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 Using

Owen
QuickBooks Accountant ®

2018
FOR ACCOUNTING

Using
QuickBooks Accountant
®
FOR ACCOUNTING
2018
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Using

QuickBooks Accountant
2018
FOR ACCOUNTING

Glenn Owen
Allan Hancock College

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

 Using QuickBooks Accountant 2018 for © 2019, 2016 Cengage Learning, Inc.
Accounting, Sixteenth Edition Unless otherwise noted, all content is © Cengage
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 Brief Contents

Part 1 Getting Started with QuickBooks

Accountant1
Chapter 1 An Interactive Tour of QuickBooks
Accountant2

Chapter 2 Preparing a Balance Sheet Using

QuickBooks Accountant 27

Chapter 3 Preparing an Income Statement

Using QuickBooks Accountant 43

Chapter 4 Preparing a Statement of Cash

Flows Using QuickBooks Accountant 63

Chapter 5 Creating Supporting Reports to

Help Make Business Decisions 72

Part 2 Creating a QuickBooks Accountant File

to Record and Analyze Business Events 89
Chapter 6 Setting Up Your Business’s
Accounting System 90

Chapter 7 Cash-Oriented Business Activities 146

Chapter 8 Additional Business Activities 224

Chapter 9 Adjusting Entries 270

Chapter 10 Budgeting 298

Chapter 11 Reporting Business Activities 322

Chapter 12 Managing Fixed Assets 365

Appendix 1 Payroll Taxes 392

Appendix 2 Traditional Accounting:

Debits and Credits 402

Appendix 3 Helpful References 413

Index 427 iii

 Contents

Prefaceix Chapter 2 Preparing a Balance

About the Author & Dedication xiv Sheet Using QuickBooks
Accountant27
Note to the Student and
Case: Larry’s Landscaping & Garden Supply 27
Instructorxv
Creating a Balance Sheet 27
Creating a Comparative Balance Sheet 29
Part 1 Getting Started with Creating a Summary Balance Sheet 30
QuickBooks Accountant 1 Investigating the Balance Sheet Using QuickZoom 30
Modifying Balance Sheet Reports 33
Chapter 1 An Interactive Tour of Memorizing a Report in QuickBooks Accountant 35
QuickBooks Accountant 2 Printing the Balance Sheet 37
Case: Larry’s Landscaping & Garden Supply 2 Chapter 2 Practice 38
Using This Text Effectively 3 Chapter 2 Questions 38
Demonstrations3 Chapter 2 Matching 38
QuickBooks Accountant 4 Chapter 2 Assignments 39
Data Files 4 Chapter 2 Cases 40
What Is QuickBooks Accountant? 4 Case Problem 1: Sierra Marina 40
Lists 5 Case Problem 2: Jennings & Associates 41
Forms 5 Case Problem 3: Jason Galas Attorney at Law PC 41
Registers 6
Reports and Graphs 7
Chapter 3 Preparing an Income
Launching QuickBooks Accountant 8 Statement Using
Restoring and Opening a QuickBooks QuickBooks Accountant 43
Accountant File  8 Case: Larry’s Landscaping & Garden Supply 43
The QuickBooks Accountant Window 10 Creating an Income Statement 43
Backing Up and Closing a QuickBooks Modifying an Income Statement 45
Accountant File 11 Creating a Comparative Income Statement 47
QuickBooks Accountant’s Menus and Using QuickZoom with the Income Statement 48
Shortcut List 13 Modifying the Income Statement Report 50
Using QuickBooks Accountant to Printing the Income Statement 53
Make Business Decisions 14 Chapter 3 Practice 59
Printing in QuickBooks Accountant 17 Chapter 3 Questions 59
Using QuickBooks Accountant Help 18 Chapter 3 Matching 59
Date Formats 19 Chapter 3 Assignments 60
The QuickBooks Accountant Home Page 20 Chapter 3 Cases 60
Exiting QuickBooks Accountant 23 Case Problem 1: Sierra Marina 60
End Note 23 Case Problem 2: Jennings & Associates 61
Chapter 1 Practice 24 Case Problem 3: Jason Galas Attorney at Law PC 61
Chapter 1 Questions 24
Chapter 1 Matching 24
Chapter 1 Assignments 25

iv
 Contents v

Chapter 4 Preparing a Statement of Part 2 Creating a QuickBooks

Cash Flows Using Accountant File to
QuickBooks Accountant 63 Record and Analyze
Case: Larry’s Landscaping & Garden Supply 63 Business Events 89
Creating a Statement of Cash Flows 63
Using QuickZoom with the Statement Chapter 6 Setting Up Your Business’s
of Cash Flows 67 Accounting System 90
Formatting and Printing the Statement
Case: Wild Water Sports, Inc. 90
of Cash Flows 68
Creating a New Company File Using the
Chapter 4 Practice 69
EasyStep Interview 91
Chapter 4 Questions 69
Set Up Company Preferences 95
Chapter 4 Matching 69
Set Up Company Items 99
Chapter 4 Assignment 70
Set Up Customers, Vendors, and Accounts 105
Chapter 4 Cases 70
Set Up Payroll and Employees 116
Case Problem 1: Sierra Marina 70
Viewing Transactions and Backing Up
Case Problem 2: Jennings & Associates 70
Your Company File 123
Case Problem 3: Jason Galas Attorney at Law PC 71
End Note 125
Chapter 5 Creating Supporting Reports Chapter 6 Practice 127
Chapter 6 Questions 127
to Help Make Business
Chapter 6 Matching 127
Decisions72
Chapter 6 Exercises 128
Case: Larry’s Landscaping & Garden Supply 72 Exercise 1: Create a New Company 128
Creating and Printing an Accounts Exercise 2: Add Customers 129
Receivable Aging Report 72 Exercise 3: Add Vendors 129
Creating and Printing a Customer Exercise 4: Add Items 130
Balance Summary 75 Exercise 5: Add Employees 130
Creating and Printing an Inventory Valuation Exercise 6: Add Accounts and Set Opening
Summary Report 76 Balances 131
Creating, Printing, and Analyzing an Accounts Chapter 6 Assignments 131
Payable Aging Report 79 Assignment 1: Adding More Information:
Creating and Printing a Vendor Wild Water Sports 131
Balance Summary 81 Assignment 2: Creating a New Company:
End Note 84 Central Coast Cellular 133
Chapter 5 Practice 85 Assignment 3: Creating a New Company:
Chapter 5 Questions 85 Santa Barbara Sailing 135
Chapter 5 Matching 85 Assignment 4: Creating a New Company:
Chapter 5 Assignments 86 Drone City 137
Chapter 5 Cases 87 Chapter 6 Cases 139
Case Problem 1: Sierra Marina 87 Case 1: Forever Young 139
Case Problem 2: Jennings & Associates 87 Case 2: Ocean View Flowers 142
Case Problem 3: Jason Galas Attorney Case 3: Aloha Properties 143
at Law PC  87
vi Contents

Chapter 7 Cash-Oriented Business Recording Noncash Investing and

Activities146 Financing Activities 246
Case: Wild Water Sports, Inc. 146 Evaluate a Firm’s Performance and
Recording Cash-Oriented Financing Activities 147 Financial Position 247
Recording Cash-Oriented Investing Activities 148 End Note 251
Recording Cash-Oriented Operating Activities 152 Chapter 8 Practice 253
Evaluate a Firm’s Performance and Chapter 8 Questions 253
Financial Position 181 Chapter 8 Matching 253
End Note 185 Chapter 8 Exercises 254
Chapter 7 Practice 187 Exercise 1: Financing Activities 254
Chapter 7 Questions 187 Exercise 2: Investing Activities 254
Chapter 7 Matching 187 Exercise 3: Operating Activities—Purchases
Chapter 7 Exercises 188 and Payments from/to Vendors 254
Exercise 1: Cash-Oriented Financing Activities 188 Exercise 4: Operating Activities—Expenses
Exercise 2: Cash-Oriented Investing Activities 188 & Sales 255
Exercise 3: Cash-Oriented Operating Chapter 8 Assignments 256
Activities—Sales 188 Assignment 1: Adding More Information:
Exercise 4: Cash-Oriented Operating Wild Water Sports 256
Activities—Purchases 189 Assignment 2: Adding More Information:
Exercise 5: Cash-Oriented Operating Central Coast Cellular 259
Activities—Expenses 189 Assignment 3: Adding More Information:
Chapter 7 Assignments 190 Santa Barbara Sailing 260
Assignment 1: Adding More Information: Assignment 4: Adding More Information:
Wild Water Sports 190 Drone City 261
Assignment 2: Adding More Information: Chapter 8 Cases 263
Central Coast Cellular 193 Case 1: Forever Young 263
Assignment 3: Adding More Information: Case 2: Ocean View Flowers 265
Santa Barbara Sailing 195 Case 3: Aloha Properties 267
Assignment 4: Adding More Information:
Chapter 9 Adjusting Entries 270
Drone City 196
Chapter 7 Cases 198 Case: Wild Water Sports, Inc. 270
Case 1: Forever Young 198 Accruing Expenses 270
Case 2: Ocean View Flowers 199 Accruing Revenue 273
Case 3: Aloha Properties 201 Recording Expenses Incurred but
Comprehensive Problems 203 Previously Deferred 277
Comprehensive Problem 1: Sarah Duncan, CPA 203 Adjusting for Unearned Revenues 281
Comprehensive Problem 2: Pacific Brew 207 Preparing a Bank Reconciliation and Recording
Comprehensive Problem 3: Sunset Spas 210 Related Adjustments 284
Comprehensive Problem 4: Bridgette Sweet End Note 287
Photography 214 Chapter 9 Practice 289
Comprehensive Problem 5: Crystal Clear Pool Service 219 Chapter 9 Questions 289
Chapter 9 Matching 289
Chapter 8 Additional Business Chapter 9 Exercises 290
Activities224 Exercise 1: Accruing Expenses 290
Case: Wild Water Sports, Inc. 224 Exercise 2: Accruing Revenue 290
Recording Additional Financing Activities 224 Exercise 3: Recording Expenses Incurred
Recording Additional Investing Activities 228 but Previously Deferred 291
Recording Additional Operating Activities 229 Exercise 4: Preparing Bank Reconciliation 291
Chapter 9 Assignments 292
 Contents vii

Assignment 1: Adding More Information: Creating Graphs to Illustrate

Wild Water Sports 292 Financial Information 329
Assignment 2: Adding More Information: Create Additional Detail Reports 334
Central Coast Cellular 293 Exporting Reports to Excel 338
Assignment 3: Adding More Information: End Note 342
Santa Barbara Sailing 293 Chapter 11 Practice 343
Assignment 4: Adding More Information: Chapter 11 Questions 343
Drone City 294 Chapter 11 Matching 343
Chapter 9 Cases 295 Chapter 11 Exercises 344
Case 1: Forever Young 295 Exercise 1: Graphs 344
Case 2: Ocean View Flowers 296 Exercise 2: Additional Reports 344
Case 3: Aloha Properties 297 Exercise 3: Export to Excel 344
Chapter 11 Assignments 345
Chapter 10 Budgeting 298 Assignment 1: Adding More Information:
Case: Wild Water Sports, Inc. 298 Wild Water Sports 345
Budgeting Revenues 299 Assignment 2: Adding More Information:
Budgeting Expenses 302 Central Coast Cellular 345
Budgeted Income Statement 303 Assignment 3: Adding More Information:
Budgeting Assets, Liabilities, and Equities 306 Santa Barbara Sailing 346
Budgeted Balance Sheet 309 Assignment 4: Adding More Information:
End Note 313 Drone City 347
Chapter 10 Practice 314 Chapter 11 Cases 347
Chapter 10 Questions 314 Case 1: Forever Young 347
Chapter 10 Matching 314 Case 2: Ocean View Flowers 348
Chapter 10 Exercises 315 Case 3: Aloha Properties 349
Exercise 1: Budgeting Revenues and Expenses 315 Comprehensive Problems 349
Exercise 2: Budgeting Assets, Liabilities, Comprehensive Problem 1: Sports City 349
and Equities 315 Comprehensive Problem 2: Pacific Brew 352
Chapter 10 Assignments 316 Comprehensive Problem 3: Sunset Spas 354
Assignment 1: Adding More Information: Comprehensive Problem 4: Bridgette Sweet
Wild Water Sports 316 Photography 357
Assignment 2: Adding More Information: Comprehensive Problem 5: Crystal Clear Pool 361
Central Coast Cellular 316
Assignment 3: Adding More Information: Chapter 12 Managing Fixed Assets 365
Santa Barbara Sailing 317 Case: Wild Water Sports, Inc. 365
Assignment 4: Adding More Information: Starting the Fixed Asset Manager Application  366
Drone City 318 Fixed Asset Item List  369
Chapter 10 Cases 319 Synchronizing the Fixed Asset Manager  374
Case 1: Forever Young 319 Depreciation Report  376
Case 2: Ocean View Flowers 320 Depreciation Journal Entry  378
Case 3: Aloha Properties 321 Projections of Future Depreciation  380
Disposal of an Asset  382
Chapter 11 Reporting Business End Note 386
Activities322 Chapter 12 Practice 387
Case: Wild Water Sports, Inc. 322 Chapter 12 Questions 387
Creating and Memorizing a Customized Chapter 12 Matching 387
Income Statement 323 Chapter 12 Assignments 388
Creating and Memorizing a Customized Assignment 1: Adding More Information:
Balance Sheet 326 Wild Water Sports 388
viii Contents

Assignment 2: Adding More Information: General Ledger 405

Central Coast Cellular 388 General Journal 408
Assignment 3: Adding More Information: Santa End Note 410
Barbara Sailing 389 Appendix 2 Practice 411
Assignment 4: Adding More Information: Appendix 2 Questions 411
Drone City 390 Appendix 2 Assignments 411
Appendix 2 Case Problems 412
Appendix 1 Payroll Taxes 392
Overview  392 Appendix 3 Helpful References 413
Federal Income Tax Withholding 392 Overview413
Social Security and Medicare Taxes 395 Install and Register QuickBooks
Federal Unemployment Taxes 397 Accountant Desktop 413
State Income Tax Withholding and File Management 417
Unemployment Taxes  399 Memorize Reports in Groups 419
Appendix 1 Practice 400 Upload a QuickBooks Company or Backup
Appendix 1 Questions  400 File to an Instructor 419
Appendix 1 Assignments  400 Become QuickBooks Certified 420

Appendix 2 Traditional Accounting: Index 427

Debits and Credits 402
Case: Wild Water Sports, Inc. 402
Trial Balance 403
 Preface

What if you could integrate a popular computerized accounting program into

your classroom without using complicated and confusing manuals? What if your
students could use this program and reinforce basic accounting concepts in an
online and interactive case setting? What if you could accomplish both without
spending a fortune and a vast amount of time preparing examples, cases, and
illustrations? In fact, Using QuickBooks Accountant® 2018 for Accounting by
Owen is a textbook that fulfills and expands upon all three of these ‘‘what ifs.’’

Why Is This Textbook Needed?

The first course in accounting has evolved significantly over the last several years.
Educators are responding to the demand of accounting and nonaccounting fac-
ulty who rely on this course to lay a foundation for other courses. Moreover, the
accounting profession relies on this course to attract the ‘‘best and the brightest’’
to become accounting majors. The evolution of this course has also put pressure
on instructors to integrate computers into the classroom and, in so doing, develop
students’ skills in intelligently using and interpreting accounting information.
Faculty often want to incorporate computerized accounting into the first
course but are reluctant to invest the time and effort necessary to accomplish this
laudable goal. Existing materials are often ‘‘preparer’’ driven in that they focus on
the creation of financial reports only. Students are often discouraged in their use
of computers in the first accounting course because of the confusing and com-
plicated accounting software manuals that concentrate on accounting mechanics.
This text responds to all of these needs. It provides a self-paced, step-by-
step environment in which students use QuickBooks® Pro 2018 or QuickBooks®
Accountant 2018 to create financial statements and other financial reports, to
reinforce the concepts they learn in their first course, and to see how computer
software can be used to make business decisions.

QuickBooks Pro vs. QuickBooks Accountant

This text includes access to QuickBooks® Accountant 2018. However, it can be
toggled between various editions: General Business, Contractor, Manufacturing
& Wholesale, Nonprofits, Professional Services, Retail, and Pro. The text itself
will focus on the Accountant version.

What Are the Goals of This Textbook?

This textbook takes a user perspective by illustrating how accounting information
is both used and created. QuickBooks Accountant is extremely user-friendly and
provides point-and-click simplicity with excellent and sophisticated accounting
ix
x Preface 

reporting and analysis tools. The textbook uses a proven and successful pedagogy
to demonstrate the software’s features and elicit student interaction.
The text’s first and foremost goal is to help students learn or review fun-
damental accounting concepts and principles through the use of QuickBooks
Accountant and the analysis of business events. The content complements the
first course in accounting and thus should be used in conjunction with a core text
on accounting.
A second goal is to enable students to view financial statements from a user
perspective. After an initial tour of QuickBooks Accountant, students learn how
to use QuickBooks Accountant to understand and interpret financial statements.
A third goal of the text is to provide students a means to investigate the under-
lying source documents that generate most financial accounting information such
as purchase orders and sales invoices. Students will experience this process by
entering a few business events for later inclusion in financial reports.
A fourth goal is to provide students a means of exploring some managerial
aspects of accounting by performing financial analysis and comparisons. Bud-
gets are created and compared to actual operating results, and receivables and
payables are aged for the purpose of analyzing cash management and cash flow
projections.
A fifth goal of this text is to reduce the administrative burdens of accounting
faculty by providing a self-paced environment, data sets, cases, and a correlation
table describing how this book might be used with a variety of popular account-
ing texts.

What Are the Key Features of This Textbook?

This text is designed to work with QuickBooks® Accountant 2018. It can be used
with other versions of QuickBooks, but the screenshots and instructions are
based entirely on QuickBooks® Accountant 2018.
The text is divided into two parts. Part 1 is designed to help you navigate through
QuickBooks Accountant. It provides a foundation for Part 2, which will show you
how to create new QuickBooks Accountant files and record a variety of operating,
investing, and financing transactions. Part 2 consists of seven c­ hapters, each with
its own set of questions, assignments, and case problems (except ­chapter 12, which
only has questions and assignments). All chapters in Part 1 revolve around Larry’s
Landscaping & Garden Supply. Larry’s specializes in landscaping new and existing
homes and is well known in town for its high-quality work and timely completion
of projects. You’ve answered an ad for a part-time administrative assistant and
are about to learn more about what QuickBooks Accountant can do for a busi-
ness. Chapter 1 gives you a quick interactive tour of QuickBooks Accountant, in
which you will restore data files and become familiar with QuickBooks Accoun-
tant’s essential features. Chapters 2–5 introduce you to creating and preparing the
­balance sheet, the income statement, the statement of cash flows, and supporting
reports.
Part 2 is designed to teach you how to use QuickBooks Accountant and the
accounting methods and concepts you’ve learned in your introductory accounting
course. You will follow the adventures of Donna and Karen at Wild Water Sports,
who have hired you to help them set up their business in QuickBooks Accountant,
capture various business transactions, make adjusting entries, set up and use budgets,
 Preface xi

and generate key business reports. You will utilize QuickBooks Accountant’s Easy-
Step Interview to establish accounts, customers, vendors, items, and employees and
then record business transactions using key source documents like sales receipts,
invoices, bills, deposit forms, and checks. You will learn how to create journal entries
in QuickBooks Accountant to accrue revenues and expenses, adjust deferred assets
and liabilities, and record depreciation of long-lived assets. Finally, you will learn
how QuickBooks Accountant’s budgeting and reporting process can help Wild
Water Sports plan and control their business activities.
A tested, proven, step-by-step methodology keeps students on track. Students
enter data, analyze information, and make decisions all within the context of the
case. The text constantly guides students, letting them know where they are in the
course of completing their accounting tasks.
Numerous screenshots include callouts that direct students’ attention to what
they should look at on the screen. On almost every page in the book, you will find
examples of how steps, screenshots, and callouts work together.
Trouble? paragraphs anticipate the mistakes that students are likely to make—
or problems they might encounter—and then help them recover and continue
with the chapter. This feature facilitates independent learning and frees you to
focus on accounting concepts rather than on computer skills.
With very few exceptions, QuickBooks Accountant does not require the user
to record journal entries to record business events. An appendix on traditional
accounting records gives you the flexibility to teach journal entries at your discre-
tion. It provides the information necessary for students to make journal entries to
record the events described in Chapters 6–12.
Questions begin the end-of-chapter material. They are intended to test stu-
dents’ recall of what they learned in the chapter.
Matching exercises follow the questions. Each matching exercise lists key
concepts/terms used or introduced in each chapter, terms that the student
must match with the appropriate definition. This helps reinforce the student’s
grasp of the accounting and QuickBooks Accountant concepts.
Assignments follow the matching exercises. In the first five chapters, the
assignments involve continuing the students’ exploration of QuickBooks Accoun-
tant by viewing Larry’s information. Three additional cases are used to extend
their practice and exploration of QuickBooks Accountant files. The first is Sierra
Marina, a sole proprietorship renting boats in the Sierra Mountains. The second
is Kelly Jennings, an advertising agency doing business as a corporation. The
third is Jason Galas Attorney at Law PC, a law firm doing business as a profes-
sional corporation.
In Chapters 6–11, exercises follow the matching exercises. Each exercise revolves
around Boston Catering where students are asked to add customers, vendors, items,
employees, and operating, investing, and financing activities. Each exercise stands
alone and does not require completion of the previous exercise.
In Chapter 12, the end-of-chapter material includes questions, matching exer-
cises, and four assignments. These are designed to help students apply the knowl-
edge gained in the chapter on managing a firm’s fixed assets including creating a
new client, creating a fixed asset item list, depreciating fixed assets, and recording
a journal entry in QuickBooks Accountant.
In Chapters 6–11, four assignments follow the exercises. Each assignment in
Chapters 7–11 includes a beginning backup data file, which is used to get the
xii Preface 

student started. This includes an extension of the Wild Water Sports continuing
business problem used in the chapter, followed by the Central Coast Cellular,
Santa Barbara Sailing, and Drone City assignments. Three additional cases fol-
low these assignments. None of these cases include a beginning data file; students
continue the case from the previous chapter. These include the Forever Young,
Ocean View Flowers, and Aloha Properties cases.
Five comprehensive problems appear at the end of each Chapter 7 and
Chapter 11. These problems provide an opportunity for students to demonstrate
their comprehensive understanding of QuickBooks Accountant procedures and
accounting knowledge.
The Student version of the text web site includes all beginning data files for each
chapter and for each assignment. Students should navigate their browser to https://
login.cengage.com to log in or create an account. Click on Find Free Study Tools, and
then search using ISBN 9780357042076. Book resources should be listed including
student data files.
The Instructor’s Manual includes solutions to all questions, matching exer-
cises, assignments, cases, and comprehensive problems. Completed QuickBooks
Accountant backup files are provided for the assignments, cases, and comprehen-
sive problems to enable instructors to see what the student completed data file
should look like after each chapter. The instructor’s section of the text web site
includes student data files and instructor completed data files. Instructors should
navigate their browser to http://www.cengage.com. Click Higher Education, then
type Glenn Owen in the Search for Books or Materials text box, and then click
Find. Locate and then click the QuickBooks 2018 text from the listing provided.
Click the text Instructor Companion Site. Book resources should be listed includ-
ing both student and instructor data files. Instructor completed backup files,
solution manual, rubrics, and so on are locked and require registration and login
available at this site.

Dates
QuickBooks Accountant, like all accounting programs, is extremely date sensitive.
This follows from the accounting periodicity concept, which requires accounting
information to be organized by accounting periods such as months, quarters, and
years. It is most important that, when using this text, you enter the proper dates
to record business transactions or view business reports. For example, if you are
using this book in 2019 (and thus your computer has a system date of 10/1/19,
for example), then you will need to adjust the date references. In the Employee
Center, for instance, the concept of ‘‘The Calendar Year’’ means 2019. However,
if you are using this book in 2020 (and thus your computer has a system date of
2/1/20, for example), then the reference to ‘‘The Calendar Year’’ refers to 2020.
The Larry’s Landscaping & Garden Supply file used in Chapters 1–5 is a sample
file created by Intuit, which automatically sets the system date to 12/15/2022.
Thus, you won’t have to worry about differences in report dates.
The end-of-chapter assignments, cases, and comprehensive problems often
have dates that differ from the date you might be entering business transactions. For
example, the Central Coast Cellular assignment is dated 2014. When entering dates
 Preface xiii

for transactions, QuickBooks Accountant automatically warns you of transactions

being recorded more than 30 days into the future or more than 90 days in the past
as shown by the following windows:

Figure P.1
Future Transactions Warning

Figure P.2
Past Transactions Warning

Click the Yes button when this occurs and then go to the Edit menu, click Pref-
erences, click Accounting, and then click the Company Preferences tab. Uncheck
the two check boxes located in the Date Warnings section as shown below.

Figure P.3
Turning Off Date Warnings

Uncheck these
two check boxes
 About the Author

Glenn Owen is a retired Professor of Accounting at Allan Hancock College where

he lectured on accounting and information systems since 1995. In addition, he is a
retired lecturer at the University of California at Santa Barbara, where he taught
accounting and information systems courses from 1980 to 2011. He has also
been a lecturer at the Orfala College of Business at Cal Poly, San Luis Obispo,
teaching financial and managerial accounting courses. His professional experi-
ence includes five years at Deloitte & Touche as well as vice president of finance
positions at Westpac Resources, Inc., and Expertelligence, Inc. He has authored
many Internet-related books and accounting course supplements and is currently
developing online accounting instruction modules for his Internet-based finan-
cial accounting courses. Mr. Owen previously released a 2016 edition of his Excel
and Access in Accounting text, which gives accounting students specific, self-
paced instruction on the use of spreadsheets (Excel 2016) and database appli-
cations (Access 2016) in accounting. His innovative teaching style emphasizes
the decision maker’s perspective and encourages students to think creatively. His
graduate studies in educational psychology and his 43 years of business experi-
ence yield a balanced blend of theory and practice.

Dedication
I would like to thank my wife Kelly for her support and assistance during the cre-
ation of this and previous editions of this text. While our boys are now out of the
house and pursuing their own interests, she continues to listen to my often crazy
ideas for new cases and experiences with college students, providing an excellent
sounding board and reality check. You, the boys, their wives, and our grandchil-
dren continue to be what life is all about.

xiv
 Note to the Student and Instructor

QuickBooks Version, Passwords, and Payroll

Tax Tables
The text and related data files created for this book were constructed using
QuickBooks® Accountant 2018 release R4P and R5P. To check your release
number, open QuickBooks® Accountant 2018 and type Ctrl 1. If your release is
less than number R5, click Update QuickBooks Desktop located in the Help
menu to update your version. This is a free service to version 2018 users and
requires an Internet connection. The files accompanying this text can be used
in any QuickBooks® Accountant 2018 release R4 or higher. If you are using
a higher release number, QuickBooks Accountant will automatically offer to
update your file when you try and restore it. Click Yes in the corresponding
Update Company window. Note that Intuit updated QuickBooks 2018 in the
middle of this text’s update. Thus, many files were created using release R4P.
Those files should all be updated when opened for the first time. However,
all Wild Water Sports files were updated to R5P and thus won’t have to be
updated.
Intuit now requires you to have a complex password (new security require-
ments) when any of the following data is in the file you are opening:
1. Employee and Employer Social Security Number
2. Employer EIN
3. Employer Bank Details (Routing Number, Account Number)
4. Vendor Tax ID
QuickBooks 2018 doesn’t know that all of the data used in this text’s data files
is fictitious. Thus, the author has assigned an administrator password for all files
provided. The password is Qbooks2018 (Q must be capitalized). When the stu-
dent creates a new file in Chapter 6 for Wild Water Sports, he/she should accept
Admin as his/her username and then type Qbooks2018 as his/her password twice.
Then he/she should select Name of your High School mascot as the Challenge
Question and type Bulldog as the answer.
In this version of QuickBooks Accountant, Intuit continues its use of a basic
payroll service. This is a requirement in order to use the QuickBooks Accountant
payroll features that automatically calculate taxes due to federal or state agen-
cies. QuickBooks Accountant initially comes with the current tax tables; however,
these tables soon become outdated, and the payroll feature is disabled unless the
user subscribes to the payroll service.
Some previous versions of this text applied whatever tax tables were in effect at
the time of publication. Users who had different tax tables often noted differences
in solutions as a result. This new requirement solves that problem. The author
decided to use the manual payroll tax feature, which requires that students manually
xv
 Note to the Student and Instructor xvi

enter the tax deductions. This alleviates the discrepancies between the solutions
manual and the students’ data entry and removes the burden of p ­ urchasing the tax
table service for each copy of QuickBooks Accountant installed in a lab environ-
ment. Instructions on how to set up payroll for manual calculation of payroll taxes
are provided in the text. For more information, see your QuickBooks Accountant
documentation.
All reports have a default feature that identifies the basis in which the report
was created (e.g., accrual or cash) and the date and time the report was printed.
The date and time shown on your report will, of course, be different from that are
shown in this text.
 1
Getting Started with

part
QuickBooks Accountant

In this Part, you will:

• Take an interactive tour of QuickBooks Accountant
• Create a balance sheet and modify its presentation

Q
• Create an income statement and modify its
presentation
• Create a statement of cash flows and modify its
presentation
• Create supporting reports and modify their
presentation

P
art 1 is designed to help you navigate through QuickBooks
Accountant. It provides a foundation for Part 2, which shows
you how to create a new QuickBooks Accountant file and record
a variety of operating, investing, and financing transactions.
This part is divided into five chapters—each with its own set of ques-
tions, assignments, and case problems. Chapter 1 gives you a quick interac-
tive tour of QuickBooks Accountant, in which you will become familiar with
the essential features of QuickBooks Accountant. Chapters 2–5 introduce
you to creating and preparing the balance sheet, the income statement, the
statement of cash flows, and supporting reports.
 1
chapter

An Interactive Tour of
QuickBooks Accountant

Student Learning Outcomes

Upon completion of this chapter, the student will be able to:
• Discuss QuickBooks Accountant’s basic features
• Restore, open, back up, and close a QuickBooks Accountant file
• Identify the components and menus available in the QuickBooks Accountant
window
• Use QuickBooks Accountant Help resources
• Examine a few forms and reports available in QuickBooks Accountant

Case: Larry’s Landscaping & Garden Supply

You’ve been working in a part-time job at a restaurant, and today you decide
that you’ve served your last hamburger. You want a new part-time job—one
that’s more directly related to your future career in business. As you skim the
want ads, you see an ad for an administrative assistant at Larry’s Landscaping
& Garden Supply. The ad says that job candidates must have earned or be earn-
ing a business degree, have some computer skills, and be willing to learn on the
job. This looks promising. And then you see the line ‘‘Send a résumé to Scott
Montalvo.’’ You know Scott! He was in one of your marketing classes two years
ago; he graduated last year with a degree in business. You decide to send your
résumé to Scott right away.
A few days later you’re delighted to hear Scott’s voice on the phone. He
remembers you well. He explains that he wants to hire someone to help him with
clerical and other administrative tasks. He asks if you could start right away.
When you say yes, he offers you the job on the spot! You start next Monday.
When you arrive Monday morning, Scott explains that the first thing he
needs you to learn is how to use a software package called QuickBooks Accoun-
tant. You quickly remind Scott that you’re not an accounting major. Scott laughs
as he assures you that you’ll have no problem with QuickBooks Accountant
because it is so user oriented. He chose QuickBooks Accountant exactly for
that reason and has been using it for about three months. Scott wants accurate,
useful, and timely financial information to help him make sound business deci-
sions—and he’s not an accountant, either.
Scott explains that the company has been using QuickBooks Accountant
since its inception. He has become so busy at the company that he needs some-
one else in the office who can enter transactions, generate reports for the man-
agers, and so on. So he says that today he will give you a tour of QuickBooks
 An Interactive Tour of QuickBooks Accountant Chapter 1 3

Accountant and teach you some of the basic features and functions of this
package. You tell him that you’re familiar with Windows and you’re ready to
start. (Note: The file used in Chapters 1–5 is a service-based practice file created
by Intuit. This file is used because it automatically sets the system date and no
changes are made to the data.)

Using This Text Effectively

Before you begin the tour of QuickBooks Accountant, note that this textbook
assumes that you are familiar with the basics of Windows: how to control win-
dows, how to choose menu commands, how to complete dialog boxes, and how
to select directories, drives, and files. If you do not understand these concepts,
please consult your instructor. Also note that this book is designed to be used
with your instructor’s and/or another textbook’s discussion of essential account-
ing concepts.
The best way to work through this textbook is to read the text carefully and
complete the numbered steps, which appear on a shaded background, as you
work at your computer. Read each step carefully and completely before you try it.
As you work, compare your screen with the figures in the chapter to verify
your results. You can use QuickBooks Accountant with any Windows operating
system. The screenshots used in this book were captured in a Windows 10 envi-
ronment. So, if you are using an earlier or later version of Windows, you may see
some minor differences between your screens and the screens in this book. Any
significant differences that result from using QuickBooks Accountant within dif-
ferent operating systems will be explained.
Don’t worry about making mistakes—that’s part of the learning process. The
Trouble? Paragraphs identify common problems and explain how to correct them
or get back on track. Follow those suggestions only if you are having the specific
problem described.
After completing a chapter, you may do the questions, assignments, and case
problems found at the end of each chapter. They are carefully structured so that
you will review what you have learned and then apply your knowledge to new
situations.

Demonstrations
Video Demonstration
Demonstrations are available throughout this text and are referenced by a Video
Demonstration icon in the margin. These demonstrations are stand-alone full-ac-
tion videos with audio showing step-by-step illustrations of business processes
explained in this text.
All of these are available via the Student Companion web site. See the Pref-
ace of this text for detailed instructions on how to access demonstrations from
the Student Companion web site located at www.cengage.com/student.
The demonstrations you download are in a very large compressed zip file.
When you double-click the file downloaded, you’ll see a list of files. All of these
need to be extracted (decompressed) first before you can view them. Click Extract
to a folder and then create a folder on your computer or flash drive that you want
4 Chapter 1 An Interactive Tour of QuickBooks Accountant

to contain all of your demonstration files. Remember where you extracted these
files so you can find them later.

QuickBooks Accountant
To complete the chapters, cases, and exercises in this book, you must have access
to the QuickBooks Accountant application. Your instructor might make the
application available in a lab environment, suggest you a link to download the
software with information available in this text, or you may already own the soft-
ware. If you would like to download this application to your own computer, fol-
low the instructions provided in Appendix 3.

Data Files
To complete the chapters, cases, and exercises in this book, you must have access
to data files. See the Preface to this text for detailed instructions on how to access
student data files from the student companion web site.
In most cases, the file you download is a very large compressed zip file.
When you double-click the file downloaded, you’ll see a list of files. All of
these need to be extracted (decompressed) first before you can restore them
to QuickBooks. Click Extract to a folder and then create a folder on your
computer or flash drive that you want to contain all of your student data files.
Remember where you extracted these files so you can find them later. In other
cases, the file you download is a QuickBooks backup file that doesn’t have to
be extracted and restored.
You will then need to restore the backup files to their original format. The
files are named to correspond to chapters, assignments, and cases in this book.
Working from your computer’s hard drive is the most efficient way to use the
QuickBooks Accountant program. However, if you are in a lab environment and
want to take your file with you when you leave, you’ll need to copy that file to a
removable disk (ideally a portable USB drive). There is more on this later.

What Is QuickBooks Accountant?

Scott is excited about using QuickBooks Accountant because it is the
best-selling small business accounting software on the market today. He
explains that QuickBooks Accountant is an automated accounting informa-
tion system that describes an entity’s financial position and operating results
and that helps managers make more effective business decisions. He also likes
the QuickBooks Accountant reports and graphs, which quickly and easily
organize and summarize all the data he enters.
Scott cautions you not to confuse this version of QuickBooks Accountant,
which is installed on your computer and does not normally require access to the
Internet, with QuickBooks Online, which does require Internet access and only
allows you one company file. (See a more extensive discussion on the difference
between QuickBooks Accountant Desktop and QuickBooks Online in the Pref-
ace to this text.)
 An Interactive Tour of QuickBooks Accountant Chapter 1 5

Scott says he especially likes QuickBooks Accountant because it can handle Video Demonstration

all of the company’s needs to invoice customers and maintain receivables and
can also be used to pay bills and maintain payables. It can track inventory and
create purchase orders using on-screen forms—all without calculating, posting,
or closing. Scott can correct any previously recorded transaction, and an ‘‘audit DEMO 1A - Overview and introduction
trail’’ automatically keeps a record of any changes he makes.
Scott explains further that QuickBooks Accountant has four basic features
that, when combined, help manage the financial activity of a company. The four
features—lists, forms, registers, and reports and graphs—work together to create
an accounting information system. Let’s take a closer look at each of these four
features. Don’t start the QuickBooks Accountant program yet. Just read through
the following to better understand QuickBooks Accountant’s features. The
screenshots provided are from an Intuit generated sample company with product
sales. Once again, you don’t need to view this in QuickBooks Accountant.

Lists
Lists are groups of names—such as customers, vendors, employees, inventory
items, and accounts—and information about those names. Lists are created and
edited from a list window or while completing a form, such as an invoice, bill, or
time sheet. Figure 1.1 shows a list of customer names with jobs for each of these
customers, balances owed for each job, and any explanatory notes.

Figure 1.1
A Customer List

Customer Amounts
names due

Forms
Forms are QuickBooks Accountant’s electronic representations of the paper doc-
uments used to record business activities, such as customer invoices, a vendor’s
bill for goods purchased, and a check written to a vendor. The customer invoice
form in Figure 1.2 contains many fields, or areas on the form, that you can fill in.
If you fill in a field, such as the Customer: Job field, QuickBooks Accoun-
tant often automatically fills in several other fields with relevant information to
speed up data entry. In Figure 1.2, for example, the Bill To, Terms, and Invoice #
fields are filled in as soon as the Customer: Job field is entered.
6 Chapter 1 An Interactive Tour of QuickBooks Accountant

Figure 1.2 Your screen may show the words Print, Send/Ship, and Find
if your Create Invoices window is expanded. QuickBooks Accountant
An Invoice Form automatically removes words to save space when the
window size is reduced.

Here is where you enter specific data

for each invoice

Also, filling in a field is made easier through the use of drop-down lists.
Whenever you see an arrow next to or in a field, that field is a drop-down list.

Registers
A QuickBooks Accountant register contains all financial activity for a specified
balance sheet account. Examples of registers include checking (cash), accounts
receivable, inventory, and accounts payable. The checking register in Figure 1.3
shows some cash payments and cash receipts; it also provides cash balances after
each transaction.

Figure 1.3 Note the Cash payments Cash receipts

four-digit year
A Section of the Checking
Register

Balances are calculated after

each transaction
 An Interactive Tour of QuickBooks Accountant Chapter 1 7

The financial effects of business transactions may be entered directly into

the register or into the forms that automatically record the effects of these trans-
actions in the relevant register. For example, if an owner’s cash contribution is
recorded on a Deposit form, the increases in both the checking account and rele-
vant owner’s equity account are simultaneously recorded in the Checking register
and Contributed Capital register.

Reports and Graphs

QuickBooks Accountant reports and graphs present the financial position and
the operating results of a company in a way that makes business decision making
easier. The Profit and Loss report in Figure 1.4 shows the revenues and expenses
for a specific period of time. Note that QuickBooks Accountant uses the title
‘‘Profit & Loss,’’ but the generally accepted accounting title for this report is
‘‘Income Statement.’’ Titles for this and other reports are all changeable using
QuickBooks Accountant’s Header/Footer tab. You can modify reports in many
other ways, such as by comparing monthly periods, comparing this year with
prior years, or examining year-to-date activity.

Figure 1.4
A Profit & Loss Report
(Income Statement)

QuickBooks Accountant can also graph data to illustrate a company’s financial

position and operating results. For example, the bar chart in Figure 1.5 illustrates
sales by month, and the pie chart illustrates sales by construction category.
8 Chapter 1 An Interactive Tour of QuickBooks Accountant

Figure 1.5
A Sales Graph

A bar chart helps

you quickly see relative
sales by month

A pie chart helps you

quickly see relative
percentages

Launching QuickBooks Accountant

Now that you know about lists, forms, registers, and reports and graphs, you are
ready to launch QuickBooks Accountant. Scott invites you to join him in his
office and use his large-screen monitor to start your tour. You open Windows,
and Scott tells you how to launch QuickBooks Accountant.

To launch QuickBooks Accountant in Windows:

1 Click the Start button.
2 Select the Programs menu and look down the list for QuickBooks
Accountant. Alternatively, if you have a QuickBooks 2018 icon on
your desktop you can double-click it to start the program.
3Once you’ve located the QuickBooks Accountant program, click the
QuickBooks Accountant icon or name.
Trouble? If, when QuickBooks Accountant was last used, the file being
worked on was closed, you will see a No Company Open window. If,
however, a QuickBooks Accountant file is open, click File, and then
click Close Company. Be sure to close any open files before you proceed
to the next set of steps.

Now that you have launched QuickBooks Accountant, you can begin to
learn how to use it.

Video Demonstration
Restoring and Opening a QuickBooks
Accountant File
Scott hands you a disk and asks you to restore the Larry’s Landscaping & Gar-
DEMO 1C - Restoring and backing
up a file den Supply QuickBooks Accountant file. (Note: This file is one of the files you
already downloaded and extracted from Cengage.)
 An Interactive Tour of QuickBooks Accountant Chapter 1 9

To restore a backup file to its original format:

1 Download the data files from the textbook’s web site as previously
described.
2 Launch QuickBooks Accountant if you closed it above. (Note: If a
QuickBooks Setup window appears, close it.)
3 Click Open or restore an existing company. When and if asked, enter
information requested to register your copy of QuickBooks.
4 Choose the Restore a backup copy option button as shown in Figure
1.6, and then click Next.
Figure 1.6
Open or Restore
Company Window

5 Choose the Local backup option button, and then click Next.
6 Locate the Larry’s Landscaping & Garden Supply (Backup).QBB file
wherever you downloaded the file from the textbook’s web site. Select
it, as shown in Figure 1.7, and then click Open.

Figure 1.7
Open Backup Copy Window

7 Click Next in the Open or Restore Company window.

10 Chapter 1 An Interactive Tour of QuickBooks Accountant

8 In the Save in: section of the Save Company File as window, navigate
to the location where you want the file to be stored on your computer’s
hard drive. Be sure to note its location for future use. In the example
shown in Figure 1.8, we chose to save the restored file in a folder we
created called Restored Files and typed Larry’s Landscaping & Garden
Supply.qbw in the File name: text box.

Figure 1.8
Save Company File as Window

9 Click Save to restore the file.

10 Click OK in the QuickBooks Desktop Information window, indicating
that the file has been successfully restored.
11 Close the Accountant Center window if it opens.

Later, you can continue this process for all the backup files as you need them.
As mentioned before, you may be working in a lab environment where the files
you work on today may be erased tomorrow. To preserve your work, you should
back up your files to removable data storage (e.g., a USB drive). See Appendix 3
for more information on file management as well as backing up and restoring files.

The QuickBooks Accountant Window

Scott explains that QuickBooks Accountant operates like most other Windows
programs, so most of the QuickBooks Accountant window controls should be
familiar to you. He reaches for the mouse and quickly clicks a few times until his
screen looks like Figure 1.9. The main components of the QuickBooks Accoun-
tant window are shown in this figure. Let’s take a look at these components so
that you can become familiar with their location and use.
The title bar at the top of the window tells you that you are in the
QuickBooks Accountant program and identifies the company file currently open.
The menu bar contains the command menus, which open windows within
QuickBooks Accountant. The File, Edit, View, and Help menus are similar to
other Windows programs in that they allow you to perform such common tasks
as open, save, copy, paste, find, and get help.
The Lists menu gives you access to all lists, including the chart of accounts,
customers, vendors, employees, and inventory items. The Company, Customers,
 An Interactive Tour of QuickBooks Accountant Chapter 1 11

Menu bar
Icon bar Title bar Figure 1.9
Components of the
QuickBooks Accountant
Window

Vendors, Employees, and Banking menus provide easy access to QuickBooks

Accountant Centers as well as common tasks unique to that menu. For instance,
in the Customers menu, you can create invoices, enter cash sales, create credit
memos, receive payments, and so forth. The Reports menu will give you quick
access to common reports and graphs for easy creation. The Window menu allows
you to choose the format for window displays, such as cascade or tile vertically.
Finally, the Help menu will give you immediate access to an index of help topics.
The icon bar gives you one-click access to the QuickBooks Accountant Cen-
ters and Home page. From time to time, you may want to hide the icon bar so
you can have more horizontal space for the customizable icon bar.
The icon bar can include icons representing tasks you do every day, such as
entering and paying bills, creating invoices, and receiving payments. If you use
QuickBooks Accountant’s payroll system, you might consider adding icons for
your payroll forms. Icons can be added, removed, or reordered to fit your needs.
Use the View menu to hide or display the icon bar and make any changes. The
current icon bar was set up to show just a few icons (Home, Customers, Vendors,
Employees, Reports, and User Licenses).

Backing Up and Closing a QuickBooks

Accountant File
Now that you have seen the components of the QuickBooks Accountant screen,
Scott wants to show you how to back up and close a file so that you will always
be able to save your work and exit QuickBooks Accountant.
12 Chapter 1 An Interactive Tour of QuickBooks Accountant

‘‘Maintaining backups is important just in case your original file is some-

how damaged or lost,’’ Scott explains.

To create a backup file for later use and then close the file:
1 In Windows Explorer, create a folder on your USB or other external
drive called ‘‘My QuickBooks Backups.’’
2 In QuickBooks Accountant, click File, and then click Back Up Company,
and then select Create Local Backup as shown in Figure 1.10.

Figure 1.10
Creating a Backup File

3 Choose the Local Backup option button, and then click Next.
4 Click Browse in the Backup Options window and navigate to the My
QuickBooks Backups folder you created in Step 1. Uncheck the Add
the date and time of the backup to the file name check box and then
uncheck the Remind me to back up when I close my company file check
box. Then click OK.
5 Click Use this Location if a warning window appears, and then click
Next two times.
6 Your screen should look like Figure 1.11. Click Save.
 An Interactive Tour of QuickBooks Accountant Chapter 1 13

Figure 1.11
Backing Up a Data File

7 Click OK in the QuickBooks Accountant Information window, which

indicates your backup was successful. Keep this QuickBooks Accountant
file open.

Then Scott tells you something very unusual. He says that, unlike other Win-
dows programs, QuickBooks Accountant does not have a Save command. In other
words, in QuickBooks Accountant, you cannot save a file whenever you want.
You stare at Scott in disbelief and ask how that can be possible. Scott explains
that QuickBooks Accountant automatically saves all of the data you input and the
changes you make as soon as you make them and click OK. Scott admits that,
when he first used QuickBooks Accountant, he was uneasy about exiting the
program until he could find a way to save his work. But he discovered that there
are no Save or Save As commands on the QuickBooks Accountant File menu as
there are on most other Windows programs. He reassures you that, as unsettling
as this is, you’ll get used to it once you become more familiar with QuickBooks
Accountant. See Appendix 3 for more information on file management as well as
backing up and restoring files.

QuickBooks Accountant’s Menus

and Shortcut List
Scott explains that to enter sales receipts, create invoices, pay bills, receive pay-
ments, and so on, you use QuickBooks Accountant menu commands. Some of
these functions are also available from buttons on the QuickBooks Accountant
icon bar.
Some QuickBooks Accountant menus are dynamic; in other words, the
options on the menu change depending upon the form, list, register, or report
with which you are working. For instance, when you enter sales receipts infor-
mation, the File menu changes to include a menu command to print the sales
receipts as shown in Figure 1.12.
Another Random Scribd Document
with Unrelated Content
The Project Gutenberg eBook of Running the
Blockade
 This ebook is for the use of anyone anywhere in the United
States and most other parts of the world at no cost and with
almost no restrictions whatsoever. You may copy it, give it away
or re-use it under the terms of the Project Gutenberg License
included with this ebook or online at www.gutenberg.org. If you
are not located in the United States, you will have to check the
laws of the country where you are located before using this
eBook.

Title: Running the Blockade

Author: Thomas E. Taylor

Release date: October 5, 2015 [eBook #50134]

Most recently updated: October 22, 2024

Language: English

Credits: Produced by readbueno and the Online Distributed

Proofreading Team at http://www.pgdp.net (This file
was
produced from images generously made available by
The
Internet Archive)

*** START OF THE PROJECT GUTENBERG EBOOK RUNNING THE

BLOCKADE ***
This Front Cover was produced by the transcriber
and is in the public domain.

RUNNING THE BLOCKADE

BURNING OF THE NIGHT HAWK. Frontispiece.

 RUNNING THE BLOCKADE
A PERSONAL NARRATIVE OF
ADVENTURES, RISKS, AND
ESCAPES DURING THE
AMERICAN CIVIL WAR

By THOMAS E. TAYLOR

WITH AN INTRODUCTION BY JULIAN CORBETT

MAPS AND ILLUSTRATIONS

LONDON
JOHN MURRAY, ALBEMARLE STREET

1896
 INTRODUCTION

A German admiral has remarked that the most valuable naval

history lies in the despatches and logs of naval officers. Our own
Navy Record Society by the line it has taken thoroughly endorses
this view, and has committed itself to the teaching of naval history
from the mouths of the men who made it.
Mr. Taylor's work then must not be taken as a mere record of
personal adventure, however absorbing it be found from this point of
view. As a picture of exciting escapes, of coolness and resource at
moments of acute danger, of well-calculated risks, boldly accepted
and obstinately carried through, it has few rivals in recent sea-story:
but its deeper value does not lie here. Over and above its romantic
interest it will be recognised by students of the naval art as a real
and solid contribution to history; for it presents to us from the pen of
a principal actor the most complete account we have of a great
blockade in the days of steam.
The important part that blockade plays in naval warfare is a thing
hardly recognised outside professional ranks. For the general reader,
the grand manœuvres of a great fleet in chase of the enemy and the
stirring hours of some decisive action throw into oblivion the tedious
months of dull, anxious, and exhausting work with which by far the
greater part of the war is taken up. Yet it is hardly too much to say
that during the most glorious period of our maritime history nine-
tenths of the energies of our admirals were devoted to blockade. In
the future it is possible that it will take even a higher place. Should
England become engaged with a first-rate foreign power, single-
handed, it is a recognised fact amongst naval strategists that in a
week she could close every one of her enemy's ports and have a
fleet free to reduce at its leisure everything he held beyond the seas.
With almost any two Powers against her it is probable she could do
as much: and it is the recognition of this power abroad which gives
England, in spite of her military weakness, so commanding a
position in Europe.
The importance then of studying every scrap of information on the
subject in order to perfect our knowledge of the art of blockade
cannot be exaggerated, and Mr. Taylor's simple and straightforward
record of his experiences may claim to be perhaps the fullest
contribution to the subject that as yet exists. Experiences of
individual captains we have had, and, read with the present work,
they are of high value: but Mr. Taylor has something more to tell.
Not only did he run the blockade personally a greater number of
times than any one else, but, boy as he was at the time, he was the
chief organiser of a great and systematised attack on the Northern
blockade, such as the world had never seen before. His operations
may be said to have opened a new era in the history of blockade,
and one which bids fair to have far-reaching consequences for every
maritime Power.
To make clear his position and its dangers and difficulties a word
must be said on the general subject of blockade. Blockade, it must
be clearly borne in mind, is of two kinds, the one military, the other
commercial. The first concerns the belligerents alone, and consists in
one of them, who has obtained a working command of the sea,
imprisoning the other's war fleets in their own ports. It was this form
of blockade which absorbed by far the greatest part of our naval
activity during the great French wars. During the American Civil War
it was considerably practised, and from American sources may be
studied in complete detail the efforts of the Confederate war-ships to
escape the vigilance of Federal blockading squadrons. The second
form, or commercial blockade, is one that principally concerns
neutrals, and it was of course to this form alone that Mr. Taylor's
operations extended.
The International Law which regulates its conditions as between
neutrals and belligerents is shortly this. A belligerent, if strong
enough at sea to close one or more ports of his enemy, may give
notice to Neutral Powers that such port or ports are blockaded, and
thereafter if any neutral vessel attempts to enter or leave them, the
belligerent may treat it as an enemy, and may destroy or capture
and condemn it as an ordinary prize. To run a blockade then is an
operation attended with all the risks of war. Indeed a blockade-
runner is in an even worse position than a hostile belligerent; for not
being a combatant he may not resist the efforts of the blockaders to
destroy or capture him. He is entitled to escape if he can, but a
single shot or blow in his own defence makes him a pirate, and a
belligerent capturing him may treat him as such. But it must always
be remembered that for a belligerent to be entitled to exercise these
high prerogatives he must first have constituted a real and effective
blockade. A mere declaration that a port is closed is not enough. It
must be so closely watched and invested with an adequate naval
force that no neutral can leave or enter without running present
danger of being sunk or captured.
Analogous to the rights arising out of an effective blockade, and
always to be clearly distinguished from them, is the right of a
belligerent to treat as an enemy a neutral vessel carrying contraband
of war to his enemy's ports, and this right he may always exercise,
whether the ports in question be effectively blockaded or not.
It was this consideration, no doubt, combined with a desire to
preserve a strict neutrality and to see the South treated as
belligerents and not as mere insurgents, that induced the English
Government to recognise the Federal blockade as soon as it was
declared. At the opening of the war the Federal Government, in
defiance of International Law, declared the whole Southern seaboard
under blockade. It was a blockade they were then wholly unable to
enforce or even to pretend to enforce, but as most of our blockade-
runners carried contraband of war, there was very little to be gained
by disputing the Federal pretensions. Some injustice, no doubt, was
thus done to the South. But it was more than counterbalanced by
the advantage they gained in that the recognition of the blockade
made them indisputably belligerents. For these reasons our
Government thought it wise to waive its neutral rights and submit to
a paper blockade, which did not exist. As the Northern power
increased at sea the blockade became more and more effective, and
by the time Mr. Taylor had got fully to work it may be said to have
been something more than a pretence. Finally it became very strict
and thoroughly effective, and it is with this instructive period that his
reminiscences are chiefly concerned.
This declaration of a blockade that could not be enforced at the
time was not the only extension of belligerent rights which the
Federal Government claimed and exercised in respect of blockade.
As Mr. Taylor fully explains, they did not confine their operations
against blockade-runners to the established practice of watching the
closed ports. Not only did they cruise for offenders on the high seas,
but they intercepted them close to their points of departure,
thousands of miles from the blockaded ports. Nay, they even went
so far as to attempt to blockade the neutral ports which the
offending vessels were using as bases of operations. To most of
these claims no objection was made, and there is no doubt that in
any future war similar operations will be recognised without
question, as within belligerent rights.
In previous wars a belligerent declaring a blockade had to concern
himself with little more than turning back ordinary merchantmen
who had not received notice of the blockade, or cutting off small fry
of the smuggling type that slipped over from adjacent coasts to take
their chance of getting in. Such a thing as neutral merchants
establishing public companies to build fleets of specially designed
vessels for the avowed purpose of breaking a blockade which was
thoroughly effective against ordinary types of merchantmen, was a
thing unknown to International Law. And further, when these
merchants stretched their rights as neutrals so far as to establish
regular bases almost in the enemy's waters from which to conduct
their revolutionary operations, it was obvious that some latitude
must be granted to the blockading power. No objection, therefore,
was ever raised to his cutting off vessels avowedly constructed for
blockade-running at any point he chose; but when he attempted to
blockade neutral ports from which they were acting, England put her
foot down and compelled the Federal cruisers to draw off. In this she
was clearly within her rights. But although the Federal claim to this
bold extension of belligerent rights was undoubtedly illegal, it was
not without provocation. It is another law of blockade that a vessel
is not "guilty" and cannot be interfered with unless it is bound for a
blockaded port. The system pursued by Mr. Taylor of establishing
depots or bases on British territory close to American waters thus
greatly increased the difficulties of the cruisers. Goods destined for
the blockaded ports were consigned first to one of these bases,
Bermuda, Havana, or the Bahamas, and on their way could not be
touched by the Northern captains. It was naturally a great
temptation to these officers as they watched the offensive traffic
pouring into the runner's bases to see that it did not get out. It is
even conceivable that England might have been induced to wink at
their proceedings. But it so happened that the first and only attempt
to blockade blockade-runners in a British port was made by the very
officer who was the culprit in the Trent affair, and that too while we
were still unsoothed from his last violation of our neutrality. The
British Government, therefore, happened to be in a very irritable
mood with the North, and though they had hitherto been
inexhaustible in their sympathy with the Federal belligerent
pretensions, they now peremptorily stopped their complacency and
the North had to submit.
Whether the claim made tentatively by the Northern Government
is destined to become recognised by International Law is by no
means clear. In the case in question the neutral was too powerful to
be resisted. Shortly after, however, the same scheme was actually
put in operation by one of the most famous of Mr. Taylor's
colleagues, the "notorious Captain Roberts," the arch-blockade
runner and a British naval officer. When the American war closed,
the Turkish Government had been trying for months to suppress an
insurrection in Crete by blockading the island on the old lines.
Hobart (whose nom de guerre as a blockade-runner was "Roberts"),
profiting by his recent experience, undertook to suppress it in a
week, and his offer was accepted. The insurgents were living entirely
on supplies sent them from Greece, and Hobart having been placed
in command of the blockading squadron proceeded at once to
blockade the Greek vessels in their own ports, and the Cretans were
immediately starved into surrender.
This and every other indication show a tendency for the
belligerent rights of blockade to increase at the expense of the
neutral. If this be so, then blockade must become a more and more
effective naval operation, and hence the importance of its study
down to the minutest particulars from which any forecast of the
future may be obtained.
For the non-professional reader one of the chief points of technical
interest in Mr. Taylor's book will be the light it throws on a great
national question, which periodically comes out in moments of
alarm. It is now a common subject for paragraphists to dilate upon
how, if England lost command of the sea, her food supply would be
cut off in a week (or some other minute period) and herself be
brought to the mercy of her enemy. However useful such
prognostications may be for stimulating an interest in the navy, they
are full of fallacies and even dangerous as leading to demands for
naval armaments so extravagant as to cause the taxpayer to turn his
back on the navy altogether, and button his pockets in sheer disgust.
To begin with, if England lost the command of the sea, it does not
follow that any one else would obtain it, a fact too often lost sight of
in naval discussion. The thing does not hang in a simple dilemma.
You cannot say, either England has the command or her enemy has
it. There is still the middle hypothesis, that neither has it. And this in
all reasonable probability is the worst that could suddenly befall us.
The destruction of England's command of the sea is no child's play,
and even if three Powers together succeeded in doing it, it could
only be at such a sacrifice to themselves as would leave the seas
practically free to the operations of neutrals. Mr. Taylor's experiences
show clearly how surprisingly easy it was for bold and expert
captains with adequate vessels to run the most strict and effective
blockades. Were England to become engaged in a great war, the first
step would be for numbers of her mercantile marine to pass to
neutral flags, and all these vessels with their crews would be ready-
made blockade-runners the moment there was a call for them. And
even assuming that by some extraordinary chance the British fleet
for a time was suppressed with little or no damage to the enemy, the
precedents of the American war go to show that the navies of three
Powers absolutely intact could hardly avail to maintain a blockade of
such a coast-line as ours.
The conditions of blockade, it is true, have changed, but the
balance remains much the same. Mr. Taylor considers that search-
lights, for instance, tell quite as much for one side as the other.
Increased speed is at least as favourable for running as it is for
blockading. Torpedo boats seem hardly to affect the balance at all.
For while they render the position of a blockading squadron less
secure than formerly, they on the other hand furnish it with ideal
patrols. Quick-firing guns are all in favour of the blockader, but on
the other hand, long-range guns of position are all against him,
compelling him to keep further to sea and so to cover more ground.
The extreme importance of invisibility too, on which Mr. Taylor
insists, shows how great an advantage a runner, able to procure
good smokeless coal, would have over a force blockading the English
coast which could not obtain it. On the whole we may safely
conclude that a commercial blockade is certainly no easier than it
was in the sixties. Many indications from the following pages show
how difficult it is to maintain the blockade even of half a dozen
ports, if you are unable to intercept the regular runners at their
points of departure. This a force without undisputed mastery of the
sea could never effect to a sufficient extent. The lesson then that the
following pages most clearly teaches is, that the danger of the
British Isles being blockaded by any conceivable combination of
hostile Powers, so as to reduce her even approximately near
starvation, may be dismissed as outside the region of practical
strategy; and in the next place they show us the vast importance of
maintaining in our navy an adequate force of vessels of a type
calculated to render a commercial blockade really effective. What Mr.
Taylor was able to do with one little steamer to prolong Lee's
resistance is a lesson to be remembered beside Dundonald's
operations on the coast of Spain.
Such are a few of the considerations which Mr. Taylor's book
suggests. Different men will draw different lessons from the facts it
presents, but its value as the work of a man of unequalled
experience in the working of a great blockade will be admitted by
all: and whatever weight may be attached to the author's
conclusions from his practical experience, the little work will amply
justify its existence if it in any way stimulates interest in the practical
side of a subject, which naval writers seem inclined to leave too
much in the hands of International lawyers.
JULIAN CORBETT.
May 1896.
 CONTENTS

CHAPTER I PAGE
How I Began 1
CHAPTER II
My First Attempt on the Despatch 16
CHAPTER III
The Banshee No. 1 33
CHAPTER IV
The Banshee's First Run In 44
CHAPTER V
Fort Fisher and Wilmington 55
CHAPTER VI
The Rest of the Banshee No. 1.'s
Career 70
CHAPTER VII
Life at Nassau 86
CHAPTER VIII
Our Fleet 101
CHAPTER IX
Bermuda 115
CHAPTER X
Experiences Ashore in Dixie's Land 131
CHAPTER XI
Havana and Galveston 145
CHAPTER XII
Blockades of the Past and the Future 166
Index 177
 ILLUSTRATIONS, MAPS, Etc.

Burning of the Night Hawk Frontispiece iv

Chart of Wilmington
Harbour and Approaches Page 45
Portrait of Colonel Lamb To face
page 56
Banshee chased by James To face
Adger page 78
Will-o'-the-wisp's Dash for To face
Wilmington page 106
Banshee No. 2 Running the
Gauntlet of the Galveston
Blockading Squadron in To face
Daylight page 156
Map of the East Coast of At
North America end
 CHAPTER I

HOW I BEGAN

Feeling in Liverpool—Declaration of blockade—Its immediate

result—Effect on trade in Liverpool—The theory of
blockades—Attitude of the Federal States—Seaboard of the
Seceding States—The Federal Navy—Energy of the Northern
States—Additions to the Federal Fleet—Position of the
Southerners at sea—Want of building yards and material—Commerce
destroyers—The Merrimac and the Monitor—The Alabama
and her consorts—Attitude of Great Britain—A royal
proclamation—Preparation for blockade-running—Amateurish
efforts—Daring attempts—The Trent affair—Launched
as a blockade-runner.

At the outbreak of the great American Civil War I was serving as

assistant to a firm of Liverpool merchants trading chiefly with India
and the United States. There was little in my life at the outset to
foretell the full taste of danger, excitement, and adventure which it
was my fortune so early to enjoy. I had nothing to hope for beyond
the usual life of office routine and a dim chance of a partnership
abroad in the future.
Young as I was, my interest in the coming struggle was deeply
aroused. From the position I occupied its significance was brought
home to me with the absorbing interest of a factor in my career. My
own fortunes and those of my nearest friends seemed at their outset
to be bound up in a piece of history that promised to leave its mark
upon the world. Nowhere indeed out of America was the secession
of the Southern States more keenly watched or canvassed than in
Liverpool offices and upon the Exchange of the city, which American
trade had begotten and nursed; and the particular aspect of the
impending war was most calculated to fill the imagination of
youngsters like myself, who were awakening from the dreams of
boyhood to the excitements of real life.
It will be remembered that, as soon as war was seen to be
inevitable, President Lincoln sanctioned the heroic measure of
attempting to choke secession by closing every orifice through which
supplies could be drawn, and in the middle of April 1861 rebellion
was turned into civil war by his declaring the whole of the Southern
ports in a state of blockade. One of the immediate results of this act
of President Lincoln was the prompt acknowledgment of the South
as belligerents by England and France. Yet the Federal States
persisted in maintaining that the Confederates were rebels, and that
whosoever ventured to recognise them as belligerents must be
regarded as friends of rebels and no friends of the North. They
ignored the fact that their interference with neutral trade, by this
declaration of blockade, was a virtual concession of belligerency to
the South. A declaration of blockade presupposes a state of war and
not mere rebellion, and the claim by the Federals of a right to seize
neutral vessels attempting to break a blockade was one which can
be exercised only by a belligerent; exercised by any one else it is
mere piracy.
The effect of the news on the Liverpool Exchange it is needless to
describe. By the scratch of a foreign pen a blow that was without
precedent was struck at the chief trade of the port. So prodigious
indeed was this first act of war that for some time there was a doubt
whether the Neutral Powers would recognise it. Only five years
before the Powers assembled at Paris to wind up the Russian war
had by solemn agreement declared, as the final and universal law of
nations, that blockades to be binding must be effective; that is to
say, that all the ports declared to be blockaded must be actually
invested, or at least so closely watched by a cruising squadron that