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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.
CHECKLIST
General
Your situation
Are you upgrading?
From Quicken?
From older Quickbooks?
Are you converting from another accounting system?
Computer?
Manual?
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 SOHO’s) 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 don’t 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 don’t 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
Introduction
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
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.
Inventory
The comments above, about items, apply here.
Opening balances
Introduction
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.
Customers
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
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.
Accounts
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 owner’s 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.
Payroll
Introduction
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 employer’s 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
Employees
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-2’s 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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