include in the group. When you click an item line in the list box, QuickBooks places a down arrow at the right end of the Tax Item column. You can click this arrow to open a drop-down list of Sales Tax items.
If you do payroll in QuickBooks, or if you track sales by employees, you need to describe each employee. Describing employees is pretty darn easy. Click the Employee Center icon at the top of the screen to display the Employee Center window. Then click the New Employee button that appears just above the list in the upper-left corner of the screen to have QuickBooks display the New Employee window, shown in Figure 3-7.
The New Employee window is pretty straightforward, right? You just fill in the fields to describe the employee.
Lesser computer-book writers would probably provide step-by-step descriptions of how you move the cursor to the First Name text box and type the person's first name, how you move the cursor to the next text box, type something there, and so on. Not me. No way. I know that you can tell just by looking at this window that all you do is click a text box and type the obvious bit of information. Right?
When you release an employee, it's important to enter the release date for the employee on the Employment Info tab after you've written that final paycheck. (To change to a new tab, choose the new tab from the cleverly named Change Tabs drop-down list.) This way, when you process payroll in the future, you can't accidentally pay the former employee.
As for the Type field, most employees probably fit the regular category. If you're uncertain whether an employee fits the guidelines for corporate officer, statutory employee, or owner, see the Circular E publication from the IRS. And sleep tight.
Tip
The Address and Contact tab provides boxes for you to collect and store address information. The Additional Info tab enables you to create customizable fields in case you want to keep information that isn't covered by the QuickBooks' default fields — favorite color and that type of thing. Again, what you need to do on this tab is fairly straightforward. By the way, if you've told QuickBooks that you want to do payroll, QuickBooks prompts you to enter the information it needs to calculate things like federal and state income taxes, payroll taxes, and vacation pay.
Tip
After you finish describing an employee, click OK to add the employee to the list and return to the Employee List window, or click Next to add the employee to the list and add more employees.
You can also inactivate an employee from your list if it starts to get cluttered with names of employees who no longer work for you. Read about inactivating items, employees, customers, and vendors in the following "Inactivating list items" sidebar. I recommend waiting to inactivate them until after the year is finished and the W-2 forms have been printed.
Here's how you add customers to your Customer list:
Choose Customers
The Customer Center window appears.
Click the New Customer & Job button and then click New Customer.
QuickBooks displays the Address Info tab of the New Customer window, as shown in Figure 3-8. Use this window to describe the customer in as much detail as possible.
Type the customer's name.
Enter the name of the customer as you want it to appear in the Customer list. You can list customers by company name or by the representative's last name.
Enter the company name.
(Optional) Enter the name of your contact, along with other pertinent information.
Move the cursor to the Mr./Ms. text box and type the appropriate title. Do the same with the First Name, M.I., and Last Name text boxes. (QuickBooks automatically fills in the names in the Contact text box as you type them. Nice touch, eh?)
Go ahead and fill in the Phone, FAX, Alt. Phone, and E-Mail text boxes while you're at it.
(Really optional) Type the name of your alternative contact in the Alt. Contact text box.
Enter the billing address.
You can use the Bill To text box to provide the customer's billing address. QuickBooks copies the Company and Contact names to the first lines of the billing address, so you need to enter only the address. To move from the end of one line to the start of the next, press Enter.
Enter the shipping address.
You can use the Ship To box to provide the customer's shipping address if this address differs from the Bill To address. Simply open the Ship To list box, click Add New, and then enter the shipping address information the same way that you enter the Bill To address. You can add multiple shipping addresses. After you have added a shipping address for a customer, you can select the shipping address from the Ship To list box.
(Optional) Click the Additional Info tab and record more data.
When you click this tab, QuickBooks displays the tab shown in Figure 3-9. You can use this tab to describe the customer in more detail.
(Optional) Click the Payment Info tab and record more data.
You can use the boxes on the Payment Info tab (see Figure 3-10) to record bits of customer information, such as the account number that should be included with any payments.
(Optional) Click the Job Info tab to add specific job information.
Because you're creating a new customer account, not invoicing by jobs, I explain this step in the next section. If you're the "can't wait" type, feel free to take a look. You can add a specific job to the new customer's information.
Save the customer information by clicking OK or Next.
When you finish describing a customer, you can save it in one of two ways: Click OK to add the customer to the list and return to the Customer Center window, or click Next to add the customer to the list and keep the New Customer window onscreen so that you can add more customers.
In QuickBooks, you can track invoices by customer or by customer and job. This may sound kooky, but some businesses invoice customers (perhaps several times) for specific jobs.
Note
Take the case of a construction subcontractor who does foundation work for a handful of builders of single-family homes. This construction subcontractor probably invoices his customers by job, and he invoices each customer several times for the same job. For example, he invoices Poverty Rock Realty for the foundation job at 1113 Birch Street when he pours the footing and then again when he lays the block. At 1028 Fairview, the same foundation job takes more than one invoice, too.
To set up jobs for customers, you first need to describe the customers (as I explain in the preceding section). Then follow these steps:
Choose Customers
QuickBooks displays the Customer Center window.
Right-click the customer for whom you want to set up a job and then choose Add Job from the contextual menu that appears.
QuickBooks displays the New Job window (shown in Figure 3-11). You use this window to describe the job. A great deal of the information in this window appears on the invoice.
Add the job name.
The cursor is in the Job Name text box. Just type the name of the job or project.
Identify the customer.
On the off chance that you selected the wrong customer in Step 2, take a peek at the Customer drop-down list. Does it name the correct customer? If not, activate the drop-down list and select the correct customer.
(Optional) Name your contact and fill in other relevant information.
You can enter the name of your contact and alternative contact in the Mr./Ms., First Name, M.I., and Last Name text boxes. QuickBooks fills in the Contact text box for you. You probably don't need to be told this, but fill in the Phone and FAX text boxes just so that you have that information on hand. If you want to get really optional, fill in the Alt. Phone and Alt. Contact text boxes. Go ahead: Take a walk on the wild side.
Tip
Enter the job's billing address.
You can use the Bill To text box to provide the customer's job billing address. Because chances are good that the job billing address is the same as the customer billing address, QuickBooks copies the billing address from the Customer list. But if need be, make changes.
Select the Ship To address.
You can use the Ship To text box to provide the job's shipping address. Click the Copy button if the shipping address is the same as the Bill To address.
(Massively optional) Click the Additional Info tab and categorize the job.
You can use the Customer Type drop-down list to give the job type. The only initial types in the default list are Corporate and Referral. You can create other types by choosing Add New from the Customer Type drop-down list (so that QuickBooks displays the New Customer Type dialog box) and then filling in the blanks.
Click the Payment Info tab and set the customer's credit limit (that is, if you've given the customer a credit limit).
You can set the customer's credit limit by using the Credit Limit box.
Specify the total of the customer's unpaid invoices by using the Opening Balance text box.
Move the cursor to the Opening Balance text box and type the total amount owed by the customer on the conversion date.
Tip
QuickBooks suggests that you not enter a balance in the Opening Balance box as part of setting up QuickBooks. (If you're interested in the logic of QuickBooks' argument, you can view the Customer's online tutorial, which is available by choosing Help
Enter the current date in the As Of text box.
(Optional) Click the Job Info tab and add specific job information.
Figure 3-12 shows the Job Info tab. You can use the Job Status drop-down list to choose None, Pending, Awarded, In Progress, Closed, or Not Awarded, whichever is most appropriate. The Start Date is (I know that this one is hard to believe) the day you start the job. As anyone knows, the Projected End and the End Date aren't necessarily the same. Don't fill in the End Date until the job is actually finished. The Job Description field can contain any helpful information you can fit on one line, and the Job Type is an extra field you can use. (If you do use this field, you can add a new job type by choosing Add New from the Job Type list.)
Save the job information by clicking OK or Next.
After you finish describing the job, you have two options: You can click OK to add the job to the list and return to the Customer Center window, or you can click Next to add the job to the list and keep the New Job window onscreen so that you can add more jobs.
Tip
You can edit job information the same way that you edit customer information. Display the Customer Center window by choosing Customer
Tip
To add a large number of customers or jobs to the Customers list at the same time, display the Customer Center window, click the New Customer & Job button, and then choose the Add Multiple Customer:Jobs option. QuickBooks displays the Add/Edit Multiple List Entries worksheet, which lets you collect and edit all of the same information that the regular customer and job windows do.
Adding vendors to your Vendor list works the same basic way as adding customers to your Customer list. Here's how to get the job done:
Choose Vendors
Vendor Center or click the Vendor Center icon at the top of the screen.QuickBooks displays the Vendor Center window. Along with listing your vendors, it lists any sales tax agencies that you identified as part of setting up Sales Tax items.
Click the New Vendor button.
QuickBooks displays the Address Info tab of the New Vendor window, as shown in Figure 3-13. You use this window to describe the vendors and all their little idiosyncrasies.
Enter the vendor's name.
The cursor is already in the Vendor Name text box. All you have to do is type the vendor's name as you want it to appear on the Vendor list. If you want to list your vendors by company name, enter the company name. To list them by the first or last name of the sales representative, enter one of these names. Just remember that the list is going to sort, alphabetically or numerically, by the information you enter in this field, not by the information below.
(Optional) Enter the name of your contact.
Fill in the Mr./Ms., First Name, M.I., and Last Name text boxes. QuickBooks fills in the Contact text box for you automatically.
Enter the address to which you're supposed to mail checks.
You can use the Address text box to provide the vendor's address. QuickBooks copies the Company and Contact names to the first line of the address, so you need to enter only the street address, city, state, and ZIP code. To move from the end of one line to the start of the next, press Enter.
(Optional) Enter the vendor's telephone and fax numbers, and, if available, the e-mail address.
The window also has an Alt. Phone text box for a second telephone number. They thought of everything, didn't they?
Verify the entry in the Print on Check As text box.
QuickBooks assumes that you want the company name to appear on any checks you write for this vendor. If not, change the text box to whatever you feel is more appropriate.
At this point, click the Additional Info tab.
The window you see onscreen hopefully bears an uncanny resemblance to Figure 3-14.
(Optional) Enter your account number in the Account No. text box.
If the vendor has assigned account numbers or customer numbers to keep track of customers, type your account or customer number in the Account No. text box. You can probably get this piece of information from the vendor's last invoice.
Note
An account number is required if you want to use QuickBooks' online bill payment feature (which I describe in Chapter 13) to pay the vendor. QuickBooks transfers the account number to the memo field of the payment check.
Categorize the vendor by selecting an option from the Type drop-down list.
See that Type drop-down list? If you open the list, you see the initial QuickBooks list of vendor types. You can pick any of these types, but my suggestion is that you diligently identify any vendor to whom you need to send a 1099 Form as a 1099 contractor. (A 1099 contractor is any unincorporated business or person who performs services and to whom you pay $600 or more during the year.)
Specify the payment terms that you're supposed to observe by selecting an option from the Terms drop-down list.
QuickBooks has already set up all the usual ones. (If you want to, you can choose Add New to set up additional payment terms.)
Tip
If a vendor offers an early payment discount, it's usually too good a deal to pass up. Interested in more information about early payment discounts? Do you have an inquiring mind that needs to know? See Chapter 21 to find out about the advantages of early payment discounts.
(Optional) Specify your credit limit, if the vendor has set one.
This procedure is obvious, right? You click in the Credit Limit text box and enter the number.
(If applicable) Store the vendor's federal tax identification number and select the Vendor Eligible for 1099 check box.
This number might be the vendor's Social Security number if the vendor is a one-person business. If the vendor has employees, the federal tax identification number is the vendor's employer identification number. You need this information only if you're required to prepare a 1099 for the vendor.
Type 0 (zero) in the Opening Balance text box.
You typically don't want to enter the amount you owe the vendor; you do that later, when you pay your bills. However, if you're using accrual basis accounting for your expenses (this just means that your accounting system counts bills as expenses when you get the bill and not when you pay the bill), you need to tell QuickBooks what amounts you owe vendors at the conversion date. You can do that most easily by entering opening balances for vendors into the Opening Balance box as you set up a vendor in the Vendor list.
Enter the conversion date in the As Of text box.
What you're doing here, by the way, is providing the date on which the value shown in the Opening Balance text box is correct.
Tip
QuickBooks provides an Account Prefill tab on the New Vendor window. Use this tab to specify a set of expense accounts that QuickBooks will suggest any time you indicate you're writing a check, entering a bill, or entering a credit card charge for the vendor.
Save the vendor information by clicking OK or Next.
After you finish describing the vendor, you have two options: Click OK to add the vendor to the list and return to the Vendor Center window, or click Next to add the vendor to the list and leave the New Vendor window onscreen so that you can add more vendors.
Tip
To add a large number of vendors to the Vendors list at the same time, display the Vendor Center window, click the New Vendor button, and then choose the Add Multiple Vendors option. QuickBooks displays the Add/Edit Multiple List Entries worksheet, which lets you collect and edit all of the same information that the regular vendor windows do.
Throughout the preceding sections, I cover almost all of the most important lists. A few others I haven't talked about yet are Fixed Asset, Price Level, Sales Tax Code, Classes, Other Names, Sales Rep, Customer Type, Vendor Type, Job Type, Terms, Customer Messages, Payment Method, Ship Via, and Memorized Transactions. I don't give blow-by-blow descriptions of how you use these lists because you don't really need them. The other QuickBooks lists are generally more than adequate. You can usually use the standard lists as is without building other lists.
Just so I don't leave you stranded, however, I want to give you quick-and-dirty descriptions of these other lists and what they do.
Tip
To see some of these lists, choose the list from the Lists menu or choose Lists
If you buy fixed assets — things such as vehicles, various pieces of furniture, miscellaneous hunks of equipment, and so on — somebody is supposed to be tracking this stuff in a list. Why? You need to have this information at your fingertips (or at your accountant's fingertips) to calculate depreciation. And if you later dispose of some item, you need this information to calculate the gain or loss on the sale of the item.
For these reasons, QuickBooks includes a Fixed Asset list. Figure 3-15 shows the Fixed Asset Item List window, used to describe and identify your fixed assets.
Note: I should tell you that your CPA or tax accountant already has such a list that he or she has been maintaining for you. So don't, like, totally freak out because this is the first you've heard about this fixed assets business.
Tip
Chapter 18 describes handling fixed assets in a bit more detail.
The first time I encountered the QuickBooks Price Level feature, I was sorely confused about how the feature worked. I'm still a little confused — not about how the feature works, but about who'd really want to use this feature. But heck, what do I know? Here's the deal: Price Levels enable you to adjust an item price as you're creating an invoice. For example, you can create a price level that increases the price for some item by 20 percent. And you create a price level that decreases the price for some item by 10 percent. You adjust a price by selecting a price level from the Price field on an invoice. (This may not make much sense until you see the Create Invoices window, which I describe in Chapter 4, but it's fairly straightforward.)
The Sales Tax Code list just maintains a list of sales tax codes. These sales tax codes, when used on an invoice or bill, tell QuickBooks whether items are taxable.
Classes enable you to classify transactions by department or location, for example, so that you can track trends and assess performance across parts of your business. Classes are cool (really cool), but they add another dimension to the accounting model that you use in QuickBooks, so I'm not going to describe them here. I urge you — nay, I implore you — to get comfortable with how the rest of QuickBooks works before you begin mucking about with classes. Here are just a handful of useful tidbits in case you want to use classes:
You may need to turn on the QuickBooks Class Tracking feature. To do this, choose Edit
Note: The Class box appears in data entry windows only after you turn on class tracking.
To display the Class list, choose Lists
To add classes to the Class list, display the Class List window (choose Lists
To tag transactions as falling into a particular class — invoices, checks, bills, journal entries, and so on — select the appropriate class from the Class list box.
By the way, one other point: Before you go off and start using classes to complicate your accounting, make sure that you can't get what you want by beefing up your chart of accounts.
Note
You won't see a Class List command in the Lists menu if you indicated during the EasyStep Interview that you don't want to use classes. But you can change your mind later and start using classes. Choose the Edit
QuickBooks provides an Other Names list that works as a watered-down, wimpy Vendor and Employee list combination. You can write checks to people named on this Other Names list, but you can't do anything else. You can't create invoices or purchase orders for them, for example. And you don't get any of the other information that you want to collect for vendors or employees.
Tip
You're really better off working with good, accurate, rich Vendor and Employee lists. If you don't like this suggestion, however, just choose Lists
You can create a list of the sales representatives you work with and then indicate which sales rep sells to a customer or generates a sale. To do this, choose Lists
You can create lists of customer types, vendor types, and job types and then use these lists to categorize customer, vendor, and job information. This is probably no surprise, but to do this, you need to use the appropriate command:
Lists
Lists
Lists
When you choose one of these commands, QuickBooks displays the appropriate List window, which lists all the Customer types, Vendor types, or Job types. To add types, click the Type button, select New from the drop-down list, and then fill in the window that QuickBooks displays.
How you use any of these types of lists depends on your business. In a situation in which you want to sort or segregate customers, vendors, or jobs in some unusual way, use the Customer Type, Vendor Type, or Job Type list.
Note
Over the last few years, I've used the Customer Type box to identify which marketing technique has brought me a client: yellow-pages advertising, newspaper advertising, professional referrals, and so on. Because QuickBooks easily prints reports that summarize client revenue by customer type, using the Customer Type field in this manner lets me easily see how much revenue different marketing activities produce — and when I'm getting a decent return on my marketing dollars.
QuickBooks maintains a Terms list, which you use to specify what payment terms are available. To add terms, choose Lists
This list is another minor player in the QuickBooks drama. You can stick messages at the bottom of invoices if you first type the message in the Customer Message list. QuickBooks provides a handful of boilerplate messages: thank you, happy holidays, mean people suck, and so on. You can add more messages by choosing Lists
Now this will be a big surprise. (I'm just kidding.) QuickBooks provides descriptions for the usual payment methods. But, of course, you can add to these by choosing Lists
QuickBooks provides descriptions for the usual shipping methods. These descriptions are probably entirely adequate. If you need to add more, however, you can do so by choosing Lists
As I describe in a bit more detail in Chapter 18, QuickBooks provides a Vehicle list that you can use to maintain a list of business vehicles. To see the Vehicle list, choose Lists
To record vehicle mileage inside QuickBooks, choose Company
The Memorized Transaction list isn't really a list. At least, it's not like the other lists that I describe in this chapter. The Memorized Transaction list is a list of accounting transactions — invoices, bills, checks, purchase orders, and so on — that you've asked QuickBooks to memorize. To display the Memorized Transaction list, choose Lists
You can have QuickBooks memorize transactions so that you can quickly record them later or even put them on a schedule for recurring usage. This feature can save you lots of time, especially for transactions you regularly make.
To organize a list, you must be in single-user mode. (I describe multi-user mode in Appendix C.) Here are some ways that you can organize your list:
To move an item and all its subitems, click the diamond beside the item and then drag the item up or down the list to a new location.
To make a subitem its own item, click the diamond beside the item and then drag it to the left.
To make an item a subitem, first move the item so that it's directly beneath the item you want it to fall under. Then click the diamond beside the item and drag it to the right.
To alphabetize a list, click the button in the lower-left corner of the list window. (The name of this button changes, depending on the list that you're displaying.) Then choose Re-Sort List from the pop-up menu. Sensing that you definitely mean business and don't want it fooling around, QuickBooks displays a message box that asks whether you're sure that you want to re-sort your list. Click OK to alphabetize.
Note
You can't reorganize the Vendor or the Employee list.
You can print customer, vendor, and employee lists by clicking the Print button at the top of the specific Center screen for the type of list you choose. The list will be among the options available to print in a drop-down list.
You can print a regular list by displaying the list, clicking the button in the lower-left corner of the list window, and then choosing Print List. However, often the best way to print a list is to print a list report. You can create, customize, and print a list report by choosing Reports
Click the Activities button in a list window to quickly access common activities associated with the items on that list. Or click Reports to quickly access common reports related to the items on the list.
If you use QuickBooks to store the names and addresses of your customers, vendors, and employees, you can create a text file of the contact information for these people. You can then export this file to another application, like a word processor, to create reports that use this information.
To export list information to a text file, click the button in the lower-left corner of the list window and choose Print List. When QuickBooks displays the Print dialog box, select the File option button, click Print, and then provide a filename when prompted.
Tip
The File menu Print Forms command also provides a Labels command for producing mailing labels for customers and vendors. And before I forget, let me also mention that the last command of the Company menu — Prepare Letters with Envelopes — lets you prepare letters (and, duh, addressed envelopes) from the name and address information from the Customer, Vendor, and Employee lists discussed earlier in this chapter.
I saved the best for last. After you get done setting up your lists, you still need to finalize one list: the Chart of Accounts. The Chart of Accounts just lists the accounts you and QuickBooks use to track income and expenses, assets, liabilities, and equity.
This is kind of a funny step, however, because a bunch of Chart of Accounts stuff is already set up. So what you're really doing here is just finalizing the chart of accounts. Typically, this consists of two or possibly three separate steps: describing customer balances, describing vendor balances, and entering the rest of the trial balance.
If you entered customer unpaid invoice totals when you set up the customers — which is what I recommend — you've already described your customer balances. You, my friend, can skip ahead to the next section, "Describing vendor balances."
If you didn't enter customer unpaid invoice totals, you need to supply that information before you finalize the Chart of Account information. To do this, you enter the invoice in the usual way, which I describe in Chapter 4. The one really important thing to do is use the original invoice date when you enter the invoice.
Now, I know what you're thinking: "Hey, dude. The order of your instructions is all screwed up. Here I am, slogging through Chapter 3, and now totally out of the blue, you're telling me that I have to jump ahead to Chapter 4 and read that?"
Yeah, well, that's right. This jumping around and jumping ahead is the big reason that I told you earlier to do it the way I did. Hey, sorry.
If you entered vendor unpaid bill totals when you set up the vendors — this is also what I recommend — you described your vendor balances.
If you didn't enter vendor unpaid bill totals, you need to supply that information, as I describe in Chapter 6 in the discussion on recording your bills the accounts payable way. The one really important thing to do is use the original vendor bill date when you enter the vendor bill.
After you enter the customer and vendor balances into QuickBooks, you need to enter the rest of the trial balance, which you do by taking two big steps. In the first step, you camouflage a couple of goofy accounts, called suspense accounts, that QuickBooks creates when you set up the Item, Customer, and Vendor lists. The second step, which I describe in the following section, is supplying the last few missing numbers.
Figure 3-16 shows a sample trial balance after I enter the inventory, accounts receivable, and accounts payable balances. (These account balances get set up indirectly, as I note in the sidebar "For accountants only," later in this chapter.) When you set up your Item, Customer, and Vendor lists, you also create account balances for inventory, accounts receivable, and accounts payable.
You can produce your own half-complete trial balance from inside QuickBooks by clicking the Report Center icon and choosing Reports
If you need to do so, enter the conversion date in the As Of box by clicking in the box and typing the conversion date in MM/DD/YYYY format. Figure 3-16, for example, shows the conversion date 7/1/2010 on the As Of line. You can set the From box to any value; the From and To range just needs to end with the conversion date. Make a note of the credit and debit balances shown for the Uncategorized Income and Uncategorized Expenses accounts.
If you want, you can print the report by clicking the Print button; then, when QuickBooks displays the Print Report dialog box, click its Print button. Yes, you click two Print buttons.
After you have the conversion date balances for the Uncategorized Income and Uncategorized Expenses accounts, you're ready to make the accrual-accounting adjustment. To do so, follow these steps:
From the Home screen, either click the Chart of Accounts icon in the Company area or choose Lists
Chart of Accounts to display the Chart of Accounts window, as shown in Figure 3-17.Double-click Opening Bal Equity in the Chart of Accounts list to display that account.
Opening Bal Equity is listed after the liability accounts. QuickBooks displays the register — just a list of transactions — for the account named Opening Bal Equity. Figure 3-18, coincidentally, shows this register.
Select the next empty row of the register if it isn't already selected (although it probably is).
You can select a row by clicking it, or you can use the up- or down-arrow key to move to the next empty row.
Type the conversion date in the Date field.
Move the cursor to the Date field (if it isn't already there), and type the date. Use the MM/DD/YYYY format. For example, you can type either 07012010 or 7/1/2010 to enter July 1, 2010.
Type the Uncategorized Income account balance (from the trial balance report) in the Increase field.
In Figure 3-16, for example, the Uncategorized Income account balance is $190,000. In this case, click the Increase field and type 190000 in the field.
Tip
You don't need to include the dollar sign or the comma; QuickBooks adds the punctuation for you.
Type Uncategorized Income (the account name) in the Account field.
Select the Account field, which is on the row under the word Payee, and begin typing Uncategorized Income, the account name. As soon as you type enough of the name for QuickBooks to figure out what you're typing, it fills in the rest of the name for you. When this happens, you can stop typing.
Click the Record button to record the Uncategorized Income adjustment transaction.
Again, select the next empty row of the register.
Click the row or use the up- or down-arrow key.
Type the conversion date in the Date field.
Move the cursor to the Date field (if it isn't already there), and type the date. You use the MM/DD/YYYY format. You can type 7/1/2010, for example, to enter July 1, 2010.
Type the Uncategorized Expenses account balance in the Decrease field.
In Figure 3-16 (shown earlier), for example, the Uncategorized Expenses account balance is $75,000. In this case, you click the Decrease field and then type 75000. I've said this before, but I'll say it again because you're just starting out: You don't need to include any punctuation, such as a dollar sign or comma.
Type Uncategorized Expenses (the account name) in the Account field.
Select the Account field, which is on the second line of the register transaction, and begin typing Uncategorized Expenses, the account name. As soon as you type enough of the name for QuickBooks to figure out what you're typing, it fills in the rest of the name for you.
Click the Record button to record the Uncategorized Expenses adjustment transaction.
Figure 3-18 shows the Opening Bal Equity register with the correction transactions. The correction transactions are numbered with a 3 and a 4. See them? They're the first transactions in the register.
Figure 3.18. The transactions numbered 3 and 4 fix the uncategorized income and uncategorized expenses account balances.
Note
You can close the Opening Bal Equity register at this point. You're finished with it. One way to close it is to click the Close button in the upper-right corner of the window.
You can check your work thus far — and checking it is a good idea — by producing another copy of the trial balance report. What you want to check are the Uncategorized Income and Uncategorized Expenses account balances. They should both be zero, as shown in Figure 3-19.
Note
You can produce a trial balance by choosing Reports
If the Uncategorized Income and the Uncategorized Expenses account balances don't show zero, you (with my help, of course) might have botched the accrual adjustment. To fix the mistake, redisplay the Opening Bal Equity register (as noted earlier, you can double-click Opening Bal Equity in the Chart of Accounts list to display that account), select the adjustment transactions, and then check the account, amount, and field (Increase or Decrease). If one of the fields is wrong, select the field and replace its contents by typing over it.
You're almost done. Really. Your last task is to enter the rest of the trial balance amounts into QuickBooks. To perform this task, you need to have a trial balance prepared as of the conversion date. If you followed my instructions in Chapter 2, you have one. Follow these steps:
Choose either Company
Make Journal Entries or AccountantMake Journal Entries.QuickBooks displays the Make General Journal Entries window, as shown in Figure 3-20.
Type the conversion date in the Date field.
Move the cursor to the Date field (if it isn't already there) and type the date. As you might know by now, you use the MM/DD/YYYY format. For example, type 7/1/2010 for July 1, 2010 (or 07012010 if you don't want to put in the slashes).
Type each trial balance account and balance that isn't already in the half-completed trial balance.
Okay. This step sounds confusing. But remember that you've already entered your cash, accounts receivable, inventory, and accounts payable account balances, and perhaps even a few other account balances and a portion of the Opening Bal Equity account balance as part of the EasyStep Interview.
Now you need to enter the rest of the trial balance — specifically, the year-to-date income and expense account balances, any missing assets or liabilities, and the remaining portion of the Opening Bal Equity. To enter each account and balance, use a row of the Make General Journal Entries window list box. Figure 3-21 shows how this window looks after you enter the rest of the trial balance into the list box rows.
Click the Save & New button to record the general journal entries that set up the rest of your trial balance.
Double-checking your work is a good idea. Produce another copy of the trial balance report. Check that the QuickBooks trial balance is the same one that you wanted to enter.
Note
You can produce a trial balance by choosing Reports
Tip
If the QuickBooks trial balance doesn't agree with what your records show, you need to fix the problem. Fixing it is a bit awkward but isn't complicated. Choose Reports
Congratulations! You're done.