QUICKBOOKS® 2011: A COMPLETE COURSE

QUICKBOOKS® 2011: A COMPLETE COURSE
CHAPTER 4—LECTURE GENERAL ACCOUNTING AND END-OF-PERIOD PROCEDURES: SERVICE BUSINESS QUICKBOOKS® 2011: A COMPLETE COURSE. CHAPTER 4—LECTURE GENERAL ACCOUNTING AND END-OF-PERIOD PROCEDURES: SERVICE BUSINESS ©2012 Pearson Education, Inc. publishing as Prentice Hall

Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

©2012 Pearson Education, Inc. publishing as Prentice Hall
Chapter Focus: Customize Chart of Accounts, Adjusting Entries, Bank Reconciliation, Closing Entries, and End-of-Period Reports Customize Chart of Accounts: Change account names Delete accounts Make accounts inactive Adjusting Entries for Accrual Basis Accounting: Depreciation Prepaid Expenses Owner Withdrawals and Investments Transfer of Net Income to Owner’s Capital account Chapter 4 focuses on customizing a chart of accounts, recording adjusting entries, preparing a bank reconciliation, completing closing entries, and preparing end-of-period reports. The Chart of Accounts will be customized by changing account names, deleting accounts, and making accounts inactive. Adjusting Entries for Accrual Basis Accounting will include entries to record: the depreciation of an asset, the use of prepaid expenses, owner withdrawals and investments, and the transfer of Net Income to the Owner’s Capital account. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Chapter Focus: Customize Chart of Accounts, Adjusting Entries, Bank Reconciliation, Closing Entries, and End-of-Period Reports Bank Reconciliation: Add interest earned Deduct service charges Change an entry Record automatic payments Closing Entries: Assign closing dates Learn to make corrections to a closed period Chapter Focus: A Bank Reconciliation will be prepared. Interest earned will be added, service charges will be deducted, an entry will be changed, and automatic payments will be recorded. Recording closing entries will include assigning closing dates. You will also learn how to make corrections to a closed period. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Chapter Focus: Customize Chart of Accounts, Adjusting Entries, Bank Reconciliation, Closing Entries, and End-of-Period Reports End of Period Reports include: Trial Balance—verify that debits equal credits Cash Flow Forecast—analyze cash requirements Statement of Cash Flows—analyze cash income and outgo Profit & Loss—calculate net income Balance Sheet—verify that assets equal liabilities and owner’s equity Chapter Focus: End of Period Reports that will be prepared include: Trial Balance—verify that debits equal credits; Cash Flow Forecast—analyze cash requirements; Statement of Cash Flows—analyze cash income and outgo; Profit & Loss—calculate net income; and Balance Sheet—verify that assets equal liabilities and owner’s equity. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Accrual Basis Accounting
Accrual Basis Accounting is used by QuickBooks Payment status does not matter when recording a transaction Income is earned when the service is performed Expenses are incurred at the time the bill is received or a purchase is made Depreciation is used to accurately depict the value of equipment at any time Prepaid expenses such as supplies and insurance are recorded as assets and adjusted as the supplies and insurance are used Accrual Basis Accounting: Accrual Basis Accounting is used by QuickBooks. Payment status does not matter when recording a transaction. Income is earned when the service is performed and expenses are incurred at the time the bill is received or a purchase is made. Depreciation is used to accurately depict the value of equipment at any time. Prepaid expenses such as supplies and insurance are recorded as assets and adjusted as the supplies and insurance are used. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Cash Basis Accounting QuickBooks may be customized to use Cash Basis Accounting Income is not recorded until payment is received Expenses are not recorded until payment is made Depreciation is not recorded—when equipment is purchased, it is recorded as an expense Insurance and supplies are not recorded as prepaid. Instead, they are recorded as expenses when the payment is made Cash Basis Accounting: QuickBooks may be customized to use Cash Basis Accounting. Income is not recorded until payment is received and expenses are not recorded until payment is made. Depreciation is not recorded—when equipment is purchased, it is recorded as an expense. Insurance and supplies are not recorded as prepaid. Instead, they are recorded as expenses when the payment is made ©2012 Pearson Education, Inc. publishing as Prentice Hall

Customize Chart of Accounts: Change Account Name
Open Chart of Accounts (Ctrl+A) Click Student’s Name Capital to select the account Customize Chart of Accounts: Change Account Name: Open Chart of Accounts (Ctrl+A), click Student’s Name Capital to select the account. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Ctrl+E to edit the account Drag through Student’s Name to highlight Type Your Name (Your Actual Name) Click Save & Close Customize Chart of Accounts: Change Account Name—Ctrl+E to edit the account, drag through Student to highlight, type Your Name (you would type your actual name), click Save & Close. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Customize Chart of Accounts: Make Account Inactive
Click Property, a subaccount of the expense account Taxes Customize Chart of Accounts: Make an Account Inactive—Click Property Taxes account to select. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Customize Chart of Accounts: Make Account Inactive
Click Account button Click Make Account Inactive Customize Chart of Accounts: Make Account Inactive—Click the Account button, click Make Account Inactive. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Customize Chart of Accounts: Verify Inactive Account
Click Include inactive to display inactive accounts in the list Notice the X in front of Property Taxes account Customize Chart of Accounts: Verify Inactive Account—Click Include inactive to display inactive accounts in the list. Notice the X in front of Property Taxes account. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Customize Chart of Accounts: Delete an Account
Click Cash Discounts to select Use keyboard shortcut Ctrl+D to delete the account Click OK on the Delete Account dialog box Customize Chart of Accounts: Delete an Account—Click Cash Discounts to select the account, use the keyboard shortcut Ctrl+D to delete the account, click OK on the Delete Account dialog box. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Customize Chart of Accounts: Verify the Deletion of an Account
Scroll through the Chart of Accounts Cash Discounts will not be shown Customize Chart of Accounts: Verify the Deletion of an Account—Scroll through the Chart of Accounts, Cash Discounts will not be shown. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Accrual Basis Accounting
As noted earlier, Accrual basis accounting matches the income of the period against the expenses of a period When a sale is made, it is recorded as income no matter when the payment is received. When a cost is incurred, it is recorded as an expense no matter when the bill is paid. Adjusting entries need to be made to account for certain expenses that have been paid for in advance. Accrual Basis Accounting: As noted earlier, accrual basis accounting matches the income of the period against the expenses of a period. When a sale is made, it is recorded as income no matter when the payment is received. When a cost is incurred, it is recorded as an expense no matter when the bill is paid. Adjusting entries need to be made to account for certain expenses that have been paid for in advance. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Cash Basis Accounting Cash basis accounting records income and expenses when cash is used or received. When a sale is made, it is not recorded until the cash payment is received When an expense is incurred, it is recorded in full when it is paid Cash Basis Accounting: As discussed previously, cash basis accounting records income and expenses when cash is used or received. When a sale is made, it is not recorded until the cash payment is received and when an expense is incurred, it is recorded in full when it is paid. This would mean that a company could make a sale for $10,000 and the income would not be shown until the payment was received. If $5,000 of office supplies were purchased to have on hand for a year, the company records would show an expense of $5,000 for the month when the payment for the supplies was made. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Accrual vs. Cash Basis Accounting
Accrual basis is a more accurate method for determining income and expenses. Example for income, a sale for $1,000 is made in November and payment is received in March Accrual shows income in November—when the sale was actually made Cash shows the income in March—when the cash was received Net income for the year would include the sale in the accrual method not in the cash method Accrual vs. Cash Basis Accounting: Accrual basis is a more accurate method for determining income and expenses. Example for income, a sale for $1,000 is made in November and payment is received in March: Accrual shows income in November—when the sale was actually made; yet, Cash shows the income in March—when the cash was received. Net income for the year would include the sale in the accrual method not in the cash method. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Example for expenses, record one year of insurance for $600 in November Accrual basis would record $600 as a prepaid expense in an asset account—Prepaid Insurance Month by month, an adjusting entry for $50 would be made to record the amount of insurance used for the month Cash basis would have $600 worth of insurance recorded as an expense for one month and nothing the rest of the year Accrual vs. Cash Basis Accounting: Example for expenses, record one year of insurance for $600 in November. Accrual basis would record $600 as a prepaid expense in an asset account—Prepaid Insurance. Month by month, an adjusting entry for $50 would be made to record the amount of insurance used for the month. Cash basis would have $600 worth of insurance recorded as an expense for November and nothing the rest of the year or during the early portion of the next year. ©2012 Pearson Education, Inc. publishing as Prentice Hall

A Statement of Profit and Loss prepared in November would show: Accrual method—income of $1,000 and insurance expense of $50. Profit of $950 Cash method—no income and insurance expense of $600. Loss of $600 QuickBooks uses the accrual method automatically but may be changed to cash basis accounting Accrual vs. Cash Basis Accounting: A Statement of Profit and Loss prepared in November would show: Accrual method—income of $1,000 and insurance expense of $50. Profit of $950. Cash method—no income and insurance expense of $600. Loss of $600. QuickBooks uses the accrual method automatically but may be changed to cash basis accounting. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Record Adjusting Entries: Prepaid Expenses
A prepaid expense is an item that is paid for in advance. Examples of prepaid expenses: Insurance: policy is usually for six months or one year Office Supplies: buy to have on hand and use as needed A prepaid expense is an asset until it is used. At the end of the period, an adjusting entry is made in the General Journal to record the amount of the asset that was used. Record Adjusting Entries: Prepaid Expenses—A prepaid expense is an item that is paid for in advance. Examples of prepaid expenses include: Insurance—policy is usually for six months or one year; Office Supplies—buy to have on hand and use as needed. A prepaid expense is an asset until it is used. At the end of the period, an adjusting entry is made in the General Journal to record the amount of the asset that was used. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Record Adjusting Entry: Prepaid Insurance
To record the use of one month’s auto insurance Click Company on the Menu bar Click Make General Journal Entries Entries are made to record both the debit and credit portions of the transaction Adjusting Entry: Prepaid Insurance—To record the use of one month’s auto insurance, click Company on the Menu bar, and click Make General Journal Entries. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Note the checkbox for Adjusting Entry (not available in Pro) A list of entries made Last Month is shown (not available in Pro) If the date of your computer does not match the text, you may not have anything shown in the List of Entries Record Adjusting Entry: Prepaid Insurance: Note the checkbox for Adjusting Entry (not available in Pro) A list of entries made Last Month is shown (not available in Pro). If the date of your computer does not match the text, you may not have anything shown in the List of Entries. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Enter the date: 01/31/11 The account is Auto Insurance Expense This account name is different from the text A subaccount of Insurance Tab to Debit Record Adjusting Entry: Prepaid Insurance—Enter the date: 01/31/11; the account is Auto Insurance Expense. This is a subaccount of Insurance and is a different account name than the one used in the text. Tab to Debit. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Use QuickMath to calculate one month’s insurance Cursor in the Debit column Enter the amount 2850 (the amount for the year) Press / Key 12 Record Adjusting Entry: Prepaid Insurance—Use QuickMath to calculate one month’s insurance: Cursor should be in the Debit column Enter the amount 2850 (the amount for the year) Press / Key 12 ©2012 Pearson Education, Inc. publishing as Prentice Hall

Press Enter Amount for one month’s insurance is entered in the debit column Tab to memo and enter: Adjusting Entry, Insurance Prepaid Insurance is the account used for the credit QuickBooks should automatically enter: the credit amount of automatically the same memo: Adjusting Entry, Insurance Click the Save icon Record Adjusting Entry: Prepaid Insurance—Press Enter. The amount for one month’s insurance is entered in the debit column. Tab to memo and enter Adjusting Entry, Insurance. Prepaid Insurance is the account used for the credit. QuickBooks should enter the credit amount of automatically. You enter the same memo: Adjusting Entry, Insurance. Click Save & Close or Save & New. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Click the drop-down list for Selected General Journal Entries Click This Month If your computer date is for January, 2011, you will see the adjusting entry for Insurance Record Adjusting Entry: Prepaid Insurance: Click the drop-down list for Selected General Journal Entries Click This Month. If your computer date is for January, 2011, you will see the adjusting entry for Insurance. If your computer date is not for January, 2011, you will not see the adjusting entry. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Office Supplies Office Supplies may be purchased to have on hand. The supplies are considered an asset. An adjusting entry will need to be recorded for the amount of supplies used in a period. Office Supplies may be purchased to use immediately. The supplies are recorded as an expense. No adjusting entry is necessary Office Supplies: Office Supplies may be purchased to have on hand or they may be purchased and used immediately. If office supplies are on hand, the supplies are considered an asset. An adjusting entry will need to be recorded for the amount of supplies used in a period. If office supplies are purchased to use immediately, the supplies are recorded as an expense. No adjusting entry is necessary. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Purchase Office Supplies to Have On Hand
On 01/31/11, rather than record a bill, make a General Journal entry to record $500 of office supplies to have on hand This is not an Adjusting Entry so click Adjusting Entry to remove the check Debit the asset—Office Supplies for $500 Credit Accounts Payable for $500 On the line for Accounts Payable, click the drop-down list for Name, click the Vendor—Supply Station Click Save & New Purchase Office Supplies to Have On Hand: On 01/31/11, rather than record a bill, make a Journal entry to record $500 of office supplies to have on hand. Debit the asset—Office Supplies for $500 and Credit Accounts Payable for $500. On the line for Accounts Payable, click the drop-down list for Name, click the Vendor—Supply Station Click the Save & New. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Record Adjusting Entry: Office Supplies
As of 01/31/11, used $150 of the office supplies on hand Make a Journal Entry: Debit Office Supplies Expense $150 Credit Office Supplies (the asset) $150 Use the Memo: Adjusting Entry, Office Supplies Adjusting Entry: Office Supplies—As of 01/31/11, used $150 of the office supplies on hand. Make a Journal Entry to record the use of the supplies: Debit Office Supplies Expense $150 and Credit Office Supplies (the asset) $150. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Record Purchase of Office Supplies to be Used Immediately
1/31/11, purchased $5 of colored paper to be used immediately to prepare sales flyers This is not an Adjusting Entry so click Adjusting Entry to remove the check Rather than record a bill, make a General Journal entry: Debit Office Supplies Expense for $5 Credit Accounts Payable and the Vendor—Supply Station, for $5 Record Purchase of Office Supplies to be Used Immediately—1/31/11, purchased $5 of colored paper to be used immediately to prepare sales flyers. Debit Office Supplies Expense for $5 and Credit Accounts Payable and the Vendor—Supply Station, for $5. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Depreciation Equipment and other long-term assets lose value over their lifetime. Depreciation records the amount of equipment that has been used up within the period. If more than one asset is depreciated, a compound entry to record all depreciation may be made in the Journal Depreciation: Equipment and other long-term assets lose value over their lifetime. Depreciation records the amount of equipment that has been used up within the period. If more than one asset is depreciated, a compound entry to record all depreciation may be made in the Journal. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Compound Adjusting Entry: Depreciation
01/31/11, make a Journal entry to record depreciation: Record credits first and QuickBooks will total the amount for the debit Credit Office Equipment: Depreciation $142 Credit Company Cars: Depreciation $583 Debit Depreciation Expense Compound Adjusting Entry: Depreciation—01/31/11, make a Journal entry to record depreciation: Credit Office Equipment: Depreciation $142 Credit Company Cars: Depreciation $583 Debit Depreciation Expense Record credits first and QuickBooks will total the amount for the debit. ©2012 Pearson Education, Inc. publishing as Prentice Hall

View the List of Selected General Journal Entries
Make sure the computer date is January, 2011 The List should be for This Month You will see all the entries you made in the General Journal Note that the adjusting entries have a checkmark in the Adj column View the List of Selected General Journal Entries: Make sure the computer date is January, 2011. The List should be for This Month. You will see all the entries you made in the General Journal. Note that the adjusting entries have a checkmark in the Adj column. ©2012 Pearson Education, Inc. publishing as Prentice Hall

View Depreciation in the Chart of Accounts
Click the Chart of Accounts icon Scroll through the Chart of Accounts Note that Company Cars has an original cost of $49,000 Depreciation is -$583 The value of the Company Cars is $48,417 Note the value of Office Equipment View Depreciation in the Chart of Accounts: Click the Chart of Accounts icon. Scroll through the Chart of Accounts. Note that Company Cars has an original cost of $49,000. The Depreciation is -$583. The value of the Company Cars is $48,417. Note the value of Office Equipment. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Owner Withdrawals and Investments
In a sole proprietorship, owners do not earn a salary Rather than get a pay check, an owner makes a withdrawal An owner may make additional investments in the business Investments may be cash, equipment, or other assets Owner Withdrawals and Investments: In a sole proprietorship, owners do not earn a salary. Rather than get a pay check, an owner makes a withdrawal. In addition to the original investment in the business, an owner may make additional investments in the business. Investments may be cash, equipment, or other assets. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Owner Withdrawal 01/31/11, prepare a check for an owner withdrawal of $500 Click the Write Checks icon Type “Your Name” on the check, press Tab To add your name to the others list, click Quick Add Owner Withdrawal: 01/31/11, prepare a check for an owner withdrawal of $500. Click the Write Checks icon, type “Your Name” on the check, press Tab. To add your name to the others list, click Quick Add. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Owner Withdrawal All names used by QuickBooks are categorized in lists Vendor list is for vendors Customer list is for customers Employee list if for employees Other list is for owners, banks, or anyone not on the Vendor, Customer, or Employee lists To add the owner, click Other Click OK Owner Withdrawal: All names used by QuickBooks are categorized in lists: the Vendor list is for vendors; the Customer list is for customers; the Employee list if for employees, the Other list is for owners, banks, or anyone not on the Vendor, Customer, or Employee lists. To add the owner, click Other, click OK. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Owner Withdrawal Enter the amount of the withdrawal, $500 Type Withdrawal for the check memo This may also be entered in the Memo column for the check detail The account is Your Name, Capital: Draws Owner Withdrawal: Enter the amount of the withdrawal, $500, type Withdrawal as the Memo on the check face. This may also be entered in the Memo column in the check detail. The account is Your Name, Capital: Draws. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Owner Investment: Cash
On 01/31/11 record $5,000 cash investment by owner in the General Journal Adjusting Entry should not be marked Debit Checking for the amount of the investment Credit Your Name, Capital: Investments Memo: Cash Investment Owner Investment: Cash—On 01/31/11 record $5,000 cash investment by owner in the General Journal. Since this transaction is to record an additional investment by the owner, Adjusting Entry should not be marked. To record the investment, debit Checking for the amount of the investment and credit Your Name, Capital: Investments. The Memo is: Cash Investment. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Owner Investment: Non-Cash
On 01/31/11 record investment of a $1,500 computer by owner Adjusting Entry should not be marked Record entry in the General Journal Debit Office Equipment: Original Cost Credit Your Name, Capital: Investments Memo: Owner Investment: Computer Owner Investment: Non-Cash—On 01/31/11 record the investment of a $1,500 computer by the owner in the General Journal. Since this transaction is to record an additional investment by the owner, Adjusting Entry should not be marked. Debit Office Equipment: Original Cost and credit Your Name, Capital: Investments. Enter the memo: Owner Investment: Computer. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Bank Reconciliation Purpose is to make sure the balance of the checking account matches the balance of the bank statement for the checking account Used to indicate which checks have been paid and which deposits have been recorded Record any bank transactions not in checking account: Interest Service charges and other bank charges Automatic payments If the bank reconciliation is started and not complete, click the Leave button so you can continue with it later When the bank reconciliation is completed, you will click the Reconcile Now button Bank Reconciliation: The purpose of a bank reconciliation is to make sure the balance of the checking account matches the balance of the bank statement for the checking account. The reconciliation is used to indicate which checks have been paid, which deposits have been recorded, and to record any bank transactions not in checking account. These may include: interest, service charges and other bank charges, and automatic payments. If the bank reconciliation is started and not complete, click the Leave button so you can continue with it later. When the bank reconciliation is completed, you will click the Reconcile Now button. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Begin Bank Reconciliation
Click Reconcile icon Account should be Checking Statement Date should be 01/31/11 Enter the bank statement ending balance: $49,318.46 Begin Bank Reconciliation: Click Reconcile icon. The Account should be Checking, the Statement Date should be 01/31/11. Enter the bank statement ending balance: 49, ©2012 Pearson Education, Inc. publishing as Prentice Hall

Begin Bank Reconciliation
Enter the $8 Service Charge on 01/31/11 Account is Bank Service Charges Enter the $66.43 Interest Earned on 01/31/11 Account is Interest Income Be sure the dates used are 01/31/11 Click Continue Begin Bank Reconciliation: Enter the $8 Service Charge on 01/31/11 use the Account Bank Service Charges. Enter the $66.43 Interest Earned on 01/31/11 use the Account Interest Income. Be sure the dates used are 01/31/11 (This is a common error in training.). Click Continue. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Bank Reconciliation: Mark Deposits
Mark two deposits: Click the check column for $25,000 Click the check column for $13,840 The Void Telephone Bill for the Month should also have a check Bank Reconciliation: Mark Deposits—To mark two deposits: Click the check column for $25,000 then click the check column for $13,840. Make sure there is a check mark by VOID: Telephone Bill for the Month, if not, click the column to mark it. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Bank Reconciliation: Mark Checks
Mark Petty Cash and Checks 1, 2, 3 Click the check column for Cash $100 Click the check column for Checks 1, 2, and 3 Mark Petty Cash and Checks 1, 2, 3, click the check column for Cash $100, click the check column for Checks 1, 2, and 3. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Bank Reconciliation: Verify Information
Verify information marked: 3 Deposits, Interest, and Other Credits for $38,840.00 4 Checks, Payments, and Service Charges $1,635.00 Ending Balance is $49,318.46 Cleared Balance is $50,133.43 Difference is -$814.97 Bank Reconciliation: Verify information—Marked: 3 Deposits, Interest, and Other Credits for $38,840.00; 4 Checks, Payments, and Service Charges $1,635.00; the Ending Balance is $49,318.46; the Cleared Balance is $50,133.43; the Difference is -$ ©2012 Pearson Education, Inc. publishing as Prentice Hall

Bank Reconciliation: Make Corrections
Petty Cash should be $110 Click the transaction Click the Go To button Bank Reconciliation: Make Corrections—Petty Cash should be $110. Click the transaction, click the Go To button. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Change the Transfer Amount to $110.00 Click Save & Close Click Yes on the Recording Transaction dialog box Bank Reconciliation: Make Corrections—Change the Transfer Amount to $110.00, click Save & Close. Click Yes on the Recording Transaction dialog box. ©2012 Pearson Education, Inc. publishing as Prentice Hall

If necessary, click the (Petty) Cash transaction of $ to mark with a √ Notice the Difference is -$804.97 Bank Reconciliation: Make Corrections—If necessary, click the (Petty) Cash transaction of $ to mark with a √. Notice the Difference is now -$ ©2012 Pearson Education, Inc. publishing as Prentice Hall

Record an automatic payment on a loan With the Bank Reconciliation on the screen Click Edit on the Menu bar Click Use Register OR use the shortcut Ctrl+R Bank Reconciliation: Make Corrections—Record an automatic payment on a loan. Click Edit on the Menu bar, click Use Register OR use the shortcut Ctrl+R. . ©2012 Pearson Education, Inc. publishing as Prentice Hall

Bank Reconciliation: Record Automatic Payments
Date is 01/31/11 Number is Transfer Payee is Sunshine Bank Use Quick Add to add Sunshine Bank to Others list Payment is $722.41 To use two accounts, click the Splits button Interest Expense: Interest on Loans $255.22 Loan Payable: Business Vehicles Loan $467.19 Click Close button in the Splits window Bank Reconciliation: Record Automatic Payments—The date is 01/31/11, the Number is Transfer, the Payee is Sunshine Bank (Use Quick Add to add Sunshine Bank to Others list.), the Payment is $ Click the Splits button to use two accounts—Interest Expense: Loan Interest for $ and Loan Payable: Business Vehicles Loan for $ Enter the Memo, and then click the Close button in the Splits window. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Add the transaction explanation: Loan Pmt., Business Vehicles Click the Record button Bank Reconciliation: Record Automatic Payments—Add the transaction explanation: Loan Pmt., Business Vehicles. Click the Record button. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Repeat to record the automatic payment for office equipment Change the transaction amount to $82.56 Change transaction memo to Loan Pmt., Office Equipment Loan Click Splits to use two accounts Interest Expense: Loan Interest $53.39 Loan Payable: Office Equipment Loan $29.17 Click Close and then click Record Close the Register to return to the Reconciliation Bank Reconciliation: Record Automatic Payments—Repeat the previous steps to record the automatic payment for office equipment. Change the transaction amount to $ Change transaction memo to Loan Pmt., Office Equipment Loan. Click Splits button to use two accounts—Interest Expense: Loan Interest $53.39 and Loan Payable: Office Equipment Loan $ Click the Close button and then click the Record button. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Bank Reconciliation Click the each of the two transfers to mark with a √ Make sure Difference is $0.00 Click Reconcile Now If there is any discrepancy, it must be corrected before clicking Reconcile Now Bank Reconciliation: Click the each of the two transfers to mark with a √. Make sure Difference is $0.00. Click Reconcile Now. If there is any discrepancy, it must be corrected before clicking Reconcile Now ©2012 Pearson Education, Inc. publishing as Prentice Hall

Print Reconciliation Reports
There are three choices on the Select Reconciliation Report screen: Summary: lists totals only Detail: lists all transactions and totals Both prints the summary and the detail reports Click Detail Print Reconciliation Reports: There are three choices on the Select Reconciliation Report screen: Summary—lists totals only Detail—lists all transactions and totals Both prints the summary and the detail reports Click Detail. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Print Reconciliation Report
Print Reconciliation Report: Click Detail. The reconciliation detail report appears on the screen and lists all the transactions and the totals. ©2012 Pearson Education, Inc. publishing as Prentice Hall

End of Period Reports: Trial Balance
Trial Balance—Proves debits equal credits Use Accountant & Taxes category in the Report Center to generate a Trial Balance End of Period Reports: Trial Balance—Proves debits equal credits. Use the Accountant & Taxes category in the Report Center to generate a Trial Balance. ©2012 Pearson Education, Inc. publishing as Prentice Hall

End of Period Reports: Cash Flow Forecast
Cash Flow Forecast—Projects: The amount you will be receiving if all those who owe you money pay on time The amounts you will be spending to pay your accounts payable on time Use Company & Financial section of the Report Center End of Period Reports: Cash Flow Forecast—Projects: The amount you will be receiving if all those who owe you money pay on time and the amounts you will be spending to pay your accounts payable on time. Use Company & Financial section of the Report Center. ©2012 Pearson Education, Inc. publishing as Prentice Hall

End of Period Reports: Profit & Loss
Profit & Loss (Income) Statement—Shows income and expenses for the period and net income or net loss for the period Use Company & Financial in the Report Center Notice the Net Income of $4,135.53 End of Period Reports: Profit & Loss (Income) Statement—Shows income and expenses for the period and net income or net loss for the period. Use Company & Financial in the Report Center. Notice the Net Income of $4, ©2012 Pearson Education, Inc. publishing as Prentice Hall

End of Period Reports: Balance Sheet
Balance Sheet—Proves the fundamental accounting equation: Assets = Liabilities + Owner’s Equity Use Company & Financial section in the Report Center End of Period Reports: Balance Sheet—Proves the fundamental accounting equation: Assets = Liabilities + Owner’s Equity. Use Company & Financial section in the Report Center. ©2012 Pearson Education, Inc. publishing as Prentice Hall

End of Period Reports: Balance Sheet
Assets of $130, are equal to Liabilities & Equity Net Income of $4, will be transferred to Retained Earnings at the end of the year In a sole proprietorship profits should be in Capital not Retained Earnings End of Period Reports: Balance Sheet—Assets of $130, are equal to Liabilities & Equity. Notice that the Net Income of $4, is in Retained Earnings. In a sole proprietorship profits should be in Capital not Retained Earnings. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Transfer Net Income into Capital
Prepare a General Journal entry to close Retained Earnings and transfer Net Income into the Capital account Debit Retained Earnings $4,135.53 Credit Your Name, Capital $4,135.53 Transfer Net Income into Capital: Prepare a Journal entry to close Retained Earnings and transfer Net Income into the Capital account. Debit Retained Earnings $4, and credit Your Name, Capital $4, ©2012 Pearson Education, Inc. publishing as Prentice Hall

Balance Sheet After Transfer of Net Income to Capital
For January, 2011 Retained Earnings shows -$4,135.53 Before the adjustment, Your Name, Capital – Other was $53,135.00 Add the $4, to Your Name, Capital – Other to get the new amount of $57,270.53 Balance Sheet After Transfer of Net Income to Capital: For January, 2011 Retained Earnings shows -$4, Before the adjustment, Your Name, Capital – Other was $53, Add the $4, to Your Name, Capital – Other to get the new amount of $57, ©2012 Pearson Education, Inc. publishing as Prentice Hall

Balance Sheet After Transfer of Net Income to Capital
Change date to January 31, 2012 Retained Earnings does not show because it was in a prior year Your Name, Capital – Other still shows $57,270.53 Balance Sheet After Transfer of Net Income to Capital: Change date to January 31, Retained Earnings does not show because it was in a prior year. Your Name, Capital – Other still shows $57, ©2012 Pearson Education, Inc. publishing as Prentice Hall

Closing a Period QuickBooks does not require closing entries when closing a period To close a period, a Closing Date is provided Closing a Period: QuickBooks does not require closing entries when closing a period. To close a period, all you need to do is provide a Closing Date. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Set Closing Date and Password
To enter a Closing Date, click Edit on the Menu Bar Click Preferences Click Accounting Click Company Preferences tab Click the Set Date/Password button Set Closing Date and Password: To enter a Closing Date, click Edit on the Menu Bar. Click Preferences, click Accounting, click the Company Preferences tab. Click the Set Date/Password button. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Enter the Closing Date 01/31/11 Do not enter any passwords Passwords can limit access to company data Click OK Set Closing Date and Password: Enter the Closing Date 01/31/11, do not enter any passwords (Passwords can limit access to company data. In an actual business, you would assign a closing password to protect the data from unauthorized changes.), click OK. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Since no password was entered, you get a No Password Entered screen Click No. Set Closing Date and Password—Since no password was entered, you get a No Password Entered screen. Click No. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Edit a Transaction in a Closed Period
Access the Chart of Accounts Click the account where the transaction will be changed—Office Supplies Use CTRL+R to access the register Edit a Transaction in a Closed Period: Access the Chart of Accounts, click the account where the transaction will be changed—Office Supplies, use CTRL+R to access the register. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Change the amount in the Decrease column from 350 to 325 Click Record Edit a Transaction in a Closed Period: Change the amount in the Decrease column from 350 to 325. Click Record. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Click Yes on the Recording Transaction dialog box Since the transaction is in a period that was closed, you get a QuickBooks dialog box Click Yes to make the change Edit a Transaction in a Closed Period: Click Yes on the Recording Transaction dialog box. Since the transaction is in a period that was closed, you get a QuickBooks dialog box warning against making a change to a closed period. Click Yes to make the change. ©2012 Pearson Education, Inc. publishing as Prentice Hall

View the change in the Register for Office Supplies Note that the Ending balance is now $ rather than $600.00 This means you have more supplies on hand Edit a Transaction in a Closed Period—View the change in the Register for Office Supplies. Note that the Ending balance is now $ rather than $ This means that you have more supplies on hand. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Analyze the Effect of Changing a Transaction in a Closed Period
The amount of the office supplies used was $350 before changing the transaction Changing the adjusting entry for Office Supplies to $325 reduces the expense by $25 The $25 decrease in the expense will result in a $25 increase in net income Analyze the Effect of Changing a Transaction in a Closed Period: The amount of the office supplies used was $150 before changing the transaction. Changing the adjusting entry for Office Supplies to $125 reduces the expense by $25. The $25 decrease in the expense will result in a $25 increase in net income. ©2012 Pearson Education, Inc. publishing as Prentice Hall

View Change in Profit & Loss
Reducing the amount of supplies used, changes Office Supplies Expense and increases Net Income by $25—to $4,160.53 View Change in Profit & Loss: Reducing the amount of supplies used, changes Office Supplies Expense and increases Net Income by $25—to $4, ©2012 Pearson Education, Inc. publishing as Prentice Hall

Change General Journal Entry
Since Net Income is $25 more, the Journal entry transferring the Retained Earnings (Net Income) to Capital needs to be changed Open the General Journal, click Previous until you get to the transaction Change Journal Entry: Since Net Income is $25 more, the Journal entry transferring the Retained Earnings (Net Income) to Capital needs to be changed. Open the Journal, click Previous until you get to the transaction. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Change General Journal Entry
The original amount of Retained Earnings was $4,135.53 Add $25 to this The new amount is $4,160.53 Debit Retained Earnings and credit Your Name Capital $4,160.53 Click Save & Close Click Yes on all dialog boxes Change Journal Entry: The original amount of Retained Earnings was $4, Add $25 to this to find the new amount of $4, for Net Income. Debit Retained Earnings and credit Your Name Capital $4, Click Save & Close. Click Yes on all dialog boxes. ©2012 Pearson Education, Inc. publishing as Prentice Hall

Balance Sheet After Change in Journal Entry
The Retained Earnings shows -$4,160.53 Your Name, Capital – Other shows $57,295.53 This reflects the $25 increase in net income Balance Sheet After Change in Journal Entry: The Retrained Earnings shows -$4, and Your Name, Capital – Other shows $57, This reflects the $25 increase in net income. ©2012 Pearson Education, Inc. publishing as Prentice Hall

QUICKBOOKS® 2011: A COMPLETE COURSE

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QUICKBOOKS® 2011: A COMPLETE COURSE

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