Managing Expenses Chapter 3

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 2 Objectives Set up vendors in the Vendor list Understand how to use classes in QuickBooks Use QuickBooks for job costing Enter expense transactions in several different ways Manage Accounts Payable transactions Print checks 113

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 3 Objectives (contd.) Void Checks Track Loans using the QuickBooks Loan Manager Create and apply vendor credits Handle deposits and refunds from Vendors Track petty cash Track credit card charges and payments Create reports about vendor transactions 113

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 4 Entering Expenses in QuickBooks Cash Vendors: –You’ll skip the Accounts Payable account and just write checks, coding the checks to the appropriate expense accounts Credit Vendors: –Track bills and bill payments using the Accounts Payable account which will track how much you owe these Vendors 113

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 5 Business Transaction Cash VendorsCredit Vendors QuickBooks Transaction Accounting Entry QuickBooks Transaction Accounting Entry Recording a Purchase Order Not Usually Used Non-posting entry used to record Purchase Orders. Recording a Bill from a Vendor Not Usually Used Increase (debit) Expenses, Increase (credit) Accounts Payable. Paying Bills Increase (debit) Expense, Decrease (credit) Checking. Decrease (debit) Accounts Payable, Decrease (credit) the Checking Account. Steps for Entering Expenses 114

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 6 Setting up Vendors Vendors include everyone from whom you purchase products or services Select the Lists menu, and then select Vendor List; or, click Vendors on the Vendor Navigator When your vendor is also your customer, the customer name must be slightly different from the vendor name 116

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 7 Activating Class Tracking Class Tracking in QuickBooks allows you to: –Separate your income and expenses by line of business, department, location, profit center, or any other meaningful breakdown of your business –Create separate profit and loss reports for each class of the business To activate Class Tracking: –Select the Edit menu, and then select Preferences –Scroll to the top and click Accounting –Select the Company Preferences tab, and check the box next to Use class tracking 121

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 8 Tracking Job Costs Job Costing refers to tracking the expenses for each customer or job Use the Customer:Job column to link each expense account or Item with the customer or job to which it applies Profit & Loss by Job report shows income and expenses separately for each job: –Select the Reports menu, select Company & Financial, and then select Profit & Loss by Job 123

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 9 Paying Vendors With QuickBooks, you can pay your vendors by check, credit card, electronic funds transfer, or in cash (although cash is not recommended) The three common situations are: 1.Manually write a check and then record the transaction in a QuickBooks account register 2.Use the Write Checks window to write and print checks 3.Use the Enter Bills window to record Accounts Payable and then use the Pay Bills window to pay the bill 125

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 10 Using Registers Select the Lists menu and then select Chart of Accounts or press CTRL+A To display the Checking account register, double-click the Checking account in the Chart of Accounts Enter the transaction and press Record To apply your purchase to more than one account: –Click the Splits button at the bottom left of the register, which allows you to split the expenses among multiple accounts 125

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 11 Using Write Checks without Using A/P Select the Banking menu and then select Write Checks Use the Write Checks window to record your expenses: –If you’re tracking job costs or classes and are not using the Accounts Payable –If you use Items to track purchases and you are not using the Accounts Payable 129

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 12 Entering Bills Select the Vendors menu and then select Enter Bills A bill in QuickBooks tracks the amount owed to the vendor along with the details of purchase in Accounts Payable For a bill to be considered paid by QuickBooks, you must pay it using the Pay Bills window 130

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 13 The Unpaid Bills Detail Report To view a list of your unpaid bills, use the Unpaid Bills Detail report Select the Reports menu, select Vendors & Payables, and then select Unpaid Bills Detail 133

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 14 Paying Bills QuickBooks keeps track of all your bills in the Accounts Payable account When you pay your bills using Pay Bills function, the balance in Accounts Payable is reduced To use Pay Bills function: –Select the Vendors menu and then select Pay Bills 133

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 15 Paying Bills Options Show Bills Discount and Credits Payment Method Amt to Pay 134

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 16 Printer Setup Select the File menu and then select Printer Setup Select the Form Name from the drop- down list Select the type of printer and checks you have (voucher checks are most common) Order preprinted checks from Intuit or from another vendor that supplies QuickBooks- compatible checks 138

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 17 Printing Checks You can print checks either individually or all together in a batch: –As you write checks and pay bills, use To be Printed status –Select the File menu, select Print Forms, and then select Checks –Verify the Checking account on which the checks are written –Set the number of the first check you put in the printer –Select the checks to be printed, QuickBooks assigns check numbers when it prints checks –Click Print when you’re ready to print When QuickBooks has finished printing the checks you’ll see the Did check(s) print OK? message 139

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 18 Voiding Checks Voiding checks retain a record of these checks, and prevent gaps in your check number sequence To void a check: –Open the Checking account register and then select check to be voided –Select the Edit menu and then select Void Check –When you void a check, QuickBooks changes the amount to zero, enters “VOID” in the memo field, and marks the check cleared –Click Record to save your change

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 19 Tracking Loans using the Loan Manager Set up a Loan to automatically amortize and track the details of each loan: –From the Banking Navigator, click the Loan Manager icon –In the Loan Manager window, click Add a loan Make Loan Payments: –Select the loan in the Loan List –Click Set Up Payment to make a payment –Confirm that Regular payment is selected –Select Write a check and click OK 145

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 20 Creating Vendor Credits Select Vendors menu and then select Enter Bills Vendor credits are recorded in the Enter Bills window using the Credit radio button Discount window can also be used to record vendor credits, but has several disadvantages: –Reference numbers or memos –Allocation of the credit to multiple accounts. –Allocation to customers or jobs –The use of Items. Apply the credit to one of your unpaid bills for the vendor 151

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 21 Applying Vendor Credits Select the Vendors menu and then select Pay Bills Enter date in the Due on or before field Verify information in the Payment Account field, the Payment Method field and the Payment Date field Click in the checkmark (√) column to the far left of the bill and then click the Set Credits button On the Discounts and Credits window, select the credits to be applied to the bill If you want to apply the credit without paying the bill, reduce the Amt. To Pay column to zero. Click Pay & Close to pay the bill using the vendor credits 153

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 22 Handling Deposits and Refunds from Vendors Vendor Deposits –Using Accounts Payable Vendor Refunds –Using Accounts Payable Vendor Refunds –Directly Expensing Payment 155

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 23 Vendor Deposits – Using Accounts Payable For Vendor Deposits: –Select the Banking menu and then select Write Checks –Code the check to Accounts Payable –This creates a credit for the vendor that can be applied to the bill when it arrives You only code checks to A/P when you are sending deposits to a vendor prior to receiving the bill 155

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 24 Vendor Refunds - Using Accounts Payable To enter a refund from a vendor will depend on how the vendor was originally paid If the vendor was prepaid and the amount of the prepayment was more than the bill –Accounts Payable account will have a negative (debit) balance for that vendor –In this case, apply the refund check from the vendor to this credit balance in Accounts Payable If a check was written to the vendor and coded the check to an expense account –reduce the expense by the amount of the refund 156

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 25 Vendor Refunds - Directly Expensing Payment If you did not use the Accounts Payable features, but instead wrote a check to the vendor and coded the check to an expense account: –Record the refund using a deposit transaction –Use the same expense account you used on the original payment to the vendor 161

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 26 Tracking Petty Cash Set up a separate bank account called Petty Cash Petty cash is used to track cash used for minor expenditures, such as office supplies, postage etc. To make a deposit to a petty cash account, simply write a check in regular account and code the check to the Petty Cash account When cash is used for a company expense, enter the transaction in the Payment column of the Petty Cash account register: –Each cash transaction in can be coded to the appropriate payee, account, class and job –Each cash transaction can be split among multiple accounts 161

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 27 Tracking Company Credit Cards Set up a separate credit card account in QuickBooks for each card Enter each charge individually using the Enter Credit Card Charges window: –Select the Banking menu –Select Record Credit Card Charges –Select Enter Credit Card Charges To pay the credit card bill, use Write Checks and code the check to the credit card account 162

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 28 A/P Reports Vendor Balance Detail: –Shows the detail of each Bill and Bill Payment to each vendor for transactions that “go through” Accounts Payable –Select the Reports menu, select Vendors & Payables, and then select Vendor Balance Detail Transaction List by Vendor: –Shows all transactions associated with vendors, even if the transactions did not “go through” Accounts Payable –Select the Reports menu, then select Vendors & Payables, and then select Transaction List by Vendor To print the report, click Print at the top of the report 166

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 29 Summary of Key Points Set up vendors in the Vendor list Understand how to use classes in QuickBooks Use QuickBooks for job costing Enter expense transactions in several different ways Manage Accounts Payable transactions Print checks 168

PAGE REF #CHAPTER 3: Managing Expenses SLIDE # 30 Summary of Key Points (contd.) Void Checks Track Loans using the QuickBooks Loan Manager Create and apply vendor credits Handle deposits and refunds from Vendors Track petty cash Track credit card charges and payments Create reports about vendor transactions 168