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RECORD TRANSACTIONS FAQs

What is an ITEM and how should we use them?

An item is anything that a company buys, sells, or resells in the ordinary course of business. Because items are critical to maximizing the benefits derived from using QuickBooks, it is important to understand how QuickBooks uses items so that you can design the most effective setup for your company.

Items are used for making it easier to fill out sales forms by filling descriptions, rates, accounts, and taxable status so that users don't need to rekey the same information again and again which saves time and reduces the chance for errors.

Items handle behind-the-scenes accounting for sales and purchases by linking transactions to the chart of accounts. When set up correctly, items allow for more consistent posting regardless of who enters the data.

Items allow you to track quantities purchased and sold in addition to dollar amounts purchased and sold.

Items help calculate amounts on sales forms, such as subtotals and discounts.

Items provide detailed sales, purchase, and profitability reports without forcing you to create a complicated chart of accounts.

Contact A1 Acct Inc today and we'll work with you to help select the appropriate type of item for each product and service you buy and sell.

What specifically are some of the types of items?

In addition to items for products and services, QuickBooks has several other types of items.

Service items are used to track services sold to or purchased from others.

Inventory Part items are used to track materials or parts you buy, keep as inventory, and then resell.

Inventory Assembly items are used to create product that contain assembled material units (finished goods). This item is only in QuickBooks Premier and Enterprise Solutions.

Non-inventory Part items are used for materials or parts you want to set up Non-inventory Part items to track products that are consumed in the ordinary course of business (office supplies). You may also set up Non-inventory Part items used to record the sale of products that are created or assembled for sale (for example, pizza).

Other Charge Items are used to track income and expenses not related to the ordinary business of a company. Examples include shipping charges, delivery charges, and finance charges.

Subtotal Items adds up the amounts of the items above it, up to any previous subtotal.

Group items are used by company's who often enter the same items when recording sales or purchases. You can add up to 20 items (and their respective quantities) to a Group item. Groups can include all item types except Group and Sales Tax Group.

Discount items are used to calculate amounts to be subtracted from a total or subtotal on forms. You can set up discounts as either percentages or straight amounts.

Payment items are used if you receive partial payments toward the amount of an invoice or statement charge at or before the time they create the invoice or statement. These payments can include such things as down payments and deposits.

Sales Tax items are used for each single tax that your company collects at a specified rate and pay to a single agency. You can set up Sales Tax items to identify non-taxable items.

Fixed Asset items are used to enter fixed assets (available in QuickBooks Pro and higher editions) to assist you with year-end tax preparation.

How important is it that items in a company file match the needs of the business?

So important, for this reason alone you should consult A1 Acct Inc for proper planning. Items are required on sales forms such as invoices, sales receipts, estimates, credit memos, and statements. You also use items on purchase orders, but their use is optional on bills, credit card charges, and checks.

You use the Item list to set up the descriptions, rates, accounts, and taxable status of each products and service you buy and sell.

Some typical questions A1 Acct Inc might ask while helping you set up your Items include:

Does the business use subcontractors?

Does the business build finished goods?

Does the business buy inventory in one unit and sell it in another?

Are the prices charged for goods and services fairly constant or do they change frequently?

Do your customers make down payments or deposits?

Do you offer discounts on sales?

Are subitems appropriate?

What information do you need from reports?

Have you already set up items?

Can you describe a two-sided item?

Yes, you can set up Service, Non-inventory Part, and Other Charge items (in QuickBooks Pro and higher) and Inventory items (in QuickBooks Premier and higher) so that a single item can track both income and expenses. This means you can use an item on a purchase form to direct cost information to an expense account and use the same item on a sales form to send revenue information to an income account.

Can you use items for profitability reports for products and services?

Yes, we use items for job costing as well as for tracking service and product profitability.

What are some common mistakes made when setting up items?

The two common errors made involve using Inventory Part item when a Non-inventory Part is appropriate. The second common error associated with setting up items involves pointing items to inappropriate accounts. A1 Acct Inc would be glad to help solve these problems with you.

I'm concerned with using Group Items on a form because it captures too much detail on the customers copy of the invoice, can this be mitigated?

Group items tend to over capture accounting details. You can use Group items to capture invoice accounting details without displaying them on the customers copy of the invoice.

Our business receives inventory in one unit, store it in another unit, and sell and ship the finished goods in another unit. This leads to calculation errors from manual conversion calculations. Can QuickBooks help bridge differences in units of measure?

In certain editions of QuickBooks Premier and QuickBooks Enterprise, you can set up units of measure to save you time and eliminate user errors from manual conversion calculations. Using units of measure also helps measure with consistent data entry if different persons enter the data (1 box = 12 pieces).

We are a light assembly company and need help setting up and using inventory assemblies. Can A1 Acct Inc help with this set up?

Yes, QuickBooks, Inventory Assemble items are appropriate for light assembled items on sales forms and in reports. QuickBooks does not track inventory throughout a manufacturing process. The ability to create and build inventory assembly items is available in QuickBooks Premier and Enterprise Solutions.

What type of item should we use to capture both income and expense information for work performed by subcontractors?

Service item

What item type would you use to capture accounting information on sales forms onscreen without displaying the line item details on the printed version of the forms?

Group item

What item type should be used to track customer down payments?

Payment item

What does using the Item tab on checks and bills allow you to do?

Track costs for products and services as well as Customer: Job profitability.

Can you explain the sales and receivable features in QuickBooks?

Many features are available in QuickBooks. The process used to enter sales in QuickBooks depends on the accounting and profitability details you need to track. Transactions must be entered in the correct order. Contact your trusted adviser at A1 Acct Inc to help you avoid the most common errors in the sales cycle.

A customer pays in full at the time of sale, what occurs?

Use the Sales Receipts form to record sales for which the customer pays in full at time of sale. Recording a sales receipt tracks what was sold, the sales tax, if any, collected and increases sales tax liability and then deposits the amount from the sale into a bank account or holds the money with other Undeposited funds (you can set a preference to make Undeposited funds the default deposit to account).

Can our company track sales to specific customers

One of the advantages of using sales receipts is that you can choose whether or not to track sales to specific customers.

Our company does not need to track sales, can we enter the payments directly into the bank.

For those who don't need to track the services or products and don't collect sales tax, don't use a sales receipt. Instead, enter the payments directly into the Make Deposits window; enter customer name in the Received From field and the income account in the From Account field.

Could you explain what an invoice is used for?

In QuickBooks, you should use invoices for collecting sales tax, apply discounts, or any item that is calculated using a percentage of charges. Invoices are useful for communicating descriptions of services or products. Create invoices or progress invoices from estimates. Another good use for invoices gives you the ability to have transaction history available in the A/R register.

Can QuickBooks allow you to create billing statements?

QuickBooks allows you to create billing statements instead of invoices. Statements are ideal for company's who accommodate charges before requesting payment, or who assess a regular monthly charge. You can enter statement charges directly in the customer register. Do not use statements to track charges subject to sales tax.

How can we record the return of items sold?

Using the Create Credit Memo/Refunds window, you can record the return of items sold, enter a credit for the customer to be used toward future purchase, create a refund check, process a credit card refund, or apply the credit to an open invoice.

How do you record receiving and depositing payments?

Use the Receive Payments window to record payments and specify which invoices to pay. Use this window not only when you have actually received payment for invoices or statements, but also when you need to apply a credit to any charge or refund for a customer.

Our business requires us to provide estimates or proposals; will this affect any income accounts or account balances?

You can create estimates or proposals using the Create Estimates window. Because estimates represent only potential sales, they do not affect any income accounts or any account balances. You can create multiple estimates for each job, or for each customer that does not have any jobs. If one of the estimates is accepted, you can make the alternate estimates inactive by clearing the Estimates Active checkbox in the Create Estimates window.

How do you create and use sales orders?

Users of QuickBooks Premier or Enterprise Solutions can use sales orders to track items that customers have ordered, but that are out of stock. If you run a service-based business you can use sales orders to schedule work crews, plan labor costs, and estimate revenue flows based on services scheduled. QuickBooks helps you uses sales orders to track orders for out-of-stock inventory, and how to use sales order reports as a scheduling tool for service oriented businesses. In Accountant, Manufacturing & Wholesale, and Retail editions, Quickbooks displays an icon that links you to information available about that items availability. Customers who provide services may find that sales orders are an effective scheduling tool that can be used in place of pending sales as a way of entering future services. You simply modify the Sales Order template by adding the Ship Date to the form (change the field name to Date Scheduled).

How do we handle deposits and prepayments from our customers?

QuickBooks does not have a specific feature to manage prepayments, deposits, or retainers. Having said this, there are ways to record this information. There are a couple of methods, both have some drawbacks. They do address the need to track customer deposits and balances. Using the first method, you record the advance payment before you enter the sale; as a result, you create a credit balance for the customer (negative receivable balance). Using the second method, you track the customer deposit in a separate liability account. This requires a complicated series of steps to enter and apply the deposits. Please consult with A1 Acct Inc for details.

What are some of the common mistakes made when receiving and depositing payments against invoices and depositing those payments into the bank?

Common errors include:

Customer payments not grouped into deposits

Undeposited Funds overlooked when making payments

Incorrectly entering credit card payments

Customer payments entered directly into a deposit

Payments or credits not applied against invoices

Since accepting credit card payments from our customers many internal transaction errors have occurred. What should we consider?

Most businesses now receive credit card payments. However, accounting for and tracking all the details associated with these transactions create a multitude of errors. Instead of listing all the errors, here are a couple of things to consider and help point you to a resource that demonstrates how a built in solution avoids most errors.

How do you handle your daily batches (summary of daily credit card sales) tie to your checking account?

How do you account for credit card account fees? Some companies deduct their fees on every transaction, while others deduct fees monthly.

Do you know your exact fees? Credit card fees differ based on whether the customer swipes the card, entered it manually, or called for approval. Keeping track of the methods used makes bank reconciliation less difficult.

Do you have systematic and accurate accounting procedures to avoid errors when entering credit card transactions manually?

If a customers payment is not deposited, do you have an accurate trail that links that payment to a specific batch?

Do you have an easy way to set up recurring payments?

How have you linked online sales with Quickbooks?

You can use any merchant service account and manually enter the transaction into QuickBooks. However, the integrated merchant solutions from Intuit make the process easier and less prone to errors. A1 Acct Inc would be glad to help you setup and periodically review your credit card payment transactions.

How is it possible that a customer has a zero balance and still shows up on the A/R aging and collection reports in QuickBooks?

You may find that you have a customer with zero balances who still show up on accounts receivable aging and collections reports in QuickBooks. This happens when payments and credits are not applied against specific invoices. A1 Acct Inc can help you fix the error.

Can A1 Acct Inc help us fix our growing Undeposited funds account?

If you notice that a large balance in Undeposited Funds, a common error in recording customer payments has probably occurred. This occurs when a customer payment is entered in the Undeposited funds account, and then enters the same payments as a deposit in the account register or in the Make Deposits window. This error causes problems with the financial statements because the payments are counted twice, which overstates income and assets. We will work with you to correct this problem.

We received a Non Sufficient Funds (NSF) check returned by the bank for insufficient funds. How do we account for NSF checks?

The first method involves re-invoicing the customer and including bank fees for the returned check. QuickBooks Help file recommends it. However, this is not the preferred approach if you collect and pay Sales Tax (because Sales and Sales Tax Reports are affected by these invoices).

A1 Acct Inc will help you with another method that will avoid affecting sales and sales tax reports by using techniques that are more advanced and includes sending customer a statement showing NSF check and fees.

One of our customers has filed bankruptcy and we need to write off bad debts in QuickBooks. How can we do this?

There are different ways to write off bad debts.

One way is to record the write off as a discount in the Receive Payments window. This method does not adjust liability for sales tax included in the invoice. If you have received partial payment from a customer, you will need to write off the balance.

Use a Credit Memo to record bad debt. This is the preferred method to write off bad debts, especially if the original sale included sales tax.

What kind of reports does QuickBooks generate about sales and receivables?

There are five reports you can use but remember; sales do not show up on any sales reports unless they are entered with an item. That means the sale must be entered via Invoice, Sales Receipt, or Statement Charge. If you enter sales directly into the Make Deposits window, check register or with journal entries, then these reports will not be accurate.

Sales by Customer Detail

Sales by Customer Summary

Income by Customer Summary

A/R Aging Summary

Open Invoice report

Our business requires that we collect and pay sales tax. Could you explain how QuickBooks tracks and pays sales tax?

Tracking sales tax can be a challenge. There are different rates depending on your location. Some of the things you sell might be taxable while others not. For those of you who collect and pay sales tax, QuickBooks provide a powerful tracking, payment, and reporting system.

What are some common errors related to sales tax?

Errors occur when setting up to track sales tax, when creating transactions, and when making sales tax payments.

Often, you are not aware of the sales tax rules that apply to your product or services, consequently your company may not have set up your items correctly for sales tax tracking purposes.

When sales tax items and rates are set up correctly, you may inadvertently change sales tax information directly on the sales form when they are recording a sale.

If you find a large balance in either the Sales Tax Payable or Sales Tax Expense account, it may be because your company has been paying their sales tax with regular checks instead of using the Pay Sales Tax window. Even though you may not owe the state money for sales tax, their financial statements and income tax reports could be incorrect.

We recommend that your company contact A1 Acct Inc for assistance on how to fix common sales tax errors.

Can you explain QuickBooks reports related to sales tax?

The Sales Tax Liability report is the main tool you have to monitor the accrual and payment of state and local taxes. The Sales Tax Revenue Summary report shows what transactions charged sales tax. It is broken down by sales tax code. Before you compare the sales tax reports to other reports in QuickBooks, be sure you know how the "When do you owe sales tax" preference is set in the company data file.

Can you explain to us the purchases and accounts payable features in QuickBooks?

In QuickBooks you can pay for products and services at the time of purchase using cash, checks or credit/debit cards. You can also use the accounts payable features to track and manage bills for clients who defer payments for purchases. You can use both methods simultaneously in a company file.

Does QuickBooks offer the use of Purchase Orders?

Use the Purchase Order form to create purchase orders or work orders. You can assign each line of a purchase order to either a customer or job in order to track goods and services for specific projects.

Can we track deferred payments?

You can track deferred payments for purchases, record the purchases in the Enter bills window. You also use the Enter Bills window to enter credits from vendors.

How do we account for inventory purchases we receive before the bill arrives?

When you receive inventory before the bill arrives, record the receipt of the items in the Receive Items window. This allows you to add the items to inventory immediately by creating a temporary item receipt. When the bill arrives for inventory items that were recorded in the Receive Items window, enter information about the bill n the Select Item Receipt window.

QuickBooks suggests using the Pay Bills window instead of using the Write Checks window. What happened?

Use Pay Bills window to pay all bills recorded in the Enter Bills window. One of the most common mistakes that you are likely to make is to use Write Checks window to pay a bill that was recorded in the Enter Bills window.

My business does not need to track bills through accounts payable, how we can pay for goods and services immediately.

When paying for bills that don't need to track through A/P, you can create a check in the Write Checks window, or enter the check directly in the check register. If you are paying an expense, use the Write Checks window.

How can you purchase and make payments by credit card?

In addition to writing checks to pay bills immediately, you can also use credit cards to pay bills when they are due. You can record the charges in the Enter Credit Card Charges window, or enter them in the credit card account register. If you want to pay a bill connected to a purchase order, use the Enter Credit Card Charges window. QuickBooks prompts you to receive against existing purchase orders.

How do you enter a purchase using cash payments?

If you pay expenses with cash, enter the transaction in the petty cash register. Then, reconcile the petty cash account to the cash in the drawer.

Can you trade account balances?

You can record transactions that trade off amounts owed to vendors against amounts due from customers. Sometimes you have customers who are also vendors. It requires multiple journal entries and can be tricky. A1 Acct Inc would be glad to help you create multiple journal entries. It involves a Clearing Account as the payment account.

How does QuickBooks record deposits to vendors and apply them to payments?

There are two ways to account for deposits or other payments you make to vendors before the vendor has provided the goods or services.

Track the deposits as negative balance in A/P

Track deposits in a separate asset account.

We work with individuals and companies to whom we send 1099-MISC forms. How does one set up the preferences for 1099s?

You turn on the 1099 tracking Preferences windows. Once the feature is turned on, you link the 1099 categories reported to the IRS to the QuickBooks account you want to track them in. The QuickBooks 1099 and 1096 Wizard guides you through the necessary steps to run 1099s.

Our inventory quantity and the value of the inventory are dissimilar. How do we adjust inventory?

QuickBooks uses the average cost method for valuing inventory rather than other methods such as FIFO or LIFO. QuickBooks calculates the average cost of an inventory item (equal to the total value of items currently in stock divided by the number of items in stock). When you record the purchased items, the value of inventory increases by the purchase cost.

When you sell items, the value of inventory decreases by the average cost per item multiplied by the number of items sold. Selling items does not change the average cost per item.

Occasionally you may need to adjust quantities from time to time for reasons such as breakage, theft, shrinkage, or fire. To adjust inventory quantity, use Vendor menu, choose Inventory Activities, and then choose Adjust Quantity/Value on Hand from the submenu.

What kind of reports does QuickBooks generate about purchases, accounts payable, and inventory?

There are six reports you can use to get detailed information about you purchases, accounts payable balances, and inventory quantities and values. They include the following:

Purchases by Vendor Summary

Expenses by Vendor Summary

Unpaid bills Detail

A/P Aging Summary

Inventory Valuation Summary

Inventory Stock Status by Item

Can you explain the banking and credit card features available in QuickBooks?

In QuickBooks 2009, online banking became more robust and user friendly. You can securely download bank and credit card transactions to keep your QuickBooks records up to date, and always know their available balance at any given time. You simply complete a short step-by-step wizard to setup online banking.

Is there a feature in QuickBooks that allows you to transfer funds between balance sheet accounts?

You can use the Transfer Funds window to record the movement of money between most balance sheet accounts without the use of written checks or deposit slips. You cannot use this window to transfer money to or from sales tax payable, accounts receivable, or accounts payable, Transfers to or from payroll liabilities will not affect the liabilities shown in the QuickBooks Pay Liabilities window.

How do we void checks from current fiscal periods and prior fiscal periods?

To void a check from the current fiscal period:

Display the check to void.

Edit, Void Check.

Enter explanation in the Memo field.

Save & Close.

To void a check from the prior fiscal period:

Display the check you want to void.

Edit, Void Check. (Users that do not have permission will not be able to void the check.)

With your permission, Yes (Recommended), QuickBooks makes the appropriate journal entries to avoid affecting prior period transactions.

Can QuickBooks and A1 Acct Inc reconcile bank accounts?

In QuickBooks, the reconciliation feature helps ensure that your records agree with bank and credit card company records. We would be glad to assist to reconcile bank accounts, find typical errors that prevent reconciliation, help you even if you have never reconciled an account, and use reports to find changes in reconcile status.

When the account doesn't reconcile, what problems should we look for?

Check for transposition errors by dividing the difference by nine.

Search for the difference in the account register.

Verify the opening reconciliation balance.

Run the reconcile discrepancy report to look for changes that affected the beginning balance.

Scan the audit trail report for an amount that equals the difference.

What kind of reports does QuickBooks generate to find information about banking transactions?

QuickBooks provides three reports you can use to find information about checks, deposits, and other transactions related to your bank accounts. They are as follows:

Deposit Detail report

Check Detail report

Missing Checks report

Does QuickBooks track loan information?

The Loan Manager is a payment calculator that computes the principal and interest portion of loan payments, and handles any escrow payment or fees and charges. The Loan Manager helps track and pay all of your business loans from one location.

Suppose we want to consider changing payment amounts or refinancing, will Loan Manager do loan scenarios?

In addition to tracking loan information, you can compare loan scenarios with Loan Manager. The What If Scenarios window displays for analysis information entered into Loan Manager. The Loan Manager lets you run the following scenarios:

Changing loan amounts

Changing interest rates

Determining the payment amounts, interest payments, total interest with a new loan

Evaluating the cost and/or benefits of refinancing an existing loan

Comparing two loans, side-by-side. You can compare existing loans, new loans, or a combination of existing and new loans.

Can QuickBooks setup and track Multiple Currencies?

Beginning with QuickBooks 2009 (Pro and higher) you can now track sales, purchase, credit card and banking transactions in any currency you choose. QuickBooks automatically downloads foreign exchange rates online (or you can manually enter these) and also handles realized and unrealized gains on reports. Please note, before turning on this preference, you should backup your file. Once selected, this preference cannot be changed.

How does QuickBooks change exchange rates?

There are two ways to update exchange rates.

Automatic.

Manual.

QuickBooks can also track currency gain/loss. QuickBooks also displays the balance in the foreign currency on the chart of accounts, but displays the balance in U.S. dollars on the balance sheet.

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