Learning How To Use QuickBooks®

by L. Kenway BComm CPB

Today we are going to chat about how to use QuickBooks ® to create four very handy and useful custom reports to track ... cheques issued, customer deposits, construction holdbacks and top customers.

What You'll Find In This Chat ...

Let's chat about good bookkeeping practices.
  • Accounting System Flowchart
  • Customizing Reports
  • Performing Period End Closing Entries
  • Tracking GST/HST as a Registrant and a Non-Registrant

We'll also take a look at the QuickBooks ® accounting system flowchart, closing procedures and how GST/HST is handled.

While you don't have to have formal bookkeeping training to use QuickBooks®, you do need to have a basic understanding of accounting principles to ensure you have accurate data ... and there are certain procedures you must follow to ensure you have accurate data.

I have found over the years that the more input accountants have had in this product, the less user friendly it has become ... but for good reason. So like you, I can get frustrated learning how to use QuickBooks® each time a new version comes out. As with most things, the frustration goes away as I climb up the learning curve.

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3 Part QuickBooks® Primer
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Learn How To Use QuickBooks

Part 1

Beginner's Tips on A/R, A/P, Banking

Period End Closing Adjusting Entries

Shortcuts, Beginner's FORUM

How to use QuickBooks to create customized reports.

Part 2

Accounting System Flowchart

Learn How To Customize Reports

Closing Procedures, Tracking GST/HST/PST

Part 3

Setup Meals Sales Tax Code
in Classic QuickBooks Online 

Differences/Limitations
QBO Canada



                               good bookkeeping practice
THE BOOKKEEPER'S|TIP    

When To Upgrade To The Latest Version

I received a note from Gary H. today letting me know he was having trouble with the newest version of QuickBooks ... annoying little bugs.

I too get frustrated with the bugs when software is first released. It is my policy not to upgrade for at least 90 to 120 days after a release date to ensure all the bugs have been fixed.

I leave the bug finding to the people who enjoy tinkering and trying to figure out what the problem is. I just don't have time ... but if you like Beta testing, watch for QuickBooks new versions in October each year.

If you use the payroll module, you have no choice but to upgrade to the latest version by the following July.



QuickBooks® Flowchart

When you first enter the QuickBooks® program, you are presented with a flowchart of the accounting system. It gives you an overview of how the program works ... and your first clue as to how to how to use QuickBooks®.

Study the chart and notice the different areas of the program. Learning what each area is for will make learning how to use QuickBooks® go faster.

Each version has five sections - Vendors (for accounts payable and expenses ... money leaving the business), Customers (for accounts receivables and sales ... money coming into the business), Employees (for payroll and/or time tracking), Company (for COA and list management), and Banking (for banking functions).

QuickBooks Flowchart

Try to understand the bookkeeping process by studying the flowchart.

Let me say again ... when learning how to use QuickBooks® ... before you do anything else ... stop and look over the flowchart.

Once you understand the bookkeeping process, things start to become easy. When in doubt, stop what you are doing and find out where you are on the flowchart. Then go from there.

The flowchart shown above varies. It depends what version you are using and what features you have. So if your chart doesn't look exactly like this one, don't worry about it. How to use QuickBooks® is pretty much the same for each version ... only the features change to accommodate different sizes of businesses.


Customizing Reports in QuickBooks®

When learning how to use QuickBooks®, make sure you take time to learn how to customize reports tailored to your informational needs. Here are four that might come in handy.

  1. Track Check Issued
  2. Customer Deposits
  3. Construction Holdbacks
  4. Top Customers


Customizing Bookkeeping Reports
How to Use QuickBooks ® To Track Cheques Issued

Have you been wondering how to use QuickBooks® to track the cheques issued during the month in your QuickBooks® accounting system?

A quick and easy way to get a cheque listing is to go to Reports / Banking / Missing Cheques. Create the report for the time period you want.

What I do is modify the report heading to Cheque Register Summary and memorize the report for easy access. I make a point of printing this report each month-end for my financial reporting package.

Learning how to use QuickBooks® to create this customized report will enable you to track the sequencing of your cheques for your audit trail.

During the month, I update it and keep it handy for easy reference throughout the month too.

If you need to see the cheque details, then choose Reports / Banking / Cheque Detail.

The reason I prefer my "summary" report is that I can scan for a cheque quickly. The "detail" report prints a lot of pages and to use it, I have to flip a lot of paper.

So there are two ways to get track the cheques you have issued. It's your choice which you use.



Customizing Bookkeeping Reports
How to Use QuickBooks ® To Track Customer Deposits

Guess what? There are also two methods to book customer deposits/prepayments.

If you use the liability method to process your customer deposits in your QuickBooks® accounting system, here's how to use QuickBooks® to keep track of who paid deposits.

  • Create a Transaction Detail by Account report found under Reports/Accountant and Taxes.
  • With the report open, customize the report. Begin with a click on Modify Report.
  • Look for Total By in the columns section. Select Customer.
  • Click on Filters tab.
  • Filter the report by account and select the Customer Deposit account in the liability section.
  • Click on Header/Footer tab.
  • Change the Report Title to Customer Deposits.
  • Click on ok.
  • Click on the Memorize button to save the report for easy use ... consider adding it to your icon bar by going to the View drop down menu.

Here is an example of what the report would look like.

After customizing, the report shows your customer deposit transactions so that you can track who still has an unapplied or unused deposit. A customer deposit account should show a zero balance once the full deposit has been applied to an invoice or several invoices.

If you print a Sales Report by customer or by item, the deposit transactions will show up there as well, but not as nicely as this customized report.

This is an excellent example showing how customizing your reports in your QuickBooks® accounting system will help you make good business decisions based on solid information.


Customizing Bookkeeping Reports
How to Use QuickBooks ® To Track Construction Holdbacks

Holdbacks are not revenue ... and not subject to tax until the holdback amounts are billed. So it's important when accounting for holdbacks to have a way to track and monitor them.

Here is how to use QuickBooks® to track and bill construction holdbacks.

Begin by setting up a current liability account named Holdbacks.

To facilitate invoice preparation, create an Other Charge list item also named Holdbacks. Code the item to the current liability account you just created above.

When you invoice your customer, show your customer the holdback by selecting the Holdback item in your drop down list. Enter your holdback amount as a negative amount. For example if your percentage of work completed to date is $5,000 with a 10% holdback, enter -500.00 as your holdback amount.

On your final invoice to bill your customer for the completion of the job, select the Holdback item ... but this time ... enter the amount as a positive number. This will clear out your holdback account and reclassify it to sales where it now becomes taxable.

Finally, setup up your QuickBooks® accounting system to create a customized report so you can easily keep track of the status of the holdbacks. I think these instructions will work but there are so many versions now, you may have to modify the instructions slightly to accommodate your version.

  • Create a Transaction Detail by Account report found under Reports/Accountant and Taxes.
  • With the report open, customize the report. Begin with a click on Modify Report.
  • Look for Total By in the columns section. Select Customer.
  • Click on Filters tab.
  • Filter the report by account and select the Holdback account in the liability section.
  • Click on Header/Footer tab.
  • Change the Report Title to Construction Holdbacks.
  • Click on ok.
  • Click on the Memorize button to save the report for easy use ... consider adding it to your icon bar by going to the View drop down menu.

If you have done everything correctly, the report should look very similar to the example report shown in the Customer Deposits segment above.



GOOD TO KNOW

A useful resource for you if you are working with construction holdbacks, and learning how to use QuickBooks® to report it, is the CRA publication GST Memoranda G300-6-7 Partial Payments (GST 300-6-7). It explains the general rule for when GST/HST is payable:

The general timing of liability rule, under subsection 168(1) of the Act, is that tax is payable by the recipient of a taxable supply on the earlier of the day the consideration for the supply is paid and the day the consideration for the supply becomes due. Tax is generally collectible by the supplier at the same time that it is payable by the recipient.

[...]

Under subsection 152(1) of the Act, consideration, or a part thereof, for a taxable supply, is deemed to become due on the earliest of the following days:

(a) the day that the supplier first issues an invoice in respect of the supply for that consideration or part and the date of that invoice;

(b) the day the supplier would have, but for an undue delay, issued an invoice in respect of the supply for that consideration or part; and

(c) the day that the recipient is required to pay that consideration or part pursuant to an agreement in writing.





Customizing Bookkeeping Reports
How to Use QuickBooks ® To Track Your Top Customers

The Sales by Customer report shows you where your revenue comes from and who your top customers are. You can use it to determine if you have any concentrated credit risk. Here's how to create the report.

  • Click on Sales under the Report menu.
  • Now select Sales by Customer Summary ... how hard is that?
  • Click modify. Select sort by total and % of column.
  • Shorten the report by clicking on the collapse button. This hides the job information.
  • Feel free to change the report heading to something else if you want.
  • Memorize the report to save your customizing and for future use.

Consider how to use QuickBooks sales information to improve your customer relations and grow your business by finding creative ways to utilize the information.

For example, the September 2010 Admin Books Newsletter (Administrative Bookkeeping Co., Inc.) suggests you select your top 10 customers and send them a hand written note with a small gift ... or share the names of the top ten customers with your employees so they can provide them VIP service.

Take a look at the percentages. Does one customer stand apart from all the others or represent more than 10% of your business? Make plans on how your business could sustain revenue if your top client left.


QuickBooks® Closing Procedures

What Are QuickBooks® Closing Procedures For Month-End and Year-End?

Learning how to use QuickBooks® to close your books is much simpler than most other accounting programs out there.

The QuickBooks® accounting system does not require any period end entries, that is why it is important to set your closing date when you have completed your month-end procedures or year-end procedures.

GOOD TO KNOW

Learning how to use QuickBooks® short cut keys will make your data processing more efficient. Huge, huge time savers!

This features allows you to always have access to prior years' data right down to the transaction level. It also allows you to create comparison reports.

QuickBooks® automatically performs the following period end adjustments:

  • The income and expense accounts are automatically zeroed out at each year end.
  • The net income is automatically posted to the Retained Earnings account, which is created by QuickBooks®, for any reporting period.

QuickBooks® does not reclassify the equity account. YOU need to book the closing entry to clear the Owner's Draws and Contributions to the Owner's Equity account.

The "closing" procedure is date driven and occurs based on the reporting dates of the financial reports you request.

QuickBooks® has a great feature for report time periods - This Month, Last Month, Year-to-Date, etc. that makes it quick and easy for you select your reporting period.

GOOD TO KNOW

Soooo, here is how to use QuickBooks® to close each month-end period:

  1. Perform your month-end procedures.
  2. Close your accounting period by setting the closing date. (See step 18 of month-end procedures.)
  3. Safeguard your data against accidental change by backing it up.
  4. Determine who has the right to change transactions in the closed period.

That's all there is to closing the books!


Tracking GST/HST in QuickBooks®

Learning how to use QuickBooks® to track GST/HST depends on whether you are a GST/HST registrant or not. We'll look at both.

This section was created using a 2009 version of QuickBooks® and before HST was implemented in B.C. and Ontario. I haven't updated it because BC will be returning to PST on April 1, 2013. All the instructions here should work in QuickBooks versions 2010, 2011, and 2012.

Please keep this in mind while learning how to use QuickBooks® sales tax module.


QuickBooks® Accounting System
Handling HST/GST

If You Are NOT An Registrant

If you are not an HST/GST registrant, you will NOT be collecting GST (and should not as you are not authorized to). This means you do not qualify for input tax credits so there is no need for your accounting system to track the sales tax you pay.

In this case, when you record any purchase or expense that has sales taxes, the sales tax amount is either expensed or capitalized.

For example, if you purchased printer toner for $150 before taxes, you would record $168 to the expense account Office Supplies if you lived in BC. In Ontario, the amount would be $169.50 (because the PST / RST rate is different).



Even though you don't have to, you may want to track how much sales tax you are paying ... so you can see how much money you are leaving on the table by not registering for GST/HST.



To track your GST/HST expense separately, create an expense account called Sales Taxes or Sales Taxes Paid. In the QuickBooks® accounting system, the account setup is done through your chart of accounts.

Each time you purchase something, you would code the sales tax amount to this expense account. This is one of the ways of how to use QuickBooks® to give you management information to run your business.

If you are under $30,000 in sales and not registered for HST/GST, you may want to consider registering voluntarily. Take time to read how you are paying more tax by not registering.

I have also created a Guide to Understanding HST/GST that explains why you might want to register voluntarily.

QuickBooks® Accounting System
Handling HST/GST

If You Are A Registrant With CRA

In the QuickBooks® accounting system, it is not necessary to have three accounts like you do when you handle GST/HST manually. One account called HST/GST Payable handles everything.

As long as you are properly booking your entries and managing your sales tax in the sales tax windows, the QuickBooks® accounting system keeps track of your GST collected and input tax credits for you. When you need to determine the amounts to report to CRA, you run your sales tax report for the details.


Here's an overview of how it works, using versions 2009 through to 2012. Tracking sales tax has five steps:

1. Turn on the sales tax feature. This creates the Manage Sales Tax icon found on the right hand side in the Vendor section of the flowchart.

  • Just be sure to go to Edit>Preferences>Sales Tax. Turn on the sales tax feature by answering Yes to "Do you collect sales tax?".
  • Tick the Customer and Vendor Tax Codes so you can customize the tax code when necessary.
  • Set your default sales tax codes to S for GST and PST (taxable items) and E for non-taxable items.

2. Setting up sales tax items and codes along with coding individual customers, vendors, sales items, and expense items.

  • QuickBooks® uses Items to setup sales tax codes which automatically applies the correct taxes on your sales forms, your bill payments forms, and/or cheque payments.
  • Your initial Canadian sales tax codes and sales tax groups are setup for you. If there is a sales tax rate change, you may have to modify some of the items and codes.
  • It will handle provincial taxes as well. Setup your PST information through the Edit Vendor Window for Minister of Finance.
  • Setup your GST information through the Company Information window.

3. Collect sales tax through the sales forms - invoices and sales receipts.

  • The default code setup in Step 1 was S for both GST & PST. If you are an HST province, your default code will be HBC or HON or HNS ... you get the idea.
  • You can change the sales tax code down to the customer level so that a customer can be customized. For example, you can change the default tax code from S to G for GST only customers by clicking on your Customers icon and selecting the customer you want to edit or directly in the invoice window.

4. Capture your input tax credits through enter bills form and write cheque form.

  • The default code setup in Step 1 was S for both GST & PST. You can change this so that a vendor can be customized. For example, you can change the default tax code from S to Z for zero rated GST vendors.

5. Pay your sales tax to CRA using the Sales Tax Drop Down Menu. Click on File Sales Tax. Here is where you find the sales tax reporting features and sales tax payment cheque form (which is NOT the same as the Write Cheque form).

  • To find out what you need to report on form GST34-2 and how much you owe, run your sales tax liability reports.
  • It is very important to pay your liability through the sales tax window NOT write cheque. If you use write cheque, your liability reports will be incorrect.


As long as you are entering your data correctly, the QuickBooks® accounting system automatically tracks your sales taxes for you.

A payable or receivable is automatically setup when you use the File Sales Tax function ...

When you get your GST/HST refund from CRA, use Receive Payment under the customer drop down menu to record your entry to undeposited funds account and clear the receivable.

If you owe, use Pay Bills to clear the payable when you make your GST/HST payment to CRA.


To organized and accurate record keeping in your accounting system! ;-)



It's been great chatting with you about your books today!


See you on the next page ...
Your tutor Lake

Member of the QuickBooks ProAdvisor® Program. Screen shots © Intuit Inc. All rights reserved. QuickBooks and QuickBooks ProAdvisor are registered trademarks and/or registered service marks of Intuit Inc.

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