©2012 Pearson Education, Inc. publishing as Prentice Hall 7-1 QUICKBOOKS® 2011: A COMPLETE COURSE CHAPTER 7—LECTURE GENERAL ACCOUNTING AND END-OF-PERIOD PROCEDURES: MERCHANDISING BUSINESS

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©2012 Pearson Education, Inc. publishing as Prentice Hall 7-3 Chapter Focus: General Accounting Procedures for a Merchandising Business and Partnership General Accounting procedures include:  Customization of the Chart of Accounts  Maintaining a Fixed Asset Item list  Recording adjusting entries for Accrual Basis Accounting  Bank and credit card reconciliations Partnership  Company owned by two or more individuals  Partners do not receive a salary  Owner Withdrawals are recorded rather than issuing paychecks  Each owner receives a portion of the profits based on the percentage of his/her investment  Net Income to Owners’ Capital accounts will be distributed based on percentage of ownership

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-4 Fixed Assets Fixed assets are long-lived assets, such as land, buildings, furniture, equipment, and vehicles Fixed assets are kept longer than one year QuickBooks can keep track of fixed assets in one place

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-5 Fixed Asset Item List To track fixed assets, you create a Fixed Asset Item list Fixed Asset List keeps records of an asset’s name, date of purchase, cost, location, warranty information, serial number, asset account, etc. Fixed Asset List does not record depreciation or book value

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-6 Fixed Asset Manager The Accountant or Enterprise versions of QuickBooks include a Fixed Asset Manager More comprehensive than a list of fixed assets. When used, the Fixed Asset Manager pulls information about the fixed assets from an open company file. The accountant can determine the depreciation for the assets and post a journal entry back to the company file. The Fixed Asset Manager also integrates with Intuit’s ProSeries Tax products and must have tax forms identified prior to use.

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-7 Create a Fixed Asset Item List To create click the List menu, then click Fixed Asset Item List To create a new fixed asset item  Use the keyboard shortcut Ctrl+N or  Click the Item button on the Fixed Asset Item screen, and click New

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-8 Add Fixed Asset Item Asset Name: Store Fixtures Purchase Description: Store Fixtures Date: 12/31/10 Cost: $4,500 Asset Account: 1520 – Store Fixtures

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-9 View the Fixed Asset Item List The Fixed Asset Item List shows Store Fixtures as a fixed asset

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-10 Credit Card Reconciliation All balance sheet accounts may be reconciled  These include assets, liabilities, and owner’s equity accounts.  Income, expense, and cost of goods sold accounts are not balance sheet accounts and may not be reconciled. Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account Lecture will also demonstrate what to do when your reconciliation does not have a 0.00 difference and you click Reconcile Now

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-11 Reconcile Credit Card Click the Reconcile icon Account: 2100 – Visa Statement Date: 01/31/2011 Ending balance: $1, Finance Charge: $0.00 Click Continue

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-12 Reconcile Credit Card Click first two transactions Notice Ending Balance of $1, and Cleared Balance of $ Difference is -$750 Click Reconcile Now

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-13 Enter Adjustment for the Credit Card Reconciliation There is a $-750 discrepancy. You may click:  Return to Reconcile to correct the discrepancy  Leave Reconcile to complete reconciliation later  Enter Adjustment to force QuickBooks to match your statement. QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account.

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-14 Enter Adjustment for the Credit Card Reconciliation Click Enter Adjustment On the Make Payment screen, click Cancel Select Detail for the Reconciliation Report

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-15 Enter Adjustment for the Credit Card Reconciliation Position the cursor on the General Journal entry for Double-click to view the Visa Account Register and the Adjustment

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-16 View the Adjustment for the Credit Card Reconciliation In the Register, review the transaction for Reconciliation Discrepancies

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-17 Undo Last Reconciliation Click the Reconcile icon Account: 2100 – Visa Click Locate Discrepancies

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-18 Undo Last Reconciliation On the Locate Discrepancies screen, click Undo Last Reconciliation

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-19 Undo Last Reconciliation To undo the reconciliation, read the screen, click Continue  Beginning Balance will be changed to $150.00

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-20 Undo Last Reconciliation Undoing a reconciliation does not remove any service charges, interest, or balance adjustments entered on the previous reconciliation Click OK

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-21 Redo Credit Card Reconciliation Click Restart Reconciliation  At the top of the screen, note: Last reconciled date Beginning balance amount

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-22 Redo Credit Card Reconciliation Account: 2100 – Visa Statement Date: 01/31/2011 Ending Balance: $1, Click Continue

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-23 Redo Credit Card Reconciliation Click Mark All Redoing a reconciliation does not remove the Journal entry entered previously. Go to the Journal entry from the previous reconciliation:  click the 01/31/11 transaction for 750  Click Go To

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-24 Redo Credit Card Reconciliation To Delete the Journal entry use the keyboard shortcut Ctrl+D or:  Click Edit on the menu bar  Click Delete General Journal  Click OK on the Are You Sure dialogue box  Close the Journal

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-25 Redo Credit Card Reconciliation The items in the Charges and Cash Advances column have been marked The previous Journal entry is no longer shown because it has been deleted The Ending Balance and Cleared Balance match The Difference is 0.00 Click Reconcile Now

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-26 Partner Withdrawal of Funds An owner in a partnership does not receive a paycheck If an owner relies on the income from the partnership for his individual income, a withdrawal is made An owner withdrawal is recorded on a check

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-27 Withdrawal of Funds by Partner Click Write Checks icon Complete the Check Face:  Pay to the Order: Your Name  Click QuickAdd and add the your name to the Other list  Click OK

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-28 Withdrawal of Funds by Partner  Date: 01/31/11  Amount: $500  Memo: Owner Withdrawal

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-29 Withdrawal of Funds by Partner Complete the check detail:  Account: 3013 – Your Name, Drawing In a partnership a drawing account and an investment account are created for each partner Notice the account for the other partner: 3014 – Larry Muir, Drawing It is used to write his withdrawal check

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-30 Organize Individual Partner Equity Accounts QuickBooks groups the partner accounts together by account number It would be easier if each partner’s investment and drawing accounts were organized individually by partner

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-31 Organize Individual Partner Equity Accounts Each partner will have a separate capital account with subaccounts for investments and withdrawals Each partner’s separate capital account will be a subaccount of the primary capital account, Your Last Name & Muir, Capital

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-32 Organize Individual Partner Equity Accounts Click Chart of Accounts Click Account 3010: Your Last Name & Muir, Capital Use the keyboard shortcut Ctrl+E to Edit the account Change the account number to 3100 Make sure this account uses only your last name in this title  Example: Horne & Muir Capital Click Save & Close

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-33 Organize Individual Partner Equity Accounts Use the keyboard shortcut Ctrl+N to create a New account Account type: Equity Click Continue

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-34 Organize Individual Partner Equity Accounts Enter the new account information:  Number: 3110  Account Name: First and Last Name, Capital This should be your full name. Example: Janet Horne, Capital  Subaccount of 3100 – Your Last Name & Muir Capital Click Save & New

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-35 Organize Individual Partner Equity Accounts Add Equity Account for Larry Muir  Number: 3120  Account Name: Larry Muir, Capital  Subaccount of 3100 – Your Last Name & Muir, Capital Click Save & Close

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-36 Organize Individual Partner Equity Accounts Change account numbers for existing owner equity accounts Edit 3011 – First and Last Name, Investment  Change the account number to 3111  Subaccount of 3110 – First and Last Name, Capital

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-37 Organize Individual Partner Equity Accounts Change First & Last Name, Drawing to:  Account number 3112  Subaccount of 3110 Change Larry Muir, Investment to:  Account number 3121  Subaccount of 3120 Change Larry Muir, Drawing to:  Account number 3122  Subaccount of 3120

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-38 Organize Individual Partner Equity Accounts The partnership capital account, Your Last Name & Muir Capital, contains the total of the all the partners equity accounts Each partner’s section contains information for investment, drawing, and capital for the individual partner

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-39 Distribute Capital to Each Owner View Equity section of the Balance Sheet Notice the total value of 3110 – First & Last Name, Capital is $19,500 The total value of Larry Muir, Capital is also $19, Your Name & Muir Capital, Other shows $25,459.44

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-40 Distribute Capital to Each Owner The $25, represents equity for the owners that has not been recorded as an investment or a withdrawal. This could include net income from previous business periods and other equity items. Each owner has the same investment in the business so the $25, from Your Last Name & Muir, Capital should be equally divided between First & Last Name, Capital and Larry Muir, Capital Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu Bar Click Make General Journal Entries

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-41 Distribute Capital to Each Owner Debit 3100 $25, to transfer the capital Credit 3110 and 3120 $12, Use the Memo: Transfer capital to owners

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-42 Distribute Capital to Each Owner Review the Equity section of the Balance Sheet Note 3110 – First and Last Name, Capital – Other and 3120 Larry Muir, Capital – Other contain the same amount Each owner’s total capital is $32, The total 3100 – Your Name & Muir Capital shows the value of capital for the business, which is the same as it was before distributing the capital to each owner

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-43 Transfer Net Income to Partners The Net Income of $3, needs to be distributed to both partners equally Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-44 Transfer Net Income to Partners 01/31/11 Journal entry:  Debit 3000 · Retained Earnings $3,  Credit 3110 · First and Last Name, Capital for $1, and 3120 · Larry Muir, Capital for $1, The difference between the two amounts results because of an odd number in the amount

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-45 View Equity Section of the Balance Sheet Note Retained Earnings shows -3, and Net Income shows 3, Note the value of the equity section for each owner After the distribution of Net Income, the Total Equity amount remains the same

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-46 Merchandise Inventory When a business sells merchandise, it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken This can be caused by:  Loss due to theft, fire, or flood  Damage to an item in the stockroom  Error in a previous physical inventory

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-47 Prepare Adjustment for Merchandise Inventory 01/31/11 Found two damaged hats for $8 each that need to be discarded Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27 Add a new expense account 6190 Merchandise Adjustment to use for the adjustment  Removing an item from the inventory that was not sold is treated as an expense

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-48 Prepare Adjustment for Merchandise Inventory Click the Inventory Activities icon Click Adjust Quantity/Value On Hand… Enter the Adjustment Date 01/31/11 Click the drop- down list arrow for Adjustment Account Click

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-49 Add Account for Merchandise Adjustment Account Type: Expense  A reduction to inventory because of damage is an increase in the cost of doing business so it is an expense Number: 6190 Account Name: Merchandise Adjustments Click Save & Close

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-50 Prepare Adjustment for Merchandise Inventory Click the Item column Click the drop-down list arrow Click Hats Enter the New Quantity of 27 Press Tab Notice the Qty Difference is -2

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-51 Prepare Adjustment for Merchandise Inventory Number of Item Adjustments is 1 The Total Value of Adjustment is  This reduces the value of merchandise inventory by $16  The decrease in hats increased expenses $16, which reduced Net Income and Retained Earnings Click Save & Close when finished

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-52 Adjust Retained Earnings for Merchandise Adjustment The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings Access the Journal entry for Retained Earnings

©2012 Pearson Education, Inc. publishing as Prentice Hall 7-53 Adjust Retained Earnings for Merchandise Adjustment Go to Make General Journal Entries Click Previous until you find the transaction for Retained Earnings Change Debit to Account 3000 to $3, ($3, – 16.00) One-half of the adjustment is 8.00 Deduct $8.00 from each owner’s capital account Change Credit to Accounts 3110 to $1, and 3120 to $1,730.53