QuickBooks 2021 All-in-One For Dummies

Stephen L. Nelson, MBA, CPA, holds an MS in Taxation and provides accounting, business advisory, and tax planning and preparation services to small businesses as a CPA. He has written more than 100 books on computers and financial management.

Introduction 1

About This Book 1

Foolish Assumptions 2

Icons Used in This Book 3

Beyond the Book 4

Where to Go from Here 4

Book 1: An Accounting Primer 7

Chapter 1: Principles of Accounting 9

The Purpose of Accounting 10

The big picture 10

Managers, investors, and entrepreneurs 10

External creditors 11

Government agencies 11

Business form generation 12

Reviewing the Common Financial Statements 12

The income statement 13

Balance sheet 16

Statement of cash flows 19

Other accounting statements 22

Putting it all together 23

The Philosophy of Accounting 25

Revenue principle 25

Expense principle 26

Matching principle 26

Cost principle 26

Objectivity principle 27

Continuity assumption 27

Unit-of-measure assumption 27

Separate-entity assumption 28

A Few Words about Tax Accounting 28

Chapter 2: Double-Entry Bookkeeping 29

The Fiddle-Faddle Method of Accounting 30

How Double-Entry Bookkeeping Works 33

The accounting model 33

Talking mechanics 35

Almost a Real-Life Example 38

Recording rent expense 39

Recording wages expense 39

Recording supplies expense 40

Recording sales revenue 40

Recording cost of goods sold 41

Recording the payoff of accounts payable 41

Recording the payoff of a loan 42

Calculating account balance 42

Using T-account analysis results 44

A Few Words about How QuickBooks Works 46

Chapter 3: Special Accounting Problems 49

Working with Accounts Receivable 50

Recording a sale 50

Recording a payment 50

Estimating bad-debt expense 51

Removing uncollectible accounts receivable 52

Recording Accounts Payable Transactions 53

Recording a bill 54

Paying a bill 54

Taking some other accounts payable pointers 55

Inventory Accounting 56

Dealing with obsolete inventory 56

Disposing of obsolete inventory 57

Dealing with inventory shrinkage 58

Accounting for Fixed Assets 60

Purchasing a fixed asset 60

Dealing with depreciation 60

Disposing of a fixed asset 61

Recognizing Liabilities 63

Borrowing money 64

Making a loan payment 64

Accruing liabilities 65

Closing Out Revenue and Expense Accounts 68

The traditional close 68

The QuickBooks close 70

One More Thing 71

Book 2: Getting Ready To Use QuickBooks 73

Chapter 1: Setting Up QuickBooks 75

Planning Your New QuickBooks System 75

What accounting does 75

What accounting systems do 76

What QuickBooks does 76

And now for the bad news 77

Installing QuickBooks 78

Dealing with the Presetup Jitters 79

Preparing for setup 79

Seeing what happens during setup 80

Running the QuickBooks Setup Wizard 81

Getting the big welcome 81

Supplying company information 82

Customizing QuickBooks 83

Setting your start date 84

Reviewing the suggested chart of accounts 86

Adding your information to the company file 87

Identifying the Starting Trial Balance 89

A simple example to start 89

A real-life example to finish 91

Chapter 2: Loading the Master File Lists 93

Setting Up the Chart of Accounts List 94

Setting Up the Item List 98

Working with the Price Level List 99

Using Sales Tax Codes 99

Setting Up a Payroll Item List 100

Setting Up Classes 101

Setting Up a Customer List 103

Setting Up the Vendor List 107

Setting Up a Fixed Assets List 110

Setting Up a Price Level List 112

Setting Up a Billing Rate Level List 112

Setting Up Your Employees 113

Setting Up an Other Names List 113

Setting Up the Profile Lists 113

Chapter 3: Fine-Tuning QuickBooks 115

Accessing the Preferences Settings 116

Setting the Accounting Preferences 117

Using account numbers 118

Setting general accounting options 119

Setting the Bills Preferences 121

Setting the Calendar Preferences 121

Setting the Checking Preferences 121

Changing the Desktop View 123

Setting Finance Charge Calculation Rules 125

Setting General Preferences 126

Controlling Integrated Applications 128

Controlling Inventory 129

Controlling How Jobs and Estimates Work 130

Dealing with Multiple Currencies 131

Starting Integrated Payment Processing 132

Controlling How Payroll Works 132

Telling QuickBooks How Reminders Should Work 134

Specifying Reports & Graphs Preferences 135

Setting Sales & Customers Preferences 138

Specifying How Sales Are Taxed 140

Setting the Search Preferences 141

Setting the Send Forms Preferences 141

Fine-Tuning the Service Connection 142

Controlling Spell Checking 143

Controlling How 1099 Tax Reporting Works 144

Setting Time & Expenses Preferences 145

Book 3: Bookkeeping Chores 147

Chapter 1: Invoicing Customers 149

Choosing an Invoice Form 149

Customizing an Invoice Form 150

Choosing a template to customize 150

Reviewing the Additional Customization options 150

Moving on to Basic Customization 155

Working with the Layout Designer tool 157

Working with the web-based Forms Customization tool 160

Invoicing a Customer 160

Billing for Time 166

Using a weekly time sheet 166

Timing single activities 167

Including billable time on an invoice 168

Printing Invoices 170

Emailing Invoices 171

Recording Sales Receipts 172

Recording Credit Memos 174

Receiving Customer Payments 176

Assessing Finance Charges 179

Setting up finance-charge rules 179

Calculating finance charges 180

Using Odds and Ends on the Customers Menu 181

Chapter 2: Paying Vendors 183

Creating a Purchase Order 183

Creating a real purchase order 184

Using some purchase order tips and tricks 187

Recording the Receipt of Items 187

Simultaneously Recording the Receipt and the Bill 191

Entering a Bill 192

If you haven’t previously recorded an item receipt 192

If you have previously recorded an item receipt 194

Paying Bills 196

Reviewing the Other Vendor Menu Commands 199

Vendor Center 199

Sales Tax menu commands 200

Inventory Activities menu commands 201

Print/E-file 1099s 201

Item List 202

Chapter 3: Tracking Inventory and Items 203

Looking at Your Item List 204

Using the Item Code column 204

Using the Item List window 205

Using inventory reports 206

Adding Items to the Item List 206

Adding an item: Basic steps 207

Adding a service item 208

Adding an inventory part 209

Adding a noninventory part 211

Adding an other-charge item 212

Adding a subtotal item 213

Adding a group item 214

Adding a discount item 215

Adding a payment item 216

Adding a sales tax item 217

Setting up a sales tax group 217

Adding custom fields to items 218

Editing Items 220

Adjusting physical counts and inventory values 220

Adjusting prices and price levels 223

Using the Change Item Prices command 223

Using price levels 224

Enabling advanced pricing 226

Managing Inventory in a Manufacturing Firm 227

Handling manufactured inventory the simple way 227

Performing inventory accounting in QuickBooks 228

Managing multiple inventory locations 231

Chapter 4: Managing Cash and Bank Accounts 233

Writing Checks 234

Recording and printing a check 234

Customizing the check form 239

Making Bank Deposits 241

Transferring Money between Bank Accounts 244

Working with the Register 245

Recording register transactions 246

Using Register window commands and buttons 249

Using Edit Menu Commands 252

Reconciling the Bank Account 256

Reviewing the Other Banking Commands 260

Order Checks & Envelopes command 260

Enter Credit Card Charges command 260

Bank Feeds command 261

Loan Manager command 262

Other Names list 262

Chapter 5: Paying Employees 263

Setting Up Basic Payroll 264

Signing up for a payroll service 265

Setting up employees 265

Setting up year-to-date amounts 269

Checking your payroll setup data 270

Scheduling Payroll Runs 270

Paying Employees 270

Editing and Voiding Paychecks 272

Paying Payroll Liabilities 273

Book 4: Accounting Chores 275

Chapter 1: For Accountants Only 277

Working with QuickBooks Journal Entries 277

Recording a journal entry 278

Reversing a journal entry 279

Editing journal entries 280

Updating Company Information 280

Working with Memorized Transactions 280

Reviewing the Accountant & Taxes Reports 281

Creating an Accountant’s Copy of the QuickBooks Data File 283

Using an accountant’s copy 288

Reusing an accountant’s copy 288

Exporting client changes 288

Importing accountant’s changes 289

Canceling accountant’s changes 290

Troubleshooting accountant’s copy transfers 291

Using the Client Data Review Commands 291

Chapter 2: Preparing Financial Statements and Reports 293

Some Wise Words Up Front 293

Producing a Report 294

Working with the Report Window 295

Working with Report window buttons 295

Using the Report window boxes 302

Modifying a Report 304

Using the Display tab 304

Using the Filters tab 306

Using the Header/Footer tab 308

Formatting fonts and numbers 309

Processing Multiple Reports 311

A Few Words about Document Retention 312

Chapter 3: Preparing a Budget 315

Reviewing Common Budgeting Tactics 315

Top-line budgeting 316

Zero-based budgeting 316

Benchmarking 317

Putting it all together 318

Taking a Practical Approach to Budgeting 319

Using the Set Up Budgets Window 319

Creating a new budget 319

Working with an existing budget 321

Managing with a Budget 323

Some Wrap-Up Comments on Budgeting 325

Chapter 4: Using Activity-Based Costing 327

Reviewing Traditional Overhead Allocation 328

Understanding How ABC Works 330

The ABC product-line income statement 330

ABC in a small firm 334

Implementing a Simple ABC System 335

Seeing How QuickBooks Supports ABC 337

Turning On Class Tracking 337

Using Classes for ABC 338

Setting up your classes 338

Classifying revenue amounts 339

Classifying expense amounts 339

After-the-fact classifications 341

Producing ABC reports 342

Chapter 5: Setting Up Project and Job Costing Systems 343

Setting Up a QuickBooks Job 343

Tracking Job or Project Costs 346

Job Cost Reporting 350

Using Job Estimates 350

Progress Billing 352

Book 5: Financial Management 355

Chapter 1: Ratio Analysis 357

Some Caveats about Ratio Analysis 358

Liquidity Ratios 359

Current ratio 359

Acid-test ratio 360

Leverage Ratios 361

Debt ratio 361

Debt equity ratio 362

Times interest earned ratio 363

Fixed-charges coverage ratio 364

Activity Ratios 365

Inventory turnover ratio 366

Days of inventory ratio 367

Average collection period ratio 367

Fixed-asset turnover ratio 368

Total-assets turnover ratio 369

Profitability Ratios 369

Gross margin percentage 370

Operating income/sales 370

Profit margin percentage 371

Return on assets 371

Return on equity 372

Chapter 2: Economic Value Added Analysis 375

Introducing the Logic of EVA 375

Seeing EVA in Action 376

An example of EVA 378

Another example of EVA 378

Reviewing Some Important Points about EVA 379

Using EVA When Your Business Has Debt 381

The first example of the modified EVA formula 381

Another EVA with debt example 383

Presenting Two Final Pointers 385

And Now, a Word to My Critics 386

Chapter 3: Capital Budgeting in a Nutshell 389

Introducing the Theory of Capital Budgeting 389

The big thing is the return 390

One little thing is maturity 390

Another little thing is risk 391

The bottom line 391

Calculating the Rate of Return on Capital 392

Calculating the investment amount 393

Estimating the net cash flows 393

Calculating the return 397

Measuring Liquidity 402

Thinking about Risk 402

What Does All of This Have to Do with QuickBooks? 404

Book 6: Business Plans 405

Chapter 1: Profit-Volume-Cost Analysis 407

Seeing How Profit-Volume-Cost Analysis Works 408

Calculating Break-Even Points 410

Using Real QuickBooks Data for Profit-Volume-Cost Analysis 412

Sales revenue 412

Gross margin percentage 412

Fixed costs 414

Recognizing the Downside of the Profit-Volume-Cost Model 414

Using the Profit-Volume-Cost Analysis Workbook 416

Collecting your inputs 416

Understanding the Break-Even Analysis Forecast 419

Understanding the Profit-Volume Forecast 421

Looking at the profit-volume-cost charts 422

Chapter 2: Creating a Business Plan Forecast 427

Reviewing Financial Statements and Ratios 428

Using the Business Plan Workbook 429

Understanding the Workbook Calculations 436

Forecasting inputs 437

Balance Sheet 437

Common Size Balance Sheet 445

Income Statement 446

Common Size Income Statement 450

Cash Flow Statement 451

Financial Ratios Table 457

Customizing the Starter Workbook 463

Changing the number of periods 463

Performing ratio analysis on existing financial statements 463

Calculating taxes for a current net loss before taxes 464

Combining this workbook with other workbooks 464

Chapter 3: Writing a Business Plan 465

What the Term “Business Plan” Means 465

A Few Words about Strategic Plans 466

Cost strategies 466

Differentiated products and services strategies 467

Focus strategies 467

Look, Ma: No Strategy 468

Two comments about tactics 469

Six final strategy pointers 469

A White-Paper Business Plan 470

A New-Venture Plan 473

Is the new venture’s product or service feasible? 473

Does the market want the product or service? 474

Can the product or service be profitably sold? 475

Is the return on the venture adequate for prospective investors? 475

Can existing management run the business? 476

Some final thoughts 477

Book 7: Care and Maintenance 479

Chapter 1: Administering QuickBooks 481

Keeping Your Data Confidential 481

Using Windows security 482

Using QuickBooks security 482

Using QuickBooks in a Multiuser Environment 483

Setting up additional QuickBooks users 484

Changing user rights in Enterprise Solutions 490

Changing user rights in QuickBooks Pro and Premier 491

Using Audit Trails 493

Enabling Simultaneous Multiuser Access 494

Maintaining Good Accounting Controls 495

Chapter 2: Protecting Your Data 499

Backing Up the QuickBooks Data File 499

Backing-up basics 500

What about online backup? 503

Some backup tactics 504

Restoring a QuickBooks Data File 505

Condensing the QuickBooks Company Files 509

Cleanup basics 510

Some cleanup and archiving strategies 515

Chapter 3: Troubleshooting 517

Using the QuickBooks Help File and This Book 517

Browsing Intuit’s Product-Support Website 519

Checking Another Vendor’s Product-Support Website 521

Tapping into Intuit’s Online and Expert Communities 521

When All Else Fails 522

Book 8: Appendixes 523

Appendix A: A Crash Course in Excel 525

Starting Excel 525

Stopping Excel 526

Explaining Excel’s Workbooks 526

Putting Text, Numbers, and Formulas in Cells 527

Writing Formulas 528

Scrolling through Big Workbooks 529

Copying and Cutting Cell Contents 530

Copying cell contents 530

Moving cell contents 531

Moving and copying formulas 531

Formatting Cell Contents 532

Recognizing That Functions Are Simply Formulas 534

Saving and Opening Workbooks 537

Saving a workbook 537

Opening a workbook 538

Printing Excel Workbooks 539

One Other Thing to Know 540

Appendix B: Government Web Resources for Businesses 541

Bureau of Economic Analysis 541

Finding information at the BEA website 542

Downloading a BEA publication 542

Uncompressing a BEA publication 543

Using a BEA publication 544

Bureau of Labor Statistics 544

Finding information at the BLS website 545

Using BLS information 545

Census Bureau 548

Finding information at the Census Bureau website 549

Using the Census Bureau’s publications 550

Using the Census Bureau search engine 550

Using the Census Bureau Subjects index 551

Securities and Exchange Commission 551

Finding information through EDGAR 552

Searching the EDGAR database 552

Federal Reserve 553

Finding information at the Federal Reserve website 554

Using the Federal Reserve website’s information 555

Government Publishing Office 555

Information available at the GPO website 556

Searching the GPO database 556

Internal Revenue Service 557

Appendix C: Glossary of Accounting and Financial Terms 559

Index 589