1. Chapter 1 Page ref. Chapter 1 Company File Setup and Maintenance 1

2. Chapter 1 Page ref. 2 Objectives 1. Using the EasyStep Interview 2. Adjusting Customer and Vendor Balances after using the EasyStep Interview 3. Performing a Complete Company File Setup – The 12-step process 4. Choosing a Start Date 5. Creating the QuickBooks Company File 6. Setting up QuickBooks Lists 7. Gathering Your Information for Setting up Opening Balances 8. Entering Opening Balances 9. Entering Year-to-Date Income and Expenses 10. Adjusting the Opening Balance for Sales Tax Payable 11. Adjusting Inventory for Physical Quantities on Hand 12. Verifying your Opening Balances 13. Closing Opening Balance Equity into Retained Earnings 14. Backing up the File and Setting the Closing Date 15. Setting up Users and Passwords 1

3. Chapter 1 3 Objective Using the EasyStep Interview

4. Chapter 1 Page ref. 4 Launching the EasyStep Interview 1. Select the File menu and then select New Company 2. The EasyStep Interview window appears 3. To navigate click Next or Prev 4. To exit the Interview and retain all changes, click Leave 1

5. Chapter 1 Page ref. 5 Entering Opening Balances in the EasyStep Interview 1. During the EasyStep Interview, QuickBooks asks you to enter the opening balances for your customers (called Accounts Receivable - A/R) and vendors (called Accounts Payable - A/P) as of your start date 2. The following problems result from entering opening balances during the EasyStep Interview:  QuickBooks posts the opening balances to accounts called Uncategorized Income and Uncategorized Expenses 3. It is best not to enter Opening Balances for customers using the EasyStep Interview 12

6. Chapter 1 6 Objective Adjusting Customer and Vendor Balances after using the EasyStep Interview

7. Chapter 1 Page ref. 7 Adjusting Customer and Vendor Opening Balances after the EasyStep Interview 1. Each customer for whom you entered an opening balance will have an Invoice that you must either edit or replace  Edit the Item column to indicate the Items that you sold on the Invoice  Also, change the date to the original Invoice date and enter the Invoice number of the original Invoice 2. Similarly, each vendor for whom you entered an opening balance will have a Bill that you must either edit or replace 13

8. Chapter 1 8 Objective Performing a Complete Company File Setup – The 12-step process

9. Chapter 1 Page ref. 9 Complete Company File Setup: A 12-Step Process 1. Choose a QuickBooks start date 2. Create a new QuickBooks company file and configure your preferences 3. Set up your Chart of Accounts, company lists 4. Enter opening balances for Balance Sheet accounts (except Accounts Receivable, Accounts Payable, Inventory, Sales Tax Payable, and Retained Earnings 5. Enter outstanding transactions including Checks, Deposits, open Invoices, and unpaid Bills as of the start date 6. If you are setting up mid-year, enter your year-to-date income and expenses 7. Adjust Sales Tax Payable 8. Adjust Inventory to match your physical counts (page 5) and set up Fixed Assets 9. Set up payroll lists and year-to-date payroll information 10. Verify that your Trial Balance report matches your accountant’s Trial Balance on your start date 11. Close the Opening Balance Equity account into Retained Earnings 12. Back up your company file and set the Closing Date and the Closing Date Password to lock the file as of your start date 15

10. Chapter 1 10 Objective Choosing a Start Date

11. Chapter 1 Page ref. 11 Choosing a Start Date – Step 1 1. Your start date is the day before you start using QuickBooks to track your daily transactions 2. It is also the date for which you have complete information for your opening balances 3. Best start dates  Calendar-Year Basis December 31  Fiscal Year basis Last day of fiscal year  For a new company First day of the business 16

12. Chapter 1 12 Objective Creating the QuickBooks Company File

13. Chapter 1 Page ref. 13 Creating the Company File – Step 2 1. Launch QuickBooks. 2. Select the File menu and then select New Company. 3. Click Next on the first three windows of the EasyStep Interview 4. On the fourth window of the EasyStep Interview, click Skip Interview 5. Enter your company information and click Next 6. Select the Company type and then click Next 7. Enter the file name and location where you want to save your company file, click Save 8. It will create your company file with extension.QBW 17

14. Chapter 1 14 Objective Setting up QuickBooks Lists

15. Chapter 1 Page ref. 15 Setting Up the Chart of Accounts – Step 3 1. To set up the Chart of Accounts, you will use the following:  Account Types  Activating Account Numbers  Adding Accounts  Adding Subaccounts  Removing Accounts from the Chart of Accounts  Turning Off Account Numbers  Reordering the Account List 20

16. Chapter 1 Page ref. 16 Account Types 1. Assets  Bank  Accounts Recievable  Other Current Asset  Fixed Asset  Other Asset 2. Liabilities  Accounts Payable  Credit Card  Other Current Liability  Long Term Liability 3. Equity 4. Income  Income  Other Income 5. Expenses  Expense  Other Expense  Cost of Goods Sold 20

17. Chapter 1 Page ref. 17 Activating Account Numbers 1. QuickBooks does not require account numbers 2. If you prefer to have numbers, you can activate them in the Accounting Company Preferences  Select the Edit menu and then select Preferences 21

18. Chapter 1 Page ref. 18 Adding Accounts 1. Select the Lists menu and then select Chart of Accounts 2. Select the Account menu at the bottom of the Chart of Accounts window and then select New 3. Select account type and enter the name etc. 22

19. Chapter 1 Page ref. 19 Adding Subaccounts 1. If you want more detail in your Chart of Accounts, you can add Subaccounts 2. In the New Account window check the Subaccount of field and select the main account from the drop-down list 23

20. Chapter 1 Page ref. 20 Removing Accounts from the Chart of Accounts 1. Following options are available in QuickBooks to delete accounts:  Deleting Accounts - Option 1  Deactivating Accounts - Option 2  Merging Accounts - Option 3 2. QuickBooks will not allow you to delete an account if you have used the account in an Item record or transaction 3. If this is the case, use either Option 2 or Option 3 to remove the account from view in the Chart of Accounts 24

21. Chapter 1 Page ref. 21 Deleting Accounts – Option 1 1. Select the account in the Chart of Accounts list 2. Select the Account menu at the bottom of the Chart of Accounts window and select Delete or press CTRL+D 24

22. Chapter 1 Page ref. 22 Deactivating Accounts – Option 2 1. If you cannot delete an account, you can deactivate it which will cause it to disappear from the Chart of Accounts and reduce the clutter  Select the account in the Chart of Accounts.  Select the Account button and then select Make Inactive from the menu 2. You can still see the account in historical transactions and reports 3. To view all accounts, including the inactive accounts, click Show All 25

23. Chapter 1 Page ref. 23 Merging Accounts – Option 3 1. When you merge two accounts, QuickBooks edits each transaction from the merging account so that it posts to the merged (combined) account 2. For example, if you merge the Entertainment account into the Meals account,  QuickBooks will edit each transaction that posts to Entertainment, making it post to Meals instead  Then QuickBooks will remove the Entertainment account from the Chart of Accounts list 3. Merging Cannot be Undone 4. Once you merge accounts together, there is no way to find out which account the old transactions used (except by reviewing from a backup file) 26

24. Chapter 1 Page ref. 24 Reordering the Account List 1. You can sort the Chart of Accounts list by the account name or number, by the (online status), or by the balance amount  When account numbers are inactive and you click the Name header, QuickBooks sorts the account list alphabetically by account name  When account numbers are active and you click the Name header, QuickBooks sorts the list by account number  Click the other headers to sort by (Online status), Type, or Balance 27

25. Chapter 1 25 Objective Gathering Your Information for Setting up Opening Balances

26. Chapter 1 Page ref. 26 Setting Up Opening Balances – Step 4 1. Gathering Your Information 2. Entering the Opening Balances 3. Understanding Opening Balance Equity 29

27. Chapter 1 Page ref. 27 Gathering Your Information 1. Trial Balance for your start date 2. Bank Statements (all accounts) 3. Outstanding Checks and Deposits 4. Open Invoices 5. Unpaid Bills 6. Employee List and W-4 Information 7. Payroll Liabilities by Item 8. Year-to-Date Payroll Detail by Employee 9. Year-to-Date Payroll Tax Deposits 10. Physical Inventory by Inventory Part 29

28. Chapter 1 28 Objective Entering Opening Balances

29. Chapter 1 Page ref. 29 Entering the Opening Balances – Step 4 1. To enter your opening balances you’ll use one of the three methods:  Method 1 — Directly Editing the Account  Method 2 — Adding a Transaction Directly in Registers  Method 3 - Using a General Journal Entry to Record Opening Balances 2. The method you use will depend on three factors:  How familiar you are with accounting  Whether or not the account you’re editing has transactions  Whether you intend to use the Bank Reconciliation feature to reconcile your accounts 33

30. Chapter 1 Page ref. 30 Method 1 — Directly Editing the Account 1. Use this method if you’re less familiar with accounting 2. Editing each account from the Chart of Accounts is the simplest way to enter opening balances for your Balance Sheet accounts  Display the Chart of Accounts  Select the Bank account  Select the Account menu at the bottom of the list and then select Edit  Enter the amount in the Opening Balance field 33

31. Chapter 1 Page ref. 31 Method 2 — Adding a Transaction Directly in Registers 1. Use this method if the account already has transactions 2. you will need to enter a transaction directly in the register for the account  Display the Chart of Accounts  Double-click the account in which you want to enter an opening balance  Enter a new transaction at the bottom of the register to record the opening balance using the start date and coding the entry to the Opening Bal Equity account  Click Record to save the entry 35

32. Chapter 1 Page ref. 32 Method 3 - Using a General Journal Entry to Record Opening Balances 1. Use this method if you’re familiar with using Journal Entries and if you understand debits and credits  Select the Banking menu and then select Make General Journal Entries.  Fill in the Make General Journal Entries window 2. You can use a General Journal Entry to record some, but not all, of your opening balances 3. On the top line of each General Journal Entry, use an account called Journal Entries  Use the Bank account type when setting up this account in your Chart of Accounts  The Journal Entries account will never have a balance, so it will never show on financial statements  It will have a register where you’ll be able to look at all of your General Journal Entries 35

33. Chapter 1 Page ref. 33 Entering Open Items – Step 5 1. You must enter all the outstanding transactions using the original dates:  Outstanding Checks and Deposits  Open Bills (Accounts Payable)  Open Invoices (Accounts Receivable)  Open Purchase Orders  Open Estimates and Sales Orders 38

34. Chapter 1 34 Objective Entering Year-to-Date Income and Expenses

35. Chapter 1 Page ref. 35 Entering Year-to-Date Income and Expenses – Step 6 1. If your start date is not at the beginning of the fiscal year, use a General Journal Entry to enter your year-to-date income and expenses 2. The entry allows you to summarize the total income and expenses for the first few months of the year 41

36. Chapter 1 36 Objective Adjusting the Opening Balance for Sales Tax Payable

37. Chapter 1 Page ref. 37 Adjusting Opening Balance for Sales Tax Payable – Step 7 1. Open the Sales Tax Payable register 2. There will be entries for each of the open Invoices you entered, this is your uncollected tax 3. The total Sales Tax Liability is a combination of the collected tax and the uncollected tax 4. You will need to subtract the current balance in the account (the uncollected tax) from the amount shown on Trial Balance from your accountant to arrive at the unpaid collected tax 5. Then create a Sales Tax Adjustment for this difference 42

38. Chapter 1 38 Objective Adjusting Inventory for Physical Quantities on Hand

39. Chapter 1 Page ref. 39 Adjusting Inventory, Set up Fixed Assets – Step 8 1. If you have inventory,  you will need to create an inventory adjustment to adjust the actual quantity and value on hand as of your start date  This is done after you enter your outstanding Bills and Invoices, so that the actual inventory counts and costs will be accurate even if some of the Bills and/or Invoices include Inventory Items 2. Setting up Fixed Assets  If you have QuickBooks Pro or Premier, you can track detailed information about your company’s Fixed Assets 3. Setting up Loans  If you have QuickBooks Pro or Premier, you can track detailed information about your loans 42

40. Chapter 1 Page ref. 40 Setup Payroll Lists and Year-to-Date Payroll Information – Step 9 1. Setup Payroll Items list  Gather information about each of your employees, like, name, address, Social Security Number, and W-4 information  Activate the Payroll function in Preferences  Set up payroll accounts in the Chart of Accounts  Using the Payroll Setup Wizard, set up payroll items, payroll vendors, employee defaults, employee records, and year-to-date payroll figures  Add additional payroll items not covered by the Payroll Setup Wizard  Edit payroll items to modify the vendor information and the way the items affect the Chart of Accounts  If setting up mid-year, enter year-to-date information for each employee and enter year-to-date liability payments  Verify payroll item setup, employee setup, and the vendor list  Use the Payroll Checkup wizard and compare reports with your accountant’s or payroll service’s reports 2. Enter Year-To-Date Payroll Information 44

41. Chapter 1 41 Objective Verifying your Opening Balances

42. Chapter 1 Page ref. 42 Verifying your Trial Balance – Step 10 1. Before you transfer the balance of Opening Bal Equity into Retained Earnings, make sure the account balances in QuickBooks match your accountant’s Trial Balance  Select the Reports menu, then select Accountant & Taxes, and then select Trial Balance 44

43. Chapter 1 43 Objective Closing Opening Balance Equity into Retained Earnings

44. Chapter 1 Page ref. 44 Closing Opening Balance Equity to Retained Earnings – Step 11 1. Once you have compared your Trial Balance report to your accountant’s report, use a General Journal Entry to transfer (close) the balance in Opening Bal Equity into Retained Earnings  Select the Banking menu and then select Make Journal Entry 45

45. Chapter 1 45 Objective Backing up the File and Setting the Closing Date

46. Chapter 1 Page ref. 46 Setting the Closing Date and Backing up the File – Step 12 1. Set the start date as the Closing Date to Protect your Setup Balances 2. Backing up your data is very important part of insuring the safety of your data  If your computer stops working  If your hard disk crashes  If you find a corruption in your file 3. To back up your company file:  Select the File menu and then select Backup 46

47. Chapter 1 47 Objective Setting up Users and Passwords

48. Chapter 1 Page ref. 48 Setting Up Users in the Company File 1. QuickBooks provides a feature for defining “users” of the file  This feature allows the “administrator” (the owner of the file) to set privileges for each user of the file  Provides security and user tracking when several people have access to the same data file  Select the Company menu and then select Set up Users 2. Each user should have a password 3. When a user opens the company file, QuickBooks requires a user name and password 4. The privileges granted to that user by the administrator determine what functions of QuickBooks they can access 47

49. Chapter 1 Page ref. 49 Summary of Key Points 1. Using the EasyStep Interview 2. Adjusting Customer and Vendor Balances after using the EasyStep Interview 3. Performing a Complete Company File Setup – The 12-step process 4. Choosing a Start Date 5. Creating the QuickBooks Company File 6. Setting up QuickBooks Lists 7. Gathering Your Information for Setting up Opening Balances 8. Entering Opening Balances 9. Entering Year-to-Date Income and Expenses 10. Adjusting the Opening Balance for Sales Tax Payable 11. Adjusting Inventory for Physical Quantities on Hand 12. Verifying your Opening Balances 13. Closing Opening Balance Equity into Retained Earnings 14. Backing up the File and Setting the Closing Date 15. Setting up Users and Passwords 51