Table of Contents
Introduction 1 About This Book 1
Foolish Assumptions 2
Icons Used in This Book 3
Beyond the Book 4
Where to Go from Here 4
Book 1: An Accounting Primer 7
Chapter 1: Principles of Accounting 9
The Purpose of Accounting 10
The big picture 10
Managers, investors, and entrepreneurs 10
External creditors 11
Government agencies 11
Business form generation 12
Reviewing the Common Financial Statements 12
The income statement 13
Balance sheet 16
Statement of cash flows 19
Other accounting statements 22
Putting it all together 23
The Philosophy of Accounting 25
Revenue principle 25
Expense principle 26
Matching principle 26
Cost principle 26
Objectivity principle 27
Continuity assumption 27
Unit-of-measure assumption 27
Separate-entity assumption 28
A Few Words about Tax Accounting 28
Chapter 2: Double-Entry Bookkeeping 29
The Fiddle-Faddle Method of Accounting 30
How Double-Entry Bookkeeping Works 33
The accounting model 33
Talking mechanics 35
Almost a Real-Life Example 38
Recording rent expense 39
Recording wages expense 39
Recording supplies expense 40
Recording sales revenue 40
Recording cost of goods sold 41
Recording the payoff of accounts payable 41
Recording the payoff of a loan 42
Calculating account balance 42
Using T-account analysis results 44
A Few Words about How QuickBooks Works 46
Chapter 3: Special Accounting Problems 49
Working with Accounts Receivable 50
Recording a sale 50
Recording a payment 50
Estimating bad-debt expense 51
Removing uncollectible accounts receivable 52
Recording Accounts Payable Transactions 53
Recording a bill 54
Paying a bill 54
Taking some other accounts payable pointers 55
Inventory Accounting 56
Dealing with obsolete inventory 56
Disposing of obsolete inventory 57
Dealing with inventory shrinkage 58
Accounting for Fixed Assets 60
Purchasing a fixed asset 60
Dealing with depreciation 60
Disposing of a fixed asset 61
Recognizing Liabilities 63
Borrowing money 64
Making a loan payment 64
Accruing liabilities 65
Closing Out Revenue and Expense Accounts 68
The traditional close 68
The QuickBooks close 70
One More Thing 71
Book 2: Getting Ready To Use QuickBooks 73
Chapter 1: Setting Up QuickBooks 75
Planning Your New QuickBooks System 75
What accounting does 75
What accounting systems do 76
What QuickBooks does 76
And now for the bad news 77
Installing QuickBooks 78
Dealing with the Presetup Jitters 79
Preparing for setup 79
Seeing what happens during setup 80
Running the QuickBooks Setup Wizard 81
Getting the big welcome 81
Supplying company information 82
Customizing QuickBooks 83
Setting your start date 84
Reviewing the suggested chart of accounts 86
Adding your information to the company file 87
Identifying the Starting Trial Balance 89
A simple example to start 89
A real-life example to finish 91
Chapter 2: Loading the Master File Lists 93
Setting Up the Chart of Accounts List 94
Setting Up the Item List 98
Working with the Price Level List 99
Using Sales Tax Codes 99
Setting Up a Payroll Item List 100
Setting Up Classes 101
Setting Up a Customer List 103
Setting Up the Vendor List 107
Setting Up a Fixed Assets List 110
Setting Up a Price Level List 112
Setting Up a Billing Rate Level List 112
Setting Up Your Employees 113
Setting Up an Other Names List 113
Setting Up the Profile Lists 113
Chapter 3: Fine-Tuning QuickBooks 115
Accessing the Preferences Settings 116
Setting the Accounting Preferences 117
Using account numbers 118
Setting general accounting options 119
Setting the Bills Preferences 121
Setting the Calendar Preferences 121
Setting the Checking Preferences 121
Changing the Desktop View 123
Setting Finance Charge Calculation Rules 125
Setting General Preferences 126
Controlling Integrated Applications 128
Controlling Inventory 129
Controlling How Jobs and Estimates Work 130
Dealing with Multiple Currencies 131
Starting Integrated Payment Processing 132
Controlling How Payroll Works 132
Telling QuickBooks How Reminders Should Work 134
Specifying Reports & Graphs Preferences 135
Setting Sales & Customers Preferences 138
Specifying How Sales Are Taxed 140
Setting the Search Preferences 141
Setting the Send Forms Preferences 141
Fine-Tuning the Service Connection 142
Controlling Spell Checking 143
Controlling How 1099 Tax Reporting Works 144
Setting Time & Expenses Preferences 145
Book 3: Bookkeeping Chores 147
Chapter 1: Invoicing Customers 149
Choosing an Invoice Form 149
Customizing an Invoice Form 150
Choosing a template to customize 150
Reviewing the Additional Customization options 150
Moving on to Basic Customization 155
Working with the Layout Designer tool 157
Working with the web-based Forms Customization tool 160
Invoicing a Customer 160
Billing for Time 166
Using a weekly time sheet 166
Timing single activities 167
Including billable time on an invoice 168
Printing Invoices 170
Emailing Invoices 171
Recording Sales Receipts 172
Recording Credit Memos 174
Receiving Customer Payments 176
Assessing Finance Charges 179
Setting up finance-charge rules 179
Calculating finance charges 180
Using Odds and Ends on the Customers Menu 181
Chapter 2: Paying Vendors 183
Creating a Purchase Order 183
Creating a real purchase order 184
Using some purchase order tips and tricks 187
Recording the Receipt of Items 187
Simultaneously Recording the Receipt and the Bill 191
Entering a Bill 192
If you haven’t previously recorded an item receipt 192
If you have previously recorded an item receipt 194
Paying Bills 196
Reviewing the Other Vendor Menu Commands 199
Vendor Center 199
Sales Tax menu commands 200
Inventory Activities menu commands 201
Print/E-file 1099s 201
Item List 202
Chapter 3: Tracking Inventory and Items 203
Looking at Your Item List 204
Using the Item Code column 204
Using the Item List window 205
Using inventory reports 206
Adding Items to the Item List 206
Adding an item: Basic steps 207
Adding a service item 208
Adding an inventory part 209
Adding a noninventory part 211
Adding an other-charge item 212
Adding a subtotal item 213
Adding a group item 214
Adding a discount item 215
Adding a payment item 216
Adding a sales tax item 217
Setting up a sales tax group 217
Adding custom fields to items 218
Editing Items 220
Adjusting physical counts and inventory values 220
Adjusting prices and price levels 223
Using the Change Item Prices command 223
Using price levels 224
Enabling advanced pricing 226
Managing Inventory in a Manufacturing Firm 227
Handling manufactured inventory the simple way 227
Performing inventory accounting in QuickBooks 228
Managing multiple inventory locations 231
Chapter 4: Managing Cash and Bank Accounts 233
Writing Checks 234
Recording and printing a check 234
Customizing the check form 239
Making Bank Deposits 241
Transferring Money between Bank Accounts 244
Working with the Register 245
Recording register transactions 246
Using Register window commands and buttons 249
Using Edit Menu Commands 252
Reconciling the Bank Account 256
Reviewing the Other Banking Commands 260
Order Checks & Envelopes command 260
Enter Credit Card Charges command 260
Bank Feeds command 261
Loan Manager command 262
Other Names list 262
Chapter 5: Paying Employees 263
Setting Up Basic Payroll 264
Signing up for a payroll service 265
Setting up employees 265
Setting up year-to-date amounts 269
Checking your payroll setup data 270
Scheduling Payroll Runs 270
Paying Employees 270
Editing and Voiding Paychecks 272
Paying Payroll Liabilities 273
Book 4: Accounting Chores 275
Chapter 1: For Accountants Only 277
Working with QuickBooks Journal Entries 277
Recording a journal entry 278
Reversing a journal entry 279
Editing journal entries 280
Updating Company Information 280
Working with Memorized Transactions 280
Reviewing the Accountant & Taxes Reports 281
Creating an Accountant’s Copy of the QuickBooks Data File 283
Using an accountant’s copy 288
Reusing an accountant’s copy 288
Exporting client changes 288
Importing accountant’s changes 289
Canceling accountant’s changes 290
Troubleshooting accountant’s copy transfers 291
Using the Client Data Review Commands 291
Chapter 2: Preparing Financial Statements and Reports 293
Some Wise Words Up Front 293
Producing a Report 294
Working with the Report Window 295
Working with Report window buttons 295
Using the Report window boxes 302
Modifying a Report 304
Using the Display tab 304
Using the Filters tab 306
Using the Header/Footer tab 308
Formatting fonts and numbers 309
Processing Multiple Reports 311
A Few Words about Document Retention 312
Chapter 3: Preparing a Budget 315
Reviewing Common Budgeting Tactics 315
Top-line budgeting 316
Zero-based budgeting 316
Benchmarking 317
Putting it all together 318
Taking a Practical Approach to Budgeting 319
Using the Set Up Budgets Window 319
Creating a new budget 319
Working with an existing budget 321
Managing with a Budget 323
Some Wrap-Up Comments on Budgeting 325
Chapter 4: Using Activity-Based Costing 327
Reviewing Traditional Overhead Allocation 328
Understanding How ABC Works 330
The ABC product-line income statement 330
ABC in a small firm 334
Implementing a Simple ABC System 335
Seeing How QuickBooks Supports ABC 337
Turning On Class Tracking 337
Using Classes for ABC 338
Setting up your classes 338
Classifying revenue amounts 339
Classifying expense amounts 339
After-the-fact classifications 341
Producing ABC reports 342
Chapter 5: Setting Up Project and Job Costing Systems 343
Setting Up a QuickBooks Job 343
Tracking Job or Project Costs 346
Job Cost Reporting 350
Using Job Estimates 350
Progress Billing 352
Book 5: Financial Management 355
Chapter 1: Ratio Analysis 357
Some Caveats about Ratio Analysis 358
Liquidity Ratios 359
Current ratio 359
Acid-test ratio 360
Leverage Ratios 361
Debt ratio 361
Debt equity ratio 362
Times interest earned ratio 363
Fixed-charges coverage ratio 364
Activity Ratios 365
Inventory turnover ratio 366
Days of inventory ratio 367
Average collection period ratio 367
Fixed-asset turnover ratio 368
Total-assets turnover ratio 369
Profitability Ratios 369
Gross margin percentage 370
Operating income/sales 370
Profit margin percentage 371
Return on assets 371
Return on equity 372
Chapter 2: Economic Value Added Analysis 375
Introducing the Logic of EVA 375
Seeing EVA in Action 376
An example of EVA 378
Another example of EVA 378
Reviewing Some Important Points about EVA 379
Using EVA When Your Business Has Debt 381
The first example of the modified EVA formula 381
Another EVA with debt example 383
Presenting Two Final Pointers 385
And Now, a Word to My Critics 386
Chapter 3: Capital Budgeting in a Nutshell 389
Introducing the Theory of Capital Budgeting 389
The big thing is the return 390
One little thing is maturity 390
Another little thing is risk 391
The bottom line 391
Calculating the Rate of Return on Capital 392
Calculating the investment amount 393
Estimating the net cash flows 393
Calculating the return 397
Measuring Liquidity 402
Thinking about Risk 402
What Does All of This Have to Do with QuickBooks? 404
Book 6: Business Plans 405
Chapter 1: Profit-Volume-Cost Analysis 407
Seeing How Profit-Volume-Cost Analysis Works 408
Calculating Break-Even Points 410
Using Real QuickBooks Data for Profit-Volume-Cost Analysis 412
Sales revenue 412
Gross margin percentage 412
Fixed costs 414
Recognizing the Downside of the Profit-Volume-Cost Model 414
Using the Profit-Volume-Cost Analysis Workbook 416
Collecting your inputs 416
Understanding the Break-Even Analysis Forecast 419
Understanding the Profit-Volume Forecast 421
Looking at the profit-volume-cost charts 422
Chapter 2: Creating a Business Plan Forecast 427
Reviewing Financial Statements and Ratios 428
Using the Business Plan Workbook 429
Understanding the Workbook Calculations 436
Forecasting inputs 437
Balance Sheet 437
Common Size Balance Sheet 445
Income Statement 446
Common Size Income Statement 450
Cash Flow Statement 451
Financial Ratios Table 457
Customizing the Starter Workbook 463
Changing the number of periods 463
Performing ratio analysis on existing financial statements 463
Calculating taxes for a current net loss before taxes 464
Combining this workbook with other workbooks 464
Chapter 3: Writing a Business Plan 465
What the Term “Business Plan” Means 465
A Few Words about Strategic Plans 466
Cost strategies 466
Differentiated products and services strategies 467
Focus strategies 467
Look, Ma: No Strategy 468
Two comments about tactics 469
Six final strategy pointers 469
A White-Paper Business Plan 470
A New-Venture Plan 473
Is the new venture’s product or service feasible? 473
Does the market want the product or service? 474
Can the product or service be profitably sold? 475
Is the return on the venture adequate for prospective investors? 475
Can existing management run the business? 476
Some final thoughts 477
Book 7: Care and Maintenance 479
Chapter 1: Administering QuickBooks 481
Keeping Your Data Confidential 481
Using Windows security 482
Using QuickBooks security 482
Using QuickBooks in a Multiuser Environment 483
Setting up additional QuickBooks users 484
Changing user rights in Enterprise Solutions 490
Changing user rights in QuickBooks Pro and Premier 491
Using Audit Trails 493
Enabling Simultaneous Multiuser Access 494
Maintaining Good Accounting Controls 495
Chapter 2: Protecting Your Data 499
Backing Up the QuickBooks Data File 499
Backing-up basics 500
What about online backup? 503
Some backup tactics 504
Restoring a QuickBooks Data File 505
Condensing the QuickBooks Company Files 509
Cleanup basics 510
Some cleanup and archiving strategies 515
Chapter 3: Troubleshooting 517
Using the QuickBooks Help File and This Book 517
Browsing Intuit’s Product-Support Website 519
Checking Another Vendor’s Product-Support Website 521
Tapping into Intuit’s Online and Expert Communities 521
When All Else Fails 522
Book 8: Appendixes 523
Appendix A: A Crash Course in Excel 525
Starting Excel 525
Stopping Excel 526
Explaining Excel’s Workbooks 526
Putting Text, Numbers, and Formulas in Cells 527
Writing Formulas 528
Scrolling through Big Workbooks 529
Copying and Cutting Cell Contents 530
Copying cell contents 530
Moving cell contents 531
Moving and copying formulas 531
Formatting Cell Contents 532
Recognizing That Functions Are Simply Formulas 534
Saving and Opening Workbooks 537
Saving a workbook 537
Opening a workbook 538
Printing Excel Workbooks 539
One Other Thing to Know 540
Appendix B: Government Web Resources for Businesses 541
Bureau of Economic Analysis 541
Finding information at the BEA website 542
Downloading a BEA publication 542
Uncompressing a BEA publication 543
Using a BEA publication 544
Bureau of Labor Statistics 544
Finding information at the BLS website 545
Using BLS information 545
Census Bureau 548
Finding information at the Census Bureau website 549
Using the Census Bureau’s publications 550
Using the Census Bureau search engine 550
Using the Census Bureau Subjects index 551
Securities and Exchange Commission 551
Finding information through EDGAR 552
Searching the EDGAR database 552
Federal Reserve 553
Finding information at the Federal Reserve website 554
Using the Federal Reserve website’s information 555
Government Publishing Office 555
Information available at the GPO website 556
Searching the GPO database 556
Internal Revenue Service 557
Appendix C: Glossary of Accounting and Financial Terms 559
Index 589