| Introduction | | | | be $0.00) For a more accurate picture of your |
| Adding accounts to Quickbooks is very easy, the | | | | business' financial situation, and to ensure an |
| warning here is that it is so easy that making a | | | | accurate reconciliation of your bank account, enter |
| mistake either in placement of the account or the | | | | the opening balance, which will be the ending |
| identification of where to put it may be a little | | | | balance of the previous month. If this account |
| deceiving. It is always advisable that you consult a | | | | was used for any business transactions prior to |
| professional to help you as once you add these | | | | the date you install Quickbooks, it would be a |
| accounts and begin using them, it can be a long | | | | good idea to have a Professional help you enter |
| procedure to correct mistakes. And because each | | | | these transactions accurately. |
| business is unique in it's accounts, it may take a | | | | When is a bank account NOT a bank account? If |
| little creative maneuvering to best fit your type | | | | your business is using petty cash system, (to |
| of business. Having said that, let's look at your | | | | make change for customers, etc) it is best to set |
| different options in adding accounts. | | | | up Petty Cash as a separate bank account so |
| I. Income Accounts | | | | that you can transfer funds from Petty Cash to |
| There may be several ways that your business | | | | Undeposited Funds when necessary. |
| receives income. (this is where the help of a | | | | What if you have a customer with whom you |
| ProAdvisor comes in) For example if you are a | | | | have an agreement to trade your services |
| service industry business, let's use a lawn care | | | | products with theirs? In this case, you can create |
| company as an example. The overall easy way to | | | | a bank account called Trade or Barter and deposit |
| handle this is to enter ALL income into one | | | | the value of your products/services to offset |
| account. However, this doesn't help you as a | | | | those of your customers. Neither one are actually |
| business owner decide which of your services is | | | | bank accounts, but they make it easy to keep |
| more profitable than another. You may not care | | | | track of those 'creative' transactions. |
| about that, but it only takes another few minutes | | | | V. Loan |
| of effort to get it right, so let's make sure we do | | | | A Loan account keeps track of the amount you |
| so. Create an account for income for lawn | | | | owe on loans from those who you owe money |
| maintenance, another for landscape design and | | | | to. This is NOT a long term liability account, this is |
| yet another for pest control or another similar | | | | money lent to the business by others and which |
| service. Create a parent account named Lawn | | | | you intend on paying back within the year. You |
| Services and a sub account for each of the areas | | | | have use of the funds, which is an asset, and you |
| you earn income in. Upon entering these | | | | owe the loaner, which is a liability. If you need to |
| sub-accounts you will see a box labeled | | | | enter a loan for a vehicle, building, etc, it needs to |
| sub-account of, check that box and type Lawn | | | | be in the Long Term Liability accounts. |
| Services. The description, note and tax-line | | | | VI. Credit Card Accounts |
| mapping boxes are optional, for the best results | | | | You must add a credit card to your account list |
| however, at least utilize the tax-line mapping and | | | | to gain access to the Enter Credit Card Charges |
| an income account will more than likely fit the first | | | | feature on the Quickbooks home menu. Credit |
| category listed which is Income: Gross Sales or | | | | Cards can be used to pay for expenses, items or |
| Services. Consult your tax professional for more | | | | bills. When using Credit Cards to pay bills, one |
| help with this area. | | | | common mistake business owners make is not |
| II. Expense Accounts | | | | choosing the correct account to pay the bill out |
| The expense window looks identical to the income | | | | of. If you are using more than one Credit Card, |
| in every way. I highly recommend a wise use of | | | | take it slow and make sure that your payments |
| sub-accounts in the expense accounts area as | | | | and credits to the account are appropriately |
| well. For example, grouping your electrical, water | | | | applied or reconciliations will be a nightmare and a |
| and phone bills under utilities is what a lot of | | | | half. |
| businesses do, however, what happens when you | | | | You are given the option of being able to enter |
| add a cell phone? | | | | the account number, expiration date and more as |
| I would create a parent account for utilities and | | | | you are entering the card for the first time. As |
| sub-accounts for power, water, phone, and other | | | | long as you don't have a situation where |
| utilities. I would also suggest doing the same with | | | | innumerable people have access to your |
| advertising expenses, having one parent account | | | | Quickbooks files, it is perfectly safe to enter this |
| for advertising and sub-accounts for signs, yellow | | | | information, if you do have that situation, consider |
| pages ads, internet ads, and more so you can | | | | hiring someone else or restricting access to |
| keep more careful track of your cash flow. | | | | others on your Quickbooks network. |
| When you get to payroll expenses, you are | | | | VII. Equity Accounts |
| definitely going to need to use sub-accounts | | | | An equity account includes owner's draw, owner's |
| appropriately and create sub-accounts for FICA | | | | contributions, etc (these categories change names |
| payable - Company, Social Security Payable - | | | | but not function, depending on the legal formation |
| Company, Worker's Comp, etc. If you do not use | | | | of the company). This is the money the business |
| Intuit's Payroll services, that's okay, but it | | | | owner invests in order to begin the company and |
| increases the risk of mistakes in transmission of | | | | the subsequent money they have to draw from |
| information from the payroll companies' to the | | | | in order to keep the company running. The |
| Quickbooks files. | | | | retained earnings account is an equity account |
| III. Fixed Assets | | | | that is added by Quickbooks at year end when |
| There is a step by step procedure in entering | | | | the revenue and expenses are calculated. The |
| fixed assets into Quickbooks and a detailed | | | | description that is given this account by |
| explanation of how to categorize your fixed | | | | Quickbooks is "undistributed earnings of the |
| assets. Fixed Assets include buildings, land, | | | | company". In the case of a company just |
| Machinery, vehicles and Accumulated Depreciation. | | | | beginning to use Quickbooks, the account can be |
| The only difference in the Fixed Assets window is | | | | created manually for previous years balances in |
| that the Tax-Line Mapping is automatically entered | | | | another accounting software system by creating |
| for you. | | | | the account manually and entering in the opening |
| IV. Bank Accounts | | | | balance from the previous year. |
| In Quickbooks a Bank Account isn't always | | | | The rest of the accounts are going to be |
| necessarily an actual bank account. When entering | | | | examined in a separate article where we will |
| a regular bank account whether it's checking or | | | | discuss common mistakes made in entering these |
| savings, Quickbooks will ask for the opening | | | | accounts and the occasional symbiotic relationship |
| balance as of a certain date. (If this is a new | | | | these accounts have with one another. |
| account, the opening balance isn't necessary, it will | | | | |