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Includes access to QuickBooks® Online software and FREE access code to myBusinessCourse only with new copies of this book. See inside for details.

Computerized Accounting w

QuickBooks® Online Gayle Williams

Computerized Accounting with ®

QuickBooks Online GAYLE WILLIAMS Sacramento City College

Cambridge BUSINESS PUBLISHERS

Editor-in-Chief: George Werthman Vice President, Brand Management: Marnee Fieldman Digital Marketing Manager: Dana Vinyard Managing Editor: Katie Jones-Aiello Development Editor: Jocelyn Mousel Product Developer: Jill Sternard Compositor: T&D Graphics Designer: Michael Warrell, Design Solutions

COMPUTERIZED ACCOUNTING WITH QUICKBOOKS ONLINE, by Gayle Williams COPYRIGHT © 2018 by Cambridge Business Publishers, LLC. Published by Cambridge Business Publishers, LLC. Exclusive rights by Cambridge Business Publishers, LLC for manufacture and export. ALL RIGHTS RESERVED. No part of this publication may be reproduced, distributed, or stored in a database or retrieval system in any form or by any means, without prior written consent of Cambridge Business Publishers, LLC, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

ISBN 978-1-61853-254-1 Bookstores & Faculty: to order this book, contact the company via email [email protected] or call 800-619-6473.

Students: to order this book, please visit the book’s Website and order directly online. Printed in the United States of America. 10 9 8 7 6 5 4 3 2 1

About the Author Gayle Williams is a Professor of Accounting at Sacramento City College, where she teaches computerized accounting. She received a BA in Comparative Literature and an MBA with a concentration in Accounting from the University of Washington. Professor Williams holds a CPA certification from the states of Washington and California and has worked in public accounting, with Voldal Wartelle & Co, P.S and Moss Adams LLP, and in private industry.

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Preface Welcome to Computerized Accounting with QuickBooks Online. I wrote this book to give students an introduction to QuickBooks Online that focuses not only on the software mechanics, but also on the basic accounting concepts that underlie all accounting systems. This book is not meant to be a user manual. It is my intention that students will come away from this book with an understanding that it is their knowledge of the principles of accounting, not their data-entry skills, that is needed to be successful in business.

TARGET AUDIENCE This book is primarily intended for use in undergraduate accounting programs, although it could be used in business or computer information programs as well. It is expected that students taking this course have already successfully completed a course in financial accounting and have a firm understanding of the basic principles of accounting.

ACCESS TO QUICKBOOKS ONLINE PLUS Each new copy of this book includes a full year of access to QuickBooks Online Plus. Students should refer to the insert at the front of the book, which contains the license number and product code and instructions on accessing the complimentary cloud-based software. With QuickBooks Online, students use their Internet browser to use the software—no installation required—and it can be used on any device with Internet access. (A high-speed Internet connection is recommended, such as DSL or cable modem. For more information go to https://community.intuit.com/quickbooks-online and type in System Requirements in the search field.)

OUTSTANDING FEATURES OF THIS BOOK Structure The book is designed in such a way that the accounting concepts, as well as the software mechanics, get more complex with each section. Other books focus primarily on software data entry. This book allows the students to see why events are recorded the way they are in a computerized accounting system while refreshing students’ knowledge of accounting concepts and reinforcing the accounting and journal entries behind transactions.

• Section One—Introduction ■ ■

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The first chapter introduces students to the basic structure of QuickBooks Online Plus (QBO). |■

Getting in and out of QuickBooks Online

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QBO organization © 2018 Cambridge Business Publishers

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Customizing and navigating QBO Reporting using QBO

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Setting up company files

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• Section Two—Service Companies ■ ■

The next three chapters (Chapters 2, 3, and 4) cover the sales, purchase, and end-ofmonth cycles in a service company.

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Students are introduced to accounting for basic accounting transactions in a computerized environment. |■

Sales on account and cash sales

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Purchases on account and cash purchases Customer collections and vendor payments

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Bank reconciliations

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Standard end-of-month adjusting entries Financial statement reporting

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• Section Three—Merchandising Companies ■ ■ ■ ■

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The section introduction includes a description of internal controls in QBO. Chapters 5, 6, and 7 cover the sales, purchase, and end-of-month cycles in a merchandising company. Students are introduced to accounting for more complex transactions in a computerized environment. |■ Purchase and sale of inventory |■

Sales tax

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Sales and purchase discounts Inventory tracking, adjustment, and valuation

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Bad debts and bounced checks

• Section Four—Paying Employees, Project Costing, and Billing for Time ■ ■

Chapter 8 covers basic payroll functions that would be used in all types of companies (service, merchandising, and manufacturing). |■ Compensation (salaried and hourly) |■

Paycheck creation

Payroll taxes (withholding and remittance) Chapter 9 covers billing for time and expenses. |■

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Tracking time

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Billing for time and expenses Tracking and reporting profitability by project

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• Section Five—Beyond the Basics ■ ■

Chapter 10 covers budgeting and segment reporting. |■ Creating budgets and budget variance reports Using location and class tracking to report on business segments Chapter 11 covers a number of special tools in QBO. |■

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Saving customized reports

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Customizing forms

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Managing attachments Exporting reports to Excel Creating recurring transactions Creating reversing entries

Clear Writing The book is written clearly to aid student understanding of difficult concepts. Clear explanations of why certain procedures are used in QBO are supported by relevant examples and relatable end-of-chapter assignments, serving to bridge the gap between computerized accounting concepts and real-world application.

Real-World Scenarios Most computerized accounting textbooks on the market approach the teaching of QuickBooks in a prescriptive manner, going through the procedures of the software while overlooking how an accountant would actually utilize the software in the real world. Williams’s Computerized Accounting takes a practical approach and shows the student how the software is used in a business environment. In addition to the standard financial reports, students are exposed to job, segment, and variance reports.

Unique Pedagogy The book’s four-color format facilitates student understanding and draws attention to the key concepts and pedagogy. Ample screenshots provide students realistic snapshots of what they will see when working in the software. A host of pedagogical elements serve as helpful illustrations, providing additional context and further concept reinforcement.

HINT Boxes HINT boxes appear throughout to provide helpful quick tips and tricks for working more efficiently in QBO. HINT: All of your transactions and settings will be deleted/cleared each time you log out or time out of QBO’s test drive company. You would need to clear the automation functions each time you start a new work session.

WARNING Boxes WARNING boxes highlight common technical pitfalls to avoid. WARNING: You cannot delete customers who have transactions associated with them. You can, however, make them inactive. Inactive customers are still in QBO (and can be reactivated) but they are not available for new transactions.

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BEHIND THE SCENES Boxes BEHIND THE SCENES boxes provide additional context in support of the accounting that is going on inside the computer. In QBO, deleted transactions don’t appear on reports. Voided transactions do appear but with zero dollar amounts. (Keeping a record of voided transactions is a good internal control policy.)

BEHIND THE SCENES

QuickChecks When students are learning accounting application software, it’s natural for them to focus on the software mechanics and forget that they’re taking an accounting course. To help put some of their focus back on accounting, students are periodically asked a question related to material covered in the chapter. The questions are intended to remind them, either directly or indirectly, of underlying accounting concepts. The answers are included at the end of each chapter. Why aren’t purchase orders and estimates accounting transactions? (Answer at end of chapter.)

QuickCheck 1-2

Key Terms Appearing in red, bold font in the first instance, key terms are defined for the student in the margins of the text for a quick refresher. A comprehensive glossary is included in the back of the book. T hese are some of the t hings that QBO automatically knows:

• It knows that behind every transaction is a journal entry and that each journal entry must balance. You will not be allowed to enter an unbalanced journal entry.

• It knows that accounts identified as assets, liabilities, or equity appear on the balance sheet and accounts identified as income or expense accounts appear on the profit and loss statement (QBO’s name for the income statement).

These are some of the things that QBO doesn’t automatically know (so make sure you DO know):

• It doesn’t know whether the account you just set up as an asset really does represent a

resource owned or controlled by the company that is expected to provide future benefit.

• It doesn’t know whether the amounts on the invoice you just created represent income the company has already earned or income that will be earned in the future.

• It doesn’t know whether there are salaries that employees have earned but haven’t been paid for.

• Etc., etc.

© 2018 Cambridge Business Publishers

Journal entry An entry of accounting information into a journal (a tabular record in which business transactions are analyzed in debit and credit terms and recorded in chronological order). Balance sheet A financial statement showing a business’s assets, liabilities, and stockholders’ equity as of a specific date. Income statement A financial statement reporting a business’s sales revenue and expenses for a given eriod of me.

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Practice Exercises Practice Exercises are included at the end of every section in the first ten chapters. The exercises provide students an immediate opportunity to practice the material they just learned and prepare them for completing the chapter assignments. The exercises use the QBO test drive company, a fictional company called Craig’s Landscaping and Design set up by Intuit. The Practice Exercises can be done in class, with the instructor, or can be done by the students, on their own, as part of the lab component of a face-to-face course or in online courses. Check figures are included with the exercises to reassure students that they are recording the transactions accurately. PRACTICE

EXERCISE

Set up a new credit term for Craig’s Design and Landscaping. (Craig’s is considering offering an early payment discount to some of his customers.) 1. Click the gear icon on the icon bar. 2. Click All Lists in the Lists column. 3. Click Terms. 4. Click New. 5. Enter “2% 10, net 30” as the Name. 6. Click due in fixed number of days and enter “30” in the days field. 7. Check Apply discount if paid early. 8. Enter “2” in the % field. 9. Enter “10” in the days field. 10. Click Save.

End-of-Chapter Material End-of-chapter review material includes:

• Chapter shortcuts. • Chapter review with matching of terms to definitions and multiple choice questions that are a combination of accounting concepts and QuickBooks application questions.

• An end-of-chapter assignment featuring a fictional company that moves from selling services exclusively in the early chapters to selling both services and products in the later chapters. The assignments include check numbers for students. This allows them to focus on the process and reduces student frustration.

Appendices There are a number of additional topics that are helpful to students as they master QBO, and these have been included as end-of-chapter and end-of-book appendices. Instructors may wish to cover these topics in class or have students go over them on their own time. End-of-chapter appendices on special topics include:

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Appendix

Title

Description

Appendix 1A

Setting Up a Google Gmail Account

Instructions for opening a separate Gmail account used in registering the student’s company file

Appendix 2A

Using Sub-service and Sub-product Items

Covers sub-items used in place of categories in the academic trial version of QBO

Appendix 3A

Reporting 1099 Activity

Appendix 4A

Getting It Right

Suggestions to help students find errors in the month-end financial statements, mirroring what accountants in industry might look at before publishing financial statements

Appendix 7A

Banking Activity

Covers QBO features allowing the download of banking and credit card activity

Appendix 9A

Working With Estimates

Covers creating and managing customer estimates

Covers 1099 setup and reporting tools available in QBO

Students often have a difficult time seeing any similarities between computerized accounting systems and the more manual systems they saw in their introductory financial accounting classes (the journal entries, T-accounts, and general ledgers). To help students connect the two, Appendix A (Is Computerized Accounting Really the Same as Manual Accounting?) is an accounting refresher that compares manual and computerized accounting and provides examples of how journal entries, journals, T-accounts, and trial balances show up in QBO. It also covers cash versus accrual accounting. Appendix

Title

Description

Appendix A

Is Computerized Accounting Really the Same as Manual Accounting?

Comparison of manual and computerized accounting

Appendix B

Account and Transaction “Types”

A summary of account types and transaction types in QuickBooks Online

Appendix C

Common Options Available on Form Toolbars

Common options available on various toolbars in QuickBooks Online

Certiport Mapped The book has been mapped to the 10 domains that comprise the exam objectives for the QuickBooks Certified User Exam.

What Is the QuickBooks Certified User Exam? The Intuit® QuickBooks Certification exam is an online exam that is proctored at Certiport Authorized Testing Centers. The certification program validates QuickBooks accounting skills while providing students with credentials that demonstrate real-world abilities to prospective employers. Once passed, test takers receive an official digital certificate representing their skills in QuickBooks. A map correlating the chapter content to the Certiport domains will be available to students so they can streamline their exam preparation.

Supplement Package For Instructors • Solutions Manual files prepared by the author contain solutions to all the assignment material.

• PowerPoint presentations illustrate chapter concepts and outline key elements with corresponding screenshots for each chapter.

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• Test Bank questions written by the author include true/false and multiple-choice •

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questions for each chapter. : A web-based learning and assessment program intended to complement your textbook and classroom instruction. This easy-to-use course management system includes question banks comprised of practice exercises, test bank questions, and assignment questions related to the end of chapter content that can be graded automatically. eLecture videos created and narrated by the author are also available (see below for list). myBusiness Course provides students with additional help when you are not available. In addition, detailed diagnostic tools assess class and individual performance. myBusinessCourse is ideal for online courses or traditional face-to-face courses for which you want to offer students more resources to succeed. Website: All instructor materials are accessible via the book’s website (password protected) along with other useful links and marketing information. www.cambridgepub.com.

For Students • Access to QuickBooks Online software with purchase of each new copy of the book. : A web-based learning and assessment program intended to comple•

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ment your textbook and faculty instruction. This easy-to-use program grades assignments automatically and provides you with additional help when your instructor is not available. Access is free with new copies of this textbook (look for the page containing the access code towards the front of the book). eLecture Presentations created and narrated by the author and available in myBusinessCourse cover essential topics and procedures in QuickBooks Online: ■ ■ Setting up accounts ■ ■ Setting up customers ■ ■ Setting up vendors ■ ■ Setting up employees ■ ■ Setting up items (one for service, one for product) ■ ■ Paying bills ■ ■ Setting up 1099 vendor tracking ■ ■ Reconciling bank and credit card accounts ■ ■ Financial statement presentation hints ■ ■ Customizing reports QuickBooks Student data files (as .QBB files) are available for download from the book’s website. Check Figures are included for assignments, allowing students to focus on the process and reduce frustration. Website: Additional useful links are available to students on the book’s website.

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ACKNOWLEDGMENTS I would like to thank the following people for their assistance and support. In particular, Qianchang Liang. I can’t thank Qianchang enough. Without her, this book would not exist. I would also like to thank the following computer accounting faculty from across the country who provided review feedback on both the Desktop and Online manuscript chap...