1. McGraw-Hill/Irwin Introduction to QuickBooks Pro, 2004 © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. Chapter 12 Adjustments and Year-End Procedures

2. Chapter 12 Textbook page ref. 2 Objectives 1. Set up and track 1099 vendors 2. Print 1099s and 1096 3. Edit, void, and delete transactions 4. Enter adjusting general journal entries 5. Track fixed assets 6. Memorize and schedule transactions to be automatically entered 7. Close the year and enter special transactions for sole proprietorships and partnerships 8. Set the closing date to lock the company file 9. Import and Export lists, form templates, and memorized reports from QuickBooks 599

3. Chapter 12 3 Objective 1. Set up and track 1099 vendors

4. Chapter 12 Textbook page ref. 4 Processing Form 1099 1. At the end of each year you must prepare, print, and send an IRS Form 1099 to your vendors and to the IRS (except if the vendor is a corporation or if total annual payments to each vendor do not equal or exceed $600) 2. The forms must be sent to your vendors no later than January 31 3. When set up properly, QuickBooks automatically tracks the details of your payments to 1099 vendors 4. After verifying 1099 Detail report you can print 1099s directly onto preprinted 1099 forms 600

5. Chapter 12 Textbook page ref. 5 Setting up 1099 Preferences 1. Select the Edit menu and then select Preferences 2. Scroll down and click Tax:1099 3. Click the Company Preferences tab 600

6. Chapter 12 Textbook page ref. 6 Editing Vendors for 1099 Setup 1. Fill out the name and address fields so that the 1099 will print all the information correctly on the form 2. Record the taxpayer ID for each 1099 vendor in addition to selecting that the vendor is eligible for 1099 602

7. Chapter 12 7 Objective 2. Print 1099s and 1096

8. Chapter 12 Textbook page ref. 8 Printing 1099s and 1096 Forms 1. Select the File menu, then select Print Forms, and then select 1099s/1096 2. Alternatively, click Print 1099s on the Vendor Navigator 604

9. Chapter 12 9 Objective 3. Edit, void, and delete transactions

10. Chapter 12 Textbook page ref. 10 Editing, Voiding, and Deleting Transactions 1. QuickBooks allows you to change or delete any transaction 2. You should not change transactions in a closed accounting period (a period for which you’ve already issued financial statements and/or filed tax returns) since it will cause discrepancies between your QuickBooks reports and your tax return 3. You can “lock” your data file to prevent users from making changes on or before a specified date by setting the closing date 606

11. Chapter 12 Textbook page ref. 11 Editing Transactions 1. Editing transactions allows you to correct posting errors 2. To edit (or modify) a transaction in QuickBooks, change the data directly on the form 606

12. Chapter 12 Textbook page ref. 12 Voiding and Deleting Transactions 1. QuickBooks allows you to void and delete transactions almost without restriction 2. Voiding and deleting transactions both zero out the debits and the credits specified by the transaction 3. There is one significant difference between voiding and deleting  When you void a transaction, QuickBooks keeps a record of the date, number, and detail of the transaction  When you delete a transaction, QuickBooks removes it completely from your file 4. To delete or Void a transaction  Select the transaction in a register or display the form  Select the Edit menu and then select Delete or void 608

13. Chapter 12 13 Objective 4. Enter adjusting general journal entries

14. Chapter 12 Textbook page ref. 14 Recording Adjustments and General Journal Entries 1. Adjusting entries are transactions that adjust the balance of one or more accounts 2. Examples:  Recategorize a transaction from one class to another  Recategorize a transaction from one account to another  Allocate prepaid expenses to each month throughout the year  Record non cash expenses, such as depreciation.  Close the Owner’s Drawing account into the Owner’s Equity account 3. In most cases, you’ll use a General Journal Entry to record adjustments 609

15. Chapter 12 Textbook page ref. 15 Creating a General Journal Entry 1. Depending on your QuickBooks user settings, you may need permission from the file Administrator to create General Journal Entries 2. Select the Banking menu and then select Make Journal Entry 3. Expert Tip:  Set up a bank account called Journal Entries  Use this account (Journal Entries) on the top line of each General Journal Entry  QuickBooks tracks all the General Journal Entries in a separate register on the Chart of Accounts which allows you to quickly look up and view all your General Journal Entries  Though you use this account in every General Journal Entry, you will never debit or credit the account and therefore it will never have a balance 610

16. Chapter 12 Textbook page ref. 16 Making Adjustments for Prepaid Expenses 1. When you prepay for goods or services, post the prepayment to an account called “Prepaid Expenses” of type Other Current Asset 2. Then, use monthly Journal Entries to allocate one-twelfth of the pre-payment amount to each month of the year 611

17. Chapter 12 17 Objective 5. Track fixed assets

18. Chapter 12 Textbook page ref. 18 Tracking Fixed Assets 1. When you purchase office equipment, buildings, computers, vehicles, or other assets (to be used in the business) that have useful lives of more than one year, these are setup as fixed assets accounts 2. You will record the depreciation of these assets periodically which appear on the Balance Sheet 3. Tracking Fixed Asset involves:  Setting up Fixed Assets  Calculating and Recording Depreciation 613

19. Chapter 12 Textbook page ref. 19 Setting up Fixed Assets 1. To track your fixed assets, create three accounts in the Chart of Accounts: A control, or master account, and two subaccounts (a Cost account and an Accumulated Depreciation account) 2. When you purchase a Fixed Asset, code the purchase to the Cost account 3. Record depreciation in Accumulated Depreciation account and code it to the Depreciation Expense account 4. The control account in the Chart of Accounts will always hold the Net Book Value (NBV) of the fixed asset 614

20. Chapter 12 Textbook page ref. 20 Calculating and Recording Depreciation 1. Select the Company menu, select Planning & Budgeting, select Decision Tools, and then select Depreciate Your Assets 2. Follow the onscreen wizard to calculate the annual depreciation for each of your fixed assets 3. To record depreciation each month, divide the amount for the first year’s depreciation by 12 and then record the depreciation expense each month using a General Journal Entry 617

21. Chapter 12 21 Objective 6. Memorize and schedule transactions to be automatically entered

22. Chapter 12 Textbook page ref. 22 Scheduling Memorized Transactions 1. Before saving the General Journal Entry  Select the Edit menu  Select Memorize General Journal (or press CTRL+M) 2. Enter a name in the Name field so that you’ll recognize and easily find this transaction in the Memorized Transaction list 3. Set the fields in Memorize Transaction window to indicate when and how often you want the transaction entered and then click OK 618

23. Chapter 12 Textbook page ref. 23 Rescheduling or Renaming Memorized Transactions 1. Select the Lists menu and then select Memorized Transaction List, or press CTRL+T 2. Select the transaction in the Memorized Transaction list 3. Then select the Edit menu and select Edit Memorized Transaction, or press CTRL+E. The Schedule Memorized Transaction window allows you to reschedule or rename the transaction, but it does not allow you to edit the actual transaction 619

24. Chapter 12 Textbook page ref. 24 Editing Memorized Transactions 1. Select the Lists menu and then select Memorized Transaction List, or press CTRL+T 2. Double-click the memorized transaction you want to edit in the Memorized Transaction List 3. This displays the contents of the memorized transaction, you can change anything on the transaction and then rememorize it 620

25. Chapter 12 Textbook page ref. 25 Deleting Memorized Transactions 1. Select the Lists menu and then select Memorized Transaction List, or press CTRL+T 2. Select the Memorized Transaction in the list that you want to delete 3. Select the Edit menu and then select Delete Memorized Transaction, or press CTRL+D 621

26. Chapter 12 26 Objective 7. Close the year and enter special transactions for sole proprietorships and partnerships

27. Chapter 12 Textbook page ref. 27 Closing the Year 1. Closing entry is an adjusting entry made at the end of each year, to transfer net income or loss into the Retained Earnings (or Owner’s Equity) account 2. In QuickBooks you do not need to make this entry, when you create a Balance Sheet, QuickBooks automatically calculates the balance in Retained Earnings by adding together the total net income for all prior years 3. At the end of your company’s fiscal year, QuickBooks automatically transfers the net income into Retained Earnings for you 621

28. Chapter 12 Textbook page ref. 28 Closing the Accounting Period 1. Run reports for the year and verify their accuracy 2. Enter adjusting entries as necessary and rerun the reports 3. Print and file the following reports as of your closing date: General Ledger, Balance Sheet Standard, Statement of Cash Flows, Trial Balance, Inventory Valuation Summary, and Profit & Loss Standard for the year 4. Back up your data file 5. Set the closing date to the last day of the period you are closing 622

29. Chapter 12 Textbook page ref. 29 Closing Sole Proprietorship Drawing Accounts 1. For Sole Proprietorships, the Retained Earnings account should be renamed to Owner’s Equity so that the net income (or loss) will automatically transfer into this account 2. At the end of each year, create a General Journal Entry to zero out the Owner’s Drawing account and close it into Owner’s Equity 3. It is best to let the balance in the Owner’s Investments account continue to accumulate over time, so that, the Balance Sheet will always show the total investments made by the owner 625

30. Chapter 12 Textbook page ref. 30 Closing Partnership Drawing Accounts 1. Use a General Journal Entry to close the Partner’s Drawing accounts into each Partner’s Profits account 2. To find the amounts for the General Journal Entry, use the year-end Trial Balance 626

31. Chapter 12 Textbook page ref. 31 Distributing Net Income to Partners 1. With partnerships, you need to use a General Journal Entry to distribute the profits of the company into each of the partner’s profit accounts 2. After making all adjusting entries, create a Profit & Loss report for the year and use the Net Income figure at the bottom of the Profit & Loss report to create the General Journal Entry 626

32. Chapter 12 32 Objective 8. Set the closing date to lock the company file

33. Chapter 12 Textbook page ref. 33 Setting the Closing Date to “Lock” Transactions 1. QuickBooks allows the Administrator to set a closing date that effectively locks the file so that no one can make changes to the file on or after a specified date 2. For further protection, all users, including the Administrator, can be required to enter a password before they can add, change or delete transactions dated on or before the closing date 3. To set the closing date:  Select Edit menu and then select Preferences  Select Accounting Company Preferences to enter the Closing date/ Password 627

34. Chapter 12 34 Objective 9. Import and Export lists, form templates, and memorized reports from QuickBooks

35. Chapter 12 Textbook page ref. 35 Importing and Exporting from QuickBooks 1. You can import and export templates 2. You can export reports to spreadsheets for further analysis 3. You can export your lists (Chart of Accounts, Customers, Vendors, etc.) to a file 4. You can import data into another application such as Word or Excel using files with exported lists 5. You can import data into another QuickBooks data file using files with exported lists 629

36. Chapter 12 Textbook page ref. 36 Exporting Lists 1. QuickBooks saves exported lists with an.IIF extension 2. To export a list:  Select the File menu  Select Export  Select Lists to IIF Files  Click the boxes next to lists to be exported and click OK  Select the file name for IIF file and click Save 629

37. Chapter 12 Textbook page ref. 37 Exporting Lists to Other Programs 1. To export any of your address lists to another program such as a database or word processor create a tab-delimited.TXT file:  Select the File menu  Select Export  Select Addresses to Text File  QuickBooks may display an instructional message, click OK  QuickBooks displays the Select Names for Export Addresses window  Select names from drop-down list and click OK to create an export file (.txt file) 631

38. Chapter 12 Textbook page ref. 38 Exporting Templates 1. You can export your custom templates (i.e., Forms) for Invoices, Sales Orders, Estimates, Credit Memos, Sales Receipts, Purchase Orders, and Statements to a special file with.DES extension 2. To explore templates:  Select Lists and then select Templates  Click the template to export to select it  Select Templates at the bottom of the Templates list, and then select Export  Enter the file and click Save QuickBooks saves exported templates in a special file format with a.DES extension 633

39. Chapter 12 Textbook page ref. 39 Exporting Reports (Premier Only) 1. QuickBooks Premier allows you to transfer memorized reports from one QuickBooks file to other using a special file with.QBR extension 2. To export memorized reports:  Select the Reports menu  Select Memorized Reports  Select Memorized Report to be exported  Click the Memorized Report button at the bottom of the Memorized Report List window  Select Export Template  QuickBooks automatically creates the filename with a QBR extension  Browse to proper Files folder and click Save 635

40. Chapter 12 Textbook page ref. 40 Importing.IIF files to QuickBooks 1. Select the File menu, then select Import, and then select IIF Files 2. Browse to the folder where IIF file is stored and select the.IIF file 3. Click Open 4. QuickBooks will display a window that says, “Your data has been imported.” 5. Click OK 636

41. Chapter 12 Textbook page ref. 41 Importing.DES Files to QuickBooks 1. Select Lists and then select Templates 2. Click Templates button at the bottom of the Templates list 3. Select Import 4. Browse to the folder where.DES file is stored and select the file Click Open 5. The imported template will show in your templates list 637

42. Chapter 12 Textbook page ref. 42 Importing Report Templates to QuickBooks 1. Select the Reports menu, then select Memorized Reports 2. Select Memorized Report List 3. Select the Memorized Report button at the bottom 4. Select Import Template 5. Browse to the folder where.QBR file is stored and select the file Click Open 6. In the Memorize Report window, enter the report name and group (if used), Click OK to import the report into the specified group of the Memorized Report list 638

43. Chapter 12 Textbook page ref. 43 Importing Excel Files to QuickBooks 1. QuickBooks can import list data from an Excel spreadsheet file 2. by mapping the columns to fields in the QuickBooks lists and then importing the data 3. Select the File menu, then select Import, and then select Excel Files 4. In the Import A File window, click on Browse and select the folder where excel file is stored 5. Click on the excel file and click Open 6. Choose a mapping and click Import 640

44. Chapter 12 Textbook page ref. 44 Summary of Key Points 1. Set up and track 1099 vendors 2. Print 1099s and 1096 3. Edit, void, and delete transactions 4. Enter adjusting general journal entries 5. Track fixed assets 6. Memorize and schedule transactions to be automatically entered 7. Close the year and enter special transactions for sole proprietorships and partnerships 8. Set the closing date to lock the company file 9. Import and Export lists, form templates, and memorized reports from QuickBooks 648