Chapter
1
Chapter 1
Page ref.
Company File Setup and Maintenance
1
Chapter
1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Objectives
Using the EasyStep Interview
Adjusting Customer and Vendor Balances after using the EasyStep
Interview
Performing a Complete Company File Setup – The 12-step process
Choosing a Start Date
Creating the QuickBooks Company File
Setting up QuickBooks Lists
Gathering Your Information for Setting up Opening Balances
Entering Opening Balances
Entering Year-to-Date Income and Expenses
Adjusting the Opening Balance for Sales Tax Payable
Adjusting Inventory for Physical Quantities on Hand
Verifying your Opening Balances
Closing Opening Balance Equity into Retained Earnings
Backing up the File and Setting the Closing Date
Setting up Users and Passwords
Page ref.
1
2
Chapter
1
Objective
Using the EasyStep
Interview
3
Chapter
1
1.
2.
3.
4.
Launching the EasyStep
Interview
Select the File menu and then select New Company
The EasyStep Interview window appears
To navigate click Next or Prev
To exit the Interview and retain all changes, click Leave
Page ref.
1
4
Chapter
1
1.
2.
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
The following problems result from entering opening
balances during the EasyStep Interview:

3.
Entering Opening Balances in
the EasyStep Interview
QuickBooks posts the opening balances to accounts called
Uncategorized Income and Uncategorized Expenses
It is best not to enter Opening Balances for
customers using the EasyStep Interview
Page ref.
12
5
Chapter
1
Objective
Adjusting Customer and
Vendor Balances after using
the EasyStep Interview
6
Chapter
1
1.
Each customer for whom you entered an
opening balance will have an Invoice that
you must either edit or replace


2.
Adjusting Customer and Vendor Opening
Balances after the EasyStep Interview
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
Similarly, each vendor for whom you entered
an opening balance will have a Bill that you
must either edit or replace
Page ref.
13
7
Chapter
1
Objective
Performing a Complete
Company File Setup – The
12-step process
8
Chapter
1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
Complete Company File Setup:
A 12-Step Process
Choose a QuickBooks start date
Create a new QuickBooks company file and configure your preferences
Set up your Chart of Accounts, company lists
Enter opening balances for Balance Sheet accounts (except Accounts
Receivable, Accounts Payable, Inventory, Sales Tax Payable, and Retained
Earnings
Enter outstanding transactions including Checks, Deposits, open Invoices,
and unpaid Bills as of the start date
If you are setting up mid-year, enter your year-to-date income and expenses
Adjust Sales Tax Payable
Adjust Inventory to match your physical counts (page 5) and set up Fixed
Assets
Set up payroll lists and year-to-date payroll information
Verify that your Trial Balance report matches your accountant’s Trial Balance
on your start date
Close the Opening Balance Equity account into Retained Earnings
Back up your company file and set the Closing Date and the Closing Date
Password to lock the file as of your start date
Page ref.
15
9
Chapter
1
Objective
Choosing a Start Date
10
Chapter
1
1.
2.
3.
Choosing a Start Date – Step 1
Your start date is the day before you start using
QuickBooks to track your daily transactions
It is also the date for which you have complete
information for your opening balances
Best start dates

Calendar-Year Basis
December 31

Fiscal Year basis
Last day of fiscal year

Page ref.
For a new company
First day of the business
16
11
Chapter
1
Objective
Creating the QuickBooks
Company File
12
Chapter
1
1.
2.
3.
4.
5.
6.
7.
8.
Creating the Company File –
Step 2
Launch QuickBooks.
Select the File menu and then select New
Company.
Click Next on the first three windows of the
EasyStep Interview
On the fourth window of the EasyStep Interview,
click Skip Interview
Enter your company information and click Next
Select the Company type and then click Next
Enter the file name and location where you want to
save your company file, click Save
It will create your company file with extension .QBW
Page ref.
17
13
Chapter
1
Objective
Setting up QuickBooks
Lists
14
Chapter
1
1.
Setting Up the Chart of
Accounts – Step 3
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
Page ref.
20
15
Chapter
1
1.
Account Types
Assets





2.
Bank
Accounts Recievable
Other Current Asset
Fixed Asset
Other Asset
Liabilities




Accounts Payable
Credit Card
Other Current Liability
Long Term Liability
3.
4.
Equity
Income


5.
Income
Other Income
Expenses



Expense
Other Expense
Cost of Goods Sold
Page ref.
20
16
Chapter
1
1.
2.
Activating Account Numbers
QuickBooks does not
require account
numbers
If you prefer to have
numbers, you can
activate them in the
Accounting Company
Preferences

Select the Edit menu
and then select
Preferences
Page ref.
21
17
Chapter
1
1.
2.
3.
Adding Accounts
Select the Lists menu
and then select Chart
of Accounts
Select the Account
menu at the bottom of
the Chart of Accounts
window and then
select New
Select account type
and enter the name
etc.
Page ref.
22
18
Chapter
1
1.
2.
Adding Subaccounts
If you want more
detail in your Chart of
Accounts, you can
add Subaccounts
In the New Account
window check the
Subaccount of field
and select the main
account from the
drop-down list
Page ref.
23
19
Chapter
1
1.
Removing Accounts from the
Chart of Accounts
Following options are available in
QuickBooks to delete accounts:



Deleting Accounts - Option 1
Deactivating Accounts - Option 2
Merging Accounts - Option 3
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
2.
Page ref.
24
20
Chapter
1
1.
2.
Deleting Accounts – Option 1
Select the account in the Chart of Accounts list
Select the Account menu at the bottom of the Chart
of Accounts window and select Delete or press
CTRL+D
Page ref.
24
21
Chapter
1
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


2.
3.
Deactivating Accounts –
Option 2
Select the account in the Chart of Accounts.
Select the Account button and then select Make Inactive
from the menu
You can still see the account in historical
transactions and reports
To view all accounts, including the inactive
accounts, click Show All
Page ref.
25
22
Chapter
1
1.
2.
Merging Accounts – Option 3
When you merge two accounts, QuickBooks edits
each transaction from the merging account so that it
posts to the merged (combined) account
For example, if you merge the Entertainment
account into the Meals account,


3.
4.
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
Merging Cannot be Undone
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)
Page ref.
26
23
Chapter
1
1.
Reordering the Account List
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
Page ref.
27
24
Chapter
1
Objective
Gathering Your Information
for Setting up Opening
Balances
25
Chapter
1
1.
2.
3.
Setting Up Opening Balances –
Step 4
Gathering Your Information
Entering the Opening Balances
Understanding Opening Balance Equity
Page ref.
29
26
Chapter
1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Gathering Your Information
Trial Balance for your start date
Bank Statements (all accounts)
Outstanding Checks and Deposits
Open Invoices
Unpaid Bills
Employee List and W-4 Information
Payroll Liabilities by Item
Year-to-Date Payroll Detail by Employee
Year-to-Date Payroll Tax Deposits
Physical Inventory by Inventory Part
Page ref.
29
27
Chapter
1
Objective
Entering Opening Balances
28
Chapter
1
1.
To enter your opening balances you’ll use one of the
three methods:



2.
Entering the Opening Balances
– Step 4
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
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
Page ref.
33
29
Chapter
1
Method 1 — Directly Editing the
Account
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
1.




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
Page ref.
33
30
Chapter
1
1.
2.
Method 2 — Adding a
Transaction Directly in Registers
Use this method if the account already has
transactions
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
Page ref.
35
31
Chapter
1
1.
Use this method if you’re familiar with using Journal
Entries and if you understand debits and credits


2.
3.
Method 3 - Using a General Journal
Entry to Record Opening Balances
Select the Banking menu and then select Make General
Journal Entries.
Fill in the Make General Journal Entries window
You can use a General Journal Entry to record
some, but not all, of your opening balances
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
Page ref.
35
32
Chapter
1
1.
Entering Open Items – Step 5
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
Page ref.
38
33
Chapter
1
Objective
Entering Year-to-Date
Income and Expenses
34
Chapter
1
Entering Year-to-Date Income
and Expenses – Step 6
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
1.
Page ref.
41
35
Chapter
1
Objective
Adjusting the Opening
Balance for Sales Tax
Payable
36
Chapter
1
1.
2.
3.
4.
5.
Adjusting Opening Balance for
Sales Tax Payable – Step 7
Open the Sales Tax Payable register
There will be entries for each of the open Invoices
you entered, this is your uncollected tax
The total Sales Tax Liability is a combination of the
collected tax and the uncollected tax
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
Then create a Sales Tax Adjustment for this
difference
Page ref.
42
37
Chapter
1
Objective
Adjusting Inventory for
Physical Quantities on Hand
38
Chapter
1
1.
If you have inventory,


2.
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
Setting up Fixed Assets

3.
Adjusting Inventory, Set up
Fixed Assets – Step 8
If you have QuickBooks Pro or Premier, you can track
detailed information about your company’s Fixed Assets
Setting up Loans

If you have QuickBooks Pro or Premier, you can track
detailed information about your loans
Page ref.
42
39
Chapter
1
Setup Payroll Items list
1.









2.
Setup Payroll Lists and Year-to-Date
Payroll Information – Step 9
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
Page ref.
Enter Year-To-Date Payroll Information
44
40
Chapter
1
Objective
Verifying your Opening
Balances
41
Chapter
1
1.
Verifying your Trial Balance –
Step 10
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
Page ref.
44
42
Chapter
1
Objective
Closing Opening Balance
Equity into Retained
Earnings
43
Chapter
1
1.
Closing Opening Balance Equity
to Retained Earnings – Step 11
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
Page ref.
45
44
Chapter
1
Objective
Backing up the File and
Setting the Closing Date
45
Chapter
1
Setting the Closing Date and
Backing up the File – Step 12
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
1.



3.
If your computer stops working
If your hard disk crashes
If you find a corruption in your file
To back up your company file:

Select the File menu and then select Backup
Page ref.
46
46
Chapter
1
Objective
Setting up Users and
Passwords
47
Chapter
1
1.
QuickBooks provides a feature for defining “users”
of the file



2.
3.
4.
Setting Up Users in the
Company 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
Each user should have a password
When a user opens the company file, QuickBooks
requires a user name and password
The privileges granted to that user by the
administrator determine what functions of
QuickBooks they can access
Page ref.
47
48
Chapter
1
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Summary of Key Points
Using the EasyStep Interview
Adjusting Customer and Vendor Balances after using the EasyStep
Interview
Performing a Complete Company File Setup – The 12-step process
Choosing a Start Date
Creating the QuickBooks Company File
Setting up QuickBooks Lists
Gathering Your Information for Setting up Opening Balances
Entering Opening Balances
Entering Year-to-Date Income and Expenses
Adjusting the Opening Balance for Sales Tax Payable
Adjusting Inventory for Physical Quantities on Hand
Verifying your Opening Balances
Closing Opening Balance Equity into Retained Earnings
Backing up the File and Setting the Closing Date
Setting up Users and Passwords
Page ref.
51
49