Supplemental Guide. Module 3 Special Transactions

Transcription

1 QUICKBOOKS DESKTOP ADVANC ED CERTIFICATION Supplemental Guide Module 3 Special Transactions

2 Copyright Copyright 2015 Intuit, Inc. All rights reserved. Intuit, Inc Headquarters Drive Plano, TX Trademarks 2015 Intuit, Inc. All rights reserved. Intuit, the Intuit logo, Intuit ProLine, Lacerte, ProAdvisor, ProSeries and QuickBooks, among others, are trademarks or registered trademarks of Intuit, Inc. in the United States and other countries. Other parties marks are the property of their respective owners. Notice to Readers The publications distributed by Intuit, Inc. are intended to assist accounting professionals in their practices by providing current and accurate information. However, no assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a client s particular situation. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit, Inc. does not render any accounting, legal or other professional advice, nor does it have any responsibility for updating or revising any information presented herein. Intuit, Inc. cannot warrant that the material contained herein will continue to be accurate nor that it is completely free of errors when published. Readers should verify statements before relying on them.

3 Table of Contents Table of Contents About the Author... 4 Supplemental Guide Overview... 5 Purpose of this Guide... 5 Learning Objectives... 5 Training at a Glance... 6 Topic 1: Barter Transactions... 8 Introduction to Barter Transactions... 8 When a Customer is also a Vendor... 9 Topic 2: Customer or Vendor Prepayments Introduction to Customer or Vendor Prepayments Customer Prepayments Customer Prepayments Method 1: Client Retainers Account Customer Prepayments Method 2: Receive Payment Vendor Prepayments Method 1: Vendor Prepayments Account Method 2: Write Check to Accounts Payable Supplemental Guide QuickBooks Desktop Advanced Certification 1

4 Table of Contents Topic 3: Unique Sales Tax Situations Introduction to Unique Sales Tax Situations Maximum Sales Tax Different Products, Different Rates Different Tax Rate Locations Topic 4: Employee Loan Tracking Introduction to Employee Loan Tracking Funds Advanced to Employee Employee Paying Back Loan Over Time Report on Employee Advances Account Topic 5: Using an Outside Payroll Service Introduction to Using an Outside Payroll Service Lump Sum Payroll Transactions Individual Payroll Transactions Using Intuit Online Payroll Topic 6: Correcting Payroll Liabilities Introduction to Correcting Payroll Liabilities Payments Entered Incorrectly Spot Incorrect Payroll Liability Payments Fix Incorrect Payroll Liabilities Supplemental Guide QuickBooks Desktop Advanced Certification 2

5 Table of Contents Topic 7: Tracking Retail Sales Introduction to Tracking Retail Sales Stores with Their Own POS Systems Credit Card Payments Including Tips Handling Merchant Fees Topic 8: Working with Bank Feeds & Rules Introduction to Working with Bank Feeds & Rules Bank Feeds Setup Rules Reconciling Downloaded Transactions Common Error Messages Topic 9: Working with Multiple Currencies Introduction to Working with Multiple Currencies When Multicurrency is Enabled Pros & Cons of Multicurrency Home Currency Adjustment Troubleshooting A/R and A/P Reporting Issues Converting from Foreign Currency A Directly to Foreign Currency B Guide Conclusion Supplemental Guide QuickBooks Desktop Advanced Certification 3

6 About the Author About the Author Esther Friedberg Karp Esther Friedberg Karp is an internationally-renowned trainer, writer, business consultant and speaker. Although she is based in Toronto, Canada, Esther has the unique distinction of holding ProAdvisor certifications in the United States, Canada and the United Kingdom. She has authored materials and delivered educational and certification courses for Intuit in all those countries as well as Australia, where she conducted live QBO training. She has spoken at QuickBooks conferences as well as those of various accounting and professional organizations, and written countless articles for Intuit Global. Esther counts among her clients companies from around the world, as well as accounting professionals who seek her out on behalf of their own clients for her expertise in various countries editions of QuickBooks Desktop and Online, and for her talent in customizing QuickBooks usage for different industries. Esther holds a BSc from the University of Toronto in Actuarial Science and Mathematics, and an MBA in Marketing in Finance from York University s Schulich School of Business. Esther can be reached at esther@e-compubooks.com or Supplemental Guide QuickBooks Desktop Advanced Certification 4

7 Supplemental Guide Overview Supplemental Guide Overview PURPOSE OF THIS GUIDE From the recorded session earlier, we learned how to use QuickBooks Desktop for a number of special transactions that deviate from the usual, anticipated, day-to-day accounting department workflows. Each of the workflows and details presented in this guide are intended to help you understand how to use QuickBooks Desktop properly in special transactions. LEARNING OBJECTIVES Identify the steps to record barter transactions in QuickBooks Determine the options for recording and reporting on customer and vendor prepayments or deposits Recognize the advantages and disadvantages of the various options for recording customer and vendor prepayments List the steps to use sales tax tracking in unique situations Identify how to track employee loans and repayments using QuickBooks payroll Identify the steps to record payroll from an outside service into QuickBooks Determine the steps to correct payroll liabilities in QuickBooks List the steps to track retail sales in QuickBooks Utilize bank feeds and bank rules Identify ways to save time using downloaded transactions Determine the advantages and disadvantages of working with multiple currencies Specify the steps to remedy reporting issues with multiple currencies Supplemental Guide QuickBooks Desktop Advanced Certification 5

8 Supplemental Guide Overview TRAINING AT A GLANCE Use this as a guide to selecting specific activities you want to cover. Topic Content Learning Objective 1. Barter Transactions 2. Customer or Vendor Prepayments When a customer is also a vendor Netting out receivables and payables Use of a barter bank account Customer prepayments Vendor prepayments Identify the steps to record barter transactions in QuickBooks Determine the options for recording and reporting on customer and vendor prepayments or deposits Recognize the advantages and disadvantages of the various options for recording customer and vendor prepayments 3. Unique Sales Tax Situations Maximum sales tax Different products, different rates Different tax rate locations List the steps to use sales tax tracking in unique situations 4. Employee Loan Tracking Funds advanced to employee as loan Employee is paying back over time off their paycheck Use payroll item for repayments Identify how to track employee loans and repayments using QuickBooks payroll 5. Using an Outside Payroll Service Lump sum payroll transactions Individual payroll transactions Using Intuit Online Payroll Identify the steps to record payroll from an outside service into QuickBooks 6. Correcting Payroll Liabilities Payments entered incorrectly Spot incorrect payroll liability payments Fixing incorrect payroll liabilities Determine the steps to correct payroll liabilities in QuickBooks 7. Tracking Retail Sales Stores with their own POS systems Credit cards include tips Handling merchant fees List the steps to track retail sales in QuickBooks 8. Working with Bank Feeds & Rules Setup Rules Reconciling downloaded transactions Common error messages Utilize bank feeds and bank rules Identify ways to save time using downloaded transactions Supplemental Guide QuickBooks Desktop Advanced Certification 6

9 Supplemental Guide Overview Topic Content Learning Objective 9. Multiple Currencies When Multicurrency is enabled Pros and cons of turning on Multicurrency Home Currency Adjustment troubleshooting A/R and A/P reporting issues Converting from foreign currency A to foreign currency B Determine the advantages and disadvantages of working with multiple currencies Specify the steps to remedy reporting issues with multiple currencies Supplemental Guide QuickBooks Desktop Advanced Certification 7

10 Topic 1: Barter Transactions Topic 1: Barter Transactions INTRODUCTION TO BARTER TRANSACTIONS We know that QuickBooks Desktop is based on names within various lists, including the Vendor list and the Customer list. We also know that the same name (with exactly the same spelling, spacing and punctuation) cannot be both a customer and a vendor. However, in real life, that s not always the way business works. Many businesses have both a buying and selling relationship with other businesses. And that means a company can belong on both the Vendor list and Customer list. Company A could be getting bills and issuing sales invoices to Company B, which means that Company A is both a customer and a vendor to Company B and vice versa. While checks and payments for the full amounts of payables and receivables could potentially fly back and forth between companies A and B, there is another way which mimics the true barter dealings that take place between companies. This topic covers three main concepts: What to do in QuickBooks when a customer is also a vendor Netting out the receivable amount with the payable amount so only one amount gets paid to any party showing an open balance The use of a barter or wash account in QuickBooks Supplemental Guide QuickBooks Desktop Advanced Certification 8

11 Topic 1: Barter Transactions WHEN A CUSTOMER IS ALSO A VENDOR SmithCo, if both a vendor and a customer of our QuickBooks company, might appear on the Vendor list as SmithCo (V) and on the Customer list as SmithCo (C). That doesn t mean that SmithCo sees the (V) and the (C) after its name on checks and invoices. SmithCo (V) would be set up in the Vendor Center using the Print on Check as field to show SmithCo on forms (not followed by the (V)), and SmithCo (C) would be set up in the Customer Center to show SmithCo on forms (not followed by the (C)). It is important to note that the solution for clearing out receivables and payables when dealing with the same company does not involve changing the amounts of the bills or invoices so that only the difference between them is entered. It is important you understand why editing the bills or invoices would be a very bad idea. Firstly, no amounts on these business-to-business transactions should be altered because, in the case of an audit, that could indicate to the auditor that something suspicious is happening. Secondly, you want to ensure the full costs and revenues are being recognized in their correct periods, and altering amounts on bills or invoices might straddle a reporting period such as a month-, quarter- or year-end, depending on the dates of the documents in question. Thirdly, you want to ensure you re obtaining accurate job costing. As an example, the QuickBooks company may be purchasing goods and services from the vendor SmithCo (which is also a customer) for another customer or job, such as JonesCo, and these costs must be linked to the right job for job costing. Finally, if any of the purchases or sales involve inventory, then editing these transactions to change the dollar amounts will skew inventory quantities, values and cost of goods sold. Enter purchase transactions specifying SmithCo (V) on the Vendor list, and if these purchases are related to a job, specify the job in the Customer:Job field. Enter sales transactions specifying SmithCo (C) on the Customer list. In reality, both SmithCo names are the same entity, but in QuickBooks they must be referred to with slightly different names on these two lists. These names should be similar enough that the user can see they are, in reality, the same entity. In all likelihood, the receivables from SmithCo (C) will not equal the payables to SmithCo (V), and at a certain point our QuickBooks company owner will want to settle accounts with SmithCo. This means either paying the difference (if the payable is greater than the receivable) or receiving the difference (if the receivable is greater than the payable), and zero out accounts receivable and accounts payable. In the rare case when the payables and receivables do equal each other exactly, then the following method will zero out both accounts receivable and accounts payable. Netting out Payables & Receivables Remember, you don t change amounts on transactions to net out payables and receivables, but you still want to minimize the flow of funds back and forth. This is true, especially if you pay SmithCo for payables and they decide not to pay you for your SmithCo receivables. Ideally, you want the company that owes more than the other to pay the difference and have a workflow that zeroes out the payables and receivables between the two companies. Supplemental Guide QuickBooks Desktop Advanced Certification 9

12 Topic 1: Barter Transactions Use of a Barter Bank Account Track barter transactions in QuickBooks by employing the following method: 1. Create a bank account for barter transactions; when you ve done things correctly, the balance in this account will be zero. 2. Look at the accounts receivable and accounts payable for this barter customer/vendor and determine which amount is the lesser of the two (if they are equal, use that figure in the next step instead of the lesser amount). Supplemental Guide QuickBooks Desktop Advanced Certification 10

13 Topic 1: Barter Transactions 3. Using the lesser amount, enter a Receive Payments transaction for the open invoices using the Barter account to deposit the funds. 4. Using this same lesser amount, use a Pay Bills transaction from the same account to pay the bill(s). Supplemental Guide QuickBooks Desktop Advanced Certification 11

14 Topic 1: Barter Transactions At this point, the balance in the Barter account is zero. If the accounts receivable and the accounts payable for this barter customer/vendor had been the same, the receivables and payables would now be zero and there would be no more steps to follow. If the accounts receivable was greater than the accounts payable, then there s still a balance in receivables. Tell the barter customer to pay you that amount, which you ll receive against the open balance of the invoices, and deposit directly into the regular bank account, or use Undeposited Funds and deposit the funds along with any other monies into the regular bank account, as you would normally do. If the accounts payable was greater than the accounts receivable, there will be a balance owing to the barter vendor. Therefore, use the Pay Bills function to produce a check (drawn on the regular bank account) or credit card payment to pay the balance as you would normally do. 5. If you need to, re-send the barter customer the invoices marked Paid or send a statement showing the balance is zero with all the details adding up to zero. A bill payment stub can also be sent to the barter vendor showing that the balance is zero. Knowledge Base article #19465 also describes this process. The link to that article is: By following this procedure, you have circumvented the list restrictions of QuickBooks to make it work in a barter situation. There is another opportunity to take advantage of this same type of methodology. A similar technique can be used to trade account balances between jobs; for example, if a credit balance exists for one job and you wish to transfer it to another job for the same customer. The difference in this scenario is that all the transactions would be related to sales and accounts receivable (no accounts payable transactions would be required). Supplemental Guide QuickBooks Desktop Advanced Certification 12

15 Topic 2: Customer or Vendor Prepayments Topic 2: Customer or Vendor Prepayments INTRODUCTION TO CUSTOMER OR VENDOR PREPAYMENTS These prepayments are also known as, among other things, retainers or deposits. Let s start with why you d need to consider these situations. Perhaps a new client has asked you to do a lot of work for them and you would like a retainer from them before you start work. Or, if you or your clients do any specialized or custom work, you might need to collect money before you start working on the project. If there is a need to purchase special parts or create a customized product that can't be sold to another customer, it is advisable to collect money before you start; collecting an upfront retainer or deposit can protect you if the customer decides to cancel the order. An upfront retainer is money that belongs to the client or customer, but which the client has put up for services to be provided or to use to purchase supplies or labor for their project. In other words, it is money you have received but have not yet earned and should not be included in income yet. From the customer s accounting point of view, the vendor or supplier in these situations must be provided with funds up front for expenses or purchases not yet made. Supplemental Guide QuickBooks Desktop Advanced Certification 13

16 Topic 2: Customer or Vendor Prepayments CUSTOMER PREPAYMENTS There are two major methods for handling customer prepayments or deposits: Method 1 involves creating a Client Retainers liability account; Method 2 does not. There are advantages and disadvantages to each method. CUSTOMER PREPAYMENTS METHOD 1: CLIENT RETAINERS ACCOUNT To Use a Client Retainers Account 1. Create a Liability account (usually an Other Current Liability) called Client Retainers, which is unrelated to and separate from Accounts Receivable. Supplemental Guide QuickBooks Desktop Advanced Certification 14

17 Topic 2: Customer or Vendor Prepayments 2. Create a Service item for Client Retainers posting to the Client Retainers liability account. This item is not taxable. 3. Record the retainer received by entering an invoice or sales receipt and using the Client Retainers item. When this transaction is recorded, this amount will be found in the Client Retainers liability account. Supplemental Guide QuickBooks Desktop Advanced Certification 15

18 Topic 2: Customer or Vendor Prepayments 4. If a sales receipt was used, deposit the funds. If an invoice was used, receive the payment against the Retainer invoice and deposit the funds. Supplemental Guide QuickBooks Desktop Advanced Certification 16

19 Topic 2: Customer or Vendor Prepayments 5. Create a Retainers by Custome report. It s a Transaction Detail report on the Client Retainers account (drilling down on its balance in the Balance Sheet is a good way to start). Make sure it s for All Dates, and total by Customer so you know at any given time how much money in prepayments is sitting in that account from each customer or job. Run this report as often as necessary to know how much is in the Client Retainers account for each job so it may be applied when invoicing. Filter this report for a Cleared Status of No (as this account will be reconciled in the last step of this methodology). Give it an appropriate title. Memorize this report. Supplemental Guide QuickBooks Desktop Advanced Certification 17

20 Topic 2: Customer or Vendor Prepayments 6. When it s time to invoice for the sales of goods and services, create another invoice or sales receipt for the appropriate items based on the services rendered, goods sold or work performed. After entering all the sales items on the transaction, go to the next blank line and enter the Client Retainers item using a quantity of -1 and a rate equal to the retainer amount you are applying. You know how much retainer is available to apply for a job based on the customized Transaction Detail report on the Client Retainers account you created and memorized. The retainers can be broken down and applied to multiple invoices if desired. NOTE: you may want to add a subtotal item after all the sales line items before applying the Client Retainers item. Supplemental Guide QuickBooks Desktop Advanced Certification 18

21 Topic 2: Customer or Vendor Prepayments 7. Reconcile the Client Retainers account (as you would a bank or credit card account) regularly so that the Transaction Detail report (filtered for a Cleared Status of No) excludes old retainers that have been received and fully used up. When starting the reconciliation enter the ending balances as $0. The beginning balance will also be $0. Ensure that the Payee field is showing on both sides of the reconciliation window by selecting Columns to Display. Place checkmarks next to retainers received (in the Charges and Cash Advances section on the left) only if, by job, each equals the total of retainers used up (in the Payments and Credits section on the right). The main difference between reconciling the Client Retainers account and reconciling a bank or credit card account is the ending balance on the reconciliation screen for Client Retainers is zero, regardless of what the account balance is. Client Retainers Account Method Pros and Cons The advantages to this method are: The Accounts Receivable account, as it is separate from the Client Retainers account, is not skewed by the amounts of prepayments, which in the case of major prepayments could actually make Accounts Receivable negative Deposits, prepayments or retainers actually appear on sales forms, which can be sent or given to the customer when those monies are paid up front The main disadvantages to this method are: You must reconcile the Client Retainers account and run a memorized report, filtered for a Cleared Status of No, in order to know how much is left for each retainer, because this account is separate from and unrelated to accounts receivable. There is no slick, elegant link between these two accounts. You must enter prepayment amounts manually on separate sales forms. Remember, when you reduce the amount owing by clients for the prepayments they ve made, you re going to use a quantity of -1 on the sales form. Supplemental Guide QuickBooks Desktop Advanced Certification 19

22 Topic 2: Customer or Vendor Prepayments Use of Client Retainers Method for Law Firms Please note that this Client Retainers method can also be applied in the case of law firms using trust accounts to hold client funds and to track the liability account for funds held in trust for clients. The difference is that with law firms, you must also set up a separate bank account to hold your client's funds. Be sure to follow the rules of your state regarding the professional and ethical conduct for handling client funds. Failure to abide by those rules and practices could result in administrative, civil or criminal sanctions. When you are ready to invoice the client for fees, etc., you will apply the amount of the retainer to the invoice. This amount will be subtracted from the amount the customer owes you. At that point, revenue is recorded and the retainer is moved out of the liability account. The funds would then be moved from the Trust account to the Operating account. Knowledge Base Articles There are some great knowledge base articles on handling trust accounts for law firms, as well as handling upfront deposits and retainers. Handling trust accounts (law firms): task_handling_trust_accounts.html Handling upfront deposits and retainers: task_handling_retainers_and_upfront_deposits.html Tracking multiple Customer Deposits is covered in more detail in the Job Costing Module. Supplemental Guide QuickBooks Desktop Advanced Certification 20

23 Topic 2: Customer or Vendor Prepayments CUSTOMER PREPAYMENTS METHOD 2: RECEIVE PAYMENT The second method for handling customer prepayments seems easier on the face of it. There is no special account or item to be created. There is no reconciling or special memorized report to be created and run. It simply involves receiving payments from a customer before any invoice is issued. Print out the payment transaction or produce a statement and give it to the customer as their record if they ask for one. Before invoicing the customer, create a sales invoice template that includes a footer field for Payments/Credits and Balance Due. Create the invoice and apply the original orphan payment to the invoice. When sending the invoice to the customer using this template it will show the payment received. Alternatively, provide the customer with an invoice and a statement. To Use Receive Payments 1. Receive the prepayment funds against the customer or job without having an invoice against which to apply it. Supplemental Guide QuickBooks Desktop Advanced Certification 21

24 Topic 2: Customer or Vendor Prepayments 2. Print out the payment transaction or produce a statement and give it to the customer. 3. Create a sales invoice template that includes a footer field for payments and credits as well as the balance due. Supplemental Guide QuickBooks Desktop Advanced Certification 22

25 Topic 2: Customer or Vendor Prepayments 4. When it s time to create an invoice, use this template and put only the goods and services for which you are invoicing on this form, but do not send it to the customer yet. 5. After the invoice is created, if you see a message about applying credits to this invoice, click Yes. Apply the credit by ensuring a checkmark is next to it then click Done. Supplemental Guide QuickBooks Desktop Advanced Certification 23

26 Topic 2: Customer or Vendor Prepayments Supplemental Guide QuickBooks Desktop Advanced Certification 24

27 Topic 2: Customer or Vendor Prepayments 6. If, after the invoice is created, you do not see a message about applying credits to this invoice, select Customers Receive Payments, specify the customer or job, and select the Discounts And Credits icon in the top ribbon to apply the credit. Again, apply the credit by ensuring a checkmark is next to it then click Done. 7. Send the invoice using the template that shows Payments/Credits and Balance Due to the customer. Receive Payment Method Pros and Cons The advantages to this method is: There is no separate General Ledger account to be maintained, no new item to be created, and no memorized report to run to make sure how much each customer has left unused in Client Retainers. The main disadvantages of this method are: Accounts receivable is skewed, sometimes significantly. In the case of large retainer amounts, accounts receivable on the Balance Sheet could actually be negative. Skewing accounts receivable makes any financial reporting inaccurate or, at the very least, suspect, particularly for clients reporting on a cash basis. When employing this method, many accountants create a journal entry (adding a customer named "A/R Adjustment") at year-end, moving the customer deposits to a liability account; then create a reversing entry at the beginning of the following period. This corrects the skew of the Balance Sheet for reporting purposes. Supplemental Guide QuickBooks Desktop Advanced Certification 25

28 Topic 2: Customer or Vendor Prepayments The Receive Payments printed form, if you wish to send it to a client, must be printed to a PDF printer if you want to it but, more importantly, it s not customizable so you cannot alter its appearance or design. There is no template for Receive Payments transactions in QuickBooks. You must provide statements along with the invoice or create an invoice template with extra footers You must remember to apply the orphan payment (or part of it) to the invoice in a separate Receive Payment transaction before sending out the invoice with the extra footers If there are many customers or jobs for which prepayments and credits must be applied, consider using Client Data Review to make this job easier Supplemental Guide QuickBooks Desktop Advanced Certification 26

29 Topic 2: Customer or Vendor Prepayments VENDOR PREPAYMENTS When discussing prepayments, you should be aware of how to handle them from the point of the business which has to provide their vendor with those up front monies. As with customers, there are two methods for handling vendor prepayments. VENDOR PREPAYMENTS METHOD 1: VENDOR PREPAYMENTS ACCOUNT To Use a Vendor Prepayments Account 1. Create an Asset account (usually Other Current Asset) called Vendor Prepayments which is unrelated to and separate from accounts payable. Supplemental Guide QuickBooks Desktop Advanced Certification 27

30 Topic 2: Customer or Vendor Prepayments 2. An optional step is to create a Service item for Vendor Prepayments linked to this asset account. This item is not taxable. Supplemental Guide QuickBooks Desktop Advanced Certification 28

31 Topic 2: Customer or Vendor Prepayments 3. When paying funds to a vendor ahead of any bills, write a check to the vendor and use either the asset account Vendor Prepayments or, if you prefer using items, use the Vendor Prepayments item you created that is linked to this account. 4. Create a Vendor Prepayments by Name report. It s a Transaction Detail report on the Vendor Prepayments account (drilling down on its balance in the Balance Sheet is a good way to start). Make sure it s for All Dates, and totaled by Vendor so you know at any given time how much money in prepayments is in that account for each vendor. Run this report as often as necessary to know how much vendor prepayments are available for that vendor when paying bills. Filter this report for a Cleared Status of No (as this account will be reconciled in the last step of this methodology). Give it an appropriate title. Memorize this report. Supplemental Guide QuickBooks Desktop Advanced Certification 29

32 Topic 2: Customer or Vendor Prepayments 5. Run this report at any time, but particularly when it is time to pay bills. Create bill credits for the amounts of the retainers you wish to use up, then pay the bills using all or part of the bill credits. As an alternative, you may wish to edit the vendor s final bill by subtracting the prepayment so the net amount of the bill is the net amount to be paid. Some accountants would not be comfortable with that because they want the documents provided by vendors to match what s entered in the accounting system. Supplemental Guide QuickBooks Desktop Advanced Certification 30

33 Topic 2: Customer or Vendor Prepayments 6. Reconcile the Vendor Prepayments account (as you would a bank or credit card account) regularly so the Transaction Detail report (filtered for a Cleared Status of No) excludes old prepayments that have been paid and fully used up. When opening the reconciliation, enter $0 as the ending balance. Ensure that the Payee field is showing on both sides of the reconciliation window by selecting Columns to Display. Place checkmarks next to prepayments used (in the Charges and Cash Advances section on the left) only if, by vendor, each equals the total of vendor prepayments used up (in the Payments and Credits section on the right). The main difference between reconciling the Vendor Prepayments account and reconciling a bank or credit card account is that the ending balance on the reconciliation screen for Vendor Prepayments is zero, regardless of what the account balance is. Vendor Prepayments Account Method Pros and Cons The main advantage of this method is: Accounts payable is not skewed by prepayments, which in the case of major prepayments could actually make accounts payable negative The main disadvantages of this method are: You must reconcile the Vendor Prepayment account (with an ending balance of zero) and run a memorized report in order to know how much is left for each retainer, because this Vendor Prepayment account is separate from and unrelated to accounts payable. There is no slick, elegant link between them. You must enter a bill credit at the time of payment before paying bills, based on running the report. If many bill credits remain unapplied to bills, you may wish to make use of Client Data Review, applying bills to bill credits more easily. Supplemental Guide QuickBooks Desktop Advanced Certification 31

34 Topic 2: Customer or Vendor Prepayments VENDOR PREPAYMENTS METHOD 2: WRITE CHECK TO ACCOUNTS PAYABLE The second method for handling vendor prepayments does seem easier but there are shortcomings to this method. There is no special account or item to be created. There is no reconciling or special memorized report to be created and run. To Use Write Check to Accounts Payable Write a check to the vendor (or enter a credit card charge) in the amount of the prepayment and code the check (or credit card charge) to go against Accounts Payable. Include the vendor name in the Customer:Job field of the Expenses tab. Most of the time, upon saving the transaction, QuickBooks populates that field for you even if you don t enter the name in that field; but make sure that it s there. When paying the bills for this vendor, apply some or all of the credit from this check payment or credit card payment to reduce the amount of the payment. Write Check to Accounts Payable Method Pros and Cons The main advantage of this method is: It s simpler; there is no separate general ledger account to create, report on or reconcile The main disadvantage of this method is: This can skew accounts payable, sometimes significantly. In the case of large prepayment amounts, accounts payable on the Balance Sheet could actually be negative. Skewing accounts payable makes any financial reporting inaccurate or, at the very least, suspect. This is particularly true of a cash-basis Balance Sheet. Many accountants create a journal entry at year-end reclassifying the A/P prepayments to the Vendor Prepayment asset account and reverse that entry at the beginning of the next period. Supplemental Guide QuickBooks Desktop Advanced Certification 32

35 Topic 3: Unique Sales Tax Situations Topic 3: Unique Sales Tax Situations INTRODUCTION TO UNIQUE SALES TAX SITUATIONS While QuickBooks can handle straightforward taxes on sales, there are situations that are somewhat unique, and you have to have a little imagination to make those situations work in a QuickBooks environment. But it can be done. These unique sales tax situations include: Maximum sales tax Different products, different rates Different tax rate locations, such as invoices to a customer having different sales tax rates depending on the ship-to address MAXIMUM SALES TAX If your state imposes a maximum sales tax for a certain type of sale on a single invoice, here are the recommended steps to follow. To Use Maximum Sales Tax From the menu bar, select Lists Item List. If you do not already have a Subtotal item on your list, create one by selecting the Item drop-down list in the lower left and clicking New. Although one Subtotal item could suffice, this method involves more than one Subtotal item to segregate the taxable section from the non-taxable section. From the Type drop-down list, select Subtotal. Type Taxable Subtotal for the both Item Name/Number and Description. Click OK to save the item. This will be your subtotal of taxable items that are listed above it in any sales transaction. Supplemental Guide QuickBooks Desktop Advanced Certification 33

36 Topic 3: Unique Sales Tax Situations 4. Click New again from the Item drop-down list in the lower left. From the Type drop-down list, select Subtotal. Type Non Taxable Subtotal for the both Item Name/Number and Description. Click OK to save the item. This will be your subtotal of non-taxable items that are listed above it in any sales transaction Create an invoice or sales receipt for the customer. Enter the taxable items on the sales form, making sure the Tax column has tax listed. Enter the Taxable Subtotal item. If you created only one Subtotal item, you might want to type in the description that this amount is subject to sales tax. Enter the next sale item that causes the sale to exceed the taxable threshold and select Non in the Tax column. Continue with any sale items that are not taxable. Supplemental Guide QuickBooks Desktop Advanced Certification 34

37 Topic 3: Unique Sales Tax Situations Enter the Non Taxable Subtotal item. If you created only one Subtotal item, you might want to type in the description that this amount is not subject to sales tax. Save the invoice or sales receipt. Supplemental Guide QuickBooks Desktop Advanced Certification 35

38 Topic 3: Unique Sales Tax Situations DIFFERENT PRODUCTS, DIFFERENT RATES If a business sells retail items, liquor and food all on one sales form, chances are good that some items are subject to a unique sales tax rate. Follow these steps for dealing with different products and different sales tax rates. To Deal with Different Products, Different Rates Create a Subtotal item as outlined in the previous section. Create a Sales Tax item enter See Above for both the Name and Description. The Tax Rate is 0.0% and the Tax Agency should be your most common tax agency vendor Assign this newly created 0% sales tax item to your customer s record on the Sales Tax Settings tab. Create a Sales Tax item for each of the tax jurisdictions on which you are required to collect and report. These items may also include different rates for the same jurisdiction. Name them clearly so they can be easily identified. Create your customer s invoice or sales receipt. Enter all the line item(s) subject to the same tax rate. Enter a Subtotal line. Enter the appropriate sales tax item, which will calculate its percentage on the subtotal in the row above it. Enter additional invoice lines, each with a subtotal and appropriate sales tax items. QuickBooks calculates and reports on the correct amount of sales tax charged for the different item types being sold. Supplemental Guide QuickBooks Desktop Advanced Certification 36

39 Topic 3: Unique Sales Tax Situations DIFFERENT TAX RATE LOCATIONS If you have a customer with different tax rate locations, you might need to create a customer for each location if you want QuickBooks to calculate the correct tax amount automatically. QuickBooks tracks the sales tax rate by customer, not by job. Another option is to use third party software such as AvaTax by Avalara, which is software for automated sales tax compliance. It connects to QuickBooks and dynamically delivers instantaneous sales tax decisions in more than 12,000 taxing jurisdictions in the U.S. AvaTax automatically assigns hundreds of thousands of taxability rules and the latest jurisdiction boundaries to deliver the right rate and tax calculation. Supplemental Guide QuickBooks Desktop Advanced Certification 37

40 Topic 4: Employee Loan Tracking Topic 4: Employee Loan Tracking INTRODUCTION TO EMPLOYEE LOAN TRACKING Often, employees may ask for advances on their paychecks. If you re running payroll in QuickBooks, you will want to handle the situation using four main concepts: Funds are advanced to employee as a loan using a regular check through the Employee Advances asset account The plan is for the employee to pay back the loan, either all at once or over time off their paychecks Use a payroll item linked to the Employee Advances asset account for these repayments on paychecks Report on the Employee Advances account by employee to see what each employee owes the company at any given time FUNDS ADVANCED TO EMPLOYEE To Use Funds Advanced to Employee 1. Create an Other Current Asset general ledger account Employee advances if it does not already exist. Supplemental Guide QuickBooks Desktop Advanced Certification 38

41 Topic 4: Employee Loan Tracking Create a regular (i.e., non-paycheck) Write Check transaction payable to the employee getting the advance. On the Expenses tab, specify the Employee advances account. Supplemental Guide QuickBooks Desktop Advanced Certification 39

42 Topic 4: Employee Loan Tracking EMPLOYEE PAYING BACK LOAN OVER TIME You will want to set up the repayments in payroll, either all at once or over time. To Use Employee Paying Back Loan Over Time 1. Create an Employee Advance Repayment payroll item (deduction), linked to the Employee advances account, for use on paychecks for repaying the advance in full or in part. There is no tax tracking on this payroll item. You can enter a default rate for this payroll item, but you will edit the way this payroll item behaves on each individual employee s record in the Employee Center. Leave the Limit field blank and make it a one-time limit. Supplemental Guide QuickBooks Desktop Advanced Certification 40

43 Topic 4: Employee Loan Tracking 2. Add the Employee Advance Repayment payroll item to the Employee Record and enter the amount of the deduction for each paycheck and the total amount of the loan in the Limit field. (It has already been set as a Onetime limit in the payroll item setup.) That way QuickBooks payroll will stop the deduction when the loan is fully repaid. Supplemental Guide QuickBooks Desktop Advanced Certification 41

44 Topic 4: Employee Loan Tracking 3. Use the Employee Advance Repayment payroll item (which appears automatically on the paycheck) to reduce the employee s net paycheck by the amount they re paying back on this payroll run and reduce Employee advances owing. This also reduces the amount in the Employee advances account related to this employee. Supplemental Guide QuickBooks Desktop Advanced Certification 42

45 Topic 4: Employee Loan Tracking REPORT ON EMPLOYEE ADVANCES ACCOUNT You ll want to know what each employee owes the company for advances at any given point in time, so you ll create a report on the Employee advances account, totaled by employee. To Use a Report on Employee Advances Account Run a Balance Sheet Standard report. Double-click on the balance next to Employee advances. Select the date range All Dates. Change the Total By field contents to Employee. Filter this report for a Cleared Status of No. Give this report a title such as Employee Advances by Name. Memorize this report. Reconcile this Employee advances account periodically, in much the same way you reconciled the Client Retainers and Vendor Prepayments accounts, with an ending balance of 0. There is also a great support article from payroll.intuit.com on creating employee advances and repayments. This article can be accessed here. Supplemental Guide QuickBooks Desktop Advanced Certification 43

46 Topic 5: Using an Outside Payroll Service Topic 5: Using an Outside Payroll Service INTRODUCTION TO USING AN OUTSIDE PAYROLL SERVICE Clients using outside payroll services (i.e., not using any of the QuickBooks payroll options) need to enter activity from the payroll service into QuickBooks so their financial information is complete. When using an outside payroll service, you must enter the information in the appropriate account so that account can be reconciled. This topic covers three main themes: Lump sum payroll transactions Individual payroll transactions Using Intuit Online Payroll Supplemental Guide QuickBooks Desktop Advanced Certification 44

47 Topic 5: Using an Outside Payroll Service LUMP SUM PAYROLL TRANSACTIONS Some payroll services credit the entire amount of the payroll in one transaction to the bank account, including any outstanding printed checks. When this is the case, use the following procedure as there is no need to reinvent the wheel in QuickBooks; W-2s and other records are being handled outside of QuickBooks. Enter one transaction either a check or a journal entry crediting the bank account that you authorized the payroll service to use for payroll deductions. To Use Lump Sum Payroll Transactions Review the reports from the payroll service for each payroll processed and identify the client with the numbers that need to be entered into QuickBooks. Record the necessary payroll information using a journal entry or check in QuickBooks. This entry will likely include the fee charged by the payroll service, if it is part of the lump sum transaction. 3. Memorize the check or journal entry showing only accounts without dollar figures to facilitate future entries. Supplemental Guide QuickBooks Desktop Advanced Certification 45

48 Topic 5: Using an Outside Payroll Service INDIVIDUAL PAYROLL TRANSACTIONS Many payroll services, however, take individual net payroll amounts out of the bank for each employee who is getting payroll via a paper check. (The service fee for doing payroll would come out as a separate charge from the bank account.) This presents a problem because it is time-consuming to have to enter every single paycheck with all of the deduction and gross earnings detail for each employee who is paid by check. Although the following method does not require you to enter each line of each individual check, it does require you to enter one check for each employee with the net check amount. To Use Individual Payroll Transactions 1. Create a bank account called Payroll Clearing in which to hold the net checks for each payroll run. Supplemental Guide QuickBooks Desktop Advanced Certification 46

49 Topic 5: Using an Outside Payroll Service 2. When recording the journal entry or check to enter information from the payroll service into QuickBooks for each employee s net paycheck, code the net amount of any paper checks to the Payroll Clearing account. 3. Record and summarize the necessary payroll liability information using a journal entry or check (or journal entries/checks) out of the Payroll Clearing bank account in QuickBooks. This, in combination with the net paychecks, zeroes out the Payroll Clearing account after each payroll run, and allows you to record and track each individual paycheck in the checking account. 4. Enter a separate check out of the checking account for the service fee charged by the payroll company. Supplemental Guide QuickBooks Desktop Advanced Certification 47

50 Topic 5: Using an Outside Payroll Service USING INTUIT ONLINE PAYROLL It's easy to update QuickBooks with your Intuit Online Payroll data with one click using the Intuit One-click application. This article explains how to export your payroll data and what to do each time you run payroll. One-click export for QuickBooks does not work consistently with 64-bit operating systems. If you are using a 64-bit operating system, you may have to use the IIF export method for QuickBooks explained here. Supplemental Guide QuickBooks Desktop Advanced Certification 48

51 Topic 6: Correcting Payroll Liabilities Topic 6: Correcting Payroll Liabilities INTRODUCTION TO CORRECTING PAYROLL LIABILITIES This topic covers correcting incorrectly entered payroll liability payments in QuickBooks. This error is something that clients have a tendency to do often, despite any training they have received. Or perhaps they never received training and felt they could be self-sufficient in running QuickBooks payroll. Perhaps payroll liability payments were recorded using a regular check, and your client ignored the warning in QuickBooks and saved the check. This would result in the Balance Sheet balance for payroll liabilities being correct, but since the wrong workflow was followed, the forms and reports from the Payroll Center showing individual liability components of this liability would be wrong. This topic covers three main themes: Payments entered incorrectly Spot incorrect payroll liability payments Fixing incorrect payroll liabilities PAYMENTS ENTERED INCORRECTLY When payroll liability payments are entered incorrectly, it means that the client used a workflow not supported by QuickBooks, such as a straight check using the account Payroll Liabilities despite any warnings issued by QuickBooks that this is not the recommended method for recording payroll liability payments. The Balance Sheet balance for Payroll Liabilities is fine but the Payroll Center reports overdue liabilities in red and forms would not reflect the payments/deposits. SPOT INCORRECT PAYROLL LIABILITY PAYMENTS Incorrectly entered payroll liability payments are suspected when you try to pay payroll liabilities using the correct workflow, but the Pay Liabilities window shows prior period payments as overdue (in red). Also, quarterly payroll forms will show an incorrect balance due, despite the fact that the balance for this account in the Balance Sheet is correct. Look at the transactions in the Payroll Liabilities account to see what transactions were used in the past to pay payroll liabilities. In all likelihood, you ll see at least one check or bill transaction. Supplemental Guide QuickBooks Desktop Advanced Certification 49

52 Topic 6: Correcting Payroll Liabilities Also, look at the payroll tax agency in the Vendor Center to see if the liability was paid with Write Checks by doing the following: To Spot Incorrect Payroll Liability Payments Open the Vendor Center. Find the payroll tax agency and click on that vendor s name. Review all transactions related to this vendor in the right-hand pane, and ensure that all transaction types are displayed. All payroll liability payments should be listed as a liability check. If there is a check or a bill, double-click to view the transaction. Supplemental Guide QuickBooks Desktop Advanced Certification 50

53 Topic 6: Correcting Payroll Liabilities 5. Verify that this transaction was created to pay payroll liabilities. Alternately, you might use Client Data Review to fix incorrectly paid payroll liabilities Find a report called Payroll Liabilities Paid by Regular Check. Customize this report to change the transaction type for which it s being filtered from checks only to both checks and bills. Retitle this report to reflect the fact that it is showing bills as well as checks. 4. Memorize this report. Supplemental Guide QuickBooks Desktop Advanced Certification 51

54 Topic 6: Correcting Payroll Liabilities FIX INCORRECT PAYROLL LIABILITIES If you find that a payroll liability was paid using the Write Checks screen (or a Bill and Bill Payment), after you determine the account where the original entries were posted, you can fix the problem by following these steps: To Fix Incorrect Payroll Liabilities Back up the company file. Find the incorrectly recorded payroll liability payment transaction. Note the amount paid and the expense account used. For QuickBooks 2014 and higher: a. In the Payroll Center, select the Pay Liabilities tab then select the overdue liability that was paid via Write Checks or Bill Payment. b. Click the View/Pay button, which brings up the liability check. c. Select the Expenses tab. d. In the Account column, click the drop-down arrow and select the account used in the incorrect transaction. In the Amount field, enter a negative amount equal to the amount of the liability check. e. If the payroll liability was only partially paid via the incorrect workflow, enter the actual amount paid via that workflow as a negative instead of the entire amount of the liability. f. Click Recalculate to zero the check amount. Supplemental Guide QuickBooks Desktop Advanced Certification 52

55 Topic 6: Correcting Payroll Liabilities 4. For QuickBooks 2013 and higher (QuickBooks 2012 and earlier present a slightly different user interface): a. Click Print Later at the top, next to the Print icon. b. If the Check Number field populates, remove the check number. c. Use the same date for this transaction as the liability payment that was already entered using the incorrect workflow. 5. Click Save then Close. The Diamond, Gold and Silver support team has published this article to assist customers in resolving incorrectly paid payroll liabilities that show as overdue in QuickBooks Desktop. While the Write Checks or Bill Payment error is quite common, there are other issues that are less common but more difficult to spot, such as: Even though the correct workflow may have been used, the paid through date might be after the check date, or crosses from one year into the next. Liabilities were overpaid in one period and the next period they were underpaid. Supplemental Guide QuickBooks Desktop Advanced Certification 53

56 Topic 7: Tracking Retail Sales Topic 7: Tracking Retail Sales INTRODUCTION TO TRACKING RETAIL SALES Just as your client might use an outside payroll service for payroll and enter summary transactions into QuickBooks to mimic what s going on in that system, your client might also have a store or restaurant with a point-of-sale system or cash register that is totally unconnected to QuickBooks. You still have to enter the summary information to reflect sales, taxes collected, payment methods used, and also to correlate to the bank deposits and what cash is sitting in the till, cash drawer or float, depending on the terminology you use. Again, there is no need to reinvent the wheel as far as the actual items sold and the quantities in QuickBooks, since you have the other system to provide you with that should you need it. This topic covers three main themes: Stores with their own POS systems Credit card payments include tips Handling merchant fees STORES WITH THEIR OWN POS SYSTEMS Many restaurants, retailers, e-commerce companies, medical offices and other establishments have their own cash register or point of sale system totally separate from their accounting system. We ll use a restaurant as an example. Restaurants are typically cash basis with no receivables (unless there is special catering being done for some major clients). They don t try to use QuickBooks to track inventory. It is too difficult and onerous to achieve in a meaningful, accurate and timely fashion. They use a separate restaurant inventory tracking system instead or a periodic inventory system. In a restaurant, these statements are generally true: The number of transactions is large and the average amount on each transaction is relatively small Details or even the total amounts of individual sales (except in the case of catering) are generally not important The accounting system must show accurately what is in the cash drawer at the end of each business day NOTE: For the purposes of this discussion, assume that tips are all in cash and they are left on the table by diners to go directly into the hands of the servers and other staff. The payroll consequences (such as FICA and income withholding taxes) of tips will not be addressed here. Just keep in mind that employees are supposed to report their tips so that the payroll checks can be produced properly (having the employer contribute the appropriate amount of FICA, having the employee s share of FICA deducted from his or her paycheck, and ensuring the income taxes deducted are accurate). Supplemental Guide QuickBooks Desktop Advanced Certification 54

57 Topic 7: Tracking Retail Sales To satisfy these needs, it is important to create items for all restaurant sales of goods that you want to track. They can be Service items or Non-inventory parts. And, of course, if inventory is being tracked, those items can be Inventory parts or Inventory assembly parts (but unlikely in a restaurant situation). Payment items are also needed for the different payment methods (cash, checks, various credit cards, debit and gift cards) linked to Undeposited Funds, and discount items are needed to record coupons (typically posted to a COGS account). There could also be Other Charge items for overage and shortage for cash discrepancies, each linked to income accounts (or overage could be linked to income and shortage could be linked to an expense). A summary sales receipt can be produced for each cash register at the end of the day (based on the cash register s Z strip or Z-out report, which is the summary report at the end of the day and before the next day begins). Supplemental Guide QuickBooks Desktop Advanced Certification 55

58 Topic 7: Tracking Retail Sales Although customer names are not necessary on sales receipts, a customer name could be assigned to each cash register. For example, Register 1 would be a customer, as would Register 2 if you wish to keep track of the separate registers totals in QuickBooks. Alternately, one summary sales receipt is posted for the entire restaurant as a whole. The total amount of each summary sales receipt is $0.00 after taking into account all sales, taxes (refer to the laws of the jurisdiction in which the restaurant is located for what items are taxable and at what rates), and payment methods, as well as how much the cash drawer balance will change by at the end of the day. If there s a discrepancy, that would be recorded by either the Overage and/or Shortage item. If coupons or gift cards are sold, they are linked to a liability account for coupons or gift cards in circulation. If a coupon or gift card is used by a customer to pay for all or part of a meal, then that coupon or gift card must be recognized with the items in the daily sales summary. In the example below, the summary sales receipt is set to go into Undeposited Funds, but that is irrelevant as the total of the sales receipt is $0.00. Supplemental Guide QuickBooks Desktop Advanced Certification 56

59 Topic 7: Tracking Retail Sales However, because each payment item is linked to Undeposited Funds, you can then select, payment method by payment method, what gets deposited into the bank in one batch via a bank deposit. Supplemental Guide QuickBooks Desktop Advanced Certification 57

60 Topic 7: Tracking Retail Sales If, after depositing the money in any form of tender into the bank, you want to add to the cash drawer balance by withdrawing some cash, you can enter this by selecting the Cash back goes to option at the bottom of the Make Deposits window. Other options are: To create a Write Check from the Operating account to Cash and specify the Cash Drawer bank account at the bottom of the check (or via a Bank Deposit into the Cash Drawer bank account from the Operating account) To do a Transfer Funds transaction from the Operating bank account to the Cash Drawer bank account To reflect some of the monies from the daily sales going directly into the cash drawer is to create an item Cash Received as a Payment item on the sales receipt Supplemental Guide QuickBooks Desktop Advanced Certification 58

61 Topic 7: Tracking Retail Sales Any cash expenses such as knife sharpening that get paid out of the cash drawer will be recorded as a check out of the Cash Drawer bank account. The Cash Drawer bank account can and should be reconciled regularly, just as any other bank account would be. In fact, this should be done daily, because the cash in the drawer is counted every night and you want to make sure there has been no theft. CREDIT CARD PAYMENTS INCLUDING TIPS We previously assumed that in a restaurant situation, all the tips for the servers were left on the table. But what if the patrons paid by credit card and included the tip in the credit card charge? That happens often. How would you account for the tips that are included with the credit card charges? Create a separate non-taxable item for Employee Tips to appear on the Daily Sales Summary. Link this item to a Tips Payable liability account. Then enter a transaction (via a check from the Cash Drawer cash account) to mimic the distribution of the tips to the employees, crediting the cash drawer and debiting to zero out the Tips Payable account. NOTE: We are not addressing the payroll implications here, but keep in mind you may also need to include these tips in the employees W-2s. Supplemental Guide QuickBooks Desktop Advanced Certification 59

62 Topic 7: Tracking Retail Sales HANDLING MERCHANT FEES If the restaurant or other business accepts payments using QuickBooks Payments, the monthly reconciliation is automatic. Visit payments.intuit.com for more information. However, if they use an outside credit card processing company that charges a monthly fee, it s easily entered as a check from the bank account from which the fee is drawn, once a month. If the company charges a fee per batch, and the fee appears separately on the bank statement from the batch gross total, again it s easily entered as a check from the bank account from which the fee is drawn, but this time once every day that an amount is drawn. The Expense account is a credit card fees or bank service fees expense account. Supplemental Guide QuickBooks Desktop Advanced Certification 60

63 Topic 7: Tracking Retail Sales If the company charges a fee per batch, and the fee reduces the gross amount of the batch, what appears on the bank statement is a net amount deposited into the bank. They will need to edit the Make Deposits window for that credit card batch and add a row for a negative number (which will be the amount of the fee), reducing the net amount of the batch for easier reconciliation. The From Account will be a credit card fees or bank service fees expense account. Supplemental Guide QuickBooks Desktop Advanced Certification 61

64 Topic 8: Working with Bank Feeds & Rules Topic 8: Working with Bank Feeds & Rules INTRODUCTION TO WORKING WITH BANK FEEDS & RULES Although we encourage our clients to enter everything into QuickBooks, at reconciliation time, whether it s a bank or a credit card account, they may encounter some transactions they missed when they compare with their online banking. The Bank Feeds function securely downloads transactions from your financial institution directly into your QuickBooks company. QuickBooks matches the downloaded transactions to existing transactions and marks any discrepancies for review. You can elect to accept or ignore transactions before adding them. This topic covers four main themes: Setup Rules Reconciling downloaded transactions Common error messages BANK FEEDS SETUP Downloading transactions (or bank feeds) can be set up using one of the following two methods: Direct Connect Users log in seamlessly to the financial institution within QuickBooks. There may be a cost to this option, but that depends on the financial institution. Web Connect Users download a file from the financial institution s website and then import this file into QuickBooks by selecting Banking Bank Feeds Import Web Connect File or by selecting File Utilities Import Web Connect Files. The Web Connect feature gets the user to import transactions manually by downloading a data file (with a filename in *.qbo format) of bank activity and importing it into QuickBooks. The method used might default to one of these options during setup because it is often determined by the bank s participation in the QuickBooks Bank Feeds feature. Supplemental Guide QuickBooks Desktop Advanced Certification 62

65 Topic 8: Working with Bank Feeds & Rules Here s what you should do to set up Bank Feeds. First, we re assuming you can use Direct Connect. To Set up Direct Connect From the menu bar, select Banking Bank Feeds Participating Financial Institutions. If your financial institution is on this list, that means they participate in bank feeds. You must already have established online account access directly with this financial institution. You must enter the online banking user ID and password when completing the remaining setup steps in QuickBooks. From the menu bar, select Banking Set Up Bank Feeds for an Account. (Note: You can also set up a bank feed for an account from the New or Edit Account window by clicking on Set Up Bank Feeds at the bottom of the window. The Find Your Bank window displays.) In the Enter Your Bank s Name field, begin typing the financial institution s name, or select from the list on the right. If your bank or credit card participates, you ll see a screen in which you can enter your online banking user ID and password. From the QuickBooks Accounts drop-down list, select an existing QuickBooks account or create a new account that is linked to this feed. To Set up Web Connect On the other hand, if you use Web Connect, you will log on to your bank s website and download transactions for a specific time period. Follow your bank's instructions to create a Web Connect file with a *.qbo file name Save the download with a *.qbo file name to your desktop. After you double-click on the file, the transactions automatically import into QuickBooks. If double-clicking doesn t work, try these detailed instructions: a. In QuickBooks, select File Utilities Import Web Connect Files. b. Select the *.qbo file and click Open. c. When prompted to Select Bank Account, select Use an existing QuickBooks account if the account you are importing is already set up in QuickBooks, then select the account in the drop-down box. If the account does not yet exist on the Chart of Accounts, select Create a new QuickBooks account and enter a name. d. Click Continue. e. Once imported, review your transactions in the Bank Feeds menu. Bank Feeds helps confirm, reconcile and add missing transactions and saves time doing it. This means your books are up to date in a timely fashion. Supplemental Guide QuickBooks Desktop Advanced Certification 63

66 Topic 8: Working with Bank Feeds & Rules RULES The next topic is Renaming Rules as they relate to Bank Feeds. QuickBooks features Renaming Rules that automate and standardize the names in downloaded banking transactions into QuickBooks. For example, your financial institution might include a transaction number or a location number for a multi-location vendor such as Starbucks, in the downloaded Payee name field. In such cases, QuickBooks might then create a new vendor for each transaction or each different Starbucks you visit. When you assign a name from one of your QuickBooks lists to this transaction, QuickBooks automatically creates the renaming rule to use for this same transaction in the future. The QuickBooks Bank Feeds feature creates a renaming rule automatically the first time you assign the transaction to an existing QuickBooks name. You can then modify the renaming rule. To create or modify Renaming Rules, click the Rules icon in the top left of the Bank Feeds window. RECONCILING DOWNLOADED TRANSACTIONS In the Bank Feeds Account Information window, select Transaction List. Bank Feeds displays a list of downloaded transactions separated into groupings indicated by a bar color. Click on the appropriate bar at the top of the window to filter the results for the following: Transaction List bar colors Orange (need review) Red (changed by a renaming rule) Blue (auto matched) Filter Add/Approve or Ignore You also see in green a bar for Add/Approved, which group transactions you have approved while viewing the Transaction List. You can also ignore transactions you do not wish to approve. Supplemental Guide QuickBooks Desktop Advanced Certification 64

67 Topic 8: Working with Bank Feeds & Rules COMMON ERROR MESSAGES There are some issues and error messages that clients encounter when using Bank Feeds such as: I receive an error when downloading There are many different error codes that could be involved here, usually starting with OL. Consult this knowledge base article for all the different situations you could encounter with error messages Show any inactive accounts in your Chart of Accounts and disable online banking for any of these inactive accounts. If there are multiple accounts activated with the same financial institution, and one account is receiving a connection or setup error, you d need to disable the online banking for all accounts associated with the problematic financial institution to get going with any troubleshooting. No new transactions You may receive this message for a number of reasons The Web Connect file doesn't contain any new transactions The transactions have already been imported Your QuickBooks company file may be damaged You imported a QuickStatement with a longer date range and then attempted to re-import a statement for dates within that range There are many ways to troubleshoot this error, including creating a dummy company file in QuickBooks with a bank or credit card account to replicate the live account that is giving you problems. If the error persists, saying there are literally no transactions in the download, contact the financial institution. If transactions do import, compare them to previously downloaded transactions in the Bank Feeds Center. If transactions match, the error message is designed to prevent duplication of transactions. If these are new transactions, proceed with other troubleshooting methods outlined here. The issue may still be on the bank s side, and the bank s online support team may need to be involved. Not all banks will provide support beyond downloading the Web Connect file. Supplemental Guide QuickBooks Desktop Advanced Certification 65

68 Topic 8: Working with Bank Feeds & Rules Browser within QB doesn t launch bank login page This may be caused by invalid information or formatting in the *.qbo file provided by the financial institution; QuickBooks cannot read the data from your Web Connect (.qbo) file. Your financial institution does not support import into QuickBooks: Check out this site for a list of participating financial institutions You're trying to import a *.qbo file into an older version of QuickBooks that no longer supports an Online Banking, Downloaded Transactions or Bank Feeds feature Your import file is not the correct file type (for example, *.qbx, *.iif, etc.) There are too many different situations to pursue now so, click here for a knowledge base article related to these issues. Supplemental Guide QuickBooks Desktop Advanced Certification 66

69 Topic 9: Working with Multiple Currencies Topic 9: Working with Multiple Currencies INTRODUCTION TO WORKING WITH MULTIPLE CURRENCIES It is of great concern that so many business owners and some accounting professionals who support them don t understand that there is an inherent risk in dealing with foreign currencies, and if this isn t recognized in the accounting system, exposure to that risk can actually make or break a business. We are going to cover some concepts that are not completely covered in the regular Desktop Certification course, such as the following: When Multicurrency is enabled Pros and cons of turning on Multicurrency Home Currency Adjustment troubleshooting A/R and A/P reporting issues Converting from foreign currency A to foreign currency B WHEN MULTICURRENCY IS ENABLED What happens when Multicurrency is enabled? Firstly, you will find a new list named Currency List. This can be found by clicking on the List drop-down menu. Supplemental Guide QuickBooks Desktop Advanced Certification 67

70 Topic 9: Working with Multiple Currencies Populate the foreign currencies you want to use (and make the rest of the currencies inactive for simplicity s sake) with at least one exchange rate for starters. You may want to go into the Currency List and put in a history of exchange rates. Secondly, every pre-existing customer and vendor in the QuickBooks file is associated with the home currency. So a Japanese vendor who was on the Vendor list before turning on Multicurrency will show up as dealing with your company in the home currency. You ll have to create a new, differently-named Japanese vendor who is associated with the yen to replace the old home currency Japanese vendor. All the pre-existing accounts on your Chart of Accounts are set up automatically as being in the home currency when you turn on Multicurrency. Of you have a Euro bank account that existed before turning on Multicurrency, it will show as being denominated in the home currency. In all likelihood, you ll want to zero out that bank account and create a new truly Euro bank account and bring in the balance you zeroed out of the old Euro account. You ll bring it in as a bank transfer using an exchange rate that gives you the correct number of Euros as of the transfer date, then you ll make the zeroed out old Euro account inactive. No revenue, expense or equity accounts can be associated with a foreign currency in QuickBooks Desktop. The only new accounts for which you can specify a foreign currency are: Banks Credit Cards Accounts Receivable Accounts Payable Therefore, if you have a client who needs to track a loan payable in a foreign currency, because it s a liability account, you have the choice of setting up that loan as either an accounts payable account or a credit card account. Because of all the special restrictions on accounts payable accounts, use a credit card account to track a foreign loan. On the flip side, if you want to track a foreign asset such as a loan receivable or a fixed asset in a foreign currency, you have the choice of setting it up as a bank or an accounts receivable account. For the same reasons as the loan payable, choose to set up the asset as a bank account. You cannot track equity accounts in foreign currency. Therefore, if you want to make use of Multicurrency for this purpose, you would probably have to resort to setting up a foreign-denominated equity account as a credit card. This is not ideal, but those are the restrictions you have to deal with when Multicurrency is enabled. Supplemental Guide QuickBooks Desktop Advanced Certification 68

71 Topic 9: Working with Multiple Currencies Any vendor, customer or bank, credit card account, accounts receivable or accounts payable account that has transactions in a balance cannot have its currency changed. You must create a vendor, customer or bank, credit card account, accounts receivable or accounts payable account, named slightly differently, assigning the new currency upon setup. NOTE: Be aware that Multicurrency cannot be turned off, so back up the company file before turning it on in case you change your mind. PROS & CONS OF MULTICURRENCY There are both advantages and disadvantages, pros and cons, to turning on Multicurrency. Advantages to Turning on Multicurrency QuickBooks maintains the foreign debits and credits as well as their value in the home currency for every foreign transaction You can reconcile foreign accounts like banks and credit cards in their native currency, without having to consider the exchange rate. If you have a Canadian dollar bank account, you d be reconciling Canadian dollar amounts on transactions in the Reconciliation window against the statement from the bank denominated in Canadian dollars. You can invoice customers in their native currency if that s what they require. If you have QuickBooks Premier or Enterprise, you can use the per item price levels to establish sales prices in other currencies that don t fluctuate with the exchange rate You can issue purchase orders to vendors in their native currency if that s what they require as well You can have QuickBooks calculate automatically the gains or losses on foreign exchange as well as track the exchange rate on foreign currency transactions The summary reports like Balance Sheet and Profit & Loss show all foreign transactions and account balances translated into the home currency based on the exchange rates in effect on each individual transaction Disadvantages to Turning on Multicurrency You can only download current exchange rates, so if you haven t been downloading for some time, you have to enter the historical exchange rates manually. In other words you have to maintain the exchange rate list for a foreign currency. Even if you re downloading the exchange rates, it doesn t happen automatically; you have to tell QuickBooks to do it. Although you can set up static foreign prices using per item price levels, you cannot do the same to create static foreign unit costs Supplemental Guide QuickBooks Desktop Advanced Certification 69

72 Topic 9: Working with Multiple Currencies Features that are not available when you turn on Multicurrency: Insights on the Home Page, Income Tracker, Create Batch Invoices or Select Multiple Customers in the Invoice for Time and Expenses window You cannot set up automatic memorized transactions in foreign currency. That s because QuickBooks doesn t know what the exchange rate will be on a date in the future. You can t exchange information with or copy the company file for QuickBooks for Mac as it does not have Multicurrency Online payment of invoices cannot be enabled for multiple currencies You can t convert to QuickBooks Online (US) at this time because QBO US, unlike QBO in other countries, does not feature multiple currencies When you turn on Multicurrency, whether you like it or not, the currency code appears in the footer fields of your sales transactions, purchase orders and statements, even if these documents are denominated in the home currency. So invoices to domestic customers in the US will show USD before the amounts in all the footer fields. Supplemental Guide QuickBooks Desktop Advanced Certification 70

73 Topic 9: Working with Multiple Currencies HOME CURRENCY ADJUSTMENT TROUBLESHOOTING To discuss Home Currency Adjustment troubleshooting, first we have to understand how foreign exchange works in QuickBooks. How Foreign Exchange Works in QuickBooks Let s take this series of events: On September 1 you invoiced a Canadian dollar customer for $1,000 Canadian. At the time, the Canadian dollar was at par with the US dollar, so the Canadian dollar was worth 1 US dollar. The foreign amount of that invoice was $1,000 Canadian, and due to the par exchange rate at the time, the home currency value was $1,000 US. By the time the invoice was paid, the Canadian dollar was worth only $0.80 US. The Canadian customer paid the invoice in full and, from their point of view, didn t owe anything more. From the point of view of QuickBooks, your accounts receivable of $1,000 CAD was cleared. But instead of the home currency value of $1,000 US, which you expected to get paid when you issued the invoice, you received a value of $800 US. So QuickBooks clears the Canadian dollar receivable with a home currency value $1,000 US, puts $800 home currency value into the bank or Undeposited Funds, and debits the Exchange Gain or Loss expense account $200 for the loss. If this had been a Canadian dollar vendor to whom you owed $1,000 Canadian in accounts payable, in this situation there would have been a $200 gain on foreign exchange. This is because you only had to come up with the equivalent of $800 US to pay off the vendor, instead of the originally anticipated $1,000 US. If you receive a foreign payment into Undeposited Funds (rather than directly into the bank), and by the time the money gets deposited into the bank there is another change in the exchange rate, there will be a further Foreign Exchange Gain or Loss calculation and entry automatically by QuickBooks. Weird Foreign Account Balances on the Balance Sheet in QuickBooks Now that you know how foreign exchange works in QuickBooks, you may wonder why, from time to time, you see a strange home currency balance for foreign accounts on the Balance Sheet. For example, you might have a bank balance of 1,000 Euro showing in a Euro bank register, but on the Balance Sheet you re seeing US. Or, more glaring, you may have a Euro balance of 0 Euro. Doesn t it stand to reason that the Balance Sheet should show $0 as its value? But what if the home currency value isn t zero? Why is my home currency wrong? And how do I fix this? Let s take a simple example to illustrate. Let s say you received 1,000 Euro at the beginning of the year from the sale of goods to a European customer and, at the time, due to the exchange rate, it was worth $1,500 US. Let s also say that you put it into a Euro bank account at a US bank or maybe you stuffed it into your mattress. Either way, you still have the 1,000 Euro at the end of the year. Now let s say the Euro strengthened during the year so that it is now worth $2,000 US. And now you have to send 1,000 Euro to a European vendor. Your Euro balance is 0 in the Euro bank account, but the Balance Sheet would show a home currency value of -$500 US. There was a balance worth $1,500 US at the start of the year; paying the Euro vendor at the end of the year depleted that balance by the equivalent of $2,000 US. Supplemental Guide QuickBooks Desktop Advanced Certification 71

74 Topic 9: Working with Multiple Currencies This is a simple example using just two transactions. The Balance Sheet shows the cumulative balance of the account in the home currency based on the home currency value of each of the transactions using the exchange rate in force for each transaction. Imagine how strange the home currency balance might become with many transactions over time, coupled with wild exchange rate swings. Home Currency Adjustments when the Foreign Balance = 0 You learned in the QuickBooks Desktop Certification Course how to access the Home Currency Adjustment function to revalue foreign balances into the home currency at a particular date given the exchange rate at that date. As you know, that Home Currency Adjustment doesn t change the number of foreign currency units, just their value in the home currency. But here s the problem. If there is a zero balance in the foreign currency for a bank, credit card, customer or vendor, that account or name will not even appear in the Home Currency Adjustment screen. The Home Currency Adjustment screen offers only non-zero balances to adjust. How, then, do you fix this zero foreign balance with a non-zero home currency balance? You must use a general journal entry, but of a special type Open the Make General Journal Entries screen and specify the date on which you wish to revalue the foreign balance. Check the box next to Home Currency Adjustment. Supplemental Guide QuickBooks Desktop Advanced Certification 72

75 Topic 9: Working with Multiple Currencies 4. A warning about home currency adjustments appears; click OK Specify the foreign account and enter the debit or credit to zero out the home currency value of that account. In the next line, the offset of the first line gets posted to Exchange Gain or Loss. Remember, unlike the Home Currency Adjustment window, you must do the calculations for revaluing the foreign balance. Also, unlike the Home Currency Adjustment window, if you are revaluing foreign Accounts Receivable or Accounts Payable, you must enter a separate Home Currency Adjustment general journal entry for each separate Customer:Job or vendor (as QuickBooks doesn t allow more than one A/R or A/P account in a general journal entry). That will zero out the foreign account in the home currency without changing the number of foreign monetary units, Euros in this case, from the zero balance at which we want to keep it. A/R AND A/P REPORTING ISSUES There are times when foreign A/R and A/P sub-ledger reports, with home currency values and balances do not match the Balance Sheet. It doesn t always happen, but can be an issue if home currency adjustments have been performed. That is not a reason to not do home currency adjustments. The calculation of foreign receivables and payables reporting is flawed in QuickBooks. It s been an issue for many years and QuickBooks is aware of this; however, there are no plans to address this in the near future. Here s what to do to support your clients. Keep in mind that the Balance Sheet home currency valuation figure for foreign receivables and payables is correct. Simply drill down on the foreign A/R or A/P balance and run a Transactions by Account report for all dates, total by customer (if it s A/R) or vendor (if it s A/P), and add any required information by specifying columns for the Foreign Amount, Foreign Balance, Exchange Rate and so on. What results is a valid sub-ledger that supports the balance on the Balance Sheet for foreign-denominated receivables or payables. You can also edit the Open Invoices and Unpaid Bills reports to filter for one foreign currency at a time, and put in columns for the Foreign Amount and Foreign Open Balance. This will create an Accounts Receivable or an Accounts Payable report in the original currency for the purpose of discussing, in their currency, the balance owing with a customer or vendor from another country. These reports can be re-titled and memorized as part of a special report group on receivables, payables or foreign currency. Supplemental Guide QuickBooks Desktop Advanced Certification 73