Adjustments and YearEnd Procedures Chapter 9 Objectives Process

Adjustments and Year-End Procedures Chapter 9

Objectives • • • Process 1099 forms for vendors Print 1099 s and 1096 forms Edit, void, and delete transactions Enter general journal entries Track fixed assets Memorize and schedule transactions to be automatically entered • Close the year and enter special transactions for sole proprietorships and partnerships • Set the closing date to lock the company file PAGE REF # 1 CHAPTER 9: Adjustments/Year-End SLIDE # 2

Processing Form 1099 • At the end of each year, you must prepare and send an IRS Form 1099 to each of your eligible vendors and to the IRS • 1099 forms must be sent to your vendors by the last day of January following the applicable year • If the vendor is a corporation or if total annual payments to the vendor are less than $600, you are not required to prepare Form 1099 -MISC • When set up properly, Quick. Books automatically tracks the details of your payments to 1099 vendors PAGE REF # 1 CHAPTER 9: Adjustments/Year-End SLIDE # 3

The 1099 Wizard • The 1099 and 1096 Wizard will allow users to go through four steps to process the 1099 and 1096 forms. – Review and edit 1099 Vendors – Setup account mapping preferences for 1099 s – Run a summary report to review 1099 data – Print 1099 and 1096 forms PAGE REF # 2 CHAPTER 9: Adjustments/Year-End SLIDE # 4

Editing Vendors for 1099 Setup • • Fill out the name and address fields so that the 1099 will print all the information correctly on the form Record the taxpayer ID for each 1099 vendor in addition to selecting that the vendor is eligible for 1099 Make sure to fill out the name fields so that the 1099 will print the information correctly on the form. PAGE REF # 3 CHAPTER 9: Adjustments/Year-End SLIDE # 5

Setting Up 1099 Preferences • • • Select the Edit menu and then select Preferences Scroll down and click Tax: 1099 Click the Company Preferences tab Drop down Account listing to choose the Rent expense to link to Box 1. PAGE REF # 5 CHAPTER 9: Adjustments/Year-End SLIDE # 6

1099 Summary Report PAGE REF # 8 CHAPTER 9: Adjustments/Year-End SLIDE # 7

Printing 1099 s and 1096 Forms • Select Print 1099 s button from the 1099 and 1096 Wizard PAGE REF # 9 CHAPTER 9: Adjustments/Year-End SLIDE # 8

Editing, Voiding, and Deleting Transactions • Unlike many other accounting programs, Quick. Books allows you to change any transaction at any time • Editing Transactions: – To edit (or modify) a transaction in Quick. Books, change the data directly on the form • Voiding and Deleting Transactions: – Voiding and deleting transactions both have the same effect on the General Ledger — zero out the debits and the credits specified by the transaction – Voiding a transaction keeps a record of the date, number, and detail of the transaction; deleting a transaction removes it completely from your file PAGE REF # 10 CHAPTER 9: Adjustments/Year-End SLIDE # 9

Recording Adjustments and General Journal Entries • Adjusting entries are transactions that adjust the balance of one or more accounts • A few examples of adjusting entries in Quick. Books: – 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 PAGE REF # 14 CHAPTER 9: Adjustments/Year-End SLIDE # 10

Creating A General Journal Entry • Depending on your Quick. Books user settings, you may need permission from the file Administrator to create General Journal Entries • Select the Banking menu and then select Make Journal Entry PAGE REF # 14 CHAPTER 9: Adjustments/Year-End SLIDE # 11

Creating A General Journal Entry • Expert Tip: – Set up a bank account called Journal Entries – Use this account (Journal Entries) on the top line of each General Journal Entry – Quick. Books 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 PAGE REF # 14 CHAPTER 9: Adjustments/Year-End SLIDE # 12

Adjusting Expense Accounts Associated with Items • If you use Items to track the details of your expenses, you may need to enter adjustments to the Items as well as the Accounts to which the Items are assigned. • However, the Journal Entry window in Quick. Books has no provision for entering Items as part of the Journal Entry. • To solve the problem, use a “Zero-Dollar Check” in that it will have an equal amount of debits and credits in the splits area of the transaction. PAGE REF # 16 CHAPTER 9: Adjustments/Year-End SLIDE # 13

Tracking Fixed Assets • To track your asset values, create a separate fixed asset account for each grouping of assets you want to track on the Balance Sheet. – For example, you could set up accounts called Furniture and Fixtures, Buildings, or Vehicles. PAGE REF # 17 CHAPTER 9: Adjustments/Year-End SLIDE # 14

Calculating and Recording Depreciation • Select the Company menu, select Planning & Budgeting, select Decision Tools, and then select Depreciate Your Assets • Select the Banking menu and then select Make General Journal Entries PAGE REF # 21 CHAPTER 9: Adjustments/Year-End SLIDE # 15

Memorizing Journal Entries • Before saving the General Journal Entry: – Select the Edit menu – Select Memorize General Journal (or press CTRL+M) • Enter a name in the Name field so that you’ll recognize and easily find this transaction in the Memorized Transaction list • Set the fields in Memorize Transaction window to indicate when and how often you want the transaction entered and then click OK PAGE REF # 22 CHAPTER 9: Adjustments/Year-End SLIDE # 16

Deleting, Rescheduling and Editing Memorized Transactions • Select the Lists menu and then select Memorized Transaction List, or press CTRL+T • Select the 2004 Truck Depreciation transaction in the Memorized Transaction list Then select the Edit menu and select Edit Memorized Transaction, or press CTRL+E: – This allows you to reschedule or rename the transaction, but it does not allow you to edit the actual transaction PAGE REF # 23 CHAPTER 9: Adjustments/Year-End SLIDE # 17

Editing Memorized Transactions • To edit the 2004 Truck Depreciation memorized transaction, double-click it in the Memorized Transaction List: – This displays a new transaction with the contents of the memorized transaction. You can change anything on the transaction and then rememorize it PAGE REF # 24 CHAPTER 9: Adjustments/Year-End SLIDE # 18

Deleting Memorized Transactions • Select the Lists menu and then select Memorized Transaction List, or press CTRL+T • Select the Memorized Transaction in the list that you want to delete • Select the Edit menu and then select Delete Memorized Transaction, or press CTRL+D PAGE REF # 25 CHAPTER 9: Adjustments/Year-End SLIDE # 19

Closing the Year • 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 • In Quick. Books you do not need to make this entry, when you create a Balance Sheet, Quick. Books automatically calculates the balance in Retained Earnings by adding together the total net income for all prior years • At the end of your company’s fiscal year, Quick. Books automatically transfers the net income into Retained Earnings for you PAGE REF # 26 CHAPTER 9: Adjustments/Year-End SLIDE # 20

Closing the Accounting Period • Run reports for the year and verify their accuracy • Enter adjusting entries as necessary and rerun the reports • 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 • Back up your data file • Set the closing date to the last day of the period you are closing PAGE REF # 26 CHAPTER 9: Adjustments/Year-End SLIDE # 21

Closing Sole Proprietorship Drawing Accounts • 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 • 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 • 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 PAGE REF # 27 CHAPTER 9: Adjustments/Year-End SLIDE # 22

Closing Partnership Drawing Accounts • Use a General Journal Entry to close the Partner’s Drawing accounts into each Partner’s Profits account • To find the amounts for the General Journal Entry, use the year-end Trial Balance PAGE REF # 29 CHAPTER 9: Adjustments/Year-End SLIDE # 23

Distributing Net Income to Partners • 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 • 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 PAGE REF # 29 CHAPTER 9: Adjustments/Year-End SLIDE # 24

Setting the Closing Date to “Lock” Transactions • Quick. Books 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 • 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 • To set the closing date: – Select Edit menu and then select Preferences – Select Accounting Company Preferences to enter the Closing date/ Password PAGE REF # 30 CHAPTER 9: Adjustments/Year-End SLIDE # 25

Chapter Review • • • Process 1099 forms for vendors Print 1099 s and 1096 forms Edit, void, and delete transactions Enter general journal entries Track fixed assets Memorize and schedule transactions to be automatically entered • Close the year and enter special transactions for sole proprietorships and partnerships • Set the closing date to lock the company file PAGE REF # 33 CHAPTER 9: Adjustments/Year-End SLIDE # 26