QuickBooks 2020 All-in-One For Dummies

Stephen L. Nelson, MBA, CPA, provides accounting, business advisory, and tax planning and preparation services to small businesses. He has written more than 100 books explaining how to use computer software to manage personal and business finances.

• Introduction 1About This Book 1Foolish Assumptions 2Icons Used in This Book 3Beyond the Book 4Where to Go from Here 4Book 1: An Accounting Primer 7Chapter 1: Principles of Accounting 9The Purpose of Accounting 9The big picture 10Managers, investors, and entrepreneurs 10External creditors 11Government agencies 11Business form generation 12Reviewing the Common Financial Statements 12The income statement 12Balance sheet 15Statement of cash flows 19Other accounting statements 22Putting it all together 24The Philosophy of Accounting 24Revenue principle 24Expense principle 25Matching principle 25Cost principle 25Objectivity principle 26Continuity assumption 26Unit-of-measure assumption 26Separate-entity assumption 27A Few Words about Tax Accounting 27Chapter 2: Double-Entry Bookkeeping 29The Fiddle-Faddle Method of Accounting 30How Double-Entry Bookkeeping Works 32The accounting model 33Talking mechanics 35Almost a Real-Life Example 38Recording rent expense 39Recording wages expense 39Recording supplies expense 40Recording sales revenue 40Recording cost of goods sold 40Recording the payoff of accounts payable 41Recording the payoff of a loan 42Calculating account balance 42Using T-account analysis results 44A Few Words about How QuickBooks Works 46Chapter 3: Special Accounting Problems 49Working with Accounts Receivable 50Recording a sale 50Recording a payment 50Estimating bad-debt expense 51Removing uncollectible accounts receivable 52Recording Accounts Payable Transactions 53Recording a bill 53Paying a bill 54Taking some other accounts payable pointers 54Inventory Accounting 55Dealing with obsolete inventory 56Disposing of obsolete inventory 57Dealing with inventory shrinkage 58Accounting for Fixed Assets 59Purchasing a fixed asset 59Dealing with depreciation 60Disposing of a fixed asset 62Recognizing Liabilities 63Borrowing money 63Making a loan payment 64Accruing liabilities 65Closing Out Revenue and Expense Accounts 67The traditional close 68The QuickBooks close 69One More Thing 70Book 2: Getting Ready to Use QuickBooks 71Chapter 1: Setting Up QuickBooks 73Planning Your New QuickBooks System 73What accounting does 74What accounting systems do 74What QuickBooks does 74And now for the bad news 75Installing QuickBooks 76Dealing with the Presetup Jitters 77Preparing for setup 78Seeing what happens during setup 79Running the QuickBooks Setup Wizard 79Getting the big welcome 79Supplying company information 81Customizing QuickBooks 82Setting your start date 83Reviewing the suggested chart of accounts 84Adding your information to the company file 85Identifying the Starting Trial Balance 87A simple example to start 87A real-life example to finish 89Chapter 2: Loading the Master File Lists 93Setting Up the Chart of Accounts List 94Setting Up the Item List 99Working with the Price Level List 99Using Sales Tax Codes 100Setting Up a Payroll Item List 100Setting Up Classes 101Setting Up a Customer List 103Setting Up the Vendor List 107Setting Up a Fixed Assets List 111Setting Up a Price Level List 112Setting Up a Billing Rate Level List 112Setting Up Your Employees 113Setting Up an Other Names List 113Setting Up the Profile Lists 114Chapter 3: Fine-Tuning QuickBooks 117Accessing the Preferences Settings 118Setting the Accounting Preferences 120Using account numbers 120Setting general accounting options 121Setting the Bills Preferences 123Setting the Calendar Preferences 123Setting the Checking Preferences 123Changing the Desktop View 125Setting Finance Charge Calculation Rules 127Setting General Preferences 128Controlling Integrated Applications 130Controlling Inventory 131Controlling How Jobs and Estimates Work 132Dealing with Multiple Currencies 133Starting Integrated Payment Processing 134Controlling How Payroll Works 134Telling QuickBooks How Reminders Should Work 136Specifying Reports & Graphs Preferences 137Setting Sales & Customers Preferences 140Specifying How Sales Are Taxed 142Setting the Search Preferences 143Setting the Send Forms Preferences 143Fine-Tuning the Service Connection 144Controlling Spell Checking 145Controlling How 1099 Tax Reporting Works 146Setting Time & Expenses Preferences 147Book 3: Bookkeeping Chores 149Chapter 1: Invoicing Customers 151Choosing an Invoice Form 151Customizing an Invoice Form 152Choosing a template to customize 152Reviewing the Additional Customization options 152Moving on to Basic Customization 157Working with the Layout Designer tool 159Working with the web-based Forms Customization tool 162Invoicing a Customer 162Billing for Time 168Using a weekly time sheet 168Timing single activities 169Including billable time on an invoice 170Printing Invoices 172Emailing Invoices 173Recording Sales Receipts 174Recording Credit Memos 176Receiving Customer Payments 178Assessing Finance Charges 180Setting up finance-charge rules 180Calculating finance charges 181Using Odds and Ends on the Customers Menu 182Chapter 2: Paying Vendors 185Creating a Purchase Order 185Creating a real purchase order 186Using some purchase order tips and tricks 189Recording the Receipt of Items 189Simultaneously Recording the Receipt and the Bill 192Entering a Bill 193If you haven’t previously recorded an item receipt 194If you have previously recorded an item receipt 195Paying Bills 197Reviewing the Other Vendor Menu Commands 201Vendor Center 201Sales Tax menu commands 202Inventory Activities menu commands 203Print/E-file 1099s 203Item List 204Chapter 3: Tracking Inventory and Items 205Looking at Your Item List 206Using the Item Code column 206Using the Item List window 207Using inventory reports 208Adding Items to the Item List 208Adding an item: Basic steps 209Adding a service item 210Adding an inventory part 211Adding a noninventory part 213Adding an other-charge item 215Adding a subtotal item 216Adding a group item 216Adding a discount item 217Adding a payment item 218Adding a sales tax item 219Setting up a sales tax group 219Adding custom fields to items 220Editing Items 222Adjusting physical counts and inventory values 222Adjusting prices and price levels 225Using the Change Item Prices command 225Using price levels 226Enabling advanced pricing 228Managing Inventory in a Manufacturing Firm 229Handling manufactured inventory the simple way 229Performing inventory accounting in QuickBooks 230Managing multiple inventory locations 233Chapter 4: Managing Cash and Bank Accounts 235Writing Checks 236Recording and printing a check 236Customizing the check form 241Making Bank Deposits 243Transferring Money between Bank Accounts 246Working with the Register 247Recording register transactions 248Using Register window commands and buttons 251Using Edit Menu Commands 254Reconciling the Bank Account 258Reviewing the Other Banking Commands 262Order Checks & Envelopes command 263Enter Credit Card Charges command 263Bank Feeds command 264Loan Manager command 265Other Names list 265Chapter 5: Paying Employees 267Setting Up Basic Payroll 268Signing up for a payroll service 269Setting up employees 269Setting up year-to-date amounts 273Checking your payroll setup data 274Scheduling Payroll Runs 274Paying Employees 274Editing and Voiding Paychecks 276Paying Payroll Liabilities 277Book 4: Accounting Chores 279Chapter 1: For Accountants Only 281Working with QuickBooks Journal Entries 281Recording a journal entry 282Reversing a journal entry 283Editing journal entries 284Updating Company Information 284Working with Memorized Transactions 284Reviewing the Accountant & Taxes Reports 285Creating an Accountant’s Copy of the QuickBooks Data File 287Using an accountant’s copy 292Reusing an accountant’s copy 292Exporting client changes 292Importing accountant’s changes 293Canceling accountant’s changes 294Troubleshooting accountant’s copy transfers 294Using the Client Data Review Commands 295Chapter 2: Preparing Financial Statements and Reports 297Some Wise Words Up Front 298Producing a Report 298Working with the Report Window 299Working with Report window buttons 299Using the Report window boxes 305Modifying a Report 308Using the Display tab 308Using the Filters tab 310Using the Header/Footer tab 312Formatting fonts and numbers 312Processing Multiple Reports 314A Few Words about Document Retention 315Chapter 3: Preparing a Budget 319Reviewing Common Budgeting Tactics 319Top-line budgeting 320Zero-based budgeting 320Benchmarking 321Putting it all together 322Taking a Practical Approach to Budgeting 322Using the Set Up Budgets Window 323Creating a new budget 323Working with an existing budget 326Managing with a Budget 327Some Wrap-Up Comments on Budgeting 329Chapter 4: Using Activity-Based Costing 331Reviewing Traditional Overhead Allocation 332Understanding How ABC Works 334The ABC product-line income statement 334ABC in a small firm 337Implementing a Simple ABC System 339Seeing How QuickBooks Supports ABC 340Turning On Class Tracking 341Using Classes for ABC 342Setting up your classes 342Classifying revenue amounts 342Classifying expense amounts 343After-the-fact classifications 343Producing ABC reports 345Chapter 5: Setting Up Project and Job Costing Systems 347Setting Up a QuickBooks Job 347Tracking Job or Project Costs 350Job Cost Reporting 353Using Job Estimates 354Progress Billing 356Book 5: Financial Management 359Chapter 1: Ratio Analysis 361Some Caveats about Ratio Analysis 362Liquidity Ratios 363Current ratio 363Acid-test ratio 364Leverage Ratios 365Debt ratio 365Debt equity ratio 366Times interest earned ratio 366Fixed-charges coverage ratio 367Activity Ratios 369Inventory turnover ratio 370Days of inventory ratio 370Average collection period ratio 371Fixed-asset turnover ratio 372Total-assets turnover ratio 373Profitability Ratios 373Gross margin percentage 373Operating income/sales 374Profit margin percentage 375Return on assets 375Return on equity 376Chapter 2: Economic Value Added Analysis 379Introducing the Logic of EVA 379Seeing EVA in Action 380An example of EVA 382Another example of EVA 383Reviewing Some Important Points about EVA 383Using EVA When Your Business Has Debt 385The first example of the modified EVA formula 385Another EVA with debt example 387Presenting Two Final Pointers 389And Now, a Word to My Critics 391Chapter 3: Capital Budgeting in a Nutshell 393Introducing the Theory of Capital Budgeting 393The big thing is the return 394One little thing is maturity 394Another little thing is risk 395The bottom line 395Calculating the Rate of Return on Capital 396Calculating the investment amount 397Estimating the net cash flows 397Calculating the return 402Measuring Liquidity 406Thinking about Risk 406What Does All of This Have to Do with QuickBooks? 408Book 6: Business Plans 409Chapter 1: Profit-Volume-Cost Analysis 411Seeing How Profit-Volume-Cost Analysis Works 412Calculating Break-Even Points 414Using Real QuickBooks Data for Profit-Volume-Cost Analysis 416Sales revenue 416Gross margin percentage 416Fixed costs 418Recognizing the Downside of the Profit-Volume-Cost Model 418Using the Profit-Volume-Cost Analysis Workbook 420Collecting your inputs 420Understanding the break-even analysis 423Understanding the profit-volume-cost forecast 424Looking at the profit-volume-cost charts 426Chapter 2: Creating a Business Plan Forecast 431Reviewing Financial Statements and Ratios 432Using the Business Plan Workbook 433Understanding the Workbook Calculations 440Forecasting inputs 440Balance Sheet 441Common Size Balance Sheet 448Income Statement 450Common Size Income Statement 454Cash Flow Statement 454Financial Ratios Table 461Customizing the Starter Workbook 467Changing the number of periods 467Performing ratio analysis on existing financial statements 467Calculating taxes for a current net loss before taxes 468Combining this workbook with other workbooks 468Chapter 3: Writing a Business Plan 469What the Term “Business Plan” Means 469A Few Words about Strategic Plans 470Cost strategies 470Differentiated products and services strategies 471Focus strategies 471Look, Ma: No Strategy 471Two comments about tactics 472Six final strategy pointers 473A White-Paper Business Plan 474A New-Venture Plan 477Is the new venture’s product or service feasible? 477Does the market want the product or service? 478Can the product or service be profitably sold? 478Is the return on the venture adequate for prospective investors? 479Can existing management run the business? 480Some final thoughts 480Book 7: Care and Maintenance 483Chapter 1: Administering QuickBooks 485Keeping Your Data Confidential 485Using Windows security 486Using QuickBooks security 486Using QuickBooks in a Multiuser Environment 487Setting up additional QuickBooks users 488Changing user rights in Enterprise Solutions 494Changing user rights in QuickBooks Pro and Premier 495Using Audit Trails 496Enabling Simultaneous Multiuser Access 497Maintaining Good Accounting Controls 498Chapter 2: Protecting Your Data 503Backing Up the QuickBooks Data File 503Backing-up basics 504What about online backup? 507Some backup tactics 508Restoring a QuickBooks Data File 509Condensing the QuickBooks Company Files 513Cleanup basics 514Some cleanup and archiving strategies 518Chapter 3: Troubleshooting 521Using the QuickBooks Help File and This Book 521Browsing Intuit’s Product-Support Website 523Checking Another Vendor’s Product-Support Website 525Tapping into Intuit’s Online and Expert Communities 525When All Else Fails 526Book 8: Appendixes 527Appendix A: A Crash Course in Excel 529Starting Excel 529Stopping Excel 530Explaining Excel’s Workbooks 530Putting Text, Numbers, and Formulas in Cells 531Writing Formulas 532Scrolling through Big Workbooks 533Copying and Cutting Cell Contents 534Copying cell contents 534Moving cell contents 535Moving and copying formulas 536Formatting Cell Contents 537Recognizing That Functions Are Simply Formulas 538Saving and Opening Workbooks 541Saving a workbook 541Opening a workbook 542Printing Excel Workbooks 543One Other Thing to Know 544Appendix B: Government Web Resources for Businesses 545Bureau of Economic Analysis 545Finding information at the BEA website 546Downloading a BEA publication 546Uncompressing a BEA publication 547Using a BEA publication 548Bureau of Labor Statistics 548Finding information at the BLS website 549Using BLS information 550Census Bureau 552Finding information at the Census Bureau website 552Using the Census Bureau’s publications 554Using the Census Bureau search engine 554Using the Census Bureau Subjects index 555Securities and Exchange Commission 555Finding information through EDGAR 556Searching the EDGAR database 556Federal Reserve 557Finding information at the Federal Reserve website 558Using the Federal Reserve website’s information 559Government Publishing Office 559Information available at the GPO website 559Searching the GPO database 560Internal Revenue Service 560Appendix C: Glossary of Accounting and Financial Terms 563Index 593