ASSIGNMENTS
Exercise 7.1: Profit & Loss: Vertical Analysis
SCENARIO
You vaguely recall from your college accounting course that performing
financial statement analysis can reveal additional useful information. Since
Mr. Castle asked for whatever additional information he might need, you
decide to print a vertical analysis of the income statement using QuickBooks.
Task 1: Restore Company File
Note: It is not necessary to restore if you already have the QBW file open from
Chapter 7. Proceed to Step 6 for directions to change the Company name to
[your name] Exercise 7.1.
If your QuickBooks working file (.QBW) for Chapter 7 is not available, restore
the backup file for Chapter 7 as follows.
Restore
Hard Drive (C:)
File name: [your name] Rock Castle.QBW
Step 1:
Insert the backup disk.
Step 2:
Click Restore a backup file (or click File, Restore).
Step 3:
Enter the location of the backup disk and the backup filename: [your
name] Chapter 7 Rock Castle Backup.QBB.
Step 4:
Identify the restored file:
 Filename: [your name] Rock Castle.QBW.
 Location: C:\Program Files\Intuit\QuickBooks Pro.
Step 5:
Click Restore. If prompted, enter your User ID and Password.
Step 6:
Change the company name to: [your name] Exercise 7.1 Rock Castle
Construction.
Task 2: Profit & Loss: Vertical Analysis
Prepare a customized profit and loss statement that shows each item on the
statement as a percentage of sales (income):
Step 1:
Open the Report Finder (click Reports in the Navigators window).
Step 2:
Select Type of Report: Company & Financial.
Step 3:
Select Report: Profit & Loss Standard.
Step 4:
Select Date Range: This Fiscal Quarter.
Step 5:
To customize the report, click the Modify Report button in the lower
left corner of the Report Finder window.
Step 6:
When the following Modify Report window appears, select: % of
Income.
Step 7:
Click the Header/Footer tab and insert [your name] Exercise 7.1 in
the report footer. Then click OK.
Step 8:
Click the Print button to print the report using the Portrait
orientation.
Step 9:
 On the printout, circle or highlight the single largest expense as a
percentage of income.
Step 10:  On the printout, circle or highlight the profit margin (income as a
percentage of sales).
Task 3: Back Up Exercise 7.1
Back up the Exercise 7.1 file to a disk.
Backup
Disk
File name: [your name] Exercise 7.1 Rock Castle Backup.QBB
Step 1:
Insert the backup disk.
Step 2:
Click File, Back Up.
Step 3:
Enter the location of the backup disk and the backup filename: [your
name] Exercise 7.1 Rock Castle Backup.QBB.
Step 4:
Click OK.
Step 5:
Click OK after the backup is complete.
Exercise 7.2: Balance Sheet: Vertical Analysis
SCENARIO
You decide to also prepare a customized balance sheet that displays each
account on the balance sheet as a percentage of total assets. This vertical
analysis indicates the proportion of total assets that each asset represents. For
example, inventory might be 30 percent of total assets. Vertical analysis also
helps to assess the percentage of assets financed by debt versus owner’s equity.
Task 1: Restore Company File
Note: It is not necessary to restore if you already have the QBW file open from
Exercise 7.1. Proceed to Step 6 for directions to change the company name.
If your QuickBooks working file (.QBW) for Exercise 7.1 is not available, restore
the backup file as follows.
Restore
Hard Drive (C:)
File name: [your name] Rock Castle.QBW
Step 1:
Insert the backup disk.
Step 2:
Click Restore a backup file (or click File, Restore).
Step 3:
Enter the location of the backup disk and the backup filename: [your
name] Exercise 7.1 Rock Castle Backup.QBB.
Step 4:
Identify the restored file:
 Filename: [your name] Rock Castle.QBW.
 Location: C:\Program Files\Intuit\QuickBooks Pro.
Step 5:
Click Restore. If prompted, enter your User ID and Password.
Step 6:
Change the company name to: [your name] Exercise 7.2 Rock Castle
Construction.
Task 2: Balance Sheet:
Vertical Analysis, Export to Excel
Prepare a customized balance sheet that shows each account as a percentage
of total assets.
Step 1:
From the Report Finder, select Type of Report: Company & Financial.
Step 2:
Select Report: Balance Sheet Standard.
Step 3:
Select Date Range: This Fiscal Quarter.
Step 4:
Click the Display button to display the balance sheet report.
Step 5:
Click the Modify Report button and select: % of Column.
Step 6:
Insert [your name] Exercise 7.2 in the report footer.
Step 7:
Print the customized balance sheet using the Portrait orientation.
Step 8:
 On the printout, circle or highlight the asset that represents the
largest percentage of assets.
Step 9:
 On the printout, circle or highlight the percentage of assets
financed with debt. (Hint: What is the percentage of total liabilities?)
Step 10: Export the customized balance sheet to Excel by clicking the Excel
button in the Balance Sheet window. Print the Excel spreadsheet
and compare it to your QuickBooks printout.
Task 3: Back Up Exercise 7.2
Backup
Disk
File name: [your name] Exercise 7.2 Rock Castle Backup.QBB
Step 1:
Insert the backup disk.
Step 2:
Click File, Back Up.
Step 3:
Enter the location of the backup disk and the backup filename: [your
name] Exercise 7.2 Rock Castle Backup.QBB.
Step 4:
Click OK.
Step 5:
Click OK after the backup is complete.
Exercise 7.3: Depreciation Decision Tool
To learn more about depreciation, see the QuickBooks Decision Tools.
Step 1:
Click Company on the menu bar, and then click Company Center to
display the Company Center window.
Step 2:
Click More Decision Tools.
Step 3:
Select: Depreciate Your Assets. Then read about depreciation basics.
Step 4:
 Using word processing or E-mail software, prepare and print a
short E-mail to Mr. Castle that summarizes depreciation basics and
answers the following questions:
 What set of accounting rules are followed when preparing
financial statements for bankers?
 What set of rules are followed when preparing federal income tax
forms?
 What is the popular definition of depreciation?
 What is the financial accounting definition of depreciation?
 What is the tax definition of depreciation?