QUICKBOOKS 2015 A COMPLETE COURSE CHAPTER 7 LECTURE

QUICKBOOKS 2015: A COMPLETE COURSE CHAPTER 7 LECTURE GENERAL ACCOUNTING AND END-OF-PERIOD PROCEDURES: MERCHANDISING BUSINESS

CHAPTER FOCUS: GENERAL ACCOUNTING PROCEDURES FOR MERCHANDISING BUSINESS AND PARTNERSHIP General Accounting procedures include: § Customizing Chart of Accounts § Maintaining 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 salary § Rather than issue paychecks, owner withdrawals are recorded § Each owner receives portion of profits based on percentage of his/her investment or on contractual agreements § Net Income to Owners’ Capital accounts distributed based on percentage of ownership Copyright © 2016 Pearson Education, Inc. 7 -2

LECTURE NOTE Examples in lecture may or may not match textbook Lectures illustrate key points within chapters Lectures do not contain every transaction completed in text Not everything presented in chapters will be shown in lecture Some parts of lecture show results of transactions entered in lecture Copyright © 2016 Pearson Education, Inc. 7 -3

FIXED ASSETS Fixed assets are long-lived assets: § Land § Buildings § Furniture § Equipment § Vehicles Fixed assets kept longer than one year Quick. Books can keep track of fixed assets Copyright © 2016 Pearson Education, Inc. 7 -4

FIXED ASSET ITEM LIST Fixed Asset Item List keeps records for each asset This includes: § Asset Name § Date of purchase § Cost § Location § Warranty information § Serial number § Asset account, etc. Fixed Asset Item List does not record depreciation or book value Copyright © 2016 Pearson Education, Inc. 7 -5

FIXED ASSET MANAGER Accountant and Enterprise versions of Quick. Books include Fixed Asset Manager § More comprehensive than Fixed Asset List § Allows use of different depreciation bases § Pulls information about fixed assets from open company file § Accountant determines depreciation for assets and posts journal entry for company file § Fixed Asset Manager integrates with Intuit’s Pro. Series Tax products if tax forms identified prior to use Copyright © 2016 Pearson Education, Inc. 7 -6

CREATE FIXED ASSET ITEM LIST To create click Lists menu, then click Fixed Asset Item List To create new fixed asset item § Use keyboard shortcut Ctrl+N or § Click Item button on Fixed Asset Item screen, and click New Copyright © 2016 Pearson Education, Inc. 7 -7

ADD FIXED ASSET ITEM Enter: § Asset Name: Store Fixtures § Purchase and Asset Description: Store Fixtures § Item is: new § Date: 12/31/14 § Cost: $4, 500 § Asset Account: 1520 – Store Fixtures Click OK Copyright © 2016 Pearson Education, Inc. 7 -8

VIEW FIXED ASSET ITEM LIST Add fixed asset Office Equipment Fixed Asset Item List

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 demonstrate what to do when your reconciliation does not have 0. 00 difference and you click Reconcile Now Copyright © 2016 Pearson Education, Inc. 7 -10

RECONCILE CREDIT CARD Click Reconcile icon § Account: 2100 – Visa § Statement Date: 01/31/2015 § Ending balance: $1, 221. 98 § Finance Charge: $0. 00 § Click Continue Copyright © 2016 Pearson Education, Inc. 7 -11

RECONCILE CREDIT CARD Click transactions for Sierra Office Supply Company, Snow Sports, Inc. ,

RECONCILE CREDIT CARD Notice Ending Balance of $1, 221. 98 and Cleared Balance of

ENTER ADJUSTMENT FOR CREDIT CARD RECONCILIATION $-400. 00 discrepancy, need to make one of three choices: § Return to Reconcile to correct discrepancy § Leave Reconcile to complete reconciliation later § Enter Adjustment to force Quick. Books to match your statement § Quick. Books will post a journal entry to Reconciliation Discrepancies expense account Copyright © 2016 Pearson Education, Inc. 7 -14

ENTER ADJUSTMENT FOR CREDIT CARD RECONCILIATION Click Enter Adjustment On Make Payment screen, click Cancel Select Detail for Reconciliation Report Click Display Copyright © 2016 Pearson Education, Inc. 7 -15

ENTER ADJUSTMENT FOR CREDIT CARD RECONCILIATION Note General Journal entry for -400 Close Report

VIEW ADJUSTMENT FOR CREDIT CARD RECONCILIATION Open Chart of Accounts and scroll to 66900 Reconciliation Discrepancies Double-click account to see Quick. Report Copyright © 2016 Pearson Education, Inc. 7 -17

UNDO LAST RECONCILIATION Click Reconcile icon Account: 2100 – Visa Click Undo Last Reconciliation

UNDO LAST RECONCILIATION Screen: § Recommends file back up § Shows Current Beginning Balance and Previous Beginning Balance § Removes cleared status of transactions, service charges, interest, and balance adjustments Click Continue Copyright © 2016 Pearson Education, Inc. 7 -19

UNDO LAST RECONCILIATION Click OK on Undo Previous Reconciliation When you undo reconciliation, § Beginning Balance changed to $150. 00 § Undoing reconciliation does not remove any service charges, interest, or balance adjustments entered on previous reconciliation Copyright © 2016 Pearson Education, Inc. 7 -20

REDO CREDIT CARD RECONCILIATION Redo reconciliation, Account: 2100 – Visa Statement Date: 01/31/2015 Ending

REDO CREDIT CARD RECONCILIATION Click Mark All to select all Charges and Cash Advances § Redoing a reconciliation does not remove previous Journal entry § Note $400 Difference Copyright © 2016 Pearson Education, Inc. 7 -22

REDO CREDIT CARD RECONCILIATION To go to Journal entry from previous reconciliation: § Click

REDO CREDIT CARD RECONCILIATION To Delete Journal entry use keyboard shortcut Ctrl+D or click Delete icon Click OK on Delete Transaction dialogue box Close Journal Copyright © 2016 Pearson Education, Inc. 7 -24

REDO CREDIT CARD RECONCILIATION Previous Journal entry no longer shows Ending Balance and Cleared

REDO CREDIT CARD RECONCILIATION Click OK on Make Payment screen Display or Print Reconciliation Report Close report If necessary, enter to Payee name and memo on check Print Check Copyright © 2016 Pearson Education, Inc. 7 -26

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Quick. Books groups partner accounts together by account number Easier if each partner’s investment and drawing accounts were organized individually by partner Copyright © 2016 Pearson Education, Inc. 7 -27

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Each partner will have separate capital account with subaccounts for investments and withdrawals Each partner’s capital account will be subaccount of primary capital account, Your Name & Muir, Capital § Use last name only for Your Name Copyright © 2016 Pearson Education, Inc. 7 -28

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Click Chart of Accounts Click Account 3010: Your Name & Muir Capital Use keyboard shortcut Ctrl+E to Edit account Copyright © 2016 Pearson Education, Inc. 7 -29

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Change account number to 3100 Enter your Last Name Add a comma after Muir Make sure account uses only your last name § Example: Horne & Muir, Capital Click Save & Close Copyright © 2016 Pearson Education, Inc. 7 -30

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Use Ctrl+N to create New account Account type: Equity

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Enter new Equity account information: § Number: 3110 § Account Name: First and Last Name, Capital § Enter your full name. Example: Janet Horne, Capital § Subaccount of 3100 – Your Last Name & Muir, Capital Click Save & New Copyright © 2016 Pearson Education, Inc. 7 -32

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 Copyright © 2016 Pearson Education, Inc. 7 -33

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Change account numbers for existing owner equity accounts § Click 3011 – Your Name, Investment § Use Ctrl+E § Change Account Number to 3111 § Change Name to First and Last Name, Investment § Subaccount of 3110 – First and Last Name, Capital § Account is now listed under 3110 First and Last Name, Capital Copyright © 2016 Pearson Education, Inc. 7 -34

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Change Your Name, Drawing to: § First and Last Name, Drawing § 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 Copyright © 2016 Pearson Education, Inc. 7 -35

ORGANIZE INDIVIDUAL PARTNER EQUITY ACCOUNTS Partnership capital account, Your Last Name & Muir, Capital, contains total of all partners equity accounts Each partner’s section contains information for investment, drawing, and capital for individual partner Copyright © 2016 Pearson Education, Inc. 7 -36

PARTNER WITHDRAWAL OF FUNDS An owner in a partnership does not receive paycheck If owner relies on income from partnership for his individual income, withdrawal is made Write a check for owner withdrawal Copyright © 2016 Pearson Education, Inc. 7 -37

WITHDRAWAL OF FUNDS BY PARTNER Click Write Checks icon Complete Check Face: § Pay to Order of: First and Last Name, press Tab § Click Quick. Add and add your name to Other list § Click OK Copyright © 2016 Pearson Education, Inc. 7 -38

WITHDRAWAL OF FUNDS BY PARTNER Date: 01/31/15 Amount: $1, 000 Memo: January Withdrawal Copyright

WITHDRAWAL OF FUNDS BY PARTNER Complete check detail: § Account: 3112 – First and

WITHDRAWAL OF FUNDS BY PARTNER Repeat to issue withdrawal check to Larry Muir §

DISTRIBUTE CAPITAL TO EACH OWNER View Equity section of Balance Sheet § Notice total value of 3110 – First and Last Name, Capital is $19, 000 § Total value of 3120 Larry Muir, Capital is also $19, 000 § 3100 Your Last Name & Muir Capital, Other shows $26, 159. 44 Copyright © 2016 Pearson Education, Inc. 7 -42

DISTRIBUTE CAPITAL TO EACH OWNER Double-click Your Last Name & Muir Capital – Other to view Transactions by Account report Enter dates From 12/01/14 to 01/31/15 Copyright © 2016 Pearson Education, Inc. 7 -43

DISTRIBUTE CAPITAL TO EACH OWNER Transactions include: assets, liabilities, and owners’ equity amounts Copyright

DISTRIBUTE CAPITAL TO EACH OWNER $26, 159. 44 represents equity for owners not recorded as investment or withdrawal Each owner has same investment in business $26, 159. 44 from Your Last Name & Muir, Capital should be equally divided between First and Last Name, Capital and Larry Muir, Capital Copyright © 2016 Pearson Education, Inc. 7 -45

DISTRIBUTE CAPITAL TO EACH OWNER Prepare General Journal entry to transfer amount to two owners § Click Company on Menu bar § Click Make General Journal Entries § Debit 3100 for $26, 159. 44 to transfer capital § Credit 3110 and 3120 for $13, 079. 72 § Use Memo: Transfer Capital to Partners Copyright © 2016 Pearson Education, Inc. 7 -46

DISTRIBUTE CAPITAL TO EACH OWNER Review Equity section of Balance Sheet § 3110 – First and Last Name, Capital – Other and 3120 Larry Muir, Capital – Other contain same amount § Each owner’s total capital is $32, 079. 72 § total 3100 – Your Name & Muir Capital shows value of capital for business Copyright © 2016 Pearson Education, Inc. 7 -47

CLOSING ENTRIES Traditional accrual-basis accounting has four closing entries: § Close Income § Close Expenses § Close Drawing § Transfer Net Income into Owners’ Equity When given a closing date, Quick. Books closes: § Income and expenses You must: § Close Drawing and transfer net income/loss into owners’ equity Copyright © 2016 Pearson Education, Inc. 7 -48

TRANSFER NET INCOME TO PARTNERS Net Income of $2, 766. 75 shown on Balance Sheet needs to be distributed to both partners equally Record a Journal entry to close Retained Earnings and transfer Net Income to each partner Copyright © 2016 Pearson Education, Inc. 7 -49

TRANSFER NET INCOME TO PARTNERS 01/31/15 Journal entry: § Debit 3000 · Owners’ Equity for $2, 766. 75 § Credit 3110 · First and Last Name, Capital for $1, 383. 38 and 3120 · Larry Muir, Capital for $1, 383. 37 § Difference between two amounts results because of an odd number in amount Copyright © 2016 Pearson Education, Inc. 7 -50

VIEW EQUITY SECTION OF BALANCE SHEET Note Owners’ Equity shows -2, 766. 75 Net Income shows 2, 766. 75 Note value of equity section for each owner After distribution of Net Income, Total Equity amount remains same Copyright © 2016 Pearson Education, Inc. 7 -51

CLOSE DRAWING To close each partner’s drawing into individual capital accounts, make General Journal Entry Close First and Last Name, Drawing § Debit 3110 First and Last Name, Capital for $1, 000 § Credit 3112 First and Last Name, Drawing for $1, 000 Copyright © 2016 Pearson Education, Inc. 7 -52

CLOSE DRAWING Close Larry Muir, Drawing § Debit 3120 Larry Muir, Capital for $1,

BALANCE SHEET AFTER CLOSING OWNERS’ DRAWING ACCOUNTS Drawing accounts no longer show 3110 First and Last Name, Capital and 3120 Larry Muir both show $1, 000 less (after drawing was closed) Copyright © 2016 Pearson Education, Inc. 7 -54

MERCHANDISE INVENTORY When business sells merchandise, possible that number of items on hand is different from quantity shown in Quick. Books Can be caused by: § Loss due to theft, fire, or flood § Damage to item in stockroom § Error in previous physical inventory Copyright © 2016 Pearson Education, Inc. 7 -55

PREPARE ADJUSTMENT FOR MERCHANDISE INVENTORY 01/31/15 Found two damaged hats valued at $8 each that need to be discarded Adjust Merchandise Inventory $16 and change quantity of hats on hand to 27 Add new expense account 6190 Merchandise Adjustment to use for adjustment § Removing item from inventory that was not sold is treated as expense § Damaged merchandise that is not salable is considered expense of doing business Copyright © 2016 Pearson Education, Inc. 7 -56

PREPARE ADJUSTMENT FOR MERCHANDISE INVENTORY Click Inventory Activities icon Click Adjust Quantity/Value On Hand… Adjustment Type: Quantity Enter Adjustment Date: 01/31/15 Copyright © 2016 Pearson Education, Inc. 7 -57

PREPARE ADJUSTMENT FOR MERCHANDISE INVENTORY Click drop-down list arrow for Adjustment Account Click <Add

ADD ACCOUNT FOR MERCHANDISE ADJUSTMENT Account Type: Expense § Reduction to inventory because of damage = increase in cost of doing business so it is an expense Number: 6190 Account Name: Merchandise Adjustments Click Save & Close Copyright © 2016 Pearson Education, Inc. 7 -59

PREPARE ADJUSTMENT FOR MERCHANDISE INVENTORY Click Item column Click drop-down list arrow Click Hats Enter New Quantity 27 Press Tab Notice Qty Difference is -2 Copyright © 2016 Pearson Education, Inc. 7 -60

PREPARE ADJUSTMENT FOR MERCHANDISE INVENTORY Number of Item Adjustments is 1 Total Value of Adjustment is -16. 00 § Reduces value of merchandise inventory by $16 § Decrease in hats increased expenses $16, which reduced Net Income and Retained Earnings Click Save & Close when finished Copyright © 2016 Pearson Education, Inc. 7 -61

ADJUST RETAINED EARNINGS FOR MERCHANDISE ADJUSTMENT Extra $16 in expenses from merchandise adjustment to be subtracted from Net Income and Retained Earnings/ Owners’ Equity Access Journal entry for Owners’ Equity Copyright © 2016 Pearson Education, Inc. 7 -62

ADJUST RETAINED EARNINGS FOR MERCHANDISE ADJUSTMENT Click Company on Menu bar Click Make General Journal Entries… Click Previous until you find transaction for Owners’ Equity Copyright © 2016 Pearson Education, Inc. 7 -63

ADJUST RETAINED EARNINGS FOR MERCHANDISE ADJUSTMENT Change Debit to Account 3000 to $2, 750. 75 ($2, 766. 75 – 16. 00) One-half of adjustment is 8. 00 Deduct $8. 00 from each owner’s capital account Change Credit to Accounts 3110 to $1, 375. 38 and 3120 to $1, 375. 37 Copyright © 2016 Pearson Education, Inc. 7 -64

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 prior written permission of publisher. Printed in United States of America. Copyright © 2016 Pearson Education, Inc. 7 -65