QUICKBOOKS

2023
ALL-IN ONE

A Comprehensive and Essential Guide to QuickBooks

2023 For the Growth
of Both Small and Big Businesses
with Useful Tips and Tricks

GOLDEN MCPHERSON

Copyright
QUICKBOOKS 2023 All-in-One for Beginners and Experts
Copyright © 2023 by GOLDEN MCPHERSON
All rights reserved. No part of this publication may be reproduced,
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up-to-date and correct, there are no representations or warranties,
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TABLE OF CONTENTS
Copyright
TABLE OF CONTENTS
INTRODUCTION
The Features of Accounting Information
CHAPTER ONE
Accounting fundamentals
Managers, inventory, and business owners
Managerial accounting's functionality
Managerial Accounting Types
ACCOUNTING SKILLS FOR ENTREPRENEURS
CORPORATE CREDITORS
Recognizing creditors
Governmental agencies
Capital Accounting
Governmental financial reporting's primary objective
Creation OF BUSINESS FORMS
Forming an Accounting Record
Strategies for Creating an Accounting Form
Examining the standardized financial statements
The Process of Examining Financial Statements
THE INCOME STATEMENT
How to Read an Income Statement
BALANCE SHEET
Operation of Balance Sheets
The assets on a balance sheet
Liabilities
The significance of a balance sheet
A balance sheet example
The Balance Sheet Formula: What Is It?
ANALYSIS OF CASH FLOWS
Operation of Cash Flow Statements
Cash Flows from Financing
The Function of Financial Statements
Analyzing Financial Statements
Assets
Comprehensive Income Statement
Net income (from the statement of income).
Financial Statements for Nonprofits organizations
THE ACCOUNTING PHILOSOPHY
Philosophy of Accounting Issues
REVENUE PRINCIPLES
implementation of the expense recognition principle
MATCHING PRINCIPLES
An illustration of the matching principle
Benefits of the Matching Principle
Negative aspects of the Matching Principle
Cost principle
The Cost Principle: How Does It Work?
 An example, using the cost principle
Benefits of the Concept of Cost Principle
OBJECTIVITY PRINCIPLES
Principle of Objectivity in Auditing
Benefits of Objectivity in Auditing
Disadvantages
CONTINUITY ASSUMPTION
UNIT-OF-MEASURE ASSUMPTION
Description of a separate entity
Benefits of a Separate Entity
CHAPTER TWO
DOUBLE-ENTRY BOOKKEEPING
What Are the Rules of Double-Entry Bookkeeping?
The Accounting Formula
Double-Entry Bookkeeping Examples
The Importance of Double-Entry Bookkeeping
Recording rental expenses
RECORDING WAGES EXPENSE
Comparing incomes and expenses for wages
Various wage expenses
Useful Illustration
RECORDING COST OF GOODS SOLD
HOW TO DETERMINE ACCOUNT BALANCE
In the general ledger, account
How to Check Your Account's Balance
How to Determine an Account's Balance
ACCESSING RESULTS FROM T-ACCOUNTING ANALYSIS
Account T Debits and Credits
Explaining T Accounts
How Does QuickBooks Work? What Is It Used For?
Use of QuickBooks by Small Businesses
CHAPTER THREE
SPECIAL ACCOUNTING PROBLEMS
How are accounting problems handled in companies?
MANAGING ACCOUNT RECEIVABLE
Overview of Receivables
What are accounts receivable?
 Accounting for Receivables Using the Cash and Accrual Basis
Credit for Recording Services Sales
Recording Credit Sales of Goods
Considering Early Payment Discounts
The Accounts Receivable's Aging
Accounts Receivables Reconciliation
RECORDING A SALE
A PAYMENT'S RECORDING
ESTIMATING BAD-DEBT EXPENSE
Bad debt: An Overview
The causes of bad debt
How to estimate bad debt costs
BAD DEBT FORMULA
How to enter a bad debt charge in the journal
RECORDING A BILL
How Do Payable Bills Work?
How Do Receivable Bills Operate?
DEALING WITH OBSOLETE INVENTORY
Keeping Track of Obsolete Inventory
GETTING RID OF OBSOLETE INVENTORY
ACCOUNTING FOR FIXED ASSETS
A fixed asset example
PURCHASING A FIXED ASSETS
APPRECIATION OF LIABILITIES
Accounting reporting of liabilities
Current vs. Non-current liabilities
BORROWING MONEY
Banks
Borrowing From a Bank
Credit Unions
Borrowing From a Credit Union
Credit Cards
Borrowing Through Credit Cards
ACCOUNTS CLOSING FOR REVENUE AND EXPENSE
Temporary Accounts
Permanent Accounts
Example of a Closing Entry
CHAPTER ONE
SETTING UP QUICKBOOKS Overview of QuickBooks
Easy Steps for QuickBooks Setup
HOW TO PLAN YOUR NEW QUICKBOOKS SYSTEM
WHY ACCOUNTING SYSTEMS ARE USED
What Distinguishes Single Entry from Double Entry?
One-entry systems have disadvantages.
INSTALLING QUICKBOOKS
Steps for Installing QuickBooks
COMPLETING SETUP
Individual QQube
GENERAL QUICKBOOKS SETUP WIZARD OPERATING
Customers, suppliers, and staff
What does trial balance mean?
Trial Balance Format
How to prepare a trial balance in steps
A bank overdraft trial balance
Second Illustration
Features of trial balance
The benefits of trial balancing
Trial balance's Drawbacks
Types of Trial Balance
CHAPTER TWO
Manager FILE LISTS LOADING
Inventories in QuickBooks
The QuickBooks Pricing Level List
Guidelines for Configuring the QuickBooks Payroll Item List
QuickBooks Class List Creation Guide
Making a Customer List in QuickBooks
Set up the vendor list and install QuickBooks.
CHAPTER THREE
FINE-TUNING QUICKBOOKS
SETTING THE ACCOUNTING PREFERENCES
Accounting Preferences Setting
USING ACCOUNT NUMBERS
Self-Assigning Account Numbers
SETTING GENERAL ACCOUNTING OPTIONS
 SETTING THE BILLS PREFERENCES
CHANGING THE DESKTOP VIEW
SETTING FINANCE CHARGE CALCULATION RULES
How do credit card companies calculate finance charges?
How to avoid finance charges
CONTROLLING INVENTORY
Inventory management versus inventory control
What makes inventory control crucial?
Inventory control systems
Tips for inventory control best practice
ABC Analysis
Set reorder points
Perform regular audits
DEALING WITH MULTIPLE CURRENCIES
The General Ledger
STARTING INTEGRATED PAYMENT PROCESSING
TELLING QUICKBOOKS HOW REMINDERS SHOULD WORK
SETTING THE SEND FORMS PREFERENCES
FINE-TUNING THE SERVICE CONNECTION
CHAPTER ONE
INVOICING CUSTOMERS
Set Price
Cost Plus Time or Materials
Fixed Price
Layout design in QuickBooks
INVOICING A CUSTOMER
How to use a weekly timesheet
Timing single activities
How to include billable time on an invoice
PRINTING INVOICE
EMAILING INVOICES
RECORDING SALES RECEIPT
CHAPTER TWO
PAYING VENDORS
Setting up
Make a vendor payment
HOW TO CREATE A PURCHASE ORDER
 Create purchase orders individually
How to fill out a purchase order
Retrieving a Voided Transaction in QuickBooks
ENTERING A BILL
Adding bills to QuickBooks Online
CHAPTER THREE
TRACKING INVENTORY AND ITEMS
Create an inventory tracking system
How to update the QuickBooks Item List to include a non-inventory part
The best way to include a discount item in the QuickBooks Item List
Performing inventory accounting in QuickBooks
Recording manufacture or assembly of items
Managing multiple inventory locations
CHAPTER FOUR
MANAGING CASH AND BANK ACCOUNTS
Viewing Your Accounts
How to Open a New Bank Account
Making an Opening Balance Entry
The Opening Balance's Editing
Deleting a credit card or bank account
Bringing Back a Deleted Account
MAKING BANK DEPOSITES
Examine previous bank deposits
Delete a bank deposit
USING EDIT MENU COMMANDS
RECONCILE BANK ACCOUNT
How to reconcile bank accounts
ORDER CHECKS AND ENVELOPES COMMAND
ENTER CREDIT CARD CHARGES COMMAND
The Credit Card register
keeping track of credit card charges
BANK FEEDS COMMAND
LOAN MANAGER COMMAND
CHAPTER FIVE
PAYING EMPLOYEES
WHAT YOU NEED TO DO FOR QUICKBOOKS PAYROLL
Direct Deposit
 State Tax Withholdings
Federal & State Tax Information
Federal Taxes
SCHEDULING PAYROLL RUNS
EDITING AND VOIDING PAYCHECKS
PAYING PAYROLL LIABILITIES
Payroll liabilities types
How to pay your payroll liabilities
How to adjust payroll liabilities
CHAPTER ONE
FOR ACCOUNTANTS ONLY
Who Are Accountants?
Background/History of Accountants
Recognizing accountants
Using the journal entry feature in Quickbooks
ANALYZING THE TAX AND ACCOUNTANT REPORTS
CREATE AN ACCOUNTANT’S COPY
Handling the accountant's copy manually
Automatically sending the accountant's copy
CHAPTER TWO
PREPARING FINANCIAL STATEMENTS AND REPORTS
Creating Financial Statements
How to Prepare a Financial Report
CHAPTER THREE
CREATING A BUDGET
SET UP A BUDGET
COMMON BUDGETING TACTICS
TOP-LINE BUDGETTING
ZERO-BASED BUDGETTING
USING THE SETUP BUDGET WINDOW
CHAPTER FOUR
USING ACTIVITY- BASED COSTING
What is Activity-Based Costing?
Setting up your classes for ABC
Various Revenue Amounts
Classifying the cost of expenses
Producing ABC reports
CHAPTER FIVE
SETTING UP PROJECT AND JOB COSTING SYSTEMS
CHAPTER ONE
RATIO ANALYSIS
Ratio Analysis Definition
What does "liquidity ratio" mean?
Types of Liquidity Ratios
ACID-TEST RATIO
Interpreting the Acid Test Ratio
What is the ratio of inventory turnover?
Benefits of Activity Ratios
CHAPTER TWO
ECONOMIC VALUE-ADDED ANALYSIS
Understanding Economic Value Added (EVA)
Advantages and Disadvantages of EVA
Value-added types and their formulas
How to calculate value added
Example of value-added calculation
CHAPTER THREE
NUTSHELL GUIDE TO CAPITAL BUDGETING
Capital Budgeting: What Is It?
Capital Budgeting Process
CHAPTER ONE
ASSESSMENT OF PROFIT-VOLUME-COST
What Is the Break-Even Point (BEP)?
How to calculate your break-even point
Break-even analysis examples
RECOGNIZING THE DOWNSIDE OF THE PROFIT-VOLUME-COST MODEL
The Benefits of Cost-Volume-Profit (CVP) Analysis
Disadvantages of Cost-Volume-Profit Analysis
BREAK-EVEN-ANALYSIS FORECAST
A break-even analysis's advantages
Benefits of a break-even analysis
Importance of Break-Even
How to calculate break-even point
Break-even point formula
CHAPTER TWO
CREATING A BUSINESS PLAN FORECAST
A business plan workbook: What is it?
What Elements Make Up a Workbook for a Business Plan?
A Summary of Your Business Plan
How to Craft a Business Plan Workbook
UNDERSTANDING THE WORKBOOK CALCULATIONS
Manually Referencing Formulas
FORECASTING INPUTS
Forecasting Techniques
Forecasting characteristics
The Forecasting Process
BALANCE SHEET
Balance Sheet Function
Importance of a Balance Sheet
Limitations of a Balance Sheet
Example of a Balance Sheet
INCOME STATEMENT
Income Statement Elements
CASH FLOW STATEMENT
How to Use the Cash Flow Statement
How to Calculate Cash Flow
Example of a Cash Flow Statement
FINANCIAL RATIOS
Financial Ratio Analysis: Uses and Users
Ratios of Liquidity

Profitability Ratios
Ratios of Market Value
CALCULATING TAXES FOR A CURRENT NET LOSS BEFORE TAXES
NI Calculation for Business
NI vs. Personal Gross Income
Tax Returns and NI
CHAPTER THREE
WRITING A BUSINESS PLAN
What is a business plan?
How to Write a Business Plan
Definition of Strategic Planning
 Process of Strategic Planning
The Benefits of strategic planning
COST STRATEGIES
A NEW- VENTURE PLAN
Grow a Business Venture
CHAPTER ONE
ADMINSTERING QUICKBOOKS
Using Windows security
Using QuickBooks security
Using QuickBooks in a Multiuser Environment
How to set up additional QuickBooks users
Adding users in QuickBooks Pro and Premier
CHAPTER TWO
PROTECTING YOUR DATA
BACKING UP THE QUICKBOOKS DATA FILE
Backing-up basics
CHAPTER THREE
TROUBLESHOOTING
BROWSING INTUIT PRODUCT-SUPPORT WEBSITE
Google Chrome
Firefox
Internet Explorer
Safari
CHAPTER 1
A CRASH COURSE IN EXCEL
Starting Excel
Using the Start menu to launch Excel 2010
Creating a desktop shortcut for Excel 2010
Leave Excel 2010
EXPLAINING EXCEL WORKBOOK
Differences Between Workbook, Worksheet, and Spreadsheet
Creating a new workbook
PUTTING TEXT, NUMBERS, AND FORMULAS IN CELLS
Cut, Copy, and Paste cell contents
Copying and pasting cell contents
Cutting and pasting cell contents
FORMATTING CELL CONTENTS
 Save your workbook
Activate AutoRecovery
Opening a workbook
Closing a workbook
PRINTING EXCEL WORKBOOK
Selecting a printing area
CHAPTER 2
GOVERNMENT WEB RESOURCES FOR BUSINESS
BUREAU FOR ECONOMIC ANALYSIS
BEA's statistical analysis
Gross Domestic Product (GDP)
Balance of Trade (BOT)
FINDING INFORMATIONS AT THE BEA WEBSITE
Cookies
Google Analytics usage
Security of data processing
BUREAU LABOUR OF STATISTICS
Understanding the Bureau of Labor Statistics (BLS)
The Bureau of Labour Statistics's past (BLS)
SECURITY AND EXCHANGE COMMISSION
History of the SEC
The Functions of the Securities and Exchange Commission (SEC)
FEDERAL RESERVE
PURPOSE OF FEDERAL RESERVE
GOVERNMENT PUBLISHING OFFICE
HISTORY OF THE GOVERNMENT PUBLISHING OFFICE
CHAPTER 3:
Financial Accounting Terms Glossary
INDEX
AN ACCOUNTING PRIMER

INTRODUCTION
The Features of Accounting Information
Ø Relevance
Ø Reliability
Ø Comparability
Ø Understandability
Ø Timeliness
Ø Cost-benefit
Ø Verifiability
Ø Neutrality
Ø Completeness
1. Relevance
To affect the users' economic decisions, the information must be pertinent.
By assisting stakeholders, creditors, and other users in assessing past and
future occurrences, accounting information affects decision-making. As a
result, it supports or contradicts previously held beliefs. Information's
relevance is influenced by its kind, nature, and materiality.
2. Reliability
Accounting data should be accurate. In the sense that the information
accurately reflects what it is intended to show, reliability is related to
confidence in accounting information.
It has to be accurate. Errors and biases shouldn't exist in information. A
truthful representation of the facts, content over style, objectivity, prudence,
and completeness are the main characteristics of reliability.
3. Comparability
When accounting data from one company is compared to data from another
company at the same time as well as data from the same company throughout
a range of periods, it becomes valuable.
For users to meaningfully compare companies, the organization must display
the information consistently over time.
4. Understandability
Users who are anticipated to have a fair understanding of business,
economics, and accounting as well as a willingness to investigate the facts
with reasonable diligence should find it simple to understand.
5. Timeliness
The users must receive the information quickly for it to have an impact on
their choices. As a result, accounting information should be made
immediately and at the proper moment for decision-making.
6. Cost/benefit
Most people who want to use it must find it useful. Furthermore, the process
of preparing that helpful information shouldn't be expensive or time-
consuming. The focus is on cost-benefit analysis, and the value of the
information should outweigh the expense of giving it.
7. Verifiability
Verifiability guarantees that the transactions are accurately recorded. Aside
from the accountant himself, other people must be able to verify its accuracy.
8. Neutrality
Accounting data should be accurate and should not favor one party over
another; this is what it means to be neutral. For those who access information
from other sources, neutrality is crucial.
9. Completeness
Completeness is the state in which the financial statements contain all
relevant information that creditors or other users need to evaluate the
organization's financial position and operating performance.
 CHAPTER ONE
Accounting fundamentals
The rules that a company must follow when disclosing financial information
are known as accounting principles. Several essential accounting principles
have arisen as a result of their broad use. These form the basis on which the
entire body of accounting standards has been built. The most well-known of
these are the concepts listed below:
Any set of accounting standards' ultimate goal is to guarantee that a
company's financial statements are complete, uniform, and comparable.
Investors can therefore more easily review and extract useful information
from the company's financial records, such as historical trend data. It also
facilitates the comparison of financial information between different
businesses. By increasing transparency and making it simpler to identify red
flags, accounting principles also help to decrease accounting fraud.

Accrual principle: According to this theory, transactions should be recorded

in the accounting periods during which they actually occur rather than during
which there are corresponding financial flows. The foundation of accrual-
based accounting is this. It is essential to compile financial statements that
accurately reflect events that took place within an accounting period rather
than being excessively delayed or accelerated by associated cash flows. For
instance, if the accrual principle weren't followed, an expense wouldn't be
recorded until it was paid for, which could cause a large delay depending on
how the linked supplier invoice is paid. The conservatism principle suggests
that while income and expenses should only be documented when they are
certain to occur, assets and liabilities should be reported as soon as feasible.
The financial statements have a more cautious slant because revenue and
asset recognition may take some time to occur; this could lead to lower
reported earnings. In contrast, this approach favors sooner rather than a later
recording of losses. If a business consistently reports outcomes that are worse
than they are, this principle could be taken too far.
Consistency principle: According to this concept, after you've decided on an
accounting theory or strategy, you should stick with it until another that is
unmistakably superior develops. It can be exceedingly difficult to predict a
corporation's long-term financial results if the consistency principle is not
observed since it may vary between multiple accounting treatments for its
activities.
Cost principle: According to this theory, a business should only record its
assets, liabilities, and equity holdings at the original acquisition cost. This
idea is becoming less and less applicable as a lot of accounting regulations
are shifting in the direction of valuing assets and liabilities at fair value.
Economic entity principle: According to this concept, a company's
transactions should be kept separate from those of its owners and other
businesses. When an audit of a new company's financial accounts is
conducted for the first time, this prevents the mixing of assets and liabilities
among numerous entities, which can provide substantial issues.
Full disclosure principle: According to this principle, everything
information that could influence how well a reader understands a company's
financial statements should be included in or offered in addition to them. The
accounting standards, which mandate a startling amount of informational
disclosures, have greatly enlarged this concept.
Going concern principle: According to this theory, a corporation will
presumably last for a while. This suggests that it would be permissible to
recognize some costs later, such as depreciation, in later periods. If not, you
would have to immediately record every expense and not put any off.
Matching principle: According to this concept, all related costs should be
included in the accounting system at the same time as revenue. Since you
charge inventory to the cost of goods sold at the same time you record
income from inventory item sales, this is how it works. This is one of the
cornerstones of the accrual basis of accounting. When accounting on a cash
basis, the matching notion is not applied.
Materiality principle: According to this theory, a transaction ought to be
recorded in the accounting books if doing so would have affected the
judgment of a person viewing the company's financial statements. Because
this is a very fuzzy phrase that is difficult to measure, some of the quaintest
controllers have been known to record even the smallest transaction.
Principle of the monetary unit: A corporation should only keep account of
transactions that can be described in terms of a certain unit of currency,
according to this theory. Because a fixed asset was purchased for a specific
price, it is simple to record its purchase, in contrast to a business' quality
control system, which is not valued. A corporation is prevented from making
several assumptions as a result of this concept while estimating the worth of
its assets and liabilities.
Reliability principle: This principle states that only transactions that can be
verified should be recorded. For instance, a supplier invoice offers
unmistakable evidence that an expense has been recorded. This concept
appeals to auditors in particular because they frequently seek evidence to
support transactions.
Revenue recognition principle: According to this viewpoint, income
shouldn't be recorded until the earning process has been completed by the
business. Due to the large number of persons who have deviated from this
idea's rules to commit reporting fraud, several standard-setting organizations
have accumulated a wealth of knowledge about what constitutes legitimate
revenue recognition.
Period principle: According to this concept, a business ought to outline the
results of its operations over a predetermined period. The objective is to offer
a uniform collection of comparable periods that are useful for trend analysis,
even if it may be the most evident accounting principle of them all.
Cash flow statement:
The balance sheet and some parts of the income statement are contained in
this statement.
The purpose of the statement of cash flows is to show how cash is brought in
and spent over a given time, or how much cash is taken in and used for what
expenses.
Managers, inventory, and business owners
What Is Management Accounting?
To achieve an organization's goals, managerial accounting includes the
identification, measurement, analysis, interpretation, and transmission of
financial information to managers.
Management accounting is distinct from financial accounting in that it is
designed to assist users within the company in making wise business
decisions.
KEY LESSONS
• Financial data is given for internal use in managerial accounting so that
management can use it to make crucial business decisions.
• Managerial accounting approaches differ from financial accounting in that
they are not bound by accounting regulations.
• The presentation of management accounting data can be altered to meet
user needs.
• Managerial accounting, which covers a wide variety of accounting issues,
includes product costing, budgeting, forecasting, and many financial studies.
• Financial accounting produces and disseminates official financial
statements that follow established accounting standards and are intended for
the general public.
Managerial accounting's functionality
Enhancing the management's access to high-quality data on key business
operating metrics is the aim of managerial accounting. The price and sales
income of the products that the company produces are used by managerial
accountants. Cost accounting is a key subset of managerial accounting,
concentrating on documenting a company's entire costs of production by
assessing the variable costs of each stage of production as well as fixed costs.
By locating and decreasing unnecessary spending, businesses can use it to
maximize earnings.
Managerial Accounting Types
1. Costing and product valuation
The goal of product costing is to determine all costs incurred in the
production of a good or service. Costs may fall under different categories,
such as direct, indirect, fixed, or variable costs. Cost accounting is used to
measure and identify such costs as well as assign overhead to each sort of
product that the firm produces.
To assess the overall cost associated with manufacturing a good, managerial
accountants distribute and compute overhead charges. The volume of goods
produced or other aspects that have an impact on production, such as the size
of the facility, may determine how overhead costs are distributed. In order to
appropriately evaluate inventory that may be in various phases of production
as well as cost of goods sold, managerial accountants use direct costs as well
as overhead costs.
Marginal costing, also known as cost-volume-profit analysis, measures how
the price of a product changes when one more unit is produced. It is useful
for making quick financial judgments. The contribution margin refers to the
impact a specific product has on the total profit of the company. Following
margin analysis is break-even analysis, which determines the unit volume at
which the company's gross revenues equal its total expenses by computing
the contribution margin on the sales mix. Break-even point analysis can be
used to establish the prices for products and services.
2. Inventory Turnover Analysis
Inventory turnover is the frequency with which a company sells and replaces
its stock over a given time. Calculating inventory turnover helps businesses
make better choices regarding pricing, production, marketing, and the
purchase of new inventory. The cost a company pays to keep unsold products
in storage is referred to as the carrying cost of inventory, and it can be
calculated by a managerial accountant.
If the company is storing too much inventory, efficiency improvements could
be made to reduce storage costs and free up cash flow for other business
needs.
ACCOUNTING SKILLS FOR ENTREPRENEURS
1. Managing Cash Flow
Cash is king, as the old saying goes. Cash turns out to be one of the most
important assets for many companies, especially new ones where credit lines
are constrained and funding is challenging. It powers the machinery of your
business. Without it, you won't be able to pay your vendors and would
struggle to expand your company by acquiring more goods or consumers.
Understanding and forecasting cash flow enables businesses to prepare for
the future and make sure there is always enough cash on hand to keep the
operation going (and hopefully growing). Keeping track of financial inflows
and outflows enables business owners to make informed plans, avoid
unneeded cash shortages, and use extra cash effectively to expand their
operations. Even if you do hire an accountant, you should still have the
necessary expertise to engage in informed conversations with potential
business partners, investors, employees, and others.
2. Keeping a balance sheet up to date
A balance sheet provides a summary of a company's financial position at a
certain point in time. It allows potential investors in the business to see right
away what resources are available, how they were financed, and both the
company's assets and liabilities, or what it currently owns and what it owes to
others.
Owners of businesses can utilize the balance sheet to assist manage their
businesses. Even when revenues may be expanding significantly, the
company must pay strict attention to the liabilities side of the balance sheet to
succeed in the long run. Investors are interested in a company's development
potential, but they are also worried about how much of its assets it owns as
opposed to how much it owes. The balance sheet gives investors and
potential buyers a comprehensive picture of the company's current financial
status.
3. Determining a Route to Profitability
Profitability is the amount of money that remains from each dollar of sales
after all expenses have been paid. This may seem simple to those who are
thinking about starting a business, but in the beginning, it might occasionally
be disregarded.
It is usually required to accept a loss at an early stage to reach a target
market, gather consumers, increase exposure, or launch successfully. This
can't be a long-term strategy, though. Entrepreneurs need a path to
profitability if they are to attract investors and grow over time.
4. Discussions about Money
Nearly every aspect of running a business requires strong communication
skills but dealing with finances and accounting demands them beyond all
others. As an entrepreneur, you must be comfortable and be able to
communicate clearly with consumers, suppliers, investors, and other
stakeholders about the financials of your business.
Making sure that everyone is on the same page through clear communication
will protect you and your business from assumptions or misunderstandings,
especially when it comes to payment terms and the scope of the task.
By becoming more orThe management of numerous invoices, purchase
orders, vendors, and tax accounts depend on this. ganized and set clear
guidelines for all payment-related tasks, you can also avoid the same kinds of
misunderstandings and misunderstandings.
5. For the majority of business owners, predicting future business
growth is a primary source of inspiration. While some people are happily
running a one-person firm, others want to diversify their sources of income.
Some individuals could attempt to grow their teams by adding new members.
Some people might still wish to make big cuts.
Entrepreneurs need to be able to predict the future of their company to grow
successfully and safely, regardless of their own growth goals. Accurate
estimates of future revenues, operating costs, resource needs, and profit levels
are essential to luring investors, obtaining financing, securing employment,
and accepting more clients or consumers. Without accurate projections, it's
far too simple to grow either too quickly or insufficiently, both of which can
be detrimental to the success of your business.

CORPORATE CREDITORS
Who Are the Creditors?
A creditor is a person or business that extends credit to another party so they
can borrow funds, frequently through a loan agreement or contract.
Frequently, personal and real categories of creditors are separated.
It is possible to classify someone as a personal creditor if they lend money to
friends, family members, or a business that provides rapid goods or services
to a person or business.
Real creditors are financial institutions or banks that have loan agreements
and legal contracts that provide the lender the right to confiscate any of the
debtor's tangible assets or collateral if the loan is not repaid.
KEY LEARNINGS
A creditor is a person or business that extends credit to another party
so they can borrow money, frequently via a loan agreement or
contract.
Creditors like banks have the legal power to seize the collateral—
including homes and cars—and take the debtors to court when they
fall behind on secured loans.
High credit scores are seen as a sign of low risk by creditors, and as a
result, these borrowers usually pay low interest rates.
Recognizing creditors
Creditors frequently charge interest on the loans they extend to their clients;
for instance, 5% APR on a $5,000 loan. The interest represents the cost of the
loan to the borrower, and the rate of interest reflects the creditor's risk that the
borrower won't repay the debt.
To minimize risk, most lenders base interest and fee amounts on the
borrower's creditworthiness and past credit history. High credit score
borrowers are seen as low risk by creditors, and they usually pay moderate
interest rates.
Lenders usually charge higher interest rates to consumers with lower credit
scores because they consider them to be riskier.
Debtor and Creditor
In legal agreements, the party who accepts credit or a loan owes the
obligation, and agrees to its payback is referred to as the debtor. The
company that extends credit is the creditor.
What Takes Place If Creditors Aren't Paid Back?
Secured creditors, typically a bank or mortgage firm, have the right to
repossess or lien the property used as collateral for a loan, such as a car or
home. A creditor is referred to as an unsecured creditor, such as a credit card
company, when the borrower declines to offer the creditor any property, such
as a car or home, as security to pay a debt. To collect on unpaid unsecured
debts, these creditors may bring lawsuits against these debtors, and the court
may impose judgments mandating payment, wage garnishment, or other
remedies.
Governmental agencies
Governmental accounting: what is it?
Government accounting divides activities into numerous funds while
upholding strong control over resources to make it evident how money is
being distributed to various programs. This accounting approach is utilized
by all types of governmental organizations, including those that are federal,
state, county, municipal, and special-purpose.

Federal Governmental Accounting Standards Board

Due to the unique requirements of governments, a unique set of accounting
standards has been developed. The major body responsible for creating and
upholding these rules is the Governmental Accounting Standards Board
(GASB). The GASB performs the same function as the Financial Accounting
Standards Board (FASB), but for all other entities not engaged in
governmental activities. Creating accounting and financial reporting
standards for state and local governments is the responsibility of the GASB.
Capital Accounting
A fund is an accounting entity with a self-balancing set of accounts used to
record financial assets and liabilities as well as operating operations and that
is separated to carry out certain tasks or realize particular goals. A fund is not
a separate legal person. Because they have to exercise rigorous control over
their resources, governments use money. The purpose of funds is to keep
track of resource inflows and withdrawals with a particular emphasis on how
much money is still available. A government can more precisely monitor
resource use by splitting resources into distinct funds, which lowers the
likelihood of overspending or spending where it is not authorized by the
government budget. Different types of funds use different accounting and
measurement focuses. The difference between these two principles is
illustrated by the fact that the measurement focus decides what transactions
will be recorded, whereas the basis of accounting dictates when transactions
will be recorded.
Adjusting the accrual foundation of accounting is necessary when dealing
with government budgets. The sum of these revisions is referred to as a
"modified accrual basis." When they become subject to accrual, revenue and
government fund resources (like the proceeds of debt issuance) are
recognized under the modified basis of accounting. This shows that these
items are both attainable and quantifiable to cover the period's expenses. The
"availability" idea holds that for the current period's liabilities to be satisfied,
the income and other fund resources must be able to be collected either
immediately after the current period ends or during it. A government can
amass money thanks to the concept of "measurable" without knowing the
exact sum.

Governmental financial reporting's primary

objective
The main measurement focus of a government fund's financial statements is
spending, which is a decrease in net financial resources. The majority of
expenses should be reported when a corresponding obligation is formed. In
other words, the cost and liability for a public fund are incurred at the same
time.
The primary focus of governmental finances is on current financial assets,
which include liabilities that can be paid with this cash and assets that may be
sold for cash. In other words, long-term assets and any other assets that
cannot be converted into cash to meet current obligations are not included on
the balance sheets of public funds. Long-term liabilities won't be included in
these balance sheets either because they might be settled without depleting
available funds. This measuring focus is only applied in government
accounting.
Creation OF BUSINESS FORMS
What is an accounting form?
A business's revenue and expenses can be found using accounting forms.
Additionally, it provides data on assets, unpaid liabilities, actual losses,
predicted losses, and actual losses. They are also used in businesses to avoid
or get rid of expensive mistakes.
Additionally, there are significant differences between the usage approaches
(automated, manual, and mechanized), the incorporation of analytics and
synthetic accounting, and the connections between the recording of data in
sequential and systematic order.

In addition, accounting helps small businesses in the following ways:

1. Accounting may help small businesses understand concepts like fixed
costs, variable expenses, and how to bargain for project rates. By doing this,
they avoid suffering project losses.
2. Accounting records assist small businesses in understanding their financial
status better. You can do this by looking at balance sheets, income
statements, and cash flow statements.
3. Accounting helps small businesses keep track of their cash flow. By
implementing efficient record-keeping procedures and developing a good
financial strategy, business owners can prevent experiencing a cash
constraints.
4. It aids in spotting and stopping fraud that is done by clients, workers, or
suppliers.
5. Business owners who understand how their finances work are better able to
conduct audits.
6. Bankers are more willing to collaborate with business owners who are
knowledgeable about their organization's finances and mindful of the
financial ramifications.
7. A thorough budget that helps small firms to spot operational inefficiencies
and a review of financial data is essential to their success.
Forming an Accounting Record
Contrary to popular belief, not only accounting and finance personnel are
required to record or document every detail of a transaction. They are also in
charge of data analysis and evaluation. The accountants are then able to
decide and offer ideas that are backed up by data.
Before being entered or documented on accounting forms that are made by an
accountant or finance officer, all information must be expressed simply and
clearly. Because they are essential to any corporate organization, reports, and
records, this is. Additionally, it determines the operational degree of the
business's cost-effectiveness. Therefore, while producing reports, accountants
must be succinct, utilize accurate language, and have a clear aim. Any type of
communication—letters, reports, notes, or papers—will be accepted.
Accounting professionals should consider their audience while creating their
reports. For instance, while emailing a coworker internally, the tone and
manner utilized should be different from when emailing a client.
Strategies for Creating an Accounting Form
Professionals in accounting and finance need to improve their writing skills.
The reason for this is that they put a lot of effort into creating and recording
reports. As a result, when preparing an accounting form, accountants or
finance officers can use the following advice:
1. Recognize who your audience is.
Being aware of who your audience is can help you set the tone for your
reports, as was already said. Reports intended for both the general public and
those written just for firm employees should be distinguished from one
another.
2. Ensure that the aim of the report or form is very clear.
If the accounting report relates to monthly income and expenses, sales growth
or fall, financial stability, or income tax, it is critical to make that clear.
3. Produce the content promptly, accurately, plainly, and succinctly.
4. Organize the data properly.
5. Comply with the standard guidelines for completing accounting forms and
report writing.
Ensure that your report is a fact-filled document. Reading comprehension can
be aided by charts, graphs, and other information.
You could use a pie chart, for instance, to compare offline and online sales.
Data should be included in your presentation. The claim that "The company's
profit margins grew throughout the last six months" is untrue if it is not
backed up by proof. Replace it with a proper growth percentage. If the
document forbids the use of percentages, use an appendix.
 6. Review the writing in the report for mistakes. It has to be carefully
polished.
7.You could offer predictions or advice at the conclusion. Being honest about
potential issues is also essential if you want to solve them.
Samples of accounting forms Every Company Needs:
Ø Sample Request Form for Cheques
Any small business must have a checkbook to function properly. When
checking account holders use their accounts to make transactions, they
receive pre-printed paper money in the form of checks in the mail. Checks
having sequential numbers that can be used as a bill of exchange are
included.
On checks, the account holder's name, address, account number, bank routing
number, check number, and other identifying details are typically preprinted.
A ChequeBook can be made using the Formplus Chequebook Request Form.
People with open bank accounts can easily request checkbooks in this
manner. Account holders may complete the form by providing the name,
type, and number of their accounts as well as the type of checkbook they
desire.
Ø Sample Credit Card Payment Form
The credit card payment form template from Formplus was carefully
designed to help businesses set up a payment structure to regularly charge
customers' cards.
Customers can fill up this form template with information such as their
contact details, payment methods, the total amount to be charged, and other
details. This form offers the alternatives of solo usage and website
embedding.
Ø Template for Client Tax Questionnaire
Employing Formplus's unique client tax questionnaire form template,
businesses may collect and save taxpayer data. You can submit your client's
personal information, financial information, medical history, and other facts
using this form. The use of Formplus storage is another option for
safeguarding all taxpayer data.
 Ø Office Expense Form Template
The Formplus Office Expense Form template makes it simple for small
businesses to track and record their office expenses. This free office
expenditure form template is made to make it simple for employees of firms
to record daily office expenses and the reason for the expense. Managers can
regulate and monitor office expenses using this form. Start by completing this
tax form right away.
Ø Sample Purchase Approval Form
Businesses can verify their purchases and the vendors using the buy approval
form. This form allows for the entry of the product's description, quantity,
price, vendor information, and other specifics. All transactional data,
including invoices, may be centralized using Formplus storage.
Ø Template for Daily Inventory Form
Small business owners can use the daily inventory form as a data form to
track and record daily inventory. You can list each item that was sold using
this form. Use the secure Formplus storage mechanism to save this
Inventory's characteristics. You can modify this form template to suit your
preferences and requirements.
Ø Material Inventory Form Template
The material inventory form can be used to record and maintain track of the
list of materials in your inventory. Using this form, your staff members or
inventory managers can easily update the material inventory list. You can
also note the name, quantity, description, etc., of each material.
Ø Fuel Requisition Form Template
If your business requires constant transportation, use the fuel requisition form
template from Formplus. Businesses and organizations in the logistics
industry that manage a large fleet of cars may utilize this form. The purpose
of this fuel request form is to aid staff in streamlining fuel requests within an
organization. Drivers can fill out this form by entering the required amount of
gasoline, the reason for the request, and the date. The business can monitor
and forecast its fuel consumption using this form.
Examining the standardized financial statements
A review of financial accounts is what?
A limited guarantee that the financial statements of a company do not require
major modification in order to conform with the appropriate accounting
structure can be obtained by an accountant using the financial statement
review service (such as GAAP or IFRS). During a review, the accountant is
not obliged to evaluate the likelihood of fraud, have a firm grasp of internal
controls, or use any other auditing techniques. The assurance that the
accountant is aware of all the crucial issues that would ordinarily be
discovered and revealed in an audit cannot be provided by a review. The
accountant reviews the financial statements, whereas management is in
charge of preparing and presenting the company's financial accounts during a
review. The accountant needs to have appropriate knowledge of the
organization and its sector.
The Process of Examining Financial Statements
The accountant performs the steps necessary in a financial statement
review to provide a reasonable basis for obtaining a limited assurance that
no significant modifications are needed to bring the financial statements
into compliance with the applicable financial reporting framework. In
areas where there is a higher risk of misstatement, these procedures are
more intensely targeted.
The following actions could be considered reasonable to complete as part
of a review:
• Look into outcomes that don't make sense.
• Learn the procedures for logging accounting transactions.
• Look into unusual or complex situations that might have an impact on
reported results.
• Look closely at significant transactions that occurred near the conclusion of
the accounting period.
• Respond to any questions that were raised during previous evaluations.
• Enquire about noteworthy events that happened beyond the financial
statements' due date.
• Examine significant journal entries.
• Review correspondence from oversight bodies
• By reading the financial statements, determine if they appear to adhere to
the pertinent financial reporting structure.
• Examine any management reports from financial statement reviews or
audits performed for prior periods by accountants.

THE INCOME STATEMENT

What Is An Income Statement?
One of the three important financial statements, the income statement, is used
to summarize a company's financial performance for a specific accounting
period. The other two crucial items are the cash flow statement and the
balance sheet.
The income statement, also known as the profit and loss (P&L) statement or
the statement of revenue and expense, primarily focuses on the business's
revenue and expenses during a given time period. It will be easier for you to
determine whether you should invest in a firm if you know how to evaluate
an income statement.
KEY LESSONS
Ø The income statement, along with the balance sheet and the cash flow
statement, are the three major financial statements that present
information about a company's operations over a certain accounting
period.
Ø Net income is the result of subtracting all revenues plus gains from all
expenses plus losses.
Ø Reciprocations are not revenue; instead, total income is the sum of
operating and nonoperating revenue, and total expenses is the sum of
primary and secondary activity expenses. The revenue earned is
displayed in the income statement. Receipts for money paid out or
collected in cash are not.
Ø The operations of a company, the efficiency of its management, poor
 performing industries, and its success in relation to rivals are all
valuable insights that may be acquired from an income statement.
How to Read an Income Statement
An essential part of the company performance reports that must be submitted
to the U.S. Securities and Exchange Commission is the income statement
(SEC). In contrast to a balance sheet, which provides a snapshot of a
company's financial situation as of a specific date, the income statement
represents income over a particular time period, usually a quarter or a year,
and its heading signifies the duration, which may read as "For the (fiscal)
year/quarter ended June 30, 2021.

"
The income statement is composed mostly of four items: revenue, expenses,
profits, and losses. It does not differentiate between cash and non-cash
receipts (cash sales versus credit sales) or between cash and non-cash
payments or expenditures (purchases in cash vs. purchases on credit). Prior to
calculating net income or earnings per share, sales data is first calculated
(EPS). It essentially outlines the procedure by which the company's net
revenue is transformed into net profitability (profit or loss).
BALANCE SHEET
What exactly is a balance sheet?
The term "balance sheet" refers to a financial statement that details the assets,
liabilities, and shareholder equity of a business at a specific point in time.
Balance sheets serve as the basis for estimating a company's capital structure
and computing investor return rates.
A financial statement called a balance sheet provides a brief summary of a
company's assets, liabilities, and shareholder investment. Balance sheets can
be used in combination with other important financial data when doing basic
analysis or computing financial ratios.
MAIN LESSONS
• A balance sheet, or financial statement, lists an organization's assets,
liabilities, and shareholder equity.
• The balance sheet is one of the three key financial statements that are
evaluated when evaluating a firm.
• It provides a snapshot of the financial position of a corporation as of the
publication date.
• The balance sheet's assets are equal to the sum of the liabilities plus
shareholders' equity.
NOTE: Fundamental analysts use balance sheets to calculate financial ratios.
Operation of Balance Sheets
The balance sheet of a business provides a snapshot of its financial standing
at any one time. It is unable to provide a knowledge of the tendencies that
appear over a longer time period on its own. For this reason, it is important to
evaluate the balance sheet to those from earlier time periods.
Investors can assess the financial health of a firm using a variety of ratios that
can be created from a balance sheet, including the debt-to-equity ratio, the
acid test ratio, and many others. The income statement, statement of cash
flows, and any remarks or addenda in an earnings report that may make a
reference to the balance sheet all provide additional valuable information for
assessing a company's financial health.
Assets=Liabilities+Shareholders’ Equity
This equation is logical. This is done so that a company can either raise
money from investors or borrow money from other individuals to pay for all
it owns (assets) (issuing shareholder equity).
A company's assets (especially the cash account) will increase by $4,000 as a
result of borrowing $4,000 from a bank over the course of five years. Its
liabilities (more specifically, the long-term debt account) will increase by
$4,000 as well to equalize the two sides of the equation. If the company
raises $8,000 from investors, its assets and shareholder equity will both
increase by $8,000. Any surplus in revenue over expenses that the company
experiences will be put in the shareholder equity account. In terms of assets,
these revenues will equal out as cash, investments, inventory, or other assets.
Note: Since different industries use different financing strategies, balance
sheets should also be compared to those of other businesses in the same
industry.
The assets on a balance sheet
The accounts in this sector are ordered from top to bottom based on their
liquidity. They may be converted into cash so quickly. Those that can be
converted into cash in a year or less are classified as current assets, and those
that cannot are classified as non-current or long-term assets.
Following is a broad breakdown of the accounts within current assets:
Ø The most liquid assets are cash and its substitutes, which can also
include Treasury bills and short-term certificates of deposit. This
section also includes hard currency.
Ø Bonds and stocks with active markets are referred to as marketable
securities.
Ø Accounts receivable is the term used to describe the company's
financial obligations to its customers (AR). This might contain a
provision for shady accounts due to the risk that some clients will
default on their loan.
Ø Inventory is any item that is easily available for purchase and valued
at either its cost or its market value.
Note: Examples of prepaid expenses that have already been paid for include
insurance, contracts for advertising, and rent.
Liabilities
A obligation is any amount that a company owes to a third party, such as rent,
utilities, salaries, interest on bonds issued to creditors, and invoices it must
pay to suppliers. Obligations that have a one-year payback window and are
organized by due dates are considered current liabilities. Long-term
commitments, on the other hand, are payable at any moment after the first
year.
Current obligation accounts may include the following:
v One year is a present liability and nine years are a long-term liability,
for example, if a firm has a debt for its storehouse with 10 years to pay
it off, the percentage of the debt that is due during the upcoming year
is termed to as the "current portion of long-term debt."
v Cumulative interest is due, also referred to as interest payable, on a
past-due obligation, such as failing to pay property taxes on time.
v The phrase "wages payable" describes the salaries, wages, and
benefits that are owing to employees, often for the most recently pay
period. Client prepayments are sums of money that a customer
receives before a service or product is delivered.
v The company must either provide the requested good or service or
reimburse the customer for their payment, whichever comes first.
v Dividends payable are those that have been authorized for payment
but have not yet been distributed.
v Prepayments and earned and unpaid premiums are comparable in
that a company receives money in advance but hasn't yet performed
their obligation; if they don't, they must return the unearned money.
Accounts payable are typically a current liability. Accounts payable typically
represents a current liability. Accounts payable are the loans on invoices that
are paid as part of a company's operations and are generally due 30 days after
receipt.

Long-term liabilities may include:

• Bond principal and interest are both considered to be part of long-term debt.
• The pension fund liability is the amount that a corporation is required to pay
into the retirement plans of its employees.
Deferred tax obligations are taxes that have accrued but won't be paid until a
subsequent year. This number explains time differences as well as differences
between financial reporting standards and tax calculation techniques like
depreciation.
• Some liabilities are not considered to be on the balance sheet, which means
they are not.
The significance of a balance sheet
A balance sheet provides several benefits, regardless of the size or industry in
which a firm operates, including:
1. Evaluate risk using balance sheets: A corporation's assets and liabilities are
detailed in this financial statement. A company will have quick access to
information that will allow it to decide whether it has taken on too much debt,
if its assets are sufficiently liquid, or whether it has enough cash on hand to
satisfy its short-term demands.
2.Balance sheets can also be used to obtain money: A lender frequently
requires a balance sheet for a company to be authorized for a business loan.
When a company seeks private equity funding from investors, a balance sheet
is frequently necessary. In both scenarios, the outside party looks to assess
the financial health, creditworthiness, and ability of the business to repay
short-term loans.
3.Managers can evaluate a company's liquidity, profitability, solvency, and
cadence using financial measurements (turnover). Data from the balance
sheet is required for several financial ratios.
4.Managers can better understand methods to improve a company's financial
health by looking at trends over time or in comparison to similar businesses.
5.Last but not least, balance sheets may attract and keep talent. Most workers
prefer to know that their jobs are secure and that the business they work for is
doing well. Employees have the opportunity to review how much cash the
company has on hand, whether it is managing debt wisely, and whether they
believe the company's financial health is consistent with what they expect
from their employer thanks to the requirement that public companies that
trade publicly disclose their balance sheets.
By examining historical trends or making comparisons to organizations of a
similar nature, managers can better comprehend strategies for enhancing a
company's financial health.
6. Lastly, but certainly not least, balance sheets may draw and retain talent.
Most employees prefer to be confident in the security of their employment
and the success of the company they work for. Congratulations to the
requirement that public companies that trade publicly disclose their balance
sheets, employees have the chance to assess the amount of cash the company
has on hand, whether it is managing debt wisely, and whether they believe
the company's financial health is coherent with what they expect from their
employer.
A balance sheet example
The comparative balance sheet for Apple, Inc. is shown in the example
below. The company's financial status as of September 2020 is compared to
its financial situation a year earlier in this balance sheet.

Apple's $323.8 billion in total assets are depicted separately toward the top of
the report in this graphic. Current assets and non-current assets, the two
divisions in this asset area, are each further separated into a number of
accounts. Apple's non-current assets increased but their cash on hand
decreased, according to a cursory analysis of their assets.
This balance sheet also includes information about Apple's liabilities and
equity, with each item given its own section in the lower half of the
document. The liabilities section is split into current liabilities and non-
current obligations, just like the assets section, and each category shows
balances per account. The section on Total Shareholder Equity contains
information regarding the Common Stock Valuation, Retained Earnings, and
Accumulated Other Basic Income. The total assets on a balance sheet show a
company's financial status at a certain point in time. Apple's total liabilities
climbed while its total equity decreased.
The Balance Sheet Formula: What Is It?
The assets, liabilities, and equity of a firm are balanced to create a balance
sheet. Total assets = Total Liabilities + Total Equity is the equation.
To calculate total assets, all short-term, long-term, and other assets are
combined together. Total liabilities are calculated by adding all short-term,
long-term, and other obligations. Total equity is determined by adding net
income, retained earnings, owner contributions, and shares of issued stock.
ANALYSIS OF CASH FLOWS
A Cash Flow Statement: What Is It?
A cash flow statement is a sort of financial statement that summarizes all
cash inflows a company experiences from ongoing operations and outside
sources of investment. It also includes any monetary outlays for investments
and business expenses that were made during a certain time frame.
Investors and analysts can get a clear picture of all business dealings and how
each one affects the organization's success from a company's financial
statements. The cash flow statement is regarded as the easiest to comprehend
of all the financial statements since it shows how much money the firm
makes from its three main sources: operations, investments, and financing.
These three categories together are referred to as net cash flow.
The data presented in these three key sections of the cash flow statement can
be used by investors to determine the value of a company's stock or the
company as a whole.
POINTS TO NOTE
• A cash flow statement details all cash inflows a company experiences from
ongoing operations and outside investments.
• The cash flow statement's net cash flow represents the cash generated by
operations, investments, and borrowing.
Transactions from all functional business activities are included in the cash
flow from operations section of the cash flow statement.
• The second part of the cash flow statement, cash flow from investments,
displays how cash flow has been impacted by investment gains and losses.
A breakdown of the cash used for debt and equity is provided in the final
section, Cash Flow from Financing.
Operation of Cash Flow Statements
The Securities and Exchange Commission must receive financial statements
and reports from every company that issues and sells stock to the general
public (SEC).
1. The three main financial statements are the cash flow statement, the
income statement, and the balance sheet. An important document that
informs interested parties of all transactions that occur within a firm is the
cash flow statement.
2. There are two different types of accounting: accrual and cash accounting.
Because most public firms employ accrual accounting, the cash position of
the company differs from the income statement. The cash flow statement,
however, emphasizes cash accounting.
3. Profitable companies may find it difficult to manage their cash flow
effectively, making the cash flow statement a crucial tool for companies,
analysts, and investors. On the cash flow statement, the three business
activities of operations, investment, and financing are divided into their
corresponding divisions.
4. Take into account a company that offers a product and extends credit to its
customers. The company could not actually receive payment for that sale
straight away, even if it is counted as revenue. On the income statement, the
corporation declares a profit and pays income taxes on it, although the
company's real cash flow may be higher or lower than anticipated sales or
revenue.
5.Analysts and investors should be cautious when evaluating changes to
working capital because some companies might be trying to enhance their
cash flow before reporting periods.
Cash Flows from Financing
Cash flows from finance is the last element of the cash flow statement (CFF).
This section provides an overview of how cash is used in business finance. It
measures the flow of funds between a company's owners and its creditors,
and it is often funded by debt or stock. These figures are often presented in a
company's 10-K report to shareholders.
Analysts determine the amount of dividends and share repurchases the
company has made using the cash flows from the finance section. Finding out
how a company obtains funding for operational expansion is also useful.
This comprises funds obtained or returned from stock or debt-based capital-
raising efforts, as well as funds borrowed or repaid. A positive cash flow
from operations figure shows that the company is taking in more money than
it is using. If the number is negative, it can mean that the company is
rebuying stock, paying dividends, or paying down debt.

The Function of Financial Statements

Financial statements are documents that describe a company's activities and
financial performance. Financial statements are routinely audited by
government agencies, accounting firms, and other organizations to ensure
their accuracy and for reasons linked to taxes, financing, or investment. The
four fundamental financial statements that for-profit firms utilize are the
balance sheet, income statement, cash flow statement, and statement of
changes in equity. Financial statements used by nonprofit organizations are
similar but different.
KEY LESSONS
v Financial statements are written documents that describe an
organization's operations and financial performance.
v The balance sheet provides a fast snapshot of the business's assets,
liabilities, and shareholders' equity.
v The principal subjects of the income statement are the revenues and
expenses incurred by a firm over a given time period. After deducting
costs from sales, the statement produces a profit amount for the
company known as net income.
v The cash flow statement (CFS) measures the efficiency with which a
company generates cash to pay debts, operating expenses, and
investments.
v The statement of changes in equity keeps track of whether profits are
distributed to outside parties or retained internally for future growth.
Analyzing Financial Statements
Investors and financial analysts use financial information to evaluate a
company 's achievements and project where its stock price will go in the
future. One of the most important sources of accurate and audited financial
data is the annual report, which covers the company's financial statements.
In order to determine a company's financial soundness and potential
profitability, creditors, market analysts, and investors evaluate its financial
statements. The three main reports of a financial statement are the balance
sheet, income statement, and statement of cash flows.
Not all financial statements are created equally. Generally Accepted
Accounting Principles are the standards used by American firms, while
International Financial Reporting Standards are widely followed by
organizations around the world (IFRS). Additionally, some U.S. federal
departments follow their own set of financial reporting rules.
Assets
Cash and its counterparts, such as Treasury Bills and certificates of deposit,
are considered liquid assets.
Accounts receivable is the term used to describe the money that a company is
owed by its customers for the sale of its products and services.
A company's inventory is its supply of goods that it expects to sell frequently.
An inventory may contain unprocessed raw materials, finished goods, and
unfinished work in progress.
Prepaid costs are those that have been paid in advance of their due dates and
are recorded as an asset because their value has not yet increased; if it does,
the company would theoretically be entitled to a return. Property, plant, and
equipment are owned by a company as capital assets for long-term
advantage. This contains buildings used for manufacturing and sizable
machinery for processing raw materials.
Investments are assets that are kept for potential future growth. These are not
used in operations, they are only held for capital growth.
Liabilities for accounts payable are the expenses that must be covered as part
of a company's normal operations. This includes any obligations to pay for
raw material purchases as well as the rent and utilities costs.
Wages payable is the term used to describe payroll for time worked.
Note: payable which are recorded debt instruments, contain the repayment
schedule and total of formal debt agreements. Dividends payable are those
that have been declared to be due to shareholders but have not yet been paid.
Long-term debt includes loans with complete repayment terms of more than a
year, including mortgages, sinking bond funds, and other loans. It is
important to know that the short-term element of this debt has been
categorized as a current liability.
Comprehensive Income Statement
A statement of comprehensive income provides standard net income while
also taking changes in other comprehensive revenue into account. It is a
commonly underused financial statement (OCI). Other Comprehensive
Income includes all unrealized earnings and losses that are not displayed on
the income statement. Profits and losses that have not yet been disclosed in
accordance with accounting rules are included in this financial statement.
Additionally, the entire revenue from change is shown.
Examples of transactions that can be included on the statement of
comprehensive income include the following:
Net income (from the statement of income).
The unrealized gains or losses on debt Unrealized gains or losses from
investments in retirement programs
In the scenario below, ExxonMobil has net unrecognized revenue of over $2
billion. When additional comprehensive income is included, ExxonMobil
reports total revenues of about $26 billion as opposed to net revenues of
about $23.5 billion. securities
Unrecognized gains or losses from derivatives. Translational adjustments that
were omitted due to foreign currency.

Financial Statements for Nonprofits organizations

Nonprofit organizations use a similar set of financial statements to report
financial transactions. Due to these differences, there are differences between
the financial statements used by a for-profit company and a fully nonprofit
entity.
The standard set of financial statements used by a nonprofit organization
includes:
Statement of Financial Position: This is analogous to a for-profit
organization's balance statement. The key difference is that nonprofit
organizations do not hold equity interests; any funds left over after all assets
have been liquidated and all liabilities have been satisfied are referred to as
"net assets."
Statement of Activities: This is analogous to a for-profit organization's
statement of income. This report tracks the company's development through
time, along with donations, grants, event revenue, and expenses incurred to
make things happen.
Expense Statement for Functional Purposes: Only non-profit organizations
can do this. The statement of functional expenses lists expenses according to
entity function (often broken into administrative, program, or fundraising
expenses). This data is made available to the public so they can better
understand what portion of business expenses are directly related to the goal.
Summing Up of Cash Flows: This is analogous to a for-profit organization's
cash flow statement. Even though the accounts presented can vary depending
on the particulars of a nonprofit organization, the statement is still divided
into operating, investing, and financing operations.
THE ACCOUNTING PHILOSOPHY
What guiding principles govern accounting?
The accounting philosophy encompasses all of the fundamental ideas,
precepts, and theories that guide the preparation and auditing of both
individual and corporate financial statements. The need for openness is one
of the tenets of the ideology because of the legal ramifications of falsified or
inaccurate financial information. Since fair and accurate accounting of
income and expenses and documentation of both are necessary, being
transparent is crucial. This is especially accurate for businesses that are traded
publicly.
The philosophy of accounting places a lot of emphasis on notions like justice,
equity, and fairness. What true meaning are they conveying? They imply that
accountants must present a fair and accurate depiction of all the statistics
listed in their accounting records, abstaining from altering any of the numbers
to make a company appear better or worse than it actually is. There cannot be
any omission or withholding of data from the records (transparency).
To be equitable to all parties, documentation and reporting standards must be
the same for every business.
Philosophy of Accounting Issues
The accounting philosophy is, of course, a target or a set of rules that ought to
direct accounting activity. However, a number of issues arise when
attempting to put these intellectual concepts into reality.
The foundation for reporting financial data honestly and morally while
exercising some level of discretion when discussing a company's or a
person's private information is one of these issues. Another is the challenge of
creating and maintaining an accurate and fair value of a company and the
assets it owns. A third issue is with laws and standards and the ability to
apply them consistently across the board, satisfying not only the needs of
investors but also those of employees.
REVENUE PRINCIPLES
What Are the Steps in Revenue Recognition?
According to the revenue recognition accounting concept, revenue must be
recorded as soon as it is earned. The question then becomes: When is money
for a company considered "earned"? Revenue is frequently acknowledged
after a significant occurrence, such the delivery of the items to the customer.

Key Points
• Depending on a company's accounting method, location, whether it is a
public or private corporation, and other factors, the requirements for
recognizing revenue may vary.
• A fundamental tenet of accrual-basis accounting is the revenue recognition
principle, which states that companies must record revenue as it is earned
rather than when it is paid.
• Accurate revenue recognition is essential since it immediately impacts the
dependability and consistency of a company's financial reporting. • To
standardize processes for this process, the FASB developed ASC 606, which
offers a five-step framework for recognizing revenue.
• The similar IFRS 15, Revenue from Contracts with Customers, was
developed in collaboration with the FASB and IASB.
Cash
When money really passes hands, cash accounting is used to report income
and costs regardless of when the transaction actually occurred. When using
cash accounting, a company doesn't worry as much about trying to match
income and expenses in the same period as it does about keeping accurate
records of the cash flow of its accounts.
Due to its simplicity and user-friendliness, cash accounting is usually chosen.
Businesses can frequently benefit from tax-deductible expenses earlier with it
than they could with accrual accounting. That's why they don't start recording
expenses until after they've been paid, but before revenue starts to flow. Cash
accounting is not, however, an option for every business.
Accrual
Accrual accounting is in contrast to cash accounting, which mandates that
businesses record income and expenses as they are incurred rather than when
money is transferred. Accrual accounting is essential for many businesses,
particularly those that operate on credit and those with annual sales of more
than $26 million over a three-year period.
Accrual accounting is essential because it allows businesses to connect
revenues with related costs. Businesses that use accrual accounting can view
this transformation of assets into expenses in their financial statements.
Additionally, this makes it less difficult for companies to assess the
profitability of diverse operations across specific time periods. For more
details, see our article on accrual versus cash accounting.
implementation of the expense recognition principle
Organizations can benefit from the expense recognition principle and accrual
accounting in the following situations:
Salaries and wages: Employing accrual accounting, businesses can
determine wage expenses prior to the actual completion of work rather than
after the cashing of checks.
Commissions from sales: If a company receives commissions from a sale,
the commission must be acknowledged as soon as the transaction occurs.
Bonuses for employees: Bonuses should be reported in the year they are
earned, not when checks are written out.
Depreciation: An asset must be depreciated in the year that it was used and
some of its usefulness was utilized.
Supply acquisition: When a business buys supplies for production in the
future, the cost should be reported when the supplies are actually used, not
when they are purchased.
Responsibility for rendered services: The expense recognition concept
holds that once you have reaped the advantages of work accomplished, even
if you haven't yet paid for it, you should go ahead and incur such costs and
accrue them as liabilities for bills payable.

MATCHING PRINCIPLES
How does the matching principle work?
Businesses must report expenses concurrently with the revenues to which
they are tied, in accordance with the matching principle, an accounting
precept. Revenues and costs on the income statement are equal for some time
(e.g., a year, quarter, or month).
An illustration of the matching principle
Consider a scenario where a company rewards its employees annually for
their efforts over the fiscal year. It is standard practice to distribute 5% of the
prior year's total earnings in February of the succeeding year.
Due to the company's $100 million in revenue in 2018, it will reward its
workforce in February 2019 with a $5 million bonus.
Despite the fact that the incentive is not paid until the next year, the matching
principle requires that the expense be recorded on the 2018 income statement
as a $5 million expense. In order to keep the balance sheet in balance, a $5
million balance for bonuses due will be recorded on the balance sheet at the
end of 2018, and retained profits will be reduced by the same amount (due to
lower net income).
When the bonus is paid out in February 2019, there won't be any impact on
the income statement. Due to the $5 million credit to the cash balance and $5
million debit to the balance of bonuses payable, the balance sheet will
continue to be in balance.

Benefits of the Matching Principle

When creating financial statements, the matching principle offers the
following benefits:
v Less chance of understating income during a particular accounting
period
v Consistency across all financial statements, including the income
statement and balance sheet
v More accuracy in portraying the business's financial situation.
Negative aspects of the Matching Principle
The matching principle might not be the best choice in some situations,
though, where businesses choose to employ cash accounting rather than
accrual. Several limitations, including the following, apply to this concept:
v The difficulty increases when income and expenses don't directly
coincide.
v Doesn't work as well when a related revenue stream is dispersed
across time, like with marketing or advertising expenses.
v It is only under these particular conditions that it becomes more
difficult to use.
v In order to use the matching concept in day-to-day accounting, it is
generally a good idea to understand it.
Cost principle
The cost principle, which governs accounting, states that when assets are
acquired or purchased, their respective monetary values are recorded. The
asset's recorded value cannot be altered to take into account changes in
market value or inflation, nor can it be altered to take into account any
depreciation. Assets that are documented include obligations, short- and long-
term assets, and any equity. These assets are always recorded at their original
cost. Even though financial records frequently show the depreciation or
increasing value of acquired assets, the cost principle will always be valid.
The historical cost principle, also known as the cost principle, states that the
asset's original purchase price, rather than its subsequent appreciation or
depreciation, serves as the value that is kept as the cost principle.
The Cost Principle: How Does It Work?
It can be tough to give a cost principle demonstration when there is no money
involved. When you have to account for a trade-in but no money is delivered,
a problem occurs. like when a company exchanges their old car for a new
one. The documents would include the trade-in automobile's worth and the
cost of the new car, expressed in cash. The cost principle emphasizes the
importance of maintaining records that appropriately reflect costs. The idea's
potential impact on the balance sheet is the problem. When the value at the
time of acquisition differs from the present value, dealing with the
appreciation of fixed assets is most difficult. It becomes relevant when taking
into account depreciation and how it impacts the firm.
An example, using the cost principle
When there is a trade-in, a company can buy an automobile for a great price.
They only pay $15,000 for the car even though it is worth $20,000. The
company will record the actual amount paid as $15,000 on the balance sheet
even though the car has a $20,000 worth. It will continue to be in line with
the cash payment made on the invoice, not the value of the vehicle.

Benefits of the Concept of Cost Principle

1. If you use the following concept, your balance sheet will be more
consistent: Consistency from one financial era to the next is preserved with
the help of the historical cost principle. It is more helpful when disclosed to
outside parties like lenders and investors.
2. Using the cost principle concept, spending can be justified: Verification is
the foundational idea in accounting. All transactions may be completed using
any accounting application or manual ledger, but you must be able to verify
each entry. If you need to verify your accounting records, you can use the
original sales document as proof of the cost of the goods charged.
3. When using this strategy, you nearly never need to make adjustments:
When using the cost principle, there is very little chance that the cost will
change. The accuracy of your financial accounts won't be compromised by
fluctuating fair values.
4. Business owners without accounting expertise can utilize cost principles to
generate accuracy, consistency, and simplicity in their accounts: The fair
market value should be used to record your assets rather than the potentially
fluctuating true cost. Over the course of the fiscal year, it delivers exact
results. It gets easier to tell the difference between an asset's value and cost.
OBJECTIVITY PRINCIPLES
What is the Objectivity Principle?
The objectivity concept in accounting states that financial statements must be
impartial and free from any internal or external influence. Financial
statements become more accurate and valuable for analysis as a result.
Example
Company XYZ has requested that an auditing firm perform an external audit
of the company's financial records. However, after the external auditor
checked the records, he asked for client receipts to confirm the accounts
receivable. If Company XYZ is unable to give the auditor the necessary
receipts, the objectivity principle is violated. Because the claims cannot be
confirmed, the records cannot be used.
Principle of Objectivity in Auditing
As part of the auditing process, both internal and external auditors of the
company review the company's books. Auditors must use extra caution when
analyzing records and back up each one with the necessary paperwork, such
as invoices, receipts, and other documents. Auditors so primarily rely on the
objectivity principle and make sure that each document is accurate and
impartial. The company's books, for instance, include the balance sheet,
profit and loss statement, cash flow statement, and shareholder equity. As a
result, the objectivity principle need to serve as the basis for each entry in the
pertinent volumes. Any inaccurate information will cast doubt on the book's
overall objectivity. As a result, auditors take great care and meticulously go
over all accompanying documents when performing a book audit.
Benefits of Objectivity in Auditing
• It shows that the historical information offered in literature is objective. The
book is transparent as a result since the records are totally accurate.
• It increases goodwill for the company. The reputations of businesses have
previously suffered severely as a result of information manipulation.
• It has been shown that businesses that uphold their financial integrity see
increases in investor confidence and stock value.
• Information misrepresentation carries stiff penalties, including jail time. As
a result, organizations that follow outstanding accounting procedures founded
on the objectivity concept are exempt from state sanctions.
Disadvantages
• Every day, businesses produce a lot of data. Therefore, all the data will need
to be captured and stored using dependable software if required by
recognized accounting standards. All products must be accompanied by
supporting paperwork. Because of this, storing such records is expensive and
time-consuming.
• It takes a lot of time to compile the required paperwork and evidence to
satisfy the objectivity principle. It affects how a business runs on a daily basis
since managers must spend more time meticulously documenting everything.
• Hiring an independent auditing team comes at a considerable cost.
• There are recurring modifications to accounting concepts, which increases a
company's operating expenses and reduces the profit margin. As a result, the
company should establish a team to keep track of the changing accounting
regulations and occasionally take the necessary action.
CONTINUITY ASSUMPTION
Accounting assumptions are defined as rules of action or conduct drawn from
experience and practice that, when shown to be effective, are recognized in
the accounting profession.
4 Accounting Assumptions are;
Ø Business Entity Assumption.
Ø Money Measurement Assumption.
Ø Going Concern Assumption.
Ø Accounting Period Assumption.
Business Entity Assumption
According to this presumption, the company is treated as a separate unit or
entity from its owners, creditors, managers, and other stakeholders.
In other words, the business owner is always viewed as independent of and
distinct from the company that he controls.
Every transaction in the company's books is recorded. The proprietor is
likewise recognized as a creditor up to the amount of his capital.
When an owner invests money in the firm, it is regarded as both an outlay of
capital and a gain for the enterprise.
Every kind of business organization needs to operate as a distinct entity. In
contrast to how a lone proprietor and his business are seen by the law, a body
corporate is treated as a separate entity.
However, they are treated separately for accounting purposes. The business,
which is also the entity in which we are interested, is the entity for recording
transactions.
Since the court's decision in the case of Salmon v. Salmon & Co., it is
generally acknowledged that a company is a separate legal entity from its
owners (1897).
For accounting reasons, all transactions should expressly relate to the
business operations of the entity itself, even though this legal assumption has
not been applied to sole proprietorships and partnerships. When a company is
administered as a partnership, the firm and the different partners that make up
its membership have established a formal agreement to cooperate to achieve a
common objective.
Although each partner has a unique existence and may have a range of
interests outside the partnership, both financially and otherwise, they all have
their own lives.
It is generally advisable to document partnership business agreements and
transactions in a company's books. If a partner acts in a private financial
transaction that has no influence on the partnership activity, such as
purchasing or selling equity shares in a limited business, it should not be
recorded in the firm's accounts.
For sole proprietors, who could have a range of interests in addition to or
apart from their business, the same is true.
But they shouldn't be entered into the records if they have nothing to do with
the business. In essence, only corporate transactions are watched and
disclosed; the proprietor's personal transactions are not.
The personal assets of the owners or shareholders are not considered while
recording and disclosing the assets of the company entity.
Income is the property of the business assets that are provided to owners.
Money Measurement Assumption
The common denominator of economic activity and an appropriate base for
accounting measurement and analysis, according to the monetary unit
assumption, is money.
In other words, the monetary unit is the most effective means of informing
interested parties about capital changes as well as exchanges of goods and
services.
The monetary unit is up to date, uncomplicated, generally available,
understandable, and beneficial.
This presumption is used under the more fundamental assumption that it is
beneficial to use quantitative statistics to communicate economic information
and direct rational economic decision-making.
The premise that all events, occurrences, and transactions worth documenting
in accounting are measured in terms of money draws attention to this reality.
A element or event that cannot be valued in monetary terms is not recorded in
the accounting records, to put it another way. The overall health of the
business chairman, the necessary working environment, the sales strategy, the
standard of the products the company offers, etc. cannot be measured in
monetary terms and are not recorded in the accounts.
Due to the aforementioned factors, this approach greatly restricts the
usefulness of accounting records for management decisions.
The foundation of money measurement is essential despite the following
limitations.
This assumption makes it easier to understand the company's current state.
For instance, without the money measurement assumption, the value of the
various asset types cannot be determined by the simple method of addition if
a company has a cash balance of $7,000, a building with 20 rooms, a plot of
land with 2,000 square meters, 40 tables, 20 fans, 2 machines, one ton of raw
materials, and so on.
On the other hand, they would be as follows if they were expressed in terms
of money: 7,000 dollars in cash, $50,000 for a building, $2,000 for land,
8,000 dollars for tables, 6,000 dollars for fans, $1,60,000 for equipment, and
80,000 dollars for raw materials. They could be incorporated and used for
comparison or any other goal.
This assumption is currently receiving attention from accountants all over the
world since it has yet another serious fault.
This theory holds that a transaction is recorded at the money value it had on
the day it occurred and that changes in the money value that occurred
subsequently are conveniently ignored.
Going Concern Assumption
Additionally known as the continuity assumption.
The core of most accounting systems is the going concern assumption, which
states that the business will endure for a long period. Despite innumerable
corporate failures, most companies have a respectable chance of surviving.
In general, we expect enterprises to last long enough to fulfill their duties and
aims.
This assumption has significant implications. The historical cost theory will
be ineffective if we anticipate ultimate liquidation.
For instance, under a liquidation plan, a firm might report asset values at net
realizable value rather than purchase cost (sales price less costs of disposal).
Depreciation and amortization techniques can only be justified and suitable if
we assume that the company will continue to exist.
If a corporation chooses the liquidation option, the current vs non-current
classification of assets and obligations is far less significant.
It would be challenging to defend anything as a fixed or long-term asset. It
would make more sense to list commitments during liquidation in the order
of priority. The going concern assumption is relevant in most business
settings.
Only when liquidation appears imminent is the presumption erroneous.
In these situations, a thorough revaluation of the business's assets and
liabilities can produce information that is very similar to the net realizable
value of the enterprise. According to the going concern assumption, the
company is often regarded as one that will continue to operate for the
foreseeable future.
The business is presumed not to be required to liquidate itself or to
substantially reduce the scope of its operations.
In light of the going concern supposition:
Ø it is assumed that the liabilities are split into two groups: short-term
and long-term. The assets are classified into fixed and current assets.
Ø The unused resources are shown as unutilized costs (or unexpired
costs) in comparison to the break-up values, just like in the case of a
liquidating corporation. The ongoing business is therefore evaluated
according to its earning potential rather than its break-up value.
Ø According to accounting regulations, since this concept is being used,
it is expected that it would also be accepted, so it is not necessary to
disclose this fact in the financial statements.
If this plan is not carried out, it should be noted in the financial statements
along with the reasons why.
Periodic Assumption
An alternative name for it is the assumption of periodicity or period.
To accurately evaluate a company's performance, we would have to wait until
it closed its doors. However, decision-makers are unable to wait indefinitely
for such information.
Users must have easy access to data about a company's performance and
financial health in order to evaluate and compare firms.
Therefore, companies are required to submit information on a regular basis.
A firm could arbitrarily divide its economic activities into time periods in
accordance with the periodicity (or time period) assumption. Although these
time ranges are flexible, the most frequent ones are monthly, quarterly, and
yearly.
It becomes increasingly challenging to determine the right net income for a
given period of time as more time passes between events. Findings from a
quarter are likely to be less reliable than results from a year, and results from
a month are normally less reliable than results from a quarter.
Investors require and expect businesses to process and disseminate
information quickly.
However, the earlier a company distributes material, the more probable it is
that it will be inaccurate.
This incident provides an intriguing instance of the trade-off between
relevance and dependability that must be made when presenting financial
data.
The challenge of determining the time period becomes more difficult as
product cycles become shorter and obsolescence occurs more quickly. Many
agree that present technologies support this.
UNIT-OF-MEASURE ASSUMPTION
What exactly does the term "unit of measure" mean?
All transactions must be consistently recorded in the same currency,
according to the generally accepted accounting principle known as the unit of
measure.
For example, a US-based company would record all of its transactions in
USD, but a German-based company would record all of its transactions in
EUR. The amount is converted to the unit of account that the organization
uses before being recorded if a transaction includes payments or receipts in a
different currency. Without a standardized unit of measurement, financial
accounts could not be produced.
Description of a separate entity
Transactions involving a firm and its owners should always be recorded
separately, according to the distinct entity theory. The situation in which the
idea is most important is the sole proprietorship since the owner's personal
and professional activities are most likely to overlap. The following instances
show the procedures to take while employing a separate entity:
• An owner is not permitted to take cash out of the business without
disclosing it as a loan, payment, or equity distribution.
• It is unlawful for an owner to make a financial contribution to a company
without either declaring it as a loan or a stock transaction. As an alternative,
the owner may buy something (like real estate) and retain it on the company's
books while, in actuality, treating it as a personal possession. If not, the
business finds unaccounted cash. The sole investor in a building arranges for
his company to use the space in exchange for the owner paying him a
monthly rent. The business must report this payment as an expense, and the
owner must report it as taxable income.
To independently ascertain the identical facts for each operating division, a
company's divisions should be considered as separate legal entities. In order
to establish profitability and financial health at the operating unit level, it is
more difficult to implement the idea at the division level because it is desired
to assign corporate spending to each of the subsidiaries.
Once created, it is crucial to regularly follow the principles and processes for
the accounting of a separate business; otherwise, there may be confusion over
transactions involving the owners of the separate company.
Benefits of a Separate Entity
In the case that a business is subject to a court order, the idea of a separate
entity is advantageous since the owner does not want their personal assets to
be mixed with those of the company and made forfeitable. Using the concept
of a distinct entity, it is possible to determine a company's true profitability
and financial standing.
 CHAPTER TWO
DOUBLE-ENTRY BOOKKEEPING
Debits and credits in two or more accounts are used to record each
transaction in double-entry bookkeeping. At least one debit from one account
and one credit from another are present. There can be no more debits than
credits (equal each other).
For her business, a copywriter, for instance, spends $1,000 on a brand-new
laptop. She moves $1,000 from her cash account to her spending account for
technology. She has $1000 less in cash and $1000 more in assets, which she
uses to pay for her technology needs.
What Are the Rules of Double-Entry Bookkeeping?
There are three basic components to the double-entry bookkeeping method.
• Every accounting entry or business transaction must be recorded in at least
two different accounts in the books.
• There must be an equal number of reported debits and credits for each
transaction.
• The total assets of an entity shall at all times equal the total of its liabilities
plus equity (net worth or capital). Both sides of this equation need to be equal
(they must balance).
The Accounting Formula
Understanding the aforementioned is made easier by taking a closer look at
the accounting equation, one of the fundamental ideas in accounting. Both
sides of this equation must be equal. Otherwise, there is a mistake in the
books.
Here’s the equation: Assets = Liabilities + Equity
If assets rise, liabilities must rise as well in order for the equation to remain
balanced.
As an example, an internet store makes credit purchases of $1,000 worth of
goods. Accounts payable (liabilities) increase by $1,000, while the inventory
account (assets) increases by $1,000.
Therefore, the two sides of the accounting equation are equal. The books
reflect this by debiting inventory and crediting accounts due.
Debits and credits are what exactly?
The two sides of any transaction are referred to as debits and credits in
double-entry bookkeeping. Credits and debits are changes to an account,
respectively.
A zero balance in every account is the outcome when all the accounts in a
company's books have been balanced. The debits and credits are therefore
equal.
KEY LESSONS
In double-entry accounting, assets are equal to liabilities plus owners'
equity.
Transactions are recorded using the double-entry approach as debits
and credits.
During the European mercantile age, double-entry accounting was
created to help streamline business operations and boost trade
effectiveness.
Double-development entry's has been connected to the beginning of
 capitalism.
Debits
Recorded on the left-hand side of a ledger sheet
Increase the asset and expense accounts or decrease the revenue,
equity, and liabilities accounts
A debit balance is the name given to the amount in money.
As an illustration, the liabilities account is debited when you make a
payment on a bank loan.
Credits
Written on the left-hand side of a ledger sheet
Reduce the accounts for assets and expenses or raise the accounts for
revenues, equity, and liabilities
The amount is referred to as a credit balance.
As an example, the revenue account is credited (raised or added to)
when you get payment for a service you rendered.

Double-Entry Bookkeeping Examples

Let's look at a few examples of how double-entry bookkeeping is applied to
routine accounting tasks.
Example 1: Credit-based business purchases
You purchase $780 worth of stock using credit. After you make the payment,
$780 is deducted from both your cash and account payable.
As a result, in your general ledger, you debit the account payable account (a
liability account) and credit the cash account (an asset account).

Example 2: Getting a Loan for a Business

You have been granted the $9,500 business loan that you requested. When
the money is received, both your cash and your loan liability increase by
$9,500.
In your ledger, you debit the cash account and credit the account for loan
payments (a liability).

Example 3: Covering Business Expenses

A domain for the website of your business costs $20. When you pay for the
domain, your cash decreases by $20 while your advertising expense increases
by $20.
You make a ledger entry to credit the cash account and debit the advertising
spend account.
Example 4: Making a Capital Contribution
You invested $15,000 of your own money to start your catering business. If
you put $15,000 into your checking account, your equity and cash both
increase by the same amount, or by $15,000 in this case.
In your ledger, the capital (equity) account is credited while the cash (asset)
account is debited.

The Importance of Double-Entry Bookkeeping

For very small, newly established businesses, single-entry bookkeeping may
be sufficient. However, there are several advantages to double-entry
bookkeeping.
This article discusses both single-entry and double-entry bookkeeping's
benefits and drawbacks.
Recording rental expenses
What is meant by "rent expense"?
The cost of leasing a property for a certain reporting period is tracked by an
account called "rent expense." This is the third biggest expense that most
businesses record, after cost of goods sold and compensation expense.
However, if a greater proportion of employees work from home, this expense
may eventually trend downward.
Rent expense is the sum paid to a landlord for the rented space used by the
company. On the revenue statement for manufacturing companies, the
expense is frequently divided between the production and selling &
administrative business divisions. On occasion, it might only be mentioned in
the selling and administrative area of the income statement.
Utilizing Rental Space
Rent expenses might really be reflected in a number of areas in a company's
financial records. It is frequently listed as a selling or administrative expense,
as was already mentioned. In the event that the region, for example, was used
as a site to manufacture items, the cost would subsequently be accounted for
in the cost of goods sold (COGS) for the commodities produced.
Deferred rent is either an asset or a burden.
Businesses must track their monthly rent costs uniformly across the board.
This is necessary for the widely used accounting concepts (GAAP). The
inconsistency of the monthly rent payments is the biggest problem with this
rule. For instance, because of inflation, monthly rent prices usually increase
over time. The lessor, on the other hand, can sporadically provide the
company with a free month or a rent cut.
To handle this situation, the balance sheet must incorporate a deferred rent
asset or liability account. The entire cost of the lease during the agreement
must be determined in this entry, including for any free, discounted, or
inflation-affected months.
then divide the entire amount by the number of months that the lease is
covered by.
No of how much was paid that month, the costs for every subsequent month
must be listed under the first monthly rental charge. There is a notation in the
expense account.
In the delayed rent asset or liability account, offset rent payments are listed as
a cost reduction or cost inflation.
RECORDING WAGES EXPENSE
What is a wage expense?
An organization's wage costs is the cost associated with paying employees
and contractors for work accomplished over a specific time period.
Comparing incomes and expenses for wages
It is frequently difficult to understand the difference between wages and
salaries. By clearly comprehending the difference between wage expense and
salary expense, an analyst's capacity to forecast an organization's spending is
increased.
Payroll costs are a variable-rate cost that depend on the type of wage (e.g., a
time wage, piece wage, or contract wage).
In accordance with the terms of each employee's compensation contract,
salary expenses are a fixed-rate expense.
Example: What an employer paid an employee over the last three months is
shown in the table below. Is this an example of a pay or salary expense?

Because the monthly payment is a variable amount, the aforementioned is an

example of a wage expense.

Various wage expenses

Payroll costs typically fall into one of three groups:
• Time earnings are based on the number of hours put in; for example, a $10
hourly rate.
• Piece wages are calculated according to the quantity of units produced; as
an illustration, a $5 piece wage would be paid for each widget produced.
• The amount of completed works under a contract determines contract
compensation; for example, a developer might be paid $10,000 for each
house built under a contract.
Useful Illustration
Background: Currently, a company employs five individuals. While
Employees 3 through 5 are paid an hourly wage of $15, Employees 1 and 2
each receive a monthly income of $6,000 per employee. The table below
shows how many hours each worker put in throughout the month of January.

Determine the salary and pay expenses for the month of January.
Answer: The salaries of employees 1 and 2 are $6,000 each per month
(salary). The cost of salaries is $12,000 for the month of January. Employees
3, 4, and 5 all receive a $15 hourly pay. They worked for a total of 525 hours.
The compensation expense for January is calculated as 525 times $15, which
comes to $7, 875.

RECORDING COST OF GOODS SOLD

What does COGS (cost of goods sold) actually mean?
The phrase "cost of goods sold" refers to a measurement of the "direct cost"
related to producing any goods or services (COGS). It immediately affects
sales and includes direct factory overheads, direct labor costs, and material
costs.
As revenue increases, more resources are required to produce the goods or
services. COGS is often the second line item on the income statement after
sales revenue. Revenue is reduced by COGS to determine gross profit.

The cost of goods sold includes the costs incurred by the business in creating
the items or providing the services it provides. The variable costs of making
goods, such as labor and raw materials, may be included in these costs.
They may also include fixed costs like production overhead, storage fees, and
possibly depreciation expenditure, depending on the appropriate accounting
principles.
COGS does not include general selling costs like management pay and
advertising costs. Under the gross profit line, under the selling, general, and
administrative (SG&A) expense section, are where these costs will be
reported.
HOW TO DETERMINE ACCOUNT BALANCE
What is the Account Balance exactly?
The balance of an account on a company's general ledger is the difference
between debits and credits. Accounts are in the negative. When credits
surpass debits, an account is in balance. Since credits outweigh debits in this
instance, the account has a net credit account balance.
In the general ledger, account
The account balance in accounting refers to the account's current residual
balance. This description states that an account is a record in an accounting
system that a business maintains to keep track of debits and credits as
evidence of accounting transactions. As a result, if an asset account has
$1,000 in total debits and $200 in total credits, the account balance is $800.
Any type of account, including a revenue, expense, asset, liability, or equity
account, can have a balance. Due to the accounting department's regular use
of account balances to identify these accounts, the least active accounts can
be consolidated into larger, more active accounts that are of a similar type.
Consolidating accounts in this way improves the efficiency of the accounting
department by reducing the number of accounts that need to be kept track of.
How to Check Your Account's Balance
The quickest way to determine an account balance in accounting is to print
the trial balance report for the most recent accounting period. In all accounts
for which there is a non-zero balance, this report solely shows the ending
account balances.
Account Balance Formula:
ƒ Sum(Account Credits - Account Debits)
ƒ Sum(Account Debits - Account Credits)
How to Determine an Account's Balance
A store makes a total of $10,000 in new sales (credits) in a single day and
sends out $1,500 in refunds (debits). The net credit amount for the day on the
store's revenue account is $8,500.
ACCESSING RESULTS FROM T-ACCOUNTING
ANALYSIS
The operation of T Accounts
If you're interested in an accounting career, T Accounts can become your new
best friend. With the T Account, all additions and deductions (debits and
credits) to the account may be easily tracked and visually shown. It is an
image of individual accounts that looks like a letter "T."
There will be a distinct T Account for each account, which looks like this:
Account T Debits and Credits
The names "debits" and "credits" are commonly used to refer to debit and
credit cards, however in accounting, they actually refer to completely
different ideas.
Debits and credits are accounting terms with a long history that are used in
the double-entry accounting system that is still in use today. Each transaction
a company makes is recorded in at least two accounts using a double-entry
accounting system, with one account receiving a "debit" entry and the other
receiving a "credit" entry.
These transactions are recorded as journal entries in the company's books.
Each of these transactions has a journal record in the company's books.
Debits and credits can reflect an increase or reduction for distinct accounts,
but their representations in T Accounts have the same left and right
placements in relation to the "T."
Explaining T Accounts
The debit side and credit side are always on the left and right, regardless of
the type of account.
For different accounts, debits and credits might reflect increases or decreases,
but in a T Account, the debit is traditionally always on the left and the credit
on the right.
Let's take a closer look at the T accounts for the assets, liabilities, and
shareholder equity—the three major sections of the balance sheet or
statement of financial position—in more detail.
The left side of the T Account (debit side) represents an increase to an asset
account, which includes cash, accounts receivable, inventories, PP&E, and
other asset accounts. In contrast, the asset account decreases on the right side
(credit side). Credits always represent an increase to the account, while debits
always represent a drop for liabilities and equity accounts.
T Accounts for the Income Statement
T Accounts are also used for income statement accounts, which cover
receipts, costs, gains, and losses.

Once more, credits to revenue/gain grow the account while debits to

revenue/gain decrease it. For costs and losses, the reverse is true. When we
combine all the accounts, we may look at the following.
Tracking several journal entries over a set period of time is made
considerably simpler with T Accounts. Each journal entry is uploaded to the
appropriate T Account, by the proper amount, on the right side.
For instance, the journal entry would consist of a Debit to Cash and a Credit
to Common Shares if a corporation issued equity shares for $500,000.
How Does QuickBooks Work? What Is It Used For?
QuickBooks is the most popular accounting software for small businesses for
managing money and keeping track of income and expenses. You can make
reports, pay bills, bill clients, produce invoices, and file taxes. To address
different business needs, the QuickBooks product line includes solutions like
QuickBooks Online, QuickBooks Desktop, QuickBooks Payroll, and
QuickBooks Time.
We recommend QuickBooks Online for the majority of new businesses even
though QuickBooks offers a variety of accounting software options. Without
requiring a credit card, it is accessible for a free 30-day trial or a three-month
50% discount.
Use of QuickBooks by Small Businesses
1. Making, sending, and tracking invoices
Simple to create and send via email or printing, invoices can be issued to
customers. QuickBooks will automatically track your revenue and the
amount that each client owes you. The total number of outstanding bills,
commonly known as accounts receivable (A/R), as well as the number of
days they have been past due can be shown by running an A/R aging report.
You also have the choice of beginning over or converting an estimate into an
invoice. After that, you can change the invoice by adding your business's
logo and changing the color.
2. Monitor Bills and Expenses
All of your purchases are downloaded and categorized when you link your
bank and credit card accounts to QuickBooks. This enables QuickBooks to
manage your invoices and outgoing funds automatically. If you need to
maintain track of a manual check or cash transaction, you may simply enter it
into QuickBooks.
You can also enter bills as soon as you receive them in order to use
QuickBooks to monitor upcoming payments. You may make sure that you
pay your invoices on time by creating an A/P report. This letter contains a
thorough overview of your current and past-due invoices.

3. Online Bill Payment

You may pay bills online with QuickBooks' online bill payment tool. The
ability to swiftly pay numerous invoices at once, as well as the ability to
make payments via bank transfer or check directly from QuickBooks, are just
a few of the ways that QuickBooks Online Bill Pay can be advantageous to
small businesses. You can pay any suppliers or dealers using a credit card as
well. QuickBooks Online Bill Pay is included with QuickBooks Essentials,
Plus, and Advanced.
Your bank account information, your chosen payment method, and your
preferred method of payment for your first bill must all be entered. After that,
QuickBooks Online will automatically process following transactions,
reducing the need for data entry. Your invoices will be taken off the list of
delinquent bills and recognized as paid in QuickBooks Online automatically.
Remember that you must first input your bills into QuickBooks Online before
you can pay them online. To do this, click the button, then choose Pay bills
online from the Add New menu.

4. Create Financial Reports for Your Company

Controlling all of your cash influx and outflow activities in QuickBooks will
allow you to create financial statements that demonstrate how your company
is performing. Lenders usually demand financial statements when you apply
for a small company loan or line of credit.
The three types of financial statements you can make in QuickBooks are a
Statement of Cash Flows, a Profit and Loss report, and a Balance Sheet
report.
Below is a brief description of each of these reports along with a screenshot
of how they appear in QuickBooks Online.
5. Monitor Employee Time & Costs
Employees or subcontractors can enter their own time as they move through
the day, but a bookkeeper can only record a worker's weekly time if the
person produces a manual timesheet. It is possible to include time that has
been entered and assigned to a client on the client's later invoice.
Every expense reported may also be marked as chargeable and linked to a
client. Similar to time, these chargeable expenses will be available for
inclusion in the customer's following billing. You can track employee hours
without the payroll add-on for invoice-related purposes.
6. Keep an eye on project profitability
Use QuickBooks Online Plus or Advanced to manage projects, create
projects, assign income and wages to projects, and monitor labor and material
costs. In QuickBooks Online's project accounting module, you can construct
project estimates that take inventory, labor, and sales taxes into account.
Although you are unable to compare actual and anticipated costs,
QuickBooks Online gives you the option to build a project profitability
summary report so that you may monitor the profitability of each project you
are working on.
7. Control Payroll
Payroll shouldn't be handled manually, and you shouldn't try to save money
here. Errors in payroll calculation can result in severe fines and angry
employees. The QuickBooks payroll tool can compute and handle payroll as
frequently as you need.
When you enter employee time, as was previously discussed, the hours flow
not just to your invoices but also to the payroll module. By doing this, you
can be certain that each hour your employees is paid for is likewise accounted
for when a customer is billed.
The fact that QuickBooks Payroll is integrated with QuickBooks is its most
helpful feature because it guarantees that your financial statements are always
up to date as of the most recent payroll run. You need a QuickBooks Payroll
subscription to run payroll, but there are various service packages to choose
from depending on your company's needs.
When you use QuickBooks to manage your payroll, you can:
• Pay employees via direct deposit or check.
• Calculate federal and state payroll taxes automatically
• Let QuickBooks finish filling out your payroll tax forms.
• Payroll taxes directly from QuickBooks online
8. Monitor Stock
QuickBooks allows you to keep track of the cost and amount of your
inventory. When you sell inventory, QuickBooks will automatically transfer a
portion of your inventory to the cost of goods sold (COGS), an expense
account that reduces your income. It takes a long time to manually complete
this allocation, which is required to calculate taxable income. QuickBooks
may also remind you to automatically order merchandise when your stock
levels are low.
Here is an illustration of a QuickBooks Online inventory valuation summary
report. This report includes a list of every item in your inventory, along with
its total value, average cost, and quantity on hand:

9. Make Taxes Easier

The most important thing QuickBooks can accomplish for your small
business may be to make tax season less complicated. By far, compiling your
income and expenses is the most challenging step in submitting a tax return.
If you use QuickBooks all year, all you need to do at tax time is print your
financial statements. Even better, QuickBooks Online enables you to grant
your tax preparer direct access to your account, enabling them to evaluate
your financials and print the records they need to finish your return.
10. Accept payments online
You might improve your cash flow by enabling online invoicing and payment
from customers. By including QuickBooks Payments, customers may make
online payments from their email-sent invoices (formerly known as Intuit
Merchant Services). Among the additional merchant services is QuickBooks
Payments. However, because the transaction is completely connected within
QuickBooks, the transaction, credit card fee, and cash payment are all
immediately recorded as they occur.
11. Scanning Receipts
Making tax season simple also requires having the capacity to organize your
receipts in QuickBooks. All users of QuickBooks Online have access to the
free QuickBooks app, which they may download to their mobile devices to
instantly upload receipt images to QuickBooks Online.
A receipt can be connected in QuickBooks to the relevant banking
transaction. Due to the fact that QuickBooks Online stores all of your data
and receipts in the cloud, you are able to upload a limitless number of
receipts.

12. Mileage tracked

Personal automobiles are widely used for work-related duties by both
employees and independent contractors. This offers a significant tax credit of
58.5 cents per mile for 2022. However, in order to be qualified for the
deduction, you must keep a record of the time, distance, and cause for your
trip.
With QuickBooks Online, doing this is quite easy. Its mobile app uses your
phone's GPS to automatically recognize whenever you are in a moving
vehicle. Once you've done that, you may review your outings, indicate
whether they were for business or personal use, and mark them as billable to
a client. The second invoice you create for that client can then automatically
include billable mileage costs.
 CHAPTER THREE
SPECIAL ACCOUNTING PROBLEMS
What exactly are accounting issues?

Accounting issues can result in material financial statement mistakes,

undetected fraud through weak internal controls, improper application of
generally accepted accounting principles (GAAP accounting standards),
regulatory noncompliance, and cybersecurity risks. Accounting problems
may have a negative impact on cash flow and overestimate corporate
profitability.
How are accounting problems handled in companies?
Financial specialists in businesses should use cutting-edge software capable
of managing current accounting standards, such as revenue recognition and
lease accounting, in order to prevent or address serious accounting problems.
Businesses can deal with accounting problems by mandating that accountants
and CPAs regularly participate in relevant continuing education courses.
Accountants with sufficient staff numbers can address accounting challenges.
Top management must convey key expectations, corporate values, employee
empowerment, and an ethical tone.
Typical accounting issues include:
1. Revenue Recognition
Problem
Revenue recognition issues include incorrectly applying GAAP revenue
recognition criteria, developing fraudulent revenue schemes, including
incorrectly accounting for consignments and third-party product shipments
above the level of potential utilization, and making irrational assumptions.
Solution
Find an ERP or accounting program that can assist your business in correctly
recognizing revenue. To comply with GAAP revenue recognition, your
accounting and finance teams need sufficient training on FASB accounting
rules. Spreadsheets in Excel are widely used. However, spreadsheets are
ineffective and prone to inaccuracy. Look for a different software program if
at all possible.
2. Lease Accounting
Problem
Lessee corporations must capitalize their operational leases with tenant right
of use (ROU) and terms longer than a year as a result of changes to GAAP
lease accounting requirements. Office space leases and shorter operations
leases can both still be tallied as monthly rent expenses. The leases are
gradually amortized.
The Financial Accounting Standards Board codifies accounting principles
(FASB). Other modifications to the Lease accounting standard that
accountants must follow.
Solution
To adhere to the most recent GAAP requirements on Lease accounting,
business accounting personnel must receive proper training. Additionally,
they will gain a lot from utilizing specialized leasing accounting software.
3. Cash Flow Statement
Problem
The cash flow statement can have mistake in the categorization of activities
by type and leave out restricted cash, a more recent GAAP requirement.
Misclassification of the type of activity for interest and dividends earned and
paid is one example of a classification error in the cash flow statement. The
cash flow statement classifies interest earned and paid as an operating
activity. In the cash flow statement, dividends paid are a financing activity
and dividends received are an operational activity.
The CPA firm RSM compares how certain components in the cash flow
statements are classified under U.S. GAAP (vs. IFRS), including interest and
dividends and restricted cash.
Solution
Understanding the fundamentals is necessary for cash flow statement issue
solving, so it's important to stay current on FASB revisions and training
subjects relating to cash flow statement preparation.
4. Outdated Accounting Software Technology
Problem
Relying on manual data entry and paper documents for business transaction
processing and recording, outdated accounting software technology is
inefficient, does not provide real-time results for visibility in managing the
company or its sales & marketing processes, and does not automate
regulatory compliance.
ERP systems from the past may not be cloud-based. Accessing software
through on-premises systems is less efficient, and it takes more IT
department resources to upgrade the system and fix hardware and software
issues locally. These non-cloud ERP systems are not suitable for the new
realities of remote or hybrid work settings.
Solution
By switching to contemporary cloud-based software, you can update obsolete
accounting software or ERP systems. If you don't have enough money to
completely rebuild your ERP system, think about integrating third-party add-
on software to handle your demands for:
Software for worldwide bulk payments and automated regulatory
compliance are also available.
billing for subscriptions (applicable to a SaaS, publishing, or utilities
business model)
Software for financial management, budgeting, and forecasting
CRM software improves efficiency and allows for better tracking of
the sales and marketing process.
leasing-specific accounting software
If your ERP lacks revenue recognition software features,
Data visualization applications for business intelligence and data
analytics
MANAGING ACCOUNT RECEIVABLE
Overview of Receivables
The practice of providing goods or services to customers on a credit basis
creates a contractual responsibility on their part to pay the supplier back. On
the other hand, this causes the seller to develop an asset called accounts
receivable. This asset is regarded as short-term due to the fact that the seller
normally receives payment in less than a year.
The formal record of an account receivable is an invoice that the seller is
required to give to the client as part of the billing process. A list of the goods
or services supplied to the consumer is included on the invoice, together with
the total price owed to the seller (including any applicable shipping and sales
tax). also the deadline.
Below, we'll give some illustrations of these concepts.
What are accounts receivable?
Accounts receivable is the term used to describe any money you are owed by
customers for goods or services they previously purchased from you. This
money is often collected after a few weeks and recorded as an asset on your
business' balance sheet. Accounts receivable are utilized in accrual based
accounting.
Accounting for Receivables Using the Cash and Accrual Basis
When a seller uses the cash basis of accounting, it only registers transactions
in its accounting records (which are ultimately merged into the financial
statements) when cash is either paid or received. The accounting records do
not contain a record of accounts receivable because submitting an invoice
does not change the amount of money. Until the buyer pays, the merchant
does not record a sale.
Regardless of any changes in cash, transactions are recorded if the seller opts
for the more popular accrual basis of accounting. An account receivable is
recorded in this way. Additionally, there's a potential the client won't send
money. If this is the case, the seller has two choices: either charge these
losses as expenses as they are incurred (a practice known as direct write-off),
or estimate the size of such losses and charge an anticipated amount as
expenses (known as the allowance method). The second strategy is preferred
because it enables the seller to match sales and bad debt expenses in the same
time frame (known as the matching principle).
Credit for Recording Services Sales
The seller normally generates an invoice in its accounting software when
services are sold to a customer in order to produce an entry to credit the sales
account and debit the accounts receivable account. Upon receipt of the final
payment from the client, the seller would debit the cash account and credit
the accounts receivable account. As an example, ABC International invoices
a customer for $10,000 in services and inputs the following data:
Debit Credit
Account 10,000
Receivable
Sales 10,000
The accounts receivable asset for ABC increases as a result of this journal
entry, and it now qualifies as a short-term asset on its balance sheet.
Additionally, it boosts sales, which can be seen in ABC's revenue statement.
Recording Credit Sales of Goods
When a seller sells a customer goods on credit, in addition to recording the
sale and the associated account receivable (as was the case for the sale of
services), the seller must also record the reduction in inventory that was sold
to the customer. This reduction in inventory is then reflected in the cost of
goods sold expense. In the balance sheet, this later transaction decreases the
inventory asset while increasing the income statement's expenses.
As an illustration, ABC International's journal entry might be as follows if it
were to complete a selling transaction for $25,000 in which it sold the
customer $12,000 worth of goods:

Debit Credit
Account 25,000
receivable
Sales 25,000
Cost of goods 12,000
 sold
Inventory 12,000

The time of the previous selling transaction has a problem. When the package
departs the shipping dock, the seller is required to record the sale transaction
and any corresponding charge to the cost of the goods sold if the purchase
was made under FOB shipping point terms. From that point forward, the
buyer or a third-party shipper are technically responsible for the delivery.
Since the delivery is still the seller's responsibility up until it gets at the
customer's location, if the sale is done under FOB destination terms, the seller
is required to record these transactions when the cargo arrives at the
customer.
Practically speaking, because it is simple to verify, many businesses record
their sale transactions as though the delivery terms were FOB shipping point.
When you record the transaction when you get to the consumer, it takes a lot
more labor to verify
Considering Early Payment Discounts
If customers take advantage of a company's offer to get a discount for paying
in advance, they will pay less than the invoice total. The accountant will have
to deduct this final sum from the profit on the income statement by charging
it to the sales discounts account.
For instance, ABC International will give a customer a $100 discount if they
pay a $2,000 payment within 10 days after the invoice date. Client carries out
this. ABC uses the following entry to record the transaction:
Debit Credit
Cash 1,900
Sales discounts 100
Accounts receivable 2,000

The Accounts Receivable's Aging

All outstanding accounts receivable are compiled in the accounts receivable
aging report, which is often prepared to show invoices that are current,
overdue by 0 to 30 days, overdue by 31 to 60 days, overdue by 61 to 90 days,
or by 90+ days. The collections department uses this information to
determine which debts are far enough overdue to require action. The
allowance for bad debts is also computed using it.
Accounts Receivables Reconciliation
Because it includes a list of every receivable in the accounting system, the
ultimate balance in the accounts receivable general ledger account should
correspond to the amount on the aging report. The accounting team's
reconciliation of the two should be a part of the period-end closure process.
If the report total and the general ledger balance differ, the difference is likely
the consequence of a journal entry against the general ledger account rather
than a formal credit memo or debit memo that would be included in the aging
report.
RECORDING A SALE
How to keep track of purchases made during a sale
Income generation is the lifeblood of any company; without it, a corporation
would be unable to pay its debts as they became due and would eventually go
out of existence. When we talk about the sales process, we don't simply refer
to finalizing the purchase; we also include having the client pay.
This section will examine many sales-related practices, including:
1. Cash transactions
The bulk of retail businesses use this as their primary means of income
generation. Regardless of whether you receive cash physically or digitally,
the Cash account is the same in our transaction records. The following details
would be noted in the transaction if goods worth $350 were sold for cash:

The accounting equation is balanced as a result of the $350 increases on both

sides.
2. Credit-card transactions
Many wholesale businesses finance their sales. In other words, the business
has trustworthy customers it can rely on to make later-paying purchases of its
items. The subsequent date is frequently within 30 days, even though in some
industries it may be up to 90 days later.
The following details would be recorded in the transaction for a $500 credit
sale of goods:

A balanced equation is produced by the growth of revenue and the asset

known as accounts receivable, which will increase in value when the
receivables are converted to cash.
3. Repayments by customers for credit sales
When clients utilize credit to make purchases, they should (hopefully) pay
the credit card business back within the time frame that has been negotiated.
What happens when businesses fail to make payments for transactions
conducted on credit will be covered in our second text, Accounting, Business,
and Society.
When the client pays down their $500 accounts receivable in full, the
following transaction, from the previous example, would be recorded:

The Revenue has not altered, as you will see. It's been reported before. The
sole activity occurring in the business at the moment is the transformation of
one asset (accounts receivable) into another (Cash). The equation is balanced
because the change in liabilities and equity is equal to the change in assets.
4. Ahead-of-time sales
A well-known business may frequently request upfront payment from
customers. This can be for a rare commodity or an unique order.
A customer orders a $2000 item that will be delivered in two months. The
record of the transaction would be as follows:

Receiving cash has boosted our assets but also produced a liability (unearned
revenue liability) for the item's potential future delivery to the client.
Technically speaking, when you purchase something online, you pay for it up
front. Prior to mailing your order to you, the company must prepare it. The
business doesn't technically make money until your order is delivered to you,
if you want to be extremely nerdy with your accounting.
5. Finishing the work for sales that were made in advance
Let's say the consumer made an advance payment and we delivered the items
two months ago. The record of the transaction would be as follows:

Please note that our assets are unaffected. There has been no modification;
the money is still in our bank account. When we provide the product to the
customer, we are fulfilling our obligation, which reduces unearned revenue
by $2000. The $2000 in revenue can now be recorded. The equation is
balanced since the sum of the liabilities and equity sides is zero, and the
change in assets likewise equals zero.
A PAYMENT'S RECORDING
How Are Payments Supposed to Be Documented in Accounting?
Accounts payable is another name for recording payments in accounting and
refers to the total amount of money that a specific company owes to
companies or suppliers for goods or services. All unpaid invoices are also
reflected on the accounts payable balance, which may be found on the
balance sheet, more especially in the current liabilities section.
For instance, a company that just paid $500 to Company B for office supplies
should record the transaction in its accounts payable sub-ledger and make the
payment on time to improve cash flow and avoid late payment fees.
ESTIMATING BAD-DEBT EXPENSE
What Is Bad Debt?
When a debtor misses a payment, the creditor must declare that sum of
money as a bad debt. When bad debts are present on a creditor's books and
become uncollectible, they are recorded as charge-offs. Every business that
extends credit to customers needs to prepare for the prospect of bad debt
because there's a chance the money won't be paid back.
The term "bad debt expenditure" refers to an expense made on an account
receivable that your business believes it will never be able to recover. On
your company's financial records, bad debt costs, sometimes referred to as
questionable debts, are recorded as a negative transaction.
KEY LESSONS
Loans or unpaid balances that must be written off because they are no
longer considered recoverable are referred to as bad debt.
As there is always some danger of default when granting credit, bad
debt is a component of the price of doing business with clients.
The allowance technique must be used to estimate bad debt expense in
the same period as the sale in order to adhere to the matching
principle.
The accounts receivable aging approach and the percentage sales
method are the two basic techniques for estimating a bad debt
allowance.
 Tax filings for both businesses and individuals can deduct bad debts.
Bad debt: An Overview
Any credit given to a borrower by a lender that has a remote probability of
ever being repaid, in whole or in part, is considered a bad debt. Any lender—
be it a bank, another financial institution, a supplier, a vendor, or another
organization—may have bad debt on their books.
Bad debts are a result of the debtor's unwillingness or incapacity to pay as a
result of bankruptcy, monetary hardship, or incompetence. These businesses
may exhaust all legal and collection avenues before concluding that a bad
debt is uncollectible.
The causes of bad debt
You'll probably encounter uncollectible accounts at some time if your
company accepts credit card payments from clients. Bad debts typically occur
as a result of clients who are unable or unwilling to pay an outstanding
invoice. Financial difficulties, like a client declaring bankruptcy, may be to
blame for this. It may also happen if there is a disagreement regarding the
delivery of your good or service.
For instance, if you execute a printing order for a client and they are unhappy
with the results, they might not want to pay. This credit sum may ultimately
become a bad debt after attempts to negotiate and request payment have been
made.
How to estimate bad debt costs
The calculation of bad debts is emphasized heavily in accounting standards
for corporations. It assists you in producing accurate financial records and
identifies whether bills are receivable and uncollectible.
There are two approaches to calculate your business's bad debt expenses:
1.Utilizing a Direct Write-Off If most of your customers pay their credit card
bills on time and you don't have many bad debts, you can decide to write off
each one separately. Once the due date for an invoice has passed and you've
made several attempts to collect the outstanding sum, it might be time to
write off bad debts.
2.Method of allowance: Bad debts are often more common in companies that
do the majority of their sales on credit. The allowance technique of
anticipating uncollectible payments may be useful in this case. This option,
commonly referred to as the allowance for suspect accounts, preemptively
labels a specific portion of your total credit sales as questionable debts. In
this way, you can plan ahead for bad debts.
The allowance technique can be used to estimate bad debts using the bad debt
formula. The algorithm uses historical information from previous bad debts
to calculate your percentage of bad debts based on your entire credit sales
over a certain accounting period.
BAD DEBT FORMULA
Percentage of bad debt=total bad debts/total credit sales
Let's look at recording bad debts now that you understand how to compute
bad debts using the write-off and allowance procedures.

How to enter a bad debt charge in the journal

It is crucial to record bad debts in commercial bookkeeping and accounting.
Because it will make it easier for you to keep your records organized and
give you genuine knowledge of your company's financial status, you'll be
able to make wiser financial decisions. However, costs associated with bad
debts need to be recognized only if you use accrual-based accounting. The
majority of companies utilize accrual accounting because GAAP rules are
widely regarded as accurate.
Since businesses that adhere to cash accounting principles never initially
recorded the amount as incoming revenue, you wouldn't need to reverse
predicted income when a pending payment turns into a bad debt. The bottom
line is that if your business uses cash-based accounting, there is nothing to
offset or balance as bad debt.
To record a bad debt, follow these steps:
Ø You can simply debit the bad debt expense account and credit your
accounts receivable if you're reporting bad debts utilizing the write-off
 technique.

Ø If you want to adopt the allowance technique, you should record bad
debts as a contra asset account on your balance sheet, which is an
account with a zero or negative balance. In this instance, you would
credit your allowance for bad debts and debit the bad debt charge.

What exactly is the technique of bad debt expenditure allowance?

establishing a reserve for bad debt
Making a bad debt allowance is a necessary step in anticipating
uncollectible accounts. By estimating the potential amount of bad
debt, you can assign a portion of your operating expenses as an
allowance account to cover a portion of your losses.
By saving this money, you and your accounting team will have a
better grasp of your company's financial status, where its assets are
located, and how much you truly anticipate to collect in accounts
receivable.
RECORDING A BILL

How Do Payable Bills Work?

Bills payable are physical records of the sum owed for any goods or services
that a business acquires on credit. The person who sells the goods or services
is known as a vendor. Due to this, payable bills are also known as vendor
invoices.
When adopting the accrual method of accounting, bills that are past due are
recorded as a credit item in the accounts payable category. Once a bill
payable is fully paid, the accounts payable is decreased with a debit entry.
How Do Receivable Bills Operate?
Physical records of the amount due for any goods or services that a business
purchases on credit are kept in bills payable. Vendor is the term used to
describe the individual who sells the goods or services. As a result, vendor
invoices and payable bills have similar meanings.
A credit item is documented in the accounts payable category when using the
accrual method of accounting to account for past-due payments. A debit entry
is made to reduce the accounts payable once a bill payment has been entirely
paid.
Check
The meaning of the word "check"
You need to fill out checks in order to make purchases from a checking
balance.
You make a note of the amount and the topic's name.
Any company you want to cover the check with. The person or organization
who receives and deposits the check, cashes it, etc., deducts the money from
your checking account at a bank. Get a comparable account from a credit
union as well.
Benefits
convenient following application for and a bank has opened the
account a credit union, etc.
It is mailable.
If a dispute arises, it is simple to demonstrate payment.
Money is kept in the checking account.
Account until the check is written the cheque is deposited, then.
Unlike cash, a check is not as easily replaced as cash.Maybe a
signature you provided is fake You have financial security in your
kitty. But it can be challenging to halt a check if the individual who
quickly deposits it after receiving it.
Risks
costing more than purchasing If you are unable to pay the credit card
amount in full each month, make purchases with cash or a cheque. If
you carry a balance, you are required to pay interest on it. creates yet
another bill that you must pay.
Puts you in debt—you're obtaining credit to cover debts and other
expenses
Cash
Definition of cash
Having cash means having money at hand
Benefits

Many times, there are no fees for giving the recipient cash in person
the business is fully funding payment due. Buying or utilizing a
unique item, like an order for money or prepaid cards could be
expensive.
 Using cash does not need you to getting into debt.
No chance of overdrawing in your account
Risks

Not all bill payments are possible to be paid in cash.

May be inconvenient and expensive travel to the business to make a
cash payment.
It could be difficult to demonstrate payment, except when you have a
receipt.
Getting cash is challenging or impossible, in case it is misplaced,
taken, or destroyed.
You ought to keep paying with the invoice every time it's due (not
automatic)
Credit card
Definition
You can take out a loan with a credit card up to the permitted credit limit. If
you have a balance, interest will be levied, and other costs may apply
depending on the contract's terms.
You should plan to make a minimum payment each month, but you might
want to pay extra if you want to finish paying it off sooner.
Benefits
Has the option to use a credit card to pay bills online or over the
phone.
Simple to demonstrate payment in the event of a disagreement.
Prevents you from being required to pay for some or all of the charges
in the event that your card or personal information is lost or stolen and
you report the crime.
It is possible to set up automatic recurring bill payment.
When you pay your bills on time and stay away from your credit limit,
you can assist establish your credit history.
Risks
If you are unable to pay the credit card amount in full each month, it
will cost you more money than making the purchase with cash or a
check. If you carry a balance, you are required to pay interest on it.
 creates yet another bill that you must pay.
Debt is created when you borrow money to pay bills and other
expenses.

DEALING WITH OBSOLETE INVENTORY

What Is Obsolete Inventory?
Inventory that has reached the end of its product life cycle is referred to as
obsolete inventory. Long stretches of time have passed since this inventory
was utilized or sold, and it is not anticipated that it will be in the future. This
kind of inventory must be written down or written off, and it can result in
significant losses for a business.
Inventory that is no longer in use is often referred to as dead inventory or
superfluous inventory.
KEY LESSONS
Inventory that has reached the end of its useful life and needs to be
written off from a company's books is referred to as obsolete
inventory.
In order to write down old inventory, expenses must be debited and a
counter asset account, such as the allowance for obsolete inventory,
must be credited.
To get the current market value or book value, the contra asset account
is netted against the total inventory asset account.
The associated amount in the inventory asset account and the contra
asset account are both deleted in the disposal journal entry when
obsolete inventory is disposed of.
Keeping Track of Obsolete Inventory
Businesses must cost outdated inventory as it is sold in order to comply with
GAAP, which reduces earnings or results in losses. Outdated inventory must
be recorded in an inventory reserve account on the balance sheets. When
reporting obsolescence of inventory, companies debit an expense account and
credit a counter asset account.
When an expense account is debited, it is obvious that the money spent on the
now-outdated items was a cost. The asset account it refers to is listed on the
balance sheet immediately beneath a contra asset account, which reduces the
reported net worth of the asset account. Expense accounts include things like
cost of goods sold, accounts for outdated inventory, and losses from
inventory write-downs. A counter asset statement may contain both a reserve
and an allowance for obsolete inventories. When an inventory write-down is
minimal, businesses usually charge the cost of goods sold account. But if the
write-down is substantial, charge the expenditure to a different account.
GETTING RID OF OBSOLETE INVENTORY
A. Having excess or outdated inventory is irritating. When you have too
much unsold merchandise, it needs to be secured from harm and takes
up valuable space. To make room, try to sell as many of the stuff as
you can. By offering discounts, use your ingenuity to make the
products enticing to customers. If you still have stock, you can return
it for a credit, sell it for scrap, or donate it to a worthy cause. Of
course, the best way to deal with outdated inventory is to avoid it from
ever developing in the first place. Keep an eye on what's succeeding
and refrain from buying the same products over and over.
Incentivizing Sales

1.Give your salespeople incentives if they sell the inventory at the regular
price. Offer your customer-serving sales team a bonus if they sell a certain
volume of out-of-date products. This may encourage them to prioritize selling
these items rather than more recent stock.
You may, for instance, include a fixed bonus on their subsequent salary or a
share of the sales.
2.Offer closeout discounts to customers to make some profit.

Reduce the cost of the merchandise to attract more customers. Promote the
sale as a percentage-off discount or draw attention to the new closeout prices.
You won't make as much money, but you'll free up space, and you won't have
to worry about what to do with the products.
Products may be discounted every three months or at the end of each season.
The amount you discount is based on the financial health of your company. If
you want to recoup the majority of the cost, you might offer a modest
discount; otherwise, you might opt to offer a big discount on the sale price.
If you wish to stagger the discounts, decide in advance. For instance, begin
your initial sales drive at 20% if you don't want to mark it down by more than
60%. Next, mark the items down by 30%, and so on.
3.Bundle obsolete inventory with fast-selling items to sell a lot of goods
quickly
Group products together for one price and sell the bundle at a fair price if you
truly want to clear out space and sell a lot of inventory at once. It's a terrific
approach for you to move products that might not sell on their own because
customers like to feel like they're receiving a deal.
For instance, pair two items from your outmoded inventory with one item
that sells well. Price the package so that it is less expensive than purchasing
each item separately, or provide the free item with the purchase of the normal
item.
Remember to specify that discounted or packaged sales are not eligible for
refunds or exchanges.
4.Create a discount sales event to bring in more customers

Set up a one- or two-day garage sale, closeout event, or warehouse sale.

Make the event public and invite both staff members and the broader public.
To pique interest, advertise a few doorbuster deals and advertise the event in
advance to generate some hype. Once more, be sure to emphasize that all
sales are final to avoid dealing with the trouble of returns.
5.Sell the inventory to a scrap dealer if you can't find customers.

If you have inventory that contains a lot of metal, get in touch with a nearby
scrap dealer and find out if they will pay you to remove it. If you wish to
charge the junk dealer a little fee, haggle the worth of your inventory.
Be upfront about charges when you set up the arrangement because some
scrap sellers could charge you to come and pick up the stuff.
If you can get a good bargain, you might be able to turn a small profit, but if
you have to pay to have it removed, it might end up costing you.
B.Getting Rid of the Inventory

1.Return the inventory if your supplier accepts it.

Some businesses will accept your outdated product in exchange for a refund.
If you're unsure, get in touch with the business and enquire about their refund
procedures. For example, the business might give you a credit toward future
purchases.
Shipping and handling costs will certainly be incurred, but it will be
worthwhile to free up space and receive some compensation for the goods.

2.Use the inventory to make new products to sell.

Examine the obsolete stock to determine if there is anything you can use for a
new product. You might be able to disassemble it into its component parts to
make something new. Think about the expense of reworking the inventory to
make it viable. If you believe that marketing the new products as "upcycled"
or "repurposed" will increase sales, do so.
For instance, if you're selling a seasonal gift basket that is out-of-season,
remove the components and sell them separately or update the basket for the
new season.

3.Trade the inventory with competitors or partners if you want to swap goods
Ask companies who sell comparable products whether they would consider
trading inventories. Be willing to bargain so you can get rid of outdated
products and get new ones to market. Trading is a fantastic approach to
strengthen your relationship with rivals.
If a company asks you to help them get rid of any of their outdated goods,
keep in mind those times when they were helpful and do business with them
again.

4.Liquidate or auction off the products to move inventory quickly.

Auctions are a fantastic way to get rid of a lot of stuff quickly, but setting one
up and staffing it will cost money. Work with a liquidator if you'd prefer to
take a hands-off approach and perhaps make a little money. They'll dispose of
the inventory for you when you and they agree on a fee. [9]
Remember that since you'll be paid up front for the goods, the liquidator
won't give you a portion of the profits.

5.Donate the inventory and claim it as a tax write-off if you can't sell it.
Find a local charity that could use the things before you run out of places to
sell or trade them. Then, consult with your accountant to determine how
much you may write off for business taxes on the purchased items. [10]
The inventory ought to be in good shape and beneficial to the cause. When
you donate the items, request a receipt from them, and keep a copy for your
accountant.
6.Recycle or trash the inventory if you can't get rid of it any other way.

Recycle or discard the inventory if you have unsuccessfully attempted to sell,

refund, or exchange the items. Although no one like doing this, keep in mind
that space could be better spent on items that are selling well.
By counting outdated inventory and guarding it against harm, you'll also save
time.
C. Preventing Obsolete Inventory

1.Review your inventory at least once a year so you know if products are
piling up.
If your business sells a lot of goods, you can set aside one week each year to
count and keep track of your inventory. If your company is smaller, you
might carry this out more frequently, perhaps once every three months. By
keeping track of your product numbers, you can determine which items you
have an abundance of and stop ordering them needlessly.
To gauge how well a product sells, you can compare your inventory levels
over time. For instance, reduce your order of a certain type of goods if you
consistently seem to have an excess of it.
2.Track which products are slow to sell.

Establish a sales tracking system to keep track of when and how much an
item sells for. Review this data from time to time, especially before placing
fresh stock orders.
This is crucial if you're introducing new products and unsure of how
customers would react.

3.Decide when a product is obsolete so you know when to push sales.

For various businesses, obsolete inventory might signify different things. If
you haven't sold a product for a predetermined amount of time or it doesn't
generate a specific level of revenue, you can consider it to be obsolete. For
example, if you haven't sold any of a product since your last inventory,
consider it obsolete.
A product may be outdated, for instance, if it costs you more to store and
promote it than it brings in in sales.

4.Stop automatic re-ordering so you don't create too much stock.

If you automatically reorder without reviewing your inventory counts, it's
simple to end up with too much product. Before deciding to restock the stock,
turn off the automatic reordering and see how rapidly the items are selling.
If more than one person places the order, items could be mistakenly ordered.
Make an effort to automate the ordering process so that a single person
manages purchases.
ACCOUNTING FOR FIXED ASSETS
What is a fixed asset?
A company invests in and employs fixed assets, such as real estate or tangible
(physical) objects, to generate its goods and services.
Fixed assets are long-term assets. This shows that the assets have longer-
than-a-year useful life. Property, plant, and equipment (PP&E) are listed on
the balance sheet as fixed assets and are categorized as such.
Even while a company could also have long-term intangible assets like
patents, the major class of fixed assets is often made up of tangible assets.
This is necessary for a business to produce its products and/or services, which
need tangible assets.
KEY LESSONS
 Fixed assets might be physical or abstract.
The useful life of fixed assets is more than a year.
A fixed asset is distinct from a current asset in that it cannot be
immediately or readily converted to cash.
On a company's balance sheet, fixed assets are listed under the
Property, Plant, and Equipment section.
To account for wear and tear and to lower the cost of the assets on the
balance sheet, fixed assets are depreciated over the course of their
useful lives.
Examples of fixed assets include:
Ø Vehicles such as company trucks
Ø Office furniture
Ø Machinery
Ø Buildings
Ø Land
TIP: Investors frequently show a lot of interest in fixed assets. People
typically look at the fixed asset turnover ratio to gauge how well a company
utilises its fixed assets to generate sales. The ratio compares net sales to fixed
assets. It is widely employed while evaluating potential investments in
various companies.
A fixed asset example
Say ABC Company manufactures and distributes toys. The company makes a
$5 million investment in a new office facility. Additionally, it spends $500k
on machinery and equipment. Over the next five years, the company plans to
use the building, the tools, and the machinery.
These assets are classified as fixed, tangible assets since they have a physical
form, will remain operational for more than a year, and will be used to
generate income for the business.
They are listed on the company's balance sheet. The corporation will then
amortize the cost of these assets over the ensuing five years. Depreciation
expenses are moved to the income statement and taken out of gross profit.
this reduces the company's taxable income.
PURCHASING A FIXED ASSETS
How to document the acquisition of a fixed asset, such as a car, piece of
equipment, or piece of office furniture.
Ensure that the Fixed Assets ledger accounts are the appropriate ones.
If you have a purchase invoice from your supplier or a simple bank
payment (Other Payment), enter it as the purchase.
How to Include fees and deposits for items purchased with a loan or
hire purchase.
Organize interest payments and repayments.
When you buy anything for the company's long-term usage and it is unlikely
that it would be immediately turned to cash, that item is referred to as a fixed
asset.
APPRECIATION OF LIABILITIES
What is a Liability?
A liability is a company's obligation to a third party that will prevent it from
realizing future financial rewards. An alternative to equity for financing a
corporation is a liability, such as debt. In addition, some debts, such as
accounts due or income taxes payable, are essential elements of everyday
corporate operations.
Liabilities can speed up value creation for businesses and help them run more
efficiently. Inadequate liability management, however, could have severe
adverse impacts, such as a fall in financial performance or, in the worst case
scenario, bankruptcy.
In the case of debt, liabilities also have an impact on the capital structure and
liquidity of the organization.
Accounting reporting of liabilities
Liabilities are listed on a company's balance sheet. The entire number of
liabilities must match the difference between the total amount of assets and
the total amount of equity, according to the accounting equation.
Liabilities + Equity Equals Assets
Assets - equity = liabilities.
According to accepted accounting rules, liabilities must be declared. The
International Financial Reporting Standards are the most widely used
accounting standards (IFRS). Many nations around the world have embraced
the criteria. However, several nations also adhere to their own reporting
requirements, such as the U.S.'s GAAP or Russia's Russian Accounting
Principles (RAP). Although the liabilities are recognized and reported in
accordance with various accounting standards, the underlying principles are
comparable to IFRS. Liabilities are categorized on a balance sheet based on
when the debt is due.
Important Points
Liabilities are future financial sacrifices that a business must make for
other entities as a result of previous occurrences or previous
transactions.
A company's liabilities must be managed effectively to prevent a
solvency crisis or, in the worst situation, bankruptcy.
There are three types of liabilities: current, non-current, and
contingent.
Current vs. Non-current liabilities
The primary basis for categorizing liabilities is the date on which they are
due. Depending on the classification, the corporation may or may not be able
to manage its financial responsibilities.
Liabilities with a one-year deadline are referred to as current liabilities. These
typically happen throughout regular business activities. Due to the short-term
nature of these financial commitments, they should be managed while
considering the company's liquidity.
The most frequent current duties are:
Accounts payable: These are the supplier invoices that have not yet
been paid by the business. In general, the bulk of firms' biggest current
liabilities come from accounts payable.
Interest charges that have been incurred but not yet paid off are
referred to as interest payable. Consider the difference between
 interest payments and interest expense, which is a line item on an
income statement.
Income taxes payable: The sum that a company owes the government
in income taxes. The tax obligation must typically be paid off within a
year. The unpaid tax would be classified as a long-term debt if it
wasn't.
In essence, overdrafts on bank accounts are a type of short-term loan
provided by a bank whenever a payment is made but there aren't
enough money in the account to cover it.
Accrued expenses are costs that have already been paid for but for
which the business has not yet received or gotten documentation from
the supplier (such as an invoice).
Retained earnings (also called unearned revenue). a result of a
company receiving advance payment for goods or services that haven't
been produced or delivered yet.
The term "short-term loans" or "the present share of long-term debt"
refers to loans or other borrowings with a maturity of one year or less.
Current commitments play a significant role in several short-term liquidity
measures. The following diagram illustrates the variables that management
teams and investors may take into account when performing a financial
analysis of a company.
Examples of key ratios that use current liabilities are:
The current ratio is the product of current liabilities and current assets.
The quick ratio is the product of current liabilities and current assets
less inventories.
Cash and cash equivalents divided by current obligations is known as
the cash ratio.
Obligations that are due in more than a year's time are referred to as non-
current (long-term) liabilities. It is essential that the short-term commitments,
such as short-term loans or the current portion of long-term debt, are
excluded from the non-current liabilities.
Non-current obligations and revenue from commercial activity are two ways
to raise money.
Project financing for a firm may be done via bonds or mortgages, for
example. It is important to comprehend a company's non-current obligations
in order to comprehend its overall liquidity and capital structure. If
businesses are unable to settle their long-term debts when they become due,
they may become insolvent and face solvency issues.
Long-term obligations include:
Bonds payable: The sum of all existing bonds having a maturity of
more than a year issued by a corporation. On a balance sheet, the
amount of the company's outstanding bonds is shown in the bonds
payable account.
Notes payable: The total number of promissory notes with a maturity
of more than one year that a corporation has issued. Similar to how the
bonds payable account does, the notes payable account shows the
value of the promissory notes on a balance sheet.
Liabilities for deferred taxes These arise from the difference between
the tax amount that has been recognized on the income statement and
the actual amount that needs to be paid to the appropriate tax
authorities. In essence, it means that the corporation "underpays" taxes
now and will "overpay" taxes at a later time when it is viewed as a
liability.
Mortgage payable and long-term debt: A company's balance sheet will
show a non-current liability for the amount of the borrowed principal
when it takes out a mortgage or other long-term debt.
Leasing contracts are noted as liabilities when a company enters into a long-
term rental agreement for real estate or equipment. The lease amount
represents the obligation of the lessee in its present worth.
BORROWING MONEY
KEY LESSONS
Ø Borrowing money might be used to establish a new business, pay for
college tuition, or finance a new home.
Ø Banks, credit unions, and finance businesses are examples of
traditional lenders.
Ø Social lending and crowdlending are other names for peer-to-peer
 (P2P) lending.
Ø The conditions, interest rate, and fees of the loan should be
understood by the borrower.
Banks
Banks are a dependable source of money for people who want to borrow
money to pay for a new house or college tuition.
Banks provide a range of loan products, such as mortgages, personal loans,
vehicle loans, and construction loans. They also provide chances to refinance
an existing loan at a better rate.
Note: Banks may not pay much interest on the money they receive in the
form of deposits, but they do charge a higher interest rate on the money they
lend out. In essence, this spread is how banks make money.
However, banks frequently charge exorbitant fees for servicing loans or
submitting loan applications. Fees, interest rates, and procedures may change
as a result of banks selling loans to other banks or financing companies,
frequently with no advance notice.
Borrowing From a Bank
Benefits
Ø Banks are trusted suppliers for consumer loans.
Ø It is somewhat simpler to apply because customers frequently have a
relationship with a bank.
Cons
Ø The bank might sell your loan to another organization.
Ø For loan applications or service, there may be expensive fees.
Credit Unions
A credit union is a cooperative organization that is run by its members, or
people who belong to a certain community, organization, or group. Although
they may restrict services to members only, credit unions provide many of the
same services as banks. Since they are often nonprofit organizations, they can
lend money at better rates or with more lenient conditions than commercial
financial institutions, and some fees or application fees for loans may be
lower or even nonexistent.
Membership in a credit union used to be restricted to those who had a
"common connection" and belonged to a certain community, labor union, or
other organization.
Borrowing From a Credit Union
pros
Credit unions may charge less than a traditional bank because they are
charitable organizations.
Additionally, fees and interest rates can be more palatable.
Cons
Less lending options may be available from credit unions than from a
bigger institution.
It's possible that membership in a credit union is necessary in order to
apply.
Credit Cards
Borrowing money is exactly what using a credit card is. By paying the
merchant, the credit card company is in effect making a loan. when cash is
withdrawn with a credit card. It is referred to as a cash advance.
For individuals who pay off their entire balance each month, credit cards can
be a source of loans with 0% interest rates. Cash advances on credit cards
have no application costs.
However, credit cards can impose astronomical interest rates, frequently
higher than 20% annually, if a debt is carried over. Large expenditures cannot
be financed in this way since credit card issuers typically only lend or extend
a relatively limited amount of money or credit to the customer.
Borrowing Through Credit Cards
pros
Ø The absence of application costs.
Ø If you can repay your advances each month, there won't be any
interest charged.
Cons
Ø If a sum is permitted to accrue, extremely high interest rates will
apply.
Ø If you borrow too much, it could lower your credit score.
ACCOUNTS CLOSING FOR REVENUE AND
EXPENSE
An explanation of a Closing Entry
A closing entry is created to transfer balances from temporary accounts to
permanent accounts at the end of an accounting period.
Companies use closure entries to reset the balances of transitory accounts,
which show balances over a single accounting period, to zero. These balances
are then moved by the company into long-term accounts on the balance sheet.
These continuous accounts show an organization's previous financial
information.
Temporary Accounts
Temporary accounts are general ledger accounts that are used to consolidate
transactions throughout the course of a single accounting period. The
balances in these accounts are ultimately utilized to create the income
statement at the conclusion of the fiscal year.
The income statement is a financial report that sums up a company's
operations and financial performance for a certain fiscal year. The date line of
the annual income statement now reads, "Year ended."
Below is a sample of Amazon's 2017 yearly income statement. As you can
see, the date is written as "Year ended December 31, YYYY."
As was already mentioned, the general ledger's temporary accounts are made
up of income statement accounts like sales or expense accounts. Before the
income statement is made public at the end of the year, the balances of these
temporary accounts are transferred to the income summary.
The income summary is used to transfer the balances of temporary accounts
to retained earnings, a permanent account on the balance sheet.

Income summary
v An interim account called the income summary is used for closing
entries.
v At the end of the accounting month, all temporary accounts shall be
reset to zero. To do this, their balances are emptied into the income
summary account. Following that, via the income summary account,
the net balance of each temporary account is moved to retained
earnings, a permanent account on the balance sheet.
Permanent Accounts
Permanent accounts are accounting that show a company's long-term
financial condition. The accounts on the balance sheet are standing ones.
These accounts carry over their balances over numerous accounting periods.
To further understand this, let's look at an account like inventory. The
following is a portion of Amazon's 2017 yearly balance sheet.
A snapshot of a company is provided by the balance sheet. The following can
be seen by looking at this balance sheet: As of December 31st, 2016, Amazon
reported having $11,461 million in inventory. Into the first quarter of 2017,
this amount was carried over.
As of December 31, 2017, Amazon's inventories were valued at $16,047
million.
Amazon increased their stockpiles in 2017 by $4,586 million for the amount
they declared on December 31.
This makes it evident that Inventory is a standing account that consistently
maintains a positive balance over a range of accounting periods.
Example of a Closing Entry
The income statement's temporary accounts are zeroed, and the amounts are
transferred to the permanent retained profits account as shown in the closing
entries examples below. Utilizing the income summary account, this is done.
1.Closing Revenue Accounts
By debiting revenue and crediting income summary, the balance in the
revenue account is cleared.

2. Close Expense Accounts

By debiting the income summary and crediting the associated expenses, the
expense accounts' balances are cleared.

3. Close Income Summary

By debiting income summary and crediting retained earnings, the income
summary account is closed.

4. Close Dividends
Retained earnings should be debited and dividends should be credited to
close the dividends account.

Quickbooks are closed.

A period of accounting in QuickBooks can be closed to prevent changes from
being made to its transactions. You should complete additional advised tasks
in Acctivate as well in order to complete the time.
Acctivate does not formally close an accounting period or year. This is
handled through integrated accounting and financial software like
QuickBooks. You should first consult the QuickBooks Year-End Guide,
which may be accessible from QuickBooks' Help menu.
One of the initial steps in ending an accounting period (or year) is to
ensure that all transactions have been synced to QuickBooks and
posted in Acctivate. When a contract closes, the following transactions
are usually overlooked.
Receiving goods but failing to record or post inventory receipts.
Vendor invoices have been received, yet purchase invoices have not
yet been posted in Acctivate.
Despite the shipping of sales orders, no invoices have yet been
generated.
A posting of the inventory count is still pending.
Negative Inventory because a sale was place prior to the
accompanying Inventory Receipt.
The actions outlined below should be taken to end each accounting
period:
Check to make sure that every transaction is recorded in Acctivate
Review's active sales orders, including scheduled and backordered
items.
Verify that no invoices were forgotten.
Review the Session drop-down for all Inventory Transactions
windows to see whether any orders have been received, billed, and/or
changed in Acctivate without being updated.
Any duplicated or incorrect sessions should be deleted.
• Fix any mistakes with the negative inventory (Qty on Hand less than 0).
• A sales invoice that has been paid but hasn't yet been added to inventory is
said to have negative inventory.
• synchronize QuickBooks. Make certain that none of the sync settings are
being used. You ought to sync completely.
• Make sure there are no exceptions or warnings during the synchronization.
• Only "Green checks" for each Synchronization Task should be visible.

Verify that there are just two "Info" lines after clicking View Log.
• Configure the closing date and password in QuickBooks Preferences.
• Read the QuickBooks Support article's advice.
The Closing Date/Password forbids transactions from any third-party
applications, such as Acctivate.
• The Password cannot be entered to override specific transactions while
synchronization is taking place.
• Re-join the QuickBooks synchronization system.
• An immediate synchronization is required in order to change the Closing
Date in Acctivate.
• All new Acctivate transactions will be halted before the closure date.
• Before the closing date, no transactions may be canceled.

GETTING READY TO USE QUICKBOOKS

 CHAPTER ONE
SETTING UP QUICKBOOKS Overview of
QuickBooks
The accounting software from Intuit, QuickBooks, is targeted for small and
medium-sized businesses. QuickBooks helps businesses keep track of their
Sales, Expenses, Payments, and Tax Calculations. It provides all the financial
information important to a company's operations accessible through a very
user-friendly user interface.
Additionally, QuickBooks provides add-on tools for inventory management,
payment receiving, sales tax gathering, and other features. It was initially
meant to be a desktop-based software. Due to a later, totally cloud-based
strategy, both instances currently coexist. Because of its affordable pricing
options and user-friendly layout, small and medium-sized enterprises adore it.
Easy Steps for QuickBooks Setup
Configuring your QuickBooks Online instance begins by going to the
QuickBooks website and signing up for a subscription. Even without a credit
card, QuickBooks offers a free trial in some locations. The trial version of
QuickBooks is an excellent way to test it out and see whether it fulfills your
needs before purchasing it.
Follow the guidelines below to complete QuickBooks Setup:
Step 1: After you submit your data, QuickBooks will query you about your
business and ask you the following questions.
Step 2: After that, it will ask you about the tasks you want to complete using
QuickBooks. To learn everything that QuickBooks has to offer, choose from
any of them using the links below.

Step 3: After that, you'll be sent to the dashboard, which is shown below,
where you can customize every part of your company.
Step 4: Let's take a closer look at all the settings that may be set up from the
dashboard to start using QuickBooks. You may obtain a summary of all
financial activities occurring in your firm by selecting the business overview
option on the dashboard, as shown below.

Step 5: The logical next step is to enter the information about your business
and the tax information into QuickBooks, as illustrated below. The dashboard
provides access to the Add your GST and company details and Finish set up
buttons, respectively. Depending on where you are in the world, you can
observe a slight variation from what you see here.
Step 6: After establishing your company, you must add your products and
services to QuickBooks. You require this in order to use QuickBooks to
create invoices, which is one of its primary uses for small enterprises.
Products and services can be added by clicking the gear symbol and then
choosing the Products and Services link from the drop-down menu, as seen
below.

Step 7: Select the type of item you wish to add by clicking Add Product or
Service as shown below. At this stage, let's keep to inventory-based things.
Step 8: To complete adding the product, input the inventory count, product
category, and tracking code as shown below.
Step 9: Before creating invoices, you must input your clients' information.
You can do this by clicking Add Customer in the left-hand column of the
Dashboard's Sales tab.
Step 10: Go to the Sales page after adding clients to begin raising invoices.
You can pick and choose the products and clients for your invoices, as shown
below.

Step 11: By clicking the gear icon, you can access the Accounts and Settings
section, where you can modify the invoice's terms or the company's
information.

HOW TO PLAN YOUR NEW QUICKBOOKS

SYSTEM
WHY ACCOUNTING SYSTEMS ARE USED
There are two different types of accounting systems. The first is a Single
Entry System, which requires small businesses to enter each transaction as a
line item in a ledger. Using a double entry system, the second way records
each transaction as both a credit and a debit in separate accounts.
A double entry method helps a business maintain its financial balance.
What Distinguishes Single Entry from Double Entry?
A single-entry system of accounting is frequently used by very small
businesses due to its simplicity. Because the business is a sole proprietorship,
it's likely that there aren't many transactions in a given day or that the owner
doesn't need or have time for meticulous bookkeeping. A single-entry system
is less expensive because it is convenient, doesn't need sophisticated
software, and needs no formal training. A small business owner might
operate a single-entry accounting system using an excel program if he so
desired.
One-entry systems have disadvantages.
It is impossible to provide accurate financial reporting since the data
entered is incomplete.
As a result, doing a financial analysis and making future resource
plans are challenging for the firm owner.
The likelihood that mistakes will go undiscovered and that theft will
be discovered is much lower (because there is no asset inventory in
place).
Single entry systems of accounting are not accepted by tax authorities
for any form of reporting reasons.
The far more thorough method of bookkeeping known as a double entry
system is frequently employed by larger companies.
Having complete records and enabling the compilation of accurate financial
statements are both benefits of a double entry system. Additionally, errors are
easier to spot. A company's financial situation can be depicted significantly
more accurately using a double entry accounting system.
An expensive, frequently complex, and time-consuming double entry system
is used. Additionally, there is a chance for error because the system has no
means of knowing if the entirety of a transaction was not captured.
INSTALLING QUICKBOOKS
Steps for Installing QuickBooks
Turn on the computer.
Find the computer's power switch and activate it. Depending on the Windows
version you're using (Windows 7, 8, or 10), your screen may differ
significantly from the samples here. I should mention that I use Windows 10.
(Not that you should give a damn or that you care.)
Advice: If you're installing QuickBooks on a computer running Windows
Professional or Business version, you might need to sign in as the
administrator or a user with administrator permissions. The QuickBooks
program can only be installed on Windows versions made for businesses by
an administrator due to security restrictions in Windows.
2. Click Next after downloading the QuickBooks application.
You probably purchased QuickBooks from the Intuit website. If that's the
case, when you download the software, Windows will request you to run the
InstallShield Wizard (another program), which starts the QuickBooks
installation routine. A little dialog window with the title Welcome to
QuickBooks Desktop opens after Windows has finished.
Alternatively, you could have purchased QuickBooks through a business like
an office supply store. The QuickBooks CD must then be taken out by tearing
up the package (which looks exactly like the ones that play music). You then
insert the CD into your CD-ROM drive. The QuickBooks installation
procedure ultimately starts when Windows recognizes that the QuickBooks
CD has been inserted, and a little message box with the words Welcome to
QuickBooks Desktop is displayed.
3. Click Next after indicating your acceptance of the QuickBooks licence
agreement.
You will be prompted to accept the license agreement, which is displayed on
screen and comprises a lengthy list of restrictions, when the QuickBooks
installation application opens. If so, select I Accept the Terms of the License
Agreement (But Only Because I Have No Other Choice) and press Next to
continue with the program installation.
4. After entering the license and product numbers, click Next.
When the Licensing and Product Numbers box appears, enter these two
license information (which should be printed on a yellow sticker on the back
of the CD sleeve or displayed on the purchase receipt window if you
downloaded the software) and then click Next.
5. Outline any network sharing you intend to do.
Indicate whether you want to share the QuickBooks data file over a network
when the Custom and Network Options window opens. Small firms generally
don't. If this applies to your company, just say when questioned that you'll
only use QuickBooks on the computer on which the program is being
installed.
However, depending on the version of QuickBooks you install, you might
have a few additional choices. Alternatively, you can forego installing the
QuickBooks program and only store the QuickBooks data file on the
computer rather than making the QuickBooks data accessible to other
computers on the network.

6. Make your installation site selection and click Next.

Click the Next button when the Upgrade or Change Installation Location
dialog box appears to use the Intuit default installation location. (The default
installation location is OK for 999 out of 1,000 clients.)
The advised installation location is optional. As an alternative, you might
decide to keep the QuickBooks program and data files elsewhere. I won't talk
about it here because the majority of users won't want to (and shouldn't)
make this adjustment. Furthermore, you don't need my assistance
comprehending how this adjustment works if you know how to safely modify
the QuickBooks installation location settings.

7. Click Install to launch the installation process.

Finally, the installation program alerts you that it is prepared to begin when
you click Install. Install, click. The app begins installing QuickBooks
Desktop.
Your progress is monitored by a little bar while the installation process goes
on.
If you need to halt the installation at any point, just click Cancel. The setup's
flaws are highlighted by QuickBooks. The solution is to simply repeat the
setup the following time.
8. To begin the installation procedure, click Install.
When you click Install, the installation program finally notifies you that it is
ready to start. Click to install. QuickBooks Desktop installation is started by
the program.
v A small indicator that shows your progress throughout the
installation procedure.
v Simply click Cancel to stop the installation at any time. QuickBooks
draws attention to the setup's shortcomings. Simply repeating the
setup the next time is the answer.
The following is a reminder: If you run a network and want to share a
QuickBooks file with another computer on the network, you must install
QuickBooks on each additional computer you plan to use to view the file.
You must own a separate copy of QuickBooks in order to install it on every
machine (such as from the five-pack version).
COMPLETING SETUP
1. Confirm that QuickBooks is registered.
2. Make use of the newest QB release. Make sure you are running the most
recent version of QuickBooks and that you have met the aforementioned
requirements.
3. Assign Access Rights and Users. Verify that you strictly follow the setup
guidelines for the QuickBooks users and permissions.
4. Provide strong passwords to EVERY user. At least one uppercase letter
and one number must be included in a password, which must be at least seven
characters long.
5. Once QuickBooks is open in Single User Mode, go to Edit>Preferences
and make sure the boxes next to the following options are selected.
It is necessary to deselect "Show lowest subaccount only." This setting,
which is crucial for Financial Statements, cannot be worked around. For any
other subjects, there is no need to change this choice.

All QuickBooks versions' Integrated Applications Preferences (Company)

The QuickBooks file cannot be accessed by QQube or any other third-party
application if the box labeled "Don't allow any programs to access this
company file" is checked.
Report Preferences for Pro/Premier Only (Company)
If you are using Assembly Items or Payroll, change "REPORTS - SHOW
ITEMS BY" in the Reports & Graphs Preferences to "Name only." This is a
scene that is occurring all over the world.
If you wish to use QuickBooks Pro/Premiere to run Job Cost Details, Payroll,
or G/L Detail analysis, you must adjust the Reports & Graphs Preferences to
"Name only" for "REPORTS - SHOW ACCOUNTS BY."

6. Search for dialog boxes that include modal arrows. Look for any Modal
Dialogue Boxes that might show and prevent the sync from happening by
opening the QuickBooks instance where the sync happens. View examples
here.
You need to rebuild your QuickBooks file. Despite the fact that file size and
the likelihood of corruption in the QuickBooks file are directly correlated, we
strongly advise against doing this for any size file.
7. Should QuickBooks be open or closed when syncing?
Individual QQube
Make sure QuickBooks is running solely in one instance while you do the
sync. (To be safe, check the task manager for any malicious QBW32.EXE
instances.)
If you are logged in, the QuickBooks file will have the permissions of that
user. If you want complete access throughout the sync process, open
QuickBooks to NO business file before beginning.
For Single-User QQube systems, the scheduler is frequently not
recommended.
A QQube With Many Users (Server). Start QuickBooks, then choose NO
business file. After data extraction, QQube will open each company before
closing it. This method will result in substantially fewer errors.
GENERAL QUICKBOOKS SETUP WIZARD
OPERATING
The same way you would launch any other program, you can also run
QuickBooks Setup by choosing FileNew Company after starting the
application.
v Being greeted with a smile.
In QuickBooks Setup, the Let's Set Up Your Business! screen (see figure)
appears when you choose FileNew Company. For the purpose of setting up a
new company in QuickBooks, the page encourages you to start entering some
general information. This screen's information should presumably be read.
When you're ready to begin, select either the Express Start or the Detailed
Start button.

v Making use of Express Start

QuickBooks has a streamlined setup method that you can use if you don't
want to customize it. If you select the Express Start option, QuickBooks will
collect information about your business and use that information to generate a
company file that should work for a business like yours.
When you choose Express Start to set up the company file, QuickBooks
prompts you to enter details about the people (customers, vendors, and staff)
you do business with, the products you sell, and your bank account. You
provide these descriptions by navigating through a series of screens and
filling up spreadsheets and onscreen fields.
v Detailed Starting Technique
If you click the Detailed Start option, the EasyStep Interview begins and
leads you through a series of information-filled panels where you can pretty
precisely select the kind of company file that QuickBooks will build.
The EasyStep Interview will progress to the next screen when you click the
Next button. The previous screen can be accessed by clicking the Back
button. If you are discouraged and wish to leave, click the Leave button. But
make an effort to continue.
v Provide business information
The EasyStep Interview's initial few screens collect a number of vital general
pieces of data about your organization, including your enterprise name and
legal name, your company address, the industry you work in, your federal tax
ID number, the first month of the fiscal year (typically, January), the type of
income tax form your enterprise uses to report to the IRS, and the sector or
type of enterprise you're operating (retail, service, and so forth). It shows the
EasyStep Interview's welcome screen.

On the first screen of the EasyStep Interview, general corporate data is

acquired.
Following the collection of this general company information, QuickBooks
creates the company data file, which contains the financial information for
your company. QuickBooks suggests a default name or a QuickBooks data
file based on the company name. All you need to do is accept the suggested
name and folder placement, with the exception of if you wish to put the data
file in the Documents folder, which isn't a bad idea.
 v How to choose when to begin
The most crucial decision you make when setting up any accounting system
may be the day you begin using it. On this day, the conversion date is
observed. An accounting system should normally be implemented on the first
day of the year or a new month. In light of this, the conversion date is a
crucial question you frequently get asked. You are prompted to choose the
start date in the dialog box.

In the EasyStep Interview dialog box, you can select the start date.
TIP: It's ideal to start using a new accounting system at the beginning of the
calendar year. The root? You can enter a trial balance that is simpler. As an
illustration, you simply enter the asset, liabilities, and owner's equity account
balances at the beginning of the year.
Additionally, you may always enter the balances of your year-to-date revenue
and expense accounts. It is customary for you to only have access to this
year-to-date income and expense information at the start of each month. You
can only select a start date other than the first of the month as a result. In this
case, your old accounting system gives you information on your yearly
earnings through the last day of the previous month. If you've been using
Sage 50 Accounting, for example, get year-to-date income and cost amounts
from Sage.
Once you've entered the start date, the essential company data, the majority
of your accounting settings, and the day you want to start using QuickBooks,
you're essentially finished.
TIP: By choosing the Leave option, QuickBooks takes you back to the
QuickBooks program, where you can get to work right immediately. There
are still some parts of the EasyStep Interview process left. Open the file you
were preparing to enter the interview again. This causes the EasyStep
Interview to reset.
Customers, suppliers, and staff
To add descriptions for customers, partners, and staff, click the first Add
button. QuickBooks will ask you if you want to manually enter the data into a
spreadsheet or if you can get it from another place, like email software or an
email service like Outlook, Gmail, etc. Pick the appropriate button, then
select Continue because it's likely that the information will be manually
entered. In the worksheet box that QuickBooks shows, enter each customer,
supplier, or employee in a separate row, being sure to include the customer's
name and address.
• After you're done, click "Continue" (not visible).
• Following that, QuickBooks will prompt you to input opening balances for
customers and vendors, or the amounts you owe or are due, respectively.
You can confirm that you do by choosing the Enter Opening Balances option,
after which you can enter the opening balances on the screen presented by
QuickBooks.
Services and inventory items you sell
• To add a description of the things you sell, click the second Add button.
• QuickBooks asks you whether you want to keep track of any sales of the
things you sell, as well as whether you provide services or sell inventory
items.
• Click Continue after selecting the choice button that best represents your
answer to each question.
When QuickBooks displays a worksheet window, each row should have a
description of the item you are selling (not shown). If you have any inventory
items on hand at the time of the QuickBooks conversion, include a
description of them. When finished, select Next. If you sell many sorts of
items, you must repeat this process for each type of product.
What does trial balance mean?
Remember that the construction of ledger accounts and the extraction of
balances are the first two steps in the accounting cycle, and that the
development of a trial balance is the third. The transactions that took place
within a specific financial period are listed in a trial balance. A trial balance,
in its simplest form, is a financial statement that totals the debit and credit
balances of all accounts. On the debit side of the trial balance, all accounts
with debit balances or totals are shown, and on the credit side, all accounts
with credit balances or totals are shown.
Trial Balance Format

Opening inventory is one of the elements of the trial balance and is

reported on the debit side.
Closing inventory is noted as supplemental data. As a result, it is not
included in the trial balance's items.
The student must understand that a trial balance is made for two different
reasons. In addition to being a summary of all ledger account balances at the
end of the defined period, it is also used to check for errors in accounting
entries. Therefore, if both the debit and credit sides of the trial balance are the
same, it is assumed that there were no errors during the establishment of the
ledger accounts. If the two sides are out of balance, then issues occur and
must be resolved. The businessperson or student should be aware that just
because the trial balance's two sides are equal doesn't indicate there aren't any
accounting problems because, as we'll see in level two of this tutorial series,
some faults might not be detected by the trial balance.
How to prepare a trial balance in steps
Take the balances lowered or account totals at the end of the financial period,
if it contains income or expense accounts.
Balancing all of the designated ledger accounts is the initial stage.
Whether the balance brought down or totals are of a Debit or Credit
character depends on the kind of the account, such as asset, capital,
obligation, expense, or income.
Step two: Include all debit balances in the DEBIT column of the trial balance
sheet.
Step three: Include any credit balances in the CREDIT column of the trial
balance sheet.
In the DR and CR columns of the trial balance, add up all the debit and credit
input amounts.
A bank overdraft trial balance
A consumer incurs a bank overdraft when they take out more cash from the
bank than they deposited.
Since there is no such thing as a bank overdraft account, students or business
owners should use caution as they might be tempted to start one even if doing
so would be against the rules of accounting.
What should a person do if they overdraw their bank account then? Actually,
the answer is fairly simple. The bank does not grant us an overdraft account.
The bank column in the cashbook is used as the tool to represent such a
transaction instead. For your information, in the event of a bank overdraft, the
amount is written on the CR side of the cashbook.
The following example demonstrates this:
Second Illustration

This means that if there is a CR balance in the bank column of the cashbook,
a bank overdraft has taken place and is regarded as a short-term loan. Despite
the fact that it appears in the trial balance as a bank account entry, the amount
is really recorded on the credit side of the trial balance, as can be seen below;
The trial balance shows a bank overdraft of $3,000 as a credit amount.
Both brought-down and carried-down trial balance balances are used.
Balance carried down (bal c/d) and balance brought down (bal b/d)
transactions are separate from one another. The difference between the two is
that what matters when preparing the trial balance is the balance brought
down (bal b/d).
Features of trial balance
1. A summary of all data from the relevant ledger accounts—This financial
statement contains all data from the accounts that the company used
throughout the relevant financial period.
2. It is made up of the credit column, the debit column, and the particulars
column. The details section includes a brief description of the account name
and either a debit or credit value.
3. It is a financial statement that was made at the conclusion of the
accounting period to reflect decreasing account balances.
4. All of the accounts whose debit and credit amounts have been decreased or
added together are copies in both its debit entry and credit entry.
5. It's flexible; as a tool for financial accounting, it can account for
adjustments made throughout the course of the year, such as accruals and
depreciations.
The benefits of trial balancing
1. It helps to double-check the veracity of entries made in multiple ledger
accounts. The accountant has to know whether there are any errors so they
can be addressed before creating more financial statements, so this is vital.
2. To ensure that all accounts with a non-zero balance have been accounted
for in the compilation of the financial statements, it is helpful to compile a list
of all participating ledger accounts.
3. This platform enables easy access to accounting data for the preparation of
financial statements, including a detailed income statement and a statement of
financial condition.
4. End-of-year adjustment platform—this is the channel utilized to make
modifications to some ledger accounts that are impacted by the close of the
fiscal year, such as accruals and prepayments.
5. A tool for error detection—this parameter is used to spot mistakes that
happen during the financial period. It can be utilized to some extent to locate
flaws that fit into a specific category, albeit not all defects will be discovered.
Trial balance's Drawbacks
1. It does not catch every error; one of the objectives in developing the trial
balance was to find errors. The instrument is selective in its detection,
though, as some errors, such as commission and payment faults, are missed
by it.
2.Duplication of effort: The information from the pertinent ledger account
can be used to generate additional financial statements even if a trial balance
hasn't been made yet. We can therefore survive without it. As a result, there is
no need to train someone to access data that we can get immediately from the
ledger account.
3. Provides very little insight into the company's financial status; a trial
balance essentially lists all transactions that took place throughout the fiscal
year. Therefore, stakeholders in a corporation shouldn't rely on it to find out
more about the company's financial situation.
4. The trial balance preparation is not cost-effective; it requires financial
resources but has a narrow scope of use. The same information is also
included in other financial statements like the profit and loss account and
balance sheet.

Types of Trial Balance

A trial balance is divided into two categories based on the end-of-year
adjustments made;
Unadjusted trial balance and
Adjusted trial balance
Trial balance differences between unadjusted and adjusted
 CHAPTER TWO
Manager FILE LISTS LOADING
The data stored in these master file lists is available for usage and reuse. One
of the master files lists has a description of each of your clients, along with
information about them, like their names and addresses, phone numbers, and
account numbers.
Inventories in QuickBooks
If you choose the Lists Item List command, as shown, QuickBooks displays
the Item List window. The Items List pane lists each item that has been
manually added since the Setup Wizard was launched as well as each item
that has been customized as part of running QuickBooks Setup.

The Item List window

The QuickBooks Pricing Level List
You may rapidly change rates using the Price Level list when you send out
invoices to clients, issue credit memos, and complete other operations.
Sales Tax Codes for QuickBooks
To indicate whether an item is taxable or not, you can use the codes or
abbreviations on the Sales Tax Code list. QuickBooks displays a popup with
a list of the most recent sales tax codes if you choose this option. (The two
codes Tax and Non are frequently seen.)
The Sales Tax Code list won't appear unless you instruct QuickBooks to track
sales tax during setup or later.
To add sales tax codes, take the following actions:
• Click Preferences on the Edit menu.
• Choose Sales Tax from the list of choices.
• Click the Company Preferences tab.
• In response to the inquiry Do You Charge Sales Tax, click the Yes button.
Click the Add Sales Tax Item button when QuickBooks displays the New
Item dialog box (not shown), then specify the new sales tax by giving it a
name, a short description, the sales tax rate, and the taxing authority.
Guidelines for Configuring the QuickBooks Payroll Item List
The Payroll Item list contains items that can be found on employee payroll
check stubs. If you hire an outside payroll service bureau to handle your
payroll, which is a good option, you don't even need to worry about the
Payroll Item list. Again, if you're using the QuickBooks Enhanced Payroll
Service, don't worry about the Payroll Item list. The payroll items you use to
record payroll in any circumstance are created by the QuickBooks staff.
When using Intuit's full "we-do-everything" Payroll Service, you don't even
need to track payroll inside of QuickBooks because the QuickBooks team
handles it on computers at their office.
If more payroll items need to be added, follow these steps:
1. Click the Payroll Item List option in the Lists section.
QuickBooks displays the list window for Payroll Item.
2. To add a new payroll item, click Payroll Item New after clicking the
Payroll Item button.
QuickBooks displays the dialog box for adding a payroll item (not shown).
To create a new payroll item, choose between the EZ Set Up method and the
Custom Set Up technique:
EZ Set Up: Simply click the EZ Set Up button, choose Next, and follow the
onscreen steps to receive assistance from QuickBooks when establishing a
standard payroll item. Custom Set Up: To create a payroll item with a
customized setup, click the Custom Set Up button and then click Next.
QuickBooks will quiz you on the payroll item to set up during a multi-screen
interview. In the opening dialog box for QuickBooks, for instance, you are
prompted to indicate the type of payroll item you wish to generate. You can
respond to this question by choosing a radio button and then clicking Next.
3. Assign a name to the pay item.
Once you know what kind a payroll item is, you assign it a name. You can
add a name for the new item in a field in a separate version of the Add New
Payroll Item dialog box that QuickBooks provides.
4. To finish the procedure, click Next after responding to the last few
payroll item setup questions.
The taxpayer authentication number (TIN) used to specifically identify you to
the taxing entity, the liability account used to track the items, the tax-form
line used to report the item, the rules QuickBooks should use to calculate the
item (such as whether the item is subject to taxes), and a few other auxiliary
details are all specified. When you complete the Add New Payroll Item box
with all of the required information and click Finish, QuickBooks adds the
new payroll item to the Payroll Item list.
TIP: The Payroll Item menu has commands that are useful for interacting
with the Payroll Item list. The menu also has commands for printing a list of
payroll items, as well as for deleting, renaming, and activating payroll items.
These instructions are in addition to the ones you use to add an item to the
list.
QuickBooks Class List Creation Guide
It is not permitted to separate or track financial data in the same ways that are
possible with classes in QuickBooks when utilizing other pieces of
accounting information, including the account number, the client, the sales
representative, the item, and so forth. A business may utilize classes to group
financial information into categories such as stores, organizational divisions,
or geographic areas.
To set up classes, follow these steps:
1. Click the Class List option in the Lists section. The QuickBooks Class List
window appears as illustrated.

The Class List window.

TIP: If the Class List command cannot be found, choose Edit Preferences,
Accounting, the Company Preferences tab, and finally tick the box next to
Use Class Tracking for Transaction.
2. Click Class New at the bottom of the window to add a new class.
QuickBooks displays the dialog box for creating a new class, as shown.

The New Class dialog box

3. In the Class Name box, enter a name or acronym to give the new class a
name.
A transaction that belongs to a class must always be recorded using the class
name in the transaction description. You shouldn't create class names that are
overly long or easy to type wrongly as a result. Be succinct, concise, and easy
to follow.
4. If the class you're setting up is in fact a subclass of another class, tick the
Subclass Of check box and then choose the parent class from the Subclass Of
drop-down list.
5. Press OK to save the lesson.
If you want to stop saving the class, click Cancel. Alternatively, you can click
the Next button to save the class and reopen the New Class dialog box. By
checking the box labeled "Class Is Inactive," the class will stop being used.
The Class menu that appears when you click the Class button also includes
commands for editing the details of the selected class, removing the selected
class, making the selected class inactive, and printing a list of classes.
Utilizing any of these instructions is rather easy. Check them out to see how
they work.
Making a Customer List in QuickBooks
A customer list contains all of the details of your clients, such as their billing
and shipping addresses.
the procedures below to add a customer to the Customer list:
1. Choose Customers Customer Center as the command.
QuickBooks is capable of viewing the Customer Information pane.
the window for customer data.
2. Choose New Customer & Job, then from the drop-down menu, choose the
New Customer command.
The window for new clients is displayed by QuickBooks.

The window for new customers

3. Fill out the Customer Name box with a succinct name for the client.
You don't have to type the customer's full name in the Customer Name
section. You can add that information in the Company Name field found on
the Address Info tab. You only need to know the customer's name in its
truncated form to refer to them within the QuickBooks accounting software.
4. If you charge your clients in a different currency than your own, choose
the correct option from the Currency drop-down menu.
If you told QuickBooks that you work with multiple currencies—as you
would have done during the EasyStep Interview setup process—QuickBooks
wants you to describe the instances in which you invoice clients and receive
payments from clients in currencies other than your own.
5. Disregard the Opening Balance and As Of boxes (usual norm).
It is not recommended to enter the customer's opening balance in the As Of
or Opening Balance sections. That shouldn't be how your new client accounts
receivable balance is set. This is similar to making an entry's debit portion
without also making its corresponding credit portion. To finish your improper
bookkeeping, you'll eventually need to create odd diary entries. There is one
exception to the general rule, though, and it is discussed in the following tip.
6. Type the company name and any necessary contact information in the
appropriate fields on the Address Info page, including contact names, phone
numbers, fax numbers, email addresses, billing and shipping addresses, etc. I
won't provide you instructions to enter a person's first and last name in the
Full Name fields or their phone number in the Main Phone and Work Phone
areas.
7. Select the Payment Settings tab to display the set of boxes.
The client's credit limit, account number, payment terms, preferred methods
of payment and delivery, and even credit card information can all be kept in
your records. It should be noted that you can select whether a customer can
pay you via bank transfer or credit card using the Online Payments check
boxes, but you must first set up these services. If you haven't already
configured the services, QuickBooks asks you to do so when you choose one
of these boxes.

The Payment Settings tab.

8. (Optional) If you maintain track of sales taxes, select the Sales Tax
Settings tab to view the options you'll use to determine this customer's sales
tax rate.
Using the Tax Code drop-down list on the Sales Tax Settings tab, for
example, you can select which sales tax code is applicable to this particular
client. The specific sales tax item and, if relevant, the resale number can also
be specified.
9. Give some additional information about the client.
QuickBooks displays additional boxes you can use to collect and save
customer information when you choose the Additional Info tab. Use the
Customer Type drop-down list, for example, to assign a customer to a certain
customer type. The Rep drop-down menu also allows you to select the default
sales representative for the customer. By clicking the Define Fields option,
you can choose any extra fields you want to collect and report for the
customer.

The Additional Info tab.

10. (Optional) Click the Work Info tab to provide a customer job explanation.
Using the Job Info tab, you can give specifics about a job being completed
for a customer. The Job Info tab is used when creating a customer and a job
for that customer.
11. After you've completed identifying the client, click Save & Close or Save
& New to save your description.

Set up the vendor list and install QuickBooks.

In the same manner that a customer list is used to keep track of all your
customers, a vendor list serves the same purpose. A vendor list allows you to
compile and maintain track of information like the vendor's address, contact
information, etc., similarly to a customer list.
To add a vendor to your vendor list, follow these instructions:
1. Under Vendors, choose the Vendor Center command.
Whenever you do this in QuickBooks, the Vendor Information window
appears.

the window for vendor data.

2. From the drop-down option, choose New Vendor to add a new vendor.
The ability to add new vendors is displayed by QuickBooks.

Window for the New Vendor

3. Enter the vendor's name in the Vendor Name box.
Similar to the Customer list, you refer to the vendor in QuickBooks by using
its name. In this scenario, an abbreviation is appropriate. You just need
something easy to remember and enter.
4. (Optional) (Optional) If you're paying your merchant in a currency other
than your default home currency, choose the alternative currency from the
Currency drop-down menu.
If you told QuickBooks that you work in different currencies, as you would
have done during the EasyStep Interview setup process, then they want you
to specify when you get bills from or pay a vendor in a currency other than
your home currency.
5. Disregard the fields for Opening Balance and As Of (usual guideline).
You should disregard the Opening Balance and As Of boxes. Unsophisticated
users enter the due date and the opening balance owed to a vendor in such
sections, but these entries only cause problems in the future. At some point in
the future, this poor soul's accountant will have to find and correct this error.
Similar to when you add new clients, there is an exception to the general
norm, as is explained in the tip that follows.
TIP: There is a sizable exception to the general recommendation that
opening balances for vendors not be set. Your accounts payable balance as of
the conversion date can be reported by setting an opening balance for each
vendor at that time. QuickBooks determines your total accounts due based on
the sum of these opening balances on the conversion date.
6. Specify the vendor's physical address.
You can utilize the easy-to-read boxes on the Address Info tab to collect
vendor names and addresses. Naturally, you include the vendor's full name in
the Company Name field.
can enter the address using the usual street address, city, state, and zip-code
forms in the Edit Address Information dialog box that displays when you
click the Edit buttons on the Address Info page. The Edit buttons are located
to the right of the Billed From and Shipped From address sections.
7. Add any necessary further information.
The most important vendor information, including account number, credit
limit, and payment terms, is gathered on the Payment Settings page;
However, QuickBooks has a few extra boxes that you can use to collect and
retain data if you select the Tax Settings, Account Settings, or Additional
Info tabs:
• To send the vendor a Form 1099 at the end of the year, as could
occasionally be required by federal tax requirements, you can get their tax
identification number from the Tax Settings tab.
• Using the Additional Info page, you may create additional custom fields and
categorize the vendor by category.
• The Account Settings tab allows you to specify which accounts QuickBooks
should use to prefill account fields when entering a transaction for the
vendor.
If you're paying a vendor for the first time, you should get their tax ID
number. If someone refuses to provide you his tax ID number, making it
impossible for you to reveal payments you make to him, it's probably a sign
that something isn't quite right.

The Payment Settings tab.

8. Select OK.
When the window for the New Vendor closes, you go back to the Vendor
Center.
When you choose the Account Settings option from the New Vendor
window's fourth available tab, you can specify the accounts you want
QuickBooks to automatically fill in for you when you record a check to a
vendor or when you record a bill from a vendor. This option won't enter a
figure because (obviously) the amount can change, so you won't have to
search through all of your accounts to find phone costs.
You can tell QuickBooks to prefill that expense category the next time you
enter a bill or record a check to pay that vendor if, for example, the check you
record to the phone company covers charges for telephones. Make a list of
your QuickBooks' fixed assets.
When you pick the Lists Fixed Asset Item List command in QuickBooks, the
Fixed Asset Item list box appears. You can browse a list of the long-term
assets you've purchased here, including things like furniture, vehicles,
machinery, equipment, and more. You can access this list, in other words,
after choosing New from the Item drop-down list and filling out the New
Item window for each fixed asset.

The QuickBooks general ledger and the Fixed Asset Item list are not actually
integrated. You can keep track of the purchase or sale of fixed assets using
typical QuickBooks transactions. You can easily record the purchase of a
certain fixed asset by simply typing a check the standard method.
Additionally, the disposal of a fixed asset may be recorded in a general ledger
journal entry.
In order to keep track of the fixed assets you've purchased, the list of Fixed
Assets Items only functions as a standalone list.
 CHAPTER THREE
FINE-TUNING QUICKBOOKS
You can adjust the service connection settings in QuickBooks. You can
choose from two check boxes on the My Preferences tab of the Service
Connection Preferences dialog box to influence how QuickBooks behaves
when you establish web connections. You have the choice to save
downloaded files using one check box. The other instructs QuickBooks to
keep your web browser open after it has finished using the internet.

The Service Connection Preferences dialog box's My Preferences tab.

There are two Company Preferences choices accessible in the Service
Connection Preferences dialog box. For instance, you can choose whether
QuickBooks should always request a password before connecting to
QuickBooks Services or if it should do so automatically.
You need only choose the relevant radio button to decide on this.
Additionally, you can notify QuickBooks that background message gathering
is acceptable by checking the Allow Background Downloading of Service
Messages check box. (If you check this box, QuickBooks will download new
messages when it is not in use to avoid interfering with other Internet
activities.)
SETTING THE ACCOUNTING
PREFERENCES
Accounting Preferences Setting
Accounting preferences are guidelines for your QuickBooks software that are
specific to the way your business uses the application. This section offers the
option to employ additional crucial elements like class tracking and the audit
trail as well as the ability to enable or disable the account numbering feature.
You'll probably need to employ an audit trail if you hire a freelance
accountant. Additionally, you can choose to make it mandatory for users to
submit account numbers on QuickBooks forms.
1. By choosing Edit, Preferences, the Preferences window will be
displayed. On the left side of the display, click the accounting
symbol.
2. At the window's top, click the Company Preferences tab. The
My Preferences tab is devoid of choices.
3. The account numbers feature can be activated by checking the
Use Account Numbers option.
4. Using account numbers and the ability to display subaccounts
apart from their parents on reports, check the Show Lowest
Subaccount Only box.
5. The Require Accounts checkbox should be selected to restrict
users from submitting forms without providing the necessary
account information.
Note: Account numbers are not eliminated when they are turned off. The
account numbers you allocated to accounts stay in place even if you choose
to disable the account numbers option, for instance if you want to produce a
report without account numbers. When you activate account numbers again,
all of the numbers come back.
6. To enable the Class functionality in QuickBooks, select the
Use Class Tracking checkbox. You can choose to have the user
be prompted to choose classes if you check this feature.
7. If you want QuickBooks to remember the last journal entry
number you used and automatically increase it for the
subsequent journal entry, check the Automatically Assign
General Journal Entry Number box.
8. If you want QuickBooks to display a pop-up warning before
making changes to Retained Earnings, check the Warn When
Posting a Transaction to Retained Earnings box.
9. Set a deadline beyond which no updates to your company file
will be permitted without a password.
10. To create a password for entries made before your
closing date, click here.
11. To secure entries made prior to your closing date, enter
a password.
12. Enter the password once more
13. Then click OK.
USING ACCOUNT NUMBERS
Self-Assigning Account Numbers
It is more difficult, but ultimately can be more beneficial to your business, to
select your own numbering/lettering scheme for account numbers as opposed
to allowing QuickBooks do so. You must enter the Preferences box and
enable account numbering, regardless of whether you choose all of your own
account numbers or let QuickBooks number the accounts. In addition to
adding an Account Number field to your New Account window, QuickBooks
numbers all of your current accounts automatically.
The steps below should be used to number your accounts:
Refer to your list of account numbers in a spreadsheet or in writing
when setting up any new accounts, and enter your own account
 number there.
For already-established accounts, open the Edit Account window and
substitute your preferred account number for the one that has been
assigned.
NOTE: The financial statements and reports you desire to be categorized by
account name will now be organized by account number, so keep that in
mind when selecting account numbers. This occurs as a result of QuickBooks
including your account number in the account name (almost like the first
word in the name).
Assign account numbers to the accounts in alphabetical order if you
want your accounts to show that way on your financial statements.
You may pick any combination of letters (uppercase and lowercase)
and digits to create your account numbers, and you may use up to
seven characters.
Account numbers cannot be assigned during the EasyStep interview.
Immediately following the interview, you must complete this.
SETTING GENERAL ACCOUNTING OPTIONS
High-level options can be defined using the Configure accounting options
dialog. Go to Finance > Settings > Configure Accounting Options in the
Advanced Accounting Console to set up accounting options.
SETTING THE BILLS PREFERENCES
The Bills Preferences being Set
You can establish company-level options for managing vendor bills by
displaying the Preferences dialog box and selecting the Bills icon. By
providing a value in the relevant text box, you can, for instance, define that
bills be regarded as being due after a particular number of days have passed
after their arrival. Additionally, you can select the use of early-payment
discounts and pick an account to record the value of these discounts using
these company-level settings.
Calendar Preferences Setting
You can customize how QuickBooks displays calendar information by
opening the Preferences dialog box and selecting the Calendar icon. You can
choose whether or not to remember previous calendar settings, the view that
is used to display weeks, which transactions should be displayed on the
calendar, and how calendar reminders should be displayed.
CHANGING THE DESKTOP VIEW
You might notice a software that looks different from your own if you use
QuickBooks on someone else's computer. The reason is that you can alter the
way your QuickBooks application looks in a number of different ways. For
each transaction that is now in progress, you could choose to see a separate
QuickBooks window on your screen, whilst other users might prefer to fill
the screen with a single window or use a different color scheme. Each user
can have their own desktop settings when using QuickBooks on a network.
Because of this, you will see that the desktop view options are limited to My
Preferences and do not include Company Preferences.
1. On the dialog box's left side, choose Edit, Preferences, and then pick
Desktop View.
2. Please select the My Preferences tab.
3. The number of QuickBooks windows you wish to view at once
depends on your preference. In QuickBooks, several windows can still
be opened; they just layer together rather than appearing
independently if you choose One Window.
 4. Choose a setting for your desktop's display. If you select the Save
When Closing Company option, QuickBooks will restore your
screen's appearance from the last time you closed the software each
time you launch it. To choose the items you want QuickBooks to
restore when you launch the software, select Save Current Desktop.
Keep previously stored desktop files will be offered as a new option.
If you choose Not to Save the Desktop, each time you reopen
QuickBooks, your desktop will default to the QuickBooks startup
desktop.
Note: The performance of your software may be affected by desktop saving.
If you select one of the choices to save open things on your desktop,
QuickBooks will open more slowly the more items you have open on your
desktop.
5.If you want QuickBooks to always open with the new Home page visible,
check the Show Home Page When Opening a Company File option. In place
of the previous QuickBooks Navigators is the Home page. If the box labeled
"Show coach window and features" is checked, these features will be added
to the Home page. The new help bar will appear on the right side of your
screen when the option labeled "Show live community" is checked.
6. Choose a color scheme for your desktop display from a selection of
options.
yellow-circle-7.jpg The two buttons in the Windows Settings section launch
dialog boxes for Windows programs and present you with format settings for
Windows on your machine as a whole, not just for QuickBooks.
8.Select OK.
SETTING FINANCE CHARGE CALCULATION
RULES
A finance charge is what?
Any fees you pay while borrowing money are referred to as financing
charges. Interest and other fees listed in the cardholder agreement are
included in the financing costs for credit cards. These fees may change
depending on how they are calculated.
How do credit card companies calculate finance charges?
Your issuer should make it clear in the terms and conditions when you apply
for your credit card exactly how finance charges are computed. Rates and
calculations may differ between issuers and even amongst cards from the
same issuer.
Here are some of the most popular approaches and how they are computed:
v Average daily balance
To determine the average daily balance, add up each day's amount and divide
the result by the number of days in the billing cycle. Your monthly finance
fee is determined by multiplying that amount by one-twelfth of your annual
percentage rate, or APR. This approach is thought to be the most typical one.
If your issuer employs this technique, it may be advantageous to make
payments throughout the course of the month to reduce your daily balances.
v Daily balance
Your issuer determines the exact balance you carried each day of your billing
cycle, much like the average daily balance. However, each day's amount is
multiplied by 1/365th of your APR to determine the daily finance charge
instead of the average, which is then added up to determine the total finance
charge for the billing cycle.
v Two-cycle billing
A credit card computation technique that applies interest to both previous and
current card balance cycles. The Credit CARD Act of 2009 prohibited this
practice because it could lead to interest charges on debts that have already
been paid in full.
v Previous balance
The sum carried over from your previous billing cycle to the next one or the
unpaid balance at the start of the billing cycle will determine how much you'll
be charged under this method.
How to avoid finance charges
The best method to prevent finance costs is to make on-time, complete
payments of your outstanding obligations each month.
No interest will be charged on your debt as long as you pay the entire amount
due each month during the grace period (the time between the end of your
billing cycle and the payment due date). Instead, if you just pay the minimum
amount due, financing charges will be computed using the manner your
issuer chooses and will appear on your subsequent statement.
Other types of finance costs, such as balance transfer fees, late fees, and cash
advance fees don't have the same grace periods as interest rates, and they can
be difficult to avoid if you do. Think about whether the advantages you will
experience outweigh the costs.
Similar to the previous example, if your card has a 0% introductory APR
promotional offer, make sure you read your terms to understand the finance
charges you'll incur if you haven't paid your debt in full by the end of the
introductory period. This way, you can avoid them when the time comes.
CONTROLLING INVENTORY
What is inventory control?
The practice of maintaining a company's inventory levels, whether they are
kept in their own warehouse or dispersed across different sites, is known as
inventory control, sometimes known as stock control. It entails overseeing
products from the time you have them in stock until their eventual disposal or
(hopefully) delivery to clients (not ideal). They are also tracked by an
inventory control system for use, storage, and movement.
Inventory control is the process of keeping the right amount of each product
on hand by controlling your inventory levels. Your purchase orders may be
tracked and a working supply chain can be maintained with proper inventory
control. Systems can be set up to aid in predicting and provide you the ability
to specify reorder points.
Inventory management may involve:
Integration of barcode scanners
complete counts of all items
Using sales and purchase orders, physical inventory is managed.
Details, locations, and histories of the products
Reports and modifications
The overarching objective is to increase earnings while keeping as little
inventory in your warehouse as is practical. This must be accomplished by
your company without sacrificing client satisfaction. Even while you can
manage inventory control manually, there are automated methods that
manage your stock levels and help cut down on expensive human mistake.
The US Census Bureau estimates that in July 2020, American manufacturers
and retailers held $1.33 worth of inventory for every $1 in sales. You may
improve the inventory/sales ratio by using effective inventory control.
Stationary stock offers little to help your company's financial line. Utilize
your limited space to the fullest while making sure you can always fulfill
customer demand.
Inventory management versus inventory control
Inventory control and management are distinct even though they both deal
with components of inventory. Inventory management deals with stock that is
already present in a distributor's warehouse. It is necessary to be aware of the
products you have in stock as well as their location in your warehouse. It
makes sure the inventory is kept in good shape and is set up to save money.
Product restocking and forecasting are two business operations that are part
of inventory management. To prevent stockouts or having too much
inventory on hand, management includes knowing when to place reorders
and how much to order. It makes sure that the appropriate inventory is
available at the appropriate time and in the appropriate quantity.
When you enhance your inventory control, you can accomplish better
inventory management.
What makes inventory control crucial?
Here are a few reasons why inventory control is crucial for your company so
that you may comprehend its underlying goals.
1.Quality Assurance
You can enforce more quality control if you have an inventory management
system. You can better control quality if you can monitor and manage every
part of your supply. The likelihood of inventory becoming damaged increases
with time. By making sure that the inventory is rotated through your
warehouse, you can prevent that.
Utilizing inventory control approaches also enables you to monitor the
caliber of the supplies you buy from vendors. How frequently do you receive
certain things back? How frequently are those that are sent back because they
malfunction or have other flaws? By monitoring how items flow through
your inventory, you may identify any issues and reduce write-offs.
2.Organizational control
The ability to handle your inventory demonstrates organizational control
inside your company. You can manage your inventory and get the most out
of your investment in physical inventory by maintaining a well-organized
stockroom. Knowing where your inventory is and how quickly you can reach
it depends on this component of inventory control.
For your business to run smoothly, inventory control is essential for
organizing your supplies. It will guarantee that you have adequate inventory
to meet demand and maintain a reserve. Utilizing efficient inventory control
procedures will also aid in preventing dead stock and overstock. As a buffer,
safety stock lowers the possibility that an item may run out of stock. Dead
stock is merchandise that isn't used. Which encapsulates the reason inventory
control is necessary.
3.Accounting precision
Maintaining an accurate inventory record is essential for managing your
assets. You will benefit from it if there is an audit. Knowing your assets can
help you determine your overall spoilage and the worth of your business.
Your business could be required by financial accounting guidelines and tax
laws to maintain a physical inventory account. In both your inventory
management systems and your accounting software, all stock should have
accurate numbers and prices. This will guarantee that the accuracy of your
company's bookkeeping will not be questioned during audits.
How can inventory costs be managed?
v Inventory control software makes it easier to keep track of stock,
packaging, and shipping information in one location, which improves
the efficiency of your company's purchasing procedure. You may
automate control of stock levels for precise sales performance and
inventory analytics by using real-time updates on stock movements.
All of it aids in keeping inventory expenses under control.
v Inventory control's difficulties
v For a business to run efficiently, inventory control is essential. It
may also have difficulties. Finding the time and resources may seem
challenging, and creating a comprehensive inventory picture may be
challenging, particularly if your business is large or you have many
locations for your inventory.
v These obstacles may be surmounted, nevertheless, to guarantee
efficient inventory control. Automation of your inventory control
process is the best solution for handling all of these issues. For your
business, research the top inventory management programs.
The difficulties you might encounter are listed below:
Ø Finding the time and resources
Manual inventory management demands a significant amount of resources.
Manual inventory control requires resources like money and labor time.
However, if inventory control is not given priority, you will eventually waste
more time and money. Spend some time setting up a regular schedule for
inventory control. Also, remember to budget for inventory management.
Ø Visibility
There may be a lot going on with an organization's inventory if it has a huge
amount of goods, complicated warehousing, or sells through several
channels. There may be problems with visibility as a result. Businesses need
a complete image of their inventory in order to restock, account for, manage
cash flow, and make sales. Losing track of your inventory might result in
dead stock and a decline in inventory quality. For this reason, mastering
warehouse inventory control is crucial.
The information you might get from software systems for inventory control
can assist you get better visibility. For example, you can receive alerts when
your inventory is low. High insight into your inventory movement helps you
limit obsolete stock and decide how much of each product to maintain in
stock.
Ø Human error
When firms constantly move merchandise in and out of their warehouses,
human errors are unavoidable. Vendors must, for instance, send precise
invoices that are compared to purchase orders and actual inventory. Any
errors that happen at this point could have an effect on your inventory
management.
By improving your inventory control system and integrating your solutions,
you can reduce human error. As a result, your software will be able to notify
you if there are any inconsistencies between the accounts payable entries and
the actual inventory counts.
Inventory control systems
Businesses can make use of a variety of inventory control systems and related
strategies. What kinds of inventory control does your company require, then?
Depending on the quantity of your inventory and how your business is run,
each has advantages and downsides. Retailers might discover that, for
instance, their needs differ from those of a wholesaler. To determine your
present and future needs and select the best inventory control strategy, start
by outlining your business goals and criteria.
Next, decide whether your company needs to use a:
v Spreadsheet for inventory management

For smaller organizations that don't retain much stock or have a wide variety
of inventory, using a spreadsheet as a manual inventory control strategy
works best. While maintaining an inventory spreadsheet is less expensive
than the other two methods, it might be challenging. However, none of your
team members will have to spend time learning how to use an automated
system for inventory control.
Even though you might think using a spreadsheet to manually manage your
inventory gives you more control, this method is labor-intensive and much
more prone to human mistake. Because an employee must keep track of
numerous moving elements, supply chain management may be more difficult
to maintain.
Furthermore, a manual approach will make it more difficult to track stock
replenishment.

Periodic inventory system

Physical inventory counts are typically used in periodic inventory systems.
Every time a physical count is done, inventory information is updated. For
firms that deal with significant amounts of inventory or frequent inventory
changes, this form of inventory control system is extremely time-consuming.
However, for businesses that don't process a lot of orders, such inventory
control strategies can be effective.
Periodic inventory usually use the following formula:
Cost of Goods Sold (COGS) = (Beginning Inventory + Purchases) – Closing
Inventory.
This inventory control system is simple to use and doesn't require much
knowledge. However, it's unlikely that your stock levels would be current,
which will cause delays and more write-offs. Additionally, it uses inventory
audits rather than a real-time-updating automatic system.
v System of perpetual inventory

When a transaction occurs or fresh stock is obtained via technology solutions,

perpetual inventory systems update your stock in real-time. A total of 72% of
merchants intend to use automation, sensors, and analytics to implement real-
time supply chain visibility. It enables you to quickly put inventory
management strategies like Economic Order Quantity into practice (EOQ).
Inventory is maintained to fulfill requests while reducing holding and storage
expenses thanks to EOQ.
Periodic systems don't give you as good of a view of your inventory as
perpetual systems do. Physical inventory counts now need less time and
money thanks to these inventory control system features.
Tips for inventory control best practice
We now have a foundational understanding of what inventory management is
and the available inventory control systems. Here are some suggestions for
managing your inventory.
Use real-time inventory tracking
It is impossible to overstate the benefits of automation. You get the most
accurate, most recent information from real-time tracking, which helps you
make business and financial decisions. Your ROI could go up, and your
carrying expenses might go down. When selling on many channels,
automatic inventory tracking is incredibly useful. When orders and inventory
data are synced in real-time across all channels, overselling, which can be
detrimental to the customer experience, can be avoided.
Be consistent with your labeling system
Companies today have a wide choice of alternatives for marking and
identifying goods thanks to modern warehouse management. Choose a
method that works for your company, and then apply label strategies
consistently.
SKUs, for instance, make it simple for your team to monitor your inventory.
You can manage your inventory across multiple channels and locations with
ease if you barcode your stock.
Radio Frequency Identification (RFID) may also be used by your business to
identify particular goods and parts. RFID isn't just for tracking raw materials;
it can also be used to track finished goods and move them around the supply
chain.
ABC Analysis
ABC analysis is a tactic you can employ in a perpetual system. Based on the
item's consumption value, inventory items are categorized in this way. That
value represents the overall cost of an item of inventory used up over a
certain period of time. The letters stand for the several categories that objects
might be categorized under.
A item: The most consumable goods are referred to as A items. The
consumption value of this small number of items will be high.
B items: fall into the consumption value category, which is higher than C
items but lower than A items.
C items: The least consumable items are in category C. This stock has a low
risk, but it also has a low return. They frequently make up a sizable chunk of
your stock.
The table that follows is an illustration of how this approach might be used in
practice:
Set reorder points
Although it might seem straightforward, reordering can be a challenging
aspect of inventory management. Without having to deal with the carrying
expenses of dead stock, you want your consumers to have immediate access
to your inventory. You can establish these levels in inventory control
software so that it will notify you when a product falls below a predetermined
level. Using EOQ or ABC analysis, you can specify reorder points for certain
products.
You may be able to better manage your lead time with its assistance. Lead
time is the period of time between placing and receiving an order to replenish
inventory. The quantity of goods you require is impacted by this aspect.
Wasteful warehouse space is taken up by dead stock.
In the US, a square foot of space in warehouses and distribution facilities
costs $5.08 on average. You can also use a data-driven inventory planning
system to enable more precise replenishment.
Perform regular audits
You should still do routine checks for theft, spoilage, and other human errors
even if you utilize inventory control software. Additionally, you want to
make sure that your inventory is being discussed among all of your
departments. Make sure your systems are appropriately transmitting the cost
and count of your inventory to your accounting department.
DEALING WITH MULTIPLE CURRENCIES
Multi-Currency Accounting is the practice of transacting in two separate
currencies.
Accounting entries can be made in several currencies in ERPNext. For
instance, if you have a bank account in a foreign currency, the system will
only display your bank balance in that currency when you make transactions.
Bank accounts in foreign currencies may be held by subsidiaries of your own
business or by overseas customers or suppliers as debtors or creditors.
1. Setup
Currency settings in the Chart of Accounts
Assigning accounting currency to the Account record is necessary to begin
using multi-currency accounting. While opening an account, you have the
option to define currency from the chart of accounts.

A fresh account with new currency

Open particular Account records for existing Accounts to allocate or adjust
the currency.

The General Ledger

When an account is used to filter transactions in the general ledger and that
account's currency is different from the company currency, the system
displays debit/credit amounts in the party currency.

Accounts Payable/Receivable
The system displays all the amounts in Party/Account Currency in the
Accounts Receivable/Payable report.

STARTING INTEGRATED PAYMENT PROCESSING

A payment processor is what?
A payment processor is a corporation that manages the credit card processing
for your business so that customers can purchase your goods. They act as the
middleman, ensuring that the funds belonging to your customers reach you
from their bank. Relaying data from your customer's credit or debit card to
your bank and vice versa is the responsibility of a payment processor.
Making ensuring there is enough money in the customer's account to cover
the amount of the purchase is an example of a payment processor's work. The
deal is finalized if there is. If not, the customer's card might be declined, and
that information is communicated in almost real-time.
TELLING QUICKBOOKS HOW REMINDERS SHOULD
WORK
1.Setting Up Reminders
At this moment, you don't want anything to go through the gaps. Without
using QuickBooks' Reminder’s tool, it is almost impossible to stay on top of
your to-do list. Setting up this's structure is necessary before you can use it.
Preferences | Reminders is found under the Edit menu. Opens in a new
window

You can tell QuickBooks which situations should trigger Reminders.

The My Preferences screen should appear after this window opens. To make
a checkmark upon opening a Company file, click the box next to Show
Reminders List. Click Company Preferences after that. A list of QuickBooks
"events," such as Checks to Print, will be displayed. By entering a number in
the box next to Days before check date, you can tell QuickBooks how many
days in advance you'd like to be alerted about this impending activity. You
may also ask for this to show up in List or Summary format. Click the Don't
Remind Me button next to any of them if you don't want to be reminded
about them. Click OK when you're finished here. Your reminders will show
up in a window at the top of your home page when you open QuickBooks the
following time. Double-clicking on one will open the transaction or other
item. Your Preferences and a blank To Do form are accessible via two icons
in the upper right corner of the Reminders screen. Here, you can plan a call,
job, appointment, etc. and, if wanted, link it to a client, supplier, or worker.
Then, this item will show up in your list of Reminders.
When you open the associated Company file, the Reminders window
displays; you can manually add To Dos in this window.
2.Viewed Graphically
You have other options besides using QuickBooks' Reminders to make sure
you're fulfilling your accounting commitments. You may check your daily
agenda and accomplishments on the Calendar.
But you should go to the Preferences tab for this tool (Edit | Preferences |
Calendar), just like you did with Reminders. You only need to interact with
the choices listed under the My Preferences menu in this case. You can select
a Daily, Weekly, or Monthly view, or you can simply have QuickBooks
remember your most recent view. Your calendar can show either a Fixed
view of 5 or 7 days or a Variable view of 5/7 days as your weekly view.
Additionally, you can choose one type of transaction (invoice, sales receipt,
or to do) or display all transactions, to do, or transactions due.

What format would you like your calendar to be in? You can select from a
variety of alternatives in QuickBooks.
Additionally, you can specify Upcoming and Past Due Settings. You have the
option to Show only if data is present, Hide these, or remember the last
settings. You can specify in QuickBooks how many days' worth of data will
be shown for both upcoming data and past-due data.
3.Navigating the Calendar
The Calendar itself can be accessed via the Company menu, a link in the
Toolbar, or the Home Page. The View you chose will display a graphical
calendar. Every day that has had activity or is expected to have activity will
have one of the following words: Due or Entered, with the associated number
of transactions in parenthesis. You can double-click on any of the entries in
the list of transactions entered below that to view the actual transaction form.
In the right vertical pane, a list of upcoming and past-due transactions is
displayed. You can alter the View and narrow down the list to only see
certain types of transactions using the fields and buttons at the top of the
screen. On this page, you may also add tasks.
SETTING THE SEND FORMS PREFERENCES
1.Setting Send Forms Preferences
Invoices, estimates, statements, purchase orders, and other documents that
you email can all have default cover notes that you can customize. All of
your business emails will look more professional as a result of this time-
saving technique, and you can still change the note before sending it if you
want to add a personal touch. 1.Then click Edit, Preferences.
2.Press the Send Forms button.

3.On the Company Preferences tab, click.

4.The form for which a default cover letter is being created should be
selected. The Invoices form has been chosen as the example.
5.select on a salutation.
6.select on the naming style you want to employ.
7.The default letter's text should be typed.
8. To verify the spelling in your letter, click Spelling.
9. For every type of form, repeat Steps 4–8.
10.Press OK.
FINE-TUNING THE SERVICE CONNECTION
You can adjust the service connection settings in QuickBooks. You can
choose from two check boxes on the My Preferences tab of the Service
Connection Preferences dialog box to influence how QuickBooks behaves
when you establish web connections.
You have the choice to save downloaded files using one check box. The other
instructs QuickBooks to keep your web browser open after it has finished
using the internet.

The My Preferences tab of the Service Connection Preferences dialog box

There are two Company Preferences choices accessible in the Service
Connection Preferences dialog box. For instance, you can choose whether
QuickBooks should always request a password before connecting to
QuickBooks Services or if it should do so automatically.
Tip: You need only choose the relevant radio button to decide on this.
Additionally, you can notify QuickBooks that background message gathering
is acceptable by checking the Allow Background Downloading of Service
Messages check box. (If you check this box, QuickBooks will download new
messages when it is not in use to avoid interfering with other Internet
activities.)

BOOKING KEEPING CHORES

 CHAPTER ONE
INVOICING CUSTOMERS
The easiest way to create invoices in QuickBooks depends on the service or
item you need to bill your client for. There are four fundamental approaches
to produce an invoice: using a straightforward set price; a fixed price;
progress-based pricing; or the initial cost of the service plus the time or
materials required. After choosing a course of action, you can edit the invoice
to include particular information or clauses from the project contract.
Set Price
Choose "Create Invoices" from the "Customers" menu by clicking on
it.
Choose "Customer:Job" from the drop-down menu. Select a client
from the list, or enter a brand-new client's name.
If necessary, include any details on the project materials along with
the purchase order number.
To add an item to the invoice, choose the "Item" column and make
your selection. Fill out the "Description," "Quantity," and "Rate"
columns as necessary.
Select a ready-made option for your invoice from the "Terms" drop-
down list.
Then choose "Preview in Create Invoices" by clicking the "Print"
arrow. Examine the data in the preview box, then click "Print" if
everything looks the way you want it to.
To add the invoice to your Accounts Receivable register and save your
data, click "Save & Close."
Cost Plus Time or Materials
1. Choose "Invoice for Time & Expenses" from the "Customers" menu.
If the option is missing, choose "Preferences" from the "Edit" menu. Check
the "Create Invoices From a List of Time and Expenses" box after selecting
"Time & Expenses," "Company Preferences," and "Company Preferences."
2. Select "Date" in the field. For the time and costs you intend to bill, choose
a range of dates.
3. From the "Customer: Job" column, choose the client you want to invoice.
4. Select the "Time & Expense" invoice template from the "Template" drop-
down list after clicking "Create Invoice."
5. To view the invoice, click the "Print" arrow and choose "Preview." After
verifying the invoice, click "Print."
6. To save the invoice and enter it into the proper register, choose "Save &
Close."
Fixed Price
1. Select "Create Invoices" from the "Customers" menu.
2. Choose the customer you wish to bill from the "Customer:Job" drop-down
list.
3. In the Class area, choose "Revenue — Job Related".
4. Select the "Quantity" field and type "1" into it.
5. Fill out the "Description" area with the contract's details. You may write,
"25% of contract due upon delivery of materials," for instance.
6. Fill out the "Rate" field with the payment due for the current statement.
7. To view the invoice, choose "Print" and then "Preview."
8. Click "OK" after selecting "Print" if the invoice appears to be in order.
Progress Invoice
1. Select "Create Invoices" from the "Customers" menu.
2. Pick "Customer:Job" from the drop-down option. To select the estimate,
you want to charge the client, select the job.
3. Select the best estimate for the job, then click "OK."
4. Based on the terms of your agreement with the consumer, choose an option
and press "OK."
5. If relevant, give the details for the amount, percentage, quantity, and rate.
The "Specify Invoice Amounts for Items on Estimate" popup shouldn't
appear if you already input this information when creating the estimate.
6. Select "Preview" after clicking the "Print" arrow.
7. Verify that everything looks as it should on the invoice, then click the
"Print" button. The invoice will be saved and added to your Accounts
Receivable register when you click "Save & Close."
WORKING WITH THE LAYOUT DESIGNERS TOOL
You may use the Layout Designer feature in QuickBooks to modify your
forms and give them a customized appearance that represents your company
well. Your invoices, sales receipts, estimates, credit notes, statements, and
purchase orders can all have their own unique looks thanks to Layout
Designer.
Layout design in QuickBooks
The purpose of creating invoices in QuickBooks is to keep track of all
transactions and payments as well as to manage products and billing
information. Each invoice has a unique style that shows how the data is
organized before being charged in the form of checks or cash.
How are the layouts made?
The layouts in QuickBooks are created for the specific product and
invoice in accordance with the specifications.
These were created by a layout designer whose job it is to maintain
data and bills looking chronological.
The QuickBooks layout designer uses time quickly and produces a lot
of work.
Quick Books has a template option where you may create an invoice
layout.
When a template is open in QuickBooks, the layout is controlled by
the user in accordance with the invoice or pay slip they wish to create.
A product called QuickBooks Layout Designer is utilized in organizations to
build forms that seem classy and are entirely business-oriented. The Layout
Designer is typically used to create invoices.
Any arrangement is possible for a page's visual components. You have the
option to construct or modify the form in accordance with your needs,
whether you're creating sales receipts, purchase orders, estimates, invoices, or
any other type of cash memo.
Steps to work on QuickBooks layout designer
Before choosing a new template, first launch the Layout Designer.
Pick the fields you want in your form from the field pane.
Add text boxes, background pictures, borders, a different font, logos,
and other customizations to the form next.
The format of photos and files can be chosen in a wide variety of
ways, for instance.
Formats supported include JPG, GIF, TIFF, BMP, PNG, and PICT.
Exporting a Template
The template is easily exportable; all you have to do is
Go to the Layout Designer page.
Select the file that you wish to export.
Select the QuickBooks export format that you prefer for the template.
Click the export option after that.
Things you can do using a QuickBooks Layout Designer
Move and resize things using a QuickBooks Layout Designer.
Select Objects
altering the width of the columns
Change the font's size and color.
Margin adjustments
align the text within the fields
INVOICING A CUSTOMER
An invoice is a record that the seller provides to the customer to request
payment. It consists of the price of the goods or services obtained by the
buyer. If an invoice includes the names of the seller and the client, the
description and cost of the goods or services, and the terms of payment, it can
also be used as legal documentation.
Creating a Thorough Invoice Form
1. Make it look professional: Instead of just writing down the amount
owed on a piece of paper, it's crucial to include critical details when
sending a customer an invoice.
You should say "invoice." If you don't use the phrase "invoice," don't
expect that the customer will understand what it means.
Assign a number to the invoice. You should preserve a record of the
invoice. You ought to write a special identifying number on the
invoice so that you can do this more quickly.
Some companies routinely include a tax identification number, or TIN,
on invoices. If you don't know if you need one or have one, ask an
accountant. Non-profit organizations and daycare centers are two
examples of businesses that frequently list tax identification numbers
on invoices.
2. Number the invoice: Since you should save a duplicate of every
invoice you send out, numbering them should help you keep better
track of them.
The invoices will then be numbered according to the day they were
sent, in order. You can either purchase already-numbered invoices, use
software to generate them automatically, or make your own invoices
and assign numbers to them.
Include, if applicable, the purchase number that the invoice belongs to.
This will enable you to use superior accounting practices at your
business.
Asking clients if they require any additional information, such as a
purchase order or an employment identification number, beforehand
will allow you to customize the invoice. If you are interacting with
someone, find out to whom the invoice should be sent.

3. Date the invoice: Date the invoice and include the terms of payment
you anticipate the buyer will abide by if you wish to get paid
promptly. Additionally, these conditions must to be made clear at the
time of purchase.
For instance, the invoice should include both the date it was issued and
the date the products or services were purchased.
Make it clear to the consumer while describing the terms of payment
how quickly they need make a payment. For instance, the payment can
be due in 30 days.
 Some businesses decide to give discounts. If you do, be sure to
explicitly state them on the invoice as well. For instance, if the client
pays the invoice within 30 days, you might give a 1% discount.

4. Retain a copy of all invoices: All invoices sent by small firms should
be kept on file for at least six years. This is crucial for both effective
corporate accounting and tax purposes.
You can learn the guidelines for record-keeping from an accountant.
You could maintain records electronically. But if you do, make sure to
have a backup copy. Post cash receipts as soon as possible so you can
keep track of which clients are sending money and which aren't so you
can see which accounts are still unpaid.
Invoiced payments are simply you offering credit to a consumer, and
the law views this as an unsecured loan because there is no security to
protect it, which makes it more difficult to get the money back from a
customer who cannot pay.
 5. Keep invoices to a minimum: Every payment can count in the early
stages of a small business because there may be less room for error in
terms of revenue.
When beginning business, make an effort to obtain payment in cash up
front as often as you can.
A third of your receivables being over due is not uncommon for many
small firms.
Take into account if it would be more advantageous to provide
services for a lower upfront flat payment as opposed to a higher hourly
rate since you might not be able to recover what is owing with the
latter.

6. Use an electronic invoice service: Even though they are expensive,

these services can help you keep track of, organize, and improve the
appearance of your invoices.
A few systems, for instance, let you create and send invoices via
email. You may see which invoices have been paid and remind those
who haven't by sending reminders. Additionally, there are apps that
allow you to send bills by phone.
Some of the services come with a thorough account history for the
client. You can keep track of customers and payments in this way.
Some of the services let you put your company's logo to the invoice
and just need you to alter the amount in online boxes. A large number
of these services are accessible online.
2.Including the Right Content
1.Describe the service clearly: On the invoice itself, you must make it crystal
obvious which service was rendered for the desired sum. Be precise, not
ambiguous.
What the consumer ordered should be extremely apparent on a decent
invoice. List any additional expenses, including tax, handling fees, and
other add-ons. Indicate the entire amount due at the bottom of the
invoice.
You should provide the quantity of goods or services purchased in
addition to fully outlining what the consumer is being charged for.
This may occasionally be billed in terms of hours.
Include the overall price as well as the cost per unit. Customers are
occasionally charged a set amount for numerous hours or units,
whereas other times they just purchase one.
Include your contact information: How to reach your firm and where the
consumer should send the payment are two of the most crucial details you
must put on an invoice.
Don't presume the buyer understands the purpose of the invoice. Make sure
the name of your business is legible, along with your address and phone
number. Include a customer service phone number if you can since the
customer might wish to call the business with queries regarding the bill.
Include details about the client. It's crucial to state clearly who received the
products and services and is being asked to make payment. To avoid having
to search up the customer's information, be sure to include it as well and
collect accurate information from them up front.
In the event that you are dealing with a firm, it can also be a good idea to
validate the order by giving the name of the person who ordered it or
approved the transaction. Additionally, you might include the name of the
representative from your business who handled the order.
How to use a weekly timesheet
Choose Customers > Enter Time > Use Weekly Timesheet to employ the
weekly time-sheet approach. The Weekly Timesheet window is displayed by
QuickBooks. Use the Name field to specify the worker, vendor, or other
service provider before using the Weekly Timesheet window.
The Name drop-down menu should allow you to choose this person's name.
When prompted, inform QuickBooks which list (employee, vendor, or other
names) the name should be added to if you are unable to select the person's
name from the Name drop-down list. After adding the performer's name, fill
out the Weekly Timesheet window's columns with information about the
customer or job for which the work was done, the service code, a brief
description or note, the payroll item (if you use QuickBooks for payroll), the
class (if you track classes), and finally the number of hours spent each day.
The Weekly Timesheet window allows for an unlimited number of lines to be
entered. In a bill, each line is displayed separately. Information from the
notes can be found in the description. You should therefore include pertinent
and descriptive annotations.
Week-by-week Timesheet window
Timing single activities
If you want to record service activities as they occur, choose
Customers→Enter Time→Time/Enter Single Activity. QuickBooks displays
the Time/Enter Single Activity dialog box, as shown.

How to include billable time on an invoice

Create the invoice as usual, using the steps I previously described, and then
add billable time and cost. QuickBooks displays a message box asking
whether you wish to bill for any of the time or costs once you identify the
customer (assuming you have entered time for the client and have been
monitoring costs for the customer). If you choose yes, QuickBooks will show
you the Choose Billable Time and Costs dialog box, as seen here.
The dialog box to Select Billable Time and Costs
Each time you've entered a time for a customer is displayed on the Time tab
of this dialog box. Click the Use column for the time to add these times to the
invoice. The Use column is the first column from the left and is marked with
a checkmark. Alternatively, you can pick every time by using the Select All
option. then press OK. Each of these billable times is included as a separate
line to the invoice by QuickBooks. The Create Invoices window's billable
time information can be seen in this figure.

The window for creating invoices, charging for chargeable time

To view a list of the items, out-of-pocket expenses, or business miles logged
on behalf of a client, click the Items, Expenses, or Mileage tab. Similar to
adding time charges, you can add charges for these kinds of things to an
invoice. Adding a markup to your out-of-pocket costs is also possible. By the
way, click the Add Time/Costs button that displays at the top of the Create
Invoices window if you want to go back to the Choose Billable Time and
Costs dialog box while looking at it.
PRINTING INVOICE
QuickBooks Online still supports printing invoices. This can be applied to a
single transaction or printed in batches.
Create a customized invoice:
Go to the invoice.
Click on Preview or Print.
Examine the billing details.
When finished, choose Print.

On the Invoices page, you may also print the transaction.

Select "Invoices" from the Sales menu.
Track down the invoice.
Click Print if the transaction has already been paid for.
If not, select Print by clicking the drop-down arrow next to Action.
Print several invoices at once:
Choose the Invoices tab from the Sales menu.
Check the boxes next to each invoice you want to print in bulk.
Select Print after selecting Batch activities.

Before printing your invoice templates, I'd also advise altering them. This
enables you to include the data that is most important to your company.
I've also included the following articles to help you understand more about
the activities you can take regarding your invoice transactions:
Create and transmit progress invoices
Custom Form Styles for Invoices Import
The Sales Forms Invoice Number May Be Modified
Please check in again and update us on the status of printing your invoices.
My top objective is to assist you in completing this QuickBooks task.
EMAILING INVOICES
Directly sending invoices to customers via email from within QuickBooks
can significantly increase cash flow and reduce receivables.
To email invoices to customers using QuickBooks Online:
Step 1: Find your client's invoice by clicking Customers in the left menu bar,
then click on the customer to display their invoices.
Step 2: Double-click the invoice to open it, then, in the bottom right corner,
select "Save and send."
From QuickBooks Windows (Pro, Premier, Enterprise), you may email
invoices
Step 1: Select Customer Center under Customers in the top menu bar.
Step 2. Select the customer you want to send an invoice to, then double-click
the invoice to open it when it appears in the list to the right.
Step 3: Select Invoice after clicking Email in the screen's middle.
Step 4: If it is not already filled in, enter the client's email address and click
Send Now.
NOTE: The email will be sent from the address that you provided when
setting up your firm. Go to Company, then Company Information, and
modify the email address if necessary.
From QuickBooks Mac, send customers' invoices via email
Step 1: Select Customer Center by going to Customers in the top menu bar.
Step 2: Select the customer you want to send an invoice to, then double-click
the invoice to open it when it appears in the list to the right.
Step 3: Select File, then select E-mail Invoice as PDF.
Step 4: Personalize the email message or decide whether to send the invoice
without one.
Step 5: Click "Send."
RECORDING SALES RECEIPT
Receipts are essential for your business's records and customer interactions if
it accepts cash sales and other forms of payment. When you have a full
payment for a service or product, you may use QuickBooks to create sales
receipts for new transactions. If you want to preserve hard copies of your
receipts on file or when consumers return or exchange items, receipts can be
useful.
1.Start QuickBooks first. Choose "Enter Sales Receipt" from the toolbar's
"Customers" menu.
2. From the "Customer: Job" drop-down list, choose the customer for whom
you want to create a sales receipt. If you categorize sales receipts, choose a
choice from the "Class" list. If you do not want to see the current date, which
is displayed by default, change the date.
3. Choose a payment method from the options, such as cash, cheque, or credit
card. If the client made a check payment, enter the check number in the
"Check No." field.
4. In the "Item" column, choose the product the consumer bought. Fill up the
respective cells with the quantity and rate. On a separate line, enter each item
you bought.
5. If desired, choose a message from the "Customer Message" box. To obtain
a print preview of the receipt, click "Print Preview." When you are prepared
to print the sales receipt, click the "Print" button. When you're done, click
"Save and Close."
 CHAPTER TWO
PAYING VENDORS
Setting up
There are a few things to keep in mind while setting up bank transfers with
your vendor:
A private bank add is the only way to set up bank transfers with a
vendor.
We'll start a test deposit of one penny into the bank account of your
seller. To ensure the bank account is capable of receiving payments,
this is done. (Note: The bank account input will be deemed invalid if
the test deposit fails. The seller will require a new bank account input.)
The earliest process date that can be chosen after manually adding a
vendor's bank account is two business days after the bank account was
added.
This is to guarantee that the test deposit works. (Note: Processing will
take an extra day on a federal holiday.)
The payment will still go through even if the test deposit fails and the
bank account is invalidated. The payment will be made using a
cheque.
Before integrating the vendor's bank account, schedule a check
payment if an immediate payment is required.
Make a vendor payment
When making a payment, a bill will be generated in the background and
synced back to QuickBooks Online along with the payment initiated. The
required tracking categories for the bill can be coded.
Log in to your QuickBooks Online account.
Choose the "Bill pay online" widget from the dashboard.
Choose the Make a payment tab.
 Ø Enter the vendor's payment details.

Pick a delivery method by clicking.

Pick between a check or a bank transfer.
Note: For bank transfers, insert bank account information if the vendor hasn't
previously been configured.
A prompt auto-confirmation of the bank account will occur. In order to
check, choose a process date and, if necessary, amend the vendor
information.)
 Pick Review, then click Submit.
Select Make a payment.

For this payment, a bill is automatically generated in the background:

Pay a Vendor Auto Created Bill is entered in the bill's description
field.
 This automatic bill cannot be changed.
HOW TO CREATE A PURCHASE ORDER
Acquire orders allow you to define the precise items you want to purchase as well as the quantity. In
QuickBooks, you can quickly add a purchase order to a bill or expense transaction once your vendor
accepts it and complies with its terms. As a result, all of the transactions are connected and your
accounts are kept in balance.

Step 1: Turn on the purchase order feature

The buy order feature should be activated if it hasn't already:
Select Account and settings under Settings.
Choosing the Expenses tab.
Select the edit icon under "Purchase orders" in the section.
Activate the option to use purchase orders.
Add a default message for vendors and up to three custom fields if you
like. These are not required.
Choose Save, followed by Done.
NOTE: There are predetermined formats for purchase orders. No
modifications will be possible.
Step 2: Create and send a purchase order
Choose + New.
Choosing Purchase order
Choose the vendor from the dropdown list for vendors.
Take a look at the mailing address.
Choose Ship via from the Ship to dropdown menu if you are sending
the products straight to a customer. Make sure the shipping address is
accurate by checking it.
Type the date of the purchase order.
On the Purchase Order form, click Settings. Next, click the link to
create your own custom fields in the Choose what you use panel.
Enter the items you want to buy in the Item details section. The phrase
"I acquire this product/service from a vendor" must be checked in
order to add a product or service. Find out more about editing services
and products.
When finished, choose Save and close. Or, choose Save and send from
the dropdown menu when you're ready to send it.
Go to Expenses if you choose to send the purchase order after all (Take me
there). Choose Send in the Action column after finding your purchase order.
Step 3: Update the status of a purchase order and add it to a bill
The status is Open when you create a purchase order. When your vendor
accepts the purchase order, you can include it in an expense or bill to
formalize the deal.
To add purchase orders to bills or costs, follow these instructions. The status
is changed to Closed by QuickBooks automatically.
Step 4: Examine your outstanding purchase orders
Reports can also be accessed by going to Business overview and
selecting it (Take me there).
A Purchases by Product/Service Detail report, a Purchases by Vendor
Detail report, an Open Purchase Order List report, or an Open
Purchase Order Detail report can all be found and executed.
Create purchase orders individually
This is how a purchase order is made:
Select Purchase Orders under Stock Control.
Pick New Purchase Order to Create.
Complete the necessary fields.
After adding the items you wish to purchase, fill out the QUANTITY
column with the quantity for each item.
Note that although the actual stock level will not yet reflect the changes, you
can see them in the AFTER column.
You can write extra notes to the vendor in the Message to Vendor
area.
To save and continue with the purchase order, select Create.
Alternately, choose Save As Draft so that you can edit the purchase
order later.
Create purchase orders in bulk
You can make several purchase orders by importing a CSV file.
Select Purchase Orders under Stock Control.
 Pick New Purchase Order to Create.
Select CSV Import.
Choose the CSV file you wish to upload by clicking Choose File.
Select Open next.
Choose Import.
Select Finish after the file has been imported.
You can write extra notes to the vendor in the Message to Vendor
area.
To save and continue with the purchase order, select Create.
Alternately, choose Save As Draft so that you can edit the purchase
order later.
How to fill out a purchase order
You might need to reorder these gadgets, accessories, or whatever else is on
your Item list because you're starting to run low on them.
To fill out a PO, proceed as follows:
1. Pick Vendors Make Purchase Orders.
Alternatively, you can click the Purchase Orders icon on the home screen or
the New Transactions section of the Vendor Center, where you can then
choose Purchase Orders. You see the Create Purchase Orders window, which
resembles the illustration in the figure. Be aware that how you customize
your PO form will affect the specifics of this window.

2. From the Vendor drop-down menu, select a vendor.

To view a list of your vendors, click the downward pointing arrow.
 In the Merchant box, click a vendor to display its name and address.
If the vendor's name isn't listed on your menu, select Add New from
the menu and then enter the vendor's details in the New Vendor dialog
box that appears.
When you're finished with the dialog box, click OK.
3. From the Class drop-down menu, select a class if you track your
inventory by class.
Ø There might not be a Class drop-down choice in the Create Purchase
Orders box.
Ø In the event that it doesn't and you want it to, you must configure
QuickBooks to track spending by course.
Ø Open the QuickBooks file as the administrator in single-user mode to
accomplish this.
Ø After that, select Edit > Preferences > Accounting from the list on the
left. (You might also need to select the tab for Company Preferences.)
Ø Finally, click OK after selecting the Use Class Tracking check box.
4. (Optional) If your PO uses a Rep, an Expected Date, and a FOB,
choose them.
Before you can see the descriptions of each item one by one at the bottom,
you might need to fill out additional fields. Once more, if you haven't
specified that you want certain fields on your form, they could not show up.
5. Start entering the products you are ordering in the Item column.
Ø The key step in creating a PO is entering the items. A drop-down
menu appears after you enter the Item column.
Ø To view the Item list, use the down arrow.
Ø To find the item you want to enter, you might need to scroll.
Ø Type the first few characters of the item's name to quickly scroll to
the item. When you enter the name of a non-existent item in the Item
list, QuickBooks prompts you to set up the item.
Ø If yes, select Set Up after which you should fill out the New Item
dialog box. In the Item column, enter as many items as you like.
Ø If necessary, you can update the description that QuickBooks enters
for you in the Description field.
 Ø Indicate how many of each item you require in the Qty column.
6. Fill out the Vendor Message form, if you'd like, but make sure to fill
out the Memo field.
You can leave a message for the person who will be receiving your order in
the vendor message section. You might compose I need this stuff now,
please!
Note: Whatever you do, make sure to write something in the Memo field.
The information you enter here is displayed in the Open Purchase Orders
dialog box and is the most reliable way for you to determine what this PO is
for. When you pay for the products you're ordering, enter something
significant that you'll comprehend in two, three, or a month.
The Print Later check box, which indicates whether you want to print this
PO, is located at the top of the Create Purchase Orders window. Be sure to
choose this check box if you want to print the PO. The check mark leaves the
box once the PO has been printed.
7. To print the PO, click Print.
If you want to print multiple copies of a PO at once that you've been filling
out, click the arrow next to the Print button and select Batch from the drop-
down menu. To see how the PO will appear when printed, you might want to
select Preview by using the down arrow next to the Print option before
printing the order. QuickBooks displays a digital copy of the PO to you. I
hope it appears alright.
When you receive the products you meticulously listed on the PO, you use
the History button. Clicking this button instructs QuickBooks to provide you
with the complete history of an item, including the dates you ordered it and
when you received it, after you have received the products and recorded their
receipt.
I believe you are aware of what the other buttons at the top do.
8. To record the PO, click Save & New or Save & Close.
Ø After saving the PO, QuickBooks opens a fresh, empty PO window
where you can add another order.
Ø QuickBooks check-up procedures for purchase orders
 Ø You keep track of Pos.
After a few weeks have passed, you begin to wonder if you really did order
those trinkets from Acme. Choose Reports Purchases Open Purchase Orders
to see a report listing all open POs. A list of purchasing reports can also be
viewed by selecting Purchases from the left-hand column in the Reports
Center and then clicking the List view button in the top-right corner. From
the list that follows, choose the Open Purchase Orders report. You may also
utilize the Report Center carousel to page through all of the reports in a
certain category. Then, hit the picture of a stack of reports that appears to the
left or right of the image of the chosen report after selecting the Carousel
view button (next to the List view button).
Retrieving a Voided Transaction in QuickBooks
Although QuickBooks business accounting software doesn't have an
automatic undo tool if you mistakenly void a transaction, the computer does
keep track of these facts in a separate report. Use the Deleted/Voided
Transactions report to locate the transaction amount and add this data back to
the transaction record in your account register to recover a deleted transaction
in QuickBooks.
1.Start QuickBooks: In the main menu, select "Reports." From the context
menu, choose "Accountants and Taxes" and then "Voided/Deleted
Transactions Detail."
2. Select the void transaction from the list of void transactions that you wish
to retrieve. The transaction amount should be copied or noted down.
3. Select "Chart of Accounts" from the drop-down menu under the heading
"Lists" in the main menu.
4. To open the account register, double-click the account that includes the
revoked transaction. In QuickBooks, when you void a transaction, the
application keeps the transaction in the account register displayed but
changes the transaction amount to 0.
5. Scroll through the account register's transactions. Select the void
transaction with a click.
6. Fill out the amount field on the transaction by typing or pasting the initial
transaction amount. To save or record the transaction in the account register
along with the obtained data, select one of the "Save" or "Record" buttons.

ENTERING A BILL
STEP 1: CHOOSE A VENDOR
Step 1 of entering a bill is choosing a vendor
Pick the supplier who sent you the bill from the drop-down menu. If you
haven't added this vendor to QuickBooks yet, click "Add New" and adhere to
the guidelines in How To Add Vendors In QuickBooks Pro.

QuickBooks will automatically add the vendor's address if you've already

entered it. Spend a moment checking the address, or if required, manually
entering it.

STEP 2: ENTER PAYMENT TERMS

Choose the appropriate payment terms and, if necessary, include a discount
date. Among the options are:
Ø 1% 10 Net 30
Ø 2% 10 Net 30
Ø Due on Receipt
Ø Net 15
Ø Net 30
Ø Net 60

STEP 3: ADD MEMO (OPTIONAL)

If desired, provide a memo outlining the bill.

STEP 4: CHOOSE DATE

Using the calendar drop-down, choose the day the law was issued.

STEP 5: ADD REFERENCE NUMBER (IF APPLICABLE)

If you'd like, you can add a reference number at this time.

STEP 6: ENTER AMOUNT

If you'd like, you can add a reference number at this time.

STEP 7: CHOOSE DUE DATE

The drop-down calendar allows you to choose the due date for the bill
payment.

STEP 8: ENTER EXPENSES OR BILL ITEMS

You can enter the expense amount and choose the appropriate account under
the "Expenses" page. Click the "Items" tab and input the precise product or
products that are on your bill there.

STEP 9: SAVE THE BILL

When you're done, click "Save & Close" or "Save & New" if you want to
create another bill.

Adding bills to QuickBooks Online

Bills can be easily entered into QuickBooks Online's user-friendly, feature-rich interface after logging
in and creating an account.
Before sending any bills, you must configure your company's suppliers, goods, services, and other
things so that they are in sync with your bills. After this initial setup, many of the fields you see should
automatically update with the proper goods, services, vendors, and even specific product lines when
you submit new bills.
Whatever accounting methods you choose, the actions listed below will let you add new bills to your
QuickBooks online account.

1. Create a new bill.

There are numerous choices on the QuickBooks Online menu. Choose New
to get started. Next, select Purchase Bill under Suppliers. The Bill interface
will then launch and show the required fields as shown in the action below.
2. Type your payment details.
The new Bill page will arrive with all required fields for entering common
information unless you've modified the interface using QuickBooks'
advanced settings.
The fields and page should like the following example:

The data on the bill is similar to what you would need to make a check. Some
of the most popular fields include the ones below:
Vendor: You have the option of selecting the vendor that sent the bill or
adding a new vendor. Once the vendor has been selected, all of the necessary
information is immediately filled in.
The bill's effective date is: Date of the invoice should be entered here. Enter
the date of the actual invoice, not the day you received the bill.
Due date: The due date is calculated automatically based on the date of the
bill and the terms of payment. However, to be sure the due date is true, it's a
good idea to confirm it to the one on the actual bill. On the vendor's bill, there
is an invoice number that you must enter. This will come in handy if you
have to talk to the vendor about the bill.
Category: Choose the proper category from the drop-down menu, or
establish a new account if none is available, suitable, or this charge won't be
billed to customers directly.
Description: Clearly describe the cost. You can be as brief or as specific as
necessary; by providing this information, you'll find it easier to recognize and
understand the type of charge when you're eventually canceling accounts.
If you want to charge the customer sales tax for the cost, check this box.
The number displayed here represents the total cost or value of the bill.
Markup percentage: This column is crucial if you plan to bill the fees to the
customer. Enter the markup percentage if you wish the billable amount to be
higher than what your supplier or vendor is invoicing.
Billable: If you want to charge the customer for this expense, choose this
option. When a billable expense is applied to the good or service rather than
the category, it is managed effectively.
Product/service: Each client purchase must be connected to an item in the
inventory. To the services that the consumer is billed, assign service items.
Click Add New to create a new product or service, or select one from the list.
After being selected, fields like rate, description, tax, markup%, and class
instantly populate.
Enter the number of hours or items that were purchased: The amount is
calculated by multiplying the price by the quantity you enter and adding any
appropriate markup percentage.
Project/customer: You can either add a new project or customer to the bill
or use an existing one.
Save: After providing all the required information, select Save to save your
bill.
3. Examine your bill.
Visit the Vendor Center to double-check a bill you've entered. To view a list
of vendors, go to the Expenses menu and choose Vendors. To get the
vendor's outstanding balance, locate the vendor and look up the open balance.
To view all outstanding bills, click on the vendor's name. The bill you just
input ought to be visible to you.
 CHAPTER THREE
TRACKING INVENTORY AND ITEMS
Inventory management and tracking take time, but they are vital to make sure
you have enough of your products available to please your clients.
QuickBooks Pro, Premier, and Enterprise editions all come with inventory
tracking, however it is turned off during installation. By activating and
utilizing the inventory monitoring capabilities, you may manage inventory,
receive notifications when to place reorders, and create purchase orders. The
training for QuickBooks inventory is simple, and you can begin adding
products or services right away.
Create an inventory tracking system
By going back to the Account and Settings menu and choosing Sales, you may turn on inventory
monitoring. For tracking current inventory, quantity, and price, turn on the setting.
A simple process is used to enable the inventory tracking features. When the On option is selected,
your account can enter information about the products, prices, and quantity that is readily available.
You can input the necessary data, such as inventory additions, deletions, and inputs, to manage your
orders, expenses, and margins in relation to the things you sell through your business.

1. Access the dashboard.

Both desktop and web solutions can use the dashboard, but due to the lack of
program installation, online solutions are gaining popularity. A menu will
appear if you go back to the gear icon. The dashboard can be accessed by
clicking Products and Services.
2. Make Modifications Using the Dashboard
There are options for personalizing the dashboard, but your preferences and
business plan ultimately determine how you use it. To manage your inventory
more effectively, you can either create categories or enter your whole
inventory. Create an organizing plan before you start the process.
Bulk inventory increase without a plan quickly results in an unmanageable
picture of the inventory. The creation of new categories and subcategories
helps with inventory management.
For instance, a clothing company could make subcategories for the many
kinds of clothing and separate each category according to the desired gender.
As a result of how you design the store layout, everything is put on a similar
loop. Include a section for women with classifications for pants, shoes, and
socks, for instance. As appropriate, add the entries to the category. The
inventory management feature of QuickBooks can then be used to monitor
quantities.
How to update the QuickBooks Item List to include a non-
inventory part
To add a noninventory part, or a tangible item that you sell but do not track inventory for, open the
New Item window and choose Non-Inventory Part from the Type drop-down list. When QuickBooks
displays the Non-Inventory Part version of the New Item window, give the non-inventory part a name
or code using the Item Name/Number box. If the new item is a subitem, check the Subitem Of box, and
then enter the parent item's name in the Subitem Of text box. The description that you write in the
Description section should appear on invoices for this non-inventory part. Naturally, you enter the price
in the Price field. Use the Tax Code drop-down menu to see whether a product is subject to sales tax.
Lastly, using the Account drop-down menu, choose the income account that should get credit for sales
of this non-inventory portion.

The regular Non-Inventory Part version of the New Item window.

Take note of the box with the name. This item is bought for a particular
customer: job or is used in assemblies. The Non-Inventory Part window
appears in QuickBooks in a slightly different form if you check that box. The
Purchase Information and Sales Information areas provided by this version of
the window function in the same manner as the Purchase Information and
Sales Information areas provided by the standard Inventory Part version of
the New Item window.
The Group version of the New Item window
The best way to include a discount item in the QuickBooks
Item List
A discount item brings down the subtotal by a specific amount or percentage. To create a discounted
item, open the New Item window and choose the Discount option under Type. QuickBooks displays the
Discount version of the New Item window when you do this.

The Discount version of the New Item window.

The Item Name/Number box is where you may give your discount item a
name or abbreviation. In the event that the discounted item is a subitem,
check the Subitem Of box, and then enter the parent item's name in the
Subitem Of text box. A description of the discount is typically entered in the
Description field. In the Amount or% box, put the discount's value in either
dollars or percentages. If you decide to submit the discount as a %, be sure to
include the percentage symbol. Make your selection from the Account drop-
down menu to choose which account will be debited for the discount. Utilize
the Tax Code drop-down menu to determine whether the discount is applied
prior to sales tax. (Or, specify if the discount is subject to sales tax.)
TIP: If you build a discount item that calculates the discount as a percentage,
you will likely also need a subtotal item. Therefore, in your invoices, the
discount item should come after the subtotal item. This allows you to rapidly
calculate the discount percentage by looking at the subtotal sum in this
manner.

The Payment version of the New Item window.

How to include a sales tax line item in the QuickBooks Item List
Your invoices will additionally include line items that charge and keep track of the applicable sales
taxes if you sell goods that are subject to sales tax. You do this by creating sales tax items. Open the
New Item box, then choose Sales Tax Item from the Type drop-down list to create a sales tax item. In
response, QuickBooks displays the Sales Tax Item version of the New Item window. If necessary, enter
an acronym for the sales tax in the field labeled "Sales Tax Name." Describe the sales tax in the
Description box. In order to select the sales tax rate, select the tax agency from the Tax Agency
(Vendor That You Collect For) drop-down list.

The Sales Tax Item version of the New Item window.

Performing inventory accounting in QuickBooks
You must add inventory assembly items to the Item list for the products you
make in order to record the manufacturing of inventory in QuickBooks
Premier or QuickBooks Enterprise Solutions. As you produce things, you
also keep track of the manufacturing process.
Let's say Pine Lake Porcelain primarily deals in coffee cups and other
porcelain trinkets for resale. Consider, however, that Pine Lake Porcelain
puts together a pair of red coffee mugs for St. Valentine's Day once a year in
a box. A packaged gift set that includes, for instance, four red coffee mugs, a
cardboard box, and some tissue paper covering can be assembled, and
QuickBooks can record that.
Recording manufacture or assembly of items
Using the Vendors Inventory Activities Build Assemblies command, you can
create some assemblies. Build Assemblies window is displayed by
QuickBooks. You just need to select the item you want to make from the
Assembly Item drop-down menu, then enter the quantity you (or another
unfortunate coworker) built in the Quantity to Build box in the bottom right
corner. Then, select the Build & New or Build & Close button as appropriate.
If you wish to document the assembly of more items, click the Build & New
button.

The Build Assemblies version of the New Item window.

The Build Assemblies command has the following features you should keep
in mind:
v QuickBooks displays the quantity of the assembly you currently
have on hand as well as the number of clients who have placed orders
in the upper-right corner of the window. It's good to know that
 knowledge is available, so keep that in mind.
v It is listed in a table in the Build Assemblies window what
components are used in your project. This is a bill of materials, not
that you should be concerned.
v QuickBooks displays the maximum number of assemblies you can
produce based on your existing inventory holdings at the bottom of
the bill of materials list. QuickBooks changes the inventory item
counts as you develop an item.
v When you record making an assembly for boxed gift sets that
contain four red mugs and two wrapping tissues apiece, QuickBooks
decreases the item counts for the red mugs and tissues and increases
the item counts for the boxed gift sets.
NOTE: It's possible that some of the parts utilized in an assembly aren't
stock goods. In an assembly, non-inventory components are acceptable.

Managing multiple inventory locations

You can handle the record-keeping difficulty posed by holding merchandise
in numerous places using QuickBooks Enterprise Solutions. Select the Edit
Preferences command, select Items & Inventory, select the Company
Preferences tab, and then select the Advanced Inventory Settings button to
enable this feature, which is known as Advanced Inventory Tracking.
QuickBooks displays dialog boxes that let you create a list of inventory sites
if you're using the Enterprise Solutions edition of the software. It also adds
fields to the necessary windows and dialog boxes so you can track inventory
items by site. In the event that you aren't using the Enterprise Solutions
edition of QuickBooks, the software shows instructions on how to do so.
 CHAPTER FOUR
MANAGING CASH AND BANK ACCOUNTS
Your bank accounts and credit cards are among the most crucial items you
need to handle. You can create any type of account with QuickBooks Online,
and you can track it through the app. You can create your accounts with
QuickBooks Online and then link them to your banking institutions.
By linking your accounts, you can view all of your current accounts in one
location and save a ton of time. But in a subsequent course, we'll talk about
connecting your accounts to financial institutions. We'll look at managing
your bank accounts and credit cards in this course. This article explains how
to rapidly examine your accounts in the dashboard, create and update
accounts, input starting balances through journal entries, reconcile accounts,
and delete and later restore accounts.
Viewing Your Accounts
Let's begin by examining how you see a summary of your accounts.
Your bank accounts are easily accessible from the dashboard. Depending on
how large your screen is, they typically show up in the right-most column.
You can perform a few activities straight from this window.

By dragging and dropping the accounts in any order you choose after clicking
the pencil symbol in this panel, you can change the order of each account.

To keep the accounts' order, click Save. Not only does it save here, but it also
stores the updated order on the Banking page.
Now that you know where bank accounts appear on the dashboard, let's look
at how to create a new account.
How to Open a New Bank Account
The first step in creating a new bank account is to select Chart of Accounts
by clicking the gear-shaped Settings symbol in the header. The Accounting
area of the left-side Navigation Pane also provides access to the Chart of
Accounts page. Click the New button located on the Chart of Accounts page.

The Account panel will then appear. You must choose the type of account to
create in the first option. Accounts Receivable (A/R), Other Current Assets,
Bank, Fixed Assets, Other Assets, Accounts Payable (A/P), Credit Card,
Other Current Liabilities, Long Term Liabilities, Equity, Income, Other
Income, Cost of Goods Sold, Expenses, and Other Expenses are among the
possibilities available here.
Please choose Bank from the dropdown menu since we are creating a bank
account.

The options you see in the Detail Type section will vary depending on what
you choose under the Account Type option. There are several options
available in this case, including Cash on Hand, Checking, Money Market,
Rents Held in Trust, Savings, and Trust Account.
You'll see that when you select Checking for Detail Type, the Name field
immediately updates to reflect your selection.
That name can be modified to be more precise. You can also complete the
Description area if you choose.

The next question is whether or not this account is a sub-account of another.

You might wish to do this so that you can subsequently break down your
costs and income in greater detail, but for now, we'll skip that step.

The amount on that date as well as the date you wish to start tracking your
account are the next two fields you can fill out. You can avoid entering an
opening balance and enter it later if you don't want to.
Whereas QuickBooks Online requests, enter the balance now if you wish to
do so. You have the option of starting your financial tracking from this
account at the start of the current year, the beginning of the current month,
today, or another time.
Choosing The tracking will begin today. The current account balance can
then be entered. By selecting Beginning of this Year, the date will be set to
the first day of the current year. The account balance as of December 31st of
the preceding year must then be entered.
It will be set to the first day of the current month when you select Beginning
of the Month. The account balance as of the previous month's last day will
then need to be entered.
By selecting Other, you can choose a certain date in either MM/DD/YYYY
format or by choosing the day of the week from their pop-up calendar. The
account balance from the day before the one you choose must then be
entered.
Ø Click the Save and Close button at the bottom once you have
completed selecting the date and balance. Your new bank account will
now be shown in the Chart of Accounts.
Ø Now let's look at adding a new credit card account.
Ø A New Credit Card Account Added
Ø A new credit card account can be added similarly to a new bank
account. Just as you did in the section before, click the New button
from the Chart of Accounts.
Ø The same Account panel that you created while creating a bank
account will appear as a result.
Ø Select Credit Card as the Account Type this time.

Ø The only option available for the Detail Type when you choose the
Account Type to be a credit card is Credit Card. To better identify this
 account, you can change its name and, optionally, its description.
Ø To improve organization, you may also make it a sub-account of
another account.
Ø In the following line, exactly like you would for a bank account,
provide the commencement date and balance if you choose.
Ø Where QuickBooks Online inquires You have the option of choosing
Beginning of this Year, Beginning of this Month, Today, or Other as
the start date for your financial tracking in QuickBooks.
Ø Choosing The tracking will begin today. The current account balance
can then be entered.
Ø By selecting Beginning of this Year, the date will be set to the first
day of the current year. The account balance as of December 31st of
the preceding year must then be entered.
Ø It will be set to the first day of the current month when you select
Beginning of the Month. The account balance as of the previous
month's last day will then need to be entered.
Ø By selecting Other, you can choose a certain date in either
MM/DD/YYYY format or by choosing the day of the week from their
pop-up calendar. The account balance from the day before the one you
choose must then be entered.
Ø The Opening Balance Equity account will be updated when a balance
is entered here.
Ø To complete the account creation, click the Save and Close button.
Making an Opening Balance Entry
You can go back and adjust the opening balance if you didn't do so initially.
Verify that the account has not yet been reconciled.
To begin, make sure there isn't an opening balance on your account. This can
be accomplished using the Chart of Accounts. Choose View Register from
the Action column after locating the account in the Chart of Accounts.
Check to see if there is an opening balance entry in the register. Opening
Balance Equity and Opening Balance should both be present in this entry's
Payee/Account and note tabs, respectively.
If there isn't an opening balance, you can create one by making a journal
entry. That will be done in the following action.
The Opening Balance's Editing
You can access the account register from the Chart of Accounts if you need
to enter transactions that occurred before the opening account date that you
previously defined.
Find the opening balance entry in the account register. The Opening Balance
Equity should be the entry's account.

By expanding it with a click, you may now change the opening account
balance. Edit the Deposit column to accurately reflect the account
information provided by your bank.

Click the Save button after you've adjusted the opening balance.
You have merely reconciled the opening balance of the accounts thus far.
Let's look at how you can balance out the account's other transactions.
Deleting a credit card or bank account
An account that you no longer require can be deleted. Making an account
inactive in QuickBooks Online is the same as deleting it. The transactions an
account was associated with will remain after deletion. If necessary, you can
also restore a deleted account.
Go to the Chart of Accounts by selecting Chart of Accounts from the
Accounting menu in the left-side Navigation Pane to delete an account.
Choose Make Inactive under the Action column for the account you want to
delete.

A confirmation window will then show up for you to confirm that you truly
do wish to deactivate it. It won't by default appear in the Chart of Accounts
after it becomes inactive.
Bringing Back a Deleted Account
You can reactivate a deleted account. Go to the Chart of Accounts and select
the gear icon to the right of the list. Select the Include Inactive checkbox.
You can now access the accounts you deleted.
[Figure: Including inactive accounts in the Chart of Accounts is chosen]
You can choose Make Active from the Action column after the deleted
account appears in the list.
MAKING BANK DEPOSITES
Payments from several sources are frequently deposited at once when you
make a deposit at the bank. Typically, your bank keeps track of all of your
deposits under a single record with a single total. These same payments won't
match your deposit if you input them as separate records in QuickBooks.
In these circumstances, QuickBooks offers a unique method for you to
integrate everything and ensure that your records correspond to your actual
bank deposits. Your Undeposited Funds account should contain the
transactions you intend to combine. Then combine them by recording a bank
deposit.
Record a bank deposit in QuickBooks to combine payments:
1.When you have your bank's deposit slip, you're prepared to record the
deposit in QuickBooks.
2.Make a selection under Record Deposits / Make Deposits on the
Homepage.
3.Make your selections in the Payments to Deposit window for the payments
you want to combine. then choose OK.
4.From the Deposit to dropdown on the Make Deposits window, choose the
account you wish to deposit into.
5.Verify the total deposit. Verify that the specified payments and the account
match those on the deposit slip from your bank. Refer to your deposit slip as
a guide.
6.At your bank, enter the day you made the deposit.
7.Add a memo if necessary.
8.Choose Save & Close once you're finished.
Every bank deposit has its own unique record. For each of your deposit slips,
make one deposit at a time.
NOTE: In the Bank Deposit window, only transactions that have recently
been made to your Undeposited Funds account are visible.
Next steps: Manage your bank deposits
Examine previous bank deposits
To view previous deposits and the aggregated transactions:
Choose Reports from the menu. Select Report Center next.
Choose the Banking category.
Select the Run icon after locating the Deposit Detail report.
All of your documented bank deposits are listed in the report. To view more
information, choose certain deposits.
Delete a bank deposit
A bank deposit can be deleted if you ever need to start over:
1.Navigate to the Reports menu. Next, choose Report Center.
2.Decide on the Banking category.
3.Discover the Deposit Detail report. then click the Run button.
4.Discover and access the deposit you want to remove.
5.All of the payments that are part of the deposit are shown in the Make
Deposits window. Make sure you need to start over by reviewing them.
6.Choose Delete deposit from the context menu when doing a right-click in
the window. To confirm, click OK.
USING EDIT MENU COMMANDS
Editing Key
Edit transaction selected in register Ctrl + E
Delete character to right of insertion point Del
Delete character to left of insertion point Backspace
Delete line from detail area Ctrl + Del
Insert line in detail area Ctrl + Ins
Cut selected characters Ctrl + X
Copy selected characters Ctrl + C
Paste cut or copied characters Ctrl + V
Copy line in an invoice Ctrl + Alt + Y
Paste copied line in an invoice Ctrl + Alt + V
Increase check or other form number by one + (plus key)
Decrease check or other form number by one – (minus key)
Undo changes made in field Ctrl + Z
RECONCILE BANK ACCOUNT
Each transaction that you enter into your QuickBooks Online file, including
costs, bill payments, deposits, and payments against customer invoices, needs
to be verified and compared to bank data. Reconciling is the action of doing
this. Every month, you should do this for each of your connected bank and
credit card accounts to your QuickBooks Online file.
Your company's bank account should be shown in QuickBooks Online's
transactions. This is a crucial step in the bookkeeping process. If you don't
take the time to reconcile properly, you can discover that you missed certain
crucial transactions that weren't entered or that were entered more than once.
These mistakes could result in major differences in your file, which could
affect:
Financials: How accurate will they be, how is your company performing,
and how can you use this information to make critical business decisions?
The BAS: If you miscalculated the transactions, you can owe the ATO more
money or you might have to pay more GST.
the tax return How precise will this be when your accountant processes your
tax returns at the conclusion of the fiscal year? Your tax obligations could
increase.
The online banking feed is one of the features of QuickBooks Online. By
doing this, accuracy will be aided and it will be made sure that all
transactions are recorded. See our earlier posts on bank policies and online
banking.
One of my clients, who works in the construction sector, tried to manually
reconcile his credit card and bank accounts. Before using and becoming
accustomed to internet banking feeds, he would frequently show up at my
office at the end of the quarter with unfinished and unreconciled accounts.
We would spend hours trying to fix the problems, missing transactions, and
incorrectly recorded sums. His and my time would be very well spent on this.
Because of the proper bank feed allocation I taught my customer, he can now
balance his bank accounts in under two minutes. Correct reconciliation helps
him save time and money.
How to reconcile bank accounts
Let's examine this procedure. The following action is taken after all of your
online banking feed transactions for the month have been matched and added:
Reconcile can be accessed from the Company gear icon (top-right
corner) by selecting Tools.

Open the drop-down menu in the Reconcile window. Select your

Account. Click Reconcile Now after selecting the bank account you
want to reconcile.
 Your end date should be entered under Statement Ending Date and
Balance. Your bank statement's final balance > Select OK.

Examining the account known as Westpac Chq Acc - 246814 will be the
focus of the example below. The closing balance of the bank statement as of
the end date, August 31, 2015, is $45645.81.
Make this account your selection from the drop-down option in the Reconcile
window. This bank account's last reconciliation was on July 31, 2015, as can
be seen. The report is seen by clicking the date. Tap Reconcile Now.

Statement Ending Date: August 31, 2015; Ending Balance: $45645.81; Enter;
then click OK.
1.Transactions that have come through from the online banking feeds are
those that are marked in yellow with the green paper emblem. These are
highlighted and checked, as you can see.
2.You must look into whether these transactions belong here because they
were manually entered. Do they hold true? Have they multiplied?
3.Initial balance on the bank statement
4.Statement Total at the end of the bank statement
5.Difference: Because the ticked transactions are accurate and there is no
balance, the bank account has been reconciled.
6.Cancel: If you need to close the reconcile window, all of the transactions
you have checked will be lost.
7.Close Later: If you need to finish it later, click this button. Any transactions
that you have checked will not be lost.
8.Close now: Done! Congratulation on the bank reconciliation!
9.Edit the following from the statement: If you accidentally entered an
inaccurate balance or date, edit it here.
ORDER CHECKS AND ENVELOPES COMMAND
A submenu of commands that you can use to order QuickBooks checks and
envelopes or to find out more about ordering QuickBooks checks and
envelopes is displayed when you choose the Order checks and envelopes
command.
ENTER CREDIT CARD CHARGES COMMAND
Ø How to track business credit cards
If you haven't previously done so in QuickBooks Setup, you must create a
credit card account if you want to use QuickBooks to manage credit card
purchases and balances. (In contrast, bank accounts are used to monitor
things like the flow of funds into and out of a checking, savings, or petty cash
account.)
Ø A credit card account being set up
The procedures for opening a credit card account are similar to those for
opening a bank account:
1. Select Chart of Accounts under Lists.
Alternatively, you can tap the Chart of Accounts icon on the home screen.
The Chart of Accounts window for QuickBooks is displayed as illustrated.
Displaying the Chart of Accounts
2. In the Chart of Accounts box, click the Account button in the lower-
left corner, and then select New.
The first Add New Account box in QuickBooks is a simple list of selection
buttons for the various types of accounts that are supported by the program.
3. Pick the Credit Card radio button.
You can notify QuickBooks that you wish to create a credit card account by
choosing Credit Card. I'm sure these surprises you. Then click Next. The
second Add New Account window for QuickBooks appears as illustrated.

The second window for adding new accounts

4. In the Account Name text box, enter a name for the account.
Why not carry it out correctly? Insert the name of your credit card after
moving the pointer to the Account Name text box.
5. Fill out the Credit Card Acct. No. text box with the card number.
Leave the Credit Card Acct. No. text box empty if you're setting up a general
credit card account for more than one card. You may also describe the card
while you're at it. Depending on how much interest is charged on your card,
you might wish to enter Usury! in the Description text box.
6.Click Save & Close on your computer.
The window for the Chart of Accounts is reopened by QuickBooks. The
recently-used credit card account is now listed as a second account in the
window.
7.Choosing an account for a credit card so you can use it
The Chart of Accounts window is where you instruct QuickBooks that you
wish to interact with a credit card account. Select Chart of Accounts under
Lists. Double-click the desired credit card account after displaying the
window. The Credit Card register is displayed by QuickBooks so you can
start entering transactions.
You can click the Enter Credit Card Charges icon in the Banking section of
the home screen as an alternative to opening the Chart of Accounts window.
Alternately, select Banking > Enter Credit Card Charges.
8.Entering credit card transactions
The Credit Card register is displayed by QuickBooks when you pick the
BankingUse Register command and a credit card account. This image
displays the register for the Frequent Flyer Card credit card account. It
resembles a checking register quite a little, don't you think?
The Credit Card register
The Credit Card register operates similarly to the standard register window
for a checking account. In the register's rows, transactions are entered. The
balance on your credit card and the remaining credit limit are updated by
QuickBooks whenever you record a charge.
keeping track of credit card charges
Similar to registering a check or bank account withdrawal, a credit card
charge is recorded similarly. As an example, let's say you spent $75 at your
favorite Mexican restaurant, La Cantina, on burritos and margaritas.
How to register this charge is as follows:
1. Select Banking > Enter Charges from Credit Card.
As illustrated, the Enter Credit Card Charges window displays.

2. Select the credit card that you used to pay for the expense from the drop-
down selection under Credit Card.
Select a card from the drop-down menu by clicking the down arrow next to
the Credit Card field.
3. Write the name of the company you used a credit card to pay in the
Purchased From box.
Click the down arrow with the pointer over the Purchased From line. A list of
names is displayed. Select a dish from the menu.
Select Add New and enter the name of the restaurant if you've never eaten
there before.
4. Click the relevant option button to specify whether the transaction is a
credit or a buy.
If you want to register an acquisition, click the Purchase/Charge option
button (which is what you do most of the time and what this example shows
you). If you want to record a credit on your account, click the tab labeled
"Refund/Credit" (if you returned something, for example).
5. Fill out the Date column with the charge date.
If the cursor isn't already in the Date line, move it there and enter the date in
the format MM/DD/YYYY. To specify July 1, 2021, enter either 07012021
or 7/1/21. Don't put the date as today if you're entering this charge two or
three days after it occurred; instead, indicate the day the charge was made.
When you receive your monthly statement, using that date makes it simpler
to reconcile your records with the records of your credit card company.
6. Fill out the Amount box with the charge's amount.
Insert the total charge amount by moving the pointer to the Amount line.
Note: To indicate the decimal place, type the period instead of the dollar sign.
7. (Optional) (Optional) In the Memo text box, type a memo description.
Put the cursor in the Memo text box and enter a detailed justification for
billing the item. You may type "Attorney/CPA Lunch" or anything similar in
this situation.
TIP: Wait. What do you know? Now, let's become more serious. Please hold
the humor for a moment. If you are documenting a travel, dining, or
entertainment business credit card transaction, this Memo box is an ideal spot
to record the business purpose for the charge, which is a tax law requirement.
8. Complete the tab for expenses.
You enter business spending under the Expenses tab.
Go to the Expenses tab's Account column, click the down arrow, and select
an expense account from the list (most likely Travel & Ent:Meals for a
business lunch). In this case, if you type in a name that QuickBooks does not
already recognize, it will prompt you to create an expenditure account.
When you input an amount in the Amount field, QuickBooks automatically
fills out the Amount column. If you choose, enter a note in the Memo box
and designate this charge to a Customer:Job and Class. If you want to
attribute the expense to a class, you must enable class tracking.
9. Finish the Items tab.
This charge does not require itemization because it is for a restaurant meal.
On the other hand, you would fill out the Items page if you were charging
inventory items like lumber, office supplies, and so forth.
QuickBooks notifies you if the vendor you listed in the Purchased From line
has a copy of a purchase order (PO) on file. Your unpaid POs with the vendor
will be listed when you click the Select PO button.
10. Enter the charge by selecting the Save & New or Save & Close button.
In the register for credit cards, the charge is noted. As you submit a few
charges, this figure displays what the Credit Card register looks like.

BANK FEEDS COMMAND

Add bank feeds to your account.
Head over to the Banking menu.
Click Set Up Bank Feed for an Account when you are hovering over
Bank Feeds.
Next, after choosing your QuickBooks account, click.
 After choosing the financial institution for this account, choose Next.
To connect your account, adhere to the steps displayed on screen.
Note: When you import transactions into QuickBooks for the first time after
downloading them from your bank, a Bank Feeds account is created.
Click Connect, then click Close.
The transactions can then be imported so that your bank feeds can access
them.
Should your bank provide Web Connect:
Choose Bank Feeds, then Import Web Connect Files, from the
Banking menu.
Then click Open after selecting the QBO file you saved.
When asked to choose a bank account, pick:
If the account you're importing transactions into is already configured
in QuickBooks, use an existing QuickBooks account.
If the account you're importing transactions into doesn't already exist
in QuickBooks, create a new one. Discover how to register.
Choose Continue. A dialogue window letting you know the data was
successfully read into QuickBooks will appear. Choose OK.
To review your transactions, visit the Bank Feeds Center.
LOAN MANAGER COMMAND
Unlock your QBDT.
Ø Choose a sample file from the Open a sample file drop-down on the
No Company Open screen.
 Ø Check to see whether you can now see the LM for the truck loan and
any past payments after restoring the backup one more.
Ø If the aforementioned characteristics are visible, the original file may
be damaged. I would advise using the QuickBooks Verify and Rebuild
function in this situation. This can aid in locating and fixing data
damage.
How to validate your data (original company file) is given below:
Ø Select File from the menu at the top.
Ø After choosing Utilities, select Verify Data.

You can rebuild your file if the verify data identifies a problem. For further
information on how to verify and rebuild data in QBDT, please click on this
link.
If you upgraded QBDT and are still unable to see the LM information, you
can look up the remedies in this article: After upgrading QBDT, Loan
Manager is no longer present. Additionally, you can learn about and evaluate
the various loan choices using the What If Scenarios tool. To get started, you
might refer to Step 3 in this article: What If tool for QuickBooks Loan
Manager.
 CHAPTER FIVE
PAYING EMPLOYEES
WHAT YOU NEED TO DO FOR QUICKBOOKS
PAYROLL
Before you even begin using the software, acquire the required documents
and information to make the QuickBooks payroll setup procedure as quick
and simple as possible. Everything you need to set up and handle payroll will
be covered. We'll walk you through the procedure step-by-step later on in this
post so you'll know precisely when to use these files and details.
W-4s: For tax purposes, each employee must have a completed and signed
W-4.
Pay Rates: How much money does each employee make at your business?
Are they commission-only, hourly, or both?
Pay Schedule: On what schedule do you pay your staff—weekly, biweekly,
monthly, or any other frequency?
Employee Basic Information: For each employee, you will require their
legal name, residence, birthdate, hire date, and termination date (if
applicable).
If your employees are entitled to any deductions, you should be aware of
their nature and scope. Garnishments, employee payments to retirement
funds, and health insurance premiums are a few examples of regular
paycheck deductions.
What are the policies of your company regarding sick time and vacation
time? You should be aware of this policy and have proof of the current
balances for each employee before setting up payroll.
Reimbursement & Additions: You'll need specifics regarding each
employee's pay and paycheck additions in order to set up payroll. Mileage
reimbursements, trip reimbursements, cash advances, and flexible spending
accounts are a some of the most popular.
Direct-deposit details for each employee who chooses direct deposit versus
receiving a paper check, you will need their routing and account numbers if
you provide direct deposit. To ensure accuracy and convenience, ask each
employee to complete a direct deposit authorization form and provide a
voided check.
Information on your business bank account is also necessary if you plan to
use direct deposit so that funds can be taken out of your account and
distributed to your employees.
Information on taxes It goes without saying that you must file taxes and pay
them. Make sure you have information on available, such your state ID
numbers and Federal Employer Identification Number, to make the payroll
tax procedure simpler (FEIN).
Previous Payroll Data: Have your previous payroll data on hand if you've
been paying your employees so that payroll taxes can be computed correctly.
QuickBooks Payroll Subscription: Regrettably, a monthly subscription fee
is required for QuickBooks Payroll. Make certain that you have chosen the
plan that is best for your company. You can either do this online at the
QuickBooks Payroll website or directly through the program.
QuickBooks Desktop can become a little perplexing at times.
Fortunately, Intuit has made the payroll process incredibly simple with a
step-by-step payroll setup application that guides you through the procedure.
Let's walk through this procedure together so that your payroll can be
operational in no time.
You may always practice with an example company file, like the one I'm
using for this lesson, if you're still unsure before you get started. In order to
gain a handle on the system before processing your own paycheck, you can
practice and test payroll in this manner. Use these steps to get started whether
you're using a sample or your own company file.
STEP 1: OPEN QUICKBOOKS PAYROLL SETUP
Once you have obtained all of your necessary paperwork, you can begin
setting up your payroll. Open the QuickBooks Payroll Setup tool first. You
can do this by clicking "Employees" in the menu bar at the top of your
screen, then choosing "Payroll Center" from the list. Once the Payroll Center
has loaded, choose "Payroll Setup" from the menu to begin.

STEP 2: SET UP COMPENSATION

The first thing to do after opening the Payroll Setup tool is to enter and/or
confirm the details of the benefits and compensation offered by your
company.
Your firm has a variety of alternatives for paying compensation. These
consist of:
Hourly employees who work overtime are paid an overtime rate.
Regular Pay: Employees are paid hourly.
Wage: Applied to workers who are paid a salary.
Bonus: Used to pay out any bonuses.
If you pay employees for mileage, you use mileage reimbursement.
There are three choices on this menu. Any form of compensation that isn't
used by your business might be deleted. Any additional remuneration that
isn't already on your list can also be added. Editing list items is another
option. You can alter the way that compensation is displayed on paychecks,
make a payroll item active or inactive, set the account type, and alter the
account name if you decide to update entries.

After you have verified these entries, click Continue to go to the following
step, Employee Benefits.
STEP 3: SET UP EMPLOYEE BENEFITS
Here, you may change or add the employee benefits your company offers.
Pay increases and deductions like cash advances and mileage reimbursements
should also be included (such as wage garnishments.) There are a few
possibilities:
Insurance Benefits: Workman's compensation retirement benefits include
401(k), Simple IRA, 403(b), 408(k)(6)SEP, and 457 plans (b)
Paid Holidays: Hourly Sick, Hourly Vacation, Salary Vacation, and Salary
Sick
Miscellaneous: Health Insurance and ACH Payments

It's time to enter the figures for each employee once you've included your
wages, benefits, additions, and deductions.
STEP 4: SET UP EMPLOYEES

Do you still have the W-4s and pay scales from earlier? We're going to set up
your employees, so it's time to remove those.
Personal Information

Start by choosing "Add New" to create a new employee. You must include
the following details in this section:
Ø Legal name
Ø Contact information
Ø Employee type
Ø Social Security Number
Ø Hire date
Ø Release date
 Ø Birthdate
Ø Gender
Ø Pay Rates & Schedules

You must enter the employee's pay rate and schedule after inputting this data.
Additionally, you can choose overtime pay rates, add a bonus, and add
expenses for health insurance and mileage reimbursement.
You will then enter the sick pay calculation method. You must input details
such as the number of sick pay hours each employee receives, when these
hours start (often at the start of each year), what happens to unused sick time,
and current balances. After entering this data, repeat the process to enter the
vacation pay information.
Direct Deposit
The following step is to include this information if your employees receive
their salary via direct deposit.
For a maximum of two accounts per employee, direct deposits can be set up.
Additionally, you have the choice of giving your workers prepaid cards that
they can use to access their direct deposits. Through the setup tool, cards can
be requested. You have the option of paying your staff with a paper check if
you choose not to use direct deposit.

State Tax Withholdings

You will respond to some tax-related inquiries regarding the employee after
putting up the direct deposit details. These consist of:
State susceptible to deductions
Tax on unemployment in the state
Did the employee reside there or work there?
Unsure of how to complete this form? Fortunately, QuickBooks has
assistance options available at all times throughout setup, making it simpler
for you to verify that your payroll is configured properly.
Federal & State Tax Information
Take out the employee's W-4 for this area. Enter the employee's filing status,
the number of allowances, additional withholding amounts, and other
withholdings and credits using the information on the form.
You will provide the same data for the state after clicking "Next."
You can save the employee's data once you've finished this part. The
Employee List should now display the employee's name, social security
number, and a summary.
The Employee List will show the problem if there is any missing data or a
mistake. Check each entry for any errors and make the appropriate
corrections. You won't need to waste time trying to figure out what caused
the problem because the summary section in the Employee List will make it
clear.

The Employee List can be accessed whenever necessary to update employee

information, fix typos, add new employees, or remove existing ones.
STEP 5: SET UP PAYROLL TAXES
Taxes are a burden that we just cannot escape. Nevertheless, you may ease
the process by using QuickBooks Desktop to compute, file, and pay your
payroll taxes. Let's go over the payroll tax setup process.
Federal Taxes

You'll see that QuickBooks has already set up a number of taxes when you
access the Federal Taxes area. This covers social security and Medicare for
both the employer and the employee, as well as federal withholding and
unemployment benefits.
You don't need to bother about figuring out rates for these taxes because they
have already been determined. You may, however, adjust each sort of tax by
altering the way it appears on paychecks, amending the cost account, or
editing the liability account. Most of the time, you won't need to make any
significant changes to this part.
STEP 6: ENTER YEAR-TO-DATE PAYROLLS
You can skip this part if you're paying staff for the first time. To ensure that
tax payments and paychecks are accurate, you must enter year-to-date
payrolls if you have employees who have been paid during the current year.

Depending on the number of employees you've paid and the number of

checks you've issued, this section can take some time.
Thankfully, QuickBooks provides clear instructions right there on the page,
and the application is rather simple to use. The check date, pay period, check
number, employee pay, and tax withholdings are just a few examples of the
data you'll enter. Before using QuickBooks Payroll, this step must be finished
for each employee who has been paid in the current year.

The payroll tax payments that have previously been made must then be
entered.
Your remaining balance will be displayed after QuickBooks determines how
much you still owe and compares it to the sum you've previously paid.
Finally, you'll enter non-tax payments like health insurance and workers'
compensation. Once more, QuickBooks will figure out how much is owed
and use the amount you've already paid to show any outstanding balance.
STEP 7: FINISH UP & PREPARE TO RUN YOUR FIRST PAYROLL

SCHEDULING PAYROLL RUNS

Do you process payroll and pay your employees using pay schedules? Do
you possess multiples? Your employees can be grouped using the
QuickBooks payroll software based on their pay schedule. This makes
processing more effective and aids in payroll management.
The many pay plans that you can give your staff access to are as follows:
Weekly: Pay your staff on a certain, recurring day of the week each week.
Every Friday is a common day for firms to schedule payments, giving them
52 distributions annually.
v Pay your staff every two weeks, or every other week. You would
 have 26 payouts a year if you scheduled payday on every other Friday.
v Pay your staff twice a month or once every two weeks.
v The first payment may be made in the middle of the month, and the
second may be made towards the end. Every 15th and 30th of the
month is the typical payout date for this plan. This amounts to 24
rewards per year.
Monthly: Your employees will be paid once per month on a set, regular day.
The result is 12 payments per year.
v Establish and control pay schedules
v Choose your product below, then follow the instructions for the
payroll product you use to set up, assign, or adjust pay schedules:
EDITING AND VOIDING PAYCHECKS
You can utilize the QuickBooks Void Check or Delete Check tool to reverse
the amount that was taken out of your account and cancel a check. For the
majority of check reversal operations, voiding a check result in the most
thorough record and is advised. A transaction should only be deleted if a
trivial error is discovered before issuing a check because doing so implies
that the transaction never took place.
Voiding a transaction is used when the transaction has already happened or
when you find the issue after printing the check since it offers the most
thorough record of your actions. Void a check, for instance, if you printed it
and discovered the amount was erroneous or if a pre-numbered check was
utilized but is smudged and difficult to read. The payee, account, check
number, date, and memo remain the same when you void a check, but the
amount is altered to zero. The note on the check has been changed to
"VOID," yet it still shows up in the bank account register. Checks that have
been voided can be reversed or undone to the original transaction.
To void a check do the following:
1.In the Write Checks window, open the check to be voided.
2.Edit > Void Check can be chosen from the menu.
3.Take note that the Memo field now reads "VOID." In the Memo area,
include any additional information regarding the transaction. When you
reconcile the bank account, stating the cause of the cancelled check will assist
you explain any missing checks.

After reviewing the revoked transaction, press Save & Close.

To delete a check:
1.A check can be deleted by opening it in the Write Checks window.
2.Select Edit > Delete Check in the menu.
3.Click OK in the Delete Transaction box. The check has been permanently
erased from your files and cannot be recovered.

Keep keep mind that any reports that contain the transaction will also alter if
you invalidate or delete a check.
PAYING PAYROLL LIABILITIES
Payroll liabilities: What are they?
A liability in accounting is the duty to make a payment. Your business has
two different sorts of payroll obligations when you manage payroll:
Payroll liabilities are the total gross wages owing to workers and independent
contractors.
Retained sums: Employee income tax withholdings must be sent to the IRS
and state departments of revenue. Payroll obligations are sums that have been
withheld but not yet sent. However, keep in mind that money withheld from
an employee by a company is not considered a payroll expense.
Payroll costs: Some payroll obligations are not deducted from employees'
salaries. For instance, when payroll is completed, the employer's portion of
Social Security and Medicare taxes becomes a liability.
The liability is moved from a liability account to an expenditure account once
the payments are made.
You deliver reports that describe the payments' purpose along with payments
when you submit them (employee name, amounts withheld, etc.). Numerous
balance-sheet account numbers may be present in your company's payroll-
liabilities chart of accounts.
Payroll liabilities types
Payroll liabilities are produced by employee remuneration, taxes, and
voluntarily made deductions. Employers also have payroll obligations for
FICA (Federal Insurance Contribution Act) tax and additional costs.
1.Employee compensation
Payroll liabilities are the sum of the gross wages owing to employees and
independent contractors. Liability can be determined in a number of ways for
a particular pay period:
Salaried workers: Employees who are paid a salary: The portion of annual
salary due for the pay period, plus bonuses and other incentive payments.
Hourly workers: This liability is equal to the total number of hours worked
multiplied by the hourly wage, including overtime. Employees paid by the
hour may also receive incentive pay.
lone workers (independent contractors): Amounts due determined by a flat
fee or according to an agreement on an hourly rate.
Taxes are not deducted from the compensation given to independent
contractors. However, you are required to deduct taxes from an employee's
compensation in accordance with the data they give on Form W-4.
2.Payroll taxes and insurance
Payroll taxes are deducted in order to cover the costs of Medicare, Social
Security, and income taxes. Some of these levies cost employers’ money.
Withholdings from federal income taxes: The employee's yearly income and
filing status are used to calculate the amounts withheld (married, single, etc.).
FICA fees the taxes gathered to pay for Medicare and Social Security.
Employers and employees both paid a 7.65% FICA tax rate on the worker's
gross wages for the tax year 2020, and the worker's taxes were deducted from
gross pay. A self-employed person must file a personal tax return and deduct
half of the self-employment taxes in addition to paying the employer and
worker portions (15.3%).
State income taxes: Varying states have different withholding and payment
rules, and other states don't have any state income taxes at all.
Both the Federal Unemployment Tax Act (FUTA) and the State
Unemployment Tax Act (SUTA) were passed in order to give workers who
lose their jobs—typically when the employee is not at fault—temporary
income. Through a cooperative federal-state arrangement, businesses pay
unemployment insurance payments; only employers are responsible for
paying FUTA taxes.
Workers' compensation insurance: Depending on state regulations, businesses
may be required to obtain workers' compensation insurance. When a worker
is hurt at work, the insurance plan covers medical expenses and missed
wages. Employers are responsible for paying workers' compensation
premiums, and the price depends on the sector and the number of employees.
Garnishments on wages: A garnishment is a court-ordered necessity to
deduct money from an employee's pay and send it to a third party.
As your company expands, you might provide benefit plans to entice staff.
Employees have the option to voluntarily deduct money from their paychecks
to pay for benefit plans.
How to pay your payroll liabilities
The most typical payroll liabilities and how they are paid are listed below:
Ø Employees receive their gross wages via cheque or direct deposit.
Ø Federal income taxes: Businesses report and submit their federal tax
withholdings using Form 941.
Ø FICA (Medicare and Social Security taxes): Companies report and
submit these tax payments using Form 941.
 Ø These payments are reported and submitted using Form 940, the
employer's yearly federal unemployment (FUTA) tax return.
To settle all payroll obligations, take the following actions:
Ø Gather employee information for Form W-4 (for employees).
Ø Utilize a worker's contract, hourly data, or a salary to determine gross
pay.
Ø Calculate the necessary deductions, if any.
Ø Compensation each employee's net pay after deductions are made.
Ø Payroll liabilities for sums that will be spent on business expenses
should be recorded. For instance, the employer's portion of FICA
taxes.
Ø Use the appropriate reporting form to submit the appropriate amounts
to each third party.
Ø Payroll liability balances should be reclassified as payroll cost
accounts.
Your payroll estimates could change from one pay period to the next due to
the following factors, which would likewise alter payroll liabilities and costs:
Ø Modifications to tax legislation
Ø Personnel who have been hired, elevated, or discharged
Ø Employees who alter their tax and benefit withholdings in response to
changes in their salaries or families
Ø Businesses must also abide by the rules on payroll record keeping.
How to adjust payroll liabilities
Accountants enter adjustments for several payroll-related transactions,
including:
You change the payroll records by reducing a payroll obligation
account and by reducing cash when amounts withheld are sent to a
third party.
Similar to how firms cut cash when workers receive their due wages,
they too reduce wages payable.
ACCOUNTING CHORES
 CHAPTER ONE
FOR ACCOUNTANTS ONLY
Who Are Accountants?
An accountant is a professional who performs accounting responsibilities
including financial statement analysis, audits, or account analysis.
Accountants are employed by accounting companies or by internal
accounting departments of large corporations. They are free to develop their
own, distinctive procedures. After meeting the educational and testing
requirements established by their individual states, national professional
organizations certify these professions.
KEY LESSONS
Ø An accountant is a professional who carries out accounting tasks
including financial statement analysis, audits, or account analysis.
Ø Accountants can establish their own practices or work for an
accounting firm or a big business with an internal accounting
department.
Ø The CPA designation is regarded as the pinnacle of the accounting
profession, which is why many accountants decide to pursue it.
Background/History of Accountants
The American Association of Public Accountants, the first organization for
accountants, was established in 1887, and CPAs were first permitted to
practice in 1896. Throughout the industrial revolution, accounting became a
more significant profession. This was largely caused by the fact that
businesses became more complex and that investors in bonds and shares, who
weren't necessarily a part of the firm but had financial stakes in it, sought to
learn more about the financial health of the enterprises in which they had
stakes. All publicly traded firms were compelled to release reports written by
certified accountants after the Great Depression and the establishment of the
Securities and Exchange Commission (SEC). The necessity for corporate
accountants was further exacerbated by this move. Accountants are still a
common and essential component of every business today.
Recognizing accountants
Accountants are certified financial professionals that oversee several different accounts, both public and
private. These accounts may be owned by an individual or a business. As a result, they might land a job
with a small or large firm, with the government, with another organization like a non-profit, or they
might start their own private practice and take on clients who hire them.
They do a range of accounting duties that vary based on where they work. Accountants undertake
account analyses, assess financial operations, perform routine and annual audits, check the accuracy of
financial statements, other documents, and reports, prepare tax returns, and provide advice on areas that
could benefit from additional cost- and efficiency-saving measures. They also undertake risk analysis
and forecasting.

The responsibilities an accountant is given typically depend on the type of

education they have and the position they occupy. Most industry
professionals hold bachelor's degrees, and if they work for a company, they
could need certification to advance in their jobs. The prerequisites for
certification vary depending on the profession, with some requiring
additional study beyond a bachelor's degree and passing challenging exams.
Titles for accountants can vary widely. However, the three most common
accounting credentials are Certified Public Accountant (CPA), Certified
Management Accountant (CMA), and Certified Internal Auditor (CIA)
(CPA). Certified Internal Auditors and Certified Management Accountants
can both work without a license.
Although your accountant may possess additional certificates, the most
common ones held by accountants are Certified Internal Auditor, Certified
Management Accountant, and Certified Public Accountant.
Many accountants want to earn the CPA credential since it is regarded as the
highest honor in the accounting profession. In the US, each state may have its
own requirements for accountant certification. The only prerequisite that
applies to all states, however, is passing the Uniform Certified Public
Accountant Examination. This test was created and graded by the American
Institute of Certified Public Accountants (AICPA).

Using the journal entry feature in Quickbooks

Entries in a journal are the final option for recording transactions. Use them exclusively in situations
where you are knowledgeable about accounting or in which you pay attention to your accountant's
advice. An accountant is also available if you need one.
Like in traditional accounting systems, debits and credits must be manually entered.
Money should be moved about among the cost and income accounts.
From an equity, liability, or asset account, money can be moved to a revenue or expense account.
Ø Journal entry added
Here's what to do if you need to write a new entry in your journal:
Select Make General Journal Entries from the Company menu.
To write an entry in your journal, complete the fields. When you're
finished, make sure your debits and credits balance.
You can choose Save or Save & Close.
Ø Edit a journal entry
Here's what to do if you need to alter a journal entry:
1.Select Make General Journal Entries from the Company menu.
2.Locate and choose the entry in your journal that needs editing:
In Windows-based QuickBooks: Enter the Name, Date, Entry No., or
Amount, then click Find after doing so.
In Mac QuickBooks: From the list on the left side of the Make General
Journal Entries window, locate and choose the journal entry.
3.Make your changes by selecting the journal entry (on a Mac) or double-
clicking it (on a Windows computer). Select Save or Save & Close when
finished.
4.Select Yes to save the changes.
Ø Reverse a journal entry
1.Make general journal entries by going to the Company menu.
2.Find and choose the journal entry you want to go back and change:
Accounting software for Windows: Select Find after entering the
Name, Date, Entry No., or Amount.
On the Mac, QuickBooks for: Find and choose the journal entry you
want to reverse on the Make General Journal Entries window's left
side.
3.Pick Reverse.
4.Choose Save or Save & Close.
Any debit and credit amounts have been reversed, and the entry number has a
"R" next to it. The new entry is updated with the original transaction date
plus the first day of the next month.
Ø Delete a journal entry
Here's what to do if you need to remove or nullify a journal entry:
1.Select Make General Journal Entries from the Company menu.
2.Locate and pick the entry in your journal that you want to remove:
In Windows-based QuickBooks: Enter the Name, Date, Entry No., or
Amount, then click Find after doing so.
In Mac QuickBooks: From the list on the left side of the Make General
Journal Entries window, locate and choose the journal entry you wish
to reverse.
3.How to remove a journal entry:
In Windows-based QuickBooks: Double-click the entry in the journal,
choose Delete or Void, and then click OK.
In Mac QuickBooks: Select Delete General Journal under Edit.
4.the Save & Close option.
ANALYZING THE TAX AND ACCOUNTANT REPORTS
The Accountant & Taxes menu appears when you choose the Reports Accountant & Taxes command.
This submenu has nearly 20 commands and reports that are both fascinating and beneficial to
accountants. The following list identifies these reports:
The "Adjusted Trial Balance" menu command is used to generate a Trial Balance report as of a given
date. The adjusting notebook entries are prominently highlighted in this Trial Balance report as
opposed to the one that follows. (Journal entries that need to be adjusted were identified as such when
they were prepared by your accountant.) Some versions of QuickBooks, like the one your accountant
probably uses, have an Adjusting Journal Entry check box. You can check that box to denote a journal
entry for modifying.

Trial Balance: A Trial Balance report as of a specific date is produced by the

Trial Balance menu command.
General Ledger: The General Ledger menu command generates a report that
only lists the accounts in your Chart of Accounts list and then modifies the
account for the month, year, or other specified accounting period.
Transaction Detail by Account: This menu option generates the report you
would anticipate, which is a list of transactions that have an impact on a
certain account.
A list of the journal entries that you or another person designated as
modifying journal entries is produced by the command "Adjusting Journal
Entries."
Journal: The Journal menu option generates a report that breaks out
transactions by number and type.
Especially for accountants who are anxious or afraid that transactions have
changed when they shouldn't have changed, the Audit Trail report is quite
crucial. Transactions are listed in the Audit Trail report according to the
individual who entered them. Modifications to transactions are also reported
in the Audit Trail report, along with who made the changes.
The Shutting Date Exception Report command identifies modifications to
closed transactions if you finalize the accounting data for the year (also
known as closing the books), which you should do.
Customer Credit Card Audit Trail: For those with high credit card
transaction volumes that are difficult to understand, a Customer Credit Card
Audit Trail report contains solely credit card transactions.
The Voided/Removed Transactions Summary command generates an
overview report of transactions that have been voided or deleted.
The command Invalidated/Deleted Transactions Detail generates a detailed
listing of all deleted transactions and all voided transactions.
Transaction List by Date: Transactions are listed in chronological order
according to the date of entry in the Transaction List by Date report.
All of the accounts in your Chart of Accounts list are listed in the Account
Listing report. Additionally, the account balance and the tax return line where
the account is recorded are stated in the report.
All of your fixed assets are listed in the Fixed Asset Listing report, which you
can see here.
Income Tax Preparation: The Income Tax Preparation report identifies the
tax forms' respective account balance reporting lines.
Income Tax Summary: The Income Tax Summary report shows which
amounts should be recorded on which lines of your tax forms based on
information from your income tax preparation. For instance, if you're a sole
proprietor submitting a Schedule C tax form, QuickBooks will examine all
the accounts you use to monitor sales or gross receipts. The balances in these
accounts are then added up to determine the real value that should be reported
on the sales or gross revenue line of your Schedule C tax form.
Income Tax Detail: The Income Tax Detail report has the same data as the
Income Tax Summary report, but it also displays the breakdown of the
several accounts that make up the tax line total.

CREATE AN ACCOUNTANT’S COPY

Your client uses his or her copy of QuickBooks and the actual data file to
generate the accountant's copy of the QuickBooks data file, and either creates
a file that they send to you (either by mail or email) or that Intuit, the
company that makes QuickBooks, gives to you. Fortunately, the procedure is
simple in both cases.
Handling the accountant's copy manually
If your client will handle transmitting the file to you, they must follow these
instructions:
1.Select the Create Copy command under File.
QuickBooks asks the customer if he wants to save a copy or backup by
displaying the dialog box.
In order to have a copy of the file in case something untoward happens
to the original QuickBooks data file, you need make a backup copy of
the file, which is a second copy of the QuickBooks file that you
typically produce.
a portable copy of the file, which is an exact replica of the
QuickBooks data file that has had its size slightly reduced to make it
more portable (such as by emailing the file as an attachment).
a copy of the file for the accountant.

The initial dialog box for saving a copy or backup.

2.To proceed, select Accountant's Copy and then click Next.
3.Verify that you truly desire an accountant's copy.
In the following dialog box, QuickBooks makes your poor, frazzled client
affirm that he actually wants an accountant's copy rather than just a portable
copy of the file.
The second dialog box to Save Copy or Backup.
4.Give a division date.
QuickBooks prompts the customer for the dividing date after he hits the Next
button to continue with the preparation of an accountant's copy. Only the
accountant's copy can be updated for transactions that occurred prior to this
date. Both the accountant's copy and the client's copy can be changed for
transactions that occur after this date.
5.For the next step, click.
Another message informs the client that in order to produce an accountant's
copy, QuickBooks needs to dismiss all open windows.
6.Select OK.
An updated Save Accountant's Copy dialog box for QuickBooks is seen
below.
The Save Accountant's Copy dialog box has been changed.
1.Name the copy for the accountant.
To name the accountant's copy of the QuickBooks data file, use the File
Name box in the Save Accountant's Copy dialog box. The customer can
optionally designate a different location for the accountant's copy of the
QuickBooks data file using the Save In drop-down menu, if necessary.
The client must keep in mind where the accountant saves a copy of the file.
The accountant receives this file via email, postal mail, or disc so that he can
use it.
2.Create the file.
The customer hits Save after giving the accountant's copy of the data file a
name and, if necessary, specifying the location where the accountant's copy
should be saved. An accountant's copy of the QuickBooks data file is saved
by QuickBooks.
NOTE: The client then sends this data file to the accountant. To put it
another way, the client must mail or email the file.
The size of email attachments, including QuickBooks files, may be restricted
by your email provider. If the file size issue bothers you, you can choose File
> Send Company File > Accountant's Copy > Client Activities > Send to
Accountant to send the QuickBooks file to the Intuit website. The accountant
receives a message from Intuit that includes a link she can click on to access
the file.
Three file types are used by accountant copies. The document that a client
generates and sends to the accountant has the file extension.qbx and is known
as the Accountant Transfer File. The accountant works with the actual
Accountant's Copy (with the.qba file extension) after opening the Accountant
Transfer File.
The Accountant Export File, which has the.qby file extension, is the last one
and contains the changes that are sent back to the client.
Of course, it's possible that you'll have to do the grunt work and your client
won't actually execute these actions. But in either case, that's how the
procedure goes. But keep in mind that when you can convince the client to
select the command and interact with the dialog box, the accountant will
actually save time and the customer will save money. Then, rather than
spending time fiddling around with the file, you may bill time spent actually
working with QuickBooks data.
Automatically sending the accountant's copy
By utilizing Intuit's file transfer service, your customer can also submit an
electronic duplicate of the QuickBooks accountant's copy. The customer
selects File > Send Company File > Accountant's Copy > Client Activities >
Send to Accountant to accomplish this. For submitting or uploading the
accountant's copy to the Intuit server, QuickBooks offers onscreen
instructions that include the processes for applying a password to protect the
uploaded file.
The Intuit server gives the accountant an email message with a link that the
accountant can use to obtain the accountant's copy file when the accountant's
copy has been uploaded. The accountant must obtain the password from the
client before the download because, as previously mentioned, the customer
gives a password to limit access to the downloaded material. To open the
downloaded file, the accountant also needs any QuickBooks passwords.
 CHAPTER TWO
PREPARING FINANCIAL STATEMENTS
AND REPORTS
Creating Financial Statements
Financial statements are produced through the process of merging accounting
data to produce a standardized set of financials. The completed financial
statements are sent to management, lenders, creditors, and investors who use
them to evaluate the profitability, liquidity, and cash flows of a company. The
following procedures are incorporated into the process of producing financial
statements (the exact order may vary by company).
Step 1: Confirm Receiving Supplier Invoices
To verify that all supplier invoices have been received, compare the receiving
log to accounts payable. Count the cost of any unpaid invoices.
Step 2: Check the Release of Customer Invoices
To make sure that all client invoices have been issued, compare the shipment
log to the accounts receivable. Any unprepared invoices should be sent out.
Step 3: Amass Unpaid Wages
As of the end of the reporting month, accrue an expense for any wages that
have been earned but have not yet been paid.
Step 4: Determine Depreciation
For each fixed asset listed in the accounting records, determine the
depreciation and amortization expense.
Step 5: Value Inventory
To determine the ending inventory balance, perform a final physical
inventory count or use another approach. Utilize this data to calculate the cost
of goods sold, then enter the result in the accounting records.

Step 6: Reconcile Bank Accounts

Perform a bank reconciliation and make all necessary corrections in journal
entries to align the accounting records with the bank statement.
Step 7: Post Account Balances
Post all balances from subsidiary ledgers to the general ledger.
Step 8: Examine Accounts
Examine the balance sheet accounts and use journal entries to update account
balances to reflect the supporting information.
Step 9: Examine the financials
Print a draft of the financial statements and check them over for mistakes.
There will probably be a number of mistakes, so make journal entries to fix
them and print the financial statements once again. Continue until all errors
have been fixed.
Step 10: Accumulate Income Taxes
Using the revised income statement as a guide, accrue an income tax
expense.
Step 11: Close Accounts
For the current reporting period, close all subsidiary ledgers and reopen them
for the subsequent one.
I2: Release Financial Statements
Print out the financial statements in their final form. Create footnotes for the
assertions based on this information. Finally, write a cover letter that
highlights significant financial statement aspects. Then put this data together
into packets and give them out to the usual group of receivers.
How to Prepare a Financial Report
A balance sheet, an income statement, a statement of retained earnings, and a
statement of cash flows make up a financial report, or financial statement.
Together, these four records reflect a company's performance throughout
time. Banks or lenders may require private enterprises to provide quarterly or
annual financial reports. The Securities and Exchange Commission must
receive audited financial reports from publicly traded companies in the US
(SEC). Small business owners have the option of creating their own financial
reports. However, you'd probably be better off hiring an accountant if your
company is huge or complicated.
Completing Your Income Statement

1.List your earnings within the reporting period: Your organization's

name and the time period the statement pertains to should be listed in the
heading of your revenue statement. The organization's total revenue for the
time period should then be entered.
If your business sells both goods and services, you might want to break down
the revenue by kind.
Verify that you include the organization's gross revenue. Later, you'll subtract
expenses to get the company's net income.

2.Calculate the price of the products or services you sold: Add up all the
expenses related to the products or services you sold, including labor,
supplies, and any overhead costs incurred during production. In a retail
setting, the cost of products is often limited to the price of the inventory
items.
Labor and supplies needed to provide the service you offer would be included
in the costs in the service sector.

3.Make a gross profit calculation: The difference between your gross

revenue and the direct cost of the products or services you sold during the
reporting period is your gross profit. After performing this calculation, write
the result on the line immediately below the cost with the title "gross profit."
For instance, your gross profit would be $15,000 if your period's income was
$20,000 and your expenses were $5,000.
Making the gross profit label and amount bold will help it stand out from the
other information in your income statement's formatting. If you're producing
a document in full color, put the gross profit in green if it's a positive figure.
For a loss or negative number, use red.
Instead of using decimals or fractions of a unit, round your numbers to the
nearest whole integer.
4.Give a breakdown of your spending for the same time period:
Employee salaries, rent or mortgage payments, office supplies, travel costs,
and marketing are examples of typical running expenses. To keep your
income statement straightforward if you have a lot of different expenses,
categorize them.
The expenses for the time period for your company also include depreciation
of fixed assets, such as equipment. You can calculate the amount of
depreciation for the time period covered by your income statement using
depreciation tables, which are normally available in tax departments. Tools
for calculating depreciation are also included in accounting software.

5.From your gross profit, deduct your costs: Add up all of the costs you
listed, then put the total beneath the list of costs with the heading "total
expenses." To make this paragraph stand out from the list of expenses, you
might wish to make it bold. Change the hue to red if you're creating a full-
color income statement. After that, deduct that sum from your gross profit.
Your net profit for the time period covered by the income statement is the
outcome of this equation. To make it stand out from the other items, give it a
name and make the wording bold. If you're creating a full-color income
statement, you should change the amount's color to green for positive
numbers and red for negative ones.
Drafting a Statement of Retained Earnings

1.Find the balance of the current retained earnings: The money the
business has made but hasn't given to equity partners or shareholders is
referred to as retained earnings. This sum builds up beginning on the day the
organization is founded. The current retained earnings balance appears on the
first line of your Statement of Retained Earnings.
Look at the organization's most recent financial statement to determine this
amount. If this is the first financial statement for your company, the retained
earnings will probably be zero.
The retained earnings balance will be zero if your company distributes all
profits to its stockholders or equity partners. This balance could be negative if
the company has a deficit or is "in the red."
2.List your income statement's net income: Include the net income you
determined on your income statement for the same period underneath the
current retained profits balance on your statement. If your company didn't
make a net profit, this sum can be negative.
Normally, you would modify the font color on a full-color Statement of
Retained Earnings so that positive sums are green and negative amounts are
red. If you're not writing a statement in full color, you should include the
number in parenthesis to indicate that it is negative.

3.Subtract any income paid out to equity partners or shareholders:

Retained income does not include any net income that was transferred to
equity partners or shareholders. The full amount of net income, on the other
hand, would be added to retained profits if no income was distributed. [10]
The amount of income allocated to shareholders or equity partners should be
shown on a line in your statement. To show that this sum is deducted from
net income, place the amount in parenthesis or change the text color to red.
For illustration, let's say that over the time period covered by your financial
report, your company earned a net income of $20,000. $10,000 of the sum
was given to your company's equity partners. That indicates that $10,000 in
profits were kept by your business.

4.Determine the revised retained earnings amount: Add the leftover net
income for the period to the total balance of retained earnings after deducting
the income allocated to equity partners or shareholders. On the last line of
your Statement of Retained Earnings, enter this sum.
As an illustration, if your business had $300,000 in retained earnings and you
kept $10,000 of the net income made during the reporting period, your
business would now have $310,000 in retained earnings.
Creating a Balance Sheet

1.Two columns should be used for formatting: The majority of balance

sheets give a quick overview of the assets and liabilities of your company on
one side of the page. Putting the assets side by side makes it easier to see the
balance than putting the liabilities and equity at the bottom and the
obligations at the top.
You don't need to utilize more than one page because using two columns
provides you plenty of space to categorize within each category.
Label the document as a "Balance Sheet" at the top of the page, across both
columns, and include the name of your company and the dates for the time
period it covers. A balance sheet template may be available in your word
processing or spreadsheet program, which will simplify formatting.

2.In the left column, list your assets: An asset is something that belongs to
your business. Current assets, fixed assets, and investments are the three main
categories of assets. An “other asset” or intangible asset category, such as
intellectual property rights, may also appear on a balance sheet. [13]
Cash, receivables from customers, stock in hand, and supplies are examples
of current assets. On the other hand, fixed assets are items like property,
machinery, and anything else that can be used for more than a year.
The worth of current assets is frequently pretty simple to ascertain. You
might need to look up the value of fixed assets in the organization's most
recent tax return. With depreciation, fixed assets lose value annually.
3.The right column should contain liabilities and equity: Similar to assets,
liabilities can be split into current and fixed categories. Also included in this
column is the ownership stake the owners have in the business.
For example, accounts payable, short-term loans, or commercial credit
accounts are examples of current liabilities. Fixed liabilities, such as
mortgages, long-term loans, or employee pension plans, are obligations that
cannot be satisfied within a year.
You must know how much the owners have invested in capital, including the
total value of any stock they may possess in the business, as well as how
much of the company's profits have been kept, in order to determine their
ownership stake. The Income Statement and Statement of Retained Earnings
are the best places to look for this information.

4.Balance the books by adding all assets and liabilities: The entire worth
of the company's assets and liabilities should match up when you've finished
your balance sheets. If the two don't add up, check your values again to see
where you made a mistake.
Review the owner's equity figures you utilized in particular. Always divide
the total value of the company's assets by the total value of its liabilities to
determine the owner's equity. If all of your other values are accurate but your
totals don't add up, you might need to alter the owner's equity until they do.
Writing a Statement of Cash Flows

1.As of the previous fiscal period, ascertain the organization's cash

balance: Your Statement of Cash Flows' first starting point is the cash
balance you have at the beginning of the reporting period. The first line of
your sentence should contain this sum.
The organization's most recent financial report is often where you may get
this figure. The starting cash must be determined if this is the organization's
first financial report. To do this, add up all of the cash on hand in the
company.
Everything that can be changed into cash in less than a year is included in the
definition of "cash," in addition to money (known as "cash equivalents").
Savings accounts, money market funds, and other accounts that the
organization owns have value and are considered cash equivalents.
2.List the net income from your income statement: Find the amount of net
profit your organization generated during the time period covered by your
financial report by going back to your income statement. Put this sum
underneath your beginning cash balance.
It is irrelevant how much, if any, of the net income was allocated to
shareholders or equity partners for the purposes of your Statement of Cash
Flows.

3.Assign three categories to your financial flows: All of the cash flows that
are recorded on your statement often fall into one of three major categories:
operating activities, investing activities, or financing activities. Direct cash
flows can then be listed under each of those headings from that point on. The
majority of businesses, however, track changes more subtly by modifying net
income in accordance with modifications to the accounts that each category
represents.
Asset depreciation, payables, and receivables are all examples of operating
activities.
Purchase and sale of capital goods, the creation of businesses or websites,
and the acquisition of marketable securities are all examples of investing
activity.
Offering and redeeming debt, issuing and retiring shares, paying dividends on
stock, and distributing profits to equity partners are all examples of financing
activities.

4.To determine the cash generated by operating operations, adjust the

net income: Depreciation on any equipment owned by the organization that
will be used for longer than a year is added back to the cash balance. Add the
sum of your accounts payable after deducting the amount of your accounts
receivable from your cash balance. The net cash brought in by operating
operations to your business is the outcome.
Add any amount, whether or not money has changed hands, that occurs
during the period covered by your financial report to accounts receivable and
payable.
You could also need to modify income for additional accounts, including
taxes or payroll. Unpaid payroll or taxes would be added to your cash balance
in the same way that the accounts payable balance was.

5.For investment and financing activities, follow the same steps: Your
cash balance is reduced when you make purchases, and increased when you
make sales. To calculate your net cash given by financing activities and your
net cash provided by investment activities, list each of these items separately
and add them together.
Put the amount in parentheses or make the typeface red to indicate a loss or
deficit for the time period covered by your financial report (for full-color
reports).
Instead of writing "given by," put "used for" if your net cash balance is
negative or negative. For instance, you would refer to this sum as "net cash
utilized for financing activities" if your net cash from financing activities
results in a $2,400 loss.
6.Calculate the period's ending cash balance: Add or deduct the net cash
amounts for each of the three categories from the organization's starting cash
balance for the reporting period. The outcome of this calculation is the
updated cash balance for your company.
Your income statement and statement of cash flows should be compared.
You may wish to investigate the cause if there is a sizable discrepancy
between the profits reported and the net cash flow produced. For instance, if
your business is young and needs significant capital investments, those
expenditures won't show up all at once on your income statement.
 CHAPTER THREE
CREATING A BUDGET
One of the best ways to manage your company's money is to create a budget.
Using QuickBooks, you may create a yearly budget for your business.
Although choosing the specifics of your budget can take some time, in
QuickBooks Pro there are only six steps needed to create one.
This article will demonstrate how to make a budget, choose the best options
for budgeting, and produce budgeting reports.
SET UP A BUDGET
Go to Company > Planning & Budgeting > Set Up Budgets to get started.
STEP 1: SELECT BUDGET YEAR
Choose the year for which you wish to make this budget using the arrows.

STEP 2: CHOOSE BUDGET TYPE

Pick the type of budget. A balance sheet budget or a profit and loss budget
can be made.
The Profit and Loss budget provides a more thorough snapshot of your
annual activity, while the Balance Sheet budget focuses primarily on your
ending balances. We will select the Profit and Loss option for our example
corporation.
Click the blue "Next" button at the bottom of the screen after choosing Profit
and Loss. Choosing Balance Sheet will prompt you to click the blue "Finish"
button and move on to step 5.
STEP 3: ADD ADDITIONAL CRITERIA (OPTIONAL)
By selecting the "Customer: Job" option, you can build budgets for particular
clients and jobs if you'd like. Another option is to select "No further criteria"
and create a general annual budget.

Click the blue "Next" button at the bottom of the screen once you've made
your choice.
STEP 4: CHOOSE BUDGET CREATION PREFERENCES
Select between "make budget from scratch" or "build budget using data from
the prior year."
When making a budget, it can be beneficial and insightful to use data from
prior years. However, because our sample company is a new one, we will
pick the first one.
STEP 5: ENTER YOUR BUDGET
Now, add your monthly and account-specific budget goals. This requires
some time and consideration.
I advise using QuickBooks reports to help shed some light on your
purchasing and spending habits.

NOTE: Make your spending plan realistic. Don't just enter $5,000 in sales
per month into QuickBooks if you want to have $5,000 in sales per month.
Divide your objective into achievable, practical actions. Consider useful
marketing and advertising strategies that could assist you in achieving this
objective.
STEP 6: SAVE
When your spending begins to resemble this, it's time to save your artwork.

Simply click "Save" to keep your budget.

To see the status of your budget, you can run reports at any moment.
COMMON BUDGETING TACTICS
Guidelines for creating a budget
There are various things you can do to simplify the budget-making process
and help ensure that the budget is as precise as possible.
Use historical data whenever possible. The optimum way for forecasting
budget totals is to use actual data from the previous year rather than a best
guess; however, this is not an option for freshly created organizations.
1.Adapt your budget to your business cycle: Verify that your budget totals
accurately reflect any seasonal budget you may have. Make sure your budget
accounts for more earnings during that time of year, for instance, if you make
the majority of your income in the spring.
2.Participate in the budgeting process with your staff: If you're creating a
departmental budget, make sure to involve your staff in the planning. The
person in charge of that department is the best person to ask about charges.
3.Overestimate costs and undervalue revenue: It's always a welcome
surprise when revenue exceeds expectations; the opposite is true when costs
exceed projections. When predicting revenue, always be a little conservative
and add an extra 10% to 15% to your expenses. This might help you manage
any unforeseen expenses and maintain your spending plan.
4.Make changes as necessary: Static budgets can give your company useful
information, but if they aren't changed when necessary, they can quickly
become out of date. Make sure to frequently review your budget and make
any necessary adjustments.
TOP-LINE BUDGETTING
The simplest budgeting method is a top-line budget. A top-line budget uses
data from the previous year or the previous month to create the budget for
this year. Of course, if inflation has taken place, a top-line budget may use an
inflation factor to inflate the figures from last year or last month.
Alternatively, the prior year's or month's numbers might have reduced
slightly if the business had shrunk or hit hard circumstances.
ZERO-BASED BUDGETTING
What exactly is a zero-based budget?
The foundation of zero-based budgeting, sometimes referred to as zero-sum
budgeting, is the idea that every dollar in your budget needs to be assigned a
category. A zero-based budgeting technique enables you to see where 100%
of your revenue was spent at the end of the month.
The main distinction between a typical budget and a zero-based budget is that
the former permits surplus funds to accumulate in your checking account.
You would have to transfer those excess funds to savings, debt repayment,
investments, or some other purpose if you used a zero-based budget. To
determine the precise amount you can realistically invest based on your
salary, use an investment calculator.
A Zero-Based Budget: How Does It Operate?
When working with a zero-based budget, you must record every single dollar
spent. A zero balance budget aims to allocate every penny of your income to
predetermined categories until there is none left over. In essence, a zero-
based budget calls for your monthly revenue less your monthly expenses to
equal zero.
How to Make a Zero-Based Budget
Start by compiling a list of all the areas where you spend money each month.
These might include:
v Housing
v Transportation
v Debt, including credit card, personal loan, and school loan debt
v Savings
v Groceries
v Utilities and the internet
v Medical costs and health insurance
v Childcare
v Memberships and subscriptions to entertainment
v Personal care
v Pets
v Charitable contributions and gifts
You'll need to categorize your financial goals, whether they are for saving
money or paying off debt, in addition to your daily costs. These should also
be considered if you need to set aside money for trips or to save for a new
car.
Then, based on the amount you presently have in your checking account,
select how much you want to set aside for each distinct category. For an
accurate approximation, consult your monthly bank and credit card accounts.
One aspect of zero-based budgeting is that you calculate how much you can
spend using the previous month's income. In this manner, you avoid
depending on a future income and solely use the money that is currently in
your bank account.
Zero-based budgeting is therefore especially beneficial for customers with
changeable income.
After you've listed everything, take the income minus the expenses. If your
spendings are more than your income, you'll need to change your budget to
minimize expenses or your financial strategy to increase income. You can
attempt living a more frugal lifestyle to reduce some of your costs, or you can
work a high-paying job to enhance your income. To have more money to
save and spend, it's crucial to aim for your dream pay.
If you have any extra cash, you should categorize it. If you don't, you're more
likely to spend it on unnecessary items rather than use it to further a long-
term objective. The core of zero-based budgeting is this.
Your zero-based budget will likely need to be revised because you might
occasionally incur unforeseen costs. But it's all right! Simply modify and
adjust your $0 budget as necessary.
USING THE SETUP BUDGET WINDOW
You must enter your budget in QuickBooks after you've created one. Follow
these steps to create a new budget in QuickBooks:
1. Select Establish Budgets under Company Planning and Budgeting.
In order to create a new budget, QuickBooks opens the Create New Budget
dialog box, which is depicted in the following figure. (I bet you didn't guess
that.)
It should be noted that QuickBooks displays the Set Up Budgets window
rather than the Create New Budget dialog box if you've already created a
budget. You must click the Create New Budget button in the Set Up Budgets
window if QuickBooks does so in order to show the Create New Budget
dialog box.

The Create New Budget dialog box

2. Decide on the fiscal-year span.
Decide which fiscal year you are creating a budget for. Enter the fiscal year
in the space provided to do that. Use the buttons to change the year to 2021 if
you're planning a budget for the fiscal year of that year, for instance.
3. Determine whether to develop a balance sheet or a profit and loss
budget.
Choose the Profit and Loss radio button, click Next, and move on to Step 4 to
construct a profit and loss budget. Choose the Balance Sheet radio button,
click Finish, and move straight to Step 5 to establish a balance sheet budget.
NOTE: Keep in mind that your method for profit and loss and balance sheet
budgets differs. Budgets for profit and loss include the anticipated monthly
revenue or expenses for each account. For budgeting for balance sheets, you
budget the ending account balance, which is the final balance anticipated for
the asset, liability, or owner's equity account at the end of the month.
4. Enter additional profit and loss budget criteria in the Additional
Profit and Loss Budget Criteria dialog box (see the accompanying
figure) and then click Next.
Pick the Customer: Job radio button if you decided to construct a profit and
loss budget in Step 3. Alternatively, you can select the Class radio button to
include classes in your budget or just choose the No Additional Criteria radio
button.
Note: Enabling class tracking is a prerequisite for budgeting by class.

The Additional Profit and Loss Budget Criteria selections

5. Select whether to establish the budget from scratch or using existing
data in the Create New Budget dialog box (see the following figure).
Select the Create Budget from Scratch radio option to start building your
budget from scratch. Select the radio option labeled "Generate Budget from
Previous Year's Actual Data" to create a budget using the actual data from
last year.

Choosing whether to create a budget from scratch

6. When finished, click Finish.
QuickBooks shows the window for setting up budgets.

The Set-Up Budgets window

 CHAPTER FOUR
USING ACTIVITY- BASED COSTING
What is Activity-Based Costing?
To better understand each of your products or services' actual costs, you can assign indirect and
overhead costs using the activity-based costing method.
This approach is not time-driven, in contrast to conventional time-driven activity-based costing, which
allocates a higher portion of these costs to a more inclusive production measure, such as a run of a
product or financial quarter. The different costing formulas are illustrated in more detail below.
Activity-based costing, or ABC for short, could be the most ground-breaking accounting idea to emerge
in the last 20 years. I need to fix it, though. Activity-based costing is the greatest new accounting idea
to have been introduced in the preceding 20 years.
The fact that ABC gives businesses a better way to forecast sales of goods
and services is more important than you might think. The problem with many
firms is that operating or overhead expenses don't directly correspond to
products or services. Without a properly distributed distribution of overhead
or operating costs, businesses cannot efficiently identify which items produce
income and which do not.
To track your operating expenditures, simply continue using a strong, solid
chart of accounts. 90% of the conflict is caused by this.
You should also take care of one or two small extras:
The QuickBooks Class Tracking feature is enabled. You can use Class
Tracking to classify income and expense transactions into specific
classes in addition to income and expense accounts.
You specify the class into which an expense falls when you record it.
You can see that all it takes is using classes that relate to your activity,
aren't you right?
Using classes is simple once class tracking is enabled.
To measure profitability, you create classes for the product lines and service
lines you wish to track. If possible, you can classify transactions as belonging
to a certain class as they are being recorded or after the fact (if you need to
fiddle with the activity and cost driver math).
Setting up your classes for ABC
For any good or service, you wish to gauge the profitability of, you set up a
class.
For instance, in the fictitious hot-dog stand enterprise, you set up two classes:
one for standard hot dogs and one for chili dogs.
Simply type the class name in the class box that displays in the window that
you use to record invoices, draw checks, and create journal entries to create a
class. A different option is ListsClass List. Click the Class button at the
bottom of the Class List window when QuickBooks shows it, then select New
from the menu that appears.
To describe the new class, use the New Class dialog box that displays, as
shown.

The New Class dialog box

Various Revenue Amounts
To classify income as belonging to a particular class, use the Class box that appears in the Create
Invoices window and the Enter Sales Receipt window. These two windows are used to enter sales data.
On a bill that displays sales of hot dogs, for instance, you could enter the class as Regular Dog. If a
sales receipt shows that chili dogs were sold, you may enter the class as "Chili Dog." This picture
displays the Create Invoices window for logging the day's sales of chili dogs.
The Create Invoices window
Near the top of the pane, next to the Customer:Job drop-down list, is the
Class drop-down list. Additionally, it can be found in the description of the
item or items being invoiced in the first column, on the far left side.
Classifying the cost of expenses
You may also utilize the Class column (found on the Expenses tab, as shown)
to specify the specific service or product line that an item belongs to when
you record a check that pays for an expense that falls under a specific
activity. The Write Checks window may look like this to record a $1,000 rent
expense for the chili dog product line.

The Write Checks window

The right side of the Expenses tab is where you'll see the Class column.
After-the-fact classifications
You might not be able to classify a cost or income amount at the time the
original transaction is recorded in some cases. In the hot-dog stand example,
you most likely won't be able to decide how to split the payroll expense
between regular hot dogs and chili dogs until after you have paid the staff.
The same can be said for material costs. You must first know how many
regular hot dogs and how many chili dogs you sold before assigning or
tracking supply and wages.
The Make General Journal Entries box is used in certain circumstances to
classify previously unclassified expenses. The example shows how to
allocate $4,000 in previously categorized salary expenses between the normal
and chili dog product lines.

The Make General Journal Entries window

The Make General Journal Entries window's right side is where you'll find
the Class column.
Producing ABC reports
You can create a profit and loss statement by class that displays the
profitability-by-product-line information after allocating as much overhead as
you can to the product or service lines.
TIP: Select ReportsCompany & FinancialProfit & Loss by Class to generate a
profit and loss statement by class.
 CHAPTER FIVE
SETTING UP PROJECT AND JOB
COSTING SYSTEMS
How to set up job costing in QuickBooks
The examples that follow are based on QuickBooks Online, which only
allows Pro or Advanced members to see job costing. Users of Simple Start or
Essentials must upgrade in order to monitor the financial success of certain
initiatives.
If you are using QuickBooks Desktop, the exact wording may differ slightly,
but we'll also include advice specific to that system.
Step 1: In the Account Settings, enable Job Costing.
Starting on the Home screen in QuickBooks Online Plus or Advanced will
enable you to compile a list of active projects. Select Account and Settings
from the list by clicking the "Gear" symbol in the top-right corner of the
Business Overview screen.

Activate custom transaction numbers

You can choose specific transaction numbers from there on the Sales tab.
This will eventually be required to monitor and evaluate currently processed
invoices.
Keep track of costs by client
Now that you've reached the Spending tab, you can tell QuickBooks that you
want to keep track of expenses per customer. Additionally, you can bill
expenses to certain clients by selecting that option from the Bills and
Expenses menu.

Make automatic invoices active (optional)

Step 1. Any estimates you produce can be automatically converted to client
bills at a later stage. Open Advanced options, go to Automation settings, and
select "Automatically invoice unbilled activities" to make this option active.
Some contractors might not want to activate this setting.
Save your work after completing all of these procedures.
Step 2: Create projects and customers
You can examine a more in-depth view of each work in your Projects list
now that the fundamental job costing setup has been established. But first, if
a customer doesn't already exist, you must create one before you can assign
the project to them.
Step 3: Create a customer
Choosing "Get paid & pay" and then "Customers" from the menu will allow
you to add a new customer. You'll find a button to add a new customer. A
customer list from an Excel or Google Sheets file can be imported by clicking
the drop-down arrow.
1.Add the job
You can now build the task for which you wish to keep tabs on costs and
revenue. Projects can be found under "Business overview" in the left-hand
menu. This will show a list of all active projects along with some summary
information regarding earnings and outlays.
To start a new project, select "New project."
It's possible that some contractors are already tracking jobs as "Sub-
customers." If QB is configured in this way, select "Convert from sub-
customer" by clicking the arrow next to the button.

At this point, you can browse particular clients and then get a more detailed
breakdown of each job the client is currently working on or has already
finished.
For instance, you might have completed some exterior repairs for a retailer
and are currently working on a project to expand the client's display area.
Using QuickBooks Online View work costing information by choosing the
"Projects" option from the Business Overview menu.
Desktop QB: Pick the "Jobs" label.
Step 2: Produce goods and services
Applying job expenses to each individual project is your next duty after
finishing the customer setup.
Create a list of goods and services
By creating a list of goods or services in QuickBooks, you can accomplish
this. As a result, you can precisely tailor the job expense categories to your
needs. For example, the external trim phase can develop categories for siding,
exterior wall treatments, stucco, brick veneer, etc.
Products & Services can be found in the "Get paid & pay" menu on the left or
in the Lists menu in the upper-right corner under the "Gear" icon.

You can build a project estimate after setting up your items, which should
include the billable labor cost per employee deployed on the assignment.
Step 3: Prepare a job estimate
From any QuickBooks screen, choose the QuickCreate option. It could show
up as a plus sign in the upper left or as "+ New" in the top center of the page.
Once you click on the plus sign, a dropdown menu will appear with the
option to produce invoices, checks, costs, and estimations. From the
selection, choose "Estimate."
Give the job an estimate.
From the Customer list on the estimate screen, choose the appropriate job.
Even while you can generate individual estimates for each job, most
contractors find it simpler to create a single estimate for the entire project,
even if they don't intend to invoice for the whole thing at once. We'll
demonstrate how to slice and dice the estimate once we get to the billing
stage in order to invoice for segments of the job for progress billing.
Add goods and services to the estimate.
You can enter materials and labor expenses on each line of the estimate by
including the service date, the type of good or service, a description, the
quantity, the rate, and the dollar amount, which can be marked as taxable.
You can specify in the detail box for a certain good or service if outside
vendors are used for the job done or the materials procured.

Save the estimate once you've entered all the data. This will give you the
option to select it during the billing process. At this stage, you can email the
consumer for their consent if you need it.
Now, each customer will receive all relevant information about expenses and
future income. Additionally, you can see expenditures and income by task or
project. (In some versions of QuickBooks, "sub-customer category" is used in
place of projects.)
Step 4: Produce invoices while working
With QuickBooks, you can instantly turn an estimate into a single invoice or
progress bills or build invoices from scratch. You can save a ton of work later
on by making a parent estimate for each project in this situation.
Turn an estimate into an invoice
The "+ New" menu's "Invoice" option will open a brand-new, blank invoice.
the Project from the "Customer" drop-down box following that. When you
construct this invoice, QuickBooks will automatically ask you if you want to
include the estimate you previously created. Select "Add."

Select the invoice amount.

You will be prompted by a page to choose the proportion of the Estimate you
wish to include in the invoice.
If you're not employing a straight-line % everywhere, you can alternatively
choose "Custom amount for each line." The amount billed for each line item
can be changed in QuickBooks.

Step 5: Create a job costing report

Where QuickBooks job costing really helps your bottom line is at the work-
in-progress stage of a project. Using QB reports, you can see how the job is
doing in terms of profitability at any time before and after completion.
The "Reports" menu under "Business overview" can be used to see a "Profit
and Loss" report. Once you've added custom filters, click the "Customize"
option. When you reach the "Customer" section, scroll down to see a list of
all the jobs and their respective costs.

You can track earnings and costs for a specific job using this report in
snapshot mode. For instance, you may complete the project in a month by
repeating the procedure and carrying it out all the way to completion, when
the job's ultimate profit margin is produced.
Remember that the report will vary based on the accounting system that your
organization employs. When compared to accrual basis, cash basis simply
records income when it is received.
Also take aware that QuickBooks does not mention the customer or the job
on the report itself, even if you pick that job. Add the job name to each
report's Notes section if you're producing a dozen job costing reports on
individual projects.
FINANCIAL MANAGEMENT
 CHAPTER ONE
RATIO ANALYSIS
Ratio Analysis Definition
You have a wall of figures in your financial statements that you must sort through. By applying ratio
analysis, the data can be more clearly understood. This approach, which makes use of ratios, can be
used to analyse standard financial documents like balance sheets, cash flow statements, and income
statements. Ratios can be used to monitor a variety of factors, including:

Debt: Amounts owed by your business.

Profit margin: The proportion of income that remains after deducting
expenses
Inventory turnover: How frequently do you sell off existing product
inventory and replace it with fresh stock?
In a ratio analysis, you monitor particular ratios over time to see whether
your business is growing or shrinking. Ratios can also be used to identify
areas that can be improved. You can then allocate your resources to where
they are most required. Example of Ratio Analysis
To assess Motorola's financial status in 2002 in comparison to its rivals, a
financial and market analysis of the company was conducted. Using financial
ratios, this analysis was conducted. However, only two of the market
segments in which Motorola competes were included in this study.
Telecommunications and the semiconductor industries are two of these. The
following were the various ratios determined:
What does "liquidity ratio" mean?
The ability of a corporation to meet its short-term debt commitments is
assessed using a liquidity ratio, a sort of financial ratio. The indicator aids in
determining whether or not a corporation can use its liquid or current assets
to pay for its immediate liabilities.
The current ratio, quick ratio, and cash ratio are the three liquidity ratios that
are most frequently utilized. For each of the liquidity ratios, the numerator of
the equation is the quantity of liquid assets, and the denominator is the
amount of current liabilities.
Ratios above 1.0 are desired due to the ratio's structure, which places assets
on top and liabilities at the bottom. With a ratio of 1, a business may fully
cover all of its current liabilities with its cash on hand. A ratio of less than 1
(for example, 0.75), would indicate that a business is unable to pay its present
obligations.
A ratio higher than 1 (for example, 2.0) would indicate that a business can
pay its present obligations. A corporation may actually cover its present
liabilities twice over with a ratio of 2.0. If they had a ratio of 3, they could
pay their existing liabilities off three times, and so on.
Types of Liquidity Ratios
1. Current Ratio
Current Ratio = Current Assets / Current Liabilities
The most straightforward liquidity ratio to compute and explain is the current
ratio. The current assets and current liabilities line items on a company's
balance sheet are clearly visible to anybody. You can calculate the current
ratio by dividing current liabilities by current assets.
2. Quick Ratio
Quick Ratio = (Cash + Accounts Receivables + Marketable Securities)
/ Current Liabilities
A more stringent liquidity test than the current ratio is the fast ratio. Both are
comparable in that the denominator is current liabilities and the numerator is
current assets.
The fast ratio, however, only takes specific current assets into account. It
takes into consideration more movable assets including cash, receivables, and
marketable securities. Because they are less liquid than current assets, such
inventory, they are excluded. Therefore, the fast ratio is a better gauge of a
company's capacity to meet its immediate obligations.
3. Cash Ratio
Cash Ratio = (Cash + Marketable Securities) / Current Liabilities
The liquidity test is extended by the cash ratio. This ratio only takes into
account a company's cash and marketable securities, which are the most
liquid assets. They are the assets that a business can use to meet short-term
obligations the quickest.
The current ratio, fast ratio, and cash ratio can be thought of as easy, medium,
and hard assessments of liquidity, respectively.
Important Remarks
An appropriate ratio will vary between the three ratios because they depend
on the numerator employed in the equation. It makes sense because the
current ratio takes into account all current assets, whereas the cash ratio
simply takes into account cash and marketable securities in the numerator.
Consequently, a good current ratio will be greater than a good fast ratio. Both
will exceed the permitted cash ratio. An organization might, for instance,
have a current ratio of 3.9, a quick ratio of 1.9, and a cash ratio of 0.94.
Depending on the company, analysts and investors may view all three as
strong.

Liquidity ratios are crucial since they:

1. Show whether you can pay your short-term obligations.
Investors and creditors use liquidity measures to assess a company's ability to
pay short-term obligations and to what extent. Although it isn't ideal, a ratio
of 1 is preferable to one that is less than 1.
Higher liquidity ratios, like 2 or 3, are preferred by creditors and investors. A
corporation is more likely to be able to pay its short-term debts if the ratio is
higher. If the ratio is less than 1, the business may be in the midst of a
liquidity crisis and have negative working capital.
(2) Establish creditworthiness
When considering whether or not to offer credit to a company, creditors
consider liquidity measures. They want to ensure that the organization they
lend money to will be able to repay them. Any indication of financial
instability may preclude a corporation from receiving loans.
3. Determine whether a deal is worth making.
To determine whether a business is financially sound and deserving of their
investment, investors will examine a company using liquidity ratios. The rest
of the business will also have limitations due to working capital concerns. A
business must have the financial flexibility to cover its immediate
obligations.
Low liquidity ratios are concerning, although the adage "the higher, the
better" is only partially true. Investors may at some point wonder why a
company's liquidity ratios are so high. A business with a liquidity ratio of 8.5
will undoubtedly be able to meet its short-term obligations, but investors
could find that to be excessive. A ratio that is unusually high indicates the
company has a lot of liquid assets.
Investors and analysts might think that a company's cash ratio of 8.5 was too
high. The company has an excessive amount of cash on hand, which is only
generating the interest the bank gives to store the company's cash. It may be
argued that the business should use the funds for other projects and
investments that have a higher chance of paying off.
With the use of liquidity ratios, it is possible to strike a compromise between
a company's ability to pay its debts on time and inefficient capital allocation.
The optimum use of capital should be made in order to maximize the firm's
value for shareholders.
ACID-TEST RATIO
The acid-test ratio (ATR), usually referred to as the fast ratio, determines how
well current assets can cover current obligations to determine a company's
liquidity.
Only the most liquid current assets that can be converted to cash in 90 days or
less are used in the quick ratio.
KEY LESSONS
The fast ratio, often known as the acid test, entails examining a
company's balance sheet to determine whether it has enough cash on
hand to pay down its current debt.
Since the acid test does not include inventory, which might be
challenging to swiftly liquidate, it is seen to be more useful than the
frequently used current ratio.
A corporation should ideally have a ratio of 1 or above, indicating that
it has adequate cash on hand to cover its obligations.
A ratio that is too low can imply that a business is cash-strapped, but
in certain circumstances, as with retailers, it simply indicates that it is
reliant on inventory.
A ratio that is too high could indicate that a business is hoarding cash,
but in some circumstances, like with some tech firms, this is purely
industry-specific.
What is Required to Determine the Acid Test Ratio?
The balance statement of a corporation contains all the data required to
calculate the acid-test ratio, which includes the following:
Current assets, or everything that can be turned into cash within a year:
Ø Cash and cash equivalents
Ø Marketable securities
Accounts receivable

The sum of a company's debts and commitments that are due within a year is
known as current liabilities:
Short-term debt
Accounts payables

Accrued liabilities and other debts

Acid-Test Ratio Calculation
The quick ratio is computed as follows by adding up cash and equivalents,
accounts receivables, and marketable investments, and dividing the total by
current liabilities:

Interpreting the Acid Test Ratio

Companies should ideally have a ratio of 1.0 or above, which indicates that
the company has sufficient liquid assets to pay all short-term debts or
invoices. Other aspects, such as how quickly a business collects its accounts
receivable, when it buys assets, and how bad-debt allowances are handled,
might affect the acid-test ratio. High acid-test ratios may exist for some IT
organizations, which is not necessarily a bad thing but rather suggests that
they have a lot of cash on hand.
Due to the fact that it excludes some of the components utilized in the current
ratio, commonly referred to as the working capital ratio, the acid-test ratio is
a more conservative indicator of liquidity. The ability of a business to fulfill
its short-term obligations (debt and payables), such as the current ratio, is one
example (cash, inventory, receivables). Because it excludes inventory, which
could take longer to liquidate than other assets, the acid-test ratio is more
cautious than the current ratio.
TIP: The required acid-test ratio for a corporation. Businesses should be
approached cautiously since they lack the liquid assets necessary to cover
their present debt commitments or invoices if their ratio is less than 1.
The acid test is a quick and dirty calculation, so if it looks to be failing, other
ratios that incorporate more balance sheet components, including the current
ratio, should be assessed as a more thorough check on liquidity.
What is the ratio of inventory turnover?
The inventory turnover ratio gauges how quickly a current batch of stocks are
replaced and converted into sales. A greater ratio shows that the company's
product is popular and moves rapidly, which lowers inventory management
costs and boosts profits.
The ratio of inventory turnover varies by industry. A clothing business, for
instance, might have a turnover of 5 to 8, whereas an automobile parts
supplier might have a turnover of 45 to 50.
With the help of this activity ratio formula, you can determine how frequently
a company that keeps inventory has sold out of all of its stock within a single
accounting period.
Inventory Turnover Ratio = Cost of Goods Sold / Average Cost of Inventory
Example: Binge Inc.'s cost of goods sold is $10,000, and the average cost of
inventory is $5,000.
As a result, one can determine the inventory turnover ratio using the formula
below:

= $10,000 / $5,000
Ratio of Inventory Turnover = 2.
Twice in one fiscal year, the available stock was sold out. In other words, it
takes Binge Inc. six months to sell all of its stock. A business should not have
excessive amounts of cash on hand. In order to raise the inventory turnover
ratio, one must therefore take the essential steps.
#2 – Total Assets Turnover Ratio
The net sales in relation to total assets are calculated using the total assets
turnover ratio. In other words, it shows how well a company can make
money. It aids investors in comprehending how well businesses use their
assets to generate money.
Overall Assets Sales / Average Total Assets is the turnover ratio.
As an illustration, PQR Inc. ended its fiscal year with $8 billion in revenue.
The total assets were $1 billion at the beginning of the year and $2 billion at
the conclusion.
($1 billion + $2 billion) / 2 equals average total assets. $1.50 billion
Total Assets Turnover Ratio is calculated as below:

= $8,000,000,000 / $1,500,000,000
Ratio of Total Asset Turnover = 5.33
A greater total asset turnover ratio reflects the company's effective operation.
#3 - Turnover Ratio for Fixed Assets
The fixed assets turnover ratio assesses how effectively a company uses its
fixed assets. It demonstrates how the business generates revenue using fixed
assets. The fixed assets turnover ratio only considers the company's fixed
assets, as opposed to the total assets turnover ratio, which also considers all
assets. Therefore, overinvestment in any fixed assets, such as a plant or
equipment, to mention a few, is the cause of a declining fixed assets turnover
ratio.
Static Assets Sales / Average Fixed Assets is the turnover ratio.
For instance, Sync Inc.'s net sales for the fiscal year were $73,500. The net
fixed assets at the start of the year were $22,500. Furthermore, the fixed
assets cost $24,000 at the end of the fiscal year after depreciation and the
addition of new assets to the company.
($22,500 + $24,000) / 2 Average Fixed Assets
Fixed Assets on Average = $23,250.
One must calculate the fixed assets turnover ratio as below:

= $73,500 / $23,250
Turnover Ratio for Fixed Assets = 3.16
#4 - Turnover of Accounts Receivable
The accounts receivables turnover ratio demonstrates how effectively a
company extends credit to its clients and collects debts. When calculating the
accounts receivables turnover ratio, only credit sales—not cash sales—are
taken into account. A greater percentage shows that consumers are paying on
time, which supports the maintenance of cash flow and the payment of the
company's debts, staff salaries, etc. Since the debts are paid off rather than
written off, a greater accounts receivable turnover ratio is a positive indicator.
It demonstrates a sound company strategy.
Net Credit Sales / Average Accounts Receivables = Account Receivables
Turnover Ratio
An illustration is Roots Inc., a distributor of replacement parts for heavy
equipment. Major manufacturers serve as all of its clients, and credit is used
in every transaction. For the fiscal year that just concluded, Roots Inc. had a
net credit sale of $1 million and average receivables of $250,000 annually.
Following are the formulas for calculating the accounts receivable turnover
ratio: -
= $1,000,000 / $250,000
Account Receivables Turnover Ratio: 4
Roots Inc. can collect its typical receivables four times each year. In other
words, the average receivables recover on a quarterly basis.
Benefits of Activity Ratios
Activity ratios are useful for comparing companies in the same
industry.
Using the appropriate activity ratios, one can identify the problem. It
can make the necessary adjustments to the way the firm runs.
provides financial data in an easy-to-understand format, which
simplifies analysis and ultimately aids in decision-making.
Investors can rely on activity ratio information because it is precise
and based on data.
 CHAPTER TWO
ECONOMIC VALUE-ADDED ANALYSIS
EVA is a statistic used to assess how well organizations are performing
financially. It is based on residual wealth, which is calculated by deducting a
company's cost of capital from its operational profit and then cash-basis tax-
adjusting the results. EVA is also frequently referred to as economic profit
because it tries to determine a company's true economic profit. This measure
was developed by Stern Value Management, which was first incorporated as
Stern Stewart & Co.
KEY LESSONS
EVA, commonly referred to as economic profit, tries to determine a
company's actual economic profit.
EVA is a metric used to assess the value a business creates from
capital invested in it.
EVA, on the other hand, is strongly reliant on invested capital and is
best suited for organizations with a lot of physical assets; enterprises
with intangible assets, such those in the technology industry, might not
be excellent choices.
Understanding Economic Value Added (EVA)
The incremental difference between a company's rate of return (RoR) and its
cost of capital is called EVA. It basically serves as a gauge for the value that
investments in a firm produce. An organization is not making money from
the capital invested in the firm if its EVA is negative. A positive EVA, on the
other hand, demonstrates that a business is making money off of the capital
put in it.
The formula for calculating EVA is:
EVA = NOPAT - (Invested Capital * WACC)
NOPAT = Net operating profit after taxes
Invested capital = Debt + capital leases + shareholders' equity
WACC = Weighted average cost of capital
Advantages and Disadvantages of EVA
EVA evaluates a firm's management based on the premise that a
company can only be profitable when it generates wealth and returns
for its shareholders, which necessitates performance above its cost of
capital.
EVA is a very helpful performance indicator. The inclusion of balance
sheet components in the computation reveals how and where a
corporation generated value. As a result, managers are compelled to
consider assets and costs while making managerial decisions.
However, the EVA calculation is most effective for stable or mature
organizations with a lot of assets because it strongly depends on the
quantity of capital spent. Businesses with intangible assets, such those
in the technology industry, might not make suitable candidates for an
EVA assessment.
Ways to create value added:
Ø Value addition encourages people to buy products and boosts a
business's bottom line. There are numerous ways for businesses to
gain a competitive edge and increase the perceived value of their
products, including:
Ø Including elements or extras that distinguish the product from
competing offerings
Ø Putting a popular brand name on an unknown or generic product
Ø Creating a new product in a novel or imaginative manner
Ø Providing perks like free warranties or technical help with the
purchase
Ø Using catchy language like "sound experience" rather than just
"wireless speakers"
Ø Attractive packaging and branding
Value-added types and their formulas
Depending on what a corporation is attempting to calculate, there are more
sophisticated methods of calculating value added that companies use. The
most typical value-added kinds and their accompanying formulas are shown
below:
Gross value added
The economic contributions of goods or services generated in a region,
industry, or sector are measured by the term "gross value added" (GVA). The
cost of the raw materials used in manufacturing is deducted from the GVA,
which places a monetary value on the quantity of goods or services produced
in that region. Taxes and subsidies have an effect on GDP's gross domestic
product (GVA), so they are taken into account as well.
The GVA formula is:
GVA = GDP + SP - TP
Where the variables are:
SP = Subsidies on products
TP = Taxes on products
Economic value added
The incremental difference between a company's cost of capital and rate of
return is used to calculate its economic value added (EVA), which is a
measure of its financial success. EVA is a tool used by experts to assess the
value a firm creates from the capital put in it. Since it determines a company's
actual economic profit, businesses frequently refer to it as economic profit.
Companies having a lot of assets and businesses with intangible assets do
better using this approach. A negative EVA indicates that the company is not
making money from its investments, whereas a positive EVA indicates that
the company is making money from its investments.
The formula for EVA is:
EVA = NOPAT − (CE ∗ WACC)
Where the variables are:
NOPAT = Net operating profit after taxes
CE = Capital employed or cash invested
WACC = Weighted average cost of capital
Market value added
The difference between the capital invested by all investors, including
shareholders and debt holders, and the company's market value is known as
market value added (MVA). MVA can demonstrate a business' capacity to
grow shareholder value over time.
A low MVA indicates that management's investments and activities have
decreased the value of investors' capital, while a high MVA demonstrates that
management has raised investors' capital with potent operational capabilities.
A negative MVA demonstrates management's reversal of the capital value of
investors. The market value of all debt, equity, and capital claims is
determined using the MVA formula.
The formula for MVA is:
MVA = V − K
Where the variables are:
V = the market value including equity and debt
K = total amount of capital invested
Cash value added
The amount of cash that a business can earn via its activities above and
beyond its cost of capital is measured as cash value added (CVA). Investors
can see a company's ability to generate cash flow and earn liquid profits by
looking at its CVA. The CVA formula is typically used by professionals who
have a specialized interest in and knowledge of CVA. CVA can be calculated
directly or indirectly.
This is the CVA direct formula:
CVA = Gross cash flow − economic depreciation − capital charge
Where the variables are:
Gross cash flow = adjusted profit + interest expense + depreciation
Economic depreciation = Weighted average cost of capital (WACC
Capital charge = cost of capital ∗ gross investment
The CVA indirect formula is:
CVA = (CFROI − cost of capital) ∗ gross investment
Where the variables are:
CFROI = cash flow return on investment as (gross cash flow − economic
depreciation) ÷ gross investment
Gross investment = net current assets + historical initial cost
How to calculate value added
Which formula you employ and the data you are working with will determine
the precise steps you take to calculate value added. However, all of the
algorithms use the same general methodology to determine value added.
1. Select the appropriate formula.
Think about the information you need to know, decide which formula will
give it to you, then collect information on the variables. For instance, you
would need to gather the total amount of capital invested and the market
value of your company, including stock and debt, in order to determine the
MVA for your business.
2. Adhere to the formula
Replace the data in the formula with the data you have using the formula you
choose. If MVA is calculated using the formula MVA = V K, for instance,
you would change V to your market value, which includes equity and debt,
and K to the entire amount of capital invested. Your equation would resemble
this: MVA = $12 million minus $8 million.
3. Determine the formula.
Do the mathematical operations specified in the formula after entering your
own values into it. When MVA is equal to $12 million minus $8 million, you
must deduct $12 million from $8 million to account for the $4 million
difference. Your MVA, or market value added, is $4 million as a result.
Example of value-added calculation
You can use the steps below to determine your company's economic value
added:
1. Compile information
Examine the EVA formula and compile the data for NOPAT, CE, and
WACC for your business. To figure out a total value for each of these things,
you might need to conduct some of your own math. In this illustration, your
company's NOPAT is $70,00, your CE is $30,000, and your WACC is
8.53%.
It goes like this:
EVA = NOPAT − (CE ∗ WACC)
Where:
NOPAT = Net operating profit after taxes
CE = Capital employed or cash invested
WACC = Weighted average cost of capital
2. Replacement
Now that you have all the data about your business to put in the calculation,
replace the values there with those of your business. For instance:
As opposed to EVA = NOPAT (CE WACC), EVA becomes EVA = $70,000
($30,000 8.53%).
3. Do the maths
Calculate the calculation to arrive at a total using the details of your business.
To begin, use the formula:
EVA = $70,000 − ($30,000 ∗ 8.53%
Add the values in parenthesis together:
EVA = $70,000 − ($2,559)
The remaining values are subtracted:
EVA = $67,441
An EVA with Debt
Here is a QuickBooks example of a modified EVA technique. Let's say that
you, the company owner, visit the bank and obtain a second $100,000 loan.
Now imagine that the company distributes this sum as a dividend to the
company's owner (you). You would receive this income statement and
balance sheet if the transaction had taken place at the beginning of the year.
A Simple Income Statement:
Ø Sales revenue =$150,000
Ø Less: Cost of goods sold=30,000
Ø Gross margin=$120,000
Operating expenses
Ø Rent=5,000
Ø Wages =50,000
Ø Supplies=5,000
Ø Total operating expenses=60,000
Ø Operating income=60,000
Ø Interest expense=(20,000)
Ø Net income=$40,000This table reflects the additional loan.
A Simple Balance Sheet
Cash=$25,000
Inventory=25,000
Current assets=$50,000
Fixed assets (net)=270,000
Total assets=$320,000
Liabilities
Accounts payable=$20,000
Loan payable=200,000
Owner’s equity
S. Nelson, capital=100,000
Total liabilities and owner’s equity=$320,000
That is to say, the only differences between the business's description in
Tables 2-1 and 2-2 and its description in these two tables are that the firm has
$100,000 more in debt and $100,000 less in owner's equity, and the
additional $100,000 in debt results in an additional $10,000 in interest costs
annually. That sounds fairly simple, don't you think?
The capital charge for this newer, more heavily indebted corporation is
estimated in the table below. Examine the capital charge's components once
more. There is no capital charge for the trade vendors' contribution to the
company's capital structure, which amounts to $20,000 in trade credit in the
form of accounts payable.
The bank loan fee has significantly increased in the new, more heavily
leveraged corporation. The company is now bearing a $200,000 loan. The
capital fee on the loan increases to $20,000 each year at 10% interest.
Estimating the New Capital Charge:
Trade vendors ($20,000 @ 0 percent)=$0
Bank loan ($200,000 @ 10 percent) =20,000
Owner’s equity ($100,000 @ 20 percent) =20,000
Adjusted capital charge =$40,000
The equity capital charge for the ultimate owner also alters: It decreases. The
20% capital fee drops to $20,000 per year when owner's equity is reduced to
just $100,000.
A $40k adjusted capital charge is the result of adding up all the small items.
Please keep in mind that this capital charge represents the cost of the new,
highly leveraged enterprise.
The EVA alters for this new, more heavily indebted business. The business's
adjusted income, which is determined by adding the $20,000 in interest
expenses to the $40,000 in net income, is $60,000. By deducting the $40,000
capital expense from the $60,000 in adjusted income, you can determine the
EVA. EVA totals $20,000 as a consequence.
Naturally, as the business's level of leverage increases, the EVA doubles.
The more difficult EVA formula can be helpful, as seen by this example. The
example recognizes more clearly how EVA happens when a company
generates profits above capital expenses.
 CHAPTER THREE
NUTSHELL GUIDE TO CAPITAL
BUDGETING
Every business faces challenges when allocating capital or funds. You frequently have an endless
supply of ideas and opportunities despite your limited resources.
To put it briefly, capital budgeting enables you to sort through all of these options. Utilizing capital
budgeting, you can respond to inquiries like the following: Should I invest in a brand-new delivery
vehicle or upgrade that crucial piece of machinery that the factory depends on? Should we invest in the
structure where our offices are situated? Or should we purchase the rival company's assets simply
because they are for sale?

Capital Budgeting: What Is It?

In capital budgeting, projects that improve a business are chosen. Almost
everything, including the acquisition of land or the purchase of fixed assets
like a new truck or machinery, can be included in the capital budgeting
process.
Businesses are often compelled—or at the very least encouraged—to invest
in initiatives that will boost their profitability and, in turn, the wealth of their
shareholders.
However, in addition to project- and company-specific considerations, other
factors also affect the rate of return that is regarded acceptable or
unsatisfactory.
For instance, a firm would frequently authorize a social or philanthropic
project based less on the rate of return and more on its goal to promote
goodwill and give back to the community.
KEY LESSONS
Investors estimate the worth of new investment projects using capital
budgeting.
Payback period (PB), internal rate of return (IRR), and net present
value (NPV) are the three methods of project selection that are most
frequently used (NPV).
How long it would take a business to generate enough cash flow to
recoup the initial investment is determined by the payback period.
The predicted return on a project is measured by its internal rate of return; if
it exceeds the cost of capital, the project is good.
The net present value, which compares a project's profitability to alternatives,
is likely the most useful of the three techniques.
Some of the characteristics of capital budgeting are:
Since it relates to making decisions that demand significant sums of
money, large investments
Irreversible judgments are ones that can't be changed after being made
regarding big sums of money.
Long-term impact on profitability because the choices you make will
have an impact on the company's prospective earnings in the present
and the future. Depending on the performance of your company, the
period could last from one year to 20 years or more.
The business commits to expenditures like interest, insurance, or
monitoring during this procedure, which has an impact on the cost
structure.
Because capital budgeting procedures take profit-generating
investments into account and have an impact on a company's
expansion, it has an impact on competitive strength.
The difference between a good decision and a bad one might mean the
difference between the company's spectacular growth and its demise.
With this in mind, a manager must pick a project that offers a rate of return
greater than the expense of funding a certain project, and they must evaluate a
project in terms of cost and benefit.
Capital Budgeting Process
The steps of the capital budgeting process are as follows:

1.Idea Generation
The creation of sound investment ideas is the process's most crucial phase in
capital budgeting. These investment suggestions may originate from senior
management, any division or functional area, staff members, or sources
outside the organization.
2.Analyzing Individual Proposals
Because the choice to accept or reject a capital investment is dependent on
such an investment's predicted cash flows, a management must gather
information to forecast cash flows for each project in order to establish its
expected profitability.
3.Planning Capital Budget
Following the timing of a project's cash flows, the availability of corporate
resources, and a company's overall strategies, an entity must give priority to
profitable ventures. Individually promising projects might not be beneficial
strategically. Scheduling and prioritizing projects is crucial due to challenges
with finances and other resources.
4.Monitoring and Conducting a Post Audit
All capital budgeting choices need to be followed up on or tracked by a
manager. Managers should make a comparison between actual and projected
results and give explanations for any discrepancies. A thorough post-audit is
therefore necessary to identify systematic forecasting inaccuracies and should
improve business operations.
BUSINESS PLANS
 CHAPTER ONE
ASSESSMENT OF PROFIT-VOLUME-COST
The three pieces of data needed to conduct profit-volume-cost analysis are sales revenue, gross margin
percentage, and fixed expenses, as was previously stated. Finding these pieces of information is
typically not difficult if you've been using QuickBooks. The line items that appear in a QuickBooks
revenue statement do not, however, completely match the information provided.
1.Sales revenue
You wish to test different sales revenue levels, thus utilize the formula's sales
revenue levels as a starting point. They most likely reflect potential or even
likely levels of sales revenue for your company. As a result, QuickBooks is
not where the sales revenue numbers actually originate. You might wish to
look at previous income statements to figure out what levels of sales revenue
are reasonable or likely. The formula's inputs don't actually come from a
QuickBooks income statement; they are most likely merely educated guesses.
2. Gross margin percentage
As previously explained, the gross margin % is computed by deducting your
variable costs from your sales revenue, dividing the result (which is the gross
margin), and multiplying the result by the sales revenue. The costs of the
goods you sell, such as inventory, commissions, shipping, and comparable
expenses, are included in the variable costs.
1.Here are a few examples to review because figuring out the gross
margin percentage can be a little perplexing the first few times you do it:
For example, if you sell $100,000 boats and your material, labor, and
commission costs come to $40,000 per boat, you can use the calculation
($100,000 - $40,000) $100,000 to determine your gross margin %.
The result of the equation is 0.6, or 60%, which is the gross margin
percentage of the boat-building industry.
2.Tax return service: Assume that you run a personal service company
where you make a career by preparing tax returns. Assume further that the
only variable cost is the $40 fee you must pay to the tax software provider for
the return, which you charge $200 for each small-business tax return. In this
instance, you use the formula to determine the gross margin percentage.
($200 – $40) ÷ $200
The result of this formula is 0.8, or 80%. The gross profit percentage in this
instance for your tax return preparation company is 80%.
The main idea is that variable expenses fluctuate according on sales income.
If there is a sale, the costs are varied. Variable costs are not incurred if no
sales are made.
What does this mean, then? The cost of goods sold (COGS) figure that
appears on your QuickBooks income statement is usually equal to the
variable costs. If you run a firm where you resell merchandise, this COGS
number likely includes the inventory products you sell in addition to other
costs like freight and sales fees.
As a result, you can get the majority or all of the variable cost data directly
from the QuickBooks income statement.
Note: The COGS number listed in the QuickBooks revenue statement might
need some adjustment. The costs you've included in the COGS portion of
your income statement may not all be variable costs, so keep in mind that
variable costs are those that change with sales. In reality, some of the
expenses shown in the section of your income statement devoted to ordinary
operating expenses are changeable.
As a result, you might wish to consider the expenses listed in your income
statement's COGS and operational expenses sections. Make some tweaks if
you find that the COGS value isn't a reliable indicator of variable costs.
Naturally, a fixed cost that is part of the COGS number needs to be deducted.
The COGS figure may also need to include a variable cost that is included
with the other operating expenses.
3.Fixed costs
All of your other nonvariable costs are included in fixed costs. Simply put,
fixed costs are considered fixed because they are unaffected by sales volume.
Paying rent on a building or factory, paying permanent employees' salary,
incurring overhead charges for insurance, and other similar expenses are
examples of fixed costs.
Returning to the examples of the boat building firm and the tax return
preparation service, we can see how fixed costs operate and are calculated:
1.The company's overhead in the boat-building industry is more than
$160,000. This sum may comprise $80,000 for the business where you
construct your boats and $80,000 for the salaries of two artisans whom you
retain the services of whether or not you are building boats. In this instance,
your $160,000 in fixed costs consists of these overhead expenses. These fixed
costs are not affected by variations in sales volume.
2.Your only fixed costs for the tax return service are $700 per month for rent
on a tiny office and $100 per month for Yellow Pages marketing. So in this
scenario, your fixed costs come to $800 per month. Again, variations in sales
volume have no effect on these fixed expenditures.
What Is the Break-Even Point (BEP)?
By comparing an asset's market price to its initial cost, the break-even point
(break-even price) for a transaction or investment can be identified. The
break-even point is attained when the two prices are equal.
In corporate accounting, the break-even point formula is calculated by
dividing the entire fixed costs related to manufacturing by the revenue per
unit less the variable costs per unit. In this context, fixed costs are defined as
expenses that are constant regardless of the quantity of units sold. The
production level at which total revenues for a product equal total expense is
known as the break-even point.
POINTS TO NOTE
The break-even point in accounting is determined by dividing the
fixed production costs by the price per unit less the variable
production costs.
The production level at which a product's revenues and manufacturing
expenses balance one another is known as the break-even point.
When an asset's market price equals its original cost, it is considered
to have reached the break-even point in investing.
How to calculate your break-even point
You may figure out your company's break-even point using a few
straightforward formulae. The first is based on the quantity of product sold,
while the second is based on points in sales dollars. How to calculate the
break-even point is as follows:
A break-even point based on units can be calculated as follows: Subtract the
unit's variable cost from the revenue to arrive at the fixed cost. Whatever the
number of units sold, the fixed costs remain constant. The sales price less the
variable costs, such as labor and materials, is your revenue.
Broken-Even Point (Units) = Fixed Costs Units of (Revenue per Unit -
Variable Cost per Unit)
When calculating a break-even threshold using sales dollars: Subtract the
contribution margin from the fixed costs. The contribution margin is
calculated by deducting the variable costs from the product's price. The fixed
costs are then covered with this sum.
Break-Even Point (in sales dollars) = Fixed Costs – Contribution Margin
Contribution Margin is equal to the product's price minus variable costs.
Let's take a closer look at the formula's component parts to better understand
what it all implies.
1. Fixed costs: As previously said, fixed expenses, such as rent for
storefronts or production facilities, computers, and software, are unaffected
by the volume of goods sold. Additionally, fees paid for services like graphic
design, advertising, and public relations are included in fixed costs.
2.Contribution margin: To determine the contribution margin, deduct the
variable costs associated with an item from the selling price. Therefore, the
contribution margin is $60 if you sell a product for $100 and your cost of
materials and labor is $40. If any money remains after paying the fixed costs
out of this $60, it is your net profit.
3. Contribution margin ratio: You can compute this number, which is
typically stated as a percentage, by deducting your fixed expenses from your
contribution margin. Then you may work out what has to be done to break
even, such as reducing production costs or raising prices.
4.You reach break-even when your revenues are equal to your fixed and
variable costs. At this moment, your business will declare a net profit or loss
of zero. Any sales made after that go toward your net profit.
Break-even analysis examples
Break-even analyses are helpful for more than simply startup planning. Here
are several applications for firms to consider in their everyday operations and
planning.
Prices: You may wish to increase the item's cost if your analysis reveals that
your present pricing is too low to allow you to break even within the
timeframe you've set. However, be cautious to research comparable product
prices to avoid pricing yourself out of the market.
Materials: Are labor and material costs unsustainable? Look at ways to
reduce costs while maintaining the desired level of quality.
New products: Before you introduce a new product, consider the fixed
expenses, such as design and promotion fees, as well as the new variable
costs.
Planning: Setting longer-term goals is simpler when you are aware of the
precise amount you must earn. You can calculate how much more you need
to sell in order to meet increased fixed expenditures, for instance, if you wish
to grow your company and relocate to a larger premises with a higher rent.
Goals: Knowing the quantity of units you must sell or the amount of revenue
required to break even can be a great motivator for you and your team.
RECOGNIZING THE DOWNSIDE OF THE PROFIT-VOLUME-
COST MODEL
Cost-volume-profit analysis has a straightforward premise. It is calculated by
dividing the ratio of revenue to total cost by the ratio of units sold to total
cost.
The unit of profit is the resulting fraction, given as a percentage. It is either
the profit-to-revenue or the profit-to-cost ratio.
According to this definition, "cost" includes both direct and indirect expenses
that are incurred in order to earn income. All payments for which there are
corresponding assets are included in revenue. No matter how much money
was given to the seller, the number of sold units represents the total number
of units manufactured and sold.
According to this definition, the whole cost includes the sum of all expenses
incurred during the unit's production, processing, delivery, and sale. These
consist of both direct and indirect costs.
Cost-volume-profit analysis (CVPA) and cost-volume-profit planning are
occasionally used interchangeably in business. The process of determining
the quantity of units necessary to satisfy demand and then determining those
production expenses (such as labor and raw materials) that can be decreased.
This is frequently used to find places where cost reduction opportunities
exist. The CVPA procedure compares the value of the sales generated with
the cost of sales after determining the number of units needed to satisfy
demand. Planning for profits is done with it.
The Benefits of Cost-Volume-Profit (CVP) Analysis
The following are CVPA's primary benefits:
Decision-making is aided by CVP analysis, which is its principal
benefit. It assists businesses in deciding whether to produce a product
in-house or purchase it from a third party, how many units of their
product should be produced, and how to manage limited resources to
maximize profit.
All sizes of organizations, even those that are very small, can use this
strategy.
It enables managers to manage expenses in order to generate a desired
level of profit.
It enables managers to choose the best-selling price to establish in
order to generate the desired level of profit.

Disadvantages of Cost-Volume-Profit Analysis

Following are the primary drawbacks of CVP analysis:
This analysis only takes into account the fixed and variable cost types.
But there are also other kinds of expenses, like semi-fixed and semi-
variable costs.
It makes the assumption that fixed costs stay the same across a
 specific spectrum of activities (for example, 2000 to 6000 units).
However, this is untrue. Some fixed costs might rise if the company
raises production from 2000 units to 3000 units.
It makes the supposition that the product's selling price will remain
constant throughout the span of activity. However, when the company
increases production, the selling price is probably going to decrease.
BREAK-EVEN-ANALYSIS FORECAST
What is break-even analysis?
A small-enterprise accounting method called "break-even analysis" can be
used to estimate when a business, or a novel good or service, would become
successful. The amount of goods or services you must sell to at least pay your
production expenses is calculated from a financial perspective.
NOTE: According to the break-even principle, there is a minimal product
level below which a business cannot turn a profit or a loss.

A break-even analysis, for instance, might assist you in figuring out how
many cellphone cases you need to sell to cover your storage expenses or how
many service hours you'll need to charge to cover the cost of your office
space. Anything you sell after reaching break-even will increase your profit.
You should be aware of your fixed and variable costs in order to completely
comprehend break-even analysis for your company.
Fixed costs are expenses that don't change regardless of how much you sell.
Costs that change according to the volume of production or sales are known
as variable costs.
A break-even analysis's advantages
A large number of small and medium-sized enterprises never do any
significant financial analysis. They are unsure of the quantity of units they
will need to sell in order to realize a profit.
TIP: A business can determine the minimum sales volume necessary to avoid
losses by using break-even analysis.
A break-even point analysis is an effective tool for planning and decision-
making that can be used to emphasize important data such as costs, sales
volumes, prices, and much more.
1.Smarter pricing
You'll be able to properly price your products by determining your break-
even point. Effective pricing involves a lot of psychology, but it's also critical
to understand how it will impact your gross profit margins. You must confirm
that you can afford to pay your payments.
2.Include fixed costs
The majority of people focus on variable cost, or how much it costs to
produce a thing, when considering pricing. But you must also pay your set
expenses, such as insurance premiums or web development fees, in addition
to your variable expenses. You can accomplish that by conducting a break-
even analysis.
3.Recognize lost expenses
When you're working through a small business idea, it's simple to overlook
expenses. To determine your break-even point while performing a break-even
analysis, you must list all of your financial commitments. This will reduce
the number of unexpected events in the future.
4.Set goals for sales revenue.
You will know exactly how many sales you need to earn to break even after
performing a break-even study. You can use this to help you and your team
come up with more specific sales targets. It will be much simpler to follow
through if you have a certain number in mind.
5.Make better choices.
Entrepreneurs frequently rely on emotion to guide their business decisions.
They pursue new endeavors if they are confident about them. Although it's
crucial, how you're feeling is insufficient. Facts are the basis on which
successful businesspeople make decisions. When you put in the effort and
have useful information in front of you, making judgments will be much
simpler.
6.Reduce financial strain
By indicating when to reject a company plan, a break-even analysis can help
you reduce risk. It will assist you in avoiding failures and reducing the
financial impact that poor choices may have on your company. Instead, you
can consider the possible results realistically.
7.Finance your enterprise
Any business plan should include a break-even analysis. If you want to
recruit investors or borrow money to fund your firm, it's typically a
prerequisite. You need to demonstrate the viability of your proposal.
Furthermore, if the study comes out well, you will feel more at ease taking on
the responsibility of funding.

Benefits of a break-even analysis

Many small and medium-sized businesses never perform any
meaningful financial analysis. They don’t know how many units they
have to sell to see a return on their capital.
Break-even analysis is a way to find out the minimum sales volume so
that a business does not suffer losses.
Importance of Break-Even
A break-even point analysis is a powerful tool for planning and decision
making, and for highlighting critical information like costs, quantities sold,
prices, and so much more.
1.Price smarter
Finding your break-even point will help you understand how to price your
products better. A lot of psychology goes into effective pricing, but knowing
how it will affect your gross profit margins is just as important. You need to
make sure you can pay your bills.
2.Cover fixed costs
When most people think about pricing, they think about variable cost—that
is, how much their product costs to make. But in addition to variable costs,
you also need to cover your fixed costs, like insurance or web development
fees. Performing a break-even analysis helps you do that.
3.Catch missing expenses
It’s easy to forget about expenses when you’re thinking through a small
business idea. When you do a break-even analysis you have to lay out all
your financial commitments to figure out your break-even point. This will
limit the number of surprises down the road.
4.Set sales revenue targets
After completing a break-even analysis, you know exactly how many sales
you need to make to be profitable. This will help you set more concrete sales
goals for you and your team. When you have a clear number in mind, it will
be much easier to follow through.
5.Make smarter decisions
Entrepreneurs often make business decisions based on emotion. If they feel
good about a new venture, they go for it. How you feel is important, but it’s
not enough. Successful entrepreneurs make their decisions based on facts. It
will be a lot easier to make decisions when you’ve put in the work and have
useful data in front of you.
6.Limit financial strain
Doing a break-even analysis helps mitigate risk by showing you when to
avoid a business idea. It will help you avoid failures and limit the financial
toll that bad decisions can have on your business. Instead, you can be realistic
about the potential outcomes.
7.Fund your business
A break-even analysis is a key component of any business plan. It’s usually a
requirement if you want to take on investors or borrow money to fund your
business. You have to prove your plan is viable. More than that, if the
analysis looks good, you will be more comfortable taking on the burden of
financing.
How to calculate break-even point
Your break-even point is equal to your fixed costs, divided by your average
selling price, minus variable costs. It is the point at which revenue is equal to
costs and anything beyond that makes the business profitable
Formula: break-even point = fixed cost / (average selling price - variable
costs)
Before we calculate the break-even point, let’s discuss how the break-even
analysis formula works. Understanding the framework of the following
formula will help determine profitability and future earnings potential.
Break-even point formula
Basically, you need to figure out what your net profit per unit sold is and
divide your fixed costs by that number. This will tell you how many units you
need to sell before you start earning a profit.
As you now know, your product sales need to pay for more than just the costs
of producing them. The remaining profit is known as the contribution margin
ratio because it contributes sales dollars to the fixed costs.
Now that you know what it is, how it works, and why it matters, let's break
down how to calculate your break-even point.
Before we get started, get your free copy of the break-even analysis template.
After you make a copy, you’ll be able to edit the template and do your own
calculations.
 CHAPTER TWO
CREATING A BUSINESS PLAN FORECAST
A business plan workbook: What is it?
A brief book regarding our business plan is called a workbook. It includes the
outline for the business plan. It could be constructed using a modest business
plan or even a large business strategy. It contains each and every crucial
component of a business plan. It is an entire development roadmap for a
business. All the possible pages from your available business plan examples
may be included in it. A workbook for creating business plans can make good
use of business plan examples. There is also a definition of a business plan in
it. It includes business financial statements and marketing plans. It
meticulously includes an executive summary.
There are business level strategies as well as detailed plans for operations and
marketing. Even a startup or a small business might have a workbook for
their business strategy. It's because these kinds of firms need a business
continuity plan. Running a firm would be simple for businessmen with a
workbook for business plans. One workbook that they could access at any
time would have all of the key information about their company. All they
have to do to access its pages whenever they need to is have a printable copy
of it.
What Elements Make Up a Workbook for a Business Plan?
A business plan workbook contains a number of components. These details
must be included in this book. The ability to enter these details into your
workbook is required.
A Summary of Your Business Plan
This outlines all of your business concepts and objectives. It explains how
your concept can help your business succeed and who is going to use it. It
demonstrates its distinctiveness and how it would be made successful. It
includes the description of your industry as well as the location of your
company and the justifications for your decision. Additionally, it describes
the leadership advantage and the firm owner's expertise.
1. The Adherence
This section contains a documented list of all permissions and restrictions.
There are also the different tax forms that the company must use. It discusses
the insurance that your company must also carry. Here is where the business
liability is indicated.
2.Information Regarding Your Products and Services
These are the primary products you offer. They demonstrate how special your
product is. how it differs from other things. There are established total
bundles and services. It contains extra information so that nobody would
misinterpret your product.
3.Competition in Business
All of your commercial rivals are listed here. Direct or indirect competition is
possible between them. About their goods and services, it gives excellent
information. Finally, it makes a comparison to your company and offers
suggestions for improving your offerings.
4. A Market Profile
This reveals the market's size as well as the demands for your products. It
outlines the characteristics of your target market and what would draw them
to your product. It also outlines where and how you plan to sell your good or
service. It indicates whether it would be advertised locally or nationally.
5.The Sales Potential
This includes every price scheme. It gives the price of the item and an
explanation of how you set the price. It explains how you arrived at this
particular pricing after weighing all available price options. It contains a chart
that displays all of your possible sales. The chart can be a weekly one
6.The Marketing Approach
This will include all marketing-related styles and methods. It contains several
concepts that could improve how you promote your goods. It offers all the
strategies that might boost your sales. A good idea exists that you can
implement in your company.
7. The Claim About Your Organization
This is a thorough overview of your company. It reveals who you are to
everyone. It describes what you do. This claim is made in well-crafted
sentences that provide a useful description of your business. It enumerates
your company's positive qualities that are immediately apparent.
8.The Long Term and Short-Term Goal
It must include a list of all your company's objectives. These are the
objectives you intend to accomplish during the coming years. You can use
this as a roadmap to complete it someday. The objectives must be specific.
9.The Business Objective
A corporate goal needs to be decided upon explicitly. You must be aware of
the identities of every customer you desire. Knowing them will help you
develop techniques for luring customers to your goods or services.
10.Organizational Management
This explains how your company can function. You will need to select a
business team that will work for the organization. It includes a list of all of
your staff and the specific duties assigned to each.
How to Craft a Business Plan Workbook
There are various approaches to creating a company plan. Here are a few
guidelines for writing a business strategy.
Step 1 First, make an executive summary.
Provide a thorough description of your business, as well as the products and
services you offer. This needs to keep the investor's interest. Keep it brief and
to the point. Declare your company's mission in a few phrases. Make every
effort to make your executive summary memorable. Make it brief because
this will function as your pitch.

Step 2 Assess your target customers.

Who will buy from you? You want to have a clear notion of the types of
customers who will purchase your goods. Decide if those running firms or
small consumers will be your focus. Pick a potential business if you want to
target one. Learn who to target within the organization. The CEO or a
salesperson could be the culprit. Think about firmographics and
demographics. Find out where they are and what they do.
Step 3 Be aware of the competition in business.
Every industry has rivals. If you fail to mention your rivals, you will come
off as unprofessional. List all of your rivals, both present and future. These
rivals include both your direct rivals—those who offer the same services as
you—and your indirect rivals—those who share the same market. Direct
selling proposition (USP) writing that distinguishes you from the competition
Step 4 Have a financial plan.
Include the financial data in your worksheet for the business strategy. It
would be the sum of all your company's expenses. Consider purchasing
accounting software to assist you in creating your financial statement.
Step 5 Choose a good example of a marketing plan.
Your marketing strategy should address these five "how’s."
How should your product be priced? - Are you aware of the variables that
influence how much you can charge for each of your products? Calculate all
the expenses and add a sufficient profit margin to arrive at a price that you
can assign to your product.
How is it possible for your product to be in demand? – Make sure it satisfies
the market's demand. possess sufficient understanding of the specific market
you are aiming for and understand effective selling techniques.
What channels will draw your customers? – Make sure you have strategies
for getting people to buy from you.
What will each product's true net cost be? – You will anticipate it from every
product.
How will you make sales at each location? – Every location's marketing
initiatives need to be well thought out.
Step 6 Make your workbook simple.
Simply complete your workbook. Complex documents wouldn't truly be read
by anyone. Once you have all the information you need, convert it into
simple sentences. The workbook must be understandable and must not cause
confusion in anyone. Your goal must be made very clear.
UNDERSTANDING THE WORKBOOK CALCULATIONS
Making references is a crucial aspect of using Excel. When figures need to be
added up to a total value in workbooks, this procedure is frequently utilized.
For instance, if you have a workbook with sales spreadsheets for every month
of the year, you may create cells that put the numbers together. Any
modifications you make to the cells that are being referenced will
immediately update the final formula. You will learn precisely how to
reference formulas in your spreadsheets from this Excel tutorial.

The highlighted cell in the sample above has references, as you can see. I
increased the annual total by adding the sums from the spreadsheets for May,
June, and July. Excel will display the exact reference in the fx bar (where the
red arrow points). There are two techniques you can employ. Either put the
formula directly into the required cell, or use a few clicks to instruct Excel to
generate the reference for you. This Excel tutorial will demonstrate how to
manually create references:
Manually Referencing Formulas
You must understand how Excel interprets these commands in order to
manually enter the formula for the cells you wish to use as references. You
must first navigate to the cell you wish to reference in order for us to explain
it to you in the exact order that you will enter it into Excel.
An equals sign (=) will always appear as the first letter of a sentence.
Whatever information you add after here will be told by Excel to total it.

Name of the worksheet

The name of the worksheet where the data is found must now be typed in.
=WORKSHEET should be the formula you use.

You must wrap the name of your worksheet in single quotation marks if it
has two or more words with spaces between them, like ='WORKSHEET
NAME.
You must type an exclamation mark after adding your equal sign and
worksheet name. Therefore, the equation will now be =WORKSHEET!

Cell Address
You have told Excel to equal the spreadsheet up to this point. This is not
sufficient; you must additionally type the name of the cell that contains the
information. The column letter at the top of your spreadsheet is used to name
cells first, followed by the row number on the left. Your formula now has to
be =WORKSHEET! CELL

Hit Enter.
You now have a single formula for reference. When you hit Enter on your
keyboard, Excel will locate the data and bring it into your spreadsheet. Using
AutoSum, you can combine many single reference formulas. You can write
numerous reference formulas in a single cell for a clean worksheet, and Excel
will use them to calculate the value.
FORECASTING INPUTS
What is a forecast?

By taking into account both past and present occurrences, forecasting is the
process of predicting what will happen in the future. In essence, it is a
decision-making tool that, by looking at historical data and trends, aids firms
in adjusting to the effects of future uncertainty. It is a method for planning
that enables organizations to map out their upcoming actions and develop
budgets that, ideally, will cover any potential risks.
Forecasting Techniques
When attempting to forecast what might occur in the future, businesses might
choose between qualitative and quantitative methodologies.
1. Qualitative approach
Qualitative forecasting, also referred to as the judging technique, provides
subjective outcomes because it relies on the expert or forecaster's own
judgements. Forecasts are frequently skewed because they are non-
mathematical processes that rely more on the knowledge, experience, and
intuition of the expert than on evidence.
One instance is when someone predicts the result of an NBA finals game,
which is obviously based more on personal interest and motivation. Such a
method's flaw is that it might not be accurate.
2.Quantitative approach
Being a mathematical process, the quantitative method of predicting is
consistent and unbiased. Instead of relying on subjective judgment and gut
instinct, it makes extensive use of analyzed data and numbers.
Forecasting characteristics
Here are some characteristics of forecasting:
1. relates to upcoming events
Forecasts are crucial for planning since they aim to forecast the future.
2. Considering recent and historical events
Forecasts are based on facts, figures, and other pertinent data in addition to
views, intuition, and educated guesses. Every aspect that goes into making a
projection, to some extent, reflects what has happened in the business in the
past and what is anticipated to happen in the future.
3. makes use of forecasting methods
The quantitative approach is used by the majority of firms, especially when
planning and budgeting.

The Forecasting Process

Forecasters must adhere to a meticulous procedure in order to get reliable
results. Here are a few actions to take:
1. Create the foundation for forecasting
Creating the framework for the research into the firm's state and figuring out
where the company stands in the market are the initial steps in the process.
2. Project the business's future operations.
The second step of forecasting is evaluating future conditions of the industry
in which the firm operates and projecting and analyzing how the company
will do based on the research done during the first step.
3. Control the forecast.
This entails reviewing historical forecasts and contrasting them with the
actual events that occurred with the business. The discrepancies between
recent forecasts and past results are examined, and the causes of the
variations are taken into account.
4. Evaluate the method
Every stage is examined, and improvements and changes are made.
1. Primary sources of data forecasting
Because it provides first-hand information, information from primary sources
is considered to be the most dependable and trustworthy type of information.
The data is gathered by the forecaster personally, who may use methods like
focus groups, surveys, and interviews.
2. Secondary sources
Information from secondary sources has already been gathered and released
by other organizations. Industry reports are one instance of this kind of data.
The procedure is sped up because this data has already been gathered and
examined.

BALANCE SHEET
A Balance Sheet is what?
A financial statement that lists a company's assets, liabilities, and shareholder
equity at a certain point in time is referred to as a balance sheet. The
foundation for calculating investor return rates and assessing the capital
structure of a company is provided by balance sheets.
The balance sheet is a financial statement that gives a quick overview of the
assets and liabilities of a firm as well as the amount of shareholder
investment. When doing basic analysis or calculating financial ratios, balance
sheets can be utilized in conjunction with other crucial financial data.
KEY LESSONS
An organization's assets, liabilities, and shareholder equity are listed
on a balance sheet, which is a financial statement.
One of the three primary financial statements used to assess a
company is the balance sheet.
It offers a snapshot of the assets and liabilities of a corporation as of
the publication date.
The assets on the balance sheet are equal to the total of the liabilities
plus the shareholders' equity.
Financial ratios are computed using balance sheets by fundamental
analysts.
Balance Sheet Function
A summary of a company's financial situation at a specific point in time is
provided by the balance sheet. It cannot, by itself, convey an understanding
of the trends developing over a longer time frame. This calls for a
comparison of the balance sheet to those from earlier periods.
The debt-to-equity ratio, the acid-test ratio, and many other ratios that can be
generated from a balance sheet can be used by investors to gauge a
company's financial health. Additionally helpful context for evaluating a
company's financial health can be found in the income statement, statement
of cash flows, and any comments or addenda in an earnings report that may
make a reference to the balance sheet.
The balance sheet follows the accounting formula below, where assets are on
one side and liabilities + shareholder equity are on the other:
Assets=Liabilities+Shareholders’ Equity
This formula makes sense. This is so that a business may pay for all it
possesses (assets) by either borrowing money from other people (taking on
liabilities) or raising money from investors (issuing shareholder equity).
If a business borrows $4,000 over five years from a bank, its assets
(particularly, the cash account) will rise by $4,000 as a result. In order to
balance the two sides of the equation, its liabilities (more particularly, the
long-term debt account) will rise by $4,000 as well. The company's assets
and shareholder equity will both rise by $8,000 if it raises $8,000 from
investors. Any profits the business makes that are more than its costs will be
deposited in the shareholder equity account.
The assets side of the ledger will reflect a balance of these revenues in the
form of cash, investments, inventories, or other assets.
NOTE: Since different industries employ various methods of financing,
balance sheets from companies in the same industry should also be
compared.
Importance of a Balance Sheet
Regardless of a company's size or the sector in which it competes, a balance
sheet has various advantages, including
Using balance sheets, assess risk. This financial statement covers all assets
and liabilities for a corporation. A business will be able to determine in a
timely manner whether it has taken on too much debt, whether the liquidity
of its assets is inadequate, or whether it has enough cash on hand to cover
immediate needs.
Balance sheets can also be used to raise money. For a company to be
approved for a business loan, a lender often need a balance sheet. A balance
sheet is typically required when a business seeks private equity investment
from investors. In both situations, the outside party seeks to determine a
company's financial stability, creditworthiness, and ability to pay off short-
term loans.
Financial ratios are a tool that managers can use to assess a company's
liquidity, profitability, solvency, and cadence (turnover). Some financial
ratios call for data from the balance sheet. Managers can better understand
how to improve a company's financial health when data is evaluated over
time or compared to similar organizations.
Finally, balance sheets can help recruit and keep talent. Employees typically
prefer to know that their jobs are secure and that their employer is doing well.
Employees have the opportunity to review how much cash the company has
on hand, whether the company is managing debt wisely, and whether they
believe the company's financial health is in line with what they expect from
their employer thanks to the requirement that public companies that must
disclose their balance sheet.
Limitations of a Balance Sheet
There are several limitations to the balance sheet, despite the fact that it is a
crucial piece of information for analysts and investors. Since the balance
sheet is static, many financial ratios rely on information from the more
dynamic income statement and statement of cash flows as well to provide a
more complete picture of the status of a company's operations. Because of
this, a balance may not accurately depict a company's financial situation.
A balance sheet has limitations because of its constrained timing. The
financial position of a corporation is only depicted in the financial statement
as of one particular day. It could be tough to determine whether a company is
functioning effectively from just one balance sheet. Consider a scenario in
which a business reports having $1,000,000 in cash on hand at the end of the
month. Knowing how much cash a company has on hand has minimal
relevance without context, a reference point, knowledge of its historical cash
balance, and comprehension of industry operating requirements.
The numbers reported on a balance sheet will also vary depending on the
accounting software used and how depreciation and inventories are handled.
Managers can therefore manipulate the figures to make them appear more
favorable. Pay close attention to the footnotes to the balance sheet to
ascertain the systems being used in their accounting and to spot any warning
signs.
Last but not least, a balance sheet is vulnerable to a variety of expert
judgment calls that could significantly affect the report. For instance,
receivables need to be continuously checked for impairment and amended to
account for any uncollectible debt. Unable to predict which receivables it will
really receive, a corporation must estimate and include its best guess on the
balance sheet.
Example of a Balance Sheet
An example of Apple, Inc.'s comparative balance sheet is shown in the image
below. This balance sheet contrasts the company's financial standing as of
September 2020 with that of the same month a year earlier.

In this illustration, Apple's $323.8 billion in total assets are shown separately
toward the top of the report. Each of the two categories in this asset section—
current assets and non-current assets—is further subdivided into a variety of
accounts. A quick examination of Apple's assets reveals that while their non-
current assets rose, their cash on hand shrank.
Liabilities and equity for Apple are also reported in this balance sheet, with
each item receiving its own section in the lower half of the document. Similar
to the assets part, the liabilities section is divided into current liabilities and
non-current obligations, with each category showing balances per account.
The common stock valuation, retained earnings, and accumulated other
comprehensive income are all disclosed in the section on total shareholder
equity. Apple's total liabilities increased, its total equity declined, and when
the two are added together, the total assets of the business are equal.
INCOME STATEMENT
What is the Income Statement?
One of a company's fundamental financial statements, the income statement
displays its profit and loss over a specific time period. After deducting all
costs associated with both operating and non-operating operations from all
revenues, the profit or loss is calculated.
One of the three statements used in corporate finance, including financial
modeling, and accounting is the income statement. The statement logically
and coherently presents the company's revenue, costs, gross profit, selling
and administrative expenses, other expenses and income, taxes paid, and net
profit.

The statement is split up into time segments that sequentially relate to how
the business operates. Although some businesses might employ a thirteen-
period cycle, the most typical periodic division is monthly (for internal
reporting). Total values for the quarterly and annual performance are derived
from these periodic statements.
This statement requires the least amount of data from the balance sheet and
cash flow statement, making it an excellent place to start a financial model.
The revenue statement is therefore the first core statement in terms of
information before the other two.

Income Statement Elements

Since expenses and income rely on the nature of activities or company
conducted, the income statement may differ slightly between different
companies. There are a few basic line items, nevertheless, that can be found
on any income statement.
The most typical components of an income statement are:
1.Revenue/Sales
Sales Revenue is the top of the statement's heading and refers to the
company's revenue from sales or services. The gross cost of producing the
offered items or rendering the services will be this figure. Some businesses
have numerous revenue lines that add to their overall revenue line.
2.Cost of Goods Sold (COGS)
Cost of Goods Sold (COGS) is a line-item that combines the direct expenses
related to purchasing and selling goods to make money. If the organization is
a service business, this line item can also be referred to as cost of sales.
Labor, components, materials, and an allocation of other costs like
depreciation are examples of direct costs (see an explanation of depreciation
below).
Total Revenue Total Revenue Cost of Goods Sold (or Cost of Sales) is
subtracted from Sales Revenue to determine gross profit.
3.Costs of marketing, promotion, and advertising
The majority of firms incur certain costs when they offer products and/or
services. Due of their similarities and shared connections to selling,
marketing, advertising, and promotion costs are frequently combined.
4.Charges for general and administrative (G&A) costs
All additional indirect costs related to running the firm are included in the
selling, general, and administrative segment, which is known as SG&A
Expenses. Along with other operating costs, this comprises salary and wages,
rent and office expenditures, insurance, travel costs, and occasionally
depreciation and amortization. Depreciation and amortization may, however,
be split up into various sections by entities.
CASH FLOW STATEMENT
A financial document called the cash flow statement (CFS) outlines the
inflow and outflow of a company's cash and cash equivalents (CCE). The
CFS gauges how effectively a business manages its cash position, or how
successfully it generates cash to cover its debt payments and finance its
operating costs. The balance sheet and the income statement are two of the
three primary financial statements, and the CFS is the third. We'll outline the
CFS's structure and application to company analysis in this article.
KEY LESSONS
v A cash flow statement lists all of the cash and cash equivalents that
come into and go out of a business.
v A company's cash management, especially how successfully it earns
cash, is highlighted by the CFS.
v The balance sheet and income statement are enhanced by this
financial statement.
v Cash from three sources, including operating, investing, and
financing activities, makes up the bulk of the CFS.
v The direct approach and the indirect method are the two ways to
 compute cash flow.
How to Use the Cash Flow Statement
The cash flow statement provides information on a company's operations,
sources of funding, and financial transactions. The CFS, often referred to as
the statement of cash flows, aids creditors in determining how much cash is
available (also known as liquidity) for the business to meet its operational
costs and settle its debts. Investors value the CFS equally since it lets them
know whether a company is financially stable. They might utilize the
statement as a result to decide on their investments in a better, more
knowledgeable manner.
How to Calculate Cash Flow
The direct approach and the indirect method are the two ways to compute
cash flow.
1.Method of Direct Cash Flow
The direct method totals all financial outlays and inflows, including cash paid
to vendors, cash collected from clients, and cash received as salaries. For
relatively small enterprises that employ the cash basis of accounting, this
CFS method is simpler.
These figures can also be computed by comparing the net gain or reduction in
the various asset and liability accounts' beginning and ending balances. It is
provided in an uncomplicated way.
2.Method of Indirect Cash Flow
When using the indirect technique, differences from non-cash transactions are
added or subtracted from net income before calculating cash flow. Non-cash
items can be seen in the shifts in a company's assets and liabilities from one
period to the next on its balance sheet. In order to determine an accurate cash
inflow or outflow, the accountant will identify any increases and decreases to
asset and liability accounts that need to be added back to or subtracted from
the net income figure.
Cash flow must reflect changes in accounts receivable (AR) from one
accounting period to the next on the balance sheet:
 If AR declines, additional money may have come into the business
from customers paying off their credit cards; the difference between
the AR decline and net earnings is then added.
Although the amounts reflected in AR are revenue, they are not cash,
so an increase in AR must be subtracted from net earnings.
Example of a Cash Flow Statement
An illustration of a cash flow statement is given below:

This CFS shows that the 2017 fiscal year's net cash flow was $1,522,000.
Investors should be encouraged by the fact that cash generated from
operations accounts for the majority of the positive cash flow. It indicates that
core operations are bringing in revenue and that there is sufficient cash on
hand to purchase fresh merchandise.
The company's ability to invest in itself is evidenced by the purchase of new
machinery. Finally, the company has plenty of cash on hand to repay the
future loan expense, which should assuage investors' concerns about the notes
payable.

FINANCIAL RATIOS
Financial Ratios: What Are They?
Financial ratios are calculated using numbers collected from financial records
in order to gather insightful data about a company. Quantitative analysis is
used to determine a company's liquidity, leverage, growth, margins,
profitability, rates of return, valuation, and other metrics from its balance
sheet, income statement, and cash flow statement.

Financial ratios are grouped into the following categories:

v Liquidity ratios
v Leverage ratios
v Efficiency ratios
v Profitability ratios
v Market value ratios
Financial Ratio Analysis: Uses and Users
Financial ratio analysis has two major objectives:
1. Monitor business performance
To identify trends that might be forming within a corporation, specific
financial ratios are determined for each period and their changes over time
are tracked. For instance, a rising debt-to-asset ratio may show that a business
is heavily indebted and may eventually be at risk of default.
2. Evaluate the performance of companies in comparison
It is possible to determine whether a company is performing better or worse
than the industry average by comparing its financial ratios to those of its main
competitors. An analyst or investor can evaluate which company is using its
assets in the most effective way by comparing the return on assets of different
companies.
Both internal and external partners to the organization use financial ratios:
External users include financial analysts, small-scale investors,
creditors, rivals, taxing and regulating bodies, and industry watchers.
Internal users: The management group, personnel, and proprietors
Ratios of Liquidity
The ability of a corporation to pay off both short-term and long-term
obligations is gauged by liquidity ratios, which are financial measures. The
following are examples of common liquidity ratios
A company's capacity to settle short-term obligations using current assets is
gauged by its current ratio:
Current ratio = Current Assets - Current Liabilities.
The acid-test ratio assesses a company's capacity to settle short-term
obligations using current assets:
Acid-test ratio = current assets - inventories - current liabilities.
The cash ratio gauges how well a business can cover short-term obligations
with cash and cash equivalents:
Cash ratio is calculated as Current Liabilities - Cash + Cash Equivalents.
A company's ability to pay off current liabilities with the cash it generates in
a particular period is determined by its operating cash flow ratio:
Operating cash flow to current liabilities is known as the operating cash flow
ratio.

Profitability Ratios
Profitability ratios gauge a company's capacity to make money in relation to
sales, assets on the balance sheet, operational expenses, and equity. the
following are typical profitability financial ratios:
To determine how much profit a firm gets after paying its cost of goods sold,
the gross margin ratio compares the gross profit of a company to its net sales:
Gross profit divided by net sales is the gross margin ratio.
To assess operating effectiveness, the operating margin ratio compares a
company's operating income to its net sales:
Operating income divided by net sales is the operating margin ratio.
The return on assets ratio gauges how effectively a business uses its resources
to make money:
Net income divided by total assets is the return on assets. The return on
equity ratio assesses how effectively a business turns equity into profits:
Net income divided by shareholder equity is the return on equity ratio.
Ratios of Market Value
The share price of a company's stock is assessed using market value ratios.
The following are examples of common market value ratios:
Based on the equity that shareholders have access to, a company's book value
per share ratio determines its per-share worth:
Book value per share is calculated as (Shareholder's equity minus Preferred
equity) / the number of outstanding Common Shares.
In relation to the market price per share, the dividend yield ratio calculates
the amount of dividends paid to shareholders
Dividend yield ratio = Dividend per share / Share Price
The net income earned for each outstanding share is expressed as an earnings
per share ratio.
Earnings per share is calculated as Net Income divided by Outstanding
Shares.
The price-earnings ratio contrasts the share price of a firm with its earnings
per share:
Share price divided by earnings per share equals the price-earnings ratio.
CALCULATING TAXES FOR A CURRENT NET LOSS
BEFORE TAXES
What Exactly Is Net Income (NI)?
Sales less cost of goods sold, selling, general and administrative costs,
operating costs, depreciation, interest, taxes, and other expenses are used to
compute net income (NI), also known as net earnings. For investors to gauge
how much a company's revenue outpaces its costs, this figure is helpful. This
figure, which is a measure of a company's profitability, can be seen on the
income statement of a business.
KEY LESSONS
v Revenues less costs, taxes, and interest equal net income (NI).
v NI is used to compute earnings per share.
v Because costs can be concealed via accounting techniques or
revenues can be artificially overstated, investors should carefully
examine the data used to calculate NI.
v In addition, after deducting taxes and deductions from gross income,
NI is a person's total income or pre-tax income.
v A person's income after taxes and deductions is referred to as their
net income.
NI Calculation for Business
Start by determining the overall revenue of the company before calculating
its net income. The business's earnings before taxes are determined by
deducting operational and spending costs from this amount. To calculate the
NI, subtract tax from this sum.
NI, like other accounting measurements, can be tricked by aggressive
revenue recognition or by concealing expenses, for example. Investors should
check the accuracy of the statistics used to calculate the taxable income and
NI before making an investment decision based on them.
NI vs. Personal Gross Income
Gross income is a person's total income or pre-tax income, and NI is the
difference after deducting taxes and deductions from gross income.
Taxpayers deduct expenses from their gross income to arrive at their taxable
income, which is the amount utilized by the Internal Revenue Service to
calculate income tax. An individual's NI is the difference between taxable
income and income tax.
For instance, if a person's gross income is $60,000, they are eligible for
$10,000 in deductions. With a taxable income of $50,000 and an effective tax
rate of 13.88%, that person would owe $6,939.50 in income tax and
$43,060.50 in NI.
Tax Returns and NI
Individual taxpayers in the US file a Form 1040 with the IRS to record their
yearly income. There isn't a line for net income on this form. Instead, it
provides spaces for taxable income, adjusted gross income (AGI), and gross
income to be entered.
Taxpayers deduct some income sources like Social Security benefits and
permissible deductions like student loan interest after calculating their gross
income. Their AGI makes a difference. Although they are occasionally used
synonymously, net income and AGI are two distinct concepts. The taxpayer
next calculates their taxable income by deducting standard or itemized
deductions from their AGI. The individual's NI, as previously indicated,
represents the difference between taxable income and income tax;
nevertheless, this figure is not shown on individual tax forms.
 CHAPTER THREE
WRITING A BUSINESS PLAN
What is a business plan?
An extensive written document that outlines a company's goals and objectives is called a business plan.
A business plan explains a strategy that has been put in writing for the operations, financing, and
marketing of the organization. Both new and established businesses employ business plans.
A business plan is an important document that should be read by both internal and external audiences.
For instance, a business plan is used to attract funding before a company has established a proven track
record. Getting money from financial institutions could be advantageous as well.
The executive team of a company might benefit from a business plan by staying aligned on important
action items and on schedule to meet goals. Every company requires a business plan, but smaller
startups especially could gain a lot from having one. Idealistically, the plan should be evaluated and
updated frequently to account for objectives that have changed or been reached. An established
business that has made the decision to change its direction occasionally needs a new business plan.
POINTS TO NOTE
v A business plan is a written document that outlines the main
operations of a company and how it intends to accomplish its
objectives.
v Startup businesses employ business plans to gain traction and draw
in outside investors.
v A business plan can also be used internally to direct an executive
team in focusing on and achieving short- and long-term goals.
v Lean startup business plans are often shorter than traditional business
plans, which are typically longer.
v A good business plan should have an executive summary as well as
sections on the company's goods and services, marketing strategy and
analysis, financial planning, and a budget.

How to Write a Business Plan

A business plan is a written document that details your company's financial
objectives and describes how you'll meet them. A solid, thorough plan will
offer a roadmap for the company's upcoming three to five years, and you can
share it with prospective investors, lenders, or other significant partners.
1. Produce an executive summary
Your business plan's opening page is this. Your elevator pitch, if you will. It
ought to contain your company's purpose statement, a succinct rundown of
the goods and services you provide, and an overview of your strategies for
boosting your revenue.
Despite the fact that your investors will read the executive summary first,
writing it last might sometimes be simpler. By doing this, you will be able to
emphasize the data you've chosen to focus on when you write more in-depth
sections.
2. Describe your business.
Your company's description comes next, and it needs to include details like:
The official name of your company.
Location address for your company.
names of influential figures in the company. Be sure to draw attention
to any special talents or technical proficiency that individuals of your
team possess.
Your company description should also specify your business's legal form,
such as a sole proprietorship, partnership, or corporation, as well as the
percentages of ownership and level of participation held by each owner.
The history of your organization and the current nature of your business
should also be included. This makes it easier for the reader to understand
your goals in the following section.
3. List your company's objectives. An objective statement comes in third
place in a business strategy. The goals you have for the short term as well as
the long term are clearly stated in this area.
This section can be used to justify your need for the money, how the finance
will help your business grow, and how you intend to meet your growth
objectives if you're asking for a business loan or outside investment. The idea
is to clearly explain the opportunity being offered and how the loan or
investment would help your business expand.
If your company is launching a new product line, for instance, you might
describe how the loan would help your business introduce the new range of
products and how much you anticipate sales will rise over the following three
years as a result.
4. Describe the goods and services you offer.
Give specifics about the goods or services you provide or intend to provide in
this section.
You ought to incorporate the following:
A description of how your service or product operates.
Your product or service's pricing structure.
The average clients you deal with.
Your order fulfillment and supply chain strategy.
your sales approach.
your plan for dissemination.
You can also talk about the trademarks and patents that are connected to your
goods or services, either registered or pending.
5. Do your market research
What distinguishes your goods from the competitors will be of interest to
lenders and investors. Explain who your competitors are in the market
analysis section. Talk about their strong points while emphasizing your own.
Let them know if you're targeting an untapped or niche market.
6. Outline your marketing and sales plan
Here, you can discuss your strategies for convincing clients to purchase your
goods or services or for cultivating recurring business.

7. Conduct a financial study of the company

If your company is still young, you might not have much knowledge of its
financials. If your company is already established, you should nevertheless
include income or profit-and-loss statements, a balance sheet that identifies
your assets and obligations, and a cash flow statement that illustrates how
cash enters and leaves the business.
You might also incorporate metrics like:
 The portion of revenue that is kept as net income is known as the net
profit margin.
The current ratio measures your liquidity and debt-paying capacity.
Accounts receivable turnover ratio: a gauge of how frequently
receivables are collected annually.
This is an excellent location to incorporate graphs and charts that help readers
of your plan quickly comprehend the state of your company's finances.
8. Create financial forecasts
If you're looking for funding or investors, this is an essential component of
any business plan. It describes how your company will make enough money
to pay back the loan or how you will provide investors with a respectable
return.
Here, you'll give projections of your company's monthly or quarterly
revenues, costs, and profits for a minimum of three years, with the future
figures presuming you've gotten a fresh loan.
Before making projections, carefully review your previous financial accounts
because accuracy is essential. Your objectives should be aggressive while yet
being attainable.
Definition of Strategic Planning
Strategic planning is the skill of developing detailed business plans, putting
them into action, and assessing the outcomes in light of a company's
overarching long-term objectives or aspirations. It is a theory that
concentrates on integrating different corporate divisions (such accounting and
finance, marketing, and human resources) to achieve a company's strategic
objectives. Strategic management and strategic planning are fundamentally
the same thing.
The idea of strategic planning initially gained popularity in the 1950s and
1960s and remained popular in business until the 1980s, when it started to
wane. However, interest in strategic business planning was rekindled in the
1990s, and it still has value in contemporary company.
Process of Strategic Planning
Upper-level management of a corporation must put a lot of thinking and
planning into the strategic planning process. Executives may look at a wide
range of choices before deciding on a course of action and then figuring out
how to strategically implement it. In the end, a company's management will,
hopefully, decide on a strategy that can be executed cost-effectively with a
high possibility of success, while avoiding excessive financial risk, and that is
most likely to deliver good results (often defined as enhancing the company's
bottom line).
Typically, strategic planning is developed and put into action through the
following three crucial steps:
1. Strategy Development
A corporation will first conduct an internal and external audit to evaluate its
current status before coming up with a strategy. Finding the organization's
strengths and weaknesses, as well as its possibilities and dangers, is the goal
of this (SWOT Analysis). The study helps managers determine which
strategies or markets to pursue or forgo, how to effectively use the company's
resources, and whether to take steps like expanding operations through a
merger or joint venture.
Business strategies have a long-term impact on the success of organizations.
The authority to allocate the resources required for its implementation
typically only extends to high management leaders.
2. Implementing a strategy
After a strategy has been developed, the business must set precise targets or
goals for implementing the strategy and provide resources for its execution.
The effectiveness of the implementation stage is frequently based on how
well senior management communicates the selected strategy throughout the
organization and persuades everyone to "buy into" the desire to put the
strategy into action.
Implementing a strategy effectively entails creating a strong framework for
doing so, making the most of available resources, and refocusing marketing
efforts to achieve the plan's aims and objectives.
3. Strategy Evaluation
Any astute businessperson is aware that today's success does not guarantee
future success. As a result, it is crucial for managers to assess the
effectiveness of a chosen strategy following the implementation stage.
Reviewing the internal and external elements influencing the strategy's
execution, monitoring performance, and taking remedial action to increase
the plan's effectiveness are the three key components of strategy evaluation.
For instance, a business might learn that, in order to achieve the needed
improvements in customer connections, it needs to acquire new customer
relationship management (CRM) software.
The three hierarchical levels of high management, middle management, and
operational levels are where all three stages of strategic planning take place.
So as to enable the company to work as a more functional and successful
team, it is crucial to encourage communication and interaction among
employees and managers at all levels.
The Benefits of strategic planning
Many businesses choose reactionary methods as opposed to proactive ones
due to the instability of the business environment. Even though they may
necessitate investing a sizable amount of resources and time in their
execution, reactive methods are often only viable for the short term. Strategic
planning aids businesses in anticipating problems and resolving them in the
long run. They make it possible for businesses to exert influence rather than
just react to events.

Strategic planning has the following main advantages, among others:

1. Aids in developing better tactics by employing a methodical, logical
approach
This is frequently the most significant advantage. Regardless of the
effectiveness of a particular strategy, some studies indicate that the strategic
planning process itself significantly contributes to enhancing a company's
overall performance.
2. Improved dialogue between employers and employees
Strategic planning requires effective communication to be successful. This
dedication to accomplishing corporate goals is demonstrated by the managers'
and employees' participation in and debate about it.
Additionally, strategic planning encourages managers and staff to support the
objectives of the company. This is so they are aware of what the business is
doing and why. Employees are better able to appreciate the connection
between their performance, the success of the firm, and compensation thanks
to strategic planning, which makes organizational goals and objectives real.
As a result, the company's growth is facilitated by both employees and
management becoming more inventive and creative.
3. Strengthens the organization's employees
Employees' perceptions of their value and efficacy in contributing to the
success of the business as a whole are strengthened by the improved
conversation and communication throughout all phases of the process. It is
crucial that businesses decentralize the strategic planning process by
incorporating employees and lower-level managers from across the firm. A
noteworthy example is the Walt Disney Co., which abolished its own
strategic planning department in favor of distributing the planning
responsibilities to several Disney business units.

COST STRATEGIES
Cost strategy is based on simplicity. Cost leadership aims to reduce costs as
much as possible in order to offer customers lower pricing and so increase
their savings. High technical aptitude and money availability are typically
required for a corporation to invest in technology and ensure economies of
scale.
Most of the time, first-movers' cost-cutting strategies result in a considerable
rise in market share and capacity utilization, which further reduces costs.
A corporation must accomplish the following before developing a cost-
cutting strategy:
 Extremely productive
High-capacity usage
Utilizing leverage to obtain the most affordable pricing for production
components
Methods of lean production (e.g., JIT)
Efficient production methods
Efficient distribution methods
Leading cost leadership brands have achieved significant success by
establishing cutting-edge business models that are based only on the lowest
pricing for a certain perceived value.
A NEW- VENTURE PLAN
The goal of business planning is to create a logical sequence of actions that
will assist your company in growing or a blueprint for creating a venture that
has the highest chance of being successful in a cutthroat industry. These
actions will cost money, and they will generate revenue, according to
estimates. To assess the company's progress toward its goals and to rectify
revenue shortfalls through a change in strategies and tactics, these forecast
statistics are periodically compared to actual results.

The Business Venture Plan

1. Develop a vision: Think about the size of the business you want to create
and the outcomes your endeavor will have produced in three to five years.
The goal of a retailer may be to establish a mini-chain of ten stores in that
time.
2. Identify market demands: Determine the size of your market or your
potential clientele. Describe the advantages your goods or services provide
for customers. Because the advantages are so great compared to what rivals
can provide, be sure you are introducing goods and services to the market
that consumers will be eager to buy.
3. Create a business plan: Describe the many revenue sources that your
business will have and the structural elements that will ensure profitability.
The servicing and fixing of items may provide extra revenue streams for a
manufacturer. Low administrative costs and a lower than average cost of
products sold are examples of structural factors.
4. Examine the competition: Find out what they are good at, or what their
competitive edge is, and what their potential shortcomings are.
5. Create a marketing strategy plan: Describe the sales techniques you'll
employ to persuade customers to buy from you as well as the marketing
strategies you'll employ to raise awareness of your business.
6. Make a staffing strategy: Identify the human resources required to
achieve the goals of the firm. Determine the knowledge and expertise that
your staff as a whole need to manage the business successfully.
7. Construct a financial strategy: With the aid of spreadsheet software, the
financial plan or forecast is created. Make a month-by-month prediction of
your income and spending.
Grow a Business Venture
1. Evaluate your development: At least once per year, evaluate the overall
performance of your business. Decide which areas need the most
improvement if you want the business to expand.
2. Look for fresh chances: Consider developing new markets for your goods
or services, making improvements to them, and coming up with fresh
offerings to advertise to your existing clientele.
3. Boost organizational effectiveness: Maintaining a high standard of
customer service will encourage repeat business from happy clients. Create
strategies to run the business more profitably and effectively in terms of both
capital and human resources.
CARE AND MAINTENANCE
 CHAPTER ONE
ADMINSTERING QUICKBOOKS
CONFIDENTIALITY OF YOUR DATA
Frequently, accounting information is classified as private. Your QuickBooks data shows how much
money you have in the bank, how much you owe creditors, and how much profit (or loss!) your
company makes. Because your data is private information, keeping it confidential should be your top
priority when managing a QuickBooks accounting system.
For securing the confidentiality of your QuickBooks data, you have two complementary options.
Utilizing Microsoft Windows' security features is the first method of maintaining confidentiality.
Utilizing QuickBooks' security features is the alternate strategy.

Using Windows security

You can limit access to a file, such as a program file or a data file, to
particular people by using the security features offered by Microsoft
Windows. This means that you can restrict who has access to the QuickBooks
program or the QuickBooks data file by using Windows-level security.
If you already utilize Windows-level security, you already know how to use
that tool to prevent unwanted access to or usage of program files and data
files, or someone in your workplace does. You can easily use your current
general knowledge to the QuickBooks program file or the QuickBooks data
file to use Windows-level security for QuickBooks. You don't have to bother
understanding Windows' intricate security mechanism if you already use
Windows-level protection. You can make use of QuickBooks' more basic
security.
Using QuickBooks security
By putting a password on a QuickBooks corporate data file, you may
safeguard the privacy of your firm's data. This is something you can set up in
QuickBooks. The Company Set Up Users & Passwords Change Your
Password command also allows you to create a password. The Change Your
Password dialog box is displayed by QuickBooks when you select this
command.
The New Password text box and the Confirm New Password text box must
both contain the same password to create a password. Please be aware that
your password corresponds to the username Admin (which stands for
administrator). There won't be a Current Password text box if you haven't yet
created a password and don't have an outdated one. You need to include a
challenge question and answer if you're using an Administrator password. If
you forget the Administrator password, you can still access your QuickBooks
file by using this response.

The Change Your Password dialog box.

NOTE: Of course, you want to be sure that no one—not even a computer—
can guess your password. This indicates that a word from a dictionary
shouldn't be your password. You should avoid using numbers as your
password. And in particular, your password shouldn't be a word, phrase, or
name that a coworker may easily deduce. From a security perspective,
illogical combinations of letters and digits, such f34t5s or s3df43x2, make the
finest passwords. Additionally, more time is preferable.
After choosing a password, you should change it on a regular basis. You can
also select the Company Change Your Password command to modify your
password. QuickBooks shows the dialog window to "Change Your
Password" once more. The Current Password text box needs to be filled out
with your previous password this time. Then, you must type your new
password into the text fields labeled "New Password" and "Confirm New
Password."
Before QuickBooks will open the company data file, it requires a username
and password. When QuickBooks opens, it displays the QuickBooks Login
dialog box, where you input your username and password before clicking
OK. This happens, for instance, if you give your company data file a
password. The data file is opened by QuickBooks. QuickBooks won't open
the data file if you can't provide the password.
Using QuickBooks in a Multiuser Environment
Multiple passwords can be set up for the QuickBooks data file. The truly cool
thing about this method is that you can instruct QuickBooks to permit
specific users and passwords to perform just specific actions.
It may seem complicated, but it's not at all. The company owner, for instance,
might have a password that gives her total control. However, a new
accounting clerk, for instance, might only be able to record bills in the system
thanks to his password.
How to set up additional QuickBooks users
You should create additional users if QuickBooks will be used by more than
one individual.
In QuickBooks Enterprise Solutions, adding users
Follow these procedures to add users to QuickBooks Enterprise Solutions:
1. Select Company > Users > Create Users and Roles.
QuickBooks shows the dialog box for Users and Roles (see the figure). This
dialog box lists any users for whom QuickBooks access has been configured
along with the roles that QuickBooks can perform when used. Who is now
logged into the system is also displayed in the Users list, which is found on
the User List tab of the dialog box.
The Users and Roles dialog box
2. Use the New button to inform QuickBooks that you wish to add a user.
This button causes QuickBooks to show the New User dialog box.
3. Provide a password and the user's identification.
Each user for whom you are creating an account must have a username. You
can do this by typing a brief name in the User Name box, possibly the user's
initial name. The user's password is entered after the user has been verified in
both the Password and Confirm Password text boxes.
The New User dialog box
4. Determine the user's function (s).
Choose the roles (or responsibilities) the user fills from the Available Roles
list box. After that, click the Add button to add the chosen role to the user's
list of assigned roles. Select the role in the Assigned Roles list box and click
Remove to remove it from the user.
TIP: You can provide more specific role details in the Description box
located at the bottom of the New User dialog box. You may, for instance, fill
in the kind of QuickBooks user who is generally given the chosen role.
5. (Optional) Change the roles as needed.
The roles you assign people can be changed (with the help of QuickBooks).
Return to the Users and Roles dialog box, select the Role List tab, click the
Edit button after selecting the relevant role. When QuickBooks shows the
Edit Role dialog box (not shown), choose an accounting activity or area from
the Area and Activities list, then use the Area Access Level radio buttons to
specify what a user with the selected role is capable of. You can specify that
the person shouldn't have access by clicking the None radio box. The Full
radio button allows you to designate that the user should have unfettered
access. If the user should only have restricted access, select the Partial button
and mark or unmark the checkboxes next to View, Create, Modify, Delete,
Print, and View Balance. After you've saved any modifications to the roles,
click OK to return to the Users and Roles dialog box.
 NOTE: You may view the initial access that each position has by choosing
one of the items from the Area and Activities list. Using the buttons and
boxes associated with the Area Access Level, QuickBooks shows the settings
that are currently applicable to the position.
When it comes to accounting controls, generally speaking, you just want to
permit a limited level of access. If the user doesn't need regular access to the
QuickBooks data file, choose the None button. When someone requires
access, such as when they need to generate task estimates or bills, you only
give it to them. The simple truth is that the more leeway you give your
employees, subcontractors, or accountants to muck around, the greater the
chance that someone may consciously or accidentally introduce issues into
your accounting system. In addition, it will be easier for someone to steal
from you the more access and powers you offer.

The Role List tab of the Users and Roles dialog box
6. Examine your user permissions (optional).
After creating a user, you should carefully go over the rights you granted the
user. To do this, select the user by clicking on the User List tab of the Users
and Roles dialog box, and then click the View Permissions button. Select the
user and then click the Display button to open the View Permissions window,
which shows a very thorough description of everything the user can and
cannot do, when QuickBooks displays the View Permissions dialog box (not
shown).
View Permissions window
7. Examine your role modifications (optional).
You should most likely review any modifications you make to a role's
permissions. To do that, pick the role in the Users and Roles dialog box by
clicking the Role List tab, and then click the View Permissions button. The
roles that you and QuickBooks have established are listed in a different
version of the View Permissions box that QuickBooks displays. Click the
View Permissions option after choosing the role you wish to look at. A
different version of the View Permissions box with a thorough list of
everything a role holder may and cannot do is displayed by QuickBooks.
8. When you have finished checking user and role permissions, click Close to
close any active windows and then click Cancel or Close to close any active
dialog boxes.
The new user may now begin using QuickBooks with the rights that you have
provided for him or her.
TIP: Depending on your employee turnover and bookkeeping procedures, it
can be crucial to audit the permissions every few months or years. It goes
without saying that former employees or bookkeepers shouldn't have access
to your file anymore. They definitely shouldn't even have roles, to be honest!
You can view this data online in QuickBooks' View Permissions window,
and all you have to do to print a copy of the permissions data is click the
window's Print button.
Adding users in QuickBooks Pro and Premier
In QuickBooks Pro and QuickBooks Premier, take the following actions to
add more users:
1. Select Company, then click Set Up Users and Passwords.
The Users and Roles List dialog box, which lists any users for whom
QuickBooks access has been configured and who are presently logged in to
the system, is displayed by QuickBooks.

2. By clicking the Add User option, you can inform QuickBooks that you
wish to add a user.
The first Set Up User Password and Access dialog box is shown by
QuickBooks (not shown).
3. Provide a password and the user's identification.
Create a username for each user for whom you're creating a password by
typing a brief name in the User Name field, such as the user's first name. The
user's password is entered after the user has been verified in both the
Password and Confirm Password text boxes.
4. Select if you want to restrict access for the new user by clicking Next
and then Next again.
If you want to restrict a user's access and rights, choose that option when
QuickBooks displays the second Set Up User Password and Access dialog
box (not shown). Selected Areas of QuickBooks should be selected if you do
wish to restrict access and rights (rights are essentially what a person is
allowed to do). Select the All Areas of QuickBooks radio button if you want
the user to have full control over everything. You can skip the subsequent
stages after setting up the user password if you specify that the new user
should have access to every part of QuickBooks.
5. To continue, click Next, and then describe how to obtain information
and perform tasks related to sales and accounts receivable.
The third Set Up User Password and Access dialog box (not shown) that
QuickBooks shows is the first in a series of dialog boxes that guides you
through an interview by asking specific questions about the level of access
that each user should have to a specific location. QuickBooks inquiries about
access to transactions, for instance, in relation to sales activities (such as
invoices, credit memos, and accounts receivable information). By selecting
the No Access radio button, you can say that the user shouldn't have any
access. Selecting the Full Access radio button will indicate that the user
should have unrestricted access. Selecting the radio button for "Selective
Access" and then choosing one of the sub-buttons for "Create Transactions
Only," "Create and Print Transactions," or "Create Transactions and Create
Reports" will grant the user only limited access.
6. After describing the purchases and accounts payable privileges, click
Next.
To control this new user's access to the purchases and payables sections,
QuickBooks shows the fourth Set Up User Password and Access dialog box
(not shown). The No Access radio button can be chosen. The Full Access
radio button can be chosen. Alternately, you can choose a compromise by
clicking the Selective Access radio button and a supplementary button. The
sales and accounts receivable section is subject to the same rights-setting and
access-control procedures as the purchases and accounts payable area.
7. After describing the remaining user permissions and access, click
Next.
QuickBooks shows a number of different dialog boxes that it uses to inquire
about your user rights and access when you click the Next button at the
bottom of each iteration of the Set-Up User Password and Access dialog box.
QuickBooks will inquire about the checking and credit card area after you
have specified the user's rights for, say, purchases and accounts payable. The
inventory area is the next question. It then asks questions concerning payroll
and then general, sensitive accounting processes. Finally, QuickBooks
queries whether financial reporting features are accessible.
Similar to how you limit rights in the sales and accounts receivable and
purchases and accounts payable categories, you also limit rights in each of
these other areas. I won't go into detail on how to repeatedly choose the No
Access option button, the Full Access option button, or the Selective Access
button. Just be considerate as you navigate the screens to limit the user's
rights. Users shouldn't be granted any more rights than they require since you
want them to be able to perform their tasks.
8. Define if the user has the ability to modify or remove transactions.
QuickBooks displays the Changing or Deleting Transactions page of the Set-
Up User Password and Access dialog box after you have navigated through
around half a dozen variations of the dialog box that ask about particular
areas of accounting (not shown). You can specify whether a user can amend
transactions that were made before the closure date on the Changing or
Deleting Transactions page. The capacity of a user to modify or delete
transactions should generally be constrained.
9. Select Next, then go over your rights choices.
The final version of the Set-Up User Password and Access dialog box (not
shown), which lists the user permissions you granted or allocated, is
displayed by QuickBooks. This dialog box can be used to check someone's
rights. If you discover that you misassigned rights, click the Back button to
cycle through the dialog boxes and return to the offending one. Change the
privileges assignment, then select Next to return to the Set-Up User Password
and Access dialog box's final window.
10. Click Finish when you have finished reviewing user rights and access.
The new user will be able to use QuickBooks as of this moment, but only
with the permissions you granted.
 CHAPTER TWO
PROTECTING YOUR DATA
BACKING UP THE QUICKBOOKS DATA FILE
A backup of the QuickBooks data file is a crucial activity that needs to be
done by either you or a team member. The QuickBooks data file is one of the
few files on your computer's hard drive that demands as much attention as it
does. The QuickBooks data file is a literal description of your company's
financial situation.
The data file must not be lost under any circumstances. If you lose the data
file, you might not be able to conveniently or accurately prepare your yearly
tax returns since you won't know how much money you have, whether you're
making or losing money, and how much money you have.
Backing-up basics
Fortunately, it's rather simple to back-up the QuickBooks data file. There are
only nine steps you must follow:
Step 1: Choose the FileCreate Copy command
The initial Save Copy or Backup dialog box, which offers three options—to
save a backup copy of your QuickBooks file, to generate a portable company
file, and to produce an accountant's copy—is displayed by QuickBooks (see
the following picture).
The first Save Copy or Backup dialog box
2. After selecting the Backup Copy option button and clicking Next to
proceed, you wish to save a backup copy.
NOTE: When you duplicate the QuickBooks file, you can either make a
complete backup file or a portable company file. A portable corporate file is
easier to transfer about because it is smaller than a backup file. A portable
business file, for instance, is simpler to email. The problem with portable
company files is that QuickBooks has to work very hard to compress it down
to a minimal size. When you wish to work with the file later, QuickBooks
also needs to put in extra effort to uncrunch it.
The second Save Copy or Backup dialog box displays when you click Next.

The second Save Copy or Backup dialog box

By selecting the FileCreate Backup command, you can move straight to the
Save Copy or Backup dialog box.
3. Select whether you want to save your QuickBooks backup file to the
off-site data center of QuickBooks or to the computer of your business.
Select Local Backup to indicate that you want to keep a backup copy of your
file on the hard drive of your computer or another removable storage
medium, like a USB flash drive.
4. Click Options to select a backup location.
The Backup Options dialog box for QuickBooks is displayed as shown.
The Backup Options dialog box
5. Identify the directory or drive where the corporate file should be
backed up.
To instruct QuickBooks where to save your backup copies, type a pathname
directly into the text field.
NOTE: Choose Browse if you're unsure of how to input a pathname. Use
QuickBooks' folder list to choose the drive or folder you want to use for
QuickBooks backups when the Browse for Folder dialog box appears.
6. (Optional) Choose a backup plan.
The Backup Options dialog box also allows you to tell QuickBooks when and
how to remind you to backup:
1.Time stamps: Check the box labeled Add the Date and Time of the
Backup to the File Name to include the date and time of the backup process
in the backup file's name (Recommended).
2.limiting the number of backup copies: By checking the box labeled Limit
the Number of Backup Copies in This Folder to X and then entering the
desired number of backup copies in the text box next to it, you can instruct
QuickBooks to get rid of outdated backup copies.
3.Adding backup remembrances: To specify that you want to be prompted
to back up the QuickBooks file when you shut QuickBooks, select the box
labelled Remind Me to Back Up When I Close My Company File Every X
Times. Every time, every other time, every third time, and so on are among
your interval options.
4.Verifying data is enabled: Use the verification buttons to instruct
QuickBooks to verify the integrity of your data before backing it up. For the
best and most thorough verification offered by QuickBooks, choose the
Complete Verification (Recommended) radio choice. Select the Quicker
Verification radio button if you don't have the extra few seconds to check
your work twice that data verification requires. Better yet, choose the No
Verification radio button and disregard every caution—curiosity is for babies,
after all.
7. After you have finished defining the backup location and parameters,
click Next.
QuickBooks asks you when you wish to back up via a dialog box that is
displayed (see the accompanying graphic).

When you want to backup, you are prompted by the Save Copy or Backup
dialog box.
8. Be clear about when you want to go back.
In most cases, when you select the Save Copy or Backup option, you wish to
make a backup. Click the Save It Now radio button when QuickBooks shows
the Save Copy or Backup dialog box and prompts you with the "when"
question in this situation. Alternatively, when QuickBooks asks "when," you
may tell it to schedule backups of the QuickBooks data file on a regular basis
by selecting either the Save It Now and Schedule Future Backups radio
button or the Only Schedule Future Backups radio button. If you inform
QuickBooks that you want to schedule backups, it will show you a few dialog
boxes where you may name the schedule, specify the days and times when
backups should be scheduled, and more.
9. To close the dialog box titled Save Copy or Backup, click Finish.
After defining the backup operation's parameters, click Finish. The current
QuickBooks company file is backed up (or copied) and kept in the backup
location by QuickBooks
 CHAPTER THREE
TROUBLESHOOTING
BROWSING INTUIT PRODUCT-SUPPORT
WEBSITE
The following notice displays when accessing Intuit websites:
v There are some troubles with our systems. Try one more later,
please.
v You can take a few simple troubleshooting actions to fix browser
difficulties on Intuit websites.
Use a different browser before continuing with the instructions below to see
if the problem is browser-specific.
Typical fixes for browser troubles:
Refresh your web browser
Clear the cache on your browser.
Add Intuit to your trusted sites list
Activate Active Scripting (only for Internet Explorer)
Put the browser's settings back to default
Resolving download problems or locating downloaded files
Pressing Ctrl + J in any browser will typically allow you to find a
downloaded file. Change the default location for the downloaded files if this
doesn't work.For instructions on altering the default location of the files,
choose the appropriate browser from the list below:
Google Chrome
v Select Settings from the menu by clicking the three dots on the
Google Chrome toolbar.
v Click the arrow next to "Advanced" when you've scrolled all the way
to the bottom of the page.
v Find the Downloads section.
v To choose a default location to store downloaded files, click the
 Change button next to Location.
v If you wish to be asked to select a specific location for each
download, move the slider labeled Ask where to save each file before
downloading.
Firefox
v Choose Options from the Tools menu.
v On the General tab, click.
v Search for the Downloads section.
v If you want to alter the default location for the downloaded files,
click Browse.
v Select If you want to be requested to select a specific location for
each download, always ask me where to save files.
Internet Explorer
v Choose View Downloads from the Tools menu.
v In the dialog box on the lower left, choose Options.
v By clicking Browse, you can specify a different default download
location.
v When finished, click OK.
Safari
v Preferences can be selected from the Safari menu.
v Select the General tab.
v Select Other from the File download location dropdown menu.
v If you wish to be prompted to select a specific place for each
download, select Ask for each download.
v Click Select after choosing a new location.
APPENDIXES
 CHAPTER 1
A CRASH COURSE IN EXCEL
Starting Excel
The Start menu or a desktop shortcut can be used to launch Excel. Excel's
File tab, Close button, or keyboard shortcuts can all be used to close the
program.
Using the Start menu to launch Excel 2010
v Select StartAll ProgramsMicrosoft OfficeMicrosoft Excel 2010 to
launch Excel 2010 from the Windows Start menu. You see a brand-
new workbook that is empty and prepared for data entry.

v When you launch Excel 2010, a brand-new, blank workbook is

displayed.
v Excel 2010 pinning to the Start menu
v If you frequently use Excel, you might want to permanently add an
option for the software to the Windows Start menu.
To add Excel 2010 to the Start menu, take the following actions:
1.Microsoft Excel 2010's shortcut menu can be accessed by right-clicking the
program on the Start menu after clicking the Start button.
Start Microsoft Excel 2010 and repeat this process if you don't see it listed in
the recently used section on the left side of the Windows Start menu.
2.On the shortcut menu, select Pin to Start Menu.
You can launch Excel once you've pinned it to the Start menu by hitting the
Start button, followed by this choice, which is always there in the Start
menu's left column.
Creating a desktop shortcut for Excel 2010
You might find it more convenient to run Excel 2010 from the Windows
desktop if the program's icon appears there.
Follow these steps to create an Excel 2010 desktop shortcut:
1.Choose Microsoft Office under Start > All Programs.
2.Click Desktop (Create Shortcut) on the shortcut menu after right-clicking
Microsoft Excel 2010 and selecting Send To from the shortcut menu's
continuation menu.
On your desktop, a shortcut for Microsoft Excel 2010 appears. You can
shorten the shortcut's name to something more concise, like Excel 2010.
3.Right-click the desktop shortcut for Microsoft Excel 2010 and select
Rename from the shortcut menu.
4.Click anywhere on the desktop after entering a new shortcut name—for
example, Excel 2010—in lieu of the existing one.
Leave Excel 2010
When you're ready to end your work with Excel, you can do it in a number of
ways:
Select File > Exit.
Hit Alt+F4.
In the Excel 2010 program window's upper right corner, click the Close
button (the X).
After working on a worksheet, if you try to close Excel and you haven't saved
your most recent modifications, Excel will prompt you to save your changes.
Click the Preserve option to save your changes before leaving the page. Click
Don't Save to prevent saving your changes.
EXPLAINING EXCEL WORKBOOK
A workbook in Microsoft Excel is a group of one or more spreadsheets, also
known as worksheets, in a single file. The spreadsheet "Sheet1" from the
Excel workbook file "Book1" is an example below. The "Sheet2" and
"Sheet3" sheet tabs are likewise present in our example and are a part of the
same worksheet.

Differences Between Workbook, Worksheet, and

Spreadsheet
Due to the similarities between the terms "spreadsheet," "workbook," and
"worksheet," it may be difficult to distinguish between them. You open a
workbook when you launch Microsoft Excel, a spreadsheet application.
Through the tabs at the bottom of the worksheet you are now viewing, you
can access one or more distinct worksheets that are contained in a workbook.
The most perplexing thing is that a worksheet and a spreadsheet are often
used interchangeably. In other words, the terms "spreadsheet" and
"worksheet" are interchangeable. However, the majority of people only use
the terms "spreadsheet application" and "spreadsheet file" to describe the
software and its output.
Creating a new workbook
Use the instructions below for your version of Excel to create a new
workbook.
The 2013 version of Microsoft Excel
1.Start Excel.
2.Press the File tab.
3.Choose New.
4.Select "Blank workbook" ().
Excel 2010 in Microsoft Office.
1.At the top of the window
2.Select the File tab.
3.Press "New"
4.Select "Blank workbook" ().
Microsoft Excel 2007.
1.Open Excel
2.To access the office button
3.Specify Recent and Blank.
4.Click twice on "Blank workbook" in the right pane.
PUTTING TEXT, NUMBERS, AND FORMULAS IN CELLS
#1: Use an Excel formula to add meaningful words.
Excel is frequently used exclusively for calculations. As a result, we are not
concerned with how effectively they deliver the message to the reader. Take a
look at the data below as an illustration.
It is obvious from the above image that we must multiply Units by Unit Price
in order to determine the Sale Value.
v To calculate the overall sales value for each salesperson, enter some
simple text into the Excel formula.

v Usually, this is where we stop the procedure.

Maybe Anderson's entire "Sale Value" should be displayed as 45,657?
It appears to be a whole sentence in order to provide the user a clear message.
Let's proceed and construct a sentence using the formula.
Let's proceed and construct a sentence using the formula.
We are aware of how the sentence should be framed. First, we require the
name of a "Sales Person" to appear. Therefore, we must choose cell A2.
We now require the salesperson's name to be followed by "Total Sale Value."
To combine this text value, we must add the ampersand operator sign after
choosing the first cell.

To determine the sale value, we must now perform the calculation. Apply the
formula as B*C2 after adding the additional (and) symbol.

Now that the formula and our text values are complete, we must press the
"Enter" key.
The incorrect formatting of the sales statistics in this formula is one issue.
That would have made the numbers look right, but they don't have a thousand
separator.
There is no need to be concerned; using the TEXT function in the Excel
formula, we can format the numbers.
Make formula changes.
The computation stage formats the numbers using the Excel TEXT function,
as illustrated below.

We now have the numbers in the correct format, along with the sales figures.
The Excel formula's TEXT function formats the calculation (B2*C2) as ###,
###.
Use the TIME Format to Include Meaningful Words in Formula
Calculations
We have learned how to include text values in our calculations to give
readers or users a clear message. We're going to add text values to a different
calculation right now that also incorporates time calculations.
Data on flight arrival and departure times is available. The length of each
flight must be determined.

We also want to display a statement such as "Flight Number DXS84's overall

duration is 10:24:56," in addition to the total length.
The formula must begin in cell D2. "Flight Number" is the first value we
have. This needs to be typed in double-quotes.

The flight number already present in cell A2 is the next value that has to be
added. Add the "&" sign and choose cell A2.
The "Total Duration" of the text has to be updated next. This text needs to be
enclosed in double-quotes, and we must add one more "&" sign.

The formula's crucial final component is now. Following the symbol "&" in
the formula, we must determine the total duration as C2 - B2.

Now is the essential last step in the formula. The total duration must be
calculated after the symbol "&" in the formula as C2 - B2.

The total duration that we obtained was 0.433398, which is not the correct
format. Therefore, we must format the calculation to TIME using the TEXT
function.
Use Date Format to Add Meaningful Words to Formula Calculations
When adding text data to obtain the proper numerical format, the TEXT
function can handle the formatting work. We shall now view it in date
format.
The daily sales table, which we regularly update with new figures, is shown
below.

As the data is added, the heading needs to be automated, therefore the last
date needs to be changed to match the last day of the table.
Step 1: We must first open the "Consolidated Sales Data from" formula in
the A1 cell.
Step 2: Add the "&" symbol to the Excel formula and use the TEXT
function. Inside the TEXT function, use the MIN function to retrieve the
least-valued date from this list. add the format "dd-mmm-yyyy."

Step 3: Type the word “to”

Step 4: We must use the MAX formula to extract the most recent date from
the table and then format it as a date using the TEXT function in the Excel
formula.
The headline will be updated automatically when we make changes to the
table.

Formula with Text in Excel: Things to Remember

• We can add the text values according to our preferences by utilizing the
Excel CONCATENATE function or the & symbol.
• We must utilize the TEXT function and specify the desired number format
in order to obtain the correct number format.
Examples
View numerous illustrations in the diagram below:
Examine the second example in the illustration very carefully to see how the
TEXT function is used. Use the TEXT function to control how the number is
displayed when joining a number to a string of text using the concatenation
operator. Instead of the formatted value you see in the cell (40%), the formula
uses the underlying value from the linked cell (.4 in this case). To get the
number formatting back, utilize the TEXT function.
Cut, Copy, and Paste cell contents
The operations Cut, Copy, and Paste are helpful in Excel XP. Information in
cells can be simply copied, cut, and pasted into other cells. You don't have to
repeatedly type the same information thanks to these actions.
The Standard toolbar contains the Cut, Copy, and Paste buttons.

The Edit menu also offers options for the Cut, Copy, and Paste actions.
Shortcut keys can also be used to carry out the operations of Cut, Copy, and
Paste.
Cut= Ctrl+X
Copy= Ctrl+C
Paste= Ctrl+V

Copying and pasting cell contents

You can temporarily store information on the Clipboard, a temporary storage
file in your computer's memory, by using the Copy feature to copy specific
data from the spreadsheet. You can choose any item on the Clipboard that has
been collected and paste it into a cell of the same or a different spreadsheet
using the Paste feature.
Copying and Pasting:
Choose the cell or cells you want to duplicate.
To copy something, click the Copy button on the Standard toolbar.
The cloned cell's border appears to have marching ants around it.
 v To insert the duplicate information, click the cell that you wish. The
highlighted cell will be shown. Click the first cell where you wish to
add the duplicate information if you are copying data into multiple
cells.

v Hit the Enter key.

v Your data has been transferred to the new location.
If you paste copied cell information into cells that already have data in them,
be cautious. If you do, the current data is replaced.
You can copy data from a variety of sources and paste it into an Excel
spreadsheet, including webpages, emails, and other Office programs like
Word and PowerPoint.
Cutting and pasting cell contents
You can delete data from spreadsheet cells using the Cut feature. As long as
the pasting happens before you execute another operation, information that
has been cut can be pasted in another cell. The information you cut is
automatically deleted from the Office clipboard if you don't paste it right
away.
To Cut and Paste:
v Choose the cell or cells you want to cut.
v The Standard toolbar's CutCut button should be clicked.
v The data in the cell is removed.
v The sliced cell's perimeter develops the look of marching ants.
v Select the cell where you wish to put the duplicate data by clicking
there.
v It will be highlighted in the cell.
v Click the first cell where the duplicate information is to be placed if
you are copying data into multiple cells.
v Choose the cell or cells you want to cut.
v The Standard toolbar's Cut button should be clicked.
v The data in the cell is removed.
The sliced cell's perimeter develops the look of marching ants.
v Select the cell where you wish to put the duplicate data by clicking
there.
v The highlighted cell will be shown. Click the first cell where you
wish to add the duplicate information if you are copying data into
multiple cells.
 v Hit the Enter key.
v Your data gets copied and placed in the new spot.
Note: You are not required to paste previously clipped content. Cut can be
used to remove data from a cell.
To use Drag and Drop:
v Using the drag-and-drop approach is another way to transfer data
between cells. You drag the cell to the new place after using the cursor
to select the information that needs to be relocated.
v When using drag and drop, make sure the cell or cells you want to
transfer are highlighted and selected.
v Place the mouse pointer close to one of the selected cell's outer
corners (s). A tall, white cross with arrows at each end becomes a thin,
black cross with arrows at each end as the mouse pointer.
 When dragging a cell or cells, keep the mouse pointer on the outer edge of
the chosen cell while clicking and holding the left mouse button.

To relocate the data to its new location, let go of the mouse button.
FORMATTING CELL CONTENTS
When you format text or numbers, they will appear more noticeable,
especially on a large worksheet. A cell's text alignment, font color, style, size,
and formatting effects are all examples of modifying default formats. This
article demonstrates how to apply various formats as well as how to reverse
them.
v Select the cell, then choose the desired format from the Home tab to
make text or numbers in that cell bold, italic, or with a single or
double underline:

v Modify the font's size, color, or effects.

v Choose "Home" and:
v Click the arrow next to the default font, Calibri, and select a different
font style to change the font.
v By selecting a different text size by clicking the arrow adjacent to the
default size of 11, you can change the font size.

Click Font Color and choose a new color to alter the font's color.
Click Fill Color next to Font Color to add a background color.
To format text using strikethrough, superscript, or subscript, click the Dialog
Box Launcher and choose an effect from the Effects menu.

Align the text differently

v You can center, align left or right, or float the text within a cell. You
 can use Wrap Text to ensure that the entire line of text is seen if it is
long.
v Choose the desired alignment option on the Home tab after selecting
the text that you wish to align.

v formatted clearly
v If you change your mind after applying any formatting, you may
undo it by selecting the text and choosing Clear > Clear Formats from
the Home tab.

Save your workbook

All of your saving is done on the File tab, whether you want to save your
workbook locally or online, for instance.
While you can save an existing workbook using Save or by pressing Ctrl+S
in its current place, you must use Save As to create a copy of your workbook
in the same or a different location or to save your workbook for the first time
in a different area.
1. Click File > Save As.
2. Choose the location where you want to save your workbook under Save
As.
v Click Computer, for instance, to save to your desktop or a specific
folder on your computer.

NOTE: Click OneDrive and register to save to your OneDrive location (or
sign in).
v Click Add a place to add your own cloud locations, such as a
Microsoft 365SharePoint or OneDrive location.
3.The desired place in your Documents folder can be found by clicking
Browse.
v Click Desktop, then select the precise area where you wish to save
the workbook on your computer, to choose a different location.
4.Give your new workbook a name in the File name box. If you're making a
duplicate of a workbook that already exists, provide a different name.

v Choose the desired file format from the Save as type option (located
beneath the File name box) to save your workbook in a different file
format, such as.xls or.txt.
v Press "Save" your preferred save location
Note: You can "pin" the location where you saved your workbook once
you're done. By doing this, the place is kept accessible for future usage when
saving more workbooks. This might be a huge time saver if you frequently
save stuff to the same folder or place! You are free to pin as many places as
you like.
v Select "File" > "Save As."
v Choose the location where you most recently stored your workbook
under Save As.
v Click Computer if you wish to bookmark the location where you last
saved your workbook, which is likely the Documents folder on your
computer.
v Point to the area you wish to pin in the Recent folders section on the
right. Push-pin illustration There is a push pin button to the right.
 To bookmark that folder, click the image. The picture now appears pinned.
Push pin symbol pinned. This location will always be listed under Recent
folders at the top of the list each time you save a workbook.
Tip: Simply click the pinned push pin picture to unpin a location. Push pin
icon pinned once more
Activate AutoRecovery
While you are working on a workbook, Excel automatically saves it in case
something happens, like the power turning out. It's known as AutoRecovery.
Don't be tempted to rely on AutoRecovery; this isn't the same as storing your
workbook. Frequently save your workbook. But having a backup, just in
case, is a smart idea with Autorecovery.
Ensure that AutoRecovery is activated:
v Press File > Options.
v Click Save in the Excel Options dialog box.
 v Make sure Save AutoRecover information every minute is selected
under Save workbooks.
v Click OK after setting the minutes for how frequently you want
Excel to back-up your work.
Opening a workbook
Any workbook that has been previously saved and given a name can be
opened.
To access a previously saved Excel XP workbook:
v From the menu bar, select FileOpen.

v The Open dialog box opens.

 v Select the drive, folder, or Internet location that contains the file you
wish to open by clicking it in the Look in list.
v Open the folder containing the file from the folder list.
v Click the file you want to open after it has been shown.
v Select Open from the menu.
Closing a workbook
To close an existing Excel XP workbook:
v From the menu bar, select FileClose.
v The Excel window's worksheet has been closed.

v If any data has been entered between the last save and the time the
file is closed, Excel XP will ask you to save it.
PRINTING EXCEL WORKBOOK
To access the Print pane:
v Go to the File tab. It will show a backstage view.
Choose Print. A print pane will show up.

To find out more about using the Print pane, click the icons in the interactive
below.
To print a workbook:
Select the selected printer by going to the Print pane.
Enter the quantity of prints you want to make.
If more settings are required, choose them (see above interactive).
Press Print.

Selecting a printing area

Decide precisely what information you want to print before printing an Excel
worksheet. You must choose whether to publish the complete workbook or
just the active worksheets, for instance, if your workbook has numerous
worksheets. Additionally, there may be occasions when you want to print
only a portion of the information in your workbook.
Active sheets to print:
v When selected, worksheets are deemed to be in use
v The worksheet you want to print should be chosen. When you wish
to print multiple worksheets, choose the first worksheet, hold down
 the Ctrl key on your keyboard, and then select any more worksheets
you desire.

v Go to the Print pane by navigating.

v From the Print Range drop-down menu, pick Print Active Sheets.

v Click the Print button.

To print the entire workbook:

v The Print pane by navigating there.
v From the drop-down choice for Print Range, choose Print Entire
Workbook.
 v Click the Print button.

To print a selection:
v We'll use a few pieces of content about forthcoming softball games
in July as our example.
v The cells you want to print should be selected.

v Go to the Print pane by navigating.

v From the drop-down selection for Print Range, choose Print
Selection.
 v Your choice will have a preview displayed in the Preview pane.

v Click the Print button to print the selection.

You can also choose to select the print area in advance so that you can see
which cells will be printed when using Excel. All you have to do is choose
the cells you wish to print, click the Page Layout tab, choose the Print Area
command, and then click Set Print Area.
 CHAPTER 2
GOVERNMENT WEB RESOURCES FOR
BUSINESS
BUREAU FOR ECONOMIC ANALYSIS
The Bureau of Economic Analysis (BEA): What Is It?
The Bureau of Economic Analysis (BEA), a branch of the Department of
Commerce of the U.S. federal government, is in charge of analyzing and
publishing economic data that is used to verify and forecast economic
patterns and business cycles.
KEY LESSONS
v The U.S. Department of Commerce's Bureau of Economic Analysis
(BEA) is in charge of compiling and reporting economic data.
v These reports have a significant impact on public and commercial
sector decisions, influencing things like taxation, interest rates, hiring,
and expenditure, among other things.
v Reports are published by the Bureau at four different levels:
international, national, regional, and industrial.
BEA's statistical analysis
The BEA's analysis and reporting of gross domestic product (GDP) data and
the U.S. balance of trade figures are among the most significant statistics
(BOT).
Gross Domestic Product (GDP)
One of the most important products of the BEA is the GDP report. It provides
us with the total dollar worth of all finished products and services created
inside a nation's borders during a certain time frame.
The size of an economy is indicated by GDP for the general population.
Additionally, by comparing current data to earlier times, we may determine if
the economy is growing (creating more products and services) or collapsing
(registering declining output). The movement of GDP assists central banks in
deciding whether or not to act with monetary policy.
Policymakers may think about implementing an expansionary policy to boost
the economy if the growth rate is slowing. On the other side, if the economy
is booming, it can be decided to control inflation and stifle expenditure.
Although GDP is typically computed on an annual basis, it can also be
estimated on a quarterly basis. In the United States, for instance, the
government publishes an annualized GDP estimate for both the current
quarter and the previous year.
GDP is regarded as the Department of Commerce's biggest accomplishment
of the 20th century and is one of the three metrics that have the greatest
influence on U.S. financial markets.
Balance of Trade (BOT)
The value of a country's imports and exports for a specific time period is
shown by the balance of trade (BOT), which tracks economic transactions
between a country and its trading partners.
The BEA provides information on the flow of commodities and services into
and out of the United States (BOP). This data is used by economists to
determine the relative strength of a nation's economy. When exports outpace
imports, the GDP often increases. It results in a trade deficit in the alternative
scenario.
Typically, a trade imbalance indicates that a nation is not producing enough
commodities for its citizens, forcing them to import them. Deficits might also
indicate that a nation's consumers are well off enough to buy more items than
the nation produces.
FINDING INFORMATIONS AT THE BEA WEBSITE
Generally speaking, using our website is possible without revealing personal
information. It may be necessary to handle personal data if you utilize any
particular services provided by our business via our website or if you want to
get in touch with us. The data subject must typically give their consent for us
to process their data if it is essential to do so and there is no prior legal basis
for doing so.
The processing of personal data, including names, addresses, phone numbers,
and emails, is always done so in compliance with German data protection
laws as well as the EU's General Data Protection Regulation (GDPR).
The public is meant to be made aware of the nature, extent, and use of the
personal data we process by this privacy policy. Additionally, this privacy
statement informs data subjects of their rights and disclosure requirements
under Articles 13, 14, and 15 of the GDPR.
1. Contact details of the data controller
According to GDPR and national data protection laws,
BeA GmbH Business Leader:
v Dr. Jörg Dalhöfer is the data controller.
v Simon Kreft
v WEEE-Reg.-Nr
v DE 94007702 HR
v Lübeck HRB 21320HL St-Nr
v 30/293 80 781 VAT-ID
v DE 342/809/873
2. Contact details of the data protection officer
v S-consit GmbH is the data protection officer of BeA.
v Schützenstr. 25a 23843 Bad Oldesloe
v Germany Daniel Nyhof LL.M., LL.B.
v Daniel.nyhof(at)s-consit.de
If you have any inquiries or comments about our data protection procedures
or this privacy statement, you may get in touch with our data protection
officer directly at any time.

3. Website use, collection of general data and information

Every time a user or automated system views the BeA website, a number of
general statistics and pieces of information are collected. The log files on the
server contain this generic data and information.
The name of the requested website, the requested file, the date and time of
access, the amount of data transferred, the notification of a successful
retrieval, the browser type and version, the user's operating system, the
referrer URL (previously visited), the IP address and the requesting provider,
as well as other similar data and information, are all included in this data.
This data is used to prevent danger in the event that attacks on our
information technology systems occur.
BeA is not able to infer any judgments about the data subject from these
general facts and information. Instead, this information is necessary to deliver
our website's contents accurately, optimize that content, ensure the long-term
functionality of our information technology systems and the technology that
powers our website, and give law enforcement agencies the data they require
to look into and prosecute cyberattacks. It uses statistical analysis to evaluate
this anonymously obtained data and information with the goal of enhancing
data security and privacy within our business and ultimately ensuring the best
level of protection for the personal data we process. All personal data
submitted by a data subject is preserved apart from the information in the
server log files.
Cookies
Cookies are used on the BeA website. Cookies are text files that an Internet
browser stores and files on a computer system.
Numerous servers and websites use cookies. A so-called cookie ID can be
found in many cookies. A cookie's ID serves as a special identifier. It is made
up of a string of characters that allow Internet servers and web pages to
identify the particular Internet browser where the cookie was saved. This
makes it possible for websites and servers to identify between the user's
browser and other Internet browsers that may also have cookies. The
distinctive cookie ID can be used to identify and recognize a certain web
browser.
In comparison to what would be possible without cookies, this website is able
to provide its users more user-friendly services.
The content and offers on our website can be tailored specifically for each
user by using cookies. We can identify website visitors using cookies in a
pseudonymous manner. The goal of this recognition is to simplify user
interaction with our website and enable technical settings to be saved. By
utilizing an appropriate setting on the browser being used, the data subject
can stop cookies from being set by our website at any moment and so
permanently object to their setting. Additionally, cookies that have already
been created can always be removed using a web browser or other
applications.
Any popular internet browser can do this. Not all features of our website
could be fully functional if the data subject disables the setting of cookies on
the Internet browser they are using.
In addition, BeA uses other cookies to improve user experience, and these are
removed once the browser session is over (session cookies).
Google Analytics usage
Google Analytics, a web analytics tool offered by Google, Inc., is used on our
websites ("Google"). On the basis of Art. 6 Para. 1 Lit. f) GDPR and Art. 15
Para. 3 of the German Telemedia Act (TMG), we are using this information
for the purposes of analyzing, improving, and efficiently running our online
presence. In order to analyze how you use the website, Google Analytics
makes use of "cookies," text files that are downloaded to and stored on your
computer. The data collected by the cookie about how you use the website,
including
the kind and version of the browser, the operating system, the referrer URL
(the website previously visited), the host name of the computer being
accessed (IP address), and the time of the server request,
1.Information typically sent to and kept on a Google server in the USA:
Your browser's IP address is provided to Google Analytics, but Google does
not link it to any other information. The "anonymizeIP" code has also been
added to the Google Analytics script that runs on this page. As a result,
within the nations that make up the European Union or the European
Economic Area, Google will truncate your IP address. The entire IP address
will only ever be sent to a Google server in the USA in exceptional
circumstances, where it will be truncated.
2. Google will use this information on our behalf to analyze how you use the
website, provide reports on website usage, and perform other tasks related to
website and internet use. By changing the proper browser settings, you can
tell your computer not to store cookies; but you might not be able to utilize
all of this website's services if you do so.
After 14 months, all information that we send that is associated with cookies,
user IDs, or advertising IDs is automatically destroyed. A process that is run
once a month will automatically erase a piece of data once the retention term
has passed. More details on the terms of use and data protection can be found
at policies.google.com or at www.google.com/analytics/terms/de.html.
By downloading and installing the browser plugin found at the following
address: http://tools.google.com/dlpage/gaoptout, you can also prevent the
data generated by cookies regarding how you use a website (including your
IP address) from being passed to Google and the processing of these data by
Google. You can also stop Google Analytics from gathering data by clicking
this link as an alternative to the browser add-on, particularly for browsers on
mobile devices: Turn off tracking. This creates an opt-out cookie that
prevents your data from ever being collected again when you visit this
website. The opt-out cookie is kept on your device and only works with this
browser and our website. You will need to set the opt-out cookie once more if
you clear the cookies in this browser.
3.Integration of third-party services and content
We incorporate third-party material or service offers like movies,
navigational services, or fonts based on our legitimate interests (i.e. interest in
the analysis, optimization, and profitable operation of our website as defined
by Art. 6 para. 1 lit f. GDPR) (hereinafter uniformly referred to as "content").
Since they would be unable to deliver the content to your browser without
your IP address, you should presume that the third parties that are providing
this content can see it. Therefore, in order to display this material, your IP
address is required. We make an effort to only use content from sources who
supply content using an IP address. Invisible graphics known as "pixel tags"
or "web beacons" may also be used by third-party service providers for
marketing or statistical purposes. Pixel tags can be used to analyze data like
visitor traffic on this website's pages.
The pseudonymous data may also be saved in cookies on the user's device
and may include specifics about the browser and operating system, websites
the user came from, how long they stayed on our website for, and other usage
data. It might also link to relevant data from other sources.
4. Contractual relationships, regulations regarding disclosure of data
Your name, address, billing address, phone number, email address, and other
personal information may be provided to BeA offices, departments, and staff
members as necessary to carry out our contractual and legal duties. We may
also provide data to third parties we have hired to process data (Article 28
GDPR). These businesses offer IT services, technical services, logistics,
printing services, telephone services, collections, consulting, and sales and
marketing services. Additionally, if it's required to protect our legal interests,
data may be given to third parties (such lawyers).
Only when necessary to comply with legal requirements or with your
permission will data be disclosed to recipients outside of BeA. If a legal or
official obligation exists, public authorities and institutions (such as taxing
authorities, social insurance companies, and supervisory authorities) as well
as any other recipient we mentioned when requesting your consent may be
the recipients of personal data under these circumstances.
Within the framework outlined above, BeA may also transfer data to third
countries or international organizations (such as Google) or if customers are
located in third countries and this is required for us to process the contracts;
the legal bases for this are Art. 6 Para. 1 Lit. b) and Art. 44, 49 GDPR.
5. Data categories and legal bases for processing
The following are some of the categories of personal information gathered:
Master and contract data encompass all information gathered to create, plan,
modify, or end a contractual relationship and the services it covers. 5.1.
Name, address, billing address, phone number(s), fax number(s), contract
start date, email address, powers of attorney, contact information for
authorized representatives, complaints made, etc. are all included in this. The
processing is done in accordance with GDPR Article 6 Paragraph 1 Lit. B.
You are now advised that BeA may, unless you have expressly objected, use
the data lawfully gathered within the context of an existing customer
relationship for the aim of direct mail advertising of its own offers. BeA will
explicitly remind you that you can object to the sending of future messages
by sending a written notice to BeA at any time when collecting or storing the
data for the first time and each time an advertisement is sent to the customer's
address. The processing is done in accordance with GDPR Article
Security of data processing
BeA complies with GDPR Article 32 by putting organizational and technical
security measures in place to safeguard your personal information from
accidental or unlawful destruction, loss, alteration, unauthorized disclosure,
and access to personal information that is transmitted, stored, or otherwise
processed. This specifically involves the encryption of website access using
widespread and cutting-edge techniques.
BeA has also put in place a process for routinely reviewing, analyzing, and
assessing the success of the organizational and technical steps taken in order
to be able to continuously enhance our security measures in pace with
technological advancements.
Information scope as per Articles 13 and 14 of the GDPR
Links to other websites may be found on some of our website pages. BeA has
no control over the information, presentation, or implementation of data
protection laws by these third-party service providers, thus we advise you to
familiarize yourself with the relevant rules before visiting their websites.
This privacy statement's provisions only apply to the BeA website and not to
any websites that are linked to it.

BUREAU LABOUR OF STATISTICS

The Bureau of Labor Statistics (BLS): What Is It?
A federal organization called the Bureau of Labor Statistics (BLS) gathers
and makes available a variety of data regarding the American economy and
labor market. The Producer Price Index (PPI) and the Consumer Price Index
(CPI), both of which are regarded as crucial indicators of inflation, are
included in its publications.
KEY LESSONS
v An American government organization called the Bureau of Labor
Statistics (BLS) is in charge of gathering and disseminating a variety
of economic and employment data.
v The Consumer Price Index (CPI) and Producer Price Index are two
important inflation indicators produced by the BLS (PPI).
v The BLS also generates regional and national statistics on wages,
productivity, labor force participation, and employment.
Understanding the Bureau of Labor Statistics (BLS)
The BLS, a division of the U.S. Department of Labor (DOL), is responsible
for collecting, compiling, and publishing a variety of statistical data on the
labor market, pricing, and productivity. The figures this government agency
generates are among the most important economic indicators for the
American economy, and it goes to considerable pains to ensure the accuracy,
impartiality, and accessibility of its reports.
Businesses, academics, and legislators routinely reference BLS data in the
media and use it to guide their decisions. Economists and market participants
also pay careful attention to it because they use the bureau's reports to make
more precise and better predictions about how the economy and markets will
function in the future.
NOTE: The BLS has a long history of providing empirical data to support
economic policy, including the case for raising the minimum wage.

The Bureau of Labour Statistics's past (BLS)

The BLS was initially founded in 1884 as a division of the Department of the
Interior with the task of collecting and conducting research on economic and
labor issues. It then ran as a separate department for almost 15 years before
being merged into the short-lived Department of Commerce and Labor in
1903.
It was only a decade-long move. The BLS and other labor-related bureaus
and agencies were moved into the newly-formed DOL, a US cabinet-level
organization tasked with upholding federal labor laws and advancing the
welfare of employees, when the Department of Commerce and Labor (DOC)
was renamed the Department of Commerce (DOC) in 1913.
The BLS has released some of the most significant statistics reports,
including:
v The Consumer Price Index (CPI) is a measure of inflation and the
cost of living that is composed of the prices of a relatively fixed
basket of products.
v A gauge of the typical prices American producers receive for their
goods and services is the producer price index (PPI).
v Local Area Unemployment Statistics (LAUS): A collection of
localized information on unemployment and labor productivity.
v The National Compensation Survey (NCS) generates thorough
summaries of employees' wages across a range of industries.
CPS: Current Population Survey This monthly survey, which is jointly
sponsored by the Census Bureau, aims to ascertain the demographic details
and employment status of all members of a household who are of working
age.
The CPS, also referred to as the "home survey," is the main source for data
on the labor force in the United States and contains the national
unemployment rate.
SECURITY AND EXCHANGE COMMISSION
The Securities and Exchange Commission (SEC): What Is It?
An independent federal government regulatory body, the U.S. Securities and
Exchange Commission (SEC), is in charge of safeguarding investors,
ensuring the fair and orderly operation of the securities markets, and
promoting capital formation. It served as the nation's first federal securities
market regulator after being established by Congress in 1934. The SEC
encourages complete public disclosure, defends investors from dishonest and
market-manipulating techniques, and keeps an eye on corporate takeover
activities in the country. Additionally, it permits bookrunner registration
declarations among underwriting companies.
Typically, in order to sell securities to investors, issuance of securities offered
in interstate commerce, via mail, or online must first be registered with the
SEC. To conduct business, financial services organizations like broker-
dealers, advisory firms, and asset managers are required to register with the
SEC. As an illustration, they would be in charge of approving any official
bitcoin exchange.
History of the SEC
Securities issued by a number of corporations went worthless when the
American stock market collapsed in October 1929. Public trust in the
reliability of the financial markets plummeted as a result of numerous people
having previously provided inaccurate or misleading information. The
Securities Exchange Act of 1934 and the Securities Act of 1933, both of
which founded the SEC, were passed by Congress in an effort to regain
public confidence. The main responsibilities of the SEC were to make sure
that corporations disclosed accurate information about their operations and
that exchanges, brokers, and dealers handled investors fairly.
KEY LESSONS
v The Securities and Exchange Commission (SEC) is a federal
watchdog organization in the United States tasked with policing the
securities industry and safeguarding investors.
v Due in significant part to the 1929 stock market crisis that
precipitated the Great Depression, the Securities and Exchange Act of
1934 and the U.S. Securities Act of 1933 were passed, creating the
SEC.
v The SEC collaborates with the Justice Department on criminal
matters and has the authority to pursue civil lawsuits against violators
of the law.
The Functions of the Securities and Exchange Commission
(SEC)
The SEC's main job is to regulate entities and people who work in the
securities industry, such as stock exchanges, brokerage houses, dealers,
investment advisors, and investment funds. The SEC encourages
transparency, information sharing, ethical business practices, and fraud
prevention through established securities rules and regulations. It offers
investors access to registration statements, periodic financial reports, and
other securities documents via its electronic data-gathering, analysis, and
retrieval database, known as EDGAR.
NOTE: After the 1929 stock market crisis, the Securities and Exchange
Commission (SEC) was established to aid in regaining investor confidence.
Five commissioners, including one who serves as chair, are appointed by the
president to lead the SEC. The five-year terms of each commissioner are
renewable for a further 18 months if a replacement is not found. Gary
Gensler, who assumed leadership of the SEC on April 17, 2021, is the current
chairman. The statute stipulates that no more than three of the five
commissioners may belong to the same political party in order to foster
nonpartisanship.
There are 23 offices and five divisions within the SEC.
Their objectives include interpreting securities laws, carrying out
enforcement actions, issuing new regulations, supervising securities
institutions, and coordinating regulation among various levels of government.
The five divisions' respective roles are as follows:
1. Division of Corporate Finance: Ensures that investors are given relevant
information (information pertinent to a company's financial outlook or stock
price) to enable them to make knowledgeable investment decisions.
2.The Division of Enforcement is in responsibility of upholding SEC
regulations through case investigations, civil litigation, and administrative
actions
3.Regulation of investment firms, variable insurance products, and federally
licensed investment advisors is handled by the Division of Investment
Management.
4.The Division of Economic and Risk Analysis incorporates data analytics
and economics into the primary objectives of the SEC.
5.The Division of Trading and Markets is responsible for creating and
upholding the norms that ensure fair, orderly, and effective markets.
Only civil lawsuits may be filed by the SEC in federal court or in front of an
administrative judge. The Department of Justice's law enforcement agencies
are responsible for handling criminal prosecutions, although the SEC
frequently collaborates closely with them to provide evidence and support
legal procedures.
The SEC seeks two primary penalties in civil actions:
1.Orders known as injunctions that forbid further offenses: A person or
business that disobeys an injunction could be fined or put in jail for contempt.
2.Civil monetary fines and the return of illicit gains: In some
circumstances, the SEC may also ask a judge to impose a ban or suspension
on a person's ability to serve as an officer or director of a corporation. A
variety of administrative processes, which are heard by internal officers and
the commission, may also be brought by the SEC. Common legal actions
include issuance of cease-and-desist letters, revocation or suspension of
registration, and the imposition of bans or employment suspensions.
The SEC also serves as the initial level of appeal for actions requested by
self-regulatory bodies of the securities sector, such FINRA or the New York
Stock Exchange.
The Office of the Whistleblower is one of the SEC's offices that stands out as
one of the most effective tools for enforcing securities laws. The SEC's
whistleblower program, which was established as a result of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010, rewards qualified
individuals with monetary sanctions exceeding $1 million for disclosing
original information that results in successful law enforcement actions. 10%
to 30% of the total money collected through the sanctions can go to the
individuals.
FEDERAL RESERVE
The central banking system of the United States of America is the Federal
Reserve System, usually referred to as the Federal Reserve or just the Fed.
With the passage of the Federal Reserve Act on December 23, 1913, it was
established in response to the need for centralized control of the monetary
system to prevent financial crises following a string of financial panics,
including the Panic of 1907. The Federal Reserve System's functions and
responsibilities have grown over time as a result of occasions like the Great
Depression in the 1930s and the Great Recession in the 2000s.
In the Federal Reserve Act, Congress outlined three main goals for monetary
policy: increasing employment, maintaining price stability, and lowering
long-term interest rates. The Federal Reserve's dual mission is another name
for the first two goals. In addition to overseeing and regulating banks,
preserving the stability of the financial system, and offering financial services
to depository institutions, the federal government, and foreign official
institutions, its responsibilities have grown over the years. The Fed also
undertakes economic research and produces a wide range of materials,
including the Beige Book and the FRED database.
There are multiple tiers to the Federal Reserve System. The Federal
Reserve Board, which is comprised of governors selected by the president,
oversees it (FRB). Privately-owned commercial banks are governed and
supervised by twelve regional Federal Reserve Banks, which are dispersed
across the country's cities. Commercial banks with national charters are
required to own stock in the local Federal Reserve Bank and have some board
member elections.
Monetary policy is decided by the Federal Open Market Committee
(FOMC). Only five bank presidents—the president of the New York Fed and
four others who rotate through one-year voting terms—vote at a time out of
the twelve regional Federal Reserve Bank presidents and all seven members
of the board of governors. There are numerous advisory councils as well. It
has a structure that is distinct from other central banks, and it is also
uncommon in that a body other than the central bank—the United States
Department of the Treasury—prints the money that is utilized.
After paying dividends on member banks' capital investments and
maintaining an account surplus, the federal government receives all of the
system's yearly earnings. The board's seven governors' salaries are
established by the federal government, which also determines the system's
annual profit. The Federal Reserve made a net profit of $100.2 billion in 2015
and remitted $97.7 billion to the U.S. Treasury; in 2020, earnings were about
$88.6 billion with payments of $86.9 billion.
Despite being a tool of the US government, the Federal Reserve System
views itself as "an independent central bank because its monetary policy
decisions do not have to be approved by the President or by anyone else in
the executive or legislative branches of government, it does not receive
funding appropriated by Congress, and the terms of the members of the board
of governors are longer than one presidential and congressional term."
PURPOSE OF FEDERAL RESERVE
Addressing banking panics was the Federal Reserve System's principal stated
purpose for existence. [6] The Federal Reserve Act also lists additional goals,
including "to provide an elastic currency, to give means of rediscounting
commercial paper, to establish more effective banking supervision in the
United States, and for other reasons." [25] The United States experienced a
number of financial crises prior to the establishment of the Federal Reserve
System. The Federal Reserve Act was passed by Congress in 1913 as a result
to a particularly bad crisis in 1907 The Federal Reserve System now is
responsible for more than just keeping the financial system stable.
The Federal Reserve System currently performs the following duties:
In order to deal with the issue of banking panics
To act as the United States' central bank
To reconcile the centralized responsibilities of the government with
the private interests of banks in order to monitor and control banking
institutions.
To safeguard consumer credit rights
To control the money supply of the country through monetary policy
in order to achieve the objectives of maximum employment, stable
prices, including the avoidance of either inflation or deflation
Modest interest rates over the long run
To protect the financial system's stability and limit systemic risk in the
financial markets
To provide financial services to depository institutions, the American
government, and international official institutions, including playing a
significant role in running the country's payments system.
 To make it easier for different regions to exchange money
To meet the demand for local liquidity
To improve America's place in the global economy
GOVERNMENT PUBLISHING OFFICE
The United States Government Publishing Office, sometimes known as the
GPO or USGPO and formerly known as the United States Government
Printing Office, is a department of the legislative branch of the federal
government of the United States. The office creates and distributes
informational goods and services for the Department of State's Department of
State, the Supreme Court, the Congress, the Executive Office of the
President, executive departments, and independent agencies. It also produces
and distributes official publications for each of these bodies.
The office's name was modified to its present form in 2014 by a
congressional statute.
HISTORY OF THE GOVERNMENT PUBLISHING OFFICE
By joint action of the Congress (12 Stat. 117), the Government Printing
Office was established on June 23, 1860. With 350 workers when it first
opened its doors on March 4, 1861, it had a peak employment of 8,500 in
1972. [1] Since the agency started converting to computer technology in the
1980s, the number of employees has steadily decreased. This is due to the
gradual replacement of paper with electronic document delivery. The GPO
has always been located in the District of Columbia at the intersection of
North Capitol Street NW and H Street NW.
In a city where most government buildings are generally made of marble and
granite, the enormous red brick building that houses the GPO is unique in
that it is one of the few major red brick government facilities. It was
constructed in 1903. (Other exceptions are the Smithsonian Castle and the
Pension Building, which houses the National Building Museum.) Later, a
second building was affixed to its northern side. The public printing and
documents chapters of Title 44 of the United States Code define the GPO's
functions. The President, with the Senate's advice and approval, appoints the
Director (formerly the Public Printer), who leads the GPO. The
Superintendent of Documents is chosen by the Director.
The GPO's Superintendent of Documents (SuDocs) is in charge of
information dissemination. This is done by running the Federal Citizen
Information Center in Pueblo, Colorado, as well as the Federal Depository
Library Program (FDLP), the Cataloging and Indexing Program, and the
Publication Sales Program. The Superintendent of Documents classification
system was created by Adelaide Hasse.
Under Public Printers Robert Houk and Michael DiMario, the GPO used 100
percent recycled paper for the Congressional Record and Federal Register for
the first time in 1991–1997. In 2009, the GPO started utilizing recycled paper
again.
The GPO published a new illustrated official history detailing the
organization's 150 years of "Keeping America Informed" in March 2011.
The name of the GPO was officially changed to "Federal Publishing Office"
in a provision of an omnibus government budget package agreed by Congress
in December 2014, as demand for print publications was declining and a
transition to digital document production and preservation was under way.
The name change occurred on December 17, 2014, when President Barack
Obama signed this law.
 CHAPTER 3:
Financial Accounting Terms Glossary
Understanding another word or phrase defined elsewhere in the reference list
may be necessary to comprehend the meaning of another word or phrase.
Words in bold denote the existence of such a definition.
A
Account payable, often known as a trade creditor, is money owed to a
supplier of products or services.
A sum owed by a customer, often known as a trade debtor, is an account
receivable.
Accounting company an organization where the partners are certified
accountants, such as a business partnership or potentially a limited company.
For clients, the firm performs work in the areas of audit, account preparation,
taxation, and related tasks.
Accounting industry the group of people who have accounting degrees and
work in fields linked to accounting. They frequently belong to a professional
organization, membership in which requires passing tests.
Accounting the method of gathering, analyzing, and disseminating financial
data about an institution to enable users of the information to make well-
informed decisions.
Accounting formula the connection between possession interest, liabilities,
and assets.
An era of accounting: The time frame in which financial statements are
produced (e.g. month, quarter, year).
Accounting procedures: Accounting practices that corporate firms have
chosen to use in order to prepare their financial statements because they
believe them to be the most suitable for their particular situation.

B
Bad debt A credit customer (debtor) is recognized for being unable to make
their monthly payments.
Balances sheet: An account reflecting the assets, liabilities, and ownership
interest of a business.
Balance sheet A financial status statement that lists an entity's assets,
liabilities, and ownership stake.
Bank facility a deal with a bank to borrow money as needed up to a set limit.
Bond the label applied to loan money occasionally (more commonly in the
USA).
Broker (stockbroker) A stock exchange member who coordinates share
purchases and sales may also offer information services that include
buy/sell/hold advice.
Broker's report a bulletin containing analysis and recommendations on
potential investment targets was created by a stockbroking business for
distribution to its clients.
Business fusion a deal where one corporation buys ownership of another.
Business cycles: The period (often 12 months) during which a company's
activity peaks and troughs reoccur in a predictable way.
C
Cash flow statement Provides information about changes in financial
position.
Corporate governance: The system by which companies are directed and
controlled. Boards of directors are responsible for the governance of their
companies.
Corporate recovery department Part of an accountancy firm which specializes
in assisting companies to recover from financial problems.
Corporate social responsibility Companies integrate social and environmental
concerns in their business operations and in their interactions with
stakeholders.
Contingent obligations that depend on a future event occurring but are not
recognized in the balance sheet.
Control the authority to control an entity's financial and operational policies
in order to profit from its operations.
Convertible debt A business that later converts its loan financing into share
capital.
Corporate tax Depending on the taxable profits for the time period,
enterprises must pay tax.
Cost of a non-current asset is the price of preparing it for use, while cost of
finished goods is the price of bringing them to their current state and location.
Cost of goods sold Materials, labor, and other costs directly associated with
the delivered goods or services
Cost of sales See cost of goods sold.
Coupon Rate of interest that will be charged on a loan.
Credit (terms of business) The provider consents to allowing the client to
make payment after the delivery of the goods or services. The typical trade
credit terms range from 30 to 60 days, although each deal is unique.
D
Debenture A company's acceptance of loan financing is known as a written
admission of a debt.
Debtor 1 individual or group that owes money to the entity.
Default failure to make payments when they are due on obligations.
Delayed taxation Tax law postpones (defers) the requirement to pay tax past
the usual due date.
Depreciable sum Cost of a non-current (fixed) asset less residual value
Depreciation the methodical distribution of an asset's depreciable amount
over the course of its useful life. Cost less residual value is the depreciable
amount.
Derecognition deleting a financial statement item because it no longer meets
the criteria for recognition
Different approaches to consolidation Difference between the fair value of
the payment made for a subsidiary and the fair value of the net assets
purchased, also known as goodwill.
Direct approach (of operating cash flow) displays the cash coming in and
going out.
Directive a declaration made by the European Union requiring all Members
to modify their domestic legislation to comply with the Directive.
Directors are those chosen by the company's shareholders to oversee its
operations.
Disclosed, disclosure It is referred to as being disclosed but not recognized
when an item is mentioned in the notes to the accounts.
E
Earnings for common shareholders Profit after deducting interest fees, taxes,
and preferential dividends (but before deducting extraordinary items).
Earnings per share are computed as earnings for common shareholders
divided by the total number of shares issued by the company.
Effective interest rates: The rate at which forecasted future cash receipts or
payments are precisely discounted over the course of the financial
instrument's anticipated life.
Efficient markets theory Stock market share prices respond instantly to the
release of fresh information.
Endorsed International financial reporting standards that were formally
endorsed and given the go-ahead to be used in Member States of the
European Union.
Endorsement Observe endorsed.
Enterprise, a commercial undertaking or business activity.
Entities, anything that exists independently of its owner, such as a firm.
Exit value: A method of valuing assets and liabilities based on selling prices,
as an alternative to historical cost.
Entrance fee the cost of buying an asset or liability, typically the replacement
cost.
Equity analyst a person who conducts research and compiles reports on
common share investments in corporations (usually for the benefit of
investors in shares).
Equity a term used to describe an entity's common stock.
Equity accounting the parent firm's or group's investment in the share capital
and reserves of a related company is disclosed in the balance sheet.
Equity stake See ownership interest.
F
Fair value: The price at which an asset or obligation could be transferred in a
fair and reasonable deal between a willing buyer and a willing seller.
Faithful presentation Information that possesses this quality represents what it
claims to represent.
Financial accounting a label typically used to describe financial reporting that
is presented externally by a corporation.
Financial flexibility the business's capacity to react to unforeseen
requirements or possibilities.
Format a list of possible elements for a financial statement that specifies their
potential order of appearance.
Forward-exchange agreement a deal to purchase foreign money at a specified
future time and price.
Fully paid shares are those for which the corporation has received complete
payment of the share capital.
Fund manager a person who oversees a group (portfolio) of investments,
typically on behalf of an insurance company, a pension fund, or a
professional fund management firm that makes investments on clients' behalf.
G
Gearing (financial) the proportion of loan capital to ownership claim.
General-purpose financial statements documents containing accounting
information that should be of interest to many different user groups. A
balance sheet, a profit and loss account, a statement of recognized profits and
losses, and a cash flow statement are all required for a limited liability
corporation.
Going-concern basis the belief that the company will remain open for some
time to come.
Goodwill: The fair value of the money paid for an investment in a subsidiary
and the fair value of the net assets acquired make up the difference between
goodwill on acquisition.
Gross before deducting.
Gross profit Sales less cost of sales before deducting selling and
administrative costs (another name for gross profit). typically used when
referring to a specific industry.
Gross margin Sales as a percentage of gross profit.
Gross income Sales less cost of sales before deducting selling and
administrative costs (see also gross margin).
Group A business structure made up of a parent company and one or more
subsidiaries.
H
Highlights statement a page at the beginning of the annual report outlining
the important performance metrics for the reporting period.
Historical price method of evaluating assets and liabilities based on their
original cost without accounting for inflation.
HM Revenue and Customs (HMRC) The agency in charge of collecting taxes
for the UK government (previously called the Inland Revenue).

I
Impairment checking for signs of any impairment on assets.
Impairment test Determine if the company must use it or sell it in order to
recoup the intangible asset's carrying value.
Impairment analysis examining resources for signs of any deterioration.
Income declaration Revenues, costs, and profit are presented on the financial
statement. also known as a profit and loss statement.
Improvement a modification or addition to a non-current (fixed) asset that
lengthens its useful life or raises the anticipated benefit in the future.
Compare this to repair, which extends the current usable life or the current
predicted future benefit.
Insider information gained by someone inside, or close to, a listed
institutional shareholder an organization or institution whose normal business
involves investing in stock of corporations; examples include insurance
companies, pension funds, charities, investment trusts, unit trusts, and
merchant banks.
Intangible Cannot be touched since it lacks form or shape.
Interest (on loans) (on loans) The percentage return on capital that the lender
requires (usually expressed as a percentage per annum).
Interim summaries financial statements are published on a semi-annual or
quarterly basis between annual reports.
Internal reporting providing detailed financial information to internal users at
different management levels.
Inventory Stocks of items kept for production or selling.
Investing activities, the purchase and sale of long-term assets and other
investments that are not cash equivalents.
Investors are people or organizations that have given money to a business in
exchange for a stake in the company.

J
Joint and several liability (in a partnership) Each partner is liable for the
entire partnership even though the responsibilities are divided.
K
Key performance indicators Quantified measures of factors that help to
measure the performance of the business effectively.
L
Leasing obtaining access to an asset through a rental contract.
Lawful form representation of a transaction in accordance with its legal
standing, which may differ from its economic shape.
Leverage A other word for gearing that is frequently used in the USA.
Liabilities Economic gains that an entity is required to transfer as a result of
previous transactions or occurrences.
Little liability a way of saying that persons who are liable for a debt may be
able to employ a mutually agreed-upon cap on their liability.
Limited liability corporation a business where an owner's liability is only up
to the amount of capital they have agreed to invest.
Liquidity the extent to which a business has access to cash or items that can
be easily swapped for cash.
Listed firm a business whose shares are listed on the Stock Exchange and can
be purchased and sold there in accordance with the Exchange's policies.
Listing demands Regulations that the Stock Exchange imposes on businesses
whose shares are listed for purchase and sale.
Listing Rules are regulations for businesses that are listed on the UK Stock
Exchange that are issued by the UK Listing Authority of the Financial
Services Authority. include regulations for accounting data in yearly reports.
Loan covenants Agreement formed between a corporation and a long-term
finance lender to protect the loan by placing restrictions on the company's
ability to borrow more money.
Loan agreements a way to borrow money from commercial organizations like
banks.
Loan stock Loan financing was traded on a stock exchange.
M
Management is the collective term for the people in charge of managing a
company on a daily basis.
Management accounting reporting financial data for management solely
within a company
Market value (of a share) The cost at which a share might be exchanged
between a willing buyer and a willing seller.
Marking for the market valuation at the current market value of a marketable
asset.
Margin Profit is the difference between income and outgoing costs.
Matching In the period in which they are incurred, expenses are compared to
revenues (see also accruals basis).
Materiality See material.
Materiality Information is considered material if it could affect the economic
decisions users make based on the financial statements due to omission or
misstatement.
Maturity the day that a debt is due for payback.
Memorandum (for a company) (for a company) document outlining the
company's primary objectives and its authority to take action.
Merger In a circumstance where neither organization can be viewed as
having acquired the other, the two organizations decide to collaborate.
Minority viewpoint the ownership stake in a business that is owned by parties
other than the parent firm and its affiliated businesses. Known as a non-
controlling interest as well.
N
Net after subtractions.
Net assets Liabilities less assets (equals ownership interest).
Net Book Value Cost of the non-current (fixed) asset less cumulative
depreciation
Net profit Sales less all selling and administrative expenses.
Net Realizable Value the amount received after deducting the item's selling
expenses from the revenues.
Nominal value (of a share) the sum listed as the designated value of a share
on the certificate's front at the time it was issued.
Non-controlling stake See minority interest.
Non-current assets any asset that does not fall under the conventional asset
definition. also known as fixed assets.
Non-current obligations any debt that does not fall under the conventional
debt definition. sometimes known as long-term obligations.
Notes to the accounts Information in financial statements that provides
greater specifics regarding things in the financial statements.
O
Off-balance sheet financing a plan to keep corresponding assets and liabilities
off the entity's balance sheet.
Offer to buy: The public is given a general offer of shares by a firm.
Operational actions the main source of income for the firm and any other
activities not related to investing or financing.
Operational and financial analysis Many companies' annual reports include a
section that highlights the key aspects of the financial statements.
Operating margin Operating profit is a proportion of revenue.
Operational risk exists in situations where there are elements that could lead
to fluctuations in earnings due to changes in the operational environment,
such as a large percentage of fixed operating costs.
Ordinary shares of a firm that entitle the bearer to a portion of the dividend
declared and a portion of the net assets upon the company's closure.
Ownership stakes the remaining sum obtained after subtracting all liabilities
from assets. (Also known as equity interest.)
P
Par value See nominal value.
Parent organization company that holds control over a group's one or more
subsidiaries.
Partnership Two or more people operating a business together with the
intention of turning a profit.
Partnership agreement A document that outlines the partners' agreement on
how the partnership will be run (including the arrangements for sharing
profits and losses).
Preferential shares of a corporation that grant the owner a preference (but not
an automatic right) to receive dividends before any ordinary share dividends
are issued.
Portfolio (of investment) (of investment) a selection of investments.
Preliminary statement the initial disclosure of a listed company's profit for the
most recent financial period. before the release of the full annual report. To
ensure that all investors are informed at the same time, the announcement is
made to the entire stock market.
Premium a sum paid above and above or extra.
Prepayment a sum paid upfront for a benefit to the company, such as rent or
insurance payments. Initially recognized as an asset, the benefit is then
converted to an expense during the time of enjoyment. (Also known as a
prepaid expense.)
Present fairly A requirement of the IASB system, comparable to accurate and
fair view in the UK ASB system.
Q
Qualified audit opinion an audit opinion stating that either the accounts do
not present a true and fair view or the accounts do present a true and fair
picture except for certain concerns
Quality of income Investors' thoughts on the dependability of earnings
(profit) as the foundation for their projections.
Quoted company Described in section 262 of the Companies Act 1985 as a
business that has been admitted to trading on either the New York Stock
Exchange or the Nasdaq exchange, or that has been officially listed in an
EEA state in accordance with the provisions of Part VI of the Financial
Services and Markets Act 2000.
R
Realizing a profit, realizing a profit that results from income that the entity
has earned and for which there is a good chance that money will be collected
soon.
Recognized When an item appears in the main financial statements of an
entity with words and a value, it is recognized.
Recognition See acknowledged.
Relevance Influencing consumers' financial decisions is a qualitative trait.
Reliability Being free from substantive bias and inaccuracy while accurately
representing is a quality.
Replacement expense a method of measuring current value that calculates the
cost of replacing an asset or liability as of the balance sheet date. Justified
with relation to the value to the company.
Reserves The claim that owners have on a company's assets because the
business has helped them accumulate money over time.
Residual benefit: The projected profit an entity would now make from selling
the asset, less the estimated cost of selling, if it were already old and in bad
shape, as predicted at the end of its useful life.
S
Sales Examine income and turnover.
Sales statement Message sent to customers confirming a credit sale and
seeking payment
Secured loan Loans in which the lender has a unique claim on certain
company assets or revenue.
Share capital is the term used to refer to the entire cash infusion made by the
shareholders to the business.
Shares of stock a statement demonstrating share ownership.
Share price a claim that shareholders have on a company's assets since they
paid more than the share's nominal worth to buy the company's shares.
Shareholder money Term used to refer to the sum of reserves and share
capital on a balance statement.
Shares The number of shares that a shareholder owns in the company's total
capital is used to calculate their shareholdings.
T
Tangible fixed assets a tangible fixed asset, often known as a non-current
asset.
Timeliness Qualitative trait that could be at odds with its relevance.
Total assets used Sales as a percentage of total assets.
Trade creditors are people that provide goods or services to a business
normally and grant a grace period before payment is due.
Trade debtors are customers who purchase goods or services from a company
normally and are given a grace period before making a payment is required.
Trade payables: The term "accounts payable" refers to money owed to
suppliers (trade creditors).
Trade debtors Accounts receivable is another name for money owed by
clients (trade debtors).
True and impartial viewpoint UK company legislation is necessary for UK
businesses that don't use the IASB system.
Turnover is the amount of money a company makes via sales or other
commercial activities.
U
UK ASB program: The business law and accounting principles that apply to
corporate reporting by UK companies that do not report in accordance with
the IASB method.
Understandability a qualitative attribute that users can understand about
financial statements.
Unlisted (company) Limited liability company with no stock market listings
for its shares.
Unrealized Gains and losses corresponding to adjustments to the values of
liabilities and assets that are not realized through sale or usage.
Unsecured debtors Those who, in the event of a company's dissolution, have
no claim on any specific assets but must wait their turn for any remaining
shares.
V
VALUE: to the company an idea considered when choosing a current value
measurement.
Variance a cost's variance from its anticipated, budgeted, or conventional
equivalent. When the actual cost exceeds the expected cost, an adverse
Variance occurs: When the actual cost is lower than the expected cost, there
is a favorable variance.

W
Working capital Finance given to sustain the company's short-term assets
(stocks and debtors), to the extent that these are not already covered by short-
term creditors. It is computed as current obligations minus current assets.
Working capital cycle total of the time taken to hold the stock plus the time
taken for customers to pay less the time taken for suppliers to pay.
Work-in-progress Cost of partially finished items or services that were
intended for completion and documented as an asset.
 INDEX
ABC, 79, 81, 182, 339, 341
accountants, 76, 206, 220, 297, 301, 501
Accountants, 237, 295, 297
accounting equation, 113
accrual, 349
Acctivate, 125
acquisition, 109, 272, 324, 374, 506
Address, 402
administrative, 363, 410, 412, 414, 421, 432, 495, 496, 506, 510
administrator, 235, 436
advantageous, 119, 174, 217
advantages, 175, 179, 390, 407, 430, 432
advertising, 329, 386, 412, 489, 491
aforementioned, 276, 414
allowance, 87, 89, 90, 97
amortization, 313, 412
analysis, 3, 86, 134, 182, 297, 351, 361, 381, 387, 388, 389, 390, 391, 392, 393, 394, 395, 396, 406, 415, 417, 418, 424, 426, 484,
487, 489, 495, 502, 507, 510
arrangement, 102, 213, 294
Assets, 23, 50, 109, 113, 256, 353, 359, 360, 363, 407, 418, 419
attachments, 305, 312
authorization, 278
authorized, 490
automatic, 93, 95, 96, 107, 180, 181, 231, 237, 343, 511
automatically, 95, 96, 107, 163, 165, 166, 170, 187, 199, 200, 215, 231, 233, 238, 273, 343, 348, 463, 467, 475, 489
automobile, 358
average, 174, 183, 358, 359, 361, 362, 366, 368, 369, 370, 376, 377, 392, 395, 414, 418, 420, 426, 432
BACKING UP, 445
backup, 217, 275, 303, 307, 445, 446, 447, 448, 449, 475, 476
Bad debts, 88
Balance Sheet, 28, 320, 321, 327, 328, 334, 371, 406, 407, 408, 409
balance sheets, 26, 321, 322, 334, 406, 407, 408
BANK, 254, 262, 264, 274
barcode, 175, 181
BEA, 484, 485
Bill, 229, 231
bookkeeping, 51, 134, 177, 264, 307, 441
borrow, 94, 117, 119, 391, 395, 502, 509
break-even point, 385, 386, 390, 391, 392, 393, 394, 395, 396
Budgets, 327, 333, 334, 335, 336
Bureau, 176, 484, 492, 493
Business Entity Assumption, 43
Business Plan, 397, 399, 425
businessperson, 429
calculating, 193, 317, 360, 361, 365, 366, 381, 386, 392, 406, 416, 422, 423
calendar, 168, 197, 239, 240, 258, 259
cash flow, 9, 62, 76, 77, 178, 225, 326, 360, 368, 369, 375, 379, 410, 414, 415, 416, 417, 419, 427, 504, 506
categorized, 113, 166, 182
Chart, 183, 237, 255, 258, 259, 260, 261, 262, 268, 269, 270, 301, 302
check, 92, 93, 94, 163, 164, 165, 168, 169, 170, 171, 172, 193, 196, 197, 199, 200, 225, 227, 229, 230, 235, 236, 243, 247, 264,
271, 277, 284, 287, 290, 291, 292, 309, 311, 314, 322, 340, 358, 422, 444, 448
checkmark, 196, 222
chronological, 213, 302
closing entries, 123
code, 194, 221, 488
columns, 204, 214, 221, 321, 336
combination, 167
command, 228, 245, 252, 253, 268, 270, 301, 302, 303, 306, 435, 436, 445, 446, 482
commencement, 259
commercial, 117, 322, 398, 484, 497, 498, 504, 509, 514
commitments, 197, 352, 357, 358, 391, 394, 419
communication, 429, 430
Comparability, 2
compensation, 103, 193, 201, 280, 288, 293, 294, 413, 430
compilation, 134
Completeness, 2, 3
comprehensive income, 410
computations, 380, 392
configuration, 185
conjunction, 406
consignments, 75
Consistency, 5
contemporary, 77, 428
contingent, 114
Contribution, 293, 386, 387
corporation, 67, 189, 327, 352, 353, 355, 356, 358, 363, 366, 372, 376, 378, 406, 407, 408, 409, 418, 425, 428, 431, 496, 502,
505, 506, 508, 509, 511
corporations, 76, 201, 494, 505, 507
Cost, 2, 3, 5, 41, 80, 98, 99, 180, 204, 256, 358, 371, 380, 386, 387, 388, 411, 412, 431, 503, 510, 515
Cost-benefit, 2
credit card, 88, 92, 93, 118, 173, 174, 189, 190, 201, 227, 258, 259, 261, 264, 265, 268, 269, 270, 271, 272, 273, 301, 332, 443ard,
229, 254, 255
9, 371, 420, 507

e, 356, 358
liquidator, 104
liquidity, 352, 353, 354, 355, 356, 357, 358, 407, 408, 415, 417, 418, 427, 499
LOAN MANAGER COMMAND, 275
logo, 206, 210, 218
Machinery, 108
mailing, 94, 195, 232
managerial, 366
matching, 87
Matching, 6, 509
Materiality, 6, 509
measurement, 48, 514
Medicare, 193, 194, 286, 292, 293, 294
Memo, 236, 273, 291
merchandise, 100, 177, 179, 253, 384, 417
Microsoft, 309, 435, 453, 454, 455, 456, 474
Misclassification, 76
Misspellings, 194
modifications, 76, 96, 175, 232, 301, 324, 401, 441, 455
Monetary, 497
Money Measurement Assumption, 45
mortgage, 317
mortgages, 117, 322
Navigating, 197
net income, 315, 319, 320, 324, 325, 363, 372, 377, 378, 413, 414, 416, 421, 422, 423, 427
Neutrality, 2, 3
nonemployee, 201
obligations, 115, 174, 265, 292, 293, 294, 321, 322, 353, 354, 355, 356, 357, 377, 378, 410, 418, 419, 427, 503, 510, 515
obsolete, 77, 97, 98, 99, 100, 103, 106, 178
online, 93, 95, 191, 218, 229, 265, 267, 278, 308, 309, 441, 473, 488, 494
orders, 106, 125, 175, 179, 180, 181, 198, 200, 212, 213, 232, 233, 236, 252
organizational, 177, 430, 433, 491
overarching, 175, 427
parameters, 227, 448, 449
parenthesis, 198, 319, 320, 370
payable, 62, 85, 86, 179, 295, 313, 322, 325, 371, 372, 377, 417, 443, 501, 513
payroll, 191, 192, 193, 194, 195, 221, 277, 278, 279, 280, 284, 286, 288, 289, 290, 292, 293, 294, 295, 307, 325, 443
percentage, 87, 100, 174, 206, 337, 360, 379, 380, 383, 384, 387, 388, 506, 507, 511, 513
Percentage, 89
Preferences, 163, 164, 166, 167, 168, 171, 172, 195, 196, 197, 198, 199, 200, 204, 235, 253, 451
PREFERENCES, 164, 167, 168, 198, 328
Prices, 387
principles, 76, 113, 514
Print, 196, 204, 205, 206, 207, 208, 223, 224, 227, 236, 314, 441, 442, 477, 478, 479, 480, 481, 482
processors, 189
professional, 198, 206, 214, 220, 297, 501, 505
profitability, 339, 341, 348, 362, 363, 374, 375, 376, 379, 392, 395, 408, 417, 420, 421, 432
purchase, 80, 93, 94, 101, 109, 175, 179, 187, 189, 190, 198, 200, 204, 212, 213, 215, 216, 219, 232, 233, 234, 236, 274, 366, 374,
381, 388, 400, 417, 426, 505, 507, 508, 513
purchases, 92, 102, 107, 189, 268, 325, 443, 502
QuickBooks, 128, 163, 164, 165, 166, 168, 171, 172, 173, 192, 195, 196, 197, 199, 200, 204, 206, 207, 208, 212, 213, 214, 220,
221, 222, 223, 225, 226, 227, 228, 229, 233, 235, 236, 237, 238, 245, 246, 247, 248, 251, 252, 253, 254, 257, 259, 261, 262,
264, 265, 268,269, 270, 271, 273, 274, 275, 276, 277, 278, 279, 284, 286, 287, 288, 289, 290, 299, 300, 302, 303, 304, 305,
306, 307, 308, 309, 329, 333, 335, 336, 337, 338, 339, 342, 343, 345, 346, 347, 348, 349, 371, 383, 384, 435, 436, 437, 438,
439, 440, 441, 442, 443, 444, 445, 446, 447, 448, 449
reclassifications, 307
reconciled, 259, 261, 267
Reconciling, 264
RECORDING COST OF GOODS SOLD, 59
registration, 191, 494, 495, 496
Relevance, 2, 512
Reliability, 2, 6, 512
remittance, 207
reporting, 89, 113, 134, 295, 302, 313, 314, 315, 316, 320, 323, 326, 410, 443, 484, 504, 505, 506, 507, 509, 514
responsibilities, 430, 439, 494, 497, 498, 508
Revenue, 6, 75, 123, 191, 200, 205, 386, 411, 412, 422, 506
Safari, 451
schedules, 289, 290
screen, 170, 171, 172, 173, 196, 198, 226, 234, 254, 268, 270, 274, 275, 279, 328, 342, 346, 347