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Quickbooks 101 Question

dieselpig | Posted in Business on February 24, 2008 12:31pm

I’m pulling my hair out here.  I just got Quickbooks because I promised my accountant last year that I wouldn’t come in with another shoebox.  Day late and a dollar short…. once again.  So here I am trying to enter all of 2007’s business transactions into this thing. 

So what if I just buy something for my business?  Say I buy a power tool and put it on the credit card.  Do I have to create a bill for this item, and then pay the bill in a seperate movement?  Or do I just create a bill for the credit card and then pay that?  What if the items on the credit card belong in totally different categories?  Doesn’t paying the whole credit card bill in one shot mess things up?  What if I “slip up” being a sole proprietor and write a check or use a credit card for something not buisness related?   And how the heck do you account for expenses that are paid for in cash? 

Aaaaarrrrgggghhhhh.

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  1. User avater
    ToolFreakBlue | Feb 24, 2008 02:01am | #1

    My understanding:

    you would need to enter the receipt as a transaction and enter the bill payment as a transaction.

    When you buy something, anything, the items would be applied to a category (tools, material, office supplys, personal use, etc.) If you bought 20 2x4s and a circular saw, apply the wood to materials and the saw to tools in a SPLIT Transaction.

    How you paid for the items at the time of purchase would determine what Acount you enter them into.

    FOr every receipt you have an account involved and one or more categories.

    Then when you paid the credit card bill for the above transaction and others, the Account would be your checking account and the Category would be the credit card.

    Clear as mud?

    TFB (Bill)
    1. User avater
      dieselpig | Feb 24, 2008 03:32am | #7

      Thanks to everyone who has answered here for me... I really appreciate it.  I had to get away from it for awhile so I took my wife out for Mexican.  It's starting to make some sense now.  I'm going to get back to tomorrow some more and see if I can't get some more of this cranked out.

      I'm sure I'll be back with more questions, but I do appreciate the help.

      -BrianView Image

  2. User avater
    ToolFreakBlue | Feb 24, 2008 02:05am | #2

    Cash purchases would be treated like credit card purchase. Simply another source of funds. If you use your "own" cash vs petty cash. You can reimburse yourself from the business.

    At the end of he month you might have $120 racked up in the Cash account , then create an entry from the Checking account charged to Cash category paid to Brian, Cut yourself the $120 check and put in in your personal account.

    TFB (Bill)
  3. eleft | Feb 24, 2008 02:08am | #3

    Check your email

    al

  4. scrumseeker | Feb 24, 2008 02:22am | #4

    I enter them as credit card charges which asks for a category to assign the item.

    Payment is from business checking account to credit card account.

  5. User avater
    BillHartmann | Feb 24, 2008 02:34am | #5

    I have never used Quickbooks, but used Quicken alot, so I can't be specific about the how to make the entries.

    But a credit card purchase is to completely different transactions.

    One is enter the charge. the other is paying the CC bill.

    While, at least in Quicken, you can get by with just entering all of the information when paying the bill you are losing alot of fucntionality by not using the full features.

    1. You want the dates to accurately reflect the date of the transaction whether it is making a purchase with the CC or paying the CC bill. One reason is that if you buy something with a CC you can deduct it when it is charged not when the CC paid. (This assumes that you are on a cash basis, not accural). Also it helps if you need to know the date of a transaction. For example you need warantee work on a tool. If you entered the date when purchased then you can quickly look that up.

    2. It makes it easy to reconcile the two different transactions. The charge, and paying the bill.

    .
    .
    A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
  6. shellbuilder | Feb 24, 2008 03:06am | #6

    I always use one credit card for busines and one for pleasure. When hyou write the check for the dredit card just recite every charge and place it inthe category you want. tools, gas, construction material,  and even labor. I use temp services with a  credit card. Then you categorize it in to jobs. One could be Dieselpig business operations where overheads are charhged like tools, office paper, gas, lunches for your crews. if you have expenses for certain jobs like lumber, nails and labor, enetr a customer name. Dont forget the 1099 function when entering sub labor.

     

  7. bc | Feb 24, 2008 05:24am | #8

    If you can:

    access your bank account online (export the data to quicken). There is usually a tab for this somewhere. Then import. This might save you some time.

    For business we use Quickbooks online edition. Tthe accountant can view whats going on at any time.

    for personal I use quicken.



    Edited 2/24/2008 12:58 pm ET by bc

    1. Leegs | Feb 24, 2008 05:56pm | #9

      One of the posters wrote
      'When you write the check for the credit card just recite every charge and place it in the category you want. tools, gas, construction material, and even labor. I use temp services with a credit card. Then you categorize it in to jobs'While this is an okay way to do it, I would not recommend it for several reasons. One is that the timing of the expense is distorted - the transaction will have the date of your payment to the CC company, not the actual date. This causes reports to be incorrect - for example activity/expenses occurring in January shows up in the reports in February only after the bill is paid.
      The other problem is that you lose visibility as the actual vendor who provided the service. You will see lots of money paid to Visa as a vendor, instead of seeing amounts spent with XYZ Lumber company.Toolfreak's / Bill Hartmann's approach is preferable IMO. One thing about Bill's statement:
      'One reason is that if you buy something with a CC you can deduct it when it is charged not when the CC paid.(This assumes that you are on a cash basis, not accrual)'
      I think this might be reversed, and the benefit mentioned is relevant to accrual accounting, not cash.

      1. User avater
        BillHartmann | Feb 24, 2008 08:48pm | #13

        "'One reason is that if you buy something with a CC you can deduct it when it is charged not when the CC paid.(This assumes that you are on a cash basis, not accrual)'
        I think this might be reversed, and the benefit mentioned is relevant to accrual accounting, not cash."No, I am correct.Merchandice bought on a bank CC is treated, for tax purposes, as if you took out a loan and used the cash to make the purchase. The IRS does not care where the "cash" comes from.However, it is not if is is "store" credit or trade credit.Note that most "store" credit from a place like HD/Lowes is not store credit. Just a credit card with their name on it. It is owned and managed by a 3rd party.Places like HC and Lowes have several different 'system's" so it might not always be clear which is which.but something like a BankofAmerica MC is always a 3rd party creditor.And a charge at a lumber yard where they send out their own statmens would not be..
        .
        A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.

        1. Leegs | Feb 24, 2008 11:52pm | #14

          That makes sense, but it makes me wonder if the benefit regarding timing of when the expense is recognized would apply to both cash and accrual accounting. In the interests of furthering my understanding of this, below are three different scenarios and the relevant accounting treatment for cash vs accrual accounting. Am I on the right track:Scenario 1: Purchase an item with a cash or check
          Cash: relevant timing for tax purposes is the date of the purchase (I know this is obvious :)
          Accrual: SameScenario 2:Purchase an item from a store 'on account', (not with a credit card but with an account at the store) in January, receive the invoice in February, and pay the invoice in March.
          Cash: relevant timing would be March
          Accrual: timing would be FebruaryScenario 3:Purchase an item with a Credit Card in Jan, pay the CC bill in Feb
          Cash: you are saying that the timing would be Jan. Your explanation makes sense.
          Accrual: I would think its the same - timing would be Jan.thanks

          1. User avater
            BillHartmann | Feb 25, 2008 12:10am | #15

            I think that you are basically correct. But I am not sure sure about the timing of accural. I have only dealt with cash basis.For accural I think that it is when the expense (or income) is committed.For example you might might order some kitchen cabinets that are going to be shipped in 3 phases; bases, uppers and countertop.When the bases are finished it would be an accured expense although they are still in shipping and you have not received the bill yet.Likewise if you expect payment at phases, such as finishing the foundation when the forms are stripped then you would have accured the income although you have sent out the bill yet.But as I said I am not that familar with accural. I know that there are other people (and their spounses) on the forum that know more about this than I do. Maybe they will respond.BTW, for capital expenses they can be depreciated/expensed when put into service..
            .
            A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.

          2. Schelling | Feb 26, 2008 02:47am | #18

            In an accrual system you do not have an expense until you receive an invoice for it. In the case of your cabinets or foundation, it makes no difference what the actual completion of these are, it only matters whether you have been billed for it.

            A deposit on the cabinets or the concrete work is an expense even though no actual work has been completed.

            Likewise income is recognized when you issue the customer an invoice. Though there is an accounting income category for percentage of work completed (but not invoiced), I don't now that this is ever used in a tax situation. Usually we try to postpone the recognition of income.

          3. User avater
            dieselpig | Feb 26, 2008 02:33am | #17

            I appreciate all the help and advice.  I'm starting to get the hang of the basics.  I called my accountant today though.... he told me to stop the bus before it ends up parked on him.  :)   He said he'd rather come to my office after tax season and tutor me to get it set up so that it's on the right track.  Kinda like some of you guys suggested.   So I spent the rest of today making spread sheets in Excel for him (I don't really come in with a shoebox) like the past few years.  Makes me miss bending nails.View Image

          4. seeyou | Feb 26, 2008 03:11am | #19

            he told me to stop the bus before it ends up parked on him.  :)  

            Good advice. Fortunately, I started with QBP when I was a one man show and didn't have as complex of a system as I do now. That allowed me to learn QBP as I grew and still continue to grow.  It's a very robust program (there may be better one's - it's the only one I've used). I do my proposals with it and can consequently produce work orders for my subs, purchase orders for my suppliers, and invoices for my customers from that proposal without much more than a few clicks. But, I have to make those few clicks.

            Set up a dummy business besides your own real business and start punching buttons to see what happens. I'm still picking up some tricks after using it for 8-9 years now. http://grantlogan.net/

             

            Today we's learnin' about rawks. They's all kinds of rawks. These [picks up rock] is rawks which you throw. These here [throws rock at Rusty] is rawks that you get hit with.  E.Cuyler

          5. User avater
            dieselpig | Feb 26, 2008 05:15am | #21

            Good idea about the dummy company to learn my way around.  Wouldn't have thought of that myself.  Sounds like I've already got a dummy company.  While I'm at it I can pretend to make lots of money and not pay my bills.  :)View Image

          6. Dave45 | Feb 26, 2008 03:27am | #20

            Listen to the accountant on this - he knows what he's talking about. - lol

            I've been using QB Pro since I started my business in '04 and I've had to learn it on my own.  My accountant answered a few questions, but 99% of what I've learned hs been by trial and error.  I have a system that works (well, sort of), but one of my New Years Resolutions was to either:

            learn to really use this program, or

            hire a book keeper.

            I'm really leaning toward the book keeper idea.  Basically, I hate paperwork and one of the most important lessons I learned in my engineering management days was to get a pro to do stuff I couldn't (or didn't want to) do.

            Try to think of him as just another sub - lol

          7. User avater
            dieselpig | Feb 26, 2008 05:18am | #22

            I hate paperwork too.  I'm gonna set it up so that my accountant can access it from his office.  That way he can nose around and straighten things out from time to time.  I only do between 10 and 15 jobs a year so I really don't have a ton of paperwork.  Most of my jobs only involve supplying labor as well.  It should take much for me to get up and running smoothly with QB.  Then again.... I'm a framer.View Image

  8. gzajac | Feb 24, 2008 06:18pm | #10

    Dieselpig

    I had a lot of questions similiar to yours when I first started with computerized accounting. I speed read the instructions and entered a ton of information over a period of many weeks.

    I felt extremely proud when I showed up at my accountants with my bundle of paper. My accountant applauded my efforts, but he spent many hours remodeling my books. My accountant gets a lot more to remodel than I do.

    My best advice would be have your accountant set up your books for you in advance. Don't waste your time entering things twice, when you can be more productive in the field with that time.

    JLC in Providence usually has some Quickbook courses worth taking.

     

    Greg In Connecticut

    1. Snort | Feb 24, 2008 06:27pm | #11

      After I enter the amount in the check for the total cc payment, my accountant has me enter all the separate credit cards charges as a "split" in the check's category. Each item is categorized, then he can sort it out. Winterlude, Winterlude, my little daisy,

      Winterlude by the telephone wire,

      Winterlude, it's makin' me lazy,

      Come on, sit by the logs in the fire.

      The moonlight reflects from the window

      Where the snowflakes, they cover the sand.

      Come out tonight, ev'rything will be tight,

      Winterlude, this dude thinks you're grand.

    2. hmj | Feb 24, 2008 06:35pm | #12

      Ya,My accountant made a quite a few changes to my "organization". How I saw it and how she saw it were very different. If you get too far along in the entry and it is not the way your acct can use it, you are no better off than a box of receipts. Talk to your acct before you get to far along....

  9. hvtrimguy | Feb 25, 2008 01:57am | #16

    I use quick books pro and probably use it inefectively but when ever I enter a purchase I enter it as a transaction in one of several accounts. I keep an account for each credit card, one for checking, one for cash. Credit cards are under it's own menu item in the pulldown menus. When I make a purchase on by debit card in the checking account, I simply enter debit in the spot where the check number would be. If I make a personal purchase, I enter it as a check paid out to myself and log it as payroll withdrawal. I think quickbooks is easy enough to do things more than one way and still be accurate. good luck

    "it aint the work I mind,
    It's the feeling of falling further behind."

    Bozini Latini

    http://www.ingrainedwoodworking.com

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