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Designing your accounting plan
Intuit built QuickBooks
with diverse capabilities for diverse
operations. Small businesses run in an
endless variety of endeavors, managed by a
wide spectrum of people, whose common
denominator is that they are not employed by
another person. QuickBooks performs a
broad set of functions, and you will find
most that you need. No program is all
things to all people. QuickBooks will
do all or most of what you want, but you may
find you want functions that it does not have.
Success will be based on
understanding QuickBooks’ capabilities and
its limitations. Then you can build
your accounting plan for the best use of its
features. The table lists summary
descriptions of the major working parts, each
of which is the subject of a page or more of
text in its respective chapter.
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Feature
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Capabilities
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Side Effects
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Balance
Sheet Accounts
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List assets, liabilities, and equity
Summarized
in balance sheet (statement
of financial position.)
Detailed in some transaction reports.
Retained
Earnings is included, but has
special functions, explained
in Accounting chapter.
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Not
available in P&L and
other summarizing
reports.
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Income and
Expense Accounts
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Record dynamics of business.
Transactions
are summarized in P&L
Report and in Custom Reports,
which are modified P&L
Reports.
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Summarized
for one year only. Results
for prior years are in
Retained Earnings.
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Jobs
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Jobs are
subordinate to customers;
usually mentioned as
Customer:Job.
New Job
gets copy of current customer
information, which stays as
it is copied in, unless
edited within job.
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Similar to a separate customer.
Payment
applies to one job only, but
if a payment is for multiple
jobs, a workaround can be
devised.
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Estimates
(QuickBooks Pro)
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Quote a
price to a customer, without
recording and income
Translate to one or more invoices
Progress
invoicing from estimates
(beginning QuickBooks Pro 5)
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Only one (1) estimate per Customer:Job.
Additional
estimates require additional
jobs.
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Classes
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Additional labels on income and expense transactions
Useful in
some reports for sorting and
selection of transactions to
be included.
Building
contractor could have expense
accounts for framing,
electrical, etc., and classes
for different job sites.
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Won’t
stick to transfers between
balance sheet accounts. See below.
Screen
width may limit use,
particularly in
Preview Payroll.
Turn on
Use class tracking in
Preferences
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Items
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Started as invoice line items
Connects
sales transaction to income
account
Declares action to customer
Payables
account uses items for
purchases
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Does not include Payroll Items
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Payroll Items
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Pay checks
are generated as if the
employee generated an invoice
to the employer, using
payroll items.
Payroll
items put in earnings, take
out deductions, etc.
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Not included among “Items” on reports
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Inventory
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Single
asset account for keeping
inventory
Divided into items
Every unit
of an item is considered
identical
Average price tracked
Income account for sales
Cost of Goods Sold account
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Only average pricing may be used.
Condense Data
does not delete old inventory transactions.
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Balance
Sheet Report
(Statement
of Financial Position)
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Summarizes
all of balance sheet
accounts, as of a certain
date.
Earnings
(or Current Earnings) are
included, as are Prior
Earnings (previous fiscal
years.)
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Profit and
Loss Report
(Income statement)
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Summarizes
all income and expense
transactions for current (or
designated) fiscal year.
Custom
Reports are essentially
P&L reports, set up for
modification.
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Views only one year.
Prior
years are summarized in
Retained Earnings.
Figures in rows and columns
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Transaction
Reports
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List transactions in detail
Can include any accounts
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Full detail, not summarized
Figures in
one basic column, with
subtotals and totals offset
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Transaction
Detail Reports
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List transactions in detail
Can include any accounts
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Cash Flow Reports
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Not
available in QuickBooks, but
workarounds have been devised.
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Time Accounting
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In QuickBooks Pro
Employee
time records for paying
employees or for billing
customers
Vendor time recording
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QuickBooks
Pro 4 and earlier can only
record time worked, can’t
accumulate time.
“Service
Items” must be used to bill
time.
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Time Accumulation
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QuickBooks Pro 5 Timer
Separate from QuickBooks Pro
Run in
several computers, one per
employee
Easy to use
Transfer
data to QuickBooks Pro 5, for
pay and billing
Include
income and expense accounts,
through service items
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Coordination
between computers requires
planning and organization
Understand it or make a mess
One
computer accumulates time on
only one activity at a time.
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That is the whole book, in one table! There is no way it can say all that you need. Most users will skip most
of the entries. One or two features will probably send you off to the relevant chapters, for details that will make
a major difference to your business.
Classes
are useful when income or expenses must be sliced in two different directions, such as by the type of
expense and by product line. A farmer might might set up expense accounts for plowing, seed, chemicals,
harvesting and more. Classes could be set up for wheat, alfafa, barley, or whatever. Then reports could detail
costs by activity or by crop. Costs could also be summarized in a report with columns for expense accounts,
and the various crops in rows.
Classes stick only to income or expense transactions. They do not apply to any transactions in balance sheet
accounts. For example, classes will not work with inventory items. These are tracked by transactions in
balance sheet asset accounts. When an item is sold, classes can be used on the related income and expense
transactions.
There are the tools, complete with caution labels. You, and your accountant, can set up a plan to put
QuickBooks to work, supporting the prosperity of your business.
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