User Guide

QuickBooks 2006 for Windows

Copyright

Copyright © 2006 Intuit Limited Intuit Limited

All rights reserved. P.O. Box 4944
First printing, January 2006 Twyford, Reading, Berkshire
RG10 9BF

STATEMENTS IN THIS DOCUMENT REGARDING THIRD-PARTY STANDARDS

OR SOFTWARE ARE BASED ON INFORMATION MADE AVAILABLE BY THIRD
PARTIES. INTUIT AND ITS AFFILIATES ARE NOT THE SOURCE OF SUCH
INFORMATION AND HAVE NOT INDEPENDENTLY VERIFIED SUCH
INFORMATION. THE INFORMATION IN THIS DOCUMENT IS SUBJECT TO
CHANGE WITHOUT NOTICE.

Trademarks and Patents

Intuit, the Intuit logo, QuickBooks, SimpleStart, QuickBase, Quicken, EasyStep,
and QuickZoom, among others, are registered trademarks and/or registered
service marks of Intuit Inc. in the United States and other countries. Other
parties’ trademarks or service marks are the property of their respective owners
and should be treated as such. Various QuickBooks products and services are
protected by one or more of the following U.S. patents: 5134564, 5423033,
5842185, 5903881.

Important
Terms, conditions, features, service offerings, prices, and hours referenced in this
document are subject to change without notice. We at Intuit are committed to
bringing you great online services through QuickBooks. Occasionally, we may
decide to update our selection and change our service offerings, so please check
www.quickbooks.co.uk for the latest information, including pricing and
availability, on our products and services.

My QuickBooks account details:

QuickBooks Support telephone number: ____________________________________

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QuickBooks Licence Key: _____________________________________

Installation Key Code (IKC) : _____________________________________

ii
 Contents
Chapter 1 Welcome to QuickBooks, 1
Where to start, 2
If you’re new to QuickBooks, 2
Using this guide, 2
If you are upgrading to QuickBooks 2006, 2

Chapter 2 Setting up a new company, 5

Decisions to make before you start, 6
Locating an advisor to help you with QuickBooks, 6
How many companies should you set up?, 6
What accounting method should I use?, 7
What accounting do I need to know?, 8
What’s the best way to track my type of detail?, 11
Reports that measure profitability, 16
Setting up your company in QuickBooks, 18
Determining a start date, 18
Information to collect, 19
Using the EasyStep Interview, 22
Should I track customers and jobs?, 24
What does QuickBooks mean by a customer?, 24
What does QuickBooks mean by a job?, 24
Changing the opening balance for a customer or job, 25
Why you probably need to set up items, 26
Items for what you sell, 26
Items for services or products you purchase, 27
Deciding how items should affect accounts, 28
How many different items do you need?, 29
Setting up items, 30
Where to find information about your items, 30
Types of QuickBooks items, 31
Setting up different units of measure for your stock, 35
Reporting in different units of measure, 38
Adding items to your Item or Fixed Asset Item list, 39
Items for reimbursable costs (QuickBooks Pro or higher), 41

iii
 Working with items, 43
Using items, saving time, 44
Using items to subtotal on sales forms, 45
Showing partial payments received at the time of sale, 47
Changing prices or rates, 49
Editing item information, 49
Final steps to complete your setup, 50
Fine-tune your accounts, 50
Enter your company’s historical transactions, 52
Complete your customer, supplier, and item information, 54
Adjusting opening balances for balance sheet accounts, 54
Setting up accounts to track equity details, 56
Things to consider after your company file is set up, 58
Create reports to check your setup, 58
Maintain your previous accounting system, 58
Set up other company files, if needed, 58
Connecting QuickBooks to the Internet, 59
Update QuickBooks to the latest release, 61
Set number, currency, time, and date formats in QuickBooks, 64

Chapter 3 Importing and exporting data, 65

Converting data from Quicken, 66
Preparing your Quicken data for conversion, 66
Converting your Quicken file to QuickBooks, 68
Fine-tuning your data after converting to QuickBooks, 69
How QuickBooks converts accounts receivable transactions, 71
Changing to QuickBooks accounts payable, 72
Comparing QuickBooks and Quicken, 74
New and renamed balance sheet accounts, 76
When you convert from Quicken, 76
Should you continue using Quicken for some things?, 77
Importing from / exporting to other software, 77
Importing from other software, 77
Exporting to other software, 78
Give your accountant permission to access your QuickBooks file
remotely, 79
Exporting data for your accountant (Accountant’s Review), 80

iv
Chapter 4 QuickBooks basics, 83
Getting around in QuickBooks, 84
About the Resource Area, 84
Navigating in the working area, 85
Using lists, forms, and registers, 86
Using the Help system in QuickBooks, 88
Context-sensitive help, 89
Getting your questions answered, 90
Learning with the QuickBooks Tutor, 91
Exploring QuickBooks with a sample company, 92
Getting information about your company, 92
Creating reports, 93
Understanding QuickBooks file types, 96
Cash Flow Projector, 97
QuickBooks Loan Manager, 97
Customising your forms, 98
Backing up your company data, 100
Recommended backup routine, 101
Backing up to a CD-R or CD-RW, 101
Backing up to a Zip drive, 102
Searching for your backup file, 103
Restoring your backup file, 103
Condensing data, 104
Reconciling bank and credit card accounts, 107
Matching bank deposits and credit card deposits (QuickBooks Card
Solution users), 108
Setting up online banking (account access and payment), 109
Going online for the first time, 109
Reconciling online accounts, 110
Working with multiple users, 111
Users and passwords, 112
Recording who changed what in the Audit Trail, 115
Solving printing problems, 116
When should I reinstall my printer driver?, 116
Nothing happens when you try to print, 116
The form is clipped on the top, bottom, left, or right, 116
Dates and the bottoms of letters are clipped on forms, 120
Printing is slow, 120

v
Chapter 5 Tracking and paying VAT, 121
Does your business need to be registered?, 122
How QuickBooks tracks VAT, 122
Setting up VAT tracking, 123
VAT accounting schemes, 123
VAT reporting periods, 124
Turning on VAT tracking, 125
Setting up and using VAT codes, 126
Handling VAT for EC member states, 130
Handling import VAT for non-EC countries, 131
Handling fuel scale charges, 132
Determining your VAT liability, 132
Creating VAT reports, 133
Completing an accrual-basis (standard scheme) VAT return, 134
Completing a cash-basis VAT return, 136
Receiving a VAT refund from HM Revenue & Customs, 136
How QuickBooks handles late VAT (accruals basis only), 137
Keeping VAT records, 138
Making adjustments to your VAT liability account, 140

Chapter 6 Doing business internationally, 145

Multicurrency: an overview, 146
Setting up multicurrency, 146
Using the Currency List, 152
Using the currency calculator, 154
Exchange rates and how they affect your transactions, 154
Unrealised Gains and Losses, 155
Realised Gains and Losses, 157
Dealing with foreign customers, 158
Creating invoices for foreign customers, 158
Receiving payments from foreign customers, 159
Dealing with foreign suppliers, 160
Creating purchase orders for a foreign supplier, 160
Paying bills from foreign suppliers, 161
Transferring foreign funds, 162

vi
Chapter 7 Payroll and employees, 163
Payroll: before you begin..., 164
Subscribing to the QuickBooks Payroll Service, 164
If you don’t use the payroll feature in QuickBooks, 164
Setting up payroll: an overview, 165
Collecting the information you’ll need, 166
Payroll expense and liability accounts, 168
Customising payroll accounts, 168
Setting up your payroll items, 169
The importance of payroll items, 169
About the default payroll items, 170
Creating new payroll items, 172
Setting up payroll items for pension contributions, 176
Setting up employees, 178
Employee defaults: entering common employee information, 178
Setting up employees, 180
Setting up and paying Statutory Payments, 184
Setting up and paying Attachment of Earnings Order, 187
Summarising amounts for the year-to-date, 188
Entering year-to-date summaries for each employee, 188
Entering year-to-date summaries of liability payments, 192
Making sure your payroll data is complete, 193
Managing payroll and employee information, 194
Changing payroll item information, 194
Changing employee information, 195
Paying employees, 198
Selecting employees to pay, 198
Previewing, adjusting, and creating payroll payments, 199
Printing payroll cheques and pay slips, 203
Using BACS to pay employees, 203
Paying payroll liabilities , 205
Determining how much to remit to the HM Revenue & Customs, 205
Adjusting a payroll liability, 206
Creating a cheque to pay payroll liabilities, 207
Tracking and paying Class 1A NIC, 209

vii
 Processing your year end, 210
Creating a P11 (Deductions Working Sheet) report, 211
Completing your payroll year-end forms, 212
Filing your payroll year-end online, 219
Making changes to your payroll year-end forms, 223
Getting information about your payroll, 224
QuickBooks Payroll Reports, 224

Chapter 8 Time and cost tracking, 229

Should I track time?, 230
Should I track time for subcontractors?, 231
How much detail should I track for time activities?, 231
Setting up QuickBooks Pro or higher to track time, 234
Setting up to use time tracking with payroll, 234
Using the Timer, 235
Using the Stopwatch in QuickBooks to track time, 235
Paying for time worked, 236
Charging customers for time worked, 238
QuickBooks Pro Timer Reference Sheet, 240

Index, 243

Appendix A Contacting Intuit, 259

Intuit Contact Information, 260
Ordering QuickBooks cheques and business stationery, 260
QuickBooks activation, 260
QuickBooks delivery, billing, and account inquiries, 261
QuickBooks Small Business Payroll, 261
QuickBooks Technical Support, 261

viii
C h a p t e r 1

Welcome to
QuickBooks

How do I use this

guide?

Welcome to QuickBooks! This user guide is

designed to help you learn how to use the most-
common features of QuickBooks. Chapter 1

The User Guide covers QuickBooks Pro, and QuickBooks

Accountant. When the name QuickBooks is used, it refers to any of
these programs. When there is an important distinction between the
versions of QuickBooks, the proper name of the software is used in
the text.

1
Where to start

If you’re new to QuickBooks

Read the Getting Started Guide that came with QuickBooks. It contains
information on the following:
■ installing QuickBooks
■ hardware, software and network requirements
■ activating QuickBooks
■ setting up multiusers
■ introduction to some essential tasks such as adding customers, suppliers,
accessing the in-product help, creating an account, tracking VAT and setting
up payroll to name a few

Using this guide

The User Guide is meant to help you get the most out of QuickBooks. Once you
have read the Getting Started Guide and you have become familiar with your
software, look to this guide to get more comprehensive instructions on
QuickBooks and its features. This guide also provides some business concepts to
help you better understand some of the accounting concepts used in QuickBooks.

If you are upgrading to QuickBooks 2006

If you have an earlier version of QuickBooks installed on your computer and you
are upgrading to QuickBooks 2006, you must complete these steps before
installing your new software.

Note: If this is the first time you’ve purchased QuickBooks, refer to the QuickBooks Getting
Started Guide for comprehensive installation instructions.

1 Back up your company file. Ensure that the backup is labelled correctly and
kept in a safe place in case you need it later. Do not overwrite this backup.
For instructions on making a backup file , see the instructions that came with
your older version of QuickBooks.
2 Verify your company file.
To verify data in most versions of QuickBooks, from the File menu, select Util-
ities, then Verify Data. In early versions of QuickBooks, see your documen-
tation for instructions.

2 Chapter 1 Welcome to QuickBooks

3 Create and print a Trial Balance for your company. For instructions on
printing a Trial Balance, see the instructions that came with your earlier
version of QuickBooks.
4 Install QuickBooks 2006. Refer to the Getting Started Guide for installation
instructions.
When you have installed QuickBooks 2006, print a second Trial Balance and com-
pare the two reports to confirm that all your accounts converted correctly.
Don’t forget to also activate your new software. Refer to the Getting Started Guide
for activation instructions or your in-product Help.
.

If you are upgrading from QuickBooks 2003...

If you previously had uncategorized amounts in your sales tax reports, the transac-
tions causing these amounts will automatically be updated when you install Quick-
Books 2006. Before installing QuickBooks 2006, you’ll need to know the ending
dates of your last VAT return.
Not sure what the ending date is? If today were 15 Feb., 2004 and the last return
that was filed for VAT was for the period 1 Oct., 2003 to 31 Dec., 2003, then the end-
ing date of your last filed VAT return would be 31 Dec., 2003.
What will happen to uncategorised amounts?
QuickBooks marks all uncategorised amounts on or before the ending date as filed
so they no longer affect your VAT liability. Uncategorised amounts after the ending
date will be categorised as sales or purchases so that they correctly affect your VAT
liability account. The next time you file a VAT return, QuickBooks will include these
newly categorised transactions properly with all other unfiled transactions.
If you had uncategorised amounts in earlier versions of QuickBooks and didn’t
adjust your VAT returns for them, consult your accountant to see if you should file
an adjustment now.

Where to start 3
 What’s new to QuickBooks 2006
The Resource Area makes it easy to find your way around in QuickBooks. Link
buttons located across the top quickly takes you to the areas you need more
information on.

Are my accounts affected because of the HM Revenue

& Customs changing its name?
Inland Revenue and HM Customs & Excise have merged to form a new
department called HM Revenue and Customs. QuickBooks will continue to track
your payroll and VAT liabilities using two accounts. However, you may want to
merge the two suppliers in your QuickBooks file and use one instead.
For more information and other news on your 2006 version of QuickBooks, go to
the Resource Area and click Updates.

4 Chapter 1 Welcome to QuickBooks

 C h a p t e r 2

Setting up a
new company

Decisions to 6
make before you
start
How do I set up
Setting up your 18 my business in
company in
QuickBooks QuickBooks?
Should I track 24
customers and
jobs?

Why you 26 This chapter tells you what information you need
probably need to
set up items to gather to complete the EasyStep Interview. It
Setting up items 30 also helps you make good choices as you set up
Working with 43
items your company in QuickBooks and suggests
Final steps to 50 things you can do after you complete your setup.
complete your
setup Chapter 2

Things to 58
consider after
your company
file is set up

Connecting 59
QuickBooks to
the Internet

Update 61
QuickBooks to
the latest release

5
Decisions to make before you start
In QuickBooks, a "company file" contains all the financial records for a single
business. Before you can use QuickBooks, you need to tell QuickBooks about your
business so that it can set up your company file.

Locating an advisor to help you with QuickBooks

Tip: Professional accountants and consultants can help set up your company file for you. To
help small businesses find these professionals, Intuit manages a referral service
through the Professional Advisor program. The referral service connects small busi-
nesses working with QuickBooks with accountants or consultants who are knowl-
edgeable in QuickBooks. The service is free—you simply pay the advisors’ fee for
specific services you need.

QuickBooks Professional Advisors possess the tools, resources, and knowledge to

help you set up, maintain and optimise QuickBooks so that you can manage your
business better.

You can locate a Professional Advisor in your area by using our online referral
service on our Web site at http://www.quickbooks.co.uk/findanadvisor. It is
recommended that you select two or three advisors and ring each one to
determine who would be right for your business. The QuickBooks Professional
Advisors Programme referral service is free. The advisor you select, however, will
provide you with information about their fees. Intuit is not liable for any loss,
damage or expense arising in any manner out of, or in connection with the
Professional Advisors programme.

How many companies should you set up?

If you operate a business, HM Revenue & Customs requires that for each business
you have, you clearly show all sources of income, and any business expenses. For
tax purposes, it’s usually best to set up a separate QuickBooks company for each
business that files its own tax return.

For more information about using classes, see “Tracking income and expenses
with classes” on page 14.

6 Chapter 2 Setting up a new company

What accounting method should I use?

Cash versus accrual bookkeeping

There are two common methods of bookkeeping: cash and accrual. Your method
determines how you report income and expenses on your tax forms. When you
begin your business, you need to decide which bookkeeping method to use.

It’s best not to switch to a different accounting system after you choose one.
However, you can switch between cash and accrual reports in QuickBooks at any
time, without affecting your accounting. By default, QuickBooks creates reports
on an accrual basis. To change reports (except a transaction report) to cash basis,
search the Help index for "Reports: cash vs. accrual."

Cash basis
Some small businesses record income when they receive the money and expenses
when they pay the bills. This method is known as bookkeeping on a cash basis. If
you’ve been recording deposits of your customers’ payments but haven’t been
including the money customers owe you as part of your income, you’ve been
using cash basis accounting. Similarly, if you’ve been tracking expenses at the
time you pay them, rather than at the time you first receive the bills, you’ve been
using cash basis accounting.

Accrual basis
In accrual-basis bookkeeping, you record income at the time you make the sale,
not at the time you receive the payment from the customer. Similarly, you enter
expenses when you receive the bill, not when you pay it. Most accountants feel
that the accrual method gives you a truer picture of your business’s finances.

How your bookkeeping method affects

QuickBooks
QuickBooks allows you to enter your transactions the same way no matter which
method you use for taxes. When you first install QuickBooks, it uses accrual-basis
accounting by default. For example, it shows income on a profit and loss
statement for invoices as soon as you record them, even if you haven’t yet received
payment. It shows expenses as soon as you record bills, even if they are unpaid.

You can see any report (except transaction reports) on a cash basis by changing
the reporting preference. (For more information, search the Help index for
"Reports: cash vs. accrual.")

Decisions to make before you start 7

What accounting do I need to know?
Using QuickBooks requires very little accounting knowledge. All you need to
understand is what a “chart of accounts” is and the different types of accounts on
it. You don’t have to know about debits and credit, journal entries, or closing
periods.

Your company’s chart of accounts

When you keep books for a business or enterprise, you want to track where your
income comes from, where you put it, what your expenses are for, and how you
pay them. You track this flow of money through a list of accounts called the chart
of accounts. Your QuickBooks chart of accounts can have:
■ Balance sheet accounts
■ Income accounts
■ Expense accounts
■ Cost of Goods Sold accounts
■ Non-posting accounts (includes purchase orders and estimates, which do not
appear on your balance sheet)

Some of these accounts are created for you automatically. For example, the first
time you create an invoice, QuickBooks automatically creates an accounts
receivable (A/R) account. You’ll add other accounts, such as your current account,
during setup using the EasyStep Interview. And, you can create and modify your
accounts as needed at any time.

Types of accounts
Balance sheet accounts
Your chart of accounts includes balance sheet accounts. These accounts track the
following:
■ What you have (assets)
■ What people owe you (accounts receivable)
■ What your company owes to other people (accounts payable and other liabil-
ities)
■ The net worth of your company (equity)

8 Chapter 2 Setting up a new company

 The following table describes the various types of QuickBooks balance sheet
accounts.
Balance sheet QuickBooks
Use to track
account type account type
Asset What you have and what people owe you

Bank Transactions in current, savings, and deposit accounts.

You can also use this type of account for petty cash.

Accounts Transactions between you and your customers, including

Receivable invoices, payments from customers, deposits of cus-
(A/R) tomer payments, refunds, and credit memos.
QuickBooks automatically creates an A/R account when
you first create an invoice.

Other Current Assets that are likely to be converted to cash or used up

Asset within one year, such as the value of your stock on hand,
promissory notes due within a year, prepaid expenses,
and security deposits.

Fixed Asset Depreciable assets your business owns that aren’t liquid
(not likely to be converted into cash within a year), such
as equipment, furniture, or a building.

Other Asset Any asset that is neither a current asset nor a fixed asset,
such as long-term promissory notes.

Liability What your company owes to other people

Accounts Outstanding bills. When you first enter a bill, QuickBooks

Payable (A/P) automatically creates an A/P account.

Credit Card Credit card transactions for your business expenses. One
account per credit card.
Other Current Liabilities that are scheduled to be paid within one year,
Liability such as VAT, payroll taxes, accrued or deferred salaries,
and short-term loans. Some businesses include the cur-
rent portion of long-term liabilities in this kind of account.

Long-Term Liabilities such as loans or mortgages scheduled to be

Liability paid over periods longer than one year.
Equity Net worth of your company
(equity = assets – liabilities)

Equity A company builds equity from three sources:

■ Investment of capital in the business by the owners
■ Net profit from operating the business during the cur-
rent accounting period
■ Retained earnings, or net profits from earlier periods
that are carried forward into the current tax year and
that have not been distributed to the owners

Decisions to make before you start 9

 Balances for balance sheet accounts
The Chart of Accounts window shows a balance for each balance sheet account
(except for the special equity account, Retained Earnings).

One of the first things you

should do when you open
a business is open a
business current account.
If you have multicurrency
turned on, the Chart of
Accounts also shows the
currency denomination of
the account.
For more information on
multicurrency, see “Doing
business internationally”
on page 145.

Income and expense accounts

Income and expense accounts track the sources of your income and the purpose
of each expense. When you record transactions in a balance sheet account, you
usually assign the amount of the transaction to one or more income or expense
accounts. For example, you not only record that you took money out of your
current account, but you keep track of what you spent the money on, such as
utilities, advertising, or office supplies.

10 Chapter 2 Setting up a new company

 There are no registers for income and expense accounts, but you can create reports
to show totals for these accounts over a period of time. To create a report on an
income or expense account, in the chart of accounts, double-click the account for
which you want a report.

Cost of Goods Sold (COGS) account

Many businesses that track stock have one cost of goods sold account. A COGS
account contains the cost of goods or raw materials that you have sold.

QuickBooks automatically adds this account to your chart of accounts the first
time you create a stock item. Your chart of accounts list the type for this account
as “Cost of Goods Sold”. QuickBooks uses this account to track how much you
paid for goods and materials held in stock that you eventually sold. After a sale,
QuickBooks adjusts your costs of goods sold by multiplying the quantity sold by
the average cost of each item.

What’s the best way to track my type of detail?

The following table describes situations that require a business to track a particular
type of detail. The next table suggests the best way to track this detail in
QuickBooks.

How to record in
Situation Comments For more...
QuickBooks

You need to track Set up items in the Item list for You can get reports search the Help
details of services your services and products. about the items for index for:
you’re providing or Record the sale, using the appro- services and products ■ items, Items
products you’re selling. priate items. On sales forms you that you have sold, are important
can edit the item descriptions to including quantities for every busi-
add detail you want the cus- and pound amounts ness
tomer or client to see. by item.

Decisions to make before you start 11

 How to record in
Situation Comments For more...
QuickBooks

You need to track Set up jobs for the customer on Reports by customer search the Help
multiple jobs for the your Customer:Job list. or by job give subto- index for:
same customer. When entering any sales for a tals by job and then a ■ jobs, setting
job, enter both the job and cus- total of jobs for the up
tomer name in the Customer:Job customer.
field.

You need to track If you don’t have QuickBooks Pro You can track search the Help
expenses by or higher, turn on the preference expenses by cus- index for:
customer or job. for tracking expenses by job. tomer alone if you ■ customers,
When entering any expenses for don’t use jobs. adding new
a customer or job, enter the The profit & loss by
■ profit and loss
customer name or the job and job report lists both
customer name in the income and expenses reports
Customer:Job field. with a separate col-
umn for each cus-
tomer and job.

You need to track Turn on class tracking, and set The profit & loss by search the Help
income and expenses up a class on your Class list for class statement has a index for:
by monies, location, each fund/monies. column for each ■ classes, turn-
department, or busi- On every transaction, enter a fund/monies (class), ing on in
ness segment. class as well as an account so you can see income QuickBooks
Examples: Religious (where appropriate). and expenses by fund.
and arts organisations,
retail stores with multi-
ple locations

You have employees Use the QuickBooks payroll fea- The payroll reports see “Setting up
and need to see detail ture to track your payroll. show all your payroll payroll: an over-
about payroll taxes and information. view” on
other payroll expenses. page 165
Example: Any company
with employees

You need to track cer- Find and fill in the appropriate If you set up custom- search the Help
tain details about your field in the New or Edit Customer ers and suppliers by index for:
customers and suppli- window or the New or Edit Sup- using the QuickAdd ■ customers,
ers. plier window. The field you want option, go back later, adding new
Example: Payment may be on the Additional Info to add missing
■ customers,
terms, customer’s VAT, tab. information.
editing infor-
customer’s “ship to” mation for
address, tax informa- ■ suppliers,
tion, your account num-
adding, add-
ber with a supplier
ing a supplier
■ suppliers,
editing infor-
mation for

12 Chapter 2 Setting up a new company

 How to record in
Situation Comments For more...
QuickBooks

You want to see reports When setting up a customer, job, You can filter a rele- search the Help
for a particular group of or supplier, assign a type. (Job vant report to limit the index for:
customers, jobs, or types are available only in transactions to those ■ customer
suppliers. QuickBooks Pro and higher.) for customers, job, or types
Examples: Residential suppliers of the type
■ job types
vs. commercial custom- (or types) you specify.
■ supplier,
ers; remodeling jobs vs. You can filter a report adding
new construction; sup- of your Customer: Job
■ report cust-
pliers that sell materials list or Supplier list to
omisation
vs. subcontractors limit the names to
those for the type (or
types) you specify.

On your Item list, you Set up a main, or parent, item On reports that sum- search the Help
want to group similar (for example, clothing). Then set marise amounts by index for:
items together. up subitems of the parent item item, QuickBooks pro- ■ subtotals, on
Example: A school (for example, T-shirt, cap). vides an amount for sales forms
store wants to group Use the appropriate subitem each subitem, and
clothing items and also when entering a sale or purchase then a subtotal for all
group book items of items. subitems of the same
item.

You want to track infor- Set up a custom field for tracking You can use the same search the Help
mation that QuickBooks the particular kind of informa- custom field for cus- index for:
doesn’t already track tion. tomers, suppliers, and ■ custom fields,
for customers, suppli- Fill in the custom field, where employees if you about
ers, employees, or the relevant, for new and existing choose.
■ estimates,
items you sell. customers, suppliers, employ- Custom fields for customising
Examples: Patient’s ees, or items. items are only for
insurance company, To display and print the custom items you sell or pur-
item size or colour field on sales forms or purchase chase (services, parts,
orders, customise the form to and other charges).
add the new field. You can filter a rele-
vant report to limit the
transactions to forms
that have specific text
in a custom field.

On your profit and loss Set up a main, or parent, account On reports that sum- search the Help
statement, you want to for the subtotal (for example, marise amounts by index for:
see subtotals for construction income). Then set account, QuickBooks ■ subaccounts,
accounts that have up subaccounts of the parent provides an amount then click the
something in common. account (for example, labour, for each subaccount link Why use
Example: A construc- materials, subcontractors). and then a subtotal for subaccounts?
tion company wants a Use the appropriate subaccount all subaccounts of the
subtotal for construc- when QuickBooks requires you same account.
tion income for labour, to specify an account.
materials, and subcon-
tractors

Decisions to make before you start 13

 Tracking income and expenses with classes
Do you need to track income and expenses for separate parts of your business or
organisation? The following table has examples of what you can track by using
classes in QuickBooks. (The word class has nothing to do with teaching or
learning—instead, it is a way of tracking income or expenses in addition to
assigning an income or expense account. For example, you might use classes to
break down your company data by department, project or location.)

Use classes to track the following Industry examples

Account executives (particularly useful if you plan on ■ Advertising

using an employee incentive program linked to the ■ PR
employee’s business goals and profitability)
■ Consulting

Construction industry standard categories (General, ■ Construction contractors

Site Work, Concrete, Masonry, and so on)

Departments ■ Businesses that budget by

department
■ Retailers

Monies (General, Building, Outreach, and so on) ■ Nonprofit organisations

You could start with two main classes for restricted ■ Religious groups
and unrestricted funds, and then make each fund a
subclass of a main class.

Locations (if the business has more than one) ■ Restaurants

■ Retailers
■ Service businesses

Manufacturers ■ Distributors
■ Manufacturing reps

Partners ■ Law firms

■ Consulting
■ Any other partnerships

Product lines ■ Distributors

■ Manufacturing reps
■ Sales agents

After you set up classes, you can enter them on any income or expense transaction
including payroll transactions.

You can’t assign classes to transactions that involve only balance sheet accounts
(for example, transfers from current to savings, setup of stock, setup of fixed
assets).

You can set up subclasses of existing classes if you need to subtotal information
about classes on reports.

14 Chapter 2 Setting up a new company

To learn about… Search the Help index for…

Turning on the preference for using classes, turning on in QuickBooks

classes

Entering a class on a transaction classes, assigning to a transaction

Adding classes and subclasses classes, adding

Should I use classes, jobs, or types?

Ask yourself: Am I trying to track income or expense activity associated with a
particular customer or group of customers or group of jobs?

If your answer is Yes, then you use jobs, customer types, or job types or track
expenses by job. The following table shows what you can do with each of these.

If you are tracking a segment of your business that is independent of your

customers and jobs, set up a class for the particular business segment. Then enter
the class name in the Class field of every income or expense transaction for that
segment.

To do the Do this in Examples of reports

following… QuickBooks… to use
Keep track of sales for sepa- Set up and use jobs Sales by customer summary
rate jobs or projects for one for the customer on (which shows each job sepa-
customer. the Customer:Job rately)
list.

See income or expenses for When entering or Sales by customer summary,

one type of customer, as editing a customer, filtered for one customer type
distinguished from another assign a customer Profit & loss by job,
type. type. filtered for one customer type
Example: A PR writer wants
to compare a restaurant
with retail clients.

(QuickBooks Pro and higher When entering or Sales by customer summary,

only) See income or editing a job, assign filtered for one job type
expenses for one type of a job type. Profit & loss by job,
job, as distinguished from filtered for one job type
another type. (Jobs of the
same type can be for differ-
ent customers.)
Example: A construction
contractor compares
kitchen remodels with office
remodels.

Decisions to make before you start 15

 To do the Do this in Examples of reports
following… QuickBooks… to use
Assign expenses to a cus- On every expense The following reports always
tomer (or to a particular job transaction for that break down amounts by cus-
for a customer). customer or job, tomer. If you have jobs, they
enter the customer also break down amounts by
name (or the cus- job.
tomer and job Profit & loss by job
name) in the Job profitability
Customer:Job field.
(QuickBooks Pro and
higher only)
Profit & loss budget vs. actual

Reports that measure profitability

The value and performance of your company can be summarised by two reports:
the balance sheet and the profit and loss statement. How you set up your accounts
will greatly influence the level of detail you can get on these reports. You may also
want to create the statement of cash flows report, which details the net change in
your cash during a period.

The balance sheet

A balance sheet is a financial snapshot of your company on one given date. This
report is useful when applying for a business loan or at year-end to get an account
of your company’s equity, assets, and liabilities.

Grangeworth Kitchens Ltd

Balance Sheet
Assets include what you have and what
As of March 31, 2003
people owe you. Examples include:
■ cash on hand
■ money in your current account ASSETS
Current Assets
■ money you are owed
Current/Savings 29,454.55
■ furniture Accounts Receivable 94,246.05
■ vehicles Other Current Assets 93.19
Total Current Assets 123,793.79
total assets = total liabilities + equity
Fixed Assets 43,900.00
TOTAL ASSETS 167,693.79
Liabilities include what your company
owes to other people or your company LIABILITIES & EQUITY
Liabilities
debts. Examples include: Current Liabilities
■ unpaid bills Accounts Payable 44,118.16
■ money you owe on credit cards Credit Cards 1,129.36
■ loans Other Current Liabilities 2,655.72
Total Current Liabilities 47,903.24
■ VAT you owe
Long Term Liabilities 8,470.96
Total Liabilities 56,374.20
Equity is the net worth of your company:
Equity 111,319.59
equity = assets - liabilities TOTAL LIABILITIES & EQUITY 167,693.79

16 Chapter 2 Setting up a new company

 The profit and loss statement
A profit and loss statement, also called an income and expenditure statement,
shows your revenue, expenses, and net profit or loss (that is, income minus
expenses), summarising the revenue and expenses of your business by category
(first income, then expenses).

Page 2

Your cost of goods sold account always

appears after income accounts and before
any other expense accounts, so you can see
what your net income is before subtracting
your business’s indirect expenses, such as
utilities and office supplies.

Net income = income - expenses

Decisions to make before you start 17

Setting up your company in QuickBooks

Determining a start date

New Business
If your business has no financial transactions yet (that is, you are starting up your
business at the same time you are setting it up in QuickBooks), your start date is
today. You can go on to “Information to collect” on page 19.

Existing Business
Your start date is the date on which you begin managing your business finances
in QuickBooks. It determines what information you need to enter in the Interview
and afterwards.

For example, you could choose today as your start date, in which case you will
need to enter how much money you have in each of your accounts and the
amounts that your customers owe you and what you owe your suppliers. Or, you
could choose an earlier date, in which case you’ll also need to enter all the business
transactions you’ve made between your start date and today.

The advantage of choosing today as your start date is that you don’t need to enter
many historical transactions, which saves you time. The advantage of choosing an
earlier date (and entering your business’ historical transactions) is that you’ll be
able to see a lot more detail in your business reports.

To choose a start date that’s best for your company, consider these questions:
■ When does your company’s financial year start?
■ How close is today to the end of your financial year?
■ Do you have an accurate balance sheet for your current financial year?
■ Do you have an accurate profit and loss statement (also called an income
statement) for your current financial year?
■ How far back in time are you willing to enter historical transactions (old
invoices, bills, bank account transactions)?
■ Will you be tracking payroll in QuickBooks?

Note: Although you can change your start date later, your start date determines much of your
setup. It’s much easier to decide on the best start date now than change it later.

18 Chapter 2 Setting up a new company

 If it’s almost the end of your company’s financial year, consider finishing it using
your old system of bookkeeping. Then set up your company in QuickBooks with
a start date of your financial year-end so you can use QuickBooks for the new
financial year. You’ll have the detail for each financial year, and you won’t have
to do a lot of work setting up.

If it is not near the beginning of your financial year, decide which is more
important to you:
■ Do you want to have full detail in QuickBooks for the current financial year?

OR

■ Do you want to enter relatively few historical transactions (covering the

period between your start date and today)? If you’re not going to enter your
historical information for the full financial year, you may want to choose a
start date at the beginning of a calendar quarter, especially if you’re going to
use QuickBooks payroll.

If your business generates a lot of invoices, bills, or cheques, you probably don’t
want to enter more than three months of historical transactions. On the other
hand, if your business has relatively few transactions, you may be willing to enter
several months of historical detail.

Information to collect

Who owns your business?

If you have not already done so, start by determining what type of business
ownership is right for you.
■ Sole proprietorships: A sole proprietorship is an unincorporated company
owned by one person.
■ Partnerships: A partnership is an unincorporated business owned by two or
more persons. In a partnership, each partner owns a share of all assets and
liabilities. Each partner may have invested in the partnership, and each
receives a specified share of profits. Partners do not receive salaries, but they
may withdraw money against their share of profits.
■ Limited Company: A limited company is owned by its shareholders. Unlike
a sole proprietorship or a partnership, a limited company can pay a working
owner a salary. It is a legal entity in its own right, separate from its owners.

Check with your accountant or HM Revenue & Customs to make sure you
understand the tax responsibilities for your type of business ownership.

Setting up your company in QuickBooks 19

 Other important information you’ll need
The following table lists the information that you will need to complete the Easy
Step Interview and also where you will find it. You should be able to enter most of
the information in the Interview, but there may be some areas that you will need
to come back to after completing your company setup.

You can leave and come back to the interview at any point.

Information you need Where to find it ✓

Company legal name and address. Owner, your accountant, or tax forms. ❏
VAT registration number. You must have a registration HM Revenue & Customs. ❏
number if you
■ collect the VAT, or
■ sell or purchase goods from EC member states.

The dates of your accounting period: Your records or accountant. ❏

■ first month of your financial year
■ first month of your income tax year, and
■ your QuickBooks start date.

Income tax form your business will file. Your accountant, HM Revenue & ❏
Tip: When the EasyStep Interview asks you, select an Customs, or tax forms.
income tax form. QuickBooks uses this information to
associate accounts with tax form lines and create tax
reports.

Chart of accounts for your business. Your accountant or previous bookkeep- ❏

Tip: If you do not have an existing chart of accounts, don’t ing method.
worry. The EasyStep Interview helps you choose an
appropriate chart of accounts for your industry.

Names of the people in your company who will use Quick- See “Working with multiple users” on ❏
Books, and which areas of your financial records you want page 111.
them to have access to.

Balances for these types of accounts: ■ Statements covering your start date ❏
■ credit card up to today for all bank accounts,
■ loan and line-of-credit, and including current, savings, and fixed
term deposits.
■ bank.
■ All uncleared cheques, deposits, or
other items (credit card receipts, for
example).
■ Balance sheet prepared by your
accountant.

How much VAT you owe. Accountant or HM Revenue & Customs. ❏

20 Chapter 2 Setting up a new company

Information you need Where to find it ✓
List of types of items you sell (products and services), Your company records. ❏
including:
■ item number or name
■ current sales price or hourly rates
■ the VAT code that is usually associated with the item,
and
■ income account for tracking sales of the item.
For stock only:
■ Purchasing cost
■ Quantity in stock
■ Total value of stock for the item

List of customers, including: Your company records. ❏

■ Addresses
■ Contact names
■ Phone numbers
■ Outstanding invoices

List of suppliers, including: Your company records. ❏

■ Addresses
■ Contact names
■ Phone numbers
■ Outstanding bills
Value of your assets. Balance sheet prepared by your accoun- ❏
For fixed assets, you also need the original cost and accu- tant.
mulated depreciation.

Equity information. Your accountant. ❏

All the money you have put into the company, plus the
sum of the retained earnings (the net profit or loss) for
each year your company has been operating.

Payroll information. See “Setting up payroll: an overview” ❏

on page 165 for details.

Setting up your company in QuickBooks 21

Using the EasyStep Interview
The EasyStep Interview walks you through the process of setting up your entire
business in QuickBooks. It takes about an hour to complete, but if for some reason
you need to exit the interview, you can click Leave at any time. The EasyStep
Interview remembers where you left off.

Tip: For a list of the questions that appear in the Interview, see the EasyStep.txt file in your
QuickBooks directory. You can use this list to organise your information for the
Interview.

Starting the Interview the first time you start QuickBooks:

■ The first time you start QuickBooks, it displays a window with several
options. One is to create a new company. Choose this option and click
OK to start the EasyStep Interview. You can also start the EasyStep
Interview by choosing New Company from the File menu.

Opening the EasyStep Interview at other times:

With your company file open, choose EasyStep Interview from the File menu.
The interview picks up where you left it and you can continue on.

You can’t change information by returning to the EasyStep Interview

and answering the questions differently.
If you need to change information you entered in the EasyStep Interview,
change it directly in QuickBooks. The EasyStep Interview is designed to help
you with the initial set up of your company file, not for editing it.

Getting around in the EasyStep Interview

The EasyStep
The tabs along the Interview is divided
top show topics into six major
within one section. sections.
A tick mark indicates A tick mark indicates
that the topic has that all the topics in
been completed. the section have been
completed.
Click Prev to return to
a previous window in
the Interview and
click Next to move to
When you see a More
the next window in
button, click it to get
the Interview.
specific information about the question being asked in the Interview.

22 Chapter 2 Setting up a new company

The EasyStep Interview is grouped into six sections. After you complete all the
sections, your company file will contain all the basic information about your
business that is needed to maintain your books.
■ General: Lets you enter company information, choose a chart of accounts
appropriate for your business, decide on QuickBooks preferences, and specify
a business start date.

Complete the General section of the Interview before going on to

other areas.
QuickBooks won’t know enough about your company to ask the rest of the
Interview questions unless the General section is completed first.

■ Income & Expenses: Lets you review the income and expense accounts on
your business’s chart of accounts and create new accounts, if needed.
■ Income Details: Lets you specify whether your business income is from
services and/or products you sell. Based on the information provided, Quick-
Books determines which income tracking and accounts receivable features
you need.
■ Opening Balances: Lets you enter information about the customers who owe
you money as of your start date, suppliers to whom you owe money as of your
start date, and balances in your balance sheet accounts as of your start date.
■ Payroll: Lets you enter information like NI numbers and date of birth for your
employees, set how often you will pay them, and set up payroll items (which
you use to assign rates of pay, and other deductions and additions to pay
cheques for employees).
■ What’s Next: Describes some common tasks in QuickBooks that you may
want to complete after you have finished the Interview.

Some questions ask you to make a decision that is not easily reversed. When
this is the case, you’ll see a warning symbol:

Setting up your company in QuickBooks 23

Should I track customers and jobs?

What does QuickBooks mean by a customer?

In QuickBooks, a customer can be any of the following:
■ A person or company that buys products or services from you
■ A client of your consultant business or law firm
■ A patient of your medical or dental practice
■ A homeowner who buys your home repair or remodeling services
■ A tenant who pays rent to your property management firm

Some businesses don’t need to keep track of the names of customers. An example
is a retail store or service business that always receives payment with the sale or
service.

However, here are some situations in which you would want to track customer
names:
■ Customers receive your goods or services and then pay you later.
■ Customers are supposed to pay a regular monthly fee, and you want to track
who has paid and who hasn’t.
■ You want to track income (and perhaps expenses as well) by customer.

If you’re using QuickBooks for an organisation that receives money but doesn’t
really sell anything, you likely don’t need to set up customers. For example, a
nonprofit or religious organisation with members making contributions or paying
dues can track the deposits without making the members customers. Specialised
membership software can keep track of membership details such as donations,

What does QuickBooks mean by a job?

In QuickBooks, a job is a project done for a particular customer. You must always
associate a job with a customer. Use jobs if you do (or expect to do) more than one
job for the same customer. For example, Michele does freelance writing for a large
company that supplies a separate purchase order for each job. Richard’s plumbing
business has to keep track of the separate jobs it does for a general contractor.

On the other hand, if your company never does more than one job per customer,
or you do not want to track individual jobs, you don’t have to enter job names.
For example, Tracey’s printing company refers to each customer order as a “job.”
However, even though Tracey gets repeat business from customers, all she cares
about is whether the customer has paid, so she doesn’t need to set up jobs for her
customers.

Besides using projects for jobs, you can be creative. For example:
■ If you manage several blocks or flats, set up the addresses as customers and the
individual flats as jobs.

24 Chapter 2 Setting up a new company

 ■ If you invoice against purchase orders (POs), set up each PO number as a job.
■ If you have a practice or organisation that sends one statement to a family to
cover individual members of the family, set up the family members as jobs.
■ If you have multiple estimates per customer, search the help index for “esti-
mates, by job”.
■ QuickBooks reports about jobs apply to customers as well. You don’t have to
set up jobs in order to use these reports. For example, the profit and loss by
job report actually applies to both customers and jobs. If you have customers
but not jobs, you will still see information about your customers.

Changing the opening balance for a customer or job

When you first set up a customer or job, you have a chance to enter the opening
(unpaid) balance for the customer or job as of a specific date. The date should be
your QuickBooks start date (that is, the date when you enter opening balances for
all accounts, customers, and suppliers).

When you enter the customer’s opening balance (in the EasyStep Interview or
New Customer window), QuickBooks creates an invoice for the amount and date
you specify. This invoice is probably the first transaction in the customer register.
(There should not be any opening balance transaction if the customer had no
unpaid balance as of the start date.)

You can change the customer’s opening balance invoice by finding it in the
customer’s register and then editing it.

If you failed to enter an opening balance but want to create one now, enter an
invoice dated on or before your start date. To summarise the amount owed as of
your start date, enter on the invoice an item set up as a nontaxable Other Charge,
and assign the account Uncategorised Income.

To learn about… Search the Help index for…

Displaying a customer’s register customers, registers for

Editing a transaction in a register registers, editing entries

Entering an invoice invoices, creating

Setting up an Other Charge item other charge items

Should I track customers and jobs? 25

Why you probably need to set up items

Items for what you sell

If your business provides a service—writing, haircutting, consulting, legal advice,
house painting, or any other service—you may charge by the hour and list the
number of hours and your rate on your sales forms. Or, you may simply charge a
flat rate for the service.
If your business sells products or parts, you probably list them on sales forms that
you give your customers.

In QuickBooks, both kinds of businesses—service and product—can benefit by

setting up items to track the services they provide or the products they sell to
customers.

Note: In QuickBooks, “sales” is a broad term. It refers to any business action that generates
income in exchange for services or products, even if you don’t think of what you do as
selling. For example, a psychologist with patients, a graphic designer with clients, and
a roofing contractor with customers all would set up items in QuickBooks for what they
sell.

Benefits of setting up items

Here are some specific benefits of setting up items:
■ You can use sales forms in QuickBooks to track the details of how your
business earns its income. Estimates and all sales forms—invoices, sales
receipts, credit memos—require items. So do QuickBooks statement charges,
which print on statements.
(If you’re a professional, you may not think of your statements as sales forms,
but they are.)
■ You can fill out sales forms or enter statement charges quickly. QuickBooks
automatically enters the description and rate or price you entered in the
item’s setup window. When you enter a quantity, QuickBooks calculates the
amount.
■ When you record a sale (remember, it can be for a service), QuickBooks auto-
matically tracks the income in the appropriate income account. You can fill
out a sales form (or enter a statement charge), keep track of your sales, and
keep track of income—all in one step.
■ You can create reports that show total units of each service or product sold as
well as pound amount totals.

26 Chapter 2 Setting up a new company

 If you’re still not sure you need items
Here are some examples of businesses or organisations that use items:
■ Rebecca is the bookkeeper for a country club where members sign for meals,
drinks, and fees and receive a statement at the end of the month. Rebecca uses
items in QuickBooks for each of these. She uses the items to enter statement
charges for each member and create monthly statements.
■ Mario is a dentist. He has items set up for the various services he provides to
his patients: cleaning, x-rays, filling cavities, and so on.

In contrast, some businesses or organisations probably don’t need items. Here are
some examples:
■ John is keeping the books for his church. The church has members who
donate and contribute money, but the church doesn’t sell anything or charge
for specific services, so John doesn’t need to create any sales forms.
■ Marina does facials in her home evenings and weekends. Her clients pay at
the time of their visit. Marina simply wants to track the income received. She
doesn’t care to track in QuickBooks how many facials she gives or to whom.
■ Rick is a commissioned sales representative. He takes orders for a manufac-
turer that then invoices the customers directly. Rick tracks the orders in a
spreadsheet, not QuickBooks, because the sales are income for the manufac-
turer, not Rick. When Rick receives a commission cheque, he enters it in
QuickBooks as a deposit.

Items for services or products you purchase

Once you’ve decided to set up items for the services or products you sell, you
might want to use items for the services and products you purchase.

If you purchase services or products for a specific customer or job, QuickBooks Pro
and higher allow you to set up items that you can use for both purchases and sales.
See “Items for reimbursable costs (QuickBooks Pro or higher)” on page 41.

On the other hand, if you don’t have QuickBooks Pro or higher and you don’t
track stock, you should not use the same items for both purchases and sales.
Instead, use items for entering sales only.

If you purchase assets such as buildings, vehicles, computers, or heavy machinery

that will contribute to the operating capacity of your company for several years,
QuickBooks Pro and higher enable you to set up items that can help you track
their depreciation. You need to track the depreciation of such fixed assets both for
tax purposes and to get an accurate accounting of the worth of your business. Your
accountant can give you more information about using fixed asset items to record
purchases and subsequent sales of fixed assets.

Why you probably need to set up items 27

Deciding how items should affect accounts
When you set up most items, you must specify which account it should affect
when you use the item on a sale or purchase. Then, when you record the sale or
purchase, each item on it affects the appropriate account.

In other words, while you are recording the items on a sale or purchase,
QuickBooks is adjusting all the right accounts behind the scenes.

Which are the right accounts? If you sell an item (service, non-stock, and other
charges), you normally associate an income account with it. If you purchase the
same item, QuickBooks Pro or higher provides a way to associate a second account,
usually an expense account, to be used on purchases. See “Items for reimbursable
costs (QuickBooks Pro or higher)” on page 41.

To learn about… Search the Help index for…

accounts for tracking stock stock, accounts

If you purchase a fixed asset, you normally associate a fixed asset account with it.
When you sell a fixed asset, you normally associate a fixed asset account with the
asset.

Before you set up your items, you have to decide how much detail from your sales
and purchases needs to show up in reports about your accounts. (The profit and
loss statement, for example, is a report on your income and expense accounts.)

You can see details of your sales (such as number of units and pound amount of
each item sold) on the QuickBooks sales reports. You don’t need to have the same
level of detail on your profit and loss statement. For example:
■ Cynthia has a single income account for all sales income. She doesn’t want to
see any further breakdown on her profit and loss statement, and she doesn’t
need it for her tax returns.
■ Derek, on the other hand, wants to split up income from services and income
from materials he buys for a job and then puts on the customer’s invoice.
Thus, he uses one income account for all his service items and a second
income account for all his non-stock part items (for his materials). Like
Cynthia, he has far more items than income accounts.

28 Chapter 2 Setting up a new company

How many different items do you need?
Every business is different, but knowing how QuickBooks works can help you
decide how specific your items should be.

First, once you use an item in a transaction, you can never delete the item unless
you delete the transaction or condense your file to remove old transactions and
old items. Fixed asset items are not condensed. Thus, if you sell unique items or a
rapidly changing assortment of items, you probably want to use more general
items. If the prices vary, you can enter prices on the sales form.

For example, Thomas has a men’s clothing store. Because his stock of styles
changes so much, he doesn’t use QuickBooks to track stock. To track his sales, he
has more general items such as Suit, Sports Jacket, Dress Shirt.

On the other hand, if you have two standard services or products that are similar
except for their rate or price, you can save time recording sales by having a
separate item for each. Then QuickBooks can fill in the correct rate or price on the
sales form.

For example, Mali employs three stylists in her beauty salon. When she cuts a
client’s hair, she charges more than the rate for a haircut by one of the employees.
So she has two separate items for haircuts.

You can change the rate or price of any item at any time. You don’t have to create
a new item in order to raise your prices.

In QuickBooks Pro and higher, you can create price levels to increase or decrease
stock, non-stock, and service item prices. Use them on sales forms to
automatically adjust the price of an item. Price levels can be created for any
customer with whom you have a special relationship.

Finally, if there are items you purchase but never sell but that are not fixed assets
(supplies for your office, for example), you probably shouldn’t bother to put them
on your Item lists. They will lengthen your list, and you’ll find it harder to pick
out the items that you do sell. However, if you plan on using QuickBooks purchase
orders, you’ll need to set up the items you purchase, even though they are only
for your office use.

Why you probably need to set up items 29

Setting up items
This section is about adding items to QuickBooks. You can add items at any time—
as part of setting up QuickBooks or whenever you think of an item you need to
use.

Remember, items are for the services or items/stock you buy and sell. You also may
need special calculating items that calculate subtotals and discounts, and that
apply specific VAT rates.
The EasyStep Interview helps you set up a few items, so you may already have
some items. Fixed asset items are not set up from the EasyStep Interview.

Where to find information about your items

When you set up an item, you enter information you can use over and over again
without retyping, such as the following:
■ Name or code
■ Description
■ Price per unit or rate per hour, if applicable
■ For items you sell, the income account to assign income from the sale; for
items you purchase, the expense account for purchases of the item

QuickBooks stores information about your items or stock on the Item list.

On the Item list, items

are in order of item type.
Within the same item
type, they are usually in
alphabetical (or
numerical) order, but
you can change this
order.
Subitems are indented
under the parent item.

Use the menu buttons

to add, edit, sort, or
perform other activities
on items.

30 Chapter 2 Setting up a new company

 Information about fixed assets is available in the Fixed Asset Item List. The Fixed
Asset Item List is only available in QuickBooks Pro and higher.
This list shows
the fixed asset
items you've set
up to track your
fixed assets. You
can use this list
to track all
transactions
having to do with
your fixed assets,
including any
repairs or
improvements,
damage—
anything that can
affect their value and amount of depreciation.

To learn about… Search the Help index for…

Price levels (Pro and higher only) price levels

Displaying the Item or Fixed Asset items, list of

Item list

Sorting the Item list (and other lists) sorting, list entries

Moving items (and other list entries) lists, reorganizing entries

Types of QuickBooks items

In addition to items for services or products, QuickBooks has several other types
of items. This section explains what each type of QuickBooks item is designed to
do.

Tip: Use one of the Part item types for any product, not just a part of another product. If you
decide to use QuickBooks stock to track your products, set up stock parts for them.
Otherwise, set up non-stock parts for your products.

Item Usual effect

Use for… Comments
type on accounts
Service Services you charge for On sale: Increases In QuickBooks Pro and
or services you purchase income. higher, you can set up a service item
Examples: professional On purchase: so that it can affect either income or
fees, labour Increases expenses. expenses, depending on where you
use it. Price levels can be used on ser-
vice items

Setting up items 31
Item Usual effect
Use for… Comments
type on accounts
Stock Part Products you purchase, On sale: Increases Available only if the stock feature is
track as stock, then resell income, increases turned on. Search the help index for
Examples: Electrical out- cost of goods sold, stock, turning on.
lets, T-shirts and decreases stock Price levels can be used with stock
assets. parts. Search the help index for price
On purchase: levels. You can set up different units of
Increases stock measure stock parts. For information
assets. on units of measure, see “Setting up
different units of measure for your
stock” on page 35.

Stock Assembled products you On sale: Increases QuickBooks Pro and higher
Assembly purchase or create and income, increases Edition(s) required to create and build
build, track as stock, cost of goods sold, stock assemblies. Available only if the
then resell and decreases stock stock feature is turned on. Appropriate
Examples: Gift assets. for “light” assembled items; Quick-
baskets, Soaker hose On purchase: Books does not track stock through the
starter kits increases stock manufacturing process. Price levels
assets. can be used with stock assemblies.
You can set up different units of mea-
sure for stock-assembly parts. For
more information on units of measure,
see “Setting up different units of mea-
sure for your stock” on page 35.

Non-stock Products you sell but On sale: Increases In QuickBooks Pro and
Part don’t purchase; items income. higher you can set up a non-stock part
you purchase and resell On purchase: item so that it can affect either income
but do not track as stock; Increases expenses. or expenses, depending on where you
items you enter on pur- use it. Price levels can be used with
chase orders non-stock parts.
Examples: Custom-
made slipcovers

Fixed Property that will con- On sale: Decreases In QuickBooks Pro and
Asset tribute to the operating assets. higher you can create fixed asset
capacity of your com- On purchase: items; in QuickBooks Regular you can
pany for several years Increases assets. view fixed asset items in the Item list
Examples: Vehicles, and edit or delete transactions in which
Computers, Heavy they’re found, but you can’t create
machinery them.

Other Other charges on a sale On sale: Increases In QuickBooks Pro and

Charge or a purchase income. higher you can set up an other charge
Examples: Shipping On purchase: item so that it can affect either income
charge, delivery charge, Increases expenses. or expenses, depending on where you
finance charge use it. Can be a percentage or a flat
amount.

Subtotal Calculating and Subtotal items have On sales forms, if you want to apply a
printing a subtotal on no effect on discount or add a percentage charge to
sales forms accounts. several items at once, subtotal first.

32 Chapter 2 Setting up a new company

Item Usual effect
Use for… Comments
type on accounts
Group Fast entry of a group of Each item in the Available for either sales or
individual items already group affects the purchases.
on the list same account it
Example: A group of ser- affects when used by
vices & food items pro- itself.
vided by a caterer

Discount Calculating an amount Either decreases Available for sales forms only; not
to be subtracted from a income or increases available for statement charges or pur-
total or subtotal expenses (depend- chase forms.
Example: A 10% dis- ing on item setup).
count given to nonprofit
organisations
Payment On invoices: Payment Increases the Available for sales forms only; not
received at the time of balance of either a available for statement charges or pur-
invoicing, so that specific current chase forms.
amount owed on invoice account or the
is reduced account for
On sales receipts sum- undeposited funds
maries: To show totals (depending on item
for each type of payment setup).
(cash, cheques, credit
card)

Items that calculate

The table of items includes some items used to perform a calculation on one or
more lines above it on a sales form.

For example, if you need to subtotal on sales forms, then you need a subtotal item.
A subtotal item adds the amounts of the items above it on the sales form and
enters the subtotal on the form.

Finally, there are some items that can be set up either as percentages or with flat
amounts, depending on what you need. For example, Carol adds a 10 % service
charge to her invoices. She has set up an other charge item with a rate of 10 %.
She uses a subtotal item before the service charge, so that the 10 % will be based
on the subtotal amount.

Steve gives a 15 % discount to certain customers. He has set up a discount item

with a rate of 15 %. He must use a subtotal item, because the discount is based on
the entire amount.

For examples of how to use items that calculate, see page 45 for subtotals, page 47
for discounts, and page 121 for VAT.

Setting up items 33
 Subitems vs. group and stock assembly items
Just as you can set up an account with related subaccounts under it on your chart
of accounts, you can have an item with related subitems. For example, Cherril
keeps the books for her club’s gift shop, which sells T-shirts and other items. She
has an item called T-shirts and subitems called Adult and Child, each with its own
price.

Subitems enable you to put similar items together on your Item list, so you can
locate them easily on the drop-down list in any Item field. Each subitem can have
its own rate or price and its own description. Each subitem can even have its own
account, although you would probably assign the same account to all subitems of
the same parent item.

In this example,
Dressers is a
parent item
with two
subitems under
it.

On sales forms, you use subitems the same way you use other items. On reports
based on items, QuickBooks subtotals each group of subitems.

Group and stock assembly items have a completely different purpose from
subitems. Group and assembly items allow you to enter a group of items—that is,
several different items—at once on a sale or purchase. Group items are appropriate
for combining several types of items, such as catering services and food items, on
one line in a sales receipt. For an example of entering a group of items, see page 45.
Assembly items, available in QuickBooks Pro and higher Edition(s), are
appropriate for indicating products you combine and sell as a unit, such as a gift
basket containing one wicker basket and three jars of homemade jam.

You can’t group fixed assets or make them subitems of other items.

34 Chapter 2 Setting up a new company

Setting up different units of measure for your stock
In QuickBooks Pro and higher, you can set up different units of measure for stock
and stock assembly-type items. For example, you can buy soda pop in cases (with
12 cans to a case) and sell them by the can. Then, when you sell one can,
QuickBooks understands this transaction to mean 1/12 of your stock.

Turning on the units of measure preference

Before you can set up different units of measure for your stock parts (items), the
units of measure preference must be turned on.

The units of measure preference cannot be turned off once it has

been enabled. You should only consider activating this feature if you
purchase, stock or sell in different units.

1 From the Edit menu, choose Preferences.

2 From the scroll box on the left, select Purchases & Suppliers.
3 On the Company Preferences tab, select Stock and purchase orders are
active, and then select Units of Measure are active. (Stock must be turned on
in order to activate units of measure.)

What happens when units of measure is turned on?

With the units of measure preference turned on, you’ll see the following changes
in QuickBooks.
■ A Units of Measure button is added to the Stock Part and Stock Assembly type
items window. This button opens the Define Units of Measure window where
you can set up different units of measure for these items.
■ A field is added to the Service and Non-stock Part items window where you
can assign a descriptive label that represents the unit of measure used when
dealing with the item.
■ A Unit column is added to all forms. This new column displays the item’s unit
of measure associated with the type of transaction. For example, the selling
unit is used on sales forms such as invoices and sales orders, and the
purchasing unit on purchase forms such as bills and purchase orders.
■ A Unit column is also displayed on some windows such as "Adjust
Quantity/Value on Hand" and "Change Item Prices".
■ A Unit column is added to display an item’s units of measure on reports to do
with the item list; and purchases, sales and stock transactions.

Setting up items 35
 Setting up different units of measure
You can now keep track of how you purchase, stock and sell your items with the
units of measure feature. Different units of measure can be set up for Stock Part
and Stock Assembly type items. The association between an item’s units of
measure cannot be changed once a transaction involving the item is recorded.
Therefore, if you have a quantity on hand for an item, you must set up its units of
measure before entering an amount in the Quantity on Hand field.
1 From the Lists menu, choose Item List.
2 From the Item menu button, choose New.
3 From the Type field of the New Item window, choose Stock Part or Stock
Assembly, and then click the Units of Measure button. The Define Units of
Measure window appears.

Type the unit of Enter the number of

measure you use selling units that
to stock the item. make up a stocking
unit, or vice versa.
Clear this box
and type the unit If the purchasing unit
you use when is the same as the
selling the item. stocking unit, keep
this box checked. If
the purchasing unit is
different, clear the
box, and set up the
purchasing unit the
same way the selling
unit was set up.

4 Click OK.

36 Chapter 2 Setting up a new company

 Using items that have different units of
measure on forms
Once units of measure are set up for an item, the item’s appropriate unit of
measure is then displayed on business forms. Sales forms show the selling units,
and purchasing forms show purchasing units. On forms, you cannot switch to a
different unit of measure.

Bills
When entering a bill, an item’s
purchasing unit is shown. If we were to
cite the example shown above, you’d
see that the purchasing unit for Soda
Pop is a case. QuickBooks understands this to mean 12
cans as defined by the item’s selling units of measure.

Invoices
When that same
item is added to an
invoice, however, the unit
displayed is the selling unit.

Tip: You can enter fractional or decimal values on forms. For example, if you purchased
only half a case of soda that you usually purchase by the case, you could enter 0.5 or
1/2 (a fraction value) on your bill.

Assigning a label to Service & Non-stock Part

items
A descriptive label can be added to Service and Non-stock Part items (with units
of measure turned on) to help identify the unit of measure or rate that is used for
these items. Different units of measure cannot be tracked for these item types.
These labels act only as a title, and when created, are displayed on business forms
and reports.

Setting up items 37
Reporting in different units of measure
By default, some reports display an item’s unit of measure. The unit that is
displayed depends on the report being created. For example, a "Purchase by Item
Summary" report displays the purchasing units of measure, whereas the "Sales by
Item Summary" report displays the selling units. You can change the reports to
display in the units you want through the Modify Report window.

1
If you want
to see the
purchasing
unit on this
report, Qty * Unit
click 1 can
Modify
Report.

2 Because this is a
In the Modify sales report, by
Report default, the selling
window, unit is shown.
select
Purchasing
Unit so that
the data on
the report is
shown in the QuickBooks converts
purchasing the quantity (which in
unit of selling units is one can)
measure. to .08333 of a case.

The report changes

to show the items in Qty * Unit
their purchasing 0.08333 case
units.

38 Chapter 2 Setting up a new company

Adding items to your Item or Fixed Asset Item list
As the table starting on page 31 shows, QuickBooks has several different item
types. Here is some general information about what to enter for most types of
items when adding a new item to your Item or Fixed Asset Item list.

Information
How QuickBooks uses this information
to enter

Type of item After you choose the item type, QuickBooks requests only the information it requires
for that particular item type. (Note: You cannot create fixed asset items from the Item
list. Use the Fixed Asset Item list to do so.)
After you set up an item, depending on the type, you may not be able to change it to
a different type.

Item name or Displays this name or number on reports of items and in the drop-down list in the
code Item field (for example, on sales forms).
Item description Prefills the entire description in the Description field of sales or purchase forms.
(optional on all Displays the beginning of the description in the drop-down list in the Item field.
but fixed assets) You can set up some types of items to have separate descriptions for sales and for
purchases.

Rate or price Prefills the rate or price in the Rate or Price fields of sales or purchase forms.
(optional) Some types of items can have a rate that is a percentage.
You can set up some types of items to have separate rates or prices for sales and for
purchases.

Account or Profit and loss statements report on the income or expense account associated with
accounts items used in transactions.
You can set up some types of items to have separate accounts for sales and for pur-
chases.
Some types of items (for example, payment items) require a balance sheet account
instead of an income or expense account. Stock items require three separate
accounts.

Default VAT code QuickBooks applies VAT to the item based upon the rate(s) defined in the VAT list.
You can override this VAT Code on the sales form.

Subitem status If this field appears, you can make an item a subitem of an existing item. QuickBooks
displays subitems of the same item together.

Custom fields You can set up custom fields that fill your company’s needs (for example, size). You
(optional) can also customise sales and purchase forms to display a column for a custom field.
Then QuickBooks prefills the column with the custom field information for the item.

Setting up items 39
 To learn about… Search the Help index for…

Adding a new item for one of the fol-

lowing:
■ A service ■ items, services
■ An assembled product that you pur- ■ items, stock assembly
chase or build yourself
■ A product or part that is not held in
■ items, non-stock parts
stock
■ A fixed asset
■ items, fixed assets
■ A miscellaneous charge
■ items, miscellaneous charges

setting up different units of measure items, units of measure

Adding a new item for a product or items, stock

part held in stock

Adding a new item that puts a group items, grouped together

of several items on a sales or pur-
chase form

Adding a new item that calculates a items, subtotal types

subtotal

Adding a new item that calculates a items, discount types

discount on a sales form

Adding a new item that records a cus- items, payment types

tomer payment or deposit received at
the time of sale

Adding a new item that calculates a items, VAT

VAT

Adding a new item that calculates the items, subitems

total VAT for a combination of VAT
rates

Creating subitems of another item items, subitems

Creating custom fields for items items, custom fields on

Turning VAT on VAT, setting up

40 Chapter 2 Setting up a new company

Items for reimbursable costs (QuickBooks Pro or higher)
Perhaps your business purchases services or products for specific customers or
jobs, then invoices the customer for the items (with or without markup). For
example, Frank is a general contractor who uses subcontractors and invoices for
their costs at a higher rate than what they charge him. Tina is an interior designer
who buys furniture at wholesale and sells it to the client at retail.

In QuickBooks Pro and higher, only service items, non-stock parts, and other
charge items have a checkbox that allows you to pass through their costs at a
markup and track costs and revenues in separate accounts.

Then you can track both the expenses and the income for these items for a
particular job. (For example, the checkbox for a non-stock part is “This item is
purchased for and sold to a specific customer:job.”)

Note: If you don’t have QuickBooks Pro or higher, use expense accounts, not items, for reim-
bursable costs.

To learn about… Search the Help index for…

using expense accounts for reimburs- reimbursable expenses, assigning to a

able costs customer or job

There are several advantages to using items for reimbursable costs in QuickBooks
Pro or higher Editions:
■ It is easy to associate the cost of an item with an expense account and the
income with a separate income account when you set up the item.
■ You can track the number of units or hours purchased or sold.
■ You can use items on estimates and purchase orders.
■ If you write a purchase order for an item, you can create a bill from the
purchase order and assign a job. Then you can invoice the customer for the
item.
■ When you enter a bill, cheque, or credit card charge, QuickBooks Pro and
higher Editions fill in the description of the item and the unit cost after you
choose the item from the drop-down list on the Items tab.
■ When you invoice the customer for the cost of the item, QuickBooks Pro and
higher Editions fill in the sales description of the item and the sales price.
■ You can create reports that compare costs to revenues for each item.

To learn about… Search the Help index for…

invoicing for reimbursable time and reimbursable expenses, assigning to a

costs customer or job

Setting up items 41
 Services performed by subcontractors or
owners
If you charge for services performed by outside subcontractors or you pay owners
(or partners) for time worked, set up a service item for each type of service. Be sure
to select the checkbox “This service is performed by a subcontractor, owner, or
partner.” Then you can designate separate income and expense (or equity)
accounts, and separate descriptions for sales and purchases.

You can enter different hourly rates for your cost and the sales price to your
customer. If you write cheques based on time tracked or enter the item on a
purchase order, purchase, or estimate, QuickBooks fills in the rate from the Cost
field. If you enter the item on a sales form, QuickBooks fills in the rate from the
Sales Price field. However, if the subcontracted service is usually billed as a flat
fee, and the fee varies, leave the Cost and Sales Price fields 0.00 when you set up
the item.

If you pay owners (or partners) and suppliers for the same service, you need
separate service items because the accounts for the costs must be different.

To learn about… Search the Help index for…

separate service items service items, creating items for services

you sell or buy

Products and materials purchased for a job

If you invoice for actual costs of products and materials purchased for a specific
customer or job, set up a non-stock part item for each type of product or service.
Be sure to select the check box for “This item is purchased for and sold to a
specific customer:job.” Then you can designate separate income and expense
accounts, and separate descriptions for sales and purchases.

You can enter different

rates for your cost and the
sales price to your
customer. However, if the
cost of the product or
material varies, leave the
Cost and Sales Price
fields at 0.00 when you set
up the non-stock part item.

42 Chapter 2 Setting up a new company

 Tip: To further aid in tracking the item, you can also specify the customer and job on the
purchase order. When you receive the item, this information prefills on the item receipt
or bill. Use the open purchase orders by job report to find out which items are still on
order for your customers.

Miscellaneous charges you pass on

If you invoice for miscellaneous charges incurred on a job, you can set up an other
charge item for each type of miscellaneous charge. For example, Frank has an
other charge item called Equipment Rental. Be sure to tick the checkbox for “This
is a reimbursable charge.” Then you can designate separate income and expense
accounts, and separate descriptions for sales and purchases.

As with products and materials, you can enter different cost and sales prices or
leave the fields at 0.00 when you set up the other charge item.

Working with items

After you have set up items, use them to enter estimates, sales, purchase orders,
sales orders, actual purchases, and disposition of fixed assets. Remember,
QuickBooks uses the term sales broadly; it can mean the performance of services
or the assessment of fees as well as the sale of products.

You can enter all item types listed in the table on page 31 on any sales form. You
can enter all but payment items on estimates and sales orders. However, you can’t
enter the following item types on purchase orders or purchases (on the Items tab
of bills, cheques, and credit card charges):
■ Other charge items set up as a percentage
■ Discount items
■ Payment items

To learn about… Search the Help index for…

Recording discounts from suppliers discounts, from suppliers

Entering payments to suppliers suppliers, paying (then Paying bills)

Working with items 43

Using items, saving time
When you fill out a sales form, you list each service, product, or fixed asset you’re
selling on its own line of the invoice or sales receipt, along with the amount the
customer owes for that item. Similarly, when you write a purchase order or receive
a bill, each service, product, or fixed asset is listed on its own line.

Because information about individual items is listed on separate lines, the items
are called “line items”. In QuickBooks, you enter line items by choosing from the
drop-down list in the Item field of a sales or purchase form. You can also type in
the Item field and let QuickBooks fill in the rest of the item’s name.

Enter an item in
the Item field
by typing or by
choosing from
the drop-down
list.

Each item on the Item list can contain all the information you need to fill in one
line. You can always change the information, such as the description and rate, as
you’re filling in a form.

When you enter a quantity, QuickBooks automatically calculates the amount.

The Item column lists the

item name you entered QuickBooks multiplies the Qty by
when you created the item. the Rate to calculate the Amount.

When you enter

items,
QuickBooks keeps
track of how much
of each item you
sell and to whom.
Each item that you sell is associated with an income account.
This association allows QuickBooks to provide useful sales and income reports.

44 Chapter 2 Setting up a new company

 You’ll have separate items not only for each service rendered and each product
sold, but also for discounts, markups, VAT, and subtotals. If the customer makes
a partial payment at the time of the sale, you can add an item for the payment.

Using items to subtotal on sales forms

The subtotal item adds up the amounts of the items above it, up to the last
subtotal.

You’ll need a subtotal item if you ever want to apply a percentage discount or
surcharge to several items. Because QuickBooks calculates percentages on the line
above, you’ll need to subtotal the items before entering the percentage line item.

If you use two subtotals in a row, the last subtotal will add up all the previous
subtotals on the form.

The first subtotal

line shows a total
for all materials.
The second
subtotal shows a The third
total for all subtotal line
labour. adds up the two
previous
subtotals, so
The second that a markup
subtotal also can be applied
makes the third subtotal include all amounts on the invoice, so to the entire
a percentage markup can apply to the total sale. sale.

Entering a group of items

The group item allows you to enter several items all at once on a sales form,
estimate, purchase order, cheque, or bill. If you often sell the same group of items
together, using a group item saves you the trouble of entering the same set of line
items again and again.

When you use a group item, you can enter a quantity for the group that affects
the quantity and amount of each item in the group. You can also edit the
individual quantity of each item in the group, and edit descriptions and rates.

Working with items 45

 Using a group item to hide details on a sales
form
The more detailed you are in tracking items, the more information you can get
from reports. The QuickBooks group item allows you to be very detailed in
tracking the items you sell without showing all that detail to your customers.
When you set up a group item, you specify whether to print each item or just the
group item. (Of course, if you use a group item on a purchase order, you must
show the detail to the supplier so the supplier will know what you want.)

For example, Stacy has a renovation company that sends invoices for full jobs,
such as complete remodels. If he used one general service item called “Remodel”,
a sales report would show income from remodels.

If you use very

general items,
like this one, your
reports won’t be
as useful as if you
used detailed
items grouped
together.

However, Stacey uses more detailed items, to learn more from the sales reports.
Stacy breaks down the remodel cost and uses items such as fitting, plumbing,
cabinetry, sinks and work tops, and labourer.

Stacy groups these items under one item called “Remodel”. Even though he
chooses not to print the items in the group on the invoice for his customers to see,
he still has those details on his sales reports.

QuickBooks
shows you
the items in
the group
onscreen,
whether
you choose
to print
them or not.

46 Chapter 2 Setting up a new company

 Applying a discount to one or more items
To apply a discount, you have to enter a discount item. If the discount item’s rate
is a percentage, the item reduces the amount due by a percentage of the line above
it.

To take a percentage off several items at once, you must first subtotal the items.
On the other hand, if you want to discount one particular item you’ve sold and
not the entire sale, add a discount item directly beneath the one discounted item.

The first line

shows a total for
all materials.
The third
The second subtotal
subtotal shows a line adds
total for all labour. up the two
The second subtotal previous
also makes the third subtotals,
subtotal include the so that a
amounts on the markup
invoice, so a can be
percentage markup applied to
can apply to the the entire
total sale. sale.

If you give discounts of different percentages, you can either set up a separate
discount item for each percentage or edit the amount right on the sales form.

Don’t use a discount item for discounts that you give for early
payment.
Enter discounts for early payment through the Receive Payments window.
Search the help index for receiving “payments, about”.

Showing partial payments received at the time of sale

If you receive a partial payment toward the amount of an invoice at the time you
create the invoice, you’ll need to enter a payment item.

The payment item tells QuickBooks to subtract the amount of the payment from
the total invoice amount. To record the payment on the invoice, enter a payment
item for the amount you’ve received after you’ve entered all the items sold.

Working with items 47

 Use a payment
item when you QuickBooks
receive a subtracts a
partial payment item
payment at or amount from
before the time the invoice
you create the total.
invoice.

You can set up a payment item so that it automatically deposits the payment
directly to a current or other account. Alternatively, you can set it up so that
QuickBooks automatically puts the payment amount into your Undeposited
Funds account so you can deposit it with other funds.

To learn about… Search the Help index for…

Receiving and depositing payments receiving payments, Receiving pay-

ments toward a statement

If you need to track the payment method (cheque, cash, credit card charge), you
can have different payment items for different methods of payment.

Using a payment item is not the only way to record a payment. For some types of
payment, you should use a different method:

Type of payment How to record in QuickBooks

Partial payment received at time of sale Enter payment item on invoice.

Full payment received at time of sale Use sales receipt, not invoice. No payment item is necessary,
because QuickBooks assumes sale is fully paid.

Summary of payments, by method, for Use sales receipt to summarize the daily sales. Enter a differ-
daily sales summary ent payment item for the summary of each payment method.

Payment from customer to pay out- Enter payment in Receive Payments window. Indicate which
standing invoice or statement invoices or statement charges have been paid by the payment.

Advance payment from customer Use one of the following options:

before work is done or sale is made. ■ Enter payment in Receive Payments window.
■ Enter payment item on a credit memo.
■ Record a retainer. See the QuickBooks and Your Industry
help for law firms, or Look in the Help Index for retainers.

Avoid entering double payments.

If you receive payment before the sale and record a deposit before you record
the invoice, do not also enter a payment item on the invoice or you will record
a double payment.

48 Chapter 2 Setting up a new company

Changing prices or rates
You can easily change the prices or rates of more than one item through the
Change Item Prices window. You can get to this window on the Items list by click
the Activities menu button. In this window, you can tell QuickBooks to raise (or
lower) prices or rates by a specified amount or percentage. You can change prices
or rates for items individually, or have QuickBooks calculate new prices or rates
on several or all items of the same type at once.

If you want to automatically apply an increase or decrease to stock, non-stock, and

service items, you can use price levels. Price levels allow you to automatically
adjust, up or down, the amount charged to customers with whom you have a
special relationship. When you apply a price level to an item, QuickBooks
calculates the rate to reflect the increase or decrease.

To learn about… Search the Help index for…

Changing prices or rates of items items, prices

Price levels price levels

Editing item information

After you’ve created an item, you can edit information about it at any time,
subject to certain restrictions.

Changing item type

In QuickBooks Regular, Pro, and higher, you can change a non-stock part or other
charge item to a service, non-stock part, stock part, or other charge item. However,
you cannot change the item type of any other type of item.

Hiding and redisplaying items on lists

You can hide an item on the Item or Fixed Asset Item list without deleting it by
making the item inactive. For example, you may have a stock item on your Item
list that you have not stocked in the last six months, but which you may want to
stock in the future.

When you make an item inactive, QuickBooks keeps the information associated
with that item, but hides the item on the Item list and removes it from any drop-
down lists that use items. You do not need to change or delete any transaction
that uses the item. If you start to use the item again, you can make it active at any
time.

You can display all your items, including the inactive ones, on the Item list by
selecting Show All. (Inactive items still appear on reports, but never display on
drop-down lists.)

Working with items 49

 Deleting items
You can delete an item only if it is not used in any transaction or group item. To
locate all transactions that use a given item, create a QuickReport for the item for
all dates.

If you condense your QuickBooks data through a specified date (to reduce the file
size and remove detail), you can also remove items that are not used after that
date. Fixed asset items are not condensed.

To learn about… Search the Help index for…

Changing item types items, changing type of

Changing information about an item items, editing information

Hiding and showing items on the Item items, hiding and showing
list and drop-down lists in Item fields

Making hidden items visible on the lists, hiding and showing

Item list as well as on drop-down lists

Deleting items items, deleting

Final steps to complete your setup

Fine-tune your accounts

QuickBooks sets up a chart of accounts for you during the Interview. Before you
begin entering transactions, make sure your chart of accounts is complete and that
it accurately represents how your business works.

Change account names and edit, delete, or add accounts to make your chart of
accounts reflect your company’s financial activity, if you have to.

Tip: You can adjust the opening balances of the accounts in your Chart of Accounts, too.
For more information, see “Adjusting opening balances for balance sheet accounts” on
page 54.

It’s important to decide on an account structure that meets your

needs now.
Although you can edit your chart of accounts later if you need to, it’s much eas-
ier to make changes before you start entering transactions.

50 Chapter 2 Setting up a new company

You can fine-tune your chart of accounts at any time to do the following:
■ Add new accounts or subaccounts.
You can add subaccounts to balance sheet accounts (for example, fixed asset
accounts) as well as to income and expense accounts.
■ Turn on and use account numbers.
QuickBooks has an option for specifying account numbers in addition to
names. If the account is one that QuickBooks added for you, it already has a
number but you can change it.
■ Change the name or number of an existing account.
■ Enter or edit an opening balance for a balance sheet account if the original
opening balance is incorrect.
■ Arrange accounts of the same type in alphabetical order (or numerical order
if account numbers are turned on).
■ Rearrange the order of accounts within the same account type.
■ Make one existing account the subaccount of another (or, conversely, move
a subaccount to a higher level).

You can drag accounts to a new position on the chart of accounts. When your
accounts are not in alphabetical or numerical order, and you add a new account,
QuickBooks places the new account above the other accounts of the same type.

To learn about… Search the Help index for…

Adding new accounts or subaccounts accounts (managing), adding

Turning on account numbers accounts (managing), numbering

Changing account names or numbers accounts (managing), editing

Changing or entering an opening bal- ■ opening balances, changing for exist-

ance for a balance sheet account ing accounts
■ opening balances, entering for existing
accounts

Arranging accounts (and other lists) in lists, sorting entries

alphabetical or numerical order

Reorganizing accounts within the lists, reorganizing entries

same account type; also, reorganizing
other lists that allow subentries (for
example, customer:Job list)

Remove accounts from your chart of accounts, deleting

accounts

Final steps to complete your setup 51

 Using account numbers
To better maintain your chart of accounts, develop and follow consistent account
naming and numbering conventions. For example, some accountants like you to
add a numbering scheme to your accounts:

■ 1000-1999 - Assets ■ 2000-2999 - Liabilities

■ 3000-3999 - Equity ■ 4000-4999 - Income

■ 5000-5999 - Expenses ■ 6000-6999 - Other income and expenses

Adding numbers can help you identify the type of accounts, thereby speeding up
your account selection on various forms.

To learn about… Search the Help index for…

Changing your chart of accounts ■ accounts, adding

■ accounts, editing
■ accounts, deleting

Enter your company’s historical transactions

If you’ve decided on a start date that is before today’s date, you’ll need to enter
past transactions to have complete financial records from your start date forward.
Then your QuickBooks records will be as complete as if you had started using the
software on your start date.

The order you enter historical transactions is important.

For example, QuickBooks won’t know how to credit a customer payment
unless you’ve previously recorded the invoice to that customer.

Enter historical transactions in this order:

1 Invoices you’ve sent out since your start date
2 Purchase orders you’ve issued since your start date that have not been
received in full
3 Cash or cheques for these invoices you’ve received since your start date
4 Bills you’ve received since your start date
5 Bills you’ve paid since your start date
6 Deposits you’ve made to any of your accounts since your start date
7 Any other payments you’ve made (for things other than bills) since your start
date

Enter transactions in your bank account last, because your accounts payable and
accounts receivable affect your bank account. By the time you enter all of your
historical transactions, your cheque register will be mostly up-to-date.

52 Chapter 2 Setting up a new company

To learn about… Search the Help index for…

Entering historical information historical transactions

Entering current transactions with historical

ones
You don’t have to enter all your historical transactions before you start using
QuickBooks for your current ones. Enter current transactions as they occur so you
don’t get behind. Then catch up with historical transactions when you can.
Remember, though, that your account balances will be off until you’ve entered all
the past transactions.

If current and historical transactions are related, enter the earlier one first. For
example, if you receive a payment today for an invoice you have not yet entered,
enter the invoice first and then use QuickBooks to record the payment. That way,
QuickBooks links your transactions correctly to each other.

Entering historical payroll information

If you are going to use QuickBooks payroll, enter historical payroll information so
QuickBooks has complete year-to-date records of wages and salaries you’ve paid.
QuickBooks needs this information to compute accurate tax information and
payroll reports. See “Setting up payroll: an overview” on page 165 for more
information
.

To learn about… Search the Help index for…

Entering historical payroll information payroll setup, year-to-date amounts

Entering bank account information

If you entered all your historical transactions, your current account or savings
account register already contains entries reflecting bills you’ve paid, cheques
you’ve written for other purposes, and deposits you’ve received. But there are
other transactions that you must enter to make your account registers complete:
■ Cheques or other payments you created before your start date but weren’t
cashed until after your start date (for example, cheques written a few months
ago but not cashed until recently).
■ Deposits you made before your start date, but which didn’t appear on state-
ments until after your start date.
■ Cheques or other payments you made after your start date that were not for
bills or accounts payable (credit card payments, for example).
■ Deposits made after your start date that were not customer payments.
■ Bank charges, fees, or interest paid to your account.

Final steps to complete your setup 53

 To learn about… Search the Help index for…

Entering information in account regis- registers, entering transactions in

ters

Complete your customer, supplier, and item information

During the Interview, you entered information about customer and supplier open
balances. Now you need to enter more information, such as addresses, phone
numbers, and credit limits—though it’s not necessary to enter this information for
all customers and suppliers at once.
Note: If you use QuickBooks Pro or higher and ACT! or Microsoft Outlook, you can
synchronise information about customers and suppliers, such as addresses and phone
numbers, from your contact manager so that you don’t have to re-enter it. To learn
about synchronising contact information, search the Help index for “contact
management, synchronising”. The Customer Manager also does all this and much
more. Call Intuit to learn how the Customer Manager can save you time and money.

Items are the goods, services, and other things you buy and sell. QuickBooks starts
a list of items when you go through the Interview, but you’ll want to add to this
list and refine the information you’ve already entered.

To learn about… Search the Help index for…

Adding a new customer customers, adding

Adding a new supplier suppliers, adding

Item types and uses items, about

Adjusting opening balances for balance sheet accounts

After creating your company in the Interview, you may need to enter additional
opening balances or make adjustments to the account balances you’ve entered.

To adjust an opening balance for an account:

1 From the Lists menu, choose Chart of Accounts.
2 Double-click the account that should have an opening balance.
3 Click anywhere on a blank entry at the end of the register.
4 Change today’s date to your QuickBooks start date.
5 Leave the Ref and Payee fields blank.
6 Enter the opening balance amount.
■ For bank accounts, enter the amount in the Deposit column.
■ For asset, liability or equity accounts, enter the amount in the Increase
column.
■ For credit card accounts, enter the amount in the Charge column.
7 In the Account field, choose Opening Bal Equity from the drop-down list.

54 Chapter 2 Setting up a new company

Note: If you have not entered an opening balance for any of your accounts, you will have to
create an Opening Bal Equity account.

8 Click Record.
These accounts may also need adjusting:
■ If you collect VAT, record the amount you owe as of your start date.
If you have entered your historical invoices and purchases, do not include the
amount you owe since your start date (as the VAT you collected is included
on them).
Instead, check whether you owe more than the invoices cover, and if so,
adjust your VAT liability accordingly. For more information, see “Setting up
VAT tracking” on page 123.

To learn about… Search the Help index for…

Recording the VAT you owed as of VAT, historical data

your start date

Adjusting your VAT liability VAT, adjusting

■ Adjust the Uncategorised Income and Uncategorised Expenses accounts (if

you’re using accrual-basis accounting).
When you enter unpaid opening balances for customers, QuickBooks assigns
the income to an account called Uncategorised Income. Similarly, when you
enter unpaid balances owing for suppliers, QuickBooks assigns the expenses
to the Uncategorised Expenses account.
If you keep your books on a cash basis (you record income when you
receive payment), QuickBooks does not show these two accounts on your
profit and loss statement until a customer makes a payment, which is the
expected behaviour. You do not need to make any adjustments.
If you keep your books on an accrual basis (you record the transaction
when you make a sale or incur an expense), QuickBooks does show these two
accounts on your profit and loss statement as of your start date. Your
accountant may want you to make an adjustment so that the income from all
invoices and the expenses from all bills before the start date are also tracked
on an accrual basis, regardless of whether payment has occurred. Ask your
accountant whether this situation applies to you.

To learn about… Search the Help index for…

Adjusting for Uncategorised Income ■ Uncategorised Expense account

and Uncategorised Expenses ■ Uncategorised Income account

Final steps to complete your setup 55

 ■ Adjust for current income and expenses if your start date is not at the
beginning of your financial year.
If you set up your company in QuickBooks with a midyear start date and you
know what your income and expenses are from the beginning of your
financial year to your start date, you can enter adjustments for them. Then,
when you create a profit and loss statement in QuickBooks, it will be accurate
from the beginning of the financial year to any date after your start date.
To get this information, have your accountant create a year-to-date profit and
loss statement (also called an income statement) for your current financial
year through your start date.

To learn about… Search the Help index for…

Adjusting income and expenses for adjustments, income and expenses

midyear setup

■ Distribute earnings and equity from before your start date.

After you have entered all of your opening balances and made other adjust-
ments, you may want to distribute the amount in your Opening Bal Equity
account to other equity accounts if you want to identify retained earnings or
the equity of several owners.

To learn about… Search the Help index for…

Distributing earnings and equity from Opening Bal Equity account

before your start date

Equity carried over from previous equity, retained earnings from

financial periods

Moving the amount in the Opening equity, transferring from Opening Bal
Bal Equity account to other equity Equity
accounts

Setting up accounts to track equity details

Your company’s equity comes from two sources:
■ Money invested in your company (capital investments)
■ Profits of your company

Of course, the owner can also take money out of the company. Such withdrawals,
called owner’s drawings, reduce the company equity.

56 Chapter 2 Setting up a new company

 QuickBooks sets up two equity accounts automatically:
■ Opening Bal Equity
For every balance sheet account you set up with an opening balance,
QuickBooks records the amount of the opening balance in the Opening Bal
Equity account. (Asset account opening balances increase the equity; liability
account opening balances decrease the equity.)
■ Retained Earnings
If you have data for more than one financial year, the QuickBooks balance
sheet has a balance for the Retained Earnings account equal to the net profit
from prior financial years. The balance for the Retained Earnings account
does not display on the chart of accounts.

Some people like to track owner investments, owner’s draws, and retained
earnings prior to the QuickBooks start date by putting them in separate equity
accounts. If you decide to add additional equity accounts, QuickBooks still adds
the Retained Earnings and Net Income lines on your balance sheet.

Equity accounts for sole traders

Because all equity of a sole traders company belongs to one person, tracking
equity can be very simple.

As of your QuickBooks start date, all equity is in the Opening Bal Equity account.
You have several options:
■ Keep the equity in this account and perhaps rename the account to some-
thing such as Owner’s Equity.
■ Transfer all the equity out of Opening Bal Equity into Retained Earnings.
This action is appropriate for companies that have built up assets as a result
of earnings prior to the QuickBooks start date. From now on, you can take
owner’s drawing out of the Retained Earnings account.
■ Set up additional accounts (or subaccounts) to track owner’s investments,
owner’s drawings, and earnings before your QuickBooks start date.

Tip: When setting up a new account for owner’s drawings, enter a negative opening
balance to show the total drawings prior to the QuickBooks start date. The negative
opening balance indicates that the drawings have reduced the company’s equity. (Or,
enter a zero opening balance and simply record drawings from now on.)

Final steps to complete your setup 57

Things to consider after your company file
is set up

Create reports to check your setup

After you’ve finished setting up your company in QuickBooks and making any
adjustments, create reports to check that QuickBooks has the right numbers.

In both QuickBooks and your former accounting system, create a profit and loss
statement and a balance sheet. Each report should cover the beginning of your
financial year through to your QuickBooks start date. For example, if your
financial year began on 6 April and your start date was 1 September, create reports
that cover 6 April to 1 September.

Both reports should show the same balances for your accounts.

Maintain your previous accounting system

If your business existed before you began to use QuickBooks, make sure you keep
your records and your previous accounting software in case the HM Revenue &
Customs requires prior year information.

Set up other company files, if needed

If you use QuickBooks with more than one company, and therefore have more
than one company file, you should keep them all in the same directory.

If you update QuickBooks, download tax tables, receive tax alerts, and so forth,
you may have to download multiple copies of the new information if the
company files are in different directories.

58 Chapter 2 Setting up a new company

Connecting QuickBooks to the Internet

What you need

Your PC must be connected to the Internet through an Internet Service Provider
(ISP). Your work PC may be connected through a local area network (LAN). If you
can read e-mail or browse the Web, you are connected to the Internet.

Why connect QuickBooks to the Internet?

You don’t need Internet access to use QuickBooks, but the ability to “go online”
can easily double the power and flexibility of your software. It allows you to take
advantage of Internet-only features in QuickBooks.

Consider these additional possibilities:

■ Explore other opportunities with QuickBooks’ connected services
From the Company menu, select Business Services Navigator.
■ Receive QuickBooks updates
Download and install QuickBooks software updates as they become available.
■ Download tax table information
If you’ve signed up for the Payroll Service, you can download the latest tax
tables.

If you are a new user

If you’re new to QuickBooks, you are prompted to activate QuickBooks, and if you
choose to do so online, QuickBooks helps you set up your Internet connection.
It’s a good idea to register as soon as you can so that you can begin using all of the
QuickBooks online features.

Note: If you did not activate your copy of QuickBooks immediately after installation, you can
do so at any time by choosing Activate QuickBooks from the File menu. (If you do not
see Activate QuickBooks under the File menu, then QuickBooks is already activated.)

If you are an upgrader

After you install QuickBooks, you’re prompted to activate QuickBooks. It’s a good
idea to activate as soon as you can so that you can begin using all of the
QuickBooks online features.

If you owned a previous version of QuickBooks, QuickBooks 2006 uses the same
Internet settings as your previous version. If you have changed your Internet
Service Provider between then and now, or switched from using a modem to using
a direct connection (for example, cable or DSL), you can change your settings
manually.

Connecting QuickBooks to the Internet 59

 To set up an Internet connection:
1 From the Help menu, choose Internet Connection Setup.
If you have not used QuickBooks on your computer before, then the first time
you go online (for example, to register your software), QuickBooks automati-
cally launches the Internet Connection Setup wizard.
2 Follow the onscreen instructions. Click Next to move through the screens. If
you need help at any time, click Help.
3 Click Done.

Changing an Internet connection

If you already have a connection to the Internet, you can modify the connection
settings. You can also set up other ways QuickBooks can connect to the Internet.
Doing so gives you an alternate way to connect to the Internet if your regular
connection is down for some reason.

To change your Internet connection:

1 From the QuickBooks Help menu, choose Internet Connection Setup. The
Internet Connection Setup displays.
2 Select Use my computer’s Internet connection settings to establish a
connection when this application accesses the Internet.
3 Click Next.
4 In the Connection Setting window, click Advanced Connection Settings. The
Internet Properties dialogue box appears.
5 To create a new dial-up networking connection, click Add.
Follow the onscreen instructions; click Next to move through the screens.
Each Internet connection profile you create, is listed on the first screen of the
Internet Connection Setup.

If QuickBooks doesn’t detect your Internet connection (for example, you’re using
certain versions of AOL or CompuServe), try the following:
■ Close QuickBooks, then connect to your Internet Service Provider (ISP).
■ When you have successfully connected to the Internet, reopen Quick-
Books.
■ Go to the Internet Connection Setup, and on the “How do you want to
connect to the Internet? screen, select Use my computer’s Internet
connection settings to establish a connection when this application
accesses the Internet.

Once you have told QuickBooks that you have a direct connection, you should be
able to access QuickBooks’ Internet features by connecting to your ISP before
opening QuickBooks.

60 Chapter 2 Setting up a new company

Update QuickBooks to the latest release
From time to time, Intuit provides updates to QuickBooks that are available for
downloading from the Internet. These updates might be:
■ A maintenance release, which Intuit creates when a problem is discovered and
fixed after QuickBooks is delivered to customers.
■ A new feature or service.
■ Timely information that is relevant to your business.

Some updates require you to exit QuickBooks before the new information goes
into effect. In these cases, when you exit QuickBooks, it displays a message asking
if you want to install the update. If you choose Yes, QuickBooks closes and installs
the update. If you choose No, QuickBooks closes without installing the update.

Tip: If you do not have a company file available, but want to update QuickBooks, open one
of the sample data files included with QuickBooks, then update the software as you
normally would.

If you signed up for the QuickBooks Payroll Service, QuickBooks checks for new
tax tables whenever you check for other updates to your software.

Getting updates from the Internet

In QuickBooks, the Update QuickBooks window gives you a convenient way to
download updates from the Intuit server to your computer.

To download an update, you need to have set up QuickBooks to work with an

Internet connection (see “Connecting QuickBooks to the Internet” on page 59).

There are several ways to update your version of QuickBooks through the Internet:
■ Automatic Update: This option prompts you when a new release is available
for your version of QuickBooks. If you choose to update when prompted,
QuickBooks downloads the necessary files to your computer via the Internet
in the background, with little impact on your computer’s performance.
■ Manual Download: With this method, you decide when to download an
update via the Internet to your computer. You can use this method at any
time—even if your computer is set up to download updates automatically.
■ Multiuser Update: When updating multiple users, the new update is down-
loaded via the Internet, or a CD, to a local server for each user to then
download to their computer. Make sure the each copy of QuickBooks you
own is always using the same release.

Update QuickBooks to the latest release 61

 Automatic updates
By default, QuickBooks is set to receive updates automatically. QuickBooks
periodically checks the Intuit server for new updates, and downloads the
information gradually at times when your open Internet connection is not being
used by another process or application.

Some of the advantages of this method include the following:

■ You can download updates without interrupting a QuickBooks session or
other tasks you perform with your computer.
■ You can download updates whether or not QuickBooks is running (as long as
your computer is connected to the Internet).
■ You can disconnect from the Internet at any time. When you reconnect to the
Internet, QuickBooks resumes downloading at the point it was previously
halted.

To turn off Automatic Update:

1 From the File menu, select Update QuickBooks.
2 Select Options.
3 Click Off for Automatic Update.
4 Click Save.
5 Close the Update QuickBooks window.

Manual updates
If you choose to manually update QuickBooks, you should check for updates
about once a month. With this method, QuickBooks only begins the downloading
process once you click Get Updates in the Update QuickBooks window.

Download times for updates vary depending on the speed of your Internet
connection, the size of the update file(s), and the amount of traffic on the
Internet. After QuickBooks downloads an update, the programme installs the
necessary files to the correct directories or folders on your computer.

To perform a manual update:

1 From the File menu, choose Update QuickBooks.
2 Click Update.
3 Select the updates you want to download by ticking the check box next to the
update name. (A tick mark means the update is selected.)
4 Click Get Updates.

Note: Manual updates can also be performed when the Automatic Update option is turned on.

Once the download process is complete, QuickBooks displays the date and time of
the download in the Last Checked column. In the File Received column,
QuickBooks displays the status of the download. Click the text in the Files
Received column for additional details about the download.

62 Chapter 2 Setting up a new company

Sharing updates among multiple users
If you use QuickBooks Pro or higher in multi-user mode, you need to install
maintenance releases on each computer that has QuickBooks installed on it. You
can either connect to the Internet from each computer that has QuickBooks
installed on it, or you can download the update to one computer on your network
and share it (for example, if one or more users don’t have Internet access).

QuickBooks sets up a shared location to which updates are downloaded. Then, if

any user in a multi-user environment downloads and installs an update,
QuickBooks detects it and prompts each of the users—as they exit the
programme—to install the new version.

To share updates, you need to be sure that all your users can access the location
on your network where the updates are downloaded:
■ All of the QuickBooks computers must be properly networked.
■ Each computer must be configured to share files across the network.

Finally, all QuickBooks Pro users on your network must complete the following
steps:

To change the download location:

1 Open the shared company file.
2 From the File menu, choose Update QuickBooks.
3 Click Options.
4 In the Options windows, click ON for the Share Download option.
5 Click Save.

Updates from a CD-ROM

If you don’t have Internet access, you can have an update mailed to you on a
CD-ROM (subject to availability and fees may apply). For more information,
contact Customer Service (see page 261).
When you receive the CD, install the update as you would install any other
software.

Before installing from a CD...

1 Ensure your QuickBooks licence key is recorded somewhere safe. We’ve
provided a space for you to record your licence key number on the second
page of this guide.
■ To find licence key, select About QuickBooks from the Help menu.
2 Back up your company file(s).

Update QuickBooks to the latest release 63

 To install your QuickBooks update:
These instructions may change from time to time. When this is the case, you’ll
receive up-to-date install instructions with the Update package.
1 Shut down all open programmes, including QuickBooks and any virus
protection software you may have. Some virus protection programmes can
interfere with the installation.
2 Insert the CD-ROM in your computer’s CD-ROM drive.
3 Open Windows Explorer and select the correct CD-ROM drive.
4 Open the folder that matches the version of QuickBooks you are currently
using.
5 Double-click Setup.exe and follow the instructions on your screen.
6 Review the Readme.txt file on your CD-ROM. It contains important infor-
mation about how your software is affected by this update, and what you
should do next.

Set number, currency, time, and date formats in

QuickBooks
Your settings in the Regional Options of Microsoft Windows affect how
QuickBooks displays numbers, currency, time, and dates.

To check your Windows Regional Options settings:

1 From the Windows Start button, select Control Panel.
2 Choose Regional Options or Regional Settings, depending on the version of
Windows you’re using.

64 Chapter 2 Setting up a new company

 C h a p t e r 3

Importing and
exporting data

Converting data 66
from Quicken
How do I bring
Importing from / 77
exporting to
other software
my data into
Exporting data 80
QuickBooks?
for your
accountant
(Accountant’s
Review)
Congratulations on your decision to move to
QuickBooks! Now you need to convert your data
from your former accounting software. You may
also want to make some adjustments to your
company file to take full advantage of
QuickBooks features. In this chapter, you’ll find
information about moving information to
QuickBooks.
Chapter 3

65
Converting data from Quicken
This section explains how to convert your Quicken data to QuickBooks data and
some of the differences between the two programs. After you finish converting,
you’ll want to make some adjustments to your new QuickBooks company to take
advantage of the QuickBooks features that Quicken does not offer.

Before you convert, back up your Quicken data file.

If you plan to continue using Quicken with this data (for example, if you have
both business and personal data in your Quicken file), make a copy of the
Quicken file before you make changes. For instructions on backing up a
Quicken file, see the documentation that came with your software.
QuickBooks data files are not compatible with and cannot be converted back
to Quicken data files.

Note: Do not uninstall Quicken before installing QuickBooks and converting to it.

Preparing your Quicken data for conversion

To make the transition to QuickBooks as smooth as possible, you may need to
make some changes to your:
■ Quicken Account list ■ Online banking accounts
■ Names of customers on accounts ■ Memorised Transaction list
receivable transactions

Convert only the accounts you want to use in

QuickBooks
Before you convert to QuickBooks, delete all accounts in Quicken that you know
you won’t want in QuickBooks. (In QuickBooks, you can’t delete accounts that
have transactions, but, in Quicken, you can. So it’s easier to delete the accounts
that you don’t need in QuickBooks before you convert your Quicken data.)

Note: All transfers to and from the deleted accounts will be converted as transactions to your
opening balance equity account to ensure that your accounts balance.

You might want to delete accounts from your Quicken file in these situations:
■ You have personal accounts as well as business accounts in your Quicken file.
■ You have investment accounts in your Quicken file.
If you do not delete your investment accounts, they will be converted to
QuickBooks Other Current Asset accounts (because QuickBooks doesn’t track
investments like Quicken does). You can either:

66 Chapter 3 Importing and exporting data

 ■ Keep the QuickBooks Other Current Asset accounts as a way to include
the value of your investments in your QuickBooks balance sheet. In this
case, you should continue tracking your investments in Quicken and
update the balance of your QuickBooks Other Current Asset accounts
periodically.
■ Or, delete the investment accounts from your Quicken file (so they are
not brought into QuickBooks) and continue to track the investments in
Quicken. (The investments still appear in the copy you made of your
Quicken data.)

Review your memorised and scheduled

transactions

If you have overdue scheduled transactions in your Quicken file,

record them before you convert to QuickBooks.
For example, print any cheques you have pending.

If the QuickFill option for memorising all transactions is turned off in Quicken,
QuickBooks converts both your memorised transactions and your scheduled
transactions.

On the other hand, if the option is turned on, QuickBooks converts only
scheduled transactions and your transaction groups. It does not convert stand-
alone memorised transactions.

So, if you have memorised transactions in Quicken that you’d rather not retype in
QuickBooks, you need to do one of two things:
■ Turn off the QuickFill option for memorising all transactions in Quicken. If
your list of memorised transactions is very long, you may want to delete the
ones you won’t need in QuickBooks, or
■ Put these transactions into a transaction group in Quicken. QuickBooks
always converts transaction groups. After the conversion is complete, you can
remove the memorised transactions from the group and use them as you did
in Quicken.

For information about transaction groups in Quicken, look in your Quicken

documentation.

Note: Memorised transactions from Quicken accounts payable will not work properly in
QuickBooks accounts payable. You should delete these before you convert your data.

To learn about… Search the Help index for…

Transactions group in QuickBooks memorised transactions, grouping

together

Converting data from Quicken 67

 Make customer names consistent
When you convert to QuickBooks, the names in your accounts receivable register
become customers, and transactions become invoices and payments. If you
accidentally used different names for the same customer in Quicken, QuickBooks
can’t link the customer’s invoices and payments correctly.

For example, if you have a customer listed as Dan Miller, D. Miller, and Daniel G.
Miller, you should edit these names in Quicken before you convert so that the
customer goes by only one name.

If you use online banking

In Quicken, you can bank online with participating financial institutions.
However, online banking, at this time, is not supported in QuickBooks. An
account that was online in Quicken will not be online in QuickBooks. When
imported, the account will become a normal bank account in QuickBooks.

Converting your Quicken file to QuickBooks

When QuickBooks converts a Quicken data file, it doesn’t change it in any way.
Also, QuickBooks does not create any sort of link between your Quicken data and
your new QuickBooks company. Instead, QuickBooks creates a completely new set
of files for you to use in QuickBooks.

Quicken XG, 2002, 2001, 2000, and 98 for

Windows
QuickBooks can directly convert data from these products.
1 If your Quicken file is protected with a password, start Quicken, and then
remove the password. If you’re not sure how, check the documentation that
came with your Quicken software for instructions.
2 Exit from Quicken if it is running.
3 Install QuickBooks 2003 according to the instructions on page 4.
4 Open QuickBooks by double-clicking the QuickBooks icon on your desktop.
5 From the File menu, select Import, then Convert from Quicken. The Important
Documentation window appears.
6 Click View Help for information about converting from Quicken. Close the
help window, then click OK.
7 Choose the Quicken file you want to convert and click Open.
8 Follow the instructions on your screen to convert your file.

68 Chapter 3 Importing and exporting data

Fine-tuning your data after converting to QuickBooks
After you convert your data from Quicken, you may need to make some additional
adjustments to it before you start using QuickBooks.

Edit your Other Names List

At the end of the Quicken conversion, unless you use Quicken XG, you are asked
to choose which account you used for Accounts Receivable (A/R).

As the conversion finishes, QuickBooks gives you a list of names to which you
made payments but which you have not used in your accounts receivable
account. This list may contain not only the names of customers, suppliers, and
employees, but also descriptions such as “Deposit,” “Transfer,” and “Interest.”

You should change the names on the list to the correct type. (If you don’t change
them now, they remain on your Other Names list. You can change them later
from the Other Names List. See instructions below.

If you want to use QuickBooks accounts payable, be sure to move your Quicken
payees (other than employees) from the Other Names List to the Suppliers List. For
more information, see “Changing to QuickBooks accounts payable” on page 72.

Once you change the type for a name, you cannot undo it.
You can move names from the Other Names List to the Suppliers, Cus-
tomer:Job, or Employee Lists. However, once moved, you cannot move a
name again. If you’re not sure whether to change a name now, it’s best to
leave it as is.

To change types for names:

1 From the Lists menu, choose Other Names List.
2 In the Other Names List window, click the Activities menu button and select
Change Other Names Type.
3 In the Change Name Types window, click the corresponding column for each
name you want to move. When all the names are ticked correctly, click OK.

To restore all the tick

marks to the Other Name
column, click Revert.

Converting data from Quicken 69

 If you have different versions of one name
If you have slightly different versions of the same name (for example, John
Lennon, J. Lennon and John L.), QuickBooks puts each version of the name in the
Other Names list.

In QuickBooks, you can’t delete any name used in a transaction. However, you can
merge the names to shorten the Other Names list.

To learn about… Search the Help index for…

Changing the name type to a cus- other names, list of

tomer, supplier, or employee

Merging similar names merging, list entries

Fill in your company information

From the Company menu, choose Company Info, and fill in the fields that apply to
your company. If you want QuickBooks to track tax information for you, you must
select the tax form you’ll be filing from the drop-down menu.

Turn on the QuickBooks features you plan to

use
In QuickBooks, from the Edit menu, choose Preferences. Now you can customise
QuickBooks for your needs.
■ If you collect VAT from customers, turn on the VAT tracking preferences. After
you close the Preferences window, you should confirm that the default VAT
codes meet your needs.
To check, from the Lists menu, select VAT Code List. Double-click any VAT
code you need to change. For more information about tracking VAT, see
“Setting up VAT tracking” on page 123.
■ If you track stock or write purchase orders, turn on the preference for stock
and purchase orders. See the Online help for information on tracking stock.
■ (QuickBooks Pro and Accountant) If you deal internationally, turn on the
preference for multicurrency. For more information about multicurrency, see
“Doing business internationally” on page 145.
■ If you plan to use QuickBooks to pay your employees, you must sign up for
the QuickBooks Payroll Service. For information about payroll, see “Setting up
payroll: an overview” on page 165.

To learn about… Search the Help index for…

Setting preferences preferences

Tracking stock tracking, stock

70 Chapter 3 Importing and exporting data

 Adjust your Opening Bal Equity account
QuickBooks automatically creates an Opening Bal Equity account for you. When
you create a new account and enter its opening balance, QuickBooks enters that
amount in the Opening Bal Equity account, so that your accounts balance. You
can leave the Opening Bal Equity total alone, or you can distribute amounts from
it to other equity accounts.

To learn about… Search the Help index for…

Distributing equity from before your Opening Bal Equity account

start date

Moving the amount in the Opening equity, transferring from Opening Bal
Bal Equity account to other equity Equity
accounts

How QuickBooks converts accounts receivable

transactions
If you answered “Yes” to converting your Quicken asset accounts to QuickBooks
A/R accounts, QuickBooks converted the transactions as follows:

This item in your Quicken ...is converted to this in

A/R account... QuickBooks:

Each transaction that increases your A/R An invoice to a customer

balance

Each transaction that decreases your A/R A payment from a customer

balance and has only one split line

Each transaction that decreases your A/R A credit memo to a customer

balance and has more than one split line

Each payee A customer on your QuickBooks

Customer:Job list

Each category Both an item on your Item list and an

income account on your Chart of
Accounts

QuickBooks applies payments in Quicken to a customer’s oldest outstanding

invoice first.

Converting data from Quicken 71

 The conversion saves you the time of typing in all your accounts receivable
transactions, but you’ll probably want to make some changes to the converted
data. For example, if the category you used in most A/R transactions was “Sales
income,” you’ll want to change the name of the converted invoice item from
“Sales income” to the product or service you actually sell, such as “Consulting
hours.” The income account, however, may be just fine as “Sales income.”

You don’t have to make these changes now. QuickBooks makes it easy to make
changes at any time.

To learn about… Search the Help index for…

QuickBooks items items, about

Using accounts receivable accounts receivable

Changing to QuickBooks accounts payable

In many versions of Quicken, the documentation explains how to set up your
software for cash-basis accounts payable and for accrual-basis accounts payable.
For a cash-basis system, Quicken recommends using a Bank account and simply
postdating cheques. For an accrual-basis system, Quicken recommends using an
Other Liability account.

The transition to QuickBooks accounts payable is the same for either system.
■ If you used postdated cheques to track your bills, treat cheques you’ve already
entered the same way you did in Quicken.
■ If you had an Other Liability account in Quicken for accounts payable, it is
now an Other Current Liability account in QuickBooks.

No matter which method you were using in Quicken, from now on, use the Enter
Bills window to track your bills. The Enter Bills window tracks your bills in the
Accounts Payable account. To create this account, you can either:
■ Use the Other Current Liability account only for currently outstanding bills
and let QuickBooks create a new Accounts Payable account for you the first
time you use the Enter Bills window.
■ Or, you can move the transactions in your Other Current Liability account to
an Accounts Payable account (see below).

72 Chapter 3 Importing and exporting data

To move your Other Current Liability transactions to the
Accounts Payable account:
1 In Quicken, create a report that gives you the total balance you owe each of
your suppliers. Make sure the date range is set to Include all dates, then print
the report for reference.
2 Start QuickBooks.
3 From the Banking menu, choose Make Journal Entry.
4 On the first line:
■ In the Account field, choose Accounts Payable from the drop-down list.
■ In the Name field, choose the supplier’s name.
■ In the Credit field, type the open balance (you’ll need to do this for each
supplier).
5 On the second line:
■ In the Account field, choose the Other Current Liability account from the
drop-down list.
■ In the Debit field, type the same amount that you entered in the Credit
field of the first line.
6 Click Save & New.

Changing your payees to QuickBooks suppliers

If you haven’t already, you need to move your Quicken payees from the Other
Names list to the Supplier list. See “Edit your Other Names List” on page 69.

If a Quicken payee had a balance that was imported in to QuickBooks, use the
Write Cheques window until the balance of your old Quicken A/P account equals
zero (in other words, you’ve paid off all your bills for that supplier). Enter any new
bills into QuickBooks accounts payable.

You also need to delete and re-enter any memorised transactions that QuickBooks
converted for you from Quicken accounts payable, as they will not work properly
in QuickBooks accounts payable.

To learn about… Search the Help index for…

Deleting memorised transactions memorised transactions, deleting

QuickBooks accounts payable accounts payable

Converting data from Quicken 73

Comparing QuickBooks and Quicken
Once you understand the few terminology and feature differences between the
programs, QuickBooks will feel very familiar.

Terminology differences
Quicken uses terms familiar to anyone who has a current account. QuickBooks
uses a few terms that are standard in business bookkeeping and that reflect the
increased power and convenience of QuickBooks for business.

This table lists the most important differences in terms. It does not list the many
completely new QuickBooks features and terms.

Quicken QuickBooks
Definition
term term
Account Balance sheet A grouping of records related to one kind
account of asset, liability, or equity.
These accounts appear on a balance sheet.
Category Income or expense A grouping of transactions related to one
account kind of income or expense.
These accounts appear on a profit and loss
statement (income statement).

Category and Chart of Accounts The QuickBooks Chart of Accounts is like

Transfer List the Quicken Account list (balance sheet
plus accounts) plus the Quicken Category list
(income and expense accounts).
Account List

74 Chapter 3 Importing and exporting data

Feature differences
The following table lists features that exist in both Quicken and QuickBooks, but
that work differently in QuickBooks than in Quicken.

Feature Quicken QuickBooks

Entering Enters most transactions Enters most transactions in forms
transactions in registers. (cheque window, invoice window,
and so on).
In QuickBooks, you can copy and
paste a transaction from one register
to another of the same type.

Write Cheques Displays a cheque that Displays a business cheque with

looks like a paper voucher area (so the “split” is part of
cheque. the cheque form).

Classes Uses a slash (/) to sepa- Enters classes in separate fields. No

rate a category from a need for a slash (/) as a separator.
class in transactions. In QuickBooks, projects or jobs can
be linked to customers as part of the
Customer:Job list, so you can use
classes for different kinds of classifi-
cation.

Transfers Uses brackets [ ] to indi- No need to use brackets. QuickBooks

cate a transfer to another handles transfers like any other
balance sheet account. transaction.

Passwords One password for enter- Customisable password and permis-

ing and viewing data. sion access for each person in your
company.

Subaccounts Categories can have sub- Most accounts, even balance sheet
categories, but accounts accounts, can have subaccounts.
cannot have subac-
counts.

Payroll accounts A separate liability You can continue using your old lia-
(if you set up account for each tax bility accounts. However, by using
your accounts as withheld and for every payroll items, you can put all your
described in the other payroll liability. payroll liabilities into a single
Quicken manual) account. To ensure the correct calcu-
lations are done for payroll accounts,
you should subscribe to the Quick-
Books Payroll Service.

Converting data from Quicken 75

New and renamed balance sheet accounts
QuickBooks and Quicken have similar kinds of balance sheet accounts, but
QuickBooks adds some types and uses different names for others. When you
convert a Quicken file, the program automatically creates QuickBooks accounts
most like your Quicken accounts.
■ In some cases, you may not want to use the account that QuickBooks creates
automatically. For example, Quicken sometimes uses liability accounts
instead of equity accounts. In QuickBooks, you can use equity accounts.
■ QuickBooks changes your Quicken categories and subcategories into income
and expense accounts with subaccounts.

Quicken account Converted to QuickBooks account

type type

Bank Bank

Credit Card Credit Card

Cash Other Current Asset

Asset Other Current Asset

Liability Other Current Liability

Investment Other Current Asset

When you convert from Quicken

After you have converted your Quicken XG data file to QuickBooks, you’ll notice
the following changes:
■ The Invoice Items list is converted to the QuickBooks Items list.
■ Each existing Invoice/Receivables account is converted to a QuickBooks
Accounts Receivable account of the same name.
■ Existing invoices are converted to QuickBooks invoices. However, they will
appear in chronological order.
■ Transactions linked to a customer remain linked.

About payments, credit memos, and refunds.

Converted Quicken payments are always applied to the customer’s oldest out-
standing invoice, so the payment links to invoices may be different after con-
version.
Credit memos and refund cheques, like payments, are also applied in
chronological order based on invoice dates, so their links may also be different
after conversion.

76 Chapter 3 Importing and exporting data

Should you continue using Quicken for some things?
QuickBooks does not change your original Quicken file in any way as it imports
information from it in to QuickBooks, nor does it create any connection between
it and your new QuickBooks company file. You can continue to use your original
file with Quicken.

Once you’re using QuickBooks for your business, you’ll probably want to continue
using Quicken for your personal finances and investment accounts.

You cannot use online banking for an account in QuickBooks.

If you track the same account in both Quicken and QuickBooks, remember that
you can only use online banking in Quicken at this time.

Here are some personal-finance activities you can perform only with Quicken:
■ Track investments
Quicken includes investment tracking and reporting. Quicken updates the
market values when you enter the latest share prices, and it reports on average
annual total return, capital gains, and investment income.
■ Amortise mortgage loans
Each time you record a payment on a loan, Quicken updates the number of
payments made and calculates the amount credited to principal and interest.
■ Create reports for personal finances
Quicken has many preset reports designed for personal use.

Importing from / exporting to other

software

Importing from other software

If you use QuickBooks Pro or Accountant, with a few clicks, you can import your
contacts from Microsoft Outlook or Symantec ACT! (see page 79).

For all other software, QuickBooks imports data in a format called IIF (Intuit
Interchange Format), a special type of ASCII text file with headings to tell
QuickBooks the type of information it contains. (This format is different from
.QIF, used by Quicken.)

Importing from / exporting to other software 77

 If you want to import data from other software programs, you need to create an
IIF file from scratch or reformat data you already use to conform to IIF standards.

Note: Creating an IIF file from scratch requires knowledge of a spreadsheet program.
Changing data from another accounting program into an IIF file is technically complex,
and is not recommended for those who do not have programming experience.
However, you do not need to learn about the IIF format to export lists and import them
back into QuickBooks (see below).

To learn about… Search the Help index for…

Creating an IIF file importing data

Transferring lists between QuickBooks companies

You can transfer a list (like the Customer:Job list) from one QuickBooks company
to another by exporting it to an IIF file, then importing it into the new company.

Note: When you import a list into an existing QuickBooks company, QuickBooks replaces any
duplicate entries with ones from the import file.

If you import customers or suppliers from an IIF file, you’ll need to edit each one
to add information such as payment terms. Also, if you have unpaid balances for
a customer or supplier, you must enter an invoice or bill that at least tells the total
amount owed.

Exporting to other software

When you export a list from QuickBooks, it is automatically formatted as an IIF
file. You can then import the IIF file into spreadsheets, word processors, database
programs, or other QuickBooks companies. You can’t export transactions from
QuickBooks, but you can create a report based on transactions and print it to a
file that another program can import.

Method What it does Advantages Disadvantages

Print to disk Makes a copy of a list or You can use the file in a Only lists and reports can be
report in a format com- spreadsheet or word printed to disk.
mon to other software processing programme. QuickBooks cannot read files
programmes printed to disk.

Export Puts lists into a file in IIF You can share lists with QuickBooks can export only
format, with one record other company files or lists, not transactions or
per line and one column databases, word reports.
for each field processors, or spread-
sheets. You can add to the
list and then import it back
into QuickBooks.

78 Chapter 3 Importing and exporting data

 To learn about… Search the Help index for…

Exporting lists to another company file exporting data

Transferring information to Microsoft Word,

Excel, Outlook, or Symantec ACT!
You can easily export data to Microsoft Word or Excel and synchronise your
contacts with Microsoft Outlook or Symantec ACT!
■ If you use Microsoft Word as your word processor, you can use customer,
supplier, employee, and other names in letters.
■ If you use Microsoft Excel, you can export your QuickBooks report data to
Excel for further customisation and filtering.
■ If you use Outlook or ACT!, you can synchronise your contact information
with QuickBooks.

To learn about… Search the Help index for…

Writing letters letters

Exporting data to Excel reports, exporting to Microsoft Excel

Synchronising contact information contact management, synchronising with

a contact manager

Give your accountant permission to access your

QuickBooks file remotely
If your accountant has QuickBooks Accountant, they can use the QuickBooks
Remote Access to work with your file directly from their computer. This can save
your accountant the time and expense of a visit to your site, and you don’t have
to worry about preparing a disk for your accountant.

To work this way, set up a time with your accountant to start the session. Your
accountant gives you an Internet address and licence key. When you go to the
address and enter the number, your accountant can begin the remote access
session.

During the session, your accountant controls QuickBooks on your computer.

Every action your accountant takes is shown in real time on your screen. Your
accountant has access only to your QuickBooks software and programs that
integrate with it.

Importing from / exporting to other software 79

Exporting data for your accountant (Accountant’s
Review)
The Accountant’s Review™ feature allows an accountant to make certain kinds of
changes in a special copy of your company file. Meanwhile, you can continue to
enter daily transactions in the original master file. After the accountant has made
the changes, you merge them into the master company file.

Start by creating an Merge your

Continue using your accountant’s
Accountant’s company file for day-
Review copy of your adjustments into
You to-day business
data for your your QuickBooks
tasks. company file.
accountant.

Opens the
Reviews your data Saves the
Your Accountant’s
and makes adjustments to one
accountant Review copy in
adjustments. or more disks.
QuickBooks.

Note: Changes cannot be made to foreign-currency accounts in an Accountant’s Review file.

Therefore, if your accountant needs to edit currency accounts in your company file,
give him or her a copy of your company file as opposed to the Accountant’s Review
copy. Note that while the accountant is editing a copy of your company file, you cannot
make changes to the master file that you have.

To learn about… Search the Help index for…

Setting up your accountant as a user permissions

with all privileges (if you have set up
users)

Creating an Accountant’s Review copy accountant’s review copy

of your current company file

Merging the accountant’s file into the accountant’s review copy

master company file

Making the accountant’s revised copy restoring data

your master company file

Cancelling an Accountant’s Review accountant’s review copy

copy

80 Chapter 3 Importing and exporting data

 What can and can’t be changed
The Accountant’s Review feature may not be right for everyone. The accountant
can make some kinds of changes but not others.

The advantage of using the Accountant’s Review feature is that you can continue
to work normally with your master company file (that is, the regular company file
from which you make the Accountant’s Review copy). After the accountant has
made changes, you can merge the changes into your master file.

The table shows what an accountant can and cannot do while using an
Accountant’s Review copy of your file, and any restrictions on you while this copy
is out.

Your accountant
Your accountant can... You cannot...
cannot...

■ View all existing transactions and ■ Enter transactions other than gen- ■ Delete any items from
lists eral journal transactions lists
■ Add new items to the Chart of ■ Edit foreign-currency accounts ■ Reorganise lists (move
Accounts, Item list, Payroll Item ■ Memorise transactions other than items, make one item
list, To Do Notes list, Memorised general journal transactions a subitem of another)
Transaction list (general journal
■ Edit or delete existing transac-
transactions only) tions, including payroll payments
To add stock items, you must ■ Reorganise lists (move items,
have this feature turned on. make one item a subitem of
■ Edit existing account names and another)
numbers ■ Rename accounts or items
■ Edit existing payroll items ■ Make items inactive
■ Edit account and VAT information ■ Edit names of existing items on
for existing items on Item list Item list
■ Enter general journal ■ Adjust payroll liabilities
transactions in home-currency ■ Enter or edit employee YTD pay-
accounts
roll setup transactions
■ Reconcile new transactions
■ Edit employee profiles
■ Adjust stock values or
■ Export changes to preferences
quantities
■ Memorise reports
■ Create reports
■ Change preferences
temporarily
■ Create, adjust, and print P60 and
P35 forms

Importing from / exporting to other software 81

 For accountants only:
working with an Accountant’s Review copy
The Accountant’s Review copy of a company file (which your client should create
from his or her master company file) is a compressed, special type of company file.
It has a .QBX extension instead of the usual .QBW or .QBB. When you start
working with these files for the first time, QuickBooks decompresses them to a
.QBA file.

You cannot make changes to foreign-currency accounts in an Accountant’s

Review copy of a company file. If your client has foreign-currency accounts that
you need to make adjustments to, have your client send you a copy of their
company file instead of the Accountant’s Review copy. Note that the client cannot
work on his or her company file while you are editing the copy that they gave you.

Note: If your client has set up users and passwords, you’ll need to find out the user name and
password assigned to you or the QuickBooks administrator.

Once you have opened an Accountant’s Review copy, it remains the current
QuickBooks company unless you open a different company or you close the
company. If you try to record a change that is not allowed, QuickBooks tells you
that it cannot record the change in an Accountant’s Review copy.

If your computer’s system date and time is earlier than the date and
time that your client created the Accountant’s Review copy, you will
not be able to open it.
To correct the problem you’ll need to determine which computer has the
incorrect date and time, change the date and time, and try to reopen the copy.
You may need to have your client cancel the first review copy and create
another one for you.

When you export your work from an Accountant’s Review copy, the changes to
his or her company file are saved in an .AIF file. You should return this file to your
client as soon as possible so it can be reintegrated with his or her .QBW file.

To learn about… Search the Help index for…

Creating a file to give to your accountant’s review copy

client

82 Chapter 3 Importing and exporting data

 C h a p t e r 4

QuickBooks
basics

Getting around in 84
QuickBooks
What do I need
Using the Help 88
system in to know to work
QuickBooks

Getting 92
in QuickBooks?
information
about your
company

Customising your 98 This chapter explains the basics of using

forms
QuickBooks, so you can get up and running
Backing up your 100
company data quickly. Once you know how to get around in
Condensing data 104
QuickBooks and where to go for more
Reconciling bank 107
and credit card information, you’ll learn how to use the features
accounts
of QuickBooks that require additional set up, like
Setting up online 109
banking (account backing up and restoring data, allowing different
access and
payment)
users to access your company file, collecting VAT,
Working with 111
multiple users and linking your accounts to tax lines.
Solving printing 116 Chapter 4
problems

83
Getting around in QuickBooks

About the Resource Area

When you first open QuickBooks, the Resource Area appears. Use the Resource
Area to help you get up and running in QuickBooks. It tells you about updates
when they are available, support options, product information, where to go to get
help when setting up your company, as well as tools to help you grow your
business.

84 Chapter 4 QuickBooks basics

Navigating in the working area
QuickBooks makes it easy to access the feature or information you want. There are
several ways to get around in most areas of QuickBooks — just choose the one that
best fits your work style. Also, many parts of QuickBooks, such as the Icon bar, are
customisable to fit the needs of your business.

The customisable Icon bar gives you one-

Navigators are
click access to the features you use most.
an easy way to
work in one area
of QuickBooks.
Each Navigator
shows the tasks
for one area of
your business.
The
As you use Customers
QuickBooks, the Navigator,
Open Windows shown here,
list keeps track of contains
the windows that customer-
you have open. specific tasks
like creating
Get your an invoice. For
questions more on the
answered by Navigators,
searching our see page 92.
help system.

The Follow-Me Help window displays help related to what you are doing in QuickBooks. For
more on Help, see “Using the Help system in QuickBooks” on page 88.

Moving between windows

QuickBooks maximises your workspace by displaying one window at a time at its
full size. Because QuickBooks keeps a list of the windows you have open, you can
quickly switch between windows as you work.

Tip: If you’d like to be able to see multiple windows open at the same time, from the View
menu, select Multiple Windows.

To learn about… Search the Help index for…

Customising and using the Icon bar Icon Bar

Displaying the navigators navigators

Getting around in QuickBooks 85

 To learn about… Search the Help index for…

Displaying and using the Open windows, list of open

Window list

Showing, hiding, or customising items on desktop

the QuickBooks desktop

Using lists, forms, and registers

When you’re working in QuickBooks, you’ll spend most of your time using a form,
a list, or a register. Since these are the basic elements to QuickBooks, take a few
minutes to become familiar with them.

Using lists
Lists store information about customers, suppliers, employees, items or services
you sell, and so on. They save you time and help you enter information
consistently and correctly.

You fill out most QuickBooks forms by selecting entries from a list. For example,
when you’re filling out an invoice form, you select a customer name from the
Customer:Job list. QuickBooks then fills in the customer’s name, address, payment
terms, and other information.
This list includes each
To re-sort the customer and job and
list by name or their outstanding
type, click the balances.
column header.
An “X” beside You can create notes on
an item means many lists.
it is inactive.
To show the items
marked “inactive,” select
Show All. To hide these
Use the menu buttons at the bottom of lists for a variety of items, clear the check
tasks: creating new entries, editing existing ones, creating box.
reports about items on the list, and using them in transactions.

86 Chapter 4 QuickBooks basics

 Using forms
You record most of your daily business transactions on a QuickBooks form, which
looks just like the paper forms you’re used to. After you fill it in, QuickBooks does
the accounting.

When you record a bill and

then write a cheque (using
the Pay Bills window) to pay
for the business expense,
QuickBooks enters
transactions in your accounts
payable register to show the
expense you incurred and the
payment you made.
It also records the cheque in
your current account, keeping
your records up to date and
providing an ending balance
of what you owe at any time.

Using registers
Just as you use the paper cheque book register to see a record of all the transactions
in your current account—cheques you’ve written, withdrawals you’ve made, and
deposits—QuickBooks uses electronic registers to record the activity in its
accounts. The register shows every transaction for that account, as well as the
account balance.

Although you usually would use forms for entering and viewing transactions, you
can also do so directly in registers. Here’s an example of the register for an
accounts receivable account.

The register shows

information about It also shows
invoices written to payments you’ve
customers — the received against
date of the invoice, your invoices.
the date it’s due, At the bottom-
the name of the right of the
customer, and the register, you see
amount. an ending
balance as it is
For foreign referred to in
accounts, registers QuickBooks, of
show their all your accounts
transaction receivable, so
amounts in the you always know
currency how much you’re
denomination of owed.
the account.

Getting around in QuickBooks 87

Using the Help system in QuickBooks
QuickBooks provides a variety of ways for you to obtain useful information and
answers to your questions. These include tutorials, Follow-Me Help, and an
exhaustive search engine (referred to as 1-2-3 Help) that searches not only the
help, but our online knowledge base.

Sidebar Windows Help main menu Search the Help How Do I? menus

Find: Use this

window to get
all your
questions
answered.

Follow-Me Help:
This window
tracks your
moves, and
displays help
about what you
are doing.
Show-Me videos
and How Do I?
links appear
here as well.

88 Chapter 4 QuickBooks basics

Context-sensitive help
In QuickBooks 2005, we have added many ways in which you can access our
context-sensitive help system.

Follow-Me Help
Follow-Me Help "follows" you as you work in QuickBooks and displays the topics
that are related to what you are doing. If you have an Invoice form open, you will
see help on how to create an invoice with "How Do I?" links listed underneath.

Index: opens the

Search: opens the search engine
Index in the Find
in the Find (also referred to as
(1-2-3 Help) window.
1-2-3 Help) window.
Refer to page 91 for
more details on the
1-2-3 Help window. Print: prints the help topic.
Make sure the help you
Back/Next: moves want printed is completely
backwards or forward expanded (i.e., click to
through help topics expand the text before
that have already been printing).
displayed in this
window.
Pin: anchors a help topic or
stops the window from
following your activities.
Topic content appears
here. This tool is useful when you
need to open several
The (plus) icon
windows, but want the help
means that there is
to remain on one topic.
help content hidden.
When you click the
plus icon, the help
topic expands so you
can read it.

The Follow-Me Help window is located, by default, at the bottom of the sidebar
area on the left-hand side of the QuickBooks work space. You can move this help
window anywhere you like by dragging it to the position you want. When you
drag it back to the sidebar window area, the window automatically docks in the
sidebar. You can also close the Follow-Me Help window altogether.

To close and open the Follow-Me Help window:

■ To close the Follow-Me Help window, click the x in the upper right-hand
corner of the window.
■ To open the Follow-Me Help window, go to the View menu and select Follow-
Me Help.
■ To reset the sidebar area to the default layout, go to the View menu and select
Reset Sidebar Windows.

Using the Help system in QuickBooks 89

 How Do I? menus
Throughout QuickBooks, you’ll find windows with a How Do I? drop-down menu
in the upper-right corner. These menus provide quick access to information and
instructions for the window you’re working in. The help topic is usually displayed
in the Follow-Me Help window.

F1 key
You can get explanations about features of most windows by pressing the F1 key
or the Help key on your keyboard. The help topic is displayed in the Follow-Me
Help window.

Some windows also have a Help button. When you click a Help button located on
a window, the help is displayed in a separate help window and not the Follow-Me
Help window.

Getting your questions answered

Using the index

To find help on a particular subject, choose Help Index from the Help menu or click
the book icon on the Follow-Me Help window. The Index appears in the Find
window. Type the word that best describes what you need information on. If you
can’t find what you want from the Index, try using the 1-2-3 Help.

Searching for answers

In most windows, next to the How Do I? drop-down menu, there is a search
feature where you can type your question and search the in-product help system.

You can also use the 1-2-3 Help to not only search our help system, but to search
the knowledge base located on our Web site. The knowledge base is a grouping of
Frequently Asked Questions (FAQs) that come from our customers. It contains
hundreds of tips and tricks.

90 Chapter 4 QuickBooks basics

 Using 1-2-3 Help to answer your questions
With 1-2-3 Help, you can get all of your questions answered at the click of a
button.

: Click Search, type your question in the box, then

1. click Ask. The search engine searches all the in-product
help topics and displays the results underneath the box.

2. : Click Look Online, type your question in

the box, then click Search. The search engine searches
all the FAQs on our Web site and displays the results
in the QuickBooks workspace in a separate window.

3.
: As a last resort, if you still haven’t found the answer
you’re looking for, click Contact Us to display a list of contact
numbers for Intuit Canada. Note that service charges may apply.

The 1-2-3 Help is located in the Find window. The Find window, by default,
appears above the Follow-Me Help sidebar window. You can move this window
anywhere you like by dragging it to the position you want. When you drag it back
to the sidebar window area, the window automatically docks in the sidebar. You
can also close the Find window altogether.

To close and open the Find window:

■ To close the Find window, click the x in the upper right-hand corner of the
window.
■ To open the Find window, go to the View menu and select Follow-Me Help.
■ To reset the sidebar area to the default layout, go to the View menu and select
Reset Sidebar Windows.

Learning with the QuickBooks Tutor

The fastest way to get started in QuickBooks is to practise with the QuickBooks
Tutor. The QuickBooks Tutor is an interactive tutorial that lets you practise some
common tasks in QuickBooks without affecting the data in your company file.

This tutorial is divided in to six lessons and you can complete it in 15 minutes.
When you do, you’ll be able to navigate in QuickBooks, set up customers and
items, make sales, and receive money.

To start the QuickBooks Tutor:

1 From the Help menu, choose QuickBooks Tutor.
2 Select Start QuickBooks Tutor to go through each lesson sequentially. You
can also select a specific lesson that describes the feature you want to learn
how to use.

Using the Help system in QuickBooks 91

Exploring QuickBooks with a sample company
Use the sample company that comes with QuickBooks to get familiar with the
software: explore the features, enter test data, and run reports.

To view the sample company:

1 From the File menu, choose Open Company.
2 In the Open a Company window, choose any one of the samples provided. A
QuickBooks company file has a .QBW extension.

Getting information about your company

Navigators are the best starting point to see how your company is doing at a
glance. They gather information from your QuickBooks data and display it in one
location so you can manage your business more effectively. There are eight
navigators: Company, Customers, Suppliers, Employee, Banking, Business
Services, Reports, and Help & Support.

Click these icons

for quick access
to features you
The flowchart
use to manage all
shows activities
your customers.
for dealing with
one customer.
Click the icons for
Use this drop-
quick access.
down list for
convenient access
to reports you’ve
added to the
memorised
reports list.

To learn about… Search the Help index for…

Using the Company Centre Company Centre

Using other QuickBooks centres centres

Decision Tools decision tools

92 Chapter 4 QuickBooks basics

Creating reports
QuickBooks provides a wide variety of preset reports and graphs designed to give
you quick and easy access to your company’s information. In addition, you can
create your own customised reports that have a different look and layout as well
as scope of information.

Finding the right report

With the Report Finder, you can quickly review and choose among the many
preset reports that QuickBooks provides. To help you choose an appropriate
report, the Report Finder displays a sample of each report, as well as a summary of
what the report conveys about your business.

To get to the Report Finder, go to the Reports menu and select Report Finder.

Choose a report
category and view View a thumbnail
a general picture with sample
description of data to get an idea of
your choice. a report’s content.
You can customise a
report before or after
you generate it.
The specific
reports available
in the category
you selected are
listed here.

QuickBooks provides details about a report’s content to help you

decide whether the report is appropriate for your needs.

To learn about… Search the Help index for…

Finding a report reports, finding

Creating a report reports, creating

Preset reports report types, all

Getting information about your company 93

 Customising the look of a report
Most reports can be customised for unique presentation of your data. For example,
you can do the following:
■ Change the typeface (font) and how numbers display
■ Add or remove columns and adjust their width
■ Create or change subtotal lines
■ Change the sort order of transactions
■ Change your item’s units of measure on reports that include purchase, sales
and inventory transactions (QuickBooks Pro and higher); refer to “Reporting
in different units of measure” on page 38 for more details on units of measure

If you’re using QuickBooks Pro or higher and

Microsoft Office, you can export reports to a
Microsoft Excel spreadsheet.

Click Modify Report to customise

a report for your needs.

The Modify Report

window is divided up in
to tabs. Each tab covers
different customisation
options for the report.
For example, the Display
tab allows you to choose
the columns you want
visible on the report that
you are currently
working on.

After you have customised a report, you can save the settings for future use. Saving
report settings is called memorising. The next time you run the report,
QuickBooks recreates the format of the report, but uses your latest financial data.

When you memorise a report, QuickBooks adds it to the Memorised Report List.
To display this list, from the Reports menu, choose Memorised Reports, then
choose Memorised Report List.

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 Changing the scope of information in a report
Creating your own version of an existing report can also include filtering, or
changing the scope of the information that displays on a preset report.

We encourage
you to explore the
extensive list of
filters.
Your options here
include filters for
data you entered
in your custom
fields.

To learn about… Search the Help index for…

Changing date ranges reports, dates in

Customising a report report customisation

Adjusting, adding, or deleting report customisation, columns

columns on a report

Tailoring the data in the report reports, changing the scope of

(filtering)

Changing headers and footers report customisation, headers

Getting information about your company 95

 What does “Other” refer to on reports?
If you use subaccounts, subitems, or jobs, then sooner or later you will see the
word “Other” on a report:

The £540.00 expense for Labour-Other

is for the Labour main account and not
for either of the subaccounts.

QuickBooks shows the word “Other” when you create a report for an account that
has subaccounts (or items that have subitems, customers that have jobs, and so
on) and there is a transaction associated with the main account. Generally, if you
are using subaccounts (or subitems or jobs), you should associate transactions only
with the subaccounts instead of the master account.

Tip: To remove the “Other” line or column on a report, double-click its monetary amount to
see the transaction and adjust it. When QuickBooks displays a report listing one or
more transactions, double-click each one in turn. In the transaction itself, replace the
problem name with the correct subaccount, subitem, or job.

Understanding QuickBooks file types

QuickBooks uses several types of files. Here are some of the more common ones:
■ .QBW: Your company file. This contains your company set up, and all the
information you enter (customers, suppliers, transactions, etc.) for your
company.
■ .QBB: A compressed backup of your company file.
■ .QBX: A compressed version of an Accountant’s Review copy of your
company file. See “Exporting data for your accountant (Accountant’s
Review)” on page 80.
■ .QBA: An Accountant’s Review copy of your company file that’s not
compressed (that is, what your accountant gets when he or she opens the
.QBX file you provided).
■ .AIF: A special file containing the changes your accountant made to your
company’s books in the .QBX file you provided. You merge the information
from this file back into your regular company file (.QBW).

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Cash Flow Projector
Use the Cash Flow Projector to prepare a six-week view of all your incoming and
outgoing cash to give you a detailed summary of any excesses and/or shortages of
cash. The Cash Flow Projector guides you through a step-by-step process that
helps you combine your existing QuickBooks data with additional cash flow
information you provide, such as future business expenses and projected cash
receipts, to arrive at a weekly cash flow projection.

Easily view your projected "available to spend" weekly cash balance in a printable
report. Also try out several "what if?" scenarios to see how making changes to your
receipts and disbursements could affect your weekly cash balance.

Specifically, the Cash Flow Projector can:

■ Help business owners project their business's cash requirements.
■ Anticipate shortfalls of cash before they occur.
■ Identify sources and uses of cash to better understand cash management.
■ View the financial impact of supplier payments terms.
■ Determine whether additional purchases can be made based upon your
business's future cash needs.

To open the Cash Flow Projector:

■ From the Company menu, select Planning & Budgeting and Cash Flow
Projector, or
■ From the Company Navigator, click the Cash Flow Projector button.

QuickBooks Loan Manager

The Loan Manager lets you track loans and schedule future payments for any Long
Term Liability or Other Current Liability account. In order to use the Loan
Manager, a liability account must already be set up in QuickBooks. To track a loan
in the Loan Manager, enter detailed information about your loan, such as
payment amount, interest rate, term, etc., and Loan Manager alerts you before a
payment is due. It calculates the principal and interest portions of your payment
and posts these amounts to the proper liability and expense accounts,
respectively.

You can modify the details of your loan at any time (i.e. change your payment,
interest rate, etc.) and the Loan Manager will automatically update your payment
schedule to reflect the new information. Additionally, the Loan Manager allows
you to run several "what if?" scenarios to evaluate different loan situations on
existing loans, as well as for new loans.

Specifically, the QuickBooks Loan Manager can help you by:

■ Preventing you from missing a loan payment (eliminate late fees).
■ Automatically calculating principal and interest payments to produce more
accurate loan balances.

Getting information about your company 97

 ■ View payment schedules and loan payoff dates.
■ Makes loan payments quicker and easier.
■ Analyse different loan "what if?" scenarios on existing loans and new loans.
■ Tracks all of your loans in one, user-friendly location.

To open the QuickBooks Loan Manager:

■ On the Banking menu, select Loan Manager, or

Customising your forms

You can customise any sales or purchase form (template) and create any number
of versions to suit your business needs.

Tip: If you plan to print your invoices or statements on preprinted forms from Intuit, you
should make only minor adjustments to the Intuit templates. For example, adding a
logo, adding your company name and address, or changing fonts still allows you to use
preprinted forms and window envelopes you purchase from Intuit. You can’t; however,
add, change, delete, or move columns unless you have purchased custom designed
forms.

For each form you customise, you decide which fields (including custom fields)
and columns to include, what they are labelled, and where to place them.

Once you’ve created your forms, you can save them to use whenever you want and
modify them whenever you want. You can also purchase custom forms to match.

Note: To purchase custom forms, see “Ordering QuickBooks cheques and business
stationery” on page 260.

To customise a form (template):

1 With any sales or purchase form open (for example, an invoice or purchase
order), click the Customise button located at the top of the form.
2 Select the template you want to customise and click Edit. The Customise
window appears.
or...
If you want to customise an Intuit template, select the one you want to cust-
omise and click New. Don’t forget to give your new template a name.

98 Chapter 4 QuickBooks basics

 The following diagram shows the areas of the form that you can change using
various tabs of the Customise window.

Header Format
Use the Header Use the Format
tab to change tab to add your
the title of a logo and to
form or other change fonts,
information in including font
this part of the style (italic,
form. bold, etc.) and
size.

Fields
Use the Fields Columns
tab to change
Use the
the information
Columns tab to
shown on this
change the
part of the
order in which
form.
columns
display. The
Amount
column always
Footer displays
You can enter up furthest to the
to 1,000 right.
characters in the You can also
Long text area rename, add, or
on the Footer tab delete columns.
to print on your
custom form.
This information could include legal Printer
disclaimers or warranty information. Use the Printer tab to change the page orientation.

To learn about… Search the Help index for…

Creating custom business forms customising forms, about

Customising your forms 99

Backing up your company data
Your data is valuable! No recovery technique can repair all possible file damage or
protect against theft or natural disasters.

To guard against and minimise data loss, make regular backup copies of your
QuickBooks company (or companies). In the event of a data loss, you can restore
your data from the back up. It’s a good idea to store at least one recent backup off-
site.

When it comes to backing up your company file, you have several options. You
can backup to
■ your hard drive ■ Zip disk
■ CD-R or CD-RW

You can back up your company file to your hard drive, but it’s a good idea to store
at least one recent backup off site. That way, in case of theft or natural disaster,
you’ll have a copy of your company data in a safe place.

The QuickBooks Backup command does not simply copy your company file.
Instead, it compresses the data into a compact backup file which only QuickBooks
can open. You can name the backup file whatever you want. QuickBooks
automatically give your backup file the extension .QBB.

Note: For a description of the various file types QuickBooks creates for your company file,
see “Understanding QuickBooks file types” on page 96.

You must be in single-user mode to backup your company file.

In single-user mode, only one person at a time can access and work with your
company file. If you have QuickBooks Regular (not QuickBooks Pro or higher),
you are always working in single-user mode and do not need to worry about
switching.
■ If other people are working with the company file, ask them either to close
the file or exit QuickBooks.
■ From the File menu, choose Switch To Single-User Mode.

100 Chapter 4 QuickBooks basics

Recommended backup routine
If you use QuickBooks Pro in multi-user mode, you must switch to single-user
mode to create a backup. For more information on single-user mode, see
“Working with multiple users” on page 111.
■ Prepare several sets of backup media.
■ Label the backup media “QuickBooks Backup Monday,” “QuickBooks Backup
Tuesday,” etc.
By having one set of backups for each business day, you likely won’t lose more
than one day’s records if a disaster strikes.
■ Each day, back up onto a media of your choice and keep them in your office.
■ At least once a week, make a second backup to keep off your premises.
Alternate between two sets of media for your weekly off-site backup. If a
disaster strikes your office, you’ll want a reliable record of your data to fall
back on.
■ Periodically, replace your backup media with new media on your machine.
■ At the end of the financial year, make an archive copy of your data to keep off
your premises.

To learn about… Search the Help index for…

Backing up your company data backups

Backing up to a CD-R or CD-RW

Although Windows XP can write data directly to a CD-R or CD-RW, we

strongly recommend that you use third-party CD writing software to
back up your company file instead.
Because of a limitation in the CD writing program that comes with Windows
XP, it may not allow QuickBooks to back up directly to a CD. Instead, it may
display an error message such as "Unable to access the disk." Also, if Windows
XP does allow QuickBooks to access the CD, Windows XP may not transfer
your company file backup from the CD Writing Tasks area to your CD properly.
Instead, you should first save the backup to your hard drive, then copy it to
your CD with reliable third-party software.

To back up to a CD-R or CD-RW:

1 Insert the CD into your CD-R drive.
2 From the File menu, choose Back Up and ensure the Back Up Company File tab
is selected.
3 Click Browse.
4 Navigate to a place on your hard drive that you can easily find again. (Quick-
Books may warn you that you are backing your data up to your hard disk.)

Backing up your company data 101

 5 In the File name field, type a name for your backup.
Tip: We recommend that you give a new name for each backup, for example, the date of
this backup. This prevents you from overwriting the previous backup should there be a
problem during the backup process (for example, a power failure).

6 Click Save.
7 (Optional) Select the backup options you want:
■ Verify data integrity: Select to verify your data before backing up.
■ Set Defaults: Click to specify the defaults for backing up manually.
8 Click OK. QuickBooks creates a backup file of your company data.
9 Start your CD writing software and use it to copy the backup file from the
location you saved it to your CD.

For those users who are very comfortable working around the limitation in
Windows XP’s built-in CD writing software, the help file includes information
about setting up Windows XP so that you can back up your company files directly
from QuickBooks to a CD.

To learn about… Search the Help index for…

Setting up Windows XP so you can back company file, backing up to CD (Win-

up to CDs right from QuickBooks dows XP)

Backing up to a Zip drive

To backup to a Zip disk:
1 Insert the Zip disk into your Zip drive.
2 From the File menu, choose Back Up and make sure the Back Up Company File
tab is selected.
3 Click Browse.
4 Navigate to your Zip drive.
5 In the File name field, type a name for your backup.
Tip: We recommend that you give a new name for each backup, for example, the date of
this backup. This prevents you from overwriting the previous backup should there be a
problem during the backup process (for example, a power failure).

6 Click Save.
7 (Optional) Select the backup options you want:
■ Verify data integrity: Select to verify your data before backing up.
■ Set Defaults: Click to specify the defaults for backing up manually.
8 Click OK. QuickBooks creates a backup file of your company data.

102 Chapter 4 QuickBooks basics

Searching for your backup file
If for some reason you can’t locate your backup file (.QBB), you can use the
Windows’ search feature to help you find it.

To search for the backup file:

1 From the Windows Start button, select Search, then choose For Files or
Folders.
2 In the Search Results window, type *.QBB in the “Search for files named”
field.
The asterisk symbol acts as a substitute for zero or more characters.
3 Choose a drive or folder in the “Look in” field.
4 Click Search Now.

Restoring your backup file

If you need to restore your backup file, use the Restore command. Because
QuickBooks backup files are compressed, simply copying the backup file to your
QuickBooks directory will not give you access to your data.

Because your backup copy is in a compressed file format, you must

use the Restore command to bring the data back into QuickBooks. Do
not use the Copy command from Windows Explorer or the DOS
prompt.
If your hard disk has malfunctioned, you first need to reinstall QuickBooks on
the repaired or new hard disk. For instructions, see “If you need to reinstall
QuickBooks” on page 8.

Note: If QuickBooks finds a company file with the same name as the one you’re restoring to
a given directory, it asks you whether you want to replace the existing file.
If you answer “No,” QuickBooks returns you to the Restore window. You must then give
a different name to the restored file, and when the process is finished, you will have
two different versions of your company data.

If you are restoring your company file because your computer or hard drive
malfunctioned, be sure all required repairs are complete and consider reinstalling
QuickBooks before you proceed.

To learn about… Search the Help index for…

Restoring your company data restoring from a backup

Backing up your company data 103

Condensing data
If your company file has grown very large, you can reduce its size by condensing
the older transactions that you no longer need much detail about.

For example, you might condense the transactions your company completed two
or more years ago, especially if your company file is quite large (more than 75 MB).
Condensing large company files can sometimes improve the performance of
QuickBooks.
When you condense data, you specify an ending date for the period of time you
want to condense. Transactions dated after your selected ending date are not
affected. For example, if your ending date is 31/12/03, all transactions dated
1/1/04 and later remain intact in your company file.
When you condense your company file, QuickBooks deletes only closed
transactions. Open transactions are retained. Therefore, to give unpaid bills and
uncleared transactions some time to complete, it is best to choose an end date that
is six months or more in the past.

If you select Remove ALL transactions, QuickBooks deletes all transaction

regardless of dates.

If you use payroll

If you use QuickBooks to pay your employees, QuickBooks will not condense
payroll data for the current payroll year or the previous one.

For example, if you choose to condense your company file in March, 2003,
QuickBooks would not condense payroll data from 2003 or 2002. It would
condense payroll transactions from the date you started using QuickBooks
through to 31 December, 2001.

You must keep the archive file the Condense function creates in case
you need to refer to your payroll transactions during an audit.
As a business owner, you are required to you keep your payroll transactions
for seven years. Since an archive file contains your payroll transactions for a
given period, you must keep it.
Also, you should make sure you have printed records of your most important
payroll transactions before you condense your data and create an archive.

104 Chapter 4 QuickBooks basics

Examples of transactions that would be
deleted
■ If an invoice has been paid in full, QuickBooks deletes the details and includes
the amount in a summary transaction showing income accounts. Neither the
customer name nor the items sold are retained. However, if an invoice is not
printed or is unpaid, partially paid, or marked as pending, QuickBooks leaves
the invoice in your file so you can apply payments to the invoice.
■ If you have QuickBooks Pro, condensing deletes only those estimates that are
dated on or before the ending date and that have a job status of Closed. If an
estimate has any other job status (Pending, Awarded, In Progress, Not
Awarded, or None), QuickBooks retains the estimate regardless of its date.
■ Only if you choose the option in the Condense preferences: if you have paid
a bill for a reimbursable expense, QuickBooks deletes the bill regardless of
whether you have invoiced the customer for the expense.

Examples of transactions that would be

retained
The following table gives examples of the situations that cause QuickBooks to
retain transactions dated on or before your specified ending date.

When you follow the steps in the Archive & Condense Data wizard, you’ll have
an opportunity to remove old transactions and unused items to further reduce the
size of your data file. However, QuickBooks always retains transactions that meet
the following criteria.

When QuickBooks
retains a transaction Example of retained transaction
with earlier date

The transaction is linked to An undeposited customer payment that you applied

another transaction that has an to an invoice. Even though the invoice is paid,
open balance QuickBooks retains the invoice because it has a link
to an open transaction (the undeposited payment).

The transaction is linked to a

transaction in the current year.

Summary transactions
The summary transactions that QuickBooks creates appear in the registers of your
balance sheet accounts (Bank, Accounts Receivable, Accounts Payable, and so on).
Each balance sheet account has one GENJRNL summary transaction for each
month in which QuickBooks deleted transactions. The transaction amount is the
total of the transactions that QuickBooks deleted for the month.

Condensing data 105

 For a given month, the register may also show other transactions that QuickBooks
did not delete. These are transactions that could be affected by transactions you
have yet to enter.
When opening a register, you can spot the summary transactions by looking for
GENJRNL in the Type field.

To view a breakdown of amounts by account, select a GENJRNL transaction and

click Edit. The General Journal Entry window shows the breakdown of amounts
by account for all summarised transactions for this month.

Note: You cannot edit a GENJRNL summary transaction.

How condensing data affects your reports

Account balances
After you condense your data, you can still create reports that summarise financial
activity for the period of time you condensed. For example, if you condense the
last financial year’s data, you can still create profit and loss reports that compare
last year’s results to this year’s. This is because QuickBooks adds summary
transactions to your company file to preserve monthly account balances.

Transaction detail
After you condense your data, you won’t be able to create reports that show
daily detail for the period of time you condensed. This is because QuickBooks
has deleted the individual transactions that would have provided the detail. In
addition, you won’t be able to create reports that show balances for individual
customers or suppliers over that period of time.

As a result, the totals for sales revenue on VAT liability reports will be incorrect. As
a precaution, QuickBooks creates a backup file in case you need access to the
deleted transactions later.

Cash basis reports

After you condense your data, you won’t get an accurate cash basis report for data
that includes a condensed time period. This is because QuickBooks has deleted the
individual transactions that would have provided the information about whether
transactions were paid. As a result, the totals will be incorrect.

To learn about… Search the Help index for…

Condensing your company file condensing data

106 Chapter 4 QuickBooks basics

Reconciling bank and credit card accounts
You should plan to reconcile your bank (current, savings, and deposit accounts)
and credit card statements on a regular basis to make sure your records agree with
the bank’s.

Situation What to do in QuickBooks

You haven’t reconciled Reconcile each month you skipped. Balance each month separately, starting
these accounts for a with your earliest statement since you’ve been using QuickBooks, through
month or more. your most recent statement.

You added earlier After you add earlier transactions, and you want to reconcile past months, you
transactions in Quick- should reconcile month by month only if you’ve never used the QuickBooks
Books. reconcile feature.
However, if you’ve already reconciled one or more months, you should recon-
cile forward only, that is, reconcile months after your start date. Use the previ-
ous months’ data for reporting only. You need to mark all older transactions as
cleared to reconcile future months.

You are reconciling for Enter all uncleared transactions in your account.
the first time. Update the Opening Balance transaction to reflect the amount actually in your
account when you began using QuickBooks.

You cancel in the mid- QuickBooks keeps track of the items you’ve marked as cleared with an asterisk
dle of reconciling. (*) in the cleared column of the account’s register. This indicates that the items
are still pending and reconciliation wasn’t complete.
When you start reconciling again, you’ll need to re-enter your ending balance
and your bank’s charges and interest earned. You’ll also need to tick off addi-
tional payments and deposits.

When you reconcile, be sure to add any bank service charges, interest earned, and
finance charges.

To learn about… Search the Help index for…

Reconciling a bank account reconciling, bank statements

Reconciling a credit card account reconciling, credit card statements

Adjusting for differences reconciling, adjusting for differences

Reconciling bank and credit card accounts 107

Matching bank deposits and credit card deposits
(QuickBooks Card Solution users)
As a QuickBooks Credit Card Service user, you can use QuickBooks to help match
your customers' credit card payments with the lump sum deposit on your bank
statement, as well as account for banking fees.

To do this, in the Receive Payments or Enter Sales Receipts window, select the
“Group with other undeposited funds” option.

In the Make Deposits window, you can display credit card payments views
grouped by credit card type, which lets you see the individual credit card
transactions that make up each lump sum deposit.

Often, the bank deposit total is less than the payments you received from
individual customers due to credit card transaction fees. QuickBooks calculates the
difference for you automatically and lets you assign the transaction fee to an
expense account.

108 Chapter 4 QuickBooks basics

Setting up online banking (account access
and payment)
QuickBooks online banking encompasses account access with Barclays Bank.
Before you can start using online banking, there a few things you’ll need to do as
described in the following table.

Look in the Help

What to set up Comments
Index for...

Internet access through an ISP if you Choose Internet Connec- Internet connections
haven’t already set this up for another tion Setup from the Help
QuickBooks feature menu.

If you don’t already have an account online banking, financial

(current, savings, money market, institutions
credit card) at Barclays Bank, you’ll
need to open one.

Submit an application for online bank- Application information online banking, setting
ing to Barclays Bank. can be accessed over the up
Internet or contact your
institution directly. There
may be a waiting period
until you get confirmation.

Select an online service for setup, by Enables you to submit an online banking, setting
completing the “Apply Now” section application for online up
of the Online Banking Setup interview banking at Barclays Bank.

When you receive your confirmation Verify that the information online banking, enabling
and a PIN/password from Barclays sent to you by the finan- a QuickBooks account
Bank, complete the “Enable cial institution is correct.
Accounts” section of the Online Bank-
ing Setup interview.

To start using online banking in QuickBooks:

1 From your bank’s Web site, select the "Download to QuickBooks" option.
(This option looks different for each bank.)
2 Choose Create a new QuickBooks account, and type the name of your account
in the field provided, then select Continue.

Going online for the first time

You should use online banking within the first month of enrolling for online
services. The first time you go online, we recommend that you download the most
recent transactions that have cleared at your financial institution.

Setting up online banking (account access and payment) 109

 Financial institutions use Web Connect for online banking connections. Web
Connect offers online integration through the financial institution’s Web site
(accessible from QuickBooks or any browser). With Web Connect, you can go
directly to your bank’s Web site for online banking services.

Reconciling online accounts

Reconciling your online accounts is a three-phase process.
1 To download your transactions, go to the Online Banking Centre, select your
financial institution from the drop-down list, and Click “Go Online.”
2 Match transactions.
View a QuickStatement for the account. The QuickStatement includes all
transactions that have cleared your financial institution since the last time
you downloaded, including deposits, cheques, transfers, and ABM with-
drawals, as well as any transactions that were downloaded previously but not
been matched.
QuickBooks automatically matches downloaded transactions to those in your
account register. For the unmatched transactions, select one of the transac-
tions from the downloaded statement, click Add to Register, and follow the
onscreen prompts until the transaction appears in the register. Assign an
account from the Account Drop Down list and click Record to enter the trans-
action in the register.

3 When you receive your bank statement for the account, use the Reconcile
window.

110 Chapter 4 QuickBooks basics

 Note: With QuickBooks, you can reconcile only to the paper statement you receive from your
financial institution.

To learn about… Search the Help index for…

Downloading and matching online trans- transactions, online

actions

Account reconciliation ■ reconciling, bank statements

■ reconciling, credit card statements

Working with multiple users

In QuickBooks, you can set up your company file so that different users have
different access to features. You can set up as many users as you want. See “Users
and passwords” on page 112.

In QuickBooks Pro and higher, up to five people can work with your company file
at the same time over a computer network.

Sharing QuickBooks Pro or higher company

files
Using QuickBooks Pro or higher on a network is basically the same as using it on
a single computer. For most of your day-to-day tasks, up to five users can access
the company file at the same time. When several users are allowed to work in the
company file simultaneously, the file is in multi-user mode.

However, for some activities, only one person at a time can use the company file.
The other users must log off, close the company file, or exit QuickBooks Pro or
higher. Then the person who wants to perform the activity must switch the file to
single-user mode. After finishing the activity, the person can switch back to multi-
user mode, and the others can log back on or open the company file again.

Single-mode activities include:

■ File operations such as backing up, condensing, converting to euro, or
exporting data
■ Some types of changes to lists
■ Adjusting stock
■ Activities involving an Accountant’s Review copy

There is also a third category of activities. Although all the networked QuickBooks
users (with the correct permissions!) have access to these features, only one person
at a time can use them. (For information about restricting access to features, see
“Setting up the Administrator and users” on page 113.)

Working with multiple users 111

 Feature-locked activities include:
■ Paying bills
■ Running payroll
■ Setting up new users or maintaining existing ones

Refreshing after entering data

If you are creating reports while others are working in the company file, you can
use the Refresh button to make sure you have the most current information on
your reports. The Refresh button updates your screen with the information that
others have entered into QuickBooks Pro or higher since you started the report.

You can refresh lists or forms as you work by pressing F5 on your keyboard or
right-clicking the item and selecting Refresh.

To learn about… Search the Help index for…

Switching between modes multi-user mode

single-user mode

Your refresh options Refresh button

Users and passwords

The QuickBooks password feature provides a basic degree of

protection for your data, but it is not a complete security system.
For example, it will not prevent someone using Windows Explorer from delet-
ing your company file.

Some parts of your company’s data are more sensitive than others. You can use
passwords to make sure that each employee you have can only access those parts
of QuickBooks you want him or her to use.

Areas you can protect include sales and accounts receivable, purchases and
accounts payable, banking and credit cards, stock, time tracking, payroll, sensitive
accounting activities, and sensitive financial reports.

In this way, you maintain the security of your business data even when several
people access your company file at the same time. Until you set up users (and
passwords) in your QuickBooks company file, any person who accesses the file will
have full access to all features of the programme.

112 Chapter 4 QuickBooks basics

 Setting up the Administrator and users
About the QuickBooks Administrator

Note: QuickBooks may ask for a password even though you have not set up any passwords.
If this occurs, leave the name Admin in the User Name field as is and leave the
Password field blank. You can still access your company file.

When you create a QuickBooks company file, QuickBooks creates a user called
“Admin.” This user is the QuickBooks Administrator for the company file.You can
set up a password for the Administrator. When you assign a password to the
Administrator, QuickBooks prompts you to log on when you open the company
file.

Do not forget the Administrator’s password. Once you’ve chosen a

password for the Administrator, write it down and store it in a safe
place.
An Administrator’s password, if forgotten, cannot be recovered. If you forget
this password, you’ll have to send your company file to Intuit (there is a fee
associated with this service).

The QuickBooks Administrator has unlimited access to the entire company file
and is the only person who can add additional users and change access privileges.
For each user he or she sets up, the Administrator designates:
■ A password. The password can contain up to 16 letters and numbers and is
case sensitive. The user can change the password later, but the Administrator
will still be able to make changes to the user’s access privileges and can assign
the user a new password, if necessary.
■ Full access, selective access, or no access to each area of QuickBooks.

Setting up and customising users

After you’ve set up the Administrator, you can add new users. Use the New User
Setup wizard to select the parts of QuickBooks you want the new user to use.
■ From the Company menu, choose Set up Users.

You can set up as many users as you wish. However, only five users can access the
company file at the same time in QuickBooks Pro and higher.

Note: In Windows 2000, using the Users and Passwords control panel, you can set up each
of your employees with a log-in profile. All the people who will use QuickBooks must
be set to Standard User (Power Users Group) or higher, not Restricted User (Users
Group). Otherwise, QuickBooks will not run properly.

When the wizard finishes, a summary screen for all your users appears:

Working with multiple users 113

 To learn about… Search the Help index for…

The different access areas passwords, access areas

The role of the Administrator admin

Setting up users with passwords users, adding

Changing passwords passwords, changing

Deleting passwords passwords, deleting

Using permissions to close an accounting

period
Unlike most other accounting systems, QuickBooks does not require you to “close
the books” at the end of an accounting period. Closing books is often a
complicated process that involves transferring information from one ledger to
another and summarising it. You can generate reports at any time, not just at the
end of the year.

However, you may want to restrict access to the transactions of prior accounting
periods to be sure the transactions are not changed without your knowledge. By
requiring permission to delete, add, or edit any transaction before a chosen date,
you can discourage accidental or casual changes to “closed” periods, but still make
corrections when necessary. For example, you may want to prevent your staff from
making changes to your older transactions after you‘ve paid the VAT liabilities for
them (see “Locking past VAT quarters” on page 139).

You can restrict users from accessing older transactions when you set them up. To
deny users access to “closed” periods, do not grant them permission to Change or
Delete Transactions recorded before the closing date.

Then enter the closing date in the User List window (from the Company menu,
select Set Up Users).

114 Chapter 4 QuickBooks basics

 To learn about… Search the Help index for…

Using permissions to “close” your closing periods

books

Recording who changed what in the Audit Trail

QuickBooks can record all changes made to transactions and the name of the user
who made the changes. Then, you can review the changes in the Audit Trail
report.

To keep an ongoing record of changes to transactions, you must make sure the
audit trail is turned on and kept on. If the preference is turned off for a period of
time, QuickBooks does not keep a record of changes, if any, to the transactions in
that period.

Choose the date range you

want to see on the report.

The Current Transaction

entry shows what the
transaction is like now;
the Previous Transaction
shows what it was like
before the change.
You can also see who
made the change and
when.

If your computer is older, or you make a lot of changes to existing transaction,

QuickBooks may slow down slightly when the Audit Trail is on. Also, the size of
your company file may increase more rapidly than it has in the past.

These changes occur because instead of writing over transactions you change,
QuickBooks records both the original transaction and all changes to it. However,
for most users, the performance of QuickBooks should not change.

To learn about… Search the Help index for…

Using the audit trail feature audit trail

Working with multiple users 115

Solving printing problems
If you’re having trouble printing, try checking these areas before you ring the
QuickBooks Support.

When should I reinstall my printer driver?

If your printer has any of these problems, you may have reinstall your printer
driver in Microsoft® Windows, or contact the printer’s manufacturer for
assistance.
■ Your printer isn’t printing at all, from any programme.
■ Your printer prints “garbage” from any programme.
■ Your printer won’t feed paper correctly.

QuickBooks Support also has information specific to some printers. For more
information, look under the Help menu.

Nothing happens when you try to print

There are several things you can try:
■ Make sure the printer is turned on and is online.
■ Try printing from another application to verify that Windows can still
communicate with the printer.
■ Check for stalled printing jobs on your printer.
a) From the Start menu, select Settings, then Printers.
b) In the list, double-click the printer you’re using.
c) Select the stalled print job in the list.
d) From the Document menu, select Cancel Printing.

The form is clipped on the top, bottom, left, or right

Likely, you only need to adjust the form’s margins and alignment. However, some
printers can’t print the entire width necessary for the standard forms that come
with QuickBooks. In this case, you’ll need to customised the form to have larger
margins.

To adjust the margins for forms:

1 In QuickBooks, from the File menu, choose Printer Setup.
2 Choose the form you want from the Form Name drop-down list.
3 Click the Margins tab.
■ If there is no Margin tab, you need to adjust the form’s alignment instead.
See “To adjust alignment of forms” on page 117.

116 Chapter 4 QuickBooks basics

4 Set the margin you want in the Left, Right, Top, and Bottom fields.
QuickBooks displays the margins in inches, but you can enter margin sizes in
inches (in), millimetres (mm), centimetres (cm), points (pt), or picas (pi).
If you find that QuickBooks leaves larger margins than you entered, your
printer may be unable to print outside a specific area. Most printers cannot
print with margins smaller than .25 inches. Many require margins no smaller
than .5 or .67 inches. Check your printer manual or contact the printer manu-
facturer if you have such a problem.
If you’re using a continuous printer, you may have to slide the paper clamps
over to get the printer to start at the position you want.
5 Click OK to save the changes.

To adjust alignment of forms

Coarse alignments:

This adjustment is only needed for continuous-feed (dot matrix) printers. Use it
when the printed text on your form is off vertically by more than a line or two.
1 Make sure your printer is turned on and is online, with the forms you want
to print inserted to the printer’s paper feeder.
2 From the File menu, choose Printer Setup.
3 Choose the form you want from the Form Name drop-down list.
4 Click Align. (If the Align button is not available, that form cannot be aligned.)
5 If a list of templates appears, click the one you want and click OK.
QuickBooks displays a window where you can choose coarse or fine adjust-
ments.
6 Click Coarse.
7 Click OK to print a sample form.
8 Look at the pointer line that QuickBooks prints across the middle of the
sample form. Determine the number that it points to. Do not adjust your
printer.

Solving printing problems 117

 If the text does
not line up
properly on the
form, determine
the closest
number to the
pointer line,
rounding up.
In this example,
you’d enter 81.

9 Type the number in the Pointer Line Position field in the window that
appears, then click OK.

If necessary, QuickBooks advances the paper in the printer to correct the

alignment, and then prints another sample.
10 Note the correct position of the form for future positioning.
Visually line up part of your printer, such as the sprocket cover or print head,
with one of the position numbers along the edge of the form. Make a note of
this spot, so you can use it in the future as an alignment cue to position your
forms visually.
Even if your printer has an “autoload” or “park” feature (the printer puts the
paper in the same place each time you load it), you need to manually line up
your forms for coarse alignment using a visual cue. QuickBooks does not
remember placement relative to your printer’s autoload point.
11 (Optional) In the Align window, click Fine to make further adjustments, then
go on to Step 5 of the Fine-alignment process (below).

118 Chapter 4 QuickBooks basics

Fine-alignment adjustments:
This method of adjustment is available for all type of printers.
1 Make sure your printer is turned on and is online, with the forms you want
to print inserted to the printer’s paper feeder.
2 From the File menu, choose Printer Setup.
3 Choose the form you want from the Form Name drop-down list.
4 Click Align. (If the Align button is not available, that form cannot be aligned)
5 If a list of templates appears, click the one you want and click OK.
6 If you are using a continuous-feed printer, QuickBooks displays a window
where you can choose coarse or fine adjustments. Click Fine.
7 Click Print Sample. QuickBooks prints the form with a small alignment grid
on it, made up of 1/10 inch squares.
8 Check the horizontal and vertical alignment of the text in the alignment grid.
9 Enter amounts in the Vertical and Horizontal fields to move the printed text
to align it. (The alignment values are in hundredths of an inch. For example,
25 means 0.25 of an inch.)
■ For continuous-feed printers, if the printing is off to the left or right, slide
the paper over to correct the problem. Use the Fine Alignment window
for changes of less than 0.25 inch only.

Problem Solution
Text prints Decrease the number in the Vertical field. For example, if the text is
too high. printing 2 squares (that is, 0.2”) too high, type -20 in the Vertical field.

Text prints Increase the number in the Vertical field. For example, if the text is
too low. printing 1 1/2 squares (that is, 0.15”) too low, type 15 in the Vertical field.

Text prints Increase the number in the Horizontal field. For example, if the text is
too far to the printing a 1/2 square (that is, 0.05”) too far to the left, type 5 in the Hor-
left. izontal field.

Text prints Decrease the number in the Horizontal field. For example, if the text is
too far to the printing 1 square (that is, 0.1”) too far to the right, type -10 in the Hori-
right. zontal field.

10 Click Print Sample to see if the form is now aligned correctly.

11 When you are finished making adjustments, click OK.
QuickBooks saves the horizontal and vertical alignment adjustments.
12 Click OK in the Printer Setup window.

Solving printing problems 119

Dates and the bottoms of letters are clipped on forms
The font you‘re using may be too large. In the Printer Setup window, click Font.
Try a font size of 10 points or less.

Changing fonts
Font options are now available for all types of forms.
1 In QuickBooks, from the File menu, choose Printer Setup.
2 Choose the form you want from the Form Name drop-down list.
Note: You can’t change the fonts on some forms here. You can change the fonts on
these forms by clicking the Customise button on the forms.

3 Click the Fonts tab.

4 Choose the font you want.
.

Choose the font. You can change to italic, bold,

or a combination.
Select one or both of
these check boxes to Choose a point size. Most
strikeout and people prefer a size between 9
underline text. and 12 points.
Choose a colour (not
available for You can see what the font
cheques). If you have looks like here.
a colour printer, you
can print any other A description for the selected
form in colour. font type appears here.

5 Click OK in the Select Font window and the Printer Setup window to save the
changes.

Printing is slow
There are several things you can try:
■ Lower the print resolution for your laser printer: In the Settings tab of the
QuickBooks Printer Setup window, click Options. Then click the Graphics tab
and set a smaller number of dots per inch.
■ If you’re printing on blank paper or letterhead, do not choose to print lines
around each field. In the Settings tab of the QuickBooks Printer Setup
window, clear the Print Lines check box.
■ Make more computer memory (RAM) available by closing down programmes
you don’t need.

120 Chapter 4 QuickBooks basics

 C h a p t e r 5

Tracking and
paying VAT

How QuickBooks 122

tracks VAT
How do I collect
Setting up VAT 123
tracking and pay the right
Setting up and
using VAT codes
126 amount of VAT?
Determining your 132
VAT liability

Making 140 This chapter explains how to set up VAT tracking

adjustments to
your VAT liability in QuickBooks. It helps you determine how much
account
tax to collect on sales you make, how to record
the VAT you pay on business purchases, and how
to remit your VAT to the government . Chapter 5

You are responsible for consulting with a tax advisor

about the VAT regulations, especially if you do business
internationally.
For detailed information about collecting and remitting VAT,
please consult your local office of HM Revenue & Customs.

If you upgraded from an earlier version of QuickBooks,

go to the Resource Area in QuickBooks for information
on how the government name change affected VAT
tracking in QuickBooks.
At the Resource Area window, click Updates. There, you will find
instructions on how to change your Inland Revenue and HM Cus-
toms & Excise suppliers to HM Revenue & Customs.

121
Does your business need to be registered?
Although businesses with an annual turnover below £60,000 are exempt, HM
Revenue & Customs recommends that most businesses register to collect value
added tax (VAT).

Registered businesses track the VAT collected from customers (output tax) and
paid on purchases (input tax). Usually, you collect more output tax from sales
than input tax on purchases, and must pay the difference to HM Revenue &
Customs. If more input tax has been paid than output tax charged, you will be
refunded by HM Revenue & Customs.

If you require more information on whether you should be registered to collect

VAT, contact HM Revenue & Customs National Advice Service (0845 010 9000) or
consult with your accountant.

How QuickBooks tracks VAT

Keeping track of VAT can be a challenge. Some items you sell may be taxable while
others may not, and some items may be taxed at different rates than others. Also,
most customers must be charged VAT, while certain ones may be exempt.

Fortunately, QuickBooks can help you automate these complexities. Take the time
to set up your QuickBooks company for VAT carefully, so you can enter sales and
purchases quickly, you’ll have accurate information about the VAT you’ve
collected and paid when it comes time to remit it.

QuickBooks automatically creates an account called VAT Control when you set up
your company. As you enter sales invoices, cash sales receipts, credit memos, bills,
credit card transactions, and cheques that have a VAT component, QuickBooks
automatically records the VAT amount in the VAT Control account.

QuickBooks’ flexible VAT reports make it easy for you to understand your VAT
position in a variety of ways. For instance, QuickBooks can prepare VAT reports
on a cash basis even if you’re reporting income and expense on an accrual basis.
They can tell you if you owe money to HM Revenue & Customs or if you are due
a refund, and also provide all the information necessary for filling out your VAT
return (subject to going on the cash or standard VAT scheme).

122 Chapter 5 Tracking and paying VAT

Setting up VAT tracking

VAT accounting schemes

There are two main methods or schemes of accounting for VAT: “cash” and
“standard.” The VAT due is worked out differently in both cases, so you need to
know which one applies to you. If you are not sure which scheme to use, contact
your local VAT office.
If you are registered under a VAT scheme other than “cash” or “standard” (for
example, for retail, fixed rate, annual etc.), consult with your accountant on how
to prepare your returns using QuickBooks. At present, QuickBooks supports the
two most-common VAT schemes (cash and standard).

Cash VAT accounting

With the cash VAT scheme, you treat income and expenses as having happened
on the date that the payment was received or made.

For example, let us assume that you report “quarterly” and your return covers the
months of January, February and March. If you invoiced a customer on 1st
February for £1,000.00 plus £175.00 VAT and she paid you on 1st April, the VAT
would be reported in your return for the April - June period. Your VAT payment
should be sent to HM Revenue & Customs no later than the end of July.

Standard (accruals basis) VAT accounting

If you account for VAT using the standard scheme, you treat income and expenses
as having happened on the invoice/VAT date.

In this case, it makes no difference when you were paid; your latest payment date
for VAT on this transaction would be at the end of April.

If you change your VAT accounting scheme

Note: The accounting basis for VAT is usually accrual (not cash).

If the annual value of your taxable supplies is below £660,000 you may find it to
your advantage to use the cash accounting scheme. This is because VAT is not
liable to be paid until you have actually received the payment from your
customer. It is particularly beneficial if you give your customers lengthy periods
of credit or if you have a high level of bad debts. ( VAT Notice 731)

Setting up VAT tracking 123

 If the annual value of your taxable supplies is above £825,000 you must switch to
accrual basis bookkeeping.

If you switch from cash basis to accrual basis accounting, you cannot
retrospectively apply the cash accounting scheme to your business.

If switching from an accruals scheme to cash scheme, you must, from the date you
start to use the scheme, identify and separate in your records any payments you
receive or make for transactions already accounted for under the normal method
of VAT accounting. Exclude such payments from your scheme records

The Accrual or Cash setting in the Reports and Graphs section of the Preferences
window does not affect VAT Reports.

We recommend seeking advice from your accountant for this procedure.

VAT reporting periods

When you set up your QuickBooks company, you set up your VAT reporting
period using information from the Certificate of VAT Registration you received
from HM Revenue & Customs. Your reporting periods refer to how often you remit
your VAT return.

If your VAT reporting period changes, choose Preferences from the Edit menu,
click VAT in the scroll box, click the Company tab, and select your new reporting
period from the VAT Reporting drop-down list.

Quarterly
QuickBooks defaults to a quarterly reporting period for VAT. When you set up
your QuickBooks company, you entered the months when each of your VAT
quarters ends. This is normally every three months.

Annually
If you have been registered for VAT for at least 12 months and the annual value of
your taxable supplies (excluding VAT) is below £660,000, you may be able to use
the Annual period. With the annual reporting period, you can make nine equal
monthly payments by direct debit to HM Revenue & Customs based on an
estimate of the amount of VAT due. These start at the end of the fourth month of
your financial year. Within two months of the end of your financial year, you
must send in your annual VAT return with a tenth balancing payment.

If your turnover is more than £100,000, you will be required to make monthly
interim payments.

To record your direct debit payments to HM Revenue & Customs, you should set
up a QuickBooks standing order (by recording the first payment, memorising it,
and selecting the “Standing Order” option in the Memorised Transactions
window). Start the standing order at the end of the fourth month of your financial
year and enter nine in the Number Remaining field (to cover the next nine
months).

124 Chapter 5 Tracking and paying VAT

 After nine standing-order payments (or when the Number Remaining field is
reduced to zero), QuickBooks deactivates the standing order. Enter the tenth
payment or refund directly into your current account. In the following year,
reactivate the standing order by entering nine in the Number Remaining field.
You may also want to edit the amount you’re paying if the installment payments
have changed.

To learn about… Search the Help index for…

Creating a standing order standing orders, creating

Other accounting periods

You can also use QuickBooks to track VAT on a monthly or bi-monthly period. If
you report VAT monthly or bi-monthly, when creating VAT reports, make sure
you select the correct starting and ending dates for the reporting period in
question.

Turning on VAT tracking

If you haven’t done so already (through the EasyStep Interview), you need to turn
on the VAT preference for QuickBooks to begin tracking VAT.

To turn on the VAT preference:

1 From the Edit menu, select Preferences.
2 Select VAT from the scroll box, then click the Company Preferences tab.
3 Set the preferences according to your business needs, then click OK.

Choose your
reporting period
here. This is
If you have
how often you
customers with
remit your VAT
return. When special VAT
status, tick this
you create your
box. You can
VAT return, its
time frame is then assign a
VAT code to
based on these
him or her. For
settings.
more details,
see“Assigning
VAT codes to
customers” on
page 128.

Tip: For details on setting default VAT codes, see “Setting up a default VAT code for new
items” on page 127.

Setting up VAT tracking 125

 Entering VAT liabilities as of your start date
If your business collected VAT before you began using QuickBooks, you need to
enter the amount you owe to HM Revenue & Customs as of your QuickBooks start
date. These can be done by doing General Journal entries but you should consult
with your accountant on the best method for you.

Setting up and using VAT codes

The VAT code list is the backbone of your VAT tracking. QuickBooks uses VAT
codes (and their associated rates to calculate VAT) on sales and purchases. When
you create an item, you enter the appropriate VAT code to indicate what rate
applies to it.

Default VAT codes are created when you set up your QuickBooks company. For
example, VAT code S indicates that an item will be bought and sold domestically
at the standard VAT rate of 17.5%.

Each time you create an item to sell or purchase, be sure to assign it a VAT code.
Then, every time you enter a sale or purchase, the item’s VAT code appears
automatically on the sales form.

To learn about… Search the Help index for…

Creating an item items, creating

If you need a different VAT code for the transaction (for example, if you are selling
an item to a VAT-registered business in an EC member state), just change the VAT
code when it appears on the sales form.

Be sure that your VAT codes are set up properly, and that you use the
correct one on each transaction, particularly if you do business with
companies located in EC member states.
QuickBooks uses VAT codes to track information for VAT reports. If your VAT
codes are not set up correctly or are not used properly, the VAT reports (and
therefore your VAT return) may be inaccurate.

126 Chapter 5 Tracking and paying VAT

 To create a new VAT code:
1 From the Lists menu, choose VAT Codes list.
2 Click the VAT Code menu button (at the bottom of the VAT Code List
window), then choose New.
3 In the VAT Code field, enter a unique code.
4 Type the VAT percentage represented by this VAT code.
5 Type a brief description (for example, Standard) for this code.
6 If you will use this VAT code to track VAT on transactions with VAT-registered
businesses in EC member states, tick the EC Code check box.
For more information, see “Handling VAT for EC member states” on
page 130.
7 Click OK.

Setting up a default VAT code for new items

You can specify a default VAT code in QuickBooks. With a default VAT code, all
new items you set up are assigned this code by default.

Tip: Even with a default VAT code specified, you can still change VAT codes “on the fly” on
most forms. By specifying the VAT code you use most often as your default VAT, you
may not have to change VAT codes for individual line items very often.

To set up a default VAT code:

1 From the Edit menu, choose Preferences.
2 Click VAT from the scroll box on the left, and click the Company tab.
3 From the Default VAT Code field, select the code you use most often when
buying and selling goods and services.

Assigning VAT codes to items

To let QuickBooks know how to tax the goods or services (items) you buy and sell
for your business, assign each item a VAT code as you set it up in the Item List.

Once you have done so, QuickBooks calculates the correct VAT applicable to them
when they are used on sales and purchase forms. (If you are unsure of what VAT
code to use for your goods and services (items), check with HM Revenue &
Customs or your accountant.

To learn about… Search the Help index for…

Assigning VAT codes to items items, assigning VAT codes to

Setting up and using VAT codes 127

 Assigning VAT codes to customers
If you have regular customers who have special VAT status (for example, who are
exempt from paying the VAT), you can assign them a VAT code that, when used
on a form, overrides VAT codes that have been set up for items. This will save you
time when creating your sales forms.

For example, if you have a customer who is a charity organisation, the

organisation may be exempt from paying VAT for your services. In this case, you
can assign this customer an “E” VAT code (for exempt). The “E” VAT code then
appears on all invoices you create for this customer instead of the default VAT
codes assigned to the service items.

To assign a VAT code to a customer:

1 From the Edit menu, choose Preferences.
2 Click VAT from the scroll box on the left, and click the Company tab.
3 Tick the Allow customer VAT codes check box and select the VAT code you
want to assign to this customer.
4 Open the Customer:Job list (from the Customer menu, select Customer:Job
List), then double-click the name of the Customer to which you want to
assign a VAT code.
5 Click the Additional Info tab.
6 Tick the Use customer VAT code check box, then select the VAT code you
want to assign to this customer.
7 Click OK.

To learn about… Search the Help index for…

Turning on the Customer VAT Codes VAT codes, turning on

Setting up customers customers, adding new

128 Chapter 5 Tracking and paying VAT

Using VAT codes on sales and purchases
Once you have assigned VAT codes to the items you sell and buy, and assigned
customer VAT codes to customers with special VAT status, QuickBooks
automatically applies the correct VAT as you fill in forms.

If you need to apply a different VAT code to an item, you can still select the item’s
VAT code from the form.

The VAT code that is

being applied to this item
is shown here.
QuickBooks gets this code
from the Item List where
you can assign a default
VAT code to your items.
You can change this VAT
code “on the fly” at any
time. Simply click on the
VAT column and select a
different VAT code from
the drop-down list.

To learn about… Search the Help index for…

Using a VAT code on a form VAT codes, changing on forms

What the Zero-Rated (Z) VAT code is for

Certain goods and services are zero-rated meaning they are taxed at a rate of 0%
instead of the standard 17.5%. To see whether the items you sell are Zero Rated,
check with HM Revenue & Customs or your accountant. Some examples are
books, newspapers, young children’s clothing and shoes, and exported goods.

If you sell a Zero Rated item, you charge your customers 0% VAT on it. This means
that you do not collect any VAT to remit to HM Revenue & Customs, but because
the item is taxable, you can reclaim the input tax you paid on the purchase. For
that reason, do not use the Exempt VAT code for Zero Rated items you sell. Use
the Zero Rated code instead.

Setting up and using VAT codes 129

Handling VAT for EC member states

EC VAT regulations vary between goods and services.

Check with HM Revenue & Customs or your accountant about the exact EC
VAT regulations that apply to your business.

As a VAT-registered business, if you purchase supplies for your company from

another VAT-registered business in an EC member state, you may be able to
receive them net of VAT. That is, you provide your VAT number to the supplier in
the other country, and the supplier sends the supplies to you without charging
you VAT on them.

The same holds true for the reverse: you may be able to ship supplies to a VAT-
registered business in an EC member state without charging that business VAT.

However, on your VAT return, you still need to account for the VAT that would
have been charged on your transactions with businesses in EC member countries.
QuickBooks’ standard VAT 100 report can track your sales to and purchases from
businesses in EC member states. To track these values, you need to create
additional, separate VAT codes with the EC Code check box ticked:
■ EZ — 0.0%: Eurosales and purchases, zero-rated. This code should be used for
all sales to and purchases from EU member states that would be zero-rated
acquisitions in the UK.
■ ES — 17.5%: Eurosales and purchases, standard-rated. This code should be
used for all sales to and purchases from VAT-registered companies in EU
member states that would be standard-rated acquisitions in the UK.

When you create an EC VAT code, be sure to tick the “EC Code”
check box in the New VAT Code window.

If the business you are dealing with is registered for VAT, you must also enter its
VAT registration number:
■ If you buy supplies from the business, enter its VAT registration number in the
Additional Info tab of its Supplier profile.
■ If you sell items to the business, enter its VAT registration number in the Addi-
tional Info tab of its Customer profile.

Note: If the business you buy from or sell to is in an EC member state but is NOT registered
for VAT, leave the VAT registration number fields blank.

When you complete a transaction with a business in an EC member state and

select an EC VAT code on the sales form, QuickBooks checks to see whether the
business has a VAT registration number:
■ If there is a VAT registration number, QuickBooks accounts for the VAT on
your VAT return, but does not charge it to the customer (that is, QuickBooks
does not add VAT to the transaction total).

130 Chapter 5 Tracking and paying VAT

 ■ If a VAT registration number is not present, QuickBooks accounts for the VAT
on your VAT return and adds the appropriate amount to the total.

Note: If your business makes exempt supplies, you may need to make a VAT partial
exemption adjustment before filing your VAT return. See page 141.

Handling import VAT for non-EC countries

When you import goods from outside the EC, they must be cleared through HM
Revenue & Customs before entering the UK. Customs clearance usually involves
paying import VAT (as VAT is also a tax on the importation of most goods).

To record import VAT:

1 From the Suppliers menu, choose Enter Bills.
2 Enter the bill from your non-EC supplier.
3 Type Z in the VAT code column.
The bill should not have any VAT on it.
4 Click Save & Close.
If you are recharged import VAT by your supplier:
1 From the Suppliers menu, choose Enter Bills.
2 Enter a bill for the amount of the VAT.
3 In the Account column of the Expenses tab, assign your Import VAT expense
account.
■ If you do not have an Import VAT expense account, select <Add New> to
create one now.
4 Type S in the VAT code column.
5 Enter the entire amount of the VAT in the VAT Amount column.
6 Click Save & Close.

Deferment arrangement
If you have a deferment arrangement, HM Revenue & Customs will collect import
VAT from your bank account by direct debit and send you a C79 certificate at the
end of the month detailing the VAT they have collected.

To record import VAT paid by direct debit:

1 From the Banking menu, choose Write Cheques.
2 Enter a cheque in your current account for the amount of the import VAT as
shown on the C79 certificate.
3 Leave the account column blank. Type S in the VAT code column and the
entire VAT amount in the VAT Amount column.
4 Click Save & Close.

Setting up and using VAT codes 131

Handling fuel scale charges
QuickBooks can easily handle the VAT you must pay if you have employees for
whom you provide fuel for business and private use.

For each VAT period, you should calculate the output VAT that is due using the
fuel scale charge table provided by HM Revenue & Customs. We recommend you
use a spreadsheet to do this.

To record VAT on private fuel:

1 From the Banking menu, choose Make Journal Entry.
2 Fill out the end date of your VAT period and an entry number.
3 On the first line, choose the account you use to track fuel benefits, then enter
the total inclusive of VAT in the Debit column.

These radio buttons

appear once a VAT
code has been
selected in the VAT
column.

4 On the second line, enter the net amount (i.e., exclusive of VAT) in the Credit
column, then choose the VAT code.
5 Select the Output radio button.
6 Click OK to record your entry.

Determining your VAT liability

You must file a VAT return each period even if you do not owe money or expect a
refund.

If you are using “cash” VAT reporting, follow the steps under
“Completing a cash-basis VAT return” on page 136.

132 Chapter 5 Tracking and paying VAT

Creating VAT reports
At any time, QuickBooks can create reports to show your VAT situation. You can
create reports that are cash or accrual based.

To prepare your VAT return, you should run a VAT 100 report covering your
reporting period. You should also create VAT Summary and Detail reports to verify
the accuracy of your VAT 100 report.

QuickBooks offers several VAT reports. You should print all when you prepare
your VAT return, then file them in a safe place for future reference.
■ VAT 100: This shows you the amounts you need to fill in your VAT return,
including your EC VAT amounts, if any. This is strictly a liability report and
shows the VAT information as of the date specified in the 'As of' field. If you
want the report to be as of a different date change the date in the 'As of' field
(if your accounting basis is accrual) or the ‘To’ field (if your accounting basis
is cash).
■ VAT Summary: This report provides a summary of transactions by VAT code.
It includes total inputs (purchases), total outputs (sales), and the balance due
to or from HM Revenue & Customs at the end of a reporting period. If you
choose a longer period than your VAT quarter, the report splits the figures by
VAT quarter.
■ VAT Exception: This report shows unfiled VAT transactions up to the end of
the previous VAT reporting period. This accrual-basis report is a good resource
to find any outstanding VAT you may owe from previous VAT reporting
periods. This is strictly a liability report and shows the VAT information as of
the end date of the previous VAT reporting period.
■ VAT Detail: This report is an exploded version of the VAT Summary report,
showing the totals of inputs (purchases) and outputs (sales), and of input tax
and output tax. You can create VAT detail reports for accrual-basis or cash-
basis reporting.
● Accrual basis
When you use this option, QuickBooks prepares a complete list of your
VAT-related transactions for a selected period.
● Cash basis
When you use this option, QuickBooks prepares two reports — one report
includes the VAT amounts and the other includes the net amounts for
each item bought or sold. You can tile or cascade the reports to see them
both on the screen at the same time.
■ EC Sales List: This report provides a summary of sales made to VAT-registered
businesses in EC member states, sorted by the business’ VAT registration
numbers. This report is always calculated on an accrual basis, regardless of
your usual VAT reporting preference.

Determining your VAT liability 133

 To create a VAT report:
1 From the Reports menu, choose VAT, then VAT Summary, VAT Exception,
VAT Detail, VAT 100, or EC Sales List.
QuickBooks creates the report for the appropriate period using the reporting
preferences you specified in your VAT Preferences. QuickBooks also uses the
reporting basis (accrual or cash basis) you chose in VAT Preferences.
For example, if you choose VAT Detail and you’re VAT reporting preference
was set to “Cash”, QuickBooks prepares two reports.
2 (Optional) Customise the report.
QuickBooks allows you to run VAT reports for different periods. You will need
to customise the VAT reports if your VAT accounting periods are non-
standard.
3 If you want to print the report, click Print.

Completing an accrual-basis (standard scheme) VAT

return
The File VAT window lets you easily remit the VAT you've collected to HM
Revenue & Customs.
1 From the Suppliers menu select VAT, then File VAT.
2 Note the date in the 'Show VAT through' field. The default date is the last day
of the previous month. If you want to see your VAT liability through a
different date, change this field.
3 Click in the Pay column of the liability you are paying.
4 Select the account that the funds are to be paid out of from the Payment
Account drop-down list.
5 Select the 'To be printed' radio button if you do not want to assign a cheque
number to the payment until you print the cheque.
or
Select the 'Assign cheque no.' radio button to assign a cheque number to the
payment as part of this step.
6 Note the Payment Date. This is the date that appears on the transaction in
your VAT Control account.
7 Click Next to continue to the Value Added Tax Return form.
8 Complete the VAT Return form and click Next. Clicking the next button does
the following:
■ Create a VAT return for the period (date 1) to (date 2);
■ Mark all the transactions that are included on this return as 'filed' (an ‘F’
will appear beside the transactions in the register);
■ Create a cheque to pay your VAT liability or create an invoice to record
your VAT refund.
Warning: This step cannot be undone. Click Cancel now if you still need to
make changes to your VAT return. Otherwise, click Continue to permanently
save your VAT return and liability payment (or refund invoice).

134 Chapter 5 Tracking and paying VAT

File VAT window explained

Field Box Description

VAT due in this period on 1 Shows the VAT due on all goods and services you supplied
sales and other outputs in this period.

VAT due in this period on 2 Shows the VAT due (but not paid) on all goods and related
acquisitions from other EC services you acquired in this period from other EC Member
Member States States

Total VAT due (the sum of 3 Show the total amount of the VAT due; i.e. the sum of boxes
boxes 1 and 2) 1 and 2. This is your total output.

VAT reclaimed in this 4 Shows the amount of VAT deductible on any business pur-
period on purchases and chases including acquisitions of goods and related services
other inputs from other EC Member States. This is your input tax.

Net VAT to be paid to Cus- 5 If this amount is under £1, you need not send any payment,
toms or reclaimed by you nor will any repayment be made to you, but you must still
fill in this form and send it to VAT Central Unit.

Total value of sales and all 6 Shows the value excluding VAT of your total outputs (sup-
other outputs excluding any plies of goods and services). Include zero rated, exempt out-
VAT puts and EC supplies from box 8.

Total value of purchases 7 Shows the value excluding VAT of all your inputs (pur-
and all other inputs exclud- chases of goods or services). Include zero rated, exempt and
ing any VAT EC acquisitions from box 9.

Total value of all supplies of 8 EC Trade Only: Box 8 and 9 are only used if you have sup-
goods and related services plied goods to or acquired goods from another EC Member
to other EC Member States State. Include related services such as transport costs where
these form part of the invoice or contract price. The figures
should exclude VAT.

Total value of all acquisi- 9

tions of goods and related
services to other EC Mem-
ber States

Determining your VAT liability 135

Completing a cash-basis VAT return
Note: This method of paying your VAT does not mark your VAT Control transactions as
'Filed'. You will have to correct this situation if in the future you switch to accrual basis
reporting.

1 Open the VAT 100 report (from the Reports menu, select VAT). This shows
you the amounts you need to fill in your VAT return, including your EC VAT
amounts, if any.
2 Select the VAT return period dates.
When you use this option, QuickBooks prepares two reports — one report
includes the VAT amounts and the other includes the net amounts for each
item bought or sold. You can tile or cascade the reports to see them both on
the screen at the same time.
3 If the 'Net VAT to pay' (box 5) amount is positive, from the Suppliers menu,
select Pay VAT Liability.
4 The Write Cheques window is automatically filled in with the relevant VAT
liability information. Leave the rest of the Expenses tab and all of the Items
tab blank.
5 Complete the remainder of the cheque, then click 'Save and Close'.
When you record the cheque, QuickBooks automatically records a decrease in
liability within your VAT Control account.
6 Submit this cheque with a completed VAT Return form to HM Revenue &
Customs.

VAT payments do not affect VAT reports at all. After you pay your VAT for the
quarter (or for whatever accounting period you use), your VAT reports for that
period still show the amount you owed. This lets you provide the necessary
support in the event of a VAT audit.

Receiving a VAT refund from HM Revenue & Customs

Recording a VAT refund using accrual basis reporting

If you are owed a refund or a credit after you have submitted your VAT 100
for the reporting period, QuickBooks will have already created an invoice as
part of the File VAT process.
1 From the Customers menu, select Receive Payments.
2 Select HM Revenue & Customs – Receivable from the Received From drop-
down list.
3 Enter the amount of the refund in the Amount field.
4 Tick the Applied To. column in the row of the invoice you are making a
payment against.
5 Complete the Receive Payments window the same as if you were receiving any
invoice payment.
6 Click Save & Close.

136 Chapter 5 Tracking and paying VAT

 Recording a VAT refund using cash basis reporting
1 From the Suppliers menu, choose Receive VAT Refund.
2 If the Payments to Deposit window appears, click Cancel.
3 In the Deposit To field select the bank account to deposit the refund to.
4 Enter the amount of the refund in the Amount column.
5 Click Save & Close.
When you record the deposit, QuickBooks adjusts your VAT Control liability
account to show that you now owe less VAT to HM Revenue & Customs.

How QuickBooks handles late VAT (accruals basis only)

If you use the cash-basis reporting as your VAT scheme, QuickBooks

cannot mark your VAT transactions as filed, nor can it handle late
VAT.

Unfiled transactions
QuickBooks automatically calculates the due or refundable VAT and generates a
VAT return based on these amounts. The calculated amount of the VAT return
includes transactions that were recorded in a previous VAT period, but have not
yet been included in a VAT return. These outstanding (VAT return) transactions
are referred to as “unfiled” Any unfiled transactions are included in the current
VAT period’s return.

Updating from earlier versions (except 2003) to

QuickBooks 2006
Since the release of QuickBooks 2003, we have made changes to the tracking of
VAT transactions for companies that are on the Standard VAT reporting scheme.
All entries that are included in a VAT return are now marked as ‘filed’ in the VAT
Control account. You can see this when you look at the VAT Control account.
Filed transactions are marked with an F.

This means that if you find a bill or invoice in the office after you have submitted
your VAT return for the period, you can enter that transaction using the original
date on the bill or invoice. QuickBooks automatically includes that transaction in
your next VAT return. In other words, QuickBooks includes all transactions that
are considered ‘unfiled’ in your next VAT return.

Therefore, when you update your old QuickBooks file (pre-QuickBooks 2003), you
must make sure that you enter the correct date of your last submitted return.
When you were prompted to enter this date in to QuickBooks, all transactions
recorded prior to your last VAT end data were marked as ‘filed’.

We recommend that you reconcile your VAT account after upgrading your file.

Determining your VAT liability 137

 Uncategorised transactions eliminated
Previously, amounts could appear as uncategorised in VAT reports and in the File
VAT window. QuickBooks labelled some transactions as uncategorised because
some forms were used for purposes other than what they were originally created.
For example, the Make Deposits window was used to enter a cash sale instead of
using a sales receipt. This type of transaction entry would result in an
uncategorised amount.

Now, QuickBooks categorises all transactions affecting your VAT liability account.
This means:
■ you’ll no longer have to manually categorise these types of transactions,
■ when you generate VAT reports, your VAT liability amount will now be
accurate, and
■ uncategorised amounts will no longer appear in the File VAT window or in
your VAT reports.

Updating from QuickBooks 2003

If you previously had uncategorised amounts, these transactions will
automatically be updated when you install QuickBooks 2006. Before you install
QuickBooks 2006, you’ll need to know the ending dates of your VAT return.

Note: If you used the filing functionality in QuickBooks 2003, QuickBooks will not ask you for
any VAT information. In this case, QuickBooks updates your VAT data automatically.

What will happen to uncategorised amounts?

QuickBooks will take the ending date you enter and mark all uncategorised
amounts on or before that date as filed so they won’t affect your VAT liability.
Uncategorised amounts after the ending date will be categorised as sales or
purchases so that they correctly affect your VAT liability account. The next time
you file a VAT return, QuickBooks will include these newly categorised
transactions properly with all other unfiled-transactions.

If you had uncategorised amounts in earlier versions of QuickBooks and didn’t

adjust your VAT returns for them, consult your accountant to see if you should file
an adjustment now.

Keeping VAT records

You are required by law to keep records and accounts of the taxable and exempt
goods and services that you supply in the course of your business. You must also
keep a record of your VAT Control account, and should track the taxable goods
and services you receive, too.

Normally, you should preserve your VAT records for six years. Check with your
local VAT office for more information. We recommend that you regularly print
out and keep all of your sales invoices that show VAT and VAT reports, both Detail
and Summary.

138 Chapter 5 Tracking and paying VAT

You will want to keep your computer files as well. Be sure to protect your data by
making regular backups of your QuickBooks file.

Locking past VAT quarters

If you report on a cash basis, we recommend that you set passwords and a closing
date to prevent unauthorised changes to your VAT account. After you’ve paid your
VAT liabilities for a given period, you likely won’t want your employees to change
any of the transactions that affected your liability payment. QuickBooks lets you
restrict access to these older transactions to be sure they are not changed without
your knowledge.

If you use the accrual-basis reporting as you VAT scheme, you cannot
modify the amounts of filed transactions. You can however change
the account designation by going to the register (VAT Control) and
right-clicking on the transaction.

By requiring your permission to delete, add, or edit any transaction before a

chosen date, you can discourage accidental or casual changes to “closed”
accounting periods, but you can still make corrections when necessary.

To deny users access to “closed” periods, when you set up user names and
passwords for your staff, do not grant them permission to Change or Delete
Transactions recorded before your closing date. Then enter a closing date that is
later than the date of your payment.

For more information about setting up user names and passwords, see “Users and
passwords” on page 112.

Determining your VAT liability 139

 To lock older transactions after remitting VAT:
1 From the Company menu, select Set Up Users.
2 Do one of the following:
■ Select an existing user name from the list, then click Edit User,
or
■ Click Add User to create a new user name.
3 If you do not want this user to have access to your historical transactions, give
him or her access only to “Selected areas of QuickBooks” when the wizard
prompts you.
4 Work through the wizard until you reach the Changing or Deleting Transac-
tions screen.
5 Select No to the question, “Should this user also have the ability to change or
delete transactions that were recorded before your closing date?”
6 Work through the rest of the wizard for this user, then any other users in your
user list or that you are adding.
7 At the bottom of the user list, click Closing Date.
■ If you closed the user list, from the Company menu, select Set Up Users.
8 Enter the date up to which your books are closed, then click OK.
9 Click Close to close the user list.

Making adjustments to your VAT liability

account
From time to time, you may need to adjust your VAT liability, possibly to correct
an error in your VAT return or to account for a discrepancy in a VAT payment or
prepayment.

You cannot make adjustments to your VAT liability directly in your VAT Control
account. Instead, you must make a general journal entry.

To correct an error:
1 From the Banking menu, choose Make Journal Entry.
2 Check that the Date field shows today’s date.
3 For your reference, fill in an Entry Number for this adjustment.
4 Leave the “Show on VAT reports as” option clear.
5 In the Account column, choose the VAT Control account.
6 In the Debit or Credit column, enter the amount to adjust your VAT Control
account by.
■ To decrease your VAT liability (that is, if your VAT control account shows
that you owe more to the government than you actually do), enter a
positive amount in the Debit column.

140 Chapter 5 Tracking and paying VAT

 ■ To increase your VAT liability (that is, if your VAT control account shows
that you owe less to the government than you actually do), enter a
positive amount in the Credit column.
7 Leave the VAT (code) and VAT Amount columns clear.
These columns are only used to account for VAT when making adjustments
to other accounts. Because you are adjusting your VAT Control account
directly, you don’t need to select a VAT code or enter a VAT amount.
8 Enter a note in the Memo column as to why this adjustment was needed.
9 On a new line in the Account column, select another account to increase or
decrease:
■ If you are decreasing your VAT liability, select the account that will
receive money from the VAT Control account.
■ If you are increasing your VAT liability, select the account that will
provide money to the VAT Control account.
■ If you are not sure what type of account to use, check with your
accountant.
10 In the Debit or Credit column, enter the amount to adjust your other account
by.
■ If you decreased your VAT liability, enter a positive amount in the Credit
column.
■ If you increased your VAT liability, enter a positive amount in the Debit
column.

Tip: The transaction must have a zero balance. That is, the total in the Debit column must
equal the total in the Credit column.

11 Leave the VAT (code) and VAT Amount columns clear.

12 Enter a note in the Memo column about why this adjustment was needed.
13 Click Save & Close to record the adjustment.

Making a VAT partial exemption adjustment

Note: We recommend that you make the necessary calculations in a spreadsheet before
making the adjustment in QuickBooks. You should check with your accountant or the
local VAT office on the best method of calculation for your business.

If you make exempt supplies and are registered for VAT, you may be required to
make both periodic and annual adjustments to the amount of input tax you are
entitled to recover in your VAT returns. To prepare for making partial exemption
adjustments, complete the following:
■ From the Lists menu, select VAT Codes and create a new code called EX at
0%, with the EC Code clear (see “Setting up and using VAT codes” on
page 126).
■ From the Lists menu, select Chart of Accounts and create a new expense
account called Exempt Input Tax to account for disallowed input tax.

Making adjustments to your VAT liability account 141

 To record exempt input tax:
1 From the Banking menu, choose Make Journal Entry.
2 Fill out the end date of your VAT period and an entry number.
3 On the first line, enter a debit to the Exempt Input Tax account.
4 On the second line, enter a credit to the VAT Control account, select the EX
VAT code. Also, click the Input option under “Show on VAT Reports as”.

5 Click Save & Close.

Eliminating VAT rounding (for accrual

accounting)
QuickBooks rounds each line to the nearest penny. If you enter historical
transactions, this rounding may accumulate over many invoice line items and
affect the total by a few pence. To prepare for removing the rounding, complete
the following:
■ From the Lists menu, select VAT Codes and create two new codes: “A” (100%)
and “B” (0%). Don’t tick the “EC Code” box for either.
■ From the Lists menu, select Item List.
■ Click Item (at the bottom of the Item List window), and choose New. Create
a new item called VAT ADJ. Assign an expense account to this item.

142 Chapter 5 Tracking and paying VAT

To adjust the VAT total to remove rounding:
1 From the Customers menu, select Create Invoices and click Previous until
the invoice you want to edit appears.
2 On one line, add the VAT ADJ item with a VAT code of A (100%) and enter
the amount. If the VAT amount is to be decreased to correct the rounding,
enter -1 in the QTY column.
3 On the next line, add the VAT ADJ item with a VAT code of B (0%) and enter
the amount. If increased, enter -1 in the QTY column.

Making adjustments to your VAT liability account 143

144 Chapter 5 Tracking and paying VAT
 C h a p t e r 6

Doing business
internationally

Multicurrency: an 146
overview
How can I manage
Setting up
multicurrency
146
my foreign
Exchange rates
and how they
154 customers and
affect your
transactions
suppliers?
Dealing with 158
foreign QuickBooks easily handles multiple currencies.
customers
At the conclusion of this chapter, you’ll know
Dealing with 160
foreign suppliers how to set up prices in foreign currencies for
Transferring 162
foreign funds items you sell internationally, enter information
for foreign customers and suppliers, and deal
with the exchange rates of the foreign currencies
you use. Multicurrency is a Pro and higher only
feature.
Chapter 6

145
Multicurrency: an overview
In QuickBooks Pro and higher, you can record transactions in many currencies.
With the multicurrency feature turned on, QuickBooks tracks foreign transactions
and accounts for them properly, regardless of the currency that is used. For
example, if you sell goods to Germany as well as within the UK, you can enter
some transactions in euro and others in Pounds Sterling. Tracking these foreign-
currency transactions is as easy as selecting the foreign customer or supplier from
your list; QuickBooks takes care of everything else.

With multicurrency, you can also set up a fixed foreign price for items, or enter
prices in your home currency and then have QuickBooks calculate the foreign
price based on the current exchange rate. See “Set up foreign prices for items (sales
items only)” on page 150 for more information on setting up foreign prices.

The home currency refers to the currency that is used in the country in which your
business is located. In registers and forms, home-currency transactions are
displayed in the home currency, whereas foreign transactions are displayed in
their foreign currency. On most reports, however, foreign balances are converted
into the home currency.

Note: Once multicurrency is turned on, you cannot turn it off. We recommend that you make
a backup of your company file before turning multicurrency on.

A note about exchange rates

Exchange rates change daily, and these fluctuations can generate a gain or loss in
your books. QuickBooks accounts for these gains and losses by tracking them in
the Exchange Gain/Loss account (see “Exchange rates and how they affect your
transactions” on page 154 for more information).

The home currency is used to determine the value of all other currencies in
relation to it. For this reason, the home currency’s exchange rate value is fixed at
one. Once the home currency is chosen, it cannot be edited or deleted.

Setting up multicurrency
If you deal in more than one currency, you need to turn on the multicurrency
preference. This preference is turned off by default, unless you specified otherwise
in the EasyStep Interview.

After this preference is turned on, you need to assign a currency to customers and
suppliers with whom you deal on an international basis. Customers and suppliers
that were created before you turned on the multicurrency preference are
automatically assigned your home currency.

Note: Foreign accounts cannot be edited in an Accountant’s Review file. For more infor-
mation, see “Exporting data for your accountant (Accountant’s Review)” on page 80.

146 Chapter 6 Doing business internationally

 Each foreign currency you deal in must have a matching Accounts Receivable or
Accounts Payable account in the same currency. This allows you to track
transactions specific to each currency you set up in QuickBooks. You can also set
up foreign-currency Bank and Credit Card accounts.

To set up multicurrency, you need to complete these tasks:

1 “Turn on the multicurrency preference” on page 147.
2 “Set up foreign accounts” on page 148.
3 “Create foreign customers and suppliers” on page 149.
4 (Optional) “Set up foreign prices for items (sales items only)” on page 150.

1 Turn on the multicurrency preference

If you invoice, receive payments, or pay bills in a currency other than the currency
denomination of the country you live in, you should turn on the multicurrency
preference. You can do so in one of two ways: in the EasyStep Interview as you
create a new company or if your company is already set up, in the Preferences
window.
Once multicurrency is turned on, you cannot turn it off. We recommend that you
back up your company file before turning this feature on. That way, you can go
back to the way your company was, if for some reason you don’t want to use the
multicurrency feature anymore.

To turn on multicurrency from the Preferences window:

1 From the Edit menu, choose Preferences.
2 From the scroll box on the left, select Accounting.
3 In the Company Preferences tab, select Use multicurrency and choose your
home currency. The home currency is the currency denomination of the
country in which you live. If you live in the Republic of Ireland, select euro as
your home currency.

Setting up multicurrency 147

 4 Click OK. Multicurrency is now turned on, and the home currency is set. You
can now:
■ Assign a foreign currency to a customer or supplier.
■ Use the currency list, which includes many common currencies and the
latest exchange rates as of QuickBooks’ release.
■ Generate a report to calculate unrealised and realised gains and losses.
■ Quickly convert foreign currency to Pounds Sterling or vice versa with the
Currency Calculator.
■ Use the "Exchange Gain & Loss" expense account to track gains and losses
due to fluctuations in exchange rates.
■ Set a fixed foreign price for items that you sell frequently to one particular
country.
■ Locate multicurrency transactions with two new filters in the "find"
function.

2 Set up foreign accounts

You can choose a foreign currency for Bank, Credit Card, Accounts Receivable
(A/R) and Accounts Payable (A/P) accounts.
You do not need to set up foreign Bank and Credit Card accounts in order to track
foreign transactions. However, for each foreign currency you deal in, you must
create an A/R account (if you have customers), an A/P account (if you have
suppliers), or both in that currency.
For example, if you have customers in the US and South Africa, you’ll need two
additional A/R accounts: one with its currency set to the US Dollar, and another
set to Rand. You cannot use the same A/R and A/P accounts that you use for your
home-currency transactions because the currencies rarely trade as equals.

Note: Once a transaction is recorded in an account, the currency of the account cannot be
changed.

To set up a foreign account:

1 From the Company menu, select Chart of Accounts. The Chart of Accounts
appears.
2 On the Chart of Accounts window, click the Account menu button, and
choose New.

148 Chapter 6 Doing business internationally

 3 With the New Account window open.

Create an A/R or A/P

account for each
The currency of currency in which you
the account is want to deal. See the
selected here. online help for
information on how to
set up a new account.

When you select a currency, the Exchange field shows its exchange rate. If you
want to update the exchange rate, do it from the Currency List. See “Using the
Currency List” on page 152 for more information.

To learn about… Search the Help index for…

Setting up accounts accounts

3 Create foreign customers and suppliers

After you’ve set up foreign A/R or A/P accounts, you can set up the foreign
customers or suppliers who will be using these accounts. To do so, create the
customer or supplier as you normally would and select their currency in his or her
profile. Once a currency is assigned to a customer or supplier, all future
transactions involving him or her are recorded in currency you assigned, with the
exception of bill and credit card payments (in this situation, the account you use
to pay determines the currency of the transaction).

Existing customers or suppliers (that is, ones you set up before turning on the
multicurrency feature) are automatically assigned the home currency. The
currency of these customers or suppliers cannot be changed if you have already
recorded a transaction for them. If you want to use a different currency for these
individuals, you’ll need to create second profiles for them in the correct currency.

Note: Once you record a transaction for a foreign customer or supplier, you cannot change
the currency that is assigned to him or her. You cannot assign a foreign currency to the
HM Revenue & Customs and the HM Revenue & Customs suppliers.

Setting up multicurrency 149

 To create a new foreign Customer, Supplier, or Other Name:
Open a new profile and fill it in as you normally would with the following
exceptions noted on the graphic below.

1 (Optional) Enter
an opening
balance if
applicable.

Once a
2 Select the currency you
transaction is
want to associate with
recorded for a
this profile. If the
customer, you
currency you want is
cannot enter an
not in the drop-down
opening
list, select <Add New>
balance in this
to create a new
window.
currency.

Also, if the exchange

rate is out-of-date,
update it.

Only one currency can be associated with a customer, supplier or “other name.”
If you deal with a customer or supplier in more than one currency, you’ll need to
create an additional profile for him or her for each currency in which you do
business.

To learn about… Search the Help index for…

Creating new customers customers

4 Set up foreign prices for items

(sales items only)
By default, items in the Item List use the currency designated as your home-
currency. What that means is when an item is used in a foreign transaction, the
price of the item is calculated by multiplying the home-currency amount with the
foreign currency’s exchange rate. Because the price is converted based on an
exchange rate, there is a possibility that the price of an item may go up or down
if the exchange rate changes.
QuickBooks allows you to set up a fixed foreign price on items you sell frequently
to one particular country. By doing this, the foreign price of the item will not
change due to fluctuations in exchange rates. You can only select one other
currency besides your home currency to assign to item prices.

150 Chapter 6 Doing business internationally

 To turn on foreign pricing:
1 From the Edit menu, choose Preferences.
2 From the scroll box on the left, select Accounting.
3 On the Company Preferences tab, select Use foreign prices on items.
4 From the "Foreign item currency" drop-down list, select the currency you
want to use as a fixed foreign price on items. If you deal with more than one
foreign currency, choose the currency you deal in the most.
5 Click OK.

Once the foreign pricing

preference is turned on...

...you’ll see an extra field on the New

Item window where you can enter a
fixed foreign price for an item.
QuickBooks uses an item’s Foreign
Price in transactions where the
currency matches the currency that
you chose in the foreign pricing
preference.

Setting up multicurrency 151

Using the Currency List
The Currency List is a list of all the currencies that are set up in QuickBooks. We’ve
included several currencies in the Currency List. It contains information about
each currency such as its exchange rate, currency symbol, and whether they are
from countries belonging to the EMU.

When a foreign transaction is recorded, QuickBooks uses the exchange rate from
the Currency List to convert the foreign amount into the home-currency amount.
You should rarely need to make changes to the Currency List, except to add and
delete currencies, and update exchange rates. You cannot delete your home
currency or a currency that has been used in a transaction.

Tip: If you want to use a fixed foreign price for an item, (in other words, the price is not multi-
plied by an exchange rate), use the foreign pricing feature. See “Set up foreign prices
for items (sales items only)” on page 150 for more information.

To create a currency:
1 From the Lists menu, choose Currency List.
Hotkeys help you convert
Inactive currencies foreign amounts to your home
are not shown in currency quickly.
this list. There are To use hotkeys, on any form,
more than 40 select the foreign amount you
currencies created want to convert, then hold
in QuickBooks. To SHIFT and type that currency’s
display all hotkey. QuickBooks multiplies
currencies, tick the foreign amount by its
this check box. exchange rate, which gives
you the amount in your home
currency.

We recommend that if you decide to assign hotkeys for foreign amounts, only use
alphanumeric values.
Using numerical values for hotkeys may cause problems when enter currency
values into invoices.

2 At the bottom of the Currency List, click the Currency menu button and
select New. The New Currency window appears.
Tick this check box to
make a currency
inactive. This hides the
Update the currency from the list as
exchange rate opposed to deleting it.
often to keep Minimising the
your records Currency List makes it
up-to-date. easier to read from
drop-down lists on
forms.

152 Chapter 6 Doing business internationally

3 On the New Currency window, fill in the options (at the very least, the
Currency Name, Country, and Country Code fields must be filled in):
■ Currency Name: The name of the currency.
■ Country: The country in which the currency is used.
■ Currency Code: The internationally-recognised code for the currency.
■ Currency Symbol: The letter and/or symbol (such as £) to represent this
currency on forms.
■ Hotkey: A unique letter or symbol to use with the SHIFT key to multiply
an amount by the currency’s exchange rate.
■ Exchange Rate: The value of one unit of the foreign currency in your
home currency. In order to keep your foreign records accurate, you
should update the exchange rate on a regular basis.
■ EMU Member: If the country of this currency is an EMU member, tick
this check box and, if necessary, enter the EMU rate. See “Exchange rates
and how they affect your transactions” on page 154 for information on
triangulation.
■ EMU Rate: The EMU rate for this currency as adopted by the EU Council.
Unless you are adding a currency for a country that has recently joined
the EMU, this rate should never be changed.

Format options
■ Symbol Position: Select where you want the currency symbol placed.
Your options include Leading (in front of the money value) or Trailing
(behind the money value).
■ Decimal Separator: Enter the symbol you want to use on forms to
represent the decimal placeholder. The default is a period or full stop (.).
■ Decimal Places: Select the number of decimal places you want to use on
forms. You can select zero through 2.
■ Thousand Separator: Enter the symbol you want to use on forms to
represent the thousand placeholder. The default is a comma (,).
4 Click OK. The new currency is added to the Currency List and is available on
forms that use it.

To learn about… Search the Help index for…

Creating, editing, or deleting a cur- ■ currencies, creating

rency ■ currencies, editing
■ currencies, deleting

Setting up multicurrency 153

Using the currency calculator
The currency calculator is a handy way to convert a home-currency amount into
a foreign amount or vice versa.
■ From the Company menu, choose Currency Calculator. You can also get to
the calculator by pressing F4 while a money value is selected.

1 Type the money

value you want
converted. 3 Select the currency
you want the pound
amount converted to.
2 Select the
currency of the
money amount A read-only field that displays
to convert. the result of the conversion.

4 Click here to copy the converted amount to

the clipboard. Than, use the paste command
(CTRL+V) to paste the amount onto a field
within a form.

Exchange rates and how they affect your

transactions
QuickBooks 2006 Pro and higher must be updated when you first start using
multicurrency, because while the exchange rates provided were accurate at the
time your software was released, currencies fluctuate in value. You should update
the exchange rates of your currencies often—every week or possibly more
frequently, depending on the volatility of the currency. (The easiest way to update
exchange rates is by using the Currency List. See “Using the Currency List” on
page 152 for more information.)

Tip: An exchange rate field also appears on some forms so that you can enter the latest
exchange rate “on the fly”, without having to go to the Currency List. You should (when
reconciling your current accounts, for example) update the exchange rate used for
cheques and deposits to reflect the actual rate that was used by your bank at the time
the cheques were processed or your deposits accepted.

It is these changes in exchange rates that can affect the profits you make from
foreign sales and your costs on foreign purchases. Generally, as a business owner,
you want to track the potential effect of exchange rate changes on foreign
transactions that haven’t been completed (referred to as unrealised gains and
losses) as well as the actual effect of the changes on transactions that have been
completed (referred to as realised gains and losses). QuickBooks provides a report
to help you track both types of gains and losses.

154 Chapter 6 Doing business internationally

Unrealised Gains and Losses
When you create a foreign transaction, the foreign currency is worth a certain
amount in your home currency as determined by its exchange rate on the day of
the transaction. However, the exchange rate is likely to change before the
transaction is closed. Until the transaction closes, the difference between the
value of the foreign currency when you created the transaction and its current
value is your unrealised gain or loss.

For example, say a US customer purchases an item from you for $50 US Dollars,
which is £65 at the time you issue the invoice. Before the customer pays you, the
Pound Sterling falls, and the US Dollar exchange rate climbs to 1.5 from 1.3. The
$50 US that the customer owes you is now worth £75, so your unrealised gain is
£10. (You won’t know how much money in Pounds Sterling the customer actually
pays you until you receive his or her payment and deposit it in a bank. At that
point, the bank converts it to Pounds Sterling, and your gain or loss is then
"realised".)

Many accountants prefer you take your unrealised gains and losses on open
foreign transactions (invoices and bills) into account when you create reports
about your company’s net worth, as doing so gives a more accurate picture of the
value of your company on that date. Check with your accountant to see what he
or she recommends.

To determine your unrealised gains and losses and make a home-

currency adjustment:
To ensure your net worth reports show the true value of your foreign currency
accounts (and therefore your company) at the end of a reporting period, your
accountant should make a home-currency adjustment in the general journal if
your records show an unrealised gain or loss.
1 Create an "Unrealised Gains and Losses" report:
a) From the Reports menu, select Multicurrency, then Unrealised Gain
and Loss.
b) In the Exchange Gain/Loss window, update the exchange rates for the
purpose of this report. (Note that doing so does not update the
Currency List.)
c) Click OK. QuickBooks summarises your open foreign transactions and
your potential gain or loss on them.

Exchange rates and how they affect your transactions 155

 On reports, foreign
amounts are displayed
in the home currency.
In this example, the
home currency is
Pounds Sterling,
therefore these
amounts are in Pounds.

2 Use the information in the report to create a home-currency adjustment in

the General Journal to account for your gain or loss. Select the Exchange
Gain/Loss expense account as the other account that will be affected by this
entry.
3 In the report above, the Unrealised Gains and Losses report shows a currency
gain for the US A/R account, and a currency loss for the UK A/P account.
Therefore, the entries in the general journal should be recorded as follows.

Tick this check

box to ensure You need to
these amounts specify a
are recorded as customer name
an adjustment when a journal
to the home transaction is
currency entered for an
without A/R account (or
affecting the supplier name
foreign balance for an A/P
of that account. account).
When making a home-
currency adjustment,
create a fake customer
or supplier to which you
can assign unrealised
gains & losses.

4 Create your net worth reports.

5 Reverse the General Journal entry to remove the unrealised gain or loss from
your books.

156 Chapter 6 Doing business internationally

Realised Gains and Losses
A gain or loss on a foreign transaction because of changes in the exchange rate
becomes realised once the transaction is paid (either partially or in full). When
you close the transaction, QuickBooks compares the value of the foreign amount
when the transaction began to its value when the transaction closed. QuickBooks
enters the difference (gain or loss) in the Exchange Gain/Loss account (this
account is created automatically when multicurrency is turned on).

For example, if you owe a supplier 500 Shillings, and the Pounds Sterling/ Shilling
exchange rate changes from 0.09 when you ordered the products to 0.08 when
you pay the bill, your realised gain would be £5. That is, when you ordered the
products, you owed £45, but you actually paid only £40 because the Shilling fell
relative to the Pound Sterling. QuickBooks balances the transaction by assigning
the £5 gain to the Exchange Gain/Loss expense account.

To determine your realised gains and losses over time, use the "Realised Gains and
Losses" report. This detailed report shows the original amount of each foreign
transaction in your home currency, the actual exchange rate when the transaction
was closed, and the resulting gain or loss to you.

To print a realised gains and losses report:

■ From the Reports menu, select Multicurrency, then Realised Gain and
Loss.

The amounts on
reports are
shown in the
home currency
denomination of
the company file.

Exchange rates and how they affect your transactions 157

Dealing with foreign customers
QuickBooks handles customers who pay in foreign currencies in much the same
way as customers who pay in your home currency. You create an invoice and
receive payments in exactly the same way. The only difference is that the currency
you assign to the customer in his or her profile becomes the currency of the
transaction (see “Create foreign customers and suppliers” on page 149).

Creating invoices for foreign customers

Before you can create an invoice for a foreign customer, you must set him or her
up in the Customer:Job list and create a foreign A/R account. Once these are done,
you can create an invoice as you normally would. As you do, you also need to:

The price of the item

is converted into the
1 Select a foreign
customer’s currency
customer. QuickBooks
using an exchange
selects an A/R account
rate. In this example,
that matches the
the price of the item
currency of the
(car) is £4.28, but
selected customer. If
when the item is
one doesn’t exist,
added to the invoice,
QuickBooks prompts
the price is
you to create one. In
converted to $10
this case, the
Canadian.
customer is Canadian,
so a Canadian A/R You can also set up a
account is selected. fixed foreign price
for items. See “Set
up foreign prices for
2 Update the exchange
items (sales items
rate if necessary.
only)” on page 150.

Note: VAT codes are not transferred to sales forms when the invoice is created for a foreign
customer, including those customers that belong to the EMU.

158 Chapter 6 Doing business internationally

Receiving payments from foreign customers
You receive payments from foreign customers as you normally would. As you do,
follow these steps:

1 Select the foreign

customer from The amounts on
whom you are this form are in
receiving the US Dollars
payment. In this because the
case, it is a US customer is
customer. from the United
QuickBooks selects States.
an A/R account that
matches the
currency of the
selected customer. If
one doesn’t exist,
QuickBooks 2 Update the
prompts you to exchange rate
create one. if necessary.

Depositing foreign money

1 From the Banking menu, choose Make Deposits.
If you have payments in more than one currency to deposit, the “Payments
to Deposit” window appears.
2 (If necessary) In the “Payments to Deposit” window, from the drop-down list,
select the currency for which you have payments to deposit. You can only
deposit payments from one currency at a time.
When you have made your selection, click OK. The "Make Deposits" window
appears.
3 In the Deposit To field, select the account to which you want to deposit the
payment.You can deposit foreign money into a home-currency account (the
amount is converted using the currency’s exchange rate or a foreign bank
account as long as the currency of the bank account matches the deposit’s
currency).
4 In the Exchange Rate field, update the exchange rate to match the rate of
exchange on the same day the deposit was made.
5 Fill in the remaining fields as you normally would.
If you are getting cash back from a foreign deposit, you need to set up a Petty
Cash account that matches the currency of the money you are depositing and
account for the holdback in it.

Dealing with foreign customers 159

Dealing with foreign suppliers
Working with foreign suppliers is much the same as working with suppliers in
your home currency. You still make purchases and pay bills in the same way, but
the currency of the transaction is the currency that you assigned to the supplier in
his or her profile (see “Create foreign customers and suppliers” on page 149).

Creating purchase orders for a foreign supplier

Before you can create a purchase order for a foreign supplier, you must set him or
her up in the supplier list, create a foreign A/P account, and have the purchase
order preference turned on.

Create a purchase order for a foreign supplier as you normally would. As you do,
you’ll also need to:

1 Select a foreign supplier.

Because the currency of
this supplier is Euro (for
example), the currency of
this transaction is in Euro.
QuickBooks selects an A/P
account that matches the
currency of the selected
supplier. If one doesn’t
exist, you are prompted to
create one.

2 Update the exchange

rate, if necessary.

As you enter items on foreign purchase orders, their prices are converted to the
supplier’s currency. If you have set up a foreign price for an item and the currency
of the price matches the currency of the supplier, QuickBooks uses the foreign
price instead (see “Set up foreign prices for items (sales items only)” on page 150
for more information).

160 Chapter 6 Doing business internationally

Paying bills from foreign suppliers
Often, you will receive bills in a foreign supplier’s currency and be expected to pay
in the same. If you make purchases from a foreign supplier, you should consider
opening a bank account in the supplier’s currency.

You can only pay bills from one currency at a time.

1 From the Suppliers menu, choose Pay Bills.
2 In the A/P Account drop-down list, select the A/P account that matches the
currency of the bill you want to pay. For example, if you are paying a bill from
a Canadian supplier, select your Canadian A/P account.

You can only display

bills in one currency at
a time. The currency is
determined by the A/P
that is selected. In this
case, we’ve selected a
Canada A/P account,
thus the bills listed
here are from
Canadian suppliers.
Update the
exchange rate.
Select the account
If the exchange
from which the
rate changes
payment will be taken.
between the time
If the bank account is
you entered the bill
not foreign,
from the time you
QuickBooks calculates
paid the bill, a gain
the amount in the
or loss is generated. QuickBooks accounts for it by making
home currency that is
an entry in the Exchange Gain/Loss expense account.
to be withdrawn using
the exchange rate.

To learn about… Search the Help index for…

Payments using your credit card credit cards

Dealing with foreign suppliers 161

Transferring foreign funds
You can transfer money from a home currency bank account to a foreign bank
account, or from a foreign account to a home currency account. Money can also
be transferred between foreign accounts of the same currency.
1 From the Banking menu, choose Transfer Funds.
2 With the Transfer Funds Between Accounts window open:

Fill in this
window as Select the currency
you normally denomination of the amount
would. you want to transfer.
For example, if you know
the transfer amount in euro,
select Eur from the drop-
down list and then enter the
Update the amount you want to transfer
exchange in euro.
rate to match
If you know the transfer
the rate of
amount in Pounds Sterling,
exchange on
then select GBP from the
the day of the
drop-down list to specify the
transfer.
transfer amount in UK
pounds.

162 Chapter 6 Doing business internationally

 C h a p t e r 7

Payroll and
employees

Payroll: before 164

you begin...
How do I pay
Setting up 165
payroll: an employees and
overview

Setting up your 169

create payroll
payroll items
forms?
Setting up 178
employees
QuickBooks helps you track employee information
Summarising 188
amounts for the and compensation. With the payroll features, you
year-to-date

Managing payroll 194

can create payroll payments; administer holidays,
and employee
information bonus payments, and benefits; and track data for
Paying 198 end-of-year payroll forms. With QuickBooks, you
employees
can also file your payroll end-of-year forms online
Paying payroll 205
liabilities
to HM Revenue and Customs. Chapter 7
Processing your 210
year end

Getting 224
information To pay your employees with QuickBooks, you must be a
about your member of the QuickBooks Payroll Service.
payroll

163
Payroll: before you begin...

Subscribing to the QuickBooks Payroll Service

Before you can use QuickBooks to pay your employees, you must have a
subscription to the QuickBooks Payroll Service. Note that although some
QuickBooks products allow you to use the payroll features for a limited time
without subscribing, you must subscribe to pay your employees with QuickBooks
when this trial period expires.

Your subscription to the Payroll Service ensures that you receive updated tax tables
whenever the payroll rates, thresholds or forms change. The Payroll Service also
helps you make the most of your software investment by keeping it current. After
you subscribe, you will receive all updates and upgrades that we release for your
software at no additional charge.

To subscribe to the Payroll Service, select Payroll Service from the Employees
menu, then click the Subscribe button and follow the instructions. We will assist
you in updating your QuickBooks user licence to show your subscription number

Once you have subscribed, you can get information about your subscription or
your current tax table by selecting Payroll Service from the Employees menu.

You must subscribe to the QuickBooks Payroll Service once for each copy of
QuickBooks whose payroll features you want to use.

To learn about… Search the Help index for…

Subscribing to the QuickBooks Payroll QuickBooks Payroll Service

Service

If you don’t use the payroll feature in QuickBooks

If you are not subscribed to the QuickBooks Payroll Service, paying employees is
unavailable; however, you can still see and use the Employee list. That’s because
you must still track your payroll expenses and liabilities in QuickBooks, even if
you use an accountant or payroll company to pay your employees rather than the
QuickBooks Payroll Service. Otherwise, your accounts will not be correct.

With the payroll features turned off, the Employee list allows only very basic
information about each employee: his or her name, contact information, National
Insurance Number, hire and release dates, and custom information you define.
Once you turn payroll on more items will appear in your Employee list.

To learn about… Search the Help index for…

Using an external payroll service payroll services, other than Intuit

164 Chapter 7 Payroll and employees

 To learn about… Search the Help index for…

If you have employees, but aren’t payroll, not using

using QuickBooks payroll

Setting up payroll: an overview

The amount of time it takes to enter your payroll information into QuickBooks
varies depending on the size of your company. Often, it can take one to two hours.

You can use the EasyStep Interview to help you set up payroll for your company.

To set up your payroll system:

1 Subscribe to the QuickBooks Payroll Service. You cannot create payments or
calculate payroll amounts unless you subscribe (see page 164).
2 In the Payroll & Employees preferences, check that the payroll features are
turned on and are configured properly for your needs.
For example, you can choose how you want your Employee list sorted and
what prints on an employee pay slip or payroll payment and voucher.
3 Gather the information you need to set up payroll (see page 166).
4 Confirm that the payroll liability and expense accounts that QuickBooks
creates for you meet your needs (see page 169).
5 Set up (in this order):
■ Payroll items (see “Setting up your payroll items” on page 169)
■ Employee default setting (see “Employee defaults: entering common
employee information” on page 178)
■ Your employees (see “Setting up employees” on page 178)
■ The employees’ year-to-date amounts (see “Summarising amounts for the
year-to-date” on page 188)
6 If you have not done so, protect your company’s payroll data from unautho-
rised access by setting up users and permissions. For information about
restricting access to your company file, see “Users and passwords” on
page 112).

To learn about… Search the Help index for…

Setting up payroll payroll setup, required information

Subscribing to the QuickBooks Payroll QuickBooks Payroll Service

Service

Getting the latest tax tables tax tables, updating

Setting payroll preferences preferences, payroll

Set user permissions for payroll permissions

Setting up payroll: an overview 165

Collecting the information you’ll need
If you paid employees before you set up your company in QuickBooks, you’ll need
to get information from your previous accounting package or your accountant.

Information you need to start Where to find it

Company

How often you pay your employees. Your accountant or company records.

Your tax district reference number. Your accountant or company records.

Start date for payroll. Your company records.

Tax information

The current payroll laws and taxes that apply to your Your accountant or HM Revenue & Customs.
company (i.e. Employee NI and Tax Codes).

Current tax tables covering payroll withholdings such QuickBooks downloads them
as National Insurance premiums. automatically for you when you are subscribed
to the Payroll Service.

Compensation, benefits, and other payroll items

How you pay your employees and directors: hourly Your accountant or company records.
wages, salaries, and/or commissions.

Things you add to employee payroll payments. Your accountant or company records.
■ Examples include bonuses, statutory payments, tax
credits, etc.

Things you deduct from employee payroll payments. Your accountant or company records.
■ Examples include union dues, repayments of
employee loans or advances, health or life insurance
paid by the employee, deductions for personal pen-
sion plans, collection of student loans.

Expenses your company pays that are based on Your accountant or company records.
employee payroll payments (employer contributions).
■ Examples include employer contributions to
employee pension funds, health or life insurance paid
by the company, etc.

Special information for company directors: Your accountant or company records.

■ Are you going to calculate the NIC deductions
according to the annual (or pro-rata annual) or the
per period (as employee) method?

166 Chapter 7 Payroll and employees

Information you need to start Where to find it

Employees

Employee names, addresses, dates Employees.

of birth, and National Insurance Numbers.

Employee’s rate of pay or salary and payroll payment Payroll cheques, P45, reports, or payroll
additions, deductions, and employer contributions (if ledger.
any).

Employee NI and Tax Codes, P45 information (for Employees, P45, P11, reports, payroll
employees who started in the current payroll year), and ledger and employees.
tax credit details.

Is employee a director? Company information, employee, existing

payments, reports, or payroll ledger.

Bank details if paid by BACs. Employees.

Statutory payments including Statutory Sick Pay (SSP), Your accountant or existing payments.
Statutory Maternity Pay (SMP), Statutory Adoption Pay
(SAP) and Statutory Paternity Pay (SPP).

Holiday time accruing policies and amounts. Existing payments, reports, or payroll ledger.

Year-to-date amounts

Each employee’s payroll amounts from the beginning Copies of employee payroll cheques, payroll
of the payroll year to the date you started using Quick- slips, former payroll service, payroll reports,
Books. accountant, payroll ledger.
■ That is, the total amount you’ve paid out to the
employee so far this year, and
■ The total amounts you withheld from each of the
employee’s payments and what for.

Your payroll liability amounts from the beginning of the Former payroll service, accountant, payroll
financial year to the date you started using QuickBooks. ledger.
■ That is, the total amounts you withheld from all pay-
roll payments you issued this year, and,
■ How much you already remitted to the HM Revenue
& Customs, benefits providers, etc. as a result of
these liabilities.

Method of calculation for director NICs (annual/pro-rata Former payroll service, accountant, payroll
annual or per period. ledger.

Setting up payroll: an overview 167

Payroll expense and liability accounts
When payroll is turned on, QuickBooks adds two accounts to your Chart of
Accounts:
■ Payroll Expenses (an Expense account)
■ Payroll Liabilities (an Other Current Liability account)
■ Attachment Deductions (an Other Current Liability account to track AEOs)

To keep your balance sheet and profit and loss statement accurate, QuickBooks
associates each payroll item with the appropriate account or accounts.

Whenever you create a new payroll item, QuickBooks helps you assign it to the
correct account or accounts by prefilling the account name to use. However, you
can use a different account if you like. For example, an accountant for a limited
company may want to create subaccounts of the Payroll Expenses and Payroll
Liabilities accounts to track expenses for directors versus other employees.

It is also correct for some types of payroll items (such as a deduction for a loan
repayment) to be associated with an account other than an expense or a liability
account.

To learn about… Search the Help index for…

Payroll Liabilities account payroll liabilities, account for

Payroll Expenses account payroll expenses, account for

Customising payroll accounts

You can change the names of the payroll liability account and payroll expense
account that QuickBooks provides by default. And, if you use numbered accounts,
you can change the default account numbers.

To see more detail of your payroll liabilities on your balance sheet, break down
your Payroll Liabilities account by using subaccounts. Similarly, use subaccounts
for your Payroll Expenses to see more detail of your payroll expenses on your
profit and loss statement. For example, a limited company may need to report
expenses for directors separately from other salaries.

To learn about… Search the Help index for…

Adding new accounts accounts (managing), adding

Changing account information accounts (managing), editing

subaccounts subaccounts

168 Chapter 7 Payroll and employees

Setting up your payroll items

The importance of payroll items

Payroll items are the building blocks of your QuickBooks payroll system. When
you create any kind of payroll transaction in QuickBooks—whether it’s a payroll
payment, a liability payment, or a payroll adjustment—you use payroll items to
do it (in the same way that sales forms use service or stock items).

There are payroll items for employee compensation (salaries and hourly wages),
amounts you withhold from employee payroll payments (taxes and other
liabilities), employer-paid expenses (such as employer-paid benefits), and
additions and deductions (such as bonuses and loan repayments). QuickBooks
uses payroll items to track the individual amounts on a payroll payment and the
accumulated year-to-date wage and tax amounts for each employee.

QuickBooks displays your payroll items on the Payroll Item list. The names of the
payroll items are what you’ll see on payroll payments and in payroll reports.

To learn about… Search the Help index for…

Payroll items payroll items, defined

payroll items, editing

Setting up your payroll items 169

About the default payroll items
When you first turn on the payroll feature, QuickBooks creates the Payroll Item list
with some standard payroll items. These include:

Payroll item name Type Use for

Holiday Salary Salary Amount paid for holidays taken by a
salaried employee

Salary Salary Amount paid per year, irrespective of hours

worked

Salary Backpay Salary Amount paid per year to cover a previous period,
irrespective of hours worked

Sick Salary Salary Amount paid for sick time taken by a

salaried employee

Holiday Hourly Hourly Pay Amount paid per hour to an hourly employee for
holiday time

Hourly Backpay Hourly Pay Amount paid per hour to cover a previous period

Hourly Pay Hourly Pay Amount paid per hour to an hourly employee

Sick Hourly Hourly Pay Amount paid per hour to an hourly employee for
sick time

Bonus Addition Bonus pay

Statutory Adoption Pay (SAP) Addition Statutory Adoption Payments (unlike SMP, SPP
and SSP, SAP is not automatically calculated; see
the online Help for information on how to pay
SAP)

Statutory Maternity Pay (SMP) Addition Statutory Maternity Payment

Statutory Paternity Pay (SPP) Addition Statutory Paternity Payments

Statutory Sick Pay (SSP) Addition Statutory Sick Payments

SPS - Employee Deduction Employee portion of a Stakeholder Pension

SPS - Employer Employer Employer portion of a Stakeholder Pension for an

Contribution employee
Pension payout Addition (Only appears if you complete the payroll section
of the EasyStep Interview)

Employer pension Employer (Only appears if you complete the payroll section
contribution Contribution of the EasyStep Interview)

Employee pension Deduction (Only appears if you complete the payroll section
contribution of the EasyStep Interview)

Additional Voluntary Deduction (Only appears if you complete the payroll section
Contribution (AVCs) of the EasyStep Interview)

Give as You Earn (GAYE) Deduction (Only appears if you complete the payroll section
of the EasyStep Interview)

170 Chapter 7 Payroll and employees

Payroll item name Type Use for
Collection of Student Loan Payroll Taxes Student Loan repayments deducted directly from
an employee’s payment

Tax Credit Tax Credit Tax Credits awarded to employees from HM Rev-
enue & Customs

Income Tax Payroll Taxes Income tax withheld from an employee

NIC Employee contracted-out Payroll Taxes National Insurance for a contracted-out

employee

NIC Employee not Payroll Taxes A regular (not contracted out) employee’s portion
contracted-out of National Insurance

NIC Employee Rebate Payroll Taxes National Insurance rebate respecting a

contracted-out employee
NIC Employee Rebate (ER) Payroll Taxes Employer portion of National Insurance Rebate
respecting a contracted-out employee

NIC Employer Payroll Taxes The employer’s portion of National

Insurance for an employee

NIC Employer Rebate Payroll Taxes National Insurance rebate for the employer of a
contracted-out employee

SMP Recovery Statutory Pay Tracks the Statutory Maternity Pay recovery
Recovery amount that is used to reduce the total liability
payments. If you qualify for SER, also tracks the
NIC compensation amount.

SPP Recovery Statutory Pay Tracks the Statutory Paternity Pay recovery
Recovery amount that is used to reduce the total liability
payments. If you qualify for SER, also tracks the
NIC compensation amount.

SAP Recovery Statutory Pay Tracks the Statutory Adoption Pay recovery
Recovery amount that is used to reduce the total liability
payments. If you qualify for SER, also tracks the
NIC compensation amount.
SSP Recovery Statutory Pay Tracks the Statutory Sick Pay recovery amount
Recovery that is used to reduce the total liability payments.
If you qualify for SER, also tracks the NIC com-
pensation amount.

Online Filing Rebate Online Filing Rebate awarded from HM Revenue & Customs if
Rebate you electronically file your 04/05 end-of-year pay-
roll forms before the mandatory date.

Setting up your payroll items 171

Creating new payroll items
As you set up your payroll system, you will need to create new payroll items to
match the way you pay your employees. To create new items, use the Add New
Payroll Item wizard.

To start the Add New Payroll Item wizard:

■ With the Payroll Items list open, click the Payroll Item menu button, then
select New.

Payroll item type Use for

Wage Use Salary Wages for compensation to employees or directors whose

annual salary is independent of the number of hours actually worked.

Use Hourly Wages for compensation based on the number of hours worked.
Use Commission for compensation based on a percentage of another quan-
tity (such as sales volume) or a flat amount multiplied by another quantity
(such as units sold).

Addition Any addition to gross or net pay such as a bonus.

Deduction Any deduction from gross or net pay. Examples include union dues, loan
repayments, employee deductions for pension schemes, or employee-paid
insurance.

Employer Contribution Any employer-paid benefit or expense that you want to track with each pay-
roll payment. Examples include employer contributions to a pension
scheme.

Attachment of Earnings A deduction from an employee’s gross pay (ordered from a court) to pay
Order down an employee’s debt.

You can limit payroll items to a maximum amount, either annually (e.g. an
employee’s union dues cannot be more than £150 per year) or absolutely (e.g. an
employee’s loan repayment cannot be more than £2000, the amount of the loan).
As you create the item in the wizard, you should:
■ Confirm that the expense and liability accounts assigned to it meet your
needs and change them, if you need to.
■ Choose whether to track the payroll item on P14/P60 forms if it’s an
addition, deduction, or employer contribution. If you’re not sure which
taxes should be affected by a payroll item, check with your accountant or
HM Revenue & Customs.

To learn about… Search the Help index for…

Changing the name of payroll items payroll items, editing

Adding payroll items payroll items, adding

172 Chapter 7 Payroll and employees

Payroll items and expenses
An expense is similar to a debt except that you pay the expense as soon as you owe
it. Common employer payroll expenses include gross pay (e.g., wages before
taxes), employer-paid payroll taxes (e.g., the employer’s part of National
Insurance) and employer-paid benefits for employees (e.g., premiums for an
employer-paid health plan).
For all payroll expenses, QuickBooks suggests using the Payroll Expenses account.
When you run payroll, QuickBooks keeps track of your company’s expenses for
each employee. You can then see totals for your expenses on the Payroll Summary
report and on the Profit and Loss Statement.

Keeping track of payroll expenses

You can break down employer-paid payroll expenses by job, class, and service
item. Expenses that you can break down include:
■ salary wages, hourly wages, and commissions
■ Employer-paid payroll taxes
■ Additions and employer contributions such as bonuses
QuickBooks can pro-rate the employer-paid expenses for an employee in the same
proportion as the amounts of the employee’s earnings. Additions, commissions,
or employer contributions can also be pro-rated.

Tracking expenses by customer and job

Some businesses like to see which customers and jobs create the most work and so
the most expenses for them. To track payroll expenses by customer and/or job, do
the following:
■ In QuickBooks Regular, turn on “Use customer:job tracking” in the
Accounting preferences. (In QuickBooks Pro or higher, this is always on.)
■ Tick the following Payroll & Employees preference: “Report all payroll taxes
by ...” Then choose whether you want to assign one class to an employee’s
entire payroll payment or to each of the payroll items you use on the payroll
payment.
■ Review all of your commission, addition, or employer contribution payroll
items to make sure the check box for “Track Expenses by Job” is ticked.
■ When you create a payroll payment for an employee, select the correct
customer:job or jobs from the drop-down menu for each salary or hourly
wage payroll items you enter.

Setting up your payroll items 173

 Tracking expenses by class
Businesses often wish to track income and expenses by department or projects.
Similarly, if you are a charity you may wish to track your income and expenses by
project, restricted and un-restricted funds. This can be done by using classes. To
track payroll expenses by class, do the following:
■ Turn on “Use class tracking” in the Accounting preferences.
■ Turn on the following Payroll & Employees preference: “Report all payroll
taxes by....” Then choose whether you want to assign one class to an
employee’s entire payroll payment or to each of the payroll items you use on
the payroll payment.
■ Review all of your commission, addition, or employer contribution payroll
items to make sure the check box for “Track Expenses by Job” is ticked.
■ When you create a payroll payment, either select the correct class or the
payment or assign a separate class to each earnings payroll item on a payroll
payment, according to the Payroll & Employee preference you chose.

Tracking expenses by service item (QuickBooks Pro and

higher only)
Some businesses track expenses by service item. (A service item is what you use on
sales forms to charge your customers for services you provide, such as labour.) To
track payroll expenses by service item, do the following:
■ Turn on the following Payroll & Employees preference: “Report all payroll
taxes by....” Then choose whether you want to assign one class to an
employee’s entire payroll payment or to each of the payroll items you use on
the payroll payment.
■ Review all of your commission, addition, or employer contribution payroll
items to make sure the check box for “Track Expenses by Job” is ticked.
■ Make sure that in the record you set up for each of your employees, the check
box for “Use time data to create payments” on the Payroll & Compensation
Info tab is ticked.
■ Have your employee create time sheets using service items associated with the
Customer:Job he or she worked on.
■ Pay your employee using the data from the time sheets or send an invoice to
your customer using the time and costs feature.

To learn about… Search the Help index for…

Keeping track of payroll expenses by cus- payroll, tracking expenses

tomer:job, class or service item

174 Chapter 7 Payroll and employees

Payroll items and liabilities
Often, you have to deduct amounts from your employees’ pay and pass them on
to the government. For example, when you pay an employee, your company
temporarily keeps the income taxes he or she owes and remits that money to the
government later.

These types of deductions are not expenses because the money you pass on comes
from the employee, not your company. Instead, because you temporarily keep
money that you owe to someone else, these types of deductions are liabilities.
Payroll items for liabilities are usually assigned to the Payroll Liabilities account.

When you run your payroll, QuickBooks calculates how much you owe the
government for each withholding tax, deduction, and employer contribution
payroll item and records the amounts in the Payroll Liability account. With each
payroll payment you create, the balance of this account increases. When you pay
your payroll taxes and other payroll liabilities with the Pay Liabilities window,
QuickBooks decreases the balance of the liability account. Recovery of statutory
pay also decreases the balance of the liability account.

Combinations of expenses and liabilities

Some payroll items are a combination of liabilities and expenses. For example, the
portion of National Insurance (NIC) that you withhold from an employee’s
payroll payment is a liability, while the portion that you pay as an employer is an
expense.

Payroll items for employer-paid taxes and employer contributions are usually
assigned to both a liability account and an expense account.

How to set up common payroll items

Follow this guide as you set up your payroll items.
Student Loans
Collection of
Pensionable

Income Tax
Pension/

Tracking
or Net
Type

Gross

Payroll item
NICs

P60

Car allowance Add’n ✓ Gross ✓ ✓ ✓ Earn

Child Support Agency Ded’n Net

Commission Add’n ✓ Gross ✓ ✓ ✓ Earn

Company Car Ded’n Net

Contribution

ESPP Ded’n Net

contribution

Setting up your payroll items 175

 Student Loans
Collection of
Pensionable

Income Tax
Pension/

Tracking
or Net
Type

Gross
Payroll item

NICs

P60
Expenses Add’n ✓ Net

Give As You Earn Ded’n Gross ✓ ✓ ✓

Health Insurance Ded’n Net
Deduction

Housing
Allowance
Add’n ✓ Gross ✓ ✓ ✓ Earn

Pay in Lieu
of Notice
Add’n ✓ Gross ✓ ✓ ✓ Earn

Redundancy
Payment (up
Add’n ✓ Net

to £30,000)

Save As You Earn Ded’n Gross ✓ ✓ ✓

Staff Loan Add’n ✓ Net

Staff Loan Ded’n Net

repayment

Stock option exercise Add’n ✓ Gross ✓ ✓ ✓ Earn

Setting up payroll items for pension contributions

After setting up your other payroll items, you can set up pension contributions
that are based on a percentage of an employee’s pension-based earnings.
There are many different types of pensions. As you set up pension payroll items
for your employees, be sure you understand how the pension works and its
income tax consequences. Once you have created the pension contribution
payroll items using the payroll items wizard, you can apply them as necessary to
each employee’s pay.

What are pensionable earnings?

A pension contribution is usually a percentage of an employees wages or earnings.
The wages or earnings used to calculate the contribution is referred to as the
pension earnings base. The pension earnings base is the employee’s pay or the
employee’s pay combined with any additions.

176 Chapter 7 Payroll and employees

 For example, your employee has a wage of £1,000 per month and receives a bonus
of £500. The employee’s pension earnings base would be £1,500. Therefore, if the
employee’s pension contribution is 10% of his or her pension earnings base, the
pension contribution would be £150.

To set up pension contributions in QuickBooks:

1 Create the payroll items you would normally use to pay your employees. As
you do, indicate whether each payroll item should be included in the
employee’s pension earnings base. (In the Payroll Item wizard, tick the
“Payroll item is pensionable earnings” check box.)
2 Create a Deduction payroll item for employee pension contributions if the
deduction payroll items provided by default don’t meet your needs. (In the
Payroll Item wizard, tick the Pension Contribution check box.)
3 Create an Employer Contribution payroll item for employer pension contri-
butions. (In the Payroll Item wizard, tick the Pension Contribution check
box.)
4 Add pension contribution payroll items to an employee’s record, or if this
pension is applicable to all or most of your employees, add it to the employee
defaults. For more information on setting up employee defaults, see page 178.

Tip: If you require additional help on the above steps, refer to the online Help.

Once you have created some payroll payments that include pension
contributions, generate a Payroll Pension Detail report to see a summary of the
pension contributions paid on behalf of each employee. Note that the Earnings
Base column in this report will show amounts for pension contributions that are
based on a percentage of the pension base, otherwise this column shows zeros.

To learn about… Search the Help index for…

Creating a payroll item to be included payroll items, creating a pension earn-

in pensionable earnings ings base

Creating a payroll item for an payroll items, adding employee pension

employee pension contribution contributions

Creating a payroll item for an pension items, adding employer pension

employer pension contribution contributions

Adding a pension contribution payroll employees, adding a pension contribu-

item to an employee’s record tion to

Generating a Pension Detail Report payroll pension detail report

Setting up your payroll items 177

Setting up employees

Use payroll only to pay employees and directors, not subcontractors

or owners.
To pay subcontractors, set them up as suppliers, have them bill you, and pay
them with the Pay Bills feature. Later, for your year-end forms, create a report
to show you how much you have paid each subcontractor and enter amounts
withheld from subcontractors for income tax on to the P35 form.
To pay owners, use an owner’s drawing from an equity account.

Generally, an employee is a person you pay on a regular and ongoing basis to

perform services for your company, using materials and equipment you provide.

Usually, people in business for themselves are owners or partners, not employees.
Always pay owners and partners with an owner’s drawing instead of a payroll
payment. If you need to track commission sales for owners or partners, add them
to the Sales Rep. list.

If your business is limited, directors who work in the business are usually paid as
employees, but their NICs will be calculated differently. You will need to decide
whether to use the annual/pro-rata method of calculation, or the alternative per
period (as employee) method.

If you’re not sure whether a person providing services for you is an employee,
owner, or contractor, contact the HM Revenue & Customs or your accountant for
advice.

To set up employees for payroll, you need to:

■ (Optional but recommended) Set up employee defaults.
■ Add new employees to your Employee list, or add payroll information for
employees already on your Employee list.

Employee defaults: entering common employee

information
Employee defaults help you set up payroll for several employees quickly. You enter
payroll information that is common to most employees. These defaults then show
up every time you create a new employee. If the information is different for a
particular employee, you can change it for him or her. This feature is also useful if
you need to make sweeping changes to all of your employees. For example, if the
pension deduction rate changes, you can enter the change once in the Employee
Defaults window as opposed to changing each employee record!

To create default settings for your employees:

1 From the Employees menu, select Employee List.
2 From the Employee menu button, select Employee Defaults.

178 Chapter 7 Payroll and employees

 You can set up the following information as employee defaults:
■ Salary or hourly wage payroll items (with or without rates)
■ Pay frequency
■ Pay method
■ Class, if you’re using classes to track your employees
■ Whether you want to use time data for the employee and base payroll
payments on it (QuickBooks Pro and higher only)
■ Additions, deductions, and employer contributions that appear on payroll
payments for most employees

Note: The order you enter payroll items in the Addition, Deductions, and Employer Contribu-
tions table can affect the amount QuickBooks calculates for each item and for taxes.

■ Payroll taxes and other withholdings

■ How employees accrue time (such as sick and holiday time). This count does
not apply to statutory payments such as Statutory Sick Pay or Maternity Pay

In QuickBooks The Class field is

Pro or higher, available only if you have
this check box class tracking turned on.
appears only if You can turn class
time tracking is tracking on and off in the
turned on. Accounting section of
You can turn your Preferences, located
time tracking in the Edit menu.
on and off in
the Time Click here to set up
Tracking common working days
section of patterns for SSP.
Preferences,
located in the
Edit menu.

To learn about… Search the Help index for…

Setting up the employee defaults employee defaults, creating

Determining the order in which you employee defaults, order of payroll items
add payroll items to the Employee in
Defaults window

Setting up employees 179

Setting up employees
Before setting up your employees in QuickBooks, you should create the payroll
items you need for your company (see “Setting up your payroll items” on
page 169).

Also, if you’ve already set up your employee defaults (if not, see “Employee
defaults: entering common employee information” on page 178), QuickBooks can
prefill much of the information you need when you set up individual employees.

Each of your employees needs to tell you about which payroll taxes apply to him
or her and which tax credits he or she will claim. If he or she has a P45 from a
former employer, the employee should provide it as well.

The Employee list contains the names of all your employees. A personal record or
profile is also stored in this list. When you add or edit an employee’s record, you
will see that it is broken down in to three tabs or sections (Personal, Payroll and
Compensation Info and Statutory Pay Info). Use this table to help set up a record
of each of your employees.

Employee record tab Used to set up...

Personal Info Address Info: the employee’s contact information,

National Insurance number, date of birth, joining
and leaving dates and similar information.

Additional Info: custom fields for tracking any extra

information you want to record that is not covered
in Address Info.

Payroll and Set up the employee’s salary or hourly wages, com-

Compensation Info: missions and additions; and deductions, AEOs or
employer contributions that apply to him or her.
You’ll need payroll items for most of this informa-
tion, which you select in the Item Name column of
the tables. If you have not already set up all the pay-
roll items you need, QuickBooks gives you a chance
to add them as you work. If you track and pay your
employees using the QuickBooks Pro Timer or the
Stopwatch, tick the Use Time data to create pay-
ments check box. For information on time tracking,
see “Time and cost tracking” on page 229.
If an employee has a tax credit, QuickBooks pro-
vides a Tax Credit payroll item for you to set up.
The Payroll and Compensation Info tab is broken
down further with the use of four buttons. Click
these buttons to set up the following payroll infor-
mation.

180 Chapter 7 Payroll and employees

Employee record tab Used to set up...

Click this button to set up how the employee

accrues sick time and holidays. This window tracks
how much sick time and holiday time an employee
has accrued and used. This information on this win-
dow is not related to the Statutory Sick Pay or
Advanced Holiday Payment information. It is only
related to the Sick/Holiday accrual information.

Click this button to open the Taxes window where

you can set up tax and NI information for an
employee. When entering tax and NI codes, ensure
that the ‘’Effective from” date you enter is the date
the code became effective (usually the start of the
payroll period), and not the date you first issued a
payroll payment to the employee.
Refer to the following list for guidelines on setting
up an employee’s taxes.
■ Tax Code: if an employee starts working for you
but doesn’t know his or her tax code, HM Reve-
nue & Customs provides you with a temporary
one, which you can enter in the Taxes window.
You can find emergency tax codes under
Employee ->Payroll Service->click Tax Table.
If you need to enter an income tax code for an
employee on a Week 1/Month 1 basis, enter his or
her tax code in the Tax Code field, then put an
“X” at the end (for example, “475LX” or
“K325X”).
■ NI Code: If an employee’s NI code changes in a
tax year, you can change it here.
■ Scottish Variable Rate: if the employee is
affected by a varying tax rate in Scotland, tick this
check box. (QuickBooks adds an “S” to the front
of his or her tax code.)
■ Collection of Student Loans: if the employee is
repaying a student loan, tick the “Subject to Col-
lection of Student Loans” check box.
■ Director’s NI: if the employee is a director of the
company, tick the Director check box, then enter
his or her appointment date and whether or not
the director holds an APP (Appropriate Personal
Pension). You will also need to choose whether
to calculate the director’s NICs according to the
annual/pro-rata method or the per period (as
employee) method.

Enter the employees’s bank account information for

BACS payments.

Setting up employees 181

 Employee record tab Used to set up...

Enter the details of an employee’s P45 form if the

employee came to you from another employer part
way through the tax year. You can also enter the
details from an employee’s SSP1(L) form if he has
one.

Statutory Pay Info This window is broken down in to three tabs to rep-
resent the following statutory payments that Quick-
Books currently calculates: SSP, SMP and SPP. For
more information on how to set up statutory pay,
see “Setting up and paying Statutory Payments” on
page 184. Refer to the online Help for instructions
on how to set up statutory adoption payments.

QuickBooks also provides a “notepad” in which you can record notes about an
employee.

To learn about… Search the Help index for…

Adding employees employees, adding

Setting up payroll information for employees, payroll information about

existing employees

Categorising employees by class employees, grouping by department or location

Types of employees employees, types

How the order of payroll items payroll payments, affecting amounts

affects amounts on your
employee’s payroll payments

How to decide whether to calculate NIC, directors

a director’s NICs by the annual or
per period method.

182 Chapter 7 Payroll and employees

If you pay on commission (QuickBooks Pro and
higher)
If your employees earn commissions for items they sell, after setting them up on
the Employee list, you should also set them up on the Sales Rep list.

When you enter an invoice, sales receipt, or estimate, select the employee’s initials
from the Rep drop-down list on the sales form to give him or her credit for the
sale. Then you will be able to produce reports showing sales by employee.

Pay commission employees with commission payroll items on a payroll payment,

not a "regular" non-payroll cheque.

To track commission sales for owners or directors, add them to the Sales Rep list
like employees, but pay them with an owner’s draw instead of a payroll payment.

To learn about… Search the Help index for…

Paying the owner(s) of a business owners’ drawings

Setting up employees 183

Setting up and paying Statutory Payments
As an employer, you must pay statutory pay to employees as long as they qualify.
QuickBooks calculates Statutory Sick Pay, Statutory Maternity Pay and Statutory
Paternity Pay automatically.

If employees are entitled to statutory pay, simply enter the details of their
payments in their employee record. QuickBooks then automatically begins paying
the employee his or her statutory pay and calculates the recovery portion in the
Pay Liabilities window. SSP, SMP and SPP payments and the amounts you can
recover are also tracked on the P35 and P14/P60 tax forms.

2 Once you know when If setting up Maternity

your employee will Pay, QuickBooks
be off on statutory calculates the end
leave, enter the day date of the statutory
the payments are to pay period for you.
begin and end.
QuickBooks uses Average Earnings
these dates to Calculations: To see
determine when to an employee’s
calculate based on average earnings,
statutory pay. select the statutory
entry type in the
Employee Journal,
1 Enter the details of the then click this button.
statutory pay here.

Note: QuickBooks does not automatically calculate SAP. However, you can still set up Stat-
utory Adoption Payments in QuickBooks. Refer to the online Help and search for ‘SAP’
for information on how to set up adoption payments.

If you want to see a breakdown of the amount of money you can recover, create a
Statutory Payments Detail report. If you qualify for SER, you’ll need know the
recovery amount including the NIC compensation for your P32 and P35 forms.
For more information on this report, see “To create a Statutory Payments Detail
report:” on page 206.

Note: If you made statutory sick, maternity or paternity payments (SSP, SMP and SPP) to
employees before you set up your company in QuickBooks, you’ll need to enter the
Statutory Pay information from your previous accounting package or your accountant
before QuickBooks can calculate further Statutory payments. You can enter SSP, SMP
and SPP details in the Employee record on the Statutory Pay Info tab (open the
employee record from the Employee List, select the Statutory Pay Info tab, then click
the ‘Previous Info’ button).

184 Chapter 7 Payroll and employees

Statutory Sick Pay (SSP)
As an employer, you must pay Statutory Sick Pay (SSP) to employees who are off
work sick. To see if your employee is entitled to SSP, visit HM Revenue &
Customs’s Web site at www.hmrc.gov.uk and search for ‘ssp’.

To set up statutory sick pay for an employee:

1 Open the New/Edit Employee window from the Employees list.
2 From the Change tabs drop-down list, select Statutory Pay Info.
3 On the SSP tab, set up the working days patterns for the employee. (See the
online help for more information about working days patterns.)
4 In the Employee Journal table, under the Entry Type column, select ‘Sick’.
5 Enter a Start Date and an End Date (if known) of the illness.
6 Click OK to save changes and exit the New/Edit Employee dialogue.
QuickBooks automatically calculates and includes SSP on payments during the
time specified, and tracks the SSP amounts to the Statutory Payments Detail report
and to the P35 and P14/P60 tax forms.

To learn about… Search the Help index for…

Recording statutory sick pay ssp

Setting up working days patterns working days patterns

Previous ssp info ssp, previous info

Statutory Maternity Pay (SMP)

As an employer, you must pay Statutory Maternity Pay (SMP) to employees who
are off work pregnant or on maternity leave. To see if your employee is entitled to
SMP, visit HM Revenue & Customs’ Web site at www.hmrc.gov.uk and search for
‘smp’.

To set up statutory maternity pay for an employee:

1 Open the New/Edit Employee dialogue from the Employees list.
2 From the Change tabs drop-down list, select Statutory Pay Info.
3 Click the SMP tab.
4 Under the Current Maternity Info section, enter the details of the employee’s
pregnancy. (See the online help for more information about Current
Maternity Info fields.)
5 In the Employee Journal table, under the Entry Type column, select Maternity
Leave, then enter a Start Date of the maternity leave (the End Date is automat-
ically calculated and entered).
6 Click OK to save changes and exit the New/Edit Employee dialogue.

Setting up employees 185

 QuickBooks automatically calculates and adds SMP to payments during the time
specified, and tracks the SMP amounts to the Statutory Payments Detail. SMP
amounts are also tracked to P14/P60 tax forms, and SMP recovery and NIC
compensation amounts are tracked to the P35.

To learn about… Search the Help index for…

Recording Statutory maternity pay smp

Previous smp info smp, previous info

Statutory Paternity Pay (SPP)

As an employer, you must pay Statutory Paternity Pay (SPP) to employees who are
off work to help care for their newborn child, or (if adopting) an adopted child
that has been placed with them.

A employee entitled to SPP can take one or two whole weeks of SPP. To pay an
employee SPP, you must first get him to fill out a ‘Becoming a parent, form SC3,
or a ‘Becoming an adoptive parent, form SC4’. To see if your employee qualifies
for SPP, visit HM Revenue & Customs’ Web site at www.hmrc.gov.uk and search
for ‘spp’.

To set up statutory paternity pay for an employee:

1 From the Employees list, select the employee that is taking SPP and open his
employee profile (click the Employee menu button and select Edit).
2 From the Change tabs drop-down list, select Statutory Pay Info then select the
SPP tab.
3 Select the reason for paternity leave. What you select here determines the
names of the fields in the ‘Current Paternity Info’ section.
4 Under the Current Paternity Info section, enter the details of the employee’s
parental leave. (See the online help for more information about Current
Paternity Info fields.)
5 In the Employee Journal table, under the Entry Type column, select Paternity
Leave, then enter a Start Date and End date. The end date must occur one or
two whole weeks after the specified start date. Employees cannot take partial
weeks of paternity pay.
6 Click OK to save changes and exit the New/Edit Employee dialogue.

QuickBooks automatically calculates and adds statutory paternity payments to

payments during the time specified and tracks the SPP amounts to the Statutory
Payments Detail report . SPP amounts are also tracked to P14/P60 tax forms, and
SPP recovery and NIC compensation amounts are tracked to the P35.

To learn about… Search the Help index for…

Recording Statutory Paternity Pay SPP

186 Chapter 7 Payroll and employees

 To learn about… Search the Help index for…

Previous SPP info SPP, previous info

Recovering SPP payments SPP, recovering

Setting up and paying Attachment of Earnings Order

You may receive a court order instructing you to deduct an Attachment from your
employee(s). If so, as an employer, you are legally required to comply by
deducting the amounts and making payments directly to the issuing authority,
usually on a weekly or monthly basis.

To deduct Attachment of Earnings Order from an employee:

1 Create an Attachment payroll item. See “Creating new payroll items” on
page 172 for details.
2 Add the Attachment payroll item to the employee’s record. (Open the
employee record, then add the Attachment payroll item to the Payroll and
Compensation Info tab.) You will be prompted to enter all the court order
information. It is here that you enter the type of the court order and the
details of the amounts.
3 Pay the employee as you normally would. You will see on the employee’s
payslip the details of the Attachment. QuickBooks automatically calculates
the AEO amount and deducts it, as well as the Administrative Fee (if selected),
from the employee’s pay.
4 Send the Attachment to the issuing authority. Depending on the details of the
AEO, you may have to send payment weekly or monthly.
a) Go to the Employees menu, select Process Payroll Liabilities, then Pay
Attachments.
b) Ensure the date range covers the period of time from which you deducted
AEOs from the employee.
c) Select the AEOs you want to remit to the issuing authority.
d) Click Create.
e) Review the cheque that appears, then print it.
f) Print a payroll liability voucher to send with your payment. Go to the File
menu, select Print Forms, then select Payroll Liability Voucher.

Setting up employees 187

Summarising amounts for the year-to-date
Note: Skip this section if your company has not done payroll before or has not issued any
payroll payments this year. You are ready to start creating payroll payments.

If you’re just starting to use QuickBooks for payroll and you’ve already issued
payroll payments for this payroll year, you need to:
■ Enter year-to-date (YTD) information to summarise your payroll transactions
from 6th April (the start of the payroll year) through to your QuickBooks start
date. For an explanation of start dates, see “Determining a start date” on
page 18.
You will need a summary of the payroll transactions for each employee and
also one of any payments you’ve made for your payroll liabilities to HM
Revenue & Customs.
■ Enter your payroll transactions (payroll payments and liability cheques) for
the period between your QuickBooks start date and today.

A wizard helps you enter your year-to-date (YTD) information. To start it, go to the
Employees menu, and select Set Up YTD Amounts. QuickBooks updates it as you
issue payroll payments during the remainder of the payroll year to keep your
payroll tax amounts correct. (The YTD wizard is not meant for entering
information from an employee’s P45 form, which belongs in his or her employee
profile or record. See page 180 for more information.)

Entering year-to-date summaries for each employee

For each employee (both current and former) you paid during the current payroll
year, you must enter a summary of his or her earnings, and the amounts you
deducted from it. The summary should cover the period from 6th April through to
the day you started using QuickBooks. In the summary, include gross pay, income
tax, NIC’s, and any other amounts you tracked on payroll payments.

You need to enter both the amounts you withheld from the employee’s earnings
and the amounts that you paid as a result of the employee’s earnings. For example,
you must enter both the employee’s and employer’s parts of NI summaries.

Depending on how you’ve kept your records, you can enter amounts summarised
by month, by pay period, or for the entire year to date.

As you work though the Enter YTD wizard, it asks you to select the employee
whose year-to-date information you want to enter. When you click Enter
Summary, QuickBooks displays each payroll item you entered in that employee’s
profile.

188 Chapter 7 Payroll and employees

 Filling in the Year-to-Date window:
■ In the “Employee Salary and hourly wages totals” area, enter payroll items for
sick and holiday time taken during this period and their corresponding wage
amounts. Do not include them in your totals for regular salary or hourly
wages.
■ In the “Employee and Employer YTD totals...” area, leave the YTD Amount
field blank if there was no amount for this payroll item during this period.
■ In the “Employee and Employer YTD totals...” area, add payroll items for one-
time-only payroll amounts, such as bonuses, that occurred during this period.
You must enter anything that affects compensation or payroll taxes. You do
not have to enter non-payroll adjustments such as reimbursements for office
supplies.

If you want, you can To insert a payroll

type a description item, press
about this adjustment. CTRL+INSERT.
You can skip over
items not used in
this period.

In this area, enter the

totals for salary,
hourly wages, and In this area, enter
holiday and sick time totals for all other
paid out during this earnings,
period. withholdings, and
Enter hours worked employer-paid
during the period if taxes or payroll
you want hours to expenses for this
appear on reports. employee.
QuickBooks displays Include taxes
a message if hours regardless of
are required. whether you have
paid them yet.

■ Enter separate amounts for the employee and employer portions of National
Insurance. QuickBooks uses the separate amounts to track totals for employee
withholding; it uses both portions to track your total payroll liability.
■ Enter all tax liabilities created because of compensation paid, even if the
amounts were paid later or were employer expenses. If you have refunded an
employee more income tax than you have withheld, enter the difference as a
negative amount.
■ If you track employer-paid expenses (such as insurance) as a payroll expense
for each pay period, you must type amounts for the employee so far this
payroll year in this window. Later in the setup procedure, you must also enter
the amounts actually paid so that QuickBooks can keep track of how much
you still owe.

Summarising amounts for the year-to-date 189

 ■ If your employees have tax credits, enter them as follows:
● if you both started and finished paying the tax credit in this period, select
the tax credit payroll item in the 'Additions, Deductions, Employer
Contributions, and Tax Credits' area and enter the total amount of the tax
credit.
● if you started paying the tax credit in this period but finished it in another
period, select the tax credit payroll item in the 'Additions, Deductions,
Employer Contributions, and Tax Credits' area and enter the amount of
the tax credit you paid this period. Enter the remaining amount in the
YTD summary for the next period.
● if you are still paying the tax credit to the employee, enter it in two places:
- in the YTD window, select the Tax Credit payroll item in the 'Addi-
tions, Deductions, Employer Contributions, and Tax Credits' area and
enter the amount of the tax credit you paid up to your QuickBooks
start date.
- Open the employee record (from the Employee list), select the Payroll
and Compensation Info tab and select the Tax Credit payroll item
from the ‘Additions, Deductions, Employer Contributions, and Tax
Credits’ table. In the Tax Credit Details window that appears,
complete the ‘Up to date info’ section (see ‘Adding a tax credit payroll
item to an employee’s record’ in the online Help for more details).
■ (Employees only) In the ‘NI from P11’ area, break down the employee's
earnings according to the NI Lower Earnings Limit (LEL), Earnings Threshold
(ET), and Upper Earnings Limit (UEL) for each payment in this period. The
P11 form that you created for this employee with your former payroll system
should provide this information. Check Columns 1a, 1b, and 1c in the End of
Year Summary section.

If an employee changed NI codes during a payroll period prior to your Quick-

Books start date, you need to enter a year-to-date entry for each NI code
change. For example, if an employee’s NI code changed from an A to a C, you
must enter two YTD entries: one to cover the time frame during which the
employee had an A code, and another to cover the C NI code time frame.

After you’ve entered the amounts for this period, click OK to finish. If you have
another period to enter, click Next Period instead.

190 Chapter 7 Payroll and employees

 Should my year-to-date information affect my
accounts?

Option When to choose What QuickBooks does

Do not affect Most people should choose this option at ■ Affects no balance sheet accounts
accounts setup. and adds no expenses.
■ You need to enter all your account ■ Adjusts payroll year-to-date amounts
opening balances in QuickBooks as of that print on cheque vouchers and
your start date, and you do not want pay slips; display in payroll reports;
these amounts to change the balances and determine annual limits for
of your accounts. taxes, deductions, and additions.
■ If your start date is midyear, and you
make an adjustment for all income and
expense accounts, you do not want
these amounts to affect that adjust-
ment.

Affect liability and You may want to choose this option at ■ Enters an increase in each liability
expense accounts setup if you have never used a payroll lia- account associated with a payroll
but not the bank bility account before, and you want a cor- item used for the period.
account rect balance in the account. ■ Tracks an expense for each expense
This option is also appropriate after you account associated with a payroll
start using payroll if you need to adjust item used for the period.
the amount owed for a payroll item. ■ Enters a decrease in the Opening Bal
Equity account for the net amount
paid the employee during the period.
(This adjustment keeps your books in
balance.)
Affect liability, You are unlikely to want to choose this ■ Enters a payment in the designated
expense, and option at setup since it affects your bank bank account for the net amount paid
bank accounts account balance. to the employee during the period.
■ Enters an increase in each liability
account associated with a payroll
item used for the period.
■ Tracks an expense for each expense
account associated with a payroll
item used for the period.

About earnings basis

An earnings basis is the total of an employee’s earnings used to calculate payroll
taxes. It’s also called taxable income or, for NI purposes, insurable ("NI-able")
earnings.

An employee’s earnings base for payroll taxes is calculated in this way:

■ First, it totals all salary, hourly wages, and commissions.
■ Then it adds to gross those additions and employer contributions that affect
gross and are subject to that specific tax.

Summarising amounts for the year-to-date 191

 ■ Finally, it subtracts from gross those deductions that are deducted prior to
calculating that specific tax.

If the year-to-date total of an earnings basis exceeds the maximum annual

earnings limit for this tax, the earnings basis equals the maximum earnings limit.
If you entered amounts for earlier periods this year, QuickBooks counts the
earnings basis from the earlier periods towards the maximum.

To learn about… Search the Help index for…

Earnings bases earnings basis

Entering year-to-date summaries of liability payments

Note: Skip this section if your company has not made any payments for payroll taxes or liabil-
ities incurred during this payroll year.

For this adjustment, you’ll need to know how much you paid from the start of the
payroll year (6th April) to your QuickBooks start date for each of the following:
■ Each payroll tax (whether withheld from employees or paid as an employer
expense).
■ Each deduction you withheld and then paid (for example, for benefits such as
an employee-paid dental plan).
■ Each employer contribution you paid (for example, for benefits such as an
employer-paid health plan).

This adjustment is just for your payroll liabilities and your expenses for employer-
paid payroll withholding. It is not for other expenses related to or paid to
employees (for example, salaries, wages, and bonuses).

Type the ending

date of the period
Type the date you are
you made the summarising.
liability
payment.

192 Chapter 7 Payroll and employees

 Search the Help index
To learn about…
for…

Entering YTD liability payments year-to-date amounts, liability payments

Making sure your payroll data is complete

Because QuickBooks bases new payroll transactions on existing data, it’s very
important that you enter all of your payroll data accurately. After setting up your
payroll system and entering your year-to-date information, you should make sure
that it is complete and correct.

Search the
Procedure Comments Help index ✓
for...

Review your The Employee list should include names of all employees, reports ❏
Employee list. employees on your payroll at any time about
during the current payroll year (even if they have lists, printing
left).

Review your The Payroll Item list should list everything you need payroll, reports ❏
Payroll Item list. to track on a payroll payment. about
lists, printing

Review an employee The report should include National Insurance num- employees, reports ❏
contact list report. bers, addresses, and phone numbers for all employ- about
ees.

Review your payroll You should be able to match the amounts for pay- employees, reports ❏
summary for all roll items with the amounts for payroll accounts in about
employees for this the payroll report from your former accounting sys-
entire payroll year. tem.

Review your payroll You should be able to match the amounts for pay- payroll, reports ❏
liabilities as of 6th roll items with the amounts for payroll accounts in about
April of this year. the liability report from your former accounting sys-
tem.

Print a balance sheet It should match the balance sheet from your former balance sheet, ❏
as 6th April of this accounting system as of 6th April of this year. reports
year.

Print a balance sheet It should match the balance sheet from your former balance sheet, ❏
as of 6th April of last accounting system as of 6th April of last year. reports
year.

Print a profit and loss It should match the profit and loss statement from profit and loss ❏
statement for the your former accounting system for the entire pay- reports
entire payroll year. roll year.

Summarising amounts for the year-to-date 193

Managing payroll and employee
information
As your business grows and changes, you will probably find it necessary to add or
remove payroll items, hire (and sometimes release) employees, and track
additional information about your payroll.

Changing payroll item information

By default, the Payroll Item list is organised by payroll item type. Earnings items
(for salaries, hourly pay, and commissions) are at the top of the list. To re-sort the
list, click a column header.

Remember that you can use the same payroll item for many employees. For
example, you can customise the amount or percentage of earnings payroll items
in the setup window for each employee to allow for different rates of pay.

You can change the information for existing payroll items, although you probably
do not want to change whether the item is subject to tax. You may want to change
a payroll item, for example, because
■ The annual limit for a deduction changes.
■ Your accountant wants you to assign it to a different account.

If you’ve set up a payroll item properly, you likely won’t need to change the way
it affects taxes, even if you need to change other information. Also, you don’t have
to create different earnings and other non-tax items for each employee as you can
customise amounts or percentages in his or her setup window.

You can’t delete the payroll items for taxes and other government deductions that
QuickBooks creates for you, but you can hide them if you don’t use them.

To learn about… Search the Help index for…

changing payroll items payroll items, editing

hiding payroll items payroll items, hiding

How changes to payroll items affect QuickBooks

Changes you make to payroll items affect new payroll payments you create, and
certain changes can also affect how past payments are classified historically on tax
forms, reports, and payment details.

194 Chapter 7 Payroll and employees

 Employee information and existing payroll payments are affected when you
change any of the following information for payroll items:
■ Payroll item name.
■ Account(s) assigned to it (liability or expense).
■ Tax tracking type.

Changing the following information affects future payroll payments only:

■ Whether it is calculated on Gross Pay or Net Pay.
■ Payroll taxes affected (for additions to or deductions from gross pay).
■ How the item is calculated on the payroll payment (for example, ticking or
clearing the "Based on Quantity" option).

To learn about… Search the Help index for…

Changing payroll item payroll items, editing

information

Changing employee information

You can change an employee’s personal or payroll information whenever
necessary. The changes will affect all future payroll payments you create for him
or her. Changes you make to an employee’s name, address, and National
Insurance number are also reflected in previously-written payroll payments, but
do not affect any of the amounts on those payroll payments.

The following types of information must be changed individually for each

affected employee. Changing the payroll item doesn’t affect the employees who
use it.
■ Annual limits for a deduction.
■ Rate or amount changes for a deduction, addition or employer contribution.

Note: Change the information in the employee defaults first. In many cases, QuickBooks asks
if you want to also change the information for all matching employees.

QuickBooks also provides a notepad with which you can make notes about an
employee.

To learn about… Search the Help index for…

Changing employee information employees, editing

employees, retrospective changes

Adding custom fields employees, custom fields for

Giving an employee a rise employees, rises for

Managing payroll and employee information 195

 When an employee leaves
When an employee leaves the company, you need to first issue his or her final
payroll payment and then add a leaving date to his or her profile.

Tip: It’s a good idea to enter a leaving date for an employee only after you have created his
or her final payroll payment. In order to print a P45, however, a leaving date must be
entered. When the pay period date is later than the leaving date, QuickBooks no longer
displays the employee’s name in the Select Employees to Pay window.

You can’t delete an employee who has left if there are transactions associated with
him or her. You can, however, hide the employee’s name from the Employee list.

Printing P45 forms

If an employee leaves your company (referred to as a leaver), QuickBooks can
generate a P45 form and print it for you to give to the leaver.

To create a P45 form:

1 Issue the employee’s final payroll payment.
2 In the Employee’s profile, enter a left or leaving date in the Left field.
3 Load the pages of the P45 form into your printer. If you have trouble aligning
the P45 form in your printer, see “Solving printing problems” on page 116.
4 From the Employee menu, select P45 for leavers.
5 From the drop-down list, select the employee that is leaving, and click Print
P45 to start the printing process.

196 Chapter 7 Payroll and employees

Hiding, showing, or merging employees
You can’t delete an employee who has existing payroll transactions. Instead, you
can hide an employee on the Employee list by making the employee inactive.

When you make an employee inactive, QuickBooks keeps the information for the
employee but hides the employee’s name on the Employee list and removes it
from most drop-down lists that references employees. However, the employee’s
payroll figures still appear on payroll reports. You do not need to change or delete
any transaction that references the employee. You can make an employee active
again at any time.

If the same employee appears in your Employee list twice, you can merge the two
names if there are no payroll transactions for either instance. Merging employees
is not reversible.

To learn about… Search the Help index for…

Making employees inactive, hiding employees, hiding and showing

them, or showing them

Merging employee names employees, merging two names

Deleting an unused employee employees, deleting

Contacting your employees by mail

You can use your QuickBooks data in conjunction with prewritten Microsoft
Word letters to mail your employees notices about such matters as accrued
holiday and sick time. Go to the Company menu and select Write Letters.

Search the Help index

To learn about…
for…

Using your QuickBooks data with letters using QuickBooks data in

Microsoft Word letters Microsoft Word

Managing payroll and employee information 197

Paying employees
Note: Before you begin creating payroll payments, be sure that your payroll system is set up
completely and correctly (see page 165). Also, go online to receive the latest payroll
update, which includes the most current tax table or install it from CD-ROM (if you
received one).

Selecting employees to pay

To select which employees you want to pay:
■ From the Employees menu, choose Pay Employees.

If you enter hours worked, commission basis, If all your employees are salaried and
sick or holiday time, or other variations from receive a standard payroll payment for
If you print pay period to pay period, select this option. this pay period, select this option.
cheques, tick
this check box.
The Payment
Date selected
here determines
If paying the date of the
employee by payment and the
BACS, clear the date the
‘To be printed’ employee
check box and receives their
specify the payment.
BACS agency.

If you have many

employees, you
can sort them by
QuickBooks creates a payment for each employee When you create a payment, payment method
you select. You can sort the list by either the the date changes to the latest and by payment
employee’s first or last name, according to the pay period end date for the frequency.
setting in Payroll and Employee Preferences. employee.

When you’ve selected the employees you want to pay, click Create to display
payment information for the first employee.

Tip: You can pay employees in groups. For example, first select your salaried employees,
whose payments you don’t need to review, and tick the “Create payment without
preview” checkbox. Then click Create. Next select your hourly employees and the
"Enter hours and preview" option, then click Create. The payment of the hourly
employees appears so you can enter their hours worked.

198 Chapter 7 Payroll and employees

Previewing, adjusting, and creating payroll payments
When you select the Enter hours and preview payment before creating option in
the Select Employees To Pay window, then click Create, QuickBooks opens the
Preview Payroll Payment window.

If the employee is If this is a bonus or Tick the Advanced Hol. This box will be
paid by the hour, commission cheque, Payment check box to active if the
type or edit the you likely don’t want display the Advance employee is a
number of hours sick or holiday time Holiday Payment window, director. Check it to
worked for each rate. to accrue for it. if the employee requests make this director’s
(QuickBooks Pro fills that you advance holiday NIC calculations on
To prevent sick and
in the hours either pay to him or her before the annual (or pro-
holiday time from
from time data or taking a holiday. See rata annual) method
accruing for this
from the last payroll Overview of advance instead of per period,
payment only, tick
payment.) holiday payments in the or for the last payroll
this box.
online Help for details. payment of the year.

If the employee is paid

on salary, you can
enter hours if you want
to split the salary
amount between jobs.

If a bonus, addition,
deduction, or employer
contribution is based
on a quantity, enter it
here.

The Employer
Summary shows
employer-paid taxes
and contributions that The Employee Summary shows wages, The net payment total.
do not directly affect the commissions, withheld taxes, and other
amount of the payment. additions and deductions that print on the
voucher of the cheque or pay slip.

In the Preview Payroll Payment window, you can do all of the following:
■ View the amounts QuickBooks calculated for each payroll item (including
gross earnings, taxes, and all other additions, deductions, and employer
contributions) for the payment.

Paying employees 199

 ■ Type or edit the number of hours worked.
■ Enter sick or holiday time, or prevent these from accruing (on this payment
only).
■ If you are not printing a payroll cheque, you can enter a payment number.
■ Enter the base quantity on which to calculate commissions, additions, deduc-
tions, or employer contributions that are based on quantity.
■ Add or delete wage, commission, addition, deduction, or employer contri-
bution payroll items.
■ Pay employees’ Advance Holiday Payments.

Note: To suppress the payment of regular salary on a bonus payment, delete the salary item
in the Preview Payroll Payment window. (Select it and press CTRL+DEL.)

■ Edit the amount for any payroll item.

When QuickBooks creates a payroll payment, it does the following:

■ Updates the pay period end date of the last payment written for the employee,
and removes the tick mark in the Select Employees to Pay window.
■ Creates a payroll payment (a cheque or pay slip) for your employee for the net
amount, showing the deductions.
■ If paying via BACS, creates an export file to send to the BACS agency.
■ Increases or decreases the employee’s accrued sick and holiday time by the
amount entered for the payroll payment.
If you ticked the Do not accrue time check box in the Preview Payment
window, you prevent the sick and holiday time from accruing for this
payment only.
■ Updates year-to-date balances for the employee.
■ Draws the amount of the payment from the bank account you chose (usually
your current account).
■ Records an increase in each affected liability account, showing the extra
liability resulting from the payroll transaction (for both the employee’s
payroll deductions and employer contributions).
■ Updates and tracks your payroll expenses in expense accounts.
■ Updates any other accounts you have assigned to any payroll items used in
the payroll transaction.

To learn about… Search the Help index for…

Previewing and adjusting payroll payroll payments, checking amounts in

payments

200 Chapter 7 Payroll and employees

Reviewing and correcting payroll payments
After you’ve recorded a payroll payment, you can review it at any time.

Reviewing a payroll payment

1 From the Lists menu, choose Chart of Accounts.
2 Select the current account you use to create the payroll payments.
3 Click the Activities button (at the bottom of the Chart of Accounts window),
then choose Use Register.
4 Locate the payment in the register.
■ Pay cheques have PAY CHQ in the Type field.
■ BACS supercheques have PAYROLL in the Type field.
5 Select the payment, then go to the Edit menu and...
■ if paying by cheque, select Edit Pay Cheque.
■ if paying by BACS, select Edit Payroll Cheque. A BACS supercheque
appears listing all employees that were paid with this payment. Click the
View Payments button.
6 QuickBooks displays the Payment window. This window is similar to the
Write Cheques and Bill Payments windows but has a Summary section
instead of a voucher. If viewing a BACS payment, you may have to click
Previous/Next to scroll to the payment of the employee you want to view.
Window

The Payment Summary

section summarises
earnings, additions,
taxes withheld, and
deductions.
It also displays the pay
period end date and the
hours worked.

Click Payment Detail

to see more detail or
to edit the payment.

7 (Optional) Change the cheque number, memo, address, or the “To be

printed” status directly in this window.
8 (Optional) Click Payment Detail.
QuickBooks displays the Review Payment window. Here, you can make any
necessary corrections. When you finish, click OK.

Paying employees 201

 Note: To ensure the accuracy of subsequent tax calculations, you cannot change certain
things. On payroll payments, you cannot edit the payment date, amount, payee, or
Advance Holiday Payment (you can’t edit the Advance Holiday Payment at all). To do
so, you must delete and re-enter the payment, as well as any subsequent payments to
the employee. On BACS supercheques, you cannot edit the payment date.

9 To print a copy of the payment, click Print. You can print pay slips to provide
your employees with the details of the payment (see “Printing payroll cheques
and pay slips” on page 203).

Deleting or voiding a payment

You cannot void BACS payment cheques. Instead, you must delete and (if
necessary) re-enter them. However, with the exception of the last payroll payment
of the previous payroll year(s) you can only edit, delete or void the last payroll
payment that you issued. You may want to do so if:
■ a payroll cheque mis-printed and you need to re-print it, but also need to
account for all the cheque numbers used.
■ an employee’s payroll cheque is lost or stolen, and you need to reissue it.
■ there was an error in a recent payroll cheque that your employee has not yet
cashed.
■ you need to make a retrospective change of information (for example, retro-
spectively correct a date of birth, marital status, NI code or Tax Code.)

Note: If you submit payroll tax forms for the period covering a payroll payment, then void the
payment, you may have to re-submit your forms.

You may want to delete a payroll payment if it is a duplicate that has not been printed
yet.

Retrospective changes
If you have been notified of a change or correction to be made in your information
for an employee or director which affects NI or PAYE codes and that change
became effective in a pay period for which you have already issued a payroll
payment (whether by cheque or BACS deposit), you can make the change and
QuickBooks automatically updates your payroll calculations. See Help index for
detailed instructions.

To learn about… Search the Help index for…

Editing existing payroll payments payroll payments, changing

Voiding payroll cheques payroll cheques, voiding

Deleting payroll payments payroll payments, deleting

Dealing with problems caused by ret- employee, retrospective changes

rospective changes of employee infor-
mation

202 Chapter 7 Payroll and employees

Printing payroll cheques and pay slips
You can print all your payroll cheques at one time, but you must print them
separately from other cheques. Set up your printer for payroll cheques the same
way as for other cheques in QuickBooks.

Tip: For information about aligning payroll cheques or pay slips, see “Solving printing
problems” on page 116.

If you don’t print payroll cheques with vouchers (e.g. if you pay through BACS or
Giro), you can print pay slips for your employees instead, from the same screen
(the Select Employee to Pay window). Like payroll cheques, pay slips provide all
required legal information, including:
■ Employee’s full name, address, and National Insurance number
■ Pay period start and end dates
■ Salary or hourly rate and hours, and gross pay for the pay period
■ Deductions from and additions to the gross pay, including income tax with-
holding or exemptions
■ Net pay
■ Accrued sick and holiday time used and available, if you have chosen to print
them in the Payroll & Employees preferences
■ Payroll year-to-date amounts for all items used to calculate payroll payments
in the current payroll year
■ Current NI and tax codes

To select what information appears in voucher payroll cheques and full-page pay
slips, click the Printing Preferences button in the Payroll & Employees
preferences (from the Edit menu, select Preferences, select Payroll & Employees
from the options on the left, and click the Company Preferences tab).

To learn about… Search the Help index for…

Printing payroll cheques payroll cheques, printing

Printing pay slips pay slips

Using BACS to pay employees

When used in conjunction with specialist BACS software, QuickBooks can send
bill and payroll payments to UK banks. On receipt of this information, banks
transfer the funds from your bank account then distributes it to your suppliers and
employee’s bank accounts.

QuickBooks offers two BACS services:

■ QuickBooks e-Payment Solutions: a subscription based Web service available
from Intuit that is seamlessly integrated with QuickBooks (for more infor-
mation on this service, open the Resource Area)

Paying employees 203

 ■ You can also create an export file that can be read by any 3rd party BACS
software. You will need to purchase this software separately as it is not
available from Intuit.

To configure QuickBooks for BACS payments:

1 From the Edit menu, choose Preferences, then Banking. Click the Company
Preferences tab.
2 Select from the following:
■ If you are using QuickBooks e-Payment Solutions, select I am signed up
for e-Payment Solutions; or
■ If using a 3rd party software to distribute your BACS payments, select
Create BACS export files.
3 Enter BACS User Number and choose the location where you want the export
files to be saved.
4 For each bank account you want to use to distribute BACS payments:
■ Open the account. From the Company menu, select Chart of Accounts.
Highlight the account you want to edit, and from the Accounts menu
button, select Edit.
■ Click the BACS Information tab and add the account name, sort code and
account number.
5 For each employee being paid with a BACS payment:
■ Open the employee record. From the Employees menu, select Employee
List. Highlight the employee you want to edit, and from the Employee
menu button, select Edit.
■ Select the Payroll and Compensation Info tab, click Bank Details, then
enter the employee’s account name, sort code and account number.
6 For each supplier being paid with a BACS payment:
■ Open the supplier record. From the Suppliers menu, select Suppliers List.
Highlight the supplier you want to edit, and from the Supplier menu
button, select Edit.
■ Click the BACS Information tab and add the supplier’s account name,
sort code and account number.

When paying suppliers and/or employees by BACS, QuickBooks creates export

files that contains the amounts and account details needed for successful transfer
of funds. These files are saved to a location on your computer that you specify in
the Preferences section of QuickBooks. When you pay with BACS, you must send
these files to the BACS software where they can be reviewed and approved for
payment.

204 Chapter 7 Payroll and employees

Paying payroll liabilities
When it’s time to pay your payroll liabilities, QuickBooks shows you how much
you owe and to whom, lets you choose which liabilities you want to pay, and
creates cheques for you. It also helps you fill in the forms you need to send in with
your payments.

Step Procedure

1 To see how much you owe, to whom, and for what, create a Payroll Liability
Balances report. If you qualify for SER and paid out statutory payments, you
also need to create a Statutory Payments Detail report. See Determining
how much to remit to the HM Revenue & Customs for more information on
creating these reports.

2 Adjust the amounts you owe, if necessary. (It usually isn’t!)

3 Create cheques for the amounts you owe by using the Pay Liabilities win-
dow.

4 Fill in a P32 report, and prepare your P30 slip to send to HM Revenue & Cus-
toms along with your payment.

Determining how much to remit to the HM Revenue &

Customs
To determine the amount you must remit each month to HM Revenue &
Customs, you must complete a P32 (Employer’s Summary) report. Use the Payroll
Liability Balances report to help fill out your P32 and P30 forms. This report
provides a summary of all the payroll liabilities you will be remitting for a given
reporting period.

If you made any statutory payments to your employees in a given tax

period, you must first create a Statutory Payments Detail report
before you create a Payroll Liability Balances report.
For more information on creating a Statutory Payments Detail report, see page
206.

To create a Payroll Liability Balances report:

1 From the Reports menu, choose Employees & Payroll, then choose Payroll
Liability Balances.
You will see all the payroll items including Income Tax and National
Insurance contributions.
2 Make sure the date range accurately reflects the tax period for which you are
remitting. (You should print this report for your records.)

If you made any statutory payments to your employees in a given tax period, you
must create a Statutory Payments Detail report before you create the Payroll

Paying payroll liabilities 205

 Liability Balances report. The Statutory Payments Detail report shows a breakdown
of the statutory recovery amounts and NIC compensation amounts.

To create a Statutory Payments Detail report:

1 From the Reports menu, choose Employees & Payroll, then choose Statutory
Payments Detail.
You will see all the statutory payroll items including recovery amounts and
NIC compensation (if entitled to SER).
2 Make sure the date range accurately reflects the tax period for which you are
remitting. (You should print this report for your records.)

Adjusting a payroll liability

In rare cases, you may find that the amount for a payroll item tracking a liability
doesn’t match what is actually owed.
1 From the Employees menu, choose Process Payroll Liabilities, then Adjust
Payroll Liabilities.

Enter the date you want this adjustment to affect your payroll liability account.

Enter the amount of the

adjustment. A positive
amount increases what you
owe. A negative amount
Select a payroll reduces what you owe.
item to adjust.
For example, if the Liability
by Payroll Item report says
that you owe £450 but you
know you owe £475, enter
the difference: 25.

2 (Optional) Click Accounts Affected to select how the adjustment will affect
your accounts.
■ If your liability and expense accounts have the wrong totals as well as
your liabilities (the usual case), you should choose to affect your
accounts.
■ If your liabilities are wrong but your liability and expense accounts have
the correct totals, choose to not affect your accounts.
3 Click OK.
4 If you chose to affect your liability and expense accounts and you adjusted an
amount withheld from payroll payments, you need to adjust an expense
account to offset the change in your liability account. Type the name of the
expense account you want to affect, then click OK. (Most people choose
Payroll Expenses.)

206 Chapter 7 Payroll and employees

 To learn about… Search the Help index for…

Adjusting payroll liabilities payroll liabilities, adjusting

Creating a cheque to pay payroll liabilities

Most companies need to remit payment by the 19th of the month for the previous
month’s deductions. Check with HM Revenue & Customs to see what’s right for
your business. You may want to set up reminder notes for yourself using the To
Do Notes feature.

Always use the Pay Liabilities window to write cheques for your
payroll (and other) liabilities.
Do not use the Write Cheques window! If you do, QuickBooks does not update
your payroll liability accounts, and your payroll reports will not be accurate.

To pay your payroll liabilities:

1 From the Employees menu, choose Process Payroll Liabilities, then Pay
Payroll Liabilities.
2 In the Through date field, enter the last day of the tax period for which you
are paying your liabilities (this is the 5th of the following month), and click
OK. You do not need to change the date in the From field. Even though it is
set to April 6th (the beginning of the tax year), QuickBooks knows to only
include your outstanding payroll liabilities for the current tax period for
which you are paying.
3 If you are qualify for Small Employer’s Relief, tick the “... Small Employers
Relief” check box, then click OK. QuickBooks will make a statutory payment
recovery adjustment that reduces your total liability amount if statutory
payments were made during the tax period for which you are remitting a
payment.
4 In the Pay Liabilities window, mark the payroll item liabilities you want to
pay now and select options for the cheque. Use the information on this
window to fill in your P30 pay slip.
■ Before you can pay a liability, you must have a payee entered in the
payroll item’s Payable To field. If you don’t have one, you’ll be asked to
add one here.
■ Certain liabilities can be selected and paid only as a group, such as
National Insurance.
5 Select whether you want to review the cheque(s), then click Create.
■ After you create a cheque, the Payroll Liabilities report shows a decrease
in the amount you owe to reflect the payment. However, other reports
may show the amount you owed for the period regardless of payments
you’ve made.
6 Send your payment and the pay slip to your Accounts Office.

Paying payroll liabilities 207

 QuickBooks displays this date on the liability
cheque as the “paid through” date.

If you use
QuickBooks to print
cheques, tick this Click Report
check box. to generate
a Payroll
If you write cheques
Liabilities
by hand, clear it.
report for
This is the date the the specified
transaction affects period.
your bank account.

Mark the liabilities

you want to pay.
QuickBooks creates
one cheque per If you want,
payee, not one you can
cheque per liability. change the
amount
To add a name that’s
you’re
missing in the
paying in
Payable To column
this column.
of this window, edit
Tick this check box to show all payroll liabilities for
the payroll item.
the period, including any credits and zero amounts.

To learn about… Search the Help index for…

Paying payroll liabilities payroll liabilities, paying

Adding an agency name missing in payroll items, editing

the Payable To column

Creating a report that shows your pay- payroll, reports about

roll liabilities

Entering a discount for payroll payroll liabilities, discounts

liabilities

Entering a penalty or fine for payroll liabilities, penalties

payroll liabilities

Entering a refund cheque for overpay- payroll liabilities, refund cheque

ment of payroll liabilities

208 Chapter 7 Payroll and employees

Tracking and paying Class 1A NIC
If you provide a car to an employee for private use (usually in addition to business
use), HM Revenue & Customs collects from you a percentage of the value of this
benefit. At the end of the payroll year, you must calculate and remit to HM
Revenue & Customs the amount you owe.

Before you can do so, you should have the following accounts set up in your Chart
of Accounts:
■ a Payroll Expense account of type “Expense”
■ a Class 1A Owed account of type “Other Current Liability.”

To enter your Class 1A NIC liability:

1 From the Banking menu, choose Make Journal Entry.
2 In the first detail line of the entry:
■ Select your payroll expense account in the Account column.
■ Enter the amount of Class 1A NIC owing in the Debit column. Enter a
memo for this transaction (e.g., Class 1A NIC) in the Memo column.
3 In the second detail line of the entry:
■ Select your Class 1A NIC liability account in the Account column.
■ Enter the amount of the Class 1A NIC that you owe in the Credit column.
■ Enter a memo for this transaction (e.g., Class 1A NIC) in the Memo
column.
4 Click OK to record your transaction.

Paying payroll liabilities 209

Processing your year end
Near the end of the payroll year, you need to create year-end payroll forms for
your employees and HM Revenue & Customs such as P11, P14/P60, and P35
forms. With QuickBooks, you can send P14s and a P35 to the HM Revenue &
Customs using the Internet.

Step Procedure

1 If you have not received your employer’s form pack, order blank portrait-
format P14/P60 forms from the HM Revenue & Customs or Intuit.

2 Consult your accountant or HM Revenue & Customs guidelines about

reporting employee benefits and any items or amounts about which you
are uncertain.

3 Print a P11 report for each of your employees for your reference (see
“Creating a P11 (Deductions Working Sheet) report” below).

4 Create and review a P14 for each employee who worked for you during
the tax year, and print a P60 for each employee who is still working for
you at the end of the tax year. See “Completing your payroll year-end
forms” on page 212. QuickBooks can only print on portrait-format forms.

5 Enter any annual calculations you need to make, including directors’ end
of year reassessments.

6 Test the printing alignment by printing a sample form, and make any
adjustments that are necessary (see “Solving printing problems” on
page 116 if you have trouble).

7 Print the forms (see “Printing P14/P60 forms” below).

8 Distribute the P60 section of the printed forms to employees and file
your office copies. If you are filing a paper return, send HM Revenue &
Customs the P14s.

9 Review P35 data (see “Completing your payroll year-end forms” on

page 212).

10 Print a P35 summary report for your files.

11 Complete the Checklist and Employer Declaration.

12 QuickBooks can now submit your End of Year P14 and P35 forms online
to HM Revenue & Customs (see “Filing your payroll year-end online” on
page 219).
If you are not filing online, use the data in your printed P35 to fill in a
paper form.

210 Chapter 7 Payroll and employees

Creating a P11 (Deductions Working Sheet) report
QuickBooks can create and print the P11 Deductions Working Sheet, which you
print at the end of the payroll year and retain for your records.

You may need to provide this document during an audit, and you may also wish
to print it part way through the year as a reference guide.

The P11 is a special report, and as such, cannot be customised like other reports.
1 From the Employees menu, choose P11 Working Sheet.
2 Select the employee for whom you are printing the P11 from the drop-down
list.
3 Click OK.
4 Click Print (on the report button bar) to print the P11.
To print all the pages in the P11 (it has been separated out into four pages for
on-screen viewing), you must click the Options tab in the Print window, then
tick the Print all linked documents box. Alternatively, you can view each page
by clicking the links at the top and bottom of a page, and print each page as
required.

To see
other
pages of
the P11,
click these
links.

Select the tax year of the

P11 you want to see.

Processing your year end 211

Completing your payroll year-end forms
After 6 April, you need to create P14/P60 and P35 forms for the last payroll year,
which are due by 19 May. You can now file your payroll end of year forms online
with QuickBooks. To begin, go to the Employees menu and choose Process
Payroll Year End... .

On the Payroll Year End Process window, you can create and review P14/P60
forms, review data for the P35 form, complete a checklist/employer’s declaration,
and print the P35 form. If you or your accountant or tax preparer are connected
to the Internet, you can then submit your end of year reports to HM Revenue &
Customs. If not, you must transfer the data to a paper P35 form.

This indicates what you have done so far in the payroll

Choose the end of year process and what you need to do next.
previous payroll
year, which is
the year for The End of Year
which you are process must be
preparing your done
End of Year sequentially. If
reports. you select a step
out of sequence,
Select the names you’re warned
for which you that you haven’t
want to process completed the
forms. previous step.
Specifically, the
You can select
File Online
specific
button remains
employees or
unavailable until
tick the Mark All Ticks appear in these
you have
button to select columns as you review
completed all
everyone on the and print employees’
necessary steps.
list. P14/P60 forms.

New legislation states that payroll End of Year forms (P14 and P35) must be
submitted online. The date on which you must comply depends on the number
of employees you have. Small employers who choose this option early are eligible
for financial incentives. Complete information on filing online, including
incentives, schedules, deadlines and how to register, is available from HM Revenue
& Customs.

Registering takes time, so begin this process well before the deadline!

Note: If you began using QuickBooks to manage your payroll during this payroll year and you
entered year-to-date information for any employees, make sure that the YTD entries
are complete before going on.

212 Chapter 7 Payroll and employees

 Creating and reviewing P14/P60 forms
You must create a P14 form for HM Revenue & Customs for all employees who
worked for you in the year, and P60 form for each employee who is still with you
as of the end of the payroll year (5th April).

QuickBooks can now send your P14 and P35 forms through the Internet.

Note: If you choose the filing online feature for the P35 and P14s, the P14s for ALL your
employees will be sent at once. In the current implementation of QuickBooks you can
only file once. You cannot file in batches or by selecting individual forms, and you
cannot file your P14s without filing your P35. Only send your forms when you have
reviewed them all for accuracy.

1 From the Employees menu, choose Process Payroll Year End.

QuickBooks displays a list of all employees you paid during the year.
2 Select the correct payroll year from the drop-down list.
3 Select the employees whose P14/P60 forms you plan to review now.
■ To mark (or clear) an employee, click in the ✓ (tick mark) column next
to the name.
■ (Optional) To include only certain employees , tick only the names you
want.
4 Click Review P14/P60s.
5 Carefully review each employee’s form.
6 To correct employer or employee information, click Cancel and make the
changes in the following places:
■ To correct or enter the name, address, or other information about the
employer (that is, your company), select Company Information from the
Company menu.
■ To correct or enter the employee’s name, address, or National Insurance
number, select Employee List from the Employee menu, then double-
click the employee to edit.
■ To correct tax office name or numbers, go to the Edit menu, select Pref-
erences, then select Payroll & Employees.
7 To change the amounts in any of the boxes, double-click it to open the
adjustment window, then enter the adjustment. Consult with your
accountant before modifying any amounts on the P14/P60 forms!
■ (Optional) Type a description to as a reminder of what the adjustment is.
■ Type the amount, then click OK.

Note: QuickBooks adds the adjustment to the amount shown, then shows the new
total. To reduce the total, put a minus sign before the amount.

8 To approve the form (with changes, if any), click Next.

9 Repeat Steps 5 through 8 for the remaining marked employees.
10 On the last form, click OK.

Processing your year end 213

 Printing P14/P60 forms
QuickBooks prints P14/P60 information for employees on laser, portrait-style
P14/P60 form blanks only. You can order blank P14 End of Year Summary forms
and P60 End of Year Certificates from HM Revenue & Customs or from Intuit (visit
<www.QuickBooksStationery.co.uk> or ring us).

Note: You must review the P14/P60 forms before you can print them.

1 Load the forms into your printer.

■ You must use a page-oriented printer such as a laser or inkjet printer.
■ Do not collate the forms. Instead, start by loading all the P14 (NI copy)
forms. When you have printed them, load and print the P14 (Tax copy)
forms. Finally, load and print the P60 forms.
2 Before you print forms, test that your printer prints them correctly, and if not,
make necessary adjustments (see “Solving printing problems” on page 116).
3 Print the forms:
a) Confirm that the employees whose forms you want to print are selected
and that the correct payroll year is showing.
b) Click Print P14/P60 forms.
c) In the Print P60s window, select the correct style of form and change your
other printer settings as required.
d) Click Print.
e) Load the next set of forms, select the correct type of form, and click Print
P60s again until you have printed all the copies you need.
f) Note: If you ordered forms from HM Revenue & Customs, photocopy
either the PAYE or NI copy of all P14 forms for your records.
4 Distribute the forms:
■ Usually, HM Revenue & Customs receives the P14 sections and the
employee receives the P60 section.

Note: If amounts appear to be incorrect or missing on your P14/P60 forms, check the
alignment of the forms in the printer. If the alignment is not the problem, check that your
payroll items are set up correctly for P14/P60 tracking.

214 Chapter 7 Payroll and employees

 Reviewing the P35 form
After you print your P14/P60 forms, you also need to review and print a P35 to
summarise the individual P14/P60 forms. QuickBooks calculates the amounts for
the P35 by adding up the amounts on the all of the P14/P60 forms. It is important
to remember that, while you can adjust and reprint these forms before you file
online, you can only file online once (successfully). Once you successfully file
your return online, adjustments will have to be made manually and submitted on
paper forms to HM Revenue & Customs.

That is why you need to take this opportunity to carefully review all the data in
your P35 form.
1 If you are not already in the Payroll Year End window, from the Employees
menu, choose Process Payroll Year End. Otherwise, click Review P35.
2 Review the four tabs of the Review P35 window, which mimic Part 1 and Part
2 of the paper P35 form. Click How Do I in the Payroll Year End Process
window for more information about preparing your forms.

Employee Summary tab

All employees and
directors for whom you
issued a P11 should be
listed here.

The amounts in the NI

Contributions and
Income Tax columns
are from the payroll
data entered in
QuickBooks. If the
amounts are incorrect,
click Cancel, then
review your payroll
data and review the
P14/P60s again.

If you are filing online, the Employee Summary will be automatically fitted to the
P35 form. If you are still filing a paper return, Part 1 of the HM Revenue &
Customs paper P35 form has only ten lines for employees and directors. If you
have more than ten employees in your PAYE scheme, list the rest on a
Continuation Sheet (paper form P35(CS)). You will find summary amounts on
Working Sheet 1 for both the P35 Part 1 and P35(CS). Filing online eliminates the
need for the P35(CS).

Note: Comprehensive help topics exist in QuickBooks to guide you if you need to change the
amount showing for an employee's NICs or income tax deducted.

Processing your year end 215

 Working Sheet 1 tab
QuickBooks automatically combines the data for all the employees in your PAYE
scheme. If you are filing online, totals are done automatically and will appear in
this window in greyed-out boxes equivalent to those on the paper form. If you are
filing a paper P35, transfer the amount in Boxes 1 through 6 to the corresponding
boxes of Part 1 on the paper form.

The amount in Box 1

is the sum of NI
Contributions for
those first ten
employees and
directors on your list.
The amount in Box 2
is the sum of
National Insurance
Contributions for the
employees and
directors on the
P35(CS).

The same split is

observed for Income
Tax in Boxes 4 and 5

If the amounts showing for Total If you received an advance from HM Revenue &
NICs from Part 1 (Box 1), Totals Customs to refund tax, enter the amount in Box
from P35(CS) (Box 2), Total Tax 7. In Box 8, enter the amount from Box F or your
from Part 1 (Box 4) or Income Tax Contractor’s Annual Return CIS36, if applicable.
Totals from P35(CS) (Box 5) are Box 11 shows the sum of Student Loan
not correct, review your payroll Deductions this year.
data and P14/P60s again.

Note: Remember, you can adjust and reprint these forms before you file online, but using
QuickBooks you can only file online once. Once you file online, amendments will have
to be made manually and submitted on paper forms to HM Revenue & Customs.

216 Chapter 7 Payroll and employees

Working Sheet 2 tab
Add data to each box if required.

Click Help for

comprehensive
instructions on how to
make sure that the
amounts in Boxes 13
through 22 are correct.
They cover SMP, SPP,
SAP recovery, and
amounts recovered
through Small
Employer’s Relief. Enter
the recovery and NI
compensation portions
in the boxes shown.
Boxes 24 and 25 are for
tax credits paid and
funding received, and
Box 26 is the net. On the
IMPORTANT: If you adjust these figures, you will have next tab, Box 27 will
to make a manual adjustment to the NICs and Tax Paid show the total amount of
figure in Box 29 (on next tab, Working Sheet 3). Also, if statutory payments
you received advance funding from HM Revenue & recovered and net tax
Customs to pay statutory payments, include the credits paid.
amount received in Box 22.

Working Sheet 3 tab

QuickBooks carries forward the totals from Working Sheet 2 but if you have made
changes on Working Sheet 2, enter the differences manually where necessary.
Your tax payable amount appears on this tab.

Your total
payable to HM
Revenue &
Customs is in
Box 30, unless
you had
Construction
Industry
Scheme
deductions, in
which case
the total
payable is in
Box 32.

Processing your year end 217

 When you are sure that all
figures are accurate, click
OK. You will be returned
to the Payroll Year End
Process dialogue box.

Click Checklist and

Declaration... to complete
the Checklist and
Employer's Declaration
(shown at right). Tick the
appropriate boxes. All
questions must be
answered before you can
proceed.

When you click OK, you

will be returned to the
Payroll Year End Process
dialogue box at which
time you can print your
P35 form.

Printing your P35 form

The printable P35 form looks like the official HM Revenue & Customs P35 form,
but it is your file copy only. Note: It is important to keep this copy in your files
as you will need it if you file any amendments. This safeguard is important
because at present, P35 amendments must be filed using paper forms. If you adjust
the figures in QuickBooks to create a new P35 form, you will not have access to
the figures used to create the form you are printing now. You will need to compare
the new data with the data in this form in order to create an amended P35.

If you are not using the file online feature yet, print this form and transfer the data
manually to the official form from HM Revenue & Customs. Either way, keep the
QuickBooks copy for your files.

You can only print the P35 after you review and print your P14/P60 forms, review
the P35 form and complete the Checklist and Employer Declaration.
1 On the Process Payroll Year End screen, click Print P35 Form.
2 If you are filing your P35 online, use the P35 for your records only. If you are
still filing paper reports, use the figures on the form you have just printed to
fill in a blank P35 Employer's Annual Return form.

You are now ready to start filing your End of Year return online.

218 Chapter 7 Payroll and employees

Filing your payroll year-end online
Filing online means sending information directly to the HM Revenue & Customs
computer instead of sending a paper return.

Filing PAYE year end returns (P14s and P35 data) online will soon be mandatory
for all employers. From May 2005, employers with 250 or more employees are
required to file online. Employers with between 50 and 249 employees must start
online filing by May 2006, but you can start in 2005 if you wish.

If you have fewer than 50 employees, you do not have to start online filing until
2009-2010, but if you start earlier, you can get a financial incentive from HM
Revenue & Customs. You qualify if you send your P14 and P35 data online, and
the return meets the HM Revenue & Customs Quality Standard. You will not
qualify if any part of your end of year return is sent on paper or using magnetic
media.

The tax-free incentive becomes available after you successfully file your return
online. HM Revenue & Customs credits it to your payment record and you can
offset it against payments you make in the following payroll year, or claim it back
and get a cheque. For details, go to the HM Revenue & Customs Web site or
consult HM Revenue & Customs.

Before you file your end-of-year forms, you must be registered for HM Revenue &
Customs Online Services on the IR Web site, the Government Gateway or the
Businesslink Web site. When you register, you will be sent a User ID and Password
(PIN) by post. You cannot file online without your PIN, so register early enough
to receive the PIN before the May 19 filing deadline. Your User ID and Password
are held securely on the Government Gateway and are not made available to other
government departments. Important: Keep your User ID and Password in a safe
location. QuickBooks does not save them for you.

Sending or receiving information online is secure and quick, more reliable and
more efficient than using paper, and can cut down on storage space, post and
administration. Because data passes between computers without manual
intervention, there is less chance of misinterpretation or mistakes in information.
You can file online yourself or some intermediaries, like agents or payroll bureaux,
can file online on your behalf.

Filing online has the same deadlines as filing paper returns: you can file as early
as April 6th and have until May 19th. After May 19th you can file online but may
be assessed a late filing penalty.

Any changes to your forms after they have been filed online have to be made
manually. Revisit the Payroll Year End Process and create amended documents,
then complete and send by paper a supplementary or amended return to your tax
office. You may need to consult HM Revenue & Customs for instructions.

For detailed information about filing End of Year returns online, including how
to register, consult HM Revenue & Customs or go to the HM Revenue & Customs
Web site. For a printable booklet go to
<www.hmrc.gov.uk /employers/doitonline.pdf >.

Processing your year end 219

 Note: If your company has one or more employees who had more than four NI code changes
during the last tax year, you QuickBooks cannot file your End of Year reports online.

Getting ready to file online

To preserve the integrity of your data, you must be in single-user

mode to use the QuickBooks Payroll Year End Process.

The File Online button will not work until you have finished all the preparatory
steps. When you choose File Online, you will see the Warning dialogue box.
Choose Yes to exit and make changes or a back up, No to proceed with online
filing

Use this checklist to ensure that you are ready to file. You can only file once, so it
is important to ensure all your end of year data is correct!
■ Ensure your P35 form is correct to the best of your knowledge. If you need to
review your data, choose Yes in the Warning dialogue box and fix your data,
then back up your company file. Click help for instructions on reviewing data.
■ Make sure you have created an End of Year backup file of your company of
payroll End of Year, in a separate place from your routine backups, and/or
with a different (explanatory) filename. If you have not created a backup,
choose Yes in the warning box and create End of Year backup, then resume.
■ If you have changed any data, print your P35 form again and file it securely.

Note: These safeguards are important because at present, P35 amendments must be filed
on paper. If you adjust the figures in QuickBooks to create a new P35 form, you will not
have access to the figures used to create the form you are printing now. You will need
to compare the new data with the data in this form to create an amended P35.

If you want to take maximum precautions, it is also advisable to back up your company
file (also in a different location or with a different filename) after you have finished filing
online. This will give you a snapshot of your company before and after filing.

220 Chapter 7 Payroll and employees

 If you have made backups of your company files, and have paper copies of all your
forms on file, choose No in the dialogue box and you will go on to the next step
of the online filing process.
1 Click No to proceed. The Online Filing for tax year... data box will appear.
2 Fill out the Employer Data, Online Filing Access, and Employer and Agent
Contact Information in the Online Filing for tax year... data box.

Note: This information accompanies your online P35. It must be filled in correctly
or your online filing will be rejected and you may incur a penalty for late
filing. Please check each area of the form carefully before submitting.

Enter your User ID and

Password here. If you have
lost or misplaced your User
Your HM Revenue & Customs Office, PAYE Reference ID or Password, contact HM
number and company's legal name appear in these Revenue & Customs
fields as they were entered in your Company immediately. You will not be
able to file online without
them.

If you are an employer

filing on behalf of your
company, leave
Employer (the default
choice) in the Agent
Information box.
If the company's return
was prepared by
someone else, click on
the arrow and select
from this drop-down
menu the choice which
best describes them.
If you choose any of the
Agent options, fill in
name of agent company
and contact information
for the agent who
prepared your return.

Did you review your P14/P60s after all changes were made?

If you made changes in your P14/P60s, you need to re-review them before
completing the rest of the process, to make sure that your changes were reflected.

QuickBooks automatically incorporates most adjustments but any discrepancies

will cause your return to be rejected by HM Revenue & Customs, so it is best to
cancel the online filing process and re-review the data first.

Processing your year end 221

 What happens when I click File Online?
When you press the File Online button, your return will be transmitted to HM
Revenue & Customs's secure server.

The P14 and P35 forms sent over the Internet and accepted by the
HM Revenue & Customs’s systems have the same legal validity and
implications as a signed paper form delivered to an HM Revenue &
Customs office.

Filing online will take some time, depending on traffic on the receiving end. Please
do not cancel the process if you feel it has taken too long. Wait until you have
received a return dialogue indicating that your transmission has been successful,
has timed out, or has failed.

This message does not indicate that your online return is without errors. It simply
means the return has been received by HM Revenue & Customs's computer. If HM
Revenue & Customs has your email address on file, they will also send a
confirmation email. You can update or add an email address to your details by
logging in to the HM Revenue & Customs Web site. At busy times the online
confirmation messages may be delayed, so HM Revenue & Customs recommends
that you provide an email address.

When you registered to use PAYE Online for Employers, you were given a User ID,
a password and a secure mailbox. You can get to your secure mailbox by going to
<https://online.inlandrevenue.gov.uk/>, keying your User ID and password into
the Login boxes, and clicking on 'View your notices and reminders'. It is important
to remember that unless you have opted out of using your secure mailbox, HM
Revenue & Customs will send all messages regarding your account to the secure
mailbox.

If you have made any errors, you’ll receive an error message. Immediate error
messages are displayed on your screen at the end of the online filing process. Print
out these messages and make the necessary adjustments before re-trying to file
online. Error messages from HM Revenue & Customs may appear somewhat
cryptic, but they include the information necessary to find and fix errors in your
forms. Note particularly the two lines indicating the problem and the location of
the problem.

Unless you have opted out of the secure mailbox service, the failure message will
also come to your secure mailbox. Therefore, please check your secure mailbox
soon for feedback messages regarding your online filing. It is also a good idea to
provide an e-mail contact address as a backup in case the secure mailbox is not
working.

Immediately after filing online you should also back up your company file and
keep the backup in a different location than your routine backups.

HM Revenue & Customs uses a Quality Standard for returns filed online.
QuickBooks meets the Quality Standard in the area of Online filing.

222 Chapter 7 Payroll and employees

Making changes to your payroll year-end forms
If you alter certain payroll data after you have filed your End of Year forms, you
will see a warning screen which tells you that the data you are changing affects
the P14 and P35 forms already filed with HM Revenue & Customs. Whether you
filed online or on a paper form, you will be required to file an amendment on a
paper form. If you are sure you want to amend your P14/P35 data, please ensure
that you have taken the following steps.
■ Have you printed out your own copies of your original P14s and kept them
on file? You will need them if the change affects an amount on the P14s.
■ Have you printed out your original P35 and kept it on file? You will need it.
■ Have you backed up your company data to a secure location which is separate
from your regular backups? You should keep a permanent record of the data
used to create your original P14s and P35.
This safeguard is important because at present, P14 and P35 amendments
must be filed from QuickBooks by hand using paper forms. If you adjust the
figures in QuickBooks to create a new P14 or P35 form, you will not have
access to the figures used to create the original form. You will need to compare
the new data with the data in the original form in order to complete and file
an amendment to your P14s or P35.

To learn about… Search the Help index for…

Filing your End of Year forms online online filing

Payroll End of Year process payroll, end of year
Reviewing and printing P14/P60 forms P14/P60
Reviewing P35 data and printing P35 P35
Amendment process for P35 P35, amending

Processing your year end 223

Getting information about your payroll

QuickBooks Payroll Reports

Use these QuickBooks reports to gather the payroll information you need:

Report Description

Payroll Summary Shows the total wages, taxes withheld, deductions from net pay, additions to
net pay, and employer-paid taxes and contributions for each employee on your
payroll.

Payroll Item Detail Lists the payroll transactions on which each payroll item appears. For example,
you could use this report to find out which payroll payments had deductions
for a dental plan.

Payroll Pension Detail Lists the payroll items that are marked as ‘pension contributions.’ Use this
report to see a list of your company’s pension contributions to a specific pen-
sion plan and the earnings base for each pension payroll item.

Statutory Payments Lists the statutory payroll items used in any statutory payments throughout the
Detail specified payroll period. You’ll also see the amount of statutory pay you can
recover from your payroll liabilities. If you qualify for SER, the recovery
amount is further broken down to show NIC compensation.

Payroll Detail Review Provides detailed information about how QuickBooks calculates tax amounts
on employee payroll payments and in year-to-date transactions. You can use
this report as a research tool to see exactly what numbers QuickBooks used to
calculate the tax amounts.

Employee Earnings Shows information similar to the payroll summary report, but in a different lay-
Summary out.

Payroll Transactions by Lists payroll transactions, grouping them by payee. For example, you could
Payee use this report to create a listing of the payroll payments you paid to each
employee.

Payroll Transaction Shows the line item detail that appears on each payroll transaction.
Detail

Payroll Liability Lists the payroll liabilities your company owes to tax agencies and labour
Balances unions for example.

Employee Quick- Lists chronologically the transactions related to a particular employee. This
Report report is available from the Employee list by clicking the Report menu button.

Payroll Item Listing Shows detailed information about each payroll item you use to track payroll-
related expenses and liabilities.

Payroll Item Lists chronologically the payroll transactions that contain a particular payroll
QuickReport report item. This report is available from the Payroll Item list by clicking the Report
menu button.

224 Chapter 7 Payroll and employees

Finding out how much you owe for payroll
liabilities
Let’s say you want to see how much you currently owe for each payroll tax for the
current payroll period.

You can find out quickly by creating a payroll liability balances report. This report
shows liabilities incurred during the date range specified that are still unpaid or
outstanding.

Ensure the date

range covers the
period for which you
have outstanding
payroll liabilities.

If you made any statutory payments to an employee, QuickBooks automatically

calculates any recovery amounts for you. If you qualify for SER, make sure you tick
the SER check box because the calculation that QuickBooks uses to determine the
recovery amount is different.

Getting information about your payroll 225

 Finding out how much you spend on your
payroll
Let’s say you want to know how much money you spend on your payroll. You can
run a payroll summary report to see your payroll totals by employee and for the
whole company for a single payroll period.

The gross pay includes

commissions, bonuses You can change the
and additions to gross. date range to cover
This represents the this year to date,
total payroll expenses, last quarter, or any
not including the period you want.
employer-portion for
employment taxes and
other contributions.

The adjusted gross pay

equals gross pay minus
deductions from gross. The net pay is the
actual amount of
money the
employee(s)
received. This
For taxes and employer amount is usually
contributions, the less than gross pay
amounts are liabilities due to taxes
accrued during the period. withheld and other
after-tax deductions.

226 Chapter 7 Payroll and employees

Figuring out what wage amount each tax is
based on
For each tax amount on employee payroll payments, you want to check the
amount of wages it is based on. You can generate the payroll detail report to see
the earnings base for all calculations on payroll payments.

To learn about… Search the Help index for…

payroll reports payroll, reports about

Getting information about your payroll 227

228 Chapter 7 Payroll and employees
 C h a p t e r 8

Time and cost

tracking

Should I track 230

time?
How do I bill for
Paying for time 236
worked employee and
Charging
customers for
238 subcontractor
time worked
time and costs?
QuickBooks Pro 240
Timer Reference
Sheet Time tracking, available only in QuickBooks Pro,
and higher, allows you to track hours worked by
yourself, employees, or subcontractors. You can
make the time billable for specific jobs.
QuickBooks can then transfer the tracked time to
pay cheques, regular cheques, and bills from
subcontractors.

Cost tracking allows you to pass costs along

directly to your customers. Chapter 8

229
Should I track time?
QuickBooks Pro and higher provide time-tracking capability to suit your needs:
■ The Stopwatch: When you’re working in QuickBooks and want to take a stop-
watch approach (that is, turn on a timer, work, and then stop the timer), use
the Stopwatch on the Time/Enter Single Activity window.
■ The QuickBooks Pro Timer: The Timer is a separate program that runs on
Windows on any computer. Because it’s separate, you can distribute copies of
the Timer to people who don’t have access to QuickBooks, such as employees
and subcontractors. Then you can merge their time data into the QuickBooks
company file.
■ You can also enter time data manually into QuickBooks in the Weekly
Timesheet window or Time/Enter Single Activity window.

Tracking time can help you make better decisions about work capacity, future
hiring needs, and employee productivity.

Furthermore, if you track the time you, your employees, or your subcontractors
spend on each job, you’ll be able to do the following:
■ Invoice customers based on the number of hours of work done for them.
■ Automatically fill in hours on pay cheques.
■ When paying subcontractors, automatically fill in hours on cheques and bills.
■ Track payroll costs by job, class, or type of work.
■ Report hours worked by person, job, or type of work.
■ Track billable versus non-billable time.

Should I make time billable?

When you record time worked for a particular customer or job, one option is to
mark it as billable. Then, when you invoice the customer, you can add the billable
time to the invoice. After you put the time on a sales form, QuickBooks marks it
non-billable, so you won’t charge twice for the same thing.

If the work done by your employees is billable to a customer, it becomes billable

as soon as you record the time in QuickBooks. It doesn’t matter whether you have
actually paid the employees for it yet.

Some businesses track time without making it billable. For example, if you agree
to do a job at a fixed price, you would not invoice for time. However, you may still
want to track time so you can decide after completing the job whether you set the
right price.

Also, you can track accrued time (like sick time), which is normally not billable.

230 Chapter 8 Time and cost tracking

Should I track time for subcontractors?
Most businesses don’t need to track time for subcontractors, with a few
exceptions:
■ On time reports, you want to see all time for a particular job, whether for an
employee, a subcontractor, or an owner.
■ Glenn’s company has only one employee now. By tracking time worked by
subcontractors, he’ll know what to expect when he has employees doing this
type of work in the future.
■ You want to track subcontractor time independently of the time subcon-
tractors report on the bills they submit to you.
■ Jill gives subcontractors copies of the Timer program and asks them to return
time data to her weekly so she can track how many hours have been spent on
her project long before she receives the bills.
■ You want to pay subcontractors based on time worked, using the time infor-
mation entered in QuickBooks.
■ Eric tracks time for subcontractors and pays them within 30 days. On a weekly
basis, Eric enters a bill for each subcontractor and transfers the time worked
during the previous week.

How much detail should I track for time activities?

You track time based on activities. Each activity needs, at a minimum, the
following to describe it:
■ Name of person who did the work
■ Date the work was done
■ Time spent doing the work

The level of detail you include when tracking an activity depends on whether or
not it’s billable and how much detail you want in your reports.

Describe an activity
Comment
by specifying …

Name of person who did the work Required.

Date the work was done Required; each activity can be for only one date.

Time spent doing the work Required. (If you use the Timer or the Stopwatch
to time an activity, fill in the time spent.)

Should I track time? 231

 Describe an activity
Comment
by specifying …

Customer (and job) the work is Required only if you plan to invoice for the time.
for Even if you don’t invoice for the time:
■ Allows you to report on hours worked by cus-
tomer and job.
■ Allows you to track payroll expenses by cus-
tomer and job.

Type of work (described by a ser- Required only if you plan to invoice for the time.
vice item from the Item list) Even if you don’t invoice for the time:
■ Allows you to report on hours worked by type
of work.
■ Allows you to track payroll expenses by type of
work.

Whether time is billable Time must be billable if you plan to invoice for
the time.

Class If your company does class tracking, you can do

the following:
■ Filter time reports by class.
■ If you are set up to split payroll expenses by
class, you can assign classes to employee
time. Then you can automatically track all pay-
roll expenses by class.

232 Chapter 8 Time and cost tracking

 Choosing a method to track time
QuickBooks Pro comes with a separate Timer programme that can run regardless
of whether QuickBooks is on the same computer. You can track time with the
Timer and transfer the time data into QuickBooks later.

You can also use the built-in Stopwatch or enter time data into QuickBooks
manually using weekly timesheets.

Situation How to track time See…

You have access to QuickBooks Use the Stopwatch in the Time/ ■ “Setting up QuickBooks Pro or
and want to use a stopwatch Enter Single Activity window in higher to track time” on
approach to time tracking: turn QuickBooks Pro. page 234
on a timer, work, then stop the ■ search the online help and
timer. search for “Stopwatch”

You want people who don’t Distribute copies of the Quick- ■ “Setting up QuickBooks Pro or
have access to your QuickBooks Books Pro Timer to these peo- higher to track time” on
company file to track their own ple, and have them give you page 234
time. their time data. ■ “Using the Timer” on page 235
■ search the online help for
“Importing Timer data into
QuickBooks”
■ “Installing the QuickBooks Pro
Timer from the CD-ROM” on
page 7

You (and others in your com- Enter time data directly into ■ “Setting up QuickBooks Pro or
pany) have access to Quick- QuickBooks Pro, either on a higher to track time” on
Books and want to enter time weekly timesheet or as separate page 234
data after the work is done. activities one at a time. ■ search the online help for
“Entering time manually in
QuickBooks”

Your employees submit paper One person can enter every- ■ “Setting up QuickBooks Pro or
timesheets. one’s time data directly into higher to track time” on
QuickBooks Pro on a weekly page 234
timesheet for each person. ■ search the online help for
“Entering time manually in
QuickBooks”

Should I track time? 233

Setting up QuickBooks Pro or higher to track time
Note: You must do this preparation before other users can install and use the Timer.

Search the Help

What to set up Comments ✓
index for…
Turn on time tracking. The timesheet starts with the day ■ preferences, time ❏
you choose as the first day of your
work week.

On the Customer:Job list, set up If you don’t plan to track time for a ■ customers, adding new ❏
the customers and jobs you want customer or job, you don’t need ■ jobs, adding new
to track time for. that name on the Customer:Job
list now.

On the Item list, set up Service items are required only if ■ service items, ❏
service items for the work you make the time billable to a setting up
to be tracked. customer or job. ■ subcontractors,
Be sure to create separate service service items for
items for subcontracted services.

Set up the people whose time If you plan to pay employees ■ employees, adding ❏
will be tracked. based on tracked time, you must ■ other names, list of
Each name must be on one of also set up their payroll informa-
■ suppliers, adding
the following lists: tion. See:
■ Employee ■ “Setting up employees” on
page 178
■ Other Name (for owners and
partners) ■ Also, see the help in the Timer
for instructions on using it
■ Supplier (for subcontractors)
On the Payroll Item list, set up Required only if you will track time ■ hourly wages ❏
salary or hourly wage payroll for employees. ■ salaries
items to use when paying
employees for time tracked.

On the Class list, set up classes Class tracking is completely ■ classes, adding ❏
for the work to be tracked. optional.

Setting up to use time tracking with payroll

When you set up your employees, be sure to
tick Use time data to create payments on
his or her Payroll Info tab.

Payroll payments will then automatically have the employee’s time data
(including job, class, and type of work) for the period covered by the payment.
QuickBooks keeps track of your payroll expenses for hourly or salaried gross pay,
employer taxes, and other payroll overhead by job, class, and type of work.

234 Chapter 8 Time and cost tracking

Using the Timer
The QuickBooks Pro Timer is designed to track and record time data which you
can then export to QuickBooks Pro (or higher). Use the Timer when you want to
gather time data from people who don’t have access to QuickBooks but do have
access to a computer.

For more information on using the Timer to track employees’ time, see the online
help in QuickBooks and the help that comes with the Timer programme.

For information on installing the timer, see “Installing the QuickBooks Pro Timer
from the CD-ROM” on page 7.

You can also create Timer install disks to give to those employees who want to
track their time using the Timer.

To create Timer install disks:

Create Timer 3.5-inch floppy install disks for those employees who need to time
their activities but do not have a copy of QuickBooks.
■ From the Windows menu, select Programs, QuickBooks, then Create
Timer Install Disks. Follow the on-screen instructions.

Once you have created the disks, give them to your employees along with the
“QuickBooks Pro Timer Reference Sheet” on page 240. This sheet explains how to
install the Timer.

Using the Stopwatch in QuickBooks to track time

The Stopwatch is a feature available within QuickBooks that can also record timed
activities. Use the Stopwatch on the Time/Enter Single Activity window in
QuickBooks Pro when you want to time an activity—simply start the Stopwatch,
work, and stop it when you’ve completed the work.

To learn about… Search the Help index for…

Blank timesheets timesheets, blank

Filling out a weekly timesheet timesheets

Entering details for a single single activity entries

activity

Using the Stopwatch to time an activ- Stopwatch

ity

Should I track time? 235

Paying for time worked

QuickBooks does not track whether you have paid workers for time
or not, only whether you have passed time costs on to your
customers.
If you pay a worker (employee, owner, or subcontractor) for time and then edit
the time data or import new data from the Timer, QuickBooks does not track
which time has been paid for and which has not. All it tracks is the end date of
your last payment for time to the worker.
To avoid paying for the same time twice, make sure your worker has submit-
ted all their time data for a period before you create a payroll payment cover-
ing that period–that is, pay a worker only for work that takes place after the
end date of your last time payment to him or her. If you accept late time data,
print a Time by Job Detail report and mark the activities you are paying for.

QuickBooks automatically transfers time data when you create payroll payments for
employees who are set up for time tracking. It fills in the hours for each "salary" or
"hourly wage" payroll item included in the time data for the payroll period.

For information on setting up and using the Timer to track employee’s time, see the
online Help.

If customers or jobs, service items, or classes are assigned to an employee’s time

activities, this detail is also included. For example, out of 40 hours altogether, 19
may be assigned to Job A, 11 to Job B, and the remaining 10 hours to Job C.
QuickBooks then splits the payroll expenses for the employee according to how you
assigned the time.

Paying non-employees for time worked

Some businesses need to pay people who are not employees (such as owners,
partners, or subcontractors) based on time worked. QuickBooks can transfer time
data for a specified date range to a payment to a nonemployee. That is, it can fill in
the number of hours worked and the rate for that type of work.

To pay a subcontractor or other supplier, you can either write a cheque (if you want
to pay immediately) or enter a bill (to be paid at a later time). To pay an owner or
partner (someone on your Other Names list), you can write a cheque.

Tip: To show payments for time worked on reports, set up subcontractors as suppliers.
Always use the subcontractor’s supplier name when you track time and pay him or her.
Then QuickBooks will report the amount paid correctly.

236 Chapter 8 Time and cost tracking

To learn about… Search the Help index for…

Setting up an owner or partner owners

partners, setting up

Adding a name to the Supplier list suppliers, adding

Editing an employee name employees, editing

Service items for non-employee time data

If you plan to transfer time data for non-employees to a payment, it should have
a service item assigned to it. QuickBooks uses the rate for "purchases" of the service
item when calculating how much to pay a non-employee for the hours worked.
■ Service items for subcontractors (suppliers)
When you pay a subcontractor set up as a supplier, the payment is an expense
to the business. You should assign the time to a service item set up to track
costs in an expense account. (This service item should not be used for owners
or partners.)
■ Service items for owners or partners
When you pay an owner or partner, the payment is a drawing against equity
rather than being an expense to the business. You should assign the time to
a service item set up specifically to track costs in that person’s equity account.
The service item should not be used for any other purpose.

To learn about… Search the Help index for…

Setting up a service item for service items, billing work by

services with both costs and income subcontractors or owners

Transferring nonemployee time to a payment or bill

When you pay a nonemployee for time worked, use the Write Cheques window.
(To pay employees, always use the payroll system!)

When you write the cheque or enter the bill, QuickBooks alerts you if there is
current time data for the payee. If you want to pay for the time now, you can
specify the date range the payment should cover. Then QuickBooks pre-fills the
Items tab of the payment with the service item, customer and job (if any), rate,
number of hours, and amount.

To learn about… Search the Help index for…

Writing a cheque to pay a time, paying non-employees for

non-employee for time worked

Paying for time worked 237

Charging customers for time worked
You can transfer time data to an invoice for a customer as long as the time data
includes the Customer:Job name, is recorded for a service item, and is marked as
billable.

As you create an invoice, you can display the unbilled time for the job and select
what to include. When you record the invoice, QuickBooks marks the time you’ve
selected as billed, so you won’t bill for it again by mistake.

Search the QuickBooks

To learn about…
Help index for…

Transferring time to invoices invoices, time and cost

Making time billable again if you time, making billed time billable again
billed for it mistakenly

Recording the cost of the work vs. invoicing for it

Don’t make both a worker’s time and your payment to that worker
for the time billable.
■ If you make an invoice from a subcontractor billable, you can invoice your
client in turn for the subcontractor’s charges. When invoicing your client,
open the Choose Billable Time and Costs window, then select the subcon-
tractor’s bill from the Expenses or Items tab (whichever you used on the
subcontractor’s bill).
■ If you pay a subcontractor, owner, or partner for time worked with the
Write Cheques window, you can make the service items on the cheque
billable. Then, when invoicing your client, open the Choose Billable Time
and Costs window, then select the time from the Items tab.
■ If you make the time itself billable, you can invoice for the time from the
Time tab of the Choose Billable Time and Costs window.
■ If you make both the time and the bill or payment billable, you are in
danger of invoicing the customer twice for the same work!

238 Chapter 8 Time and cost tracking

 When you record time or bill your customer for it, you are not recording its cost
to you. To record the cost, you have to take a second step. The following table
shows how you record costs for time worked and what you have to do to invoice
customers for work.

The work is You record the cost of the To invoice other people
done by … work when you … for the work…
Employees Pay the employees. Make the time billable.

Subcontractors Enter bills from the subcontractors (or On the bills, cheques, or credit card
(suppliers) write cheques or enter credit card charges, make the items or expenses
charges for the work). billable
OR
track the time and make the time bill-
able

Owners or Payments to owners or partners for time Make the time billable
partners worked are a draw against equity, not an OR
expense, and therefore do not affect the write a cheque to pay for the time
net profit.
worked, and make the items on the
cheque billable.

Charging customers for time worked 239

QuickBooks Pro Timer Reference Sheet

The Timer and QuickBooks Pro Starting the Timer

or higher
Click Start, Programs, then QuickBooks Pro
■ Before you can use it, the Timer needs to Timer.
import information from QuickBooks Pro
or higher. Setting up the Timer
■ Then use the Timer to time your activities. 1 In the Open Timer File window (displayed
the first time you start the Timer), choose
■ Finally, export a file of time data for Quick-
Create New Timer File, then click OK.
Books Pro or higher to import.
2 Type a name for the Timer file and the
Installing from the QuickBooks location to save it, then click OK.
Pro or higher CD-ROM 3 From the File menu of the Timer, choose
1 Insert the CD-ROM in your CD-ROM drive. Import QuickBooks Lists.
2 If the QuickBooks Installer starts automati- 4 Select the name of the .IIF file to import
cally, click No. from QuickBooks. (You may have to
If the Installer does not start automatically. navigate to a new drive or folder.) Click
display the Run window: OK.

■ Select Run from the Start menu. The person who works with QuickBooks
Pro or higher must make this IIF file
Type the letter of your CD-ROM drive, then
available to you.
:\timer\setup.exe and click OK.
5 From the File menu of the Timer, choose
3 Follow the instructions on your screen.
Preferences, then Default Name.
Installing from 3.5-inch disks 6 Choose your own name from the drop-
1 Insert the first Timer install disk in your down list.
3.5-inch disk drive. 7 If your time is always billable to a customer
2 Select Run from the Start menu. or job, select the checkbox, then click OK.

3 Type the letter of your floppy drive, then

\:setup (for example, a:\setup), then click
OK.
4 Follow the instructions on your screen.

240 Chapter 8 Time and cost tracking

Setting up an activity to time Shrinking the Timer
1 In the main Timer window, click New ■ Click the Resize button (to the right of the
Activity. Start button).
2 Fill in the fields you need and click OK. ■ To make the timer full size again, click the
Resize button on the shrunken Timer.
Timing an activity
1 If the activity you want to time is not Exporting Timer data for
already in the Current Activity field, QuickBooks
choose it from the drop-down list. 1 From the File menu of the Timer, choose
■ If you choose from Today’s Activities, Export Time Activities and click Continue.
the Timer will add time to the time 2 In the Export Activities window, change
already shown for today. the date through which to export all unex-
■ If you choose from Activity Templates, ported activities if the date is not correct.
the Timer will start with zero time. 3 Click OK.
2 To start timing, click Start (or Resume). 4 In the Create Export File window, specify a
3 To stop timing, click Stop. name, drive, and folder (or directory) for
the IIF file you are creating.

Entering time manually 5 Click OK.

1 Choose the activity from the Activity
Templates section of the drop-down list in Using the Timer’s Help system
the Current Activity field.
For onscreen help while using the Timer, press
If the activity is not on the list, set it up first. F1 or choose Help for this Window from the
2 When the activity is in the Current Help menu.
Activity field, click Edit Activity.
To find out how to use other Timer features
3 In the Edit Activity window, change the (such as entering notes or viewing your activity
date if you did not perform the work today. data), choose Help Contents from the Help
4 In the Duration field, type the time. menu.
You may enter time in any of the following
formats: System requirements for the
■ Hours and minutes (for example, Timer
01:30) The Timer requires the following hardware and
■ Hours as decimals (for example, 1.5) software:
■ Hours as fractions (for example, 1 1/2) ■ 486 PC (or higher) with a minimum of
9 MB (megabytes) of RAM (random access
■ Number of minutes (for example, 90)
memory); 16 MB is recommended.
No matter which format you use, the
■ Hard disk with at least 9MB of free disk
Timer displays hours and minutes when
you tab out of the field. space (plus space for your data file)
■ Windows 3.1 or later
5 Click OK to record the activity and its time.
■ VGA monitor or better

Charging customers for time worked 241

242 Chapter 8 Time and cost tracking
Index
If you don’t find the topic you are looking for here, try the QuickBooks Help. From the
QuickBooks Help menu, choose Help Index, enter the keyword, and press ENTER.

Symbols accounts (types)

accounts payable, 9
accounts receivable, 9
.AIF, 96
asset, 9
.QBA, 96 balance sheet, 8
.QBB, 96 bank, 9
credit card, 9
.QBW, 96 equity, 9
.QBX, 96 fixed asset, 9
liability, 9
long term liability, 9
Numbers non-posting, 8
other asset, 9
123 help, 90 other current asset, 9
other current liability, 9
accounts (working with)
A alphabetical order, 51
automatically-created accounts, 8
account numbers items, choosing for, 28
chart of accounts, 51 names, changing, 51
numerical, 51
accountant’s review feature, 80–82 opening balances
accounting changing, 51
accrual, 7 payroll, 168
annual, 124 reconciling, 107
cash basis, 7 reorganizing order of, 51
quarterly, 124 accounts payable
accounting period account for, 9
choosing, 124 converting from Quicken, 72
foreign, 148
accounting software
historical transactions, 52
transferring data to and from QuickBooks, 78
accounts receivable
accounts
account for, 9
affecting during payroll setup, 191
after converting from Quicken, 71
creating, 54
foreign, 148
editing, 52
historical transactions, 52
foreign, 148
numbering, 52 accrual basis
opening balance for, 54 adjustment during setup, 55
payroll, 168 defined, 7
Quicken, equivalent of, 74

Index 243
accrual time
employees, setting up for, 180 B
entering, 180
backing up
year-to-date, entering, 189
to Zip drive, 102
accrual vs. cash
backing up data, 100
choosing, 124
backup file, searching for, 103
activities
detail, how much to track, 231 BACS, paying employees with, 203
single, recording, 235 balance sheet
Additional Voluntary Contribution, payroll described, 16
items for, 170 types of accounts, 9
additions bank accounts
employee template, adding to, 179 description, 9
payroll item for, 172 reconciling, 107
adjusting benefits for employees, payroll item for, 172
income and expense accounts, 56 billable status
item prices or rates, 49 deciding whether to make time billable, 230
liabilities for payroll items, 206 making billed time billable again, 238
adjusting VAT bills
control account, 140 paying foreign suppliers, 161
to remove rounding, 142
blank timesheets, 235
administrator, 113
bookkeeping methods
AEO, 187 accrual basis, 7
alignment cash basis, 7
adjusting for printing, 117 bookkeeping software, transferring data to and
alphabetical order for accounts and lists, 51 from QuickBooks, 78
amortisation of loans, only in Quicken, 77 books, closing, 114
annual accounting, 124 business segments, tracking, 14
assets buying units, 35
accounts for, 9
balance sheet, viewing on, 16
current, accounts for, 9
defined, 16
C
Attachment of Earnings Order, 187 calculating, sales forms, on, by using items, 33
audit trail, 115 capital investments, 57
autoload printer feature, aligning forms with, cash basis bookkeeping, 7
118 cash flow projector, 97
Automatic Update cash vs. accrual
turning off, 62 choosing, 7, 124
AVC (Additional Voluntary Contribution), categories in Quicken, equivalent of, 74
payroll items for, 170
CD
update QuickBooks, 63

244 Index
If you don’t find the topic you are looking for here, try QuickBooks Help. From the
QuickBooks Help menu, choose Help Index, enter the keyword, and press ENTER.

CD-ROM combining names after converting from

installing Timer from, 240 Quicken, 70
changing commission
how dates display, 64 payroll item for, 172
Internet connections, 60 quantity for, 199
chart of accounts commissions
adding accounts, 52 employees on, 183
automatically-created accounts, 8 company
described, 8 backing up, 100
numerical, 51 backing up to Zip drive, 102
reorganizing, 51 data file, described, 6
checking accounts described, 6
reconciling, 107 passwords, 112
checklist for setting up payroll, 166 restoring data, 103
sample, 92
cheques setting up, 22
alignment adjustments for, 117 setup, preparing for, 21
ordering from Intuit, 260
payroll condensing data, 104
printing, 203 when using Payroll Service, 104
reviewing and correcting, 201 connecting
writing, 200 QuickBooks to the Internet, 59
choosing an accounting period, 124 connection
Class 1A NIC changing for the Internet, 60
paying, 209 construction industry, standard categories,
classes tracking, 14
adding, 15 consulting
compared to jobs, customer types, and job see professional advisors
types, 15 contacting Intuit, 260–261
employees, grouping by, 182
payroll expenses, tracking by, 174 context-sensitive help, 89, 90
turning on preference for, 15 contributions to pension, 176
uses for, in QuickBooks, 14
converting, Quicken data, 66–70
closing books or period, 114
creating
closing the follow-me help, 89 standing orders, 125
codes for VAT, creating, 126 VAT codes, 127
VAT reports, 133
Collection of Student Loans, 181
credit cards
columns accounts, 9
changing for reports, 94 reconciling, 107
changing on forms, 99
current accounts, historical transactions and, 53

Index 245
current assets, accounts for, 9 Director’s NI, check box for, 181
custom fields disable, Automatic Update, 62
filtering reports for, 95 Disabled Persons Tax Credit
for employees, 180 payroll item, 171
for items, 40
discount items
customers creating, 40
foreign, 158 description, 33
opening balances using on sales forms, 47
changing, 25
payroll expenses, tracking by, 173 disks
products and materials purchased for, 42 saving disk space, 104
VAT codes for, 128 downloading
customising reports, 94 transactions, 111
DPTC, payroll item, 171
duplicate names, after converting from
D Quicken, 70

data
audit trail of, 115
backing up, 100
E
backing up to Zip drive, 102
earnings based on pension, 176
condensing, 104
exporting, 77 earnings bases
importing from other software, 77 employee year-to-date setup, viewing, 191
refreshing, 112 EasyStep Interview, 22
restoring, 103
EC member states, VAT for, 130
transferring to and from QuickBooks, 78
EC sales list, 133
dates
changing how they display, 64 employee defaults, 178, 179
report ranges, 95 employees
start date, 18 AEO, setting up, 187
deductions, payroll BACS, paying with, 203
employee template, adding to, 179 benefits for, 172
employees, individual, setting up for, 182 categorising, 182
payroll item for, 172 commissions, 183
custom fields, 180
default VAT codes, setting up, 127
defaults, 178
defaults deleting, 197
accounts created, 8 duplicate names, 197
defaults, employee, for payroll, 179 editing information about, 195
firing, 196
deferment arrangement
hiding, 197
for VAT, 131
merging names, 197
delivery charges, item for on invoice, 32 NI code, entering, 181
departments, tracking, 14 paying, 198, 200
payroll information
depreciation, tracking, 27 changing, 195
descriptions of file types, 96 setting up, 178–179

246 Index
If you don’t find the topic you are looking for here, try QuickBooks Help. From the
QuickBooks Help menu, choose Help Index, enter the keyword, and press ENTER.

year-to-date summaries, 188 EZ, VAT codes, 130

preferences for, 165
removing from list, 197
rises, 195
setting up, 180
F
sharing QuickBooks on a network, 112 F1 key for help, 90
SMP, 185
SPP, 186 FAQs, 90
SSP, 185 fields
statutory payments, 184 adding to forms, 98
tax code, entering, 181 changing on forms, 99
week 1/month 1 tax code, 181 custom for employees, 180
employer contributions filtering reports with, 95
employee template, adding to, 179 file types, 96
employees, individual, setting up for, 182
file types described, 96
payroll item for, 172
files
envelopes, ordering from Intuit, 260
backing up, 100
equity backing up to Zip drive, 102
accounts, 9 condensing, 104
created by QuickBooks, 57 restoring, 103
setting up, 56
filing
balance sheet, viewing on, 16
payroll tax forms (P30), 205
redistributing during setup, 56
payroll tax forms online (P14 & P35), 210
retained earnings from, 56
sole traders, in, 57 filtering reports, 95
transferring from Opening Bal Equity, 56, 71 find
ES, VAT codes, 130 using 123 help to find answers, 90
using the index, 90
EU member states, VAT for, 130
finding your backup file, 103
exchange rates, 146
see also multicurrency firing an employee, 196
updating, 154 printing P45s, 196
exempt input tax, record, 142 fiscal year, 101
adjusting for mid-year QuickBooks start date,
exemption adjustment for VAT, partial, 141
56
expense accounts
flowcharts, 85
opening balances, 56
uncategorised, 55 follow-me help, 89
closing, 89
expenses, payroll, 173
fonts
exporting
forms, 99
data, 77, 79
vs. other methods of transferring data, 78 fonts, changing on reports, 94
foreign currency, see multicurrency

Index 247
forms HM Customs & Excise
described, 87 receiving VAT refund, 136
printing, alignment, 117 holiday time
freight charges accrual period and hours, entering on
item for on invoice, 32 employee defaults, 179
fuel scale charges employees, setting up for, 180
paying VAT for, 132 entering, 180
payroll item, 170
year-to-date, entering, 189

G hours worked
entering on payroll payments, 200
GAYE (Give as You Earn), payroll items for, 170 how-do-I menus, 90
Give as You Earn, payroll items for, 170
group items
compared to subitems, 34 I
creating, 40
description, 33 Icon bar, 85
uses of, 45 IIF file format, 77
using to hide details, 46 income accounts
choosing for items, 28
opening balances, 56
H uncategorised, 55
income statement, described, 17
hardware requirements
for Timer, 241 income tax
form, 20
help, 89 payroll items for, 171
123 help, 90
closing help window, 89 index, 90
F1 key, 90 Inland Revenue
follow-me help, 89 payroll liabilities and, 205
how-do-I menus, 90
Internet
index, 90
changing your connection, 60
onscreen, 89
connecting QuickBooks to, 59
opening help window, 89
requirements, 59
QuickBooks professional advisors, 6
setting up a connection, 60
QuickBooks Tutor, 91
updating QuickBooks from
resetting help windows, 89
updating
hiding QuickBooks from the Internet, 61
items in lists, 86 using to file payroll tax forms, 211
hiding and showing Intuit
details on sales forms, using group items, 46 phone numbers, 260–261
employees, 197 Web sites, 260–261
items, 49
inventory assembly items vs. groups, 34
historical transactions, 52
inventory part items
entering for payroll, 53
description, 32
locking after remitting VAT, 140

248 Index
If you don’t find the topic you are looking for here, try QuickBooks Help. From the
QuickBooks Help menu, choose Help Index, enter the keyword, and press ENTER.

investment tracking, only in Quicken, 77

invoices
L
ordering from Intuit, 260 learning
payment items on, 47 using the tutorial, 91
items, 35 leaving employees, 196
about, 54 printing P45s, 196
accounts, how affected by, 28
lessons
adding to forms with units of measure set, 37
using the QuickBooks Tutor, 91
benefits of setting up, 26
changing prices, 49 liabilities
custom fields for, 40 accounts for, 9
deleting, 50 adjusting for payroll item, 206
depreciation, 27 balance sheet, viewing on, 16
editing, 50 defined, 16
foreign prices, 150 payroll, see payroll liabilities
hiding, 49 VAT, 126
inventory assembly, 32, 34 VAT, paying, 132
list of, 30 limited company
non-inventory part, 32, 40 described, 19
other charge, 32, 40
payroll, 169–176 line items
prices, changing, 49 defined, 44
reimbursable costs, for, 41 see also items
service, 31, 40 lists
setting up units of measure, 36 activating inactive entries, 50
subitems, 34, 40 alphabetizing, 51
types described, 86
restrictions on changing, 49 exporting, 78
table of, 31 item, 30
VAT codes for, 127 reorganizing, 51
sorting, 31
loan amortisation, only in Quicken, 77
J Loan Manager, 97
jobs locations, tracking, 14
compared to classes, customer types, and job locking past VAT quarters, 114, 139
types, 15
login, 113
opening balances, changing, 25
payroll expenses, tracking by, 173 long term liability accounts, 9
products and materials purchased for, 42

M
maintaining VAT records, 138

Index 249
maintenance releases, ordering from Intuit, 260
manually update QuickBooks, 62
N
margins names, Quicken conversion and, 70
adjusting alignment when printing forms, National Insurance, payroll items for, 171
116
navigators, 85
adjusting for reports, lists, and graphs, 117
net worth, 9
markup
item prices, 49 networks
how QuickBooks works on, 111
memorising reports, 94
sharing QuickBooks on, 112
merging
NI code, 181
employee records, 197
names after converting from Quicken, 70 NIC, payroll items for, 171
midyear setup, 56 non-inventory part items
creating, 40
miscellaneous charges
description, 32
items for, 40
reimbursable charges, 43 non-posting accounts on chart of accounts, 8
modifying your Internet connection, 60 number format in reports, 94
mortgage amortisation, only in Quicken, 77 number remaining field, 124
multicurrency numbers
creating a currency, 152 changing how numbers display, 64
creating POs for foreign suppliers, 160 numerical accounts on chart of accounts, 51
currency calculator, 154
depositing foreign money, 159
exchange rates, 146, 154
foreign customers, 149, 158 O
foreign items, 150
foreign suppliers, 149 online accounts
home-currency adjustments, 155 downloading transactions, 111
invoicing foreign customers, 158 PIN/password, 109
paying foreign suppliers, 161 reconciling, 110
payments from foreign customers, 158 online banking
realised gains & losses, 157 converting from Quicken, 68
setting up, 146–154 going online, 109
setting up foreign accounts, 148 setting up, 109
transferring money, 162 onscreen help, 89, 90
unrealised gains & losses, 155 how-do-I menus, 90
using, 146–154 QuickBooks Tutor, 91
multiple users Open Window list, 85
maximum number of, 113
update QuickBooks for, 63 Opening Bal Equity account, 56
adjusting balance during setup, 56
multi-user mode, 112 described, 57
opening balance
for accounts, 54
opening balances

250 Index
If you don’t find the topic you are looking for here, try QuickBooks Help. From the
QuickBooks Help menu, choose Help Index, enter the keyword, and press ENTER.

balance sheet accounts, changing, 51 P45 forms

customer or job, changing, 25 printing for leavers, 196
entering in EasyStep Interview, 20 P60 forms
ordering tracking information in QuickBooks, 172
cheques, 260 partial exemption adjustment for VAT, 141
envelopes, 260
invoices, 260 partial payment on invoice, 47
maintenance releases of software, 260 partners
pay slips, 260 commission sales, 183
sales orders, 260
partnerships
software upgrades, 260
described, 19
statements, 260
income and expenses, tracking by partner, 14
user’s guides, 260
time worked, paying partners for, 236
other asset accounts, 9
passwords, 112
other charge items changing, 114
creating, 40 close books or period with, 114
description, 32 deleting, 114
other current asset accounts, 9 pay slips
other current liability accounts, 9 ordering from Intuit, 260
printing, 203
Other Names list, after Quicken conversion, 69
paying
Other, on reports, 96 employees, 200
overpayments foreign suppliers, 161
payroll liability, refund cheque for, 208 nonemployees (subcontractors), 236
owner’s draws, 57 payroll liabilities, 205, 208
small employer’s relief, 207
owner’s equity, 57 VAT liabilities, 132
owners payment items
commission sales, 183 creating, 40
owners/partners, paying for time worked, 236 description, 33
using on sales forms, 47
payments
P partial on invoice, 47
pay slips, printing, 203
P11 forms, 211 payroll, 200
P14/P60 forms, 212 payroll
filing online, 212 accounts, 168
AEO, setting up, 187
P35 forms, 215
BACS, using, 203
filing online, 212
checklist for setting up, 166
P35 summary condensing payroll data, 104
report, 215 customising accounts for, 168

Index 251
 customizing accounts for, 168 payroll items, creating a pension contribution,
employee template, adding to, 179 176
employees, individual, setting up for, 182 payroll liabilities
expenses, 173 adjusting, 207
filing forms online, 212 Class 1A NIC, 209
historical transactions, entering, 188–193 discounts for, 208
paying employees, 198 how QuickBooks tracks, 175
preferences for, 165 P11 forms, 211
reports, 225, 226 P14/P60 forms, 212
service, 164 P35 forms, 215
setting up, 165 P35 summary, 215
setting up SMP, 185 paying, 205, 208
setting up SSP, 185 penalties, 208
SPP, 186 report, 225
subaccounts, 168 small employer’s relief, 207
tracking expenses, 174 year-to-date summaries for setup, 192
turning on or off, 164
payroll payments
payroll cheques see payroll payments BACS, using, 203
payroll expenses creating, 200
class, tracking by, 174 deleting, 201
customer, tracking by, 173 editing, 201
job, tracking by, 173 historical, entering, 188
reports, 173 printing cheques, 203
service item, tracking by (QuickBooks Pro printing pay slips, 203
only), 174 reviewing and correcting, 201
payroll forms voiding, 201, 202
P11 forms, 211 payroll reports, 224
P14/P60 forms, 212 Payroll Service, 164
P35 forms, 215
P35 summary report, 215 payroll taxes
P45s, printing, 196 employees, setting up for, 182
historical, 188
payroll items, 169–176 on employee defaults, 179
additions, 172 P35 summary report, filing, 215
changes, effects of, 194 paying, 205, 208
commissions, 172 payments, entering year-to-date summaries,
created by QuickBooks, 170 192
creating new, 172 refunds for overpayments, 208
deductions, 172 tax forms, filing, 205
displayed by QuickBooks, 170
editing, 194–195 pension contributions, creating payroll items
employer contributions, 172 for, 176
examples of common items, 175 pension-based earnings, 176
holiday, 170
phone numbers
hourly wages, 172
Intuit, 260–261
liabilities, adjusting, 206
ordering cheques and other supplies, 260
order of, effect on amounts and gross pay,
ordering product, 260
182
registering QuickBooks, 260
reports, 227
PIN/password for online accounts, 109

252 Index
If you don’t find the topic you are looking for here, try QuickBooks Help. From the
QuickBooks Help menu, choose Help Index, enter the keyword, and press ENTER.

POs for foreign suppliers, 160 dates, changing format, 64

preferences file types, 96
employee, 165 network, sharing on, 112
multicurrency, 147 numbers, changing format, 64
payroll, 165 Payroll Service, 164
using classes, turning on, 15, 25 professional advisors, 6
sample company, 92
price levels transferring data, 77
setting up for items, 29 updating, 61
prices of items, changing, 49 updating from a CD, 63
updating multiple users, 63
printing
user’s guides, ordering from Intuit, 260
alignment, adjusting, 117
files to disk, compared to other methods of QuickBooks file types, 96
transferring data, 78 QuickBooks Tutor, 91
margin issues, 116
P45 forms, 196 Quicken, 66–76
pay slips, 203 accounts payable, converting, 69, 72
payroll cheques, 203 accounts receivable, after conversion, 71
realised gains & losses report, 157 categories, equivalent of, 74
troubleshooting, 116 comparing with QuickBooks, 74
unrealised gains & losses, 155 converted data, differences, 76
converted data, fine-tuning, 69–70
prior liability payments, 192 converting
problems to QuickBooks, 66–70
printing, solving, 116 setting preferences, 70
product lines, tracking by, 14 QuickStatement for online accounts, 110
professional advisors, 6
profit and loss statement, described, 17
projecting cash flow, 97
R
rates
items, changing, 49
Q realised gains and losses, 157
receiving VAT refund, 136
quarterly accounting, 124
recharged import VAT by shipper, 131
quarters
locking past VAT, 139 reconciling
accounts, 107
questions
canceling before completing, 107
getting answers with 123 help, 90
online accounts, 110
using the index, 90
skipped months, 107
QuickBooks transactions added earlier, 107
Administrator, 113
record
comparing with Quicken, 74

Index 253
 exempt input tax, 142 VAT 100, 133
import VAT, 131 VAT detail, 133
import VAT paid by direct debit, 131 VAT summary, 133
VAT on private fuel, 132 resetting help windows, 89
records restoring company data, 103
keeping for VAT, 138
retained
refreshing data, 112 earnings, adjusting for during setup, 56
refund transactions, 105
cheques retained earnings
payroll liability, 208 account, 57
receiving from HM Customs & Excise, 136 description, 9
registers retirement contributions, creating payroll items
described, 87 for, 176
entering transactions in, 54
rounding of VAT, eliminating, 142
reimbursable expenses
items for, 41
miscellaneous charges, items for, 43
remove VAT rounding, 142
S
reorganising transactions in reports, 94 salaries
reorganizing employee, changing, 195
accounts on chart of accounts, 51 employee, entering, 180
columns on forms, 99 removing from bonus payroll payment, 200
fields on forms, 99 year-to-date, entering for setup, 188
lists, 51 sales
Rep field in New Employee window, 183 commission tracking, 183
foreign customers, 158
Report Finder, 93 forms described, 87
reports sales orders
changing the scope of the information, 95 ordering from Intuit, 260
customising, 94
date ranges, 95 sales tax
descriptions of how QuickBooks tracks, 122
payroll, 224–227 sales tax for non-EC countries, 131
payroll item detail, 227 sample company, 92
payroll liabilities, 225
payroll summary, 226 Scottish Variable Rate, 181
EC sales list, 133 search
filtering, 95 file, 103
finding the report you want, 93
search for your backup file
fonts on, 94
backup file, 103
for VAT, 133
memorising, 94 searching
“Other” on, 96 using 123 help, 90
realised gains & losses, 157 using the index, 90
saving the customisation and filtering, 94 security
trial balance, 3 passwords, 112, 114
unrealised gains & losses, 155

254 Index
If you don’t find the topic you are looking for here, try QuickBooks Help. From the
QuickBooks Help menu, choose Help Index, enter the keyword, and press ENTER.

selecting an accounting period, 124 sole proprietorships, description, 19

selling units, 35 sole traders, 57
service businesses sorting
benefits of setting up items, 26 lists, 31
Service for Payroll, 164 SPP, 186
service items spreadsheets
creating, 40 transferring data to and from QuickBooks, 78
description, 31 SSP, 185
tracking payroll expenses by (QuickBooks Pro small employer’s relief, 207
only), 174
SSP (Statutory Sick Pay), payroll items for, 170
setting up
an Internet connection, 60 standing orders
employee defaults, 178 creating, 125
employee payroll information, 178–179 start date, 18
employee year-to-date payroll summaries, VAT liabilities, 126
188
statements
foreign accounts, 148
reconciling, 107
foreign customers, 149
foreign suppliers, 149 statements, ordering from Intuit, 260
multicurrency, 146–154 Statutory Maternity Pay, 185
payroll, 165
Statutory Maternity Pay, payroll items for, 170
SPP, 186
statutory payments, 184 Statutory Paternity Pay, 186
units of measure, 36 statutory payments, 184
your business, 22
Statutory Sick Pay, 185
sharing QuickBooks on a network, 112
Statutory Sick Pay, payroll items for, 170
shipper, recharging VAT, 131
step-by-step instructions
shipping charges using the QuickBooks Tutor, 91
item for on invoice, 32
stocking units, 35
sick time
accrual period and hours, entering on Stopwatch
employee defaults, 179 when to use, 233

single activities subaccounts

entering details about in QuickBooks, 235 adding to chart of accounts, 51
payroll, 168
small employer’s relief, 207
subaccounts, payroll, 168
SMP, 185, 207
subclasses, 15
SMP (Statutory Maternity Pay), payroll items for,
170 subcontractors
deciding whether to track time for, 231
software upgrades, ordering from Intuit, 260 services performed by, 42

Index 255
 time worked, paying for, 236 cash flows, 97
subitems loans, 97
compared to group items, 34 payroll expenses, 174
creating, 40 tracking different units, 35
subtotal items transactions
creating, 40 audit trail, 115
description, 32 deleted during condensing, 105
using on sales forms, 45 downloading, 111
subtotals on reports, 94 historical, 52
retained, 105
summary transactions, 105 sorting
suppliers in reports, 94
foreign, 149 summary, created during condensing process,
time worked, paying for, 236 105
transferring
data, 77
T foreign money, 162
trial balance, 3
Tax Code, 181
troubleshooting printing problems, 116
tax credits, payroll items for, 171
turning on
tax forms audit trail, 115
P11 forms, 211 class tracking, 15
P14/P60 forms, 212 numerical accounts on chart of accounts, 51
P35 forms, 215 payroll, 164
P35 summary, 215
P45, printing, 196 tutorial, using the QuickBooks Tutor, 91
payroll, 205 types
technical support customer
phone numbers and Web sites, 260–261 compared to classes, jobs, and job types, 15
item
templates, employee, 178 restrictions on changing, 49
time tracking table of, 31
deciding whether to make time billable, 230 job
options for tracking, 233 compared to classes, jobs, and customer
types, 15
time, paying nonemployees for, 236
Timer
hardware requirements, 241
install disks, creating, 235 U
installing from CD, 240
uncategorised
when to use, 233
expenses, 55
timesheets account, adjusting at setup, 55
blank, 235 income, 55
filling out, 235 account, adjusting at setup, 55
titles, changing units of measure
forms, 99 adding to forms, 37
tracking tracking, 35

256 Index
If you don’t find the topic you are looking for here, try QuickBooks Help. From the
QuickBooks Help menu, choose Help Index, enter the keyword, and press ENTER.

unrealised gains & losses report, 155 partial exemption adjustment, 141
updating paying for fuel scale charges, 132
automatically, turn off, 62 paying liability, 132
exchange rates, 154 purchases including, 129
QuickBooks, 61 recharged import by shipper, 131
QuickBooks automatically, 62 record exempt input tax, 142
QuickBooks for multiple users, 63 record import, 131
QuickBooks from a CD, 63 record on private fuel, 132
QuickBooks manually, 62 rounding, eliminating, 142
sales including, 129
upgrading Zero Rated VAT code, about, 129
from a previous version of QuickBooks
ordering, 260 VAT codes
creating, 127
user’s guides, ordering from Intuit, 260 customer, 128
users ES, 130
auditing, 115 EZ, 130
login, 113 for items, 127
maximum number of, 113 item, setting up, 127
passwords, 112 setting, 126
setting up, 113 setting a default, 127
Zero Rated, about, 129
VAT refund
V receiving, 136
voiding, payroll payments, 202
VAT
adjusting account for, 140
amount owed as of start date, 55
applying to sales, 129 W
assigning to items, 127
codes, setting up, 127 wage bases
correcting an error, 140 viewing on reports, 227
customer VAT codes, 128 wages
deferment arrangement, 131 employee
eliminating rounding, 142 changing hourly rates or salary, 195
for EC member states, 130 entering hourly rates, 180
for non-EC countries, 131 entering salary, 180
generating a report, 133, 134 hourly, payroll item for, 172
historical data, 55 year-to-date, entering for setup, 188
how QuickBooks tracks, 122 Web sites
keeping records, 138 connecting QuickBooks to, 59
liabilities, 126 products and supplies, 260
locking after paying, 114, 139
locking past quarters, 114, 139 Week 1/Month 1 Tax Code, 181
paid by direct debit, 131 WFTC, payroll item, 171

Index 257
Windows
converting Quicken to QuickBooks, 66–76 Y
software requirements for Timer, 241
year-to-date amounts
windows within QuickBooks, 85 payroll, entering, 188–193
withholding
paying, 208
word processors Z
transferring data to and from QuickBooks, 78
Zero Rated VAT code, 129
Working Family Tax Credit, 171
Zip drive, 102

258 Index
A p p e n d i x A

Contacting
Intuit 0

How do I get all

my questions
answered?

If you are unable to solve a problem, you can get

assistance by telephone, fax, and the Internet.
Intuit also offers services to help you make the
most of your software.
Appendix A

259
Intuit Contact Information
Ordering QuickBooks cheques and business stationery

If about Try... Or ring...

Ordering Intuit products Visiting our Web site: Within United Kingdom (UK):
■ Software upgrades www.quickBooks.co.uk 0845 606 2161
■ Additional user guides Monday - Friday
9:00 a.m. - 5:30 p.m.
(English bank holidays excluded)

Outside United Kingdom (UK):

+44 870 609 0601

Ordering QuickBooks Visiting our Web site: Intuit Business Stationery

stationery: www.quickbooksstationery.co.uk
We can supply personalised or Within United Kingdom (Freephone):
stationery to meet your
Ordering by fax: 0800 279 5285
specific business needs such
as: (within UK) 0800 279 5893
Outside United Kingdom:
■ Cheques (outside UK) +44 870 224 4080
■ Invoices +44 870 224 4020
■ Statements
■ Envelopes
■ Payslips
■ Sales Orders

QuickBooks activation

If about... Try... Or ring...

Activating QuickBooks From the File menu, choose Within United Kingdom:
Activate QuickBooks, then follow the
0845 606 2161
onscreen instructions.
Monday - Friday
9:00 a.m. - 5:30 p.m.
(English bank holidays excluded)

Outside United Kingdom:

+44 870 609 0601

260 Appendix A Contacting Intuit

QuickBooks delivery, billing, and account inquiries

If about... Try... Or ring...

■ Software replacements Visiting our Web site: Within United Kingdom:
■ Billing inquiries http://www.QuickBooks.co.uk 0845 606 2161
■ Updating credit card
Monday - Friday
information
9:00 a.m. - 5:30 p.m.
■ Exchanges
(English bank holidays excluded)
■ Order status
Outside United Kingdom:
+44 870 609 0601

QuickBooks Small Business Payroll

If about... Try... Or ring...

QuickBooks Small Visiting our Web site: Within United Kingdom:
Business Payroll http://www.QuickBooks.co.uk 0845 606 2161
Note that to use QuickBooks’ Monday - Friday
payroll features, an active 9:00 a.m. - 5:30 p.m.
subscription to the Payroll (English bank holidays excluded)
Service.
An Internet connection is Outside United Kingdom:
strongly recommended. +44 870 609 0601

Renewing QuickBooks Renewing by fax: Within United Kingdom:

Small Business Payroll 0845 601 1571 0845 606 2161
QuickBooks will remind you Monday - Friday
when you should renew your 9:30 a.m. - 5:30 p.m.
payroll subscription. As this (English bank holidays excluded)
date approaches, we will send
you a form which you must
complete and fax to us in order
to renew your payroll
subscription. You can also
renew by phone if you like.

QuickBooks Technical Support

If about... Ring...
QuickBooks eXceed support Within United Kingdom:
To sign up for this support plan... 0845 606 2161
Monday - Friday
9:00 a.m. - 5:30 p.m.
(English bank holidays excluded)

Outside United Kingdom:

+44 870 609 0601

Intuit Contact Information 261

262 Appendix A Contacting Intuit