Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Chapter 17
Chapter 18
Chapter 19
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Chapter 24
Chapter 25
Chapter 26
Chapter 27
Chapter 28

Chapter 3

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In all cases ... 

Quickbooks has a place for all of the financial description of your company, and more.  Quickbooks 4.0 and Quickbooks Pro 4.0 added the EasyStep Interview, an excellent self-guided path to setting up a Quickbooks company file.  Nevertheless, some functions do not fit well into the interview, and are better entered directly.  The checklist XE "checklist:new company"  below is based on the EasyStep Interview in Quickbooks Pro (4.0 and later.)  Regular Quickbooks 4.0 or 5.0 does not have estimates or job tracking.  Earlier versions do not have the interview, but need most of the same information, in about the same order.  The integral payroll was introduced with versions 3.1. 

Below the checklist, you will find instructions for actually setting up the company, which has some interaction with the Chart of Accounts, the subject of Chapter 4.




            Your situation  

                        Are you upgrading?

                              From Quicken?

                              From older Quickbooks?

                        Are you converting from another accounting system?



                        Are you starting a new company?

            Company Info 

                        Company name, as publicly known

                              legal name (employers need for Form 941)

More than one business?  You probably need two Quickbooks company files.  Any number of companies may be used, limited only by disk space (and confusion.)   One company file does well with the records of one financial entity.

                        Address to be used on documents printed by Quickbooks

                        Country (Quickbooks is designed for the US tax system.)

                        Federal tax ID (or, for SOHOs) social security number

                        US federal income tax form your business files

Type of business.  Quickbooks has a list of business types, one of which may fit you.  From the type, Quickbooks will suggest a list of income and expense accounts (not balance sheet accounts.) 

            Quickbooks working environment (from the Preferences or Prefs menu)           

Inventory: do you want to use the Quickbooks inventory system, which runs only on an average cost basis, and assumes all units of one inventory item are identical?

                        Sales tax collected from customers?

                        Sales tax single or multiple?

                        Names and rates of sales taxes

Tax collection agencies are entered as vendors (we pay governments money and they render services to all people in common.)

                        Time: do you track employees time on projects

Classes provide an extra label on income and expense transactions.  Some reports can sort and select data based on classes. Although classes dont stick to balance sheet accounts, they can be a useful part of your accounting plan.

Bills: Do you pay them immediately, by check? Do you record them in Accounts Payable, and pay them later?  Payables is used for this purpose.  Bills set up in Payables should be paid with Pay Bills (not using the Write Checks function.)

                        Reminders are available in Quickbooks.  Do you want to see them at startup?

Accrual method or cash method accounting?  The US Internal Revenue Code prefers accrual. Complicated rules are involved with cash method, or with changing.  Quickbooks allows a choice between cash basis or accrual basis reporting.

            Start Date  

                        Start date decision is based on what you want of Quickbooks reports.

Do you want complete reports for the year?  Then you can type in all historical transactions in detail, or you can enter summarizing transactions.  This can be done after reading the instructions on how to do it, and before reports are needed.

Will you combine Quickbooks reports with reports of the earlier system?  Then you dont need to enter historical transactions (but many people do.)

Income & Expense

            Income Accounts         

Income accounts:  The minimum is one for each reported income type.  It is your company, and the choice is yours.  Of course you need to track details needed for your tax form, lenders want information in their formats, and your accountant may have specific ideas!


            Expense Accounts

                        A list will be suggested; you can add more.

Income Details 


                        Advance payments received?  Some businesses are paid in advance for their goods or services.  This complicates accounting.  A selection in the interview allows a declaration.

                        Billing: will you bill only by invoices, or do you want to use Statement Billing, in which line items are entered to appear directly on monthly statements?  This is a help for many businesses, and was added by versions 4.0, but has restrictions and limitations.



                        Items are the blocks by which you bill customers for specific amounts, or record billings from vendors.  These usually constitute a major structure, and are not suited to development in the interview.  The chapter on Building Blocks tells the functions of items and how to set them up.



                        The comments above, about items, apply here.


Opening balances


                        Beginning balances are needed for all asset and liability accounts.  But if they are added when the accounts are set up, each will have an opposing entry in Opening Bal Equity.  This account can be renamed, but its purpose will remain.

                        You will have more control over opening balances if you enter the transactions directly into the account registers.

                        Income, expense, and equity accounts will not be set up with balances.  Their balances will be the result of transactions entered in liability and asset accounts.



                        Balances due from each customer must be known.  The balance in receivables will be the sum of all customer balances.

                        Income from customers is the essence of your business, but the selections in recording income depend on the nature of your business.  These selections can be recorded in the interview, or separately. The options are described in the chapter on Building Blocks.

                        Customer:job tracking is useful -- and inconvenient!  The same chapter tells what jobs for you and what they do to you.



                        Vendors are waiting for your money.  You need the name of each vendor, and amount of each bill owed.  Or you could enter a summary bill for each vendor, but the bills usually are the source of expense or equity account entries.


                        Opening balances in any other accounts will be needed.   Important for each is the opposing account involved.  Is it income or expense, or equity?

                        Credit cards:  do you have a balance owed? Look at the last statement.

                        Lines of credit or loans payable?

                        Bank last statement and balance.  The bank account should be created and started as described in the Bank Account chapter, so that it will stay in balance and be easy to reconcile.

                        Furniture and fixtures, property, investments, money loaned out, etc., will go into asset accounts, either Other current assets or Fixed assets.

                        Equity accounts, with specific functions, are set up automatically, interview or not.

                              Opening Bal Equity is used as the opposing account for beginning balances in new accounts.

                              Capitol Stock represents the owners equity, except for Opening Bal Equity.

                              Retained Earnings sums the net results from prior years.

                              Net Income (or Current Earnings) summarizes income for the current year.



                        The payroll decision:  The employer is legally responsible for paying employees as agreed, deducting appropriately from their checks, and paying the deductions to the right agencies. Payroll services contract to accept this responsibility.  Employers who decide to handle payroll are choosing to keep this responsibility to themselves.

                        The payroll chapter gives full information about setting up payroll, in the fifty United States, DC, PR and MU.  This can be done through the interview, but direct access through the menu bar may be more workable.

                        Pay period (or periods) must be entered.

                        State employer identification numbers are needed, for each filing state. Quickbooks accepts a maximum of five states, because of form 941.

                        No more than 250 employees can be handled legally in any one year, because Quickbooks does not do magnetic media filing.

            Payroll Items

                        Payroll items are used for earnings and anything added to or taken from pay checks, or company contributions.  Payroll items are entirely separate from the business items used in invoices and bills, and have nothing in common with those items.

                        The payroll chapters tell how to set up all of payroll

                        Wage rates. One payroll item is set up for each hourly wage type and expense account; rates vary with employee

                        Pay basis: the program will want to know which of salary, hourly, commission or piece rates are used (any or all.)

                        Salaries need one item per expense account, and are set for each employee. (QuickBooks 3.1 and 4 allow one salary item going to one expense account.)

                        Federal and state income tax rates and social security tax rates come from the tax table file included with Quickbooks, as does the FUTA rate.

                        Unemployment insurance rates usually depend on the employers history, and must be entered manually.

                        Do you get a FUTA credit?  Or are you exempt?

                        Tax items are set up automatically for each filing state

                        Local tax information is needed (but may be linked to state income tax.)

                        Voluntary deductions

                        Employer contributions

                        Payroll additions e.g. mileage reimbursement



                        Employee name, address, social security number, etc. are needed.  Entry through the interview has a disadvantage.  The payroll chapter describes a more convenient method.

                        Payroll items paid to most employees can be entered, and will go into the employee template.

                        Payroll commissions, additions, deductions, and contributions for most employees can be designated, and will go into the template.

                        Federal taxes for all or most employees can be stated.

                        State payroll taxes:  pick one dominant state.

                        Sick time tracked in Quickbooks?  Yes/no

                        Sick time:

                              When is sick time accrued?

                              What is the maximum?

                              Is it reset each year?

                        Vacation time tracked in QB?  Same questions as sick time.

                        The interview offers to add employees.

            Year-to-Date (YTD) Amounts

                        Accuracy of W-2s depends on entry of good YTD information

                        Have you already paid employees this year?

                        Do you want to enter prior information as monthly, quarterly, or single entry for all YTD information (per payroll item, per employee?)

                        Has company paid payroll liabilities this year?

                        Is any payroll liability carried over from last year?

When you have obediently collected all of that information (or all that you want to enter at the first sitting) the next step is...

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Last modified: May 21, 2004