Introduction 1
About This Book 1
Foolish Assumptions 2
Icons Used in This Book 3
Beyond the Book 4
Where to Go from Here 4
Book 1: An Accounting Primer 7
Chapter 1: Principles of Accounting 9
The Purpose of Accounting 10
The big picture 10
Managers, investors, and entrepreneurs 10
External creditors 11
Government agencies 11
Business form generation 12
Reviewing the Common Financial Statements 12
The income statement 12
Balance sheet 15
Statement of cash flows 19
Other accounting statements 22
Putting it all together 23
The Philosophy of Accounting 24
Revenue principle 25
Expense principle 25
Matching principle 25
Cost principle 26
Objectivity principle 26
Continuity assumption 26
Unit-of-measure assumption 27
Separate-entity assumption 27
A Few Words about Tax Accounting 28
Chapter 2: Double-Entry Bookkeeping 29
The Fiddle-Faddle Method of Accounting 30
How Double-Entry Bookkeeping Works 33
The accounting model 33
Talking mechanics 35
Almost a Real-Life Example 39
Recording rent expense 39
Recording wages expense 40
Recording supplies expense 40
Recording sales revenue 40
Recording cost of goods sold 41
Recording the payoff of accounts payable 42
Recording the payoff of a loan 42
Calculating account balance 42
Using T-account analysis results 45
A Few Words about How QuickBooks Works 46
Chapter 3: Special Accounting Problems 49
Working with Accounts Receivable 50
Recording a sale 50
Recording a payment 50
Estimating bad-debt expense 51
Removing uncollectible accounts receivable 52
Recording Accounts Payable Transactions 53
Recording a bill 53
Paying a bill 54
Taking some other accounts payable pointers 55
Inventory Accounting 55
Dealing with obsolete inventory 56
Disposing of obsolete inventory 57
Dealing with inventory shrinkage 58
Accounting for Fixed Assets 59
Purchasing a fixed asset 60
Dealing with depreciation 60
Disposing of a fixed asset 62
Recognizing Liabilities 63
Borrowing money 63
Making a loan payment 64
Accruing liabilities 65
Closing Out Revenue and Expense Accounts 68
The traditional close 69
The QuickBooks close 69
One More Thing 70
Book 2: Getting Ready to Use QuickBooks 71
Chapter 1: Setting Up QuickBooks 73
Planning Your New QuickBooks System 73
What accounting does 73
What accounting systems do 74
What QuickBooks does 74
And now for the bad news 75
Installing QuickBooks 76
Dealing with the Presetup Jitters 77
Preparing for setup 78
Seeing what happens during setup 79
Running the QuickBooks Setup Wizard 79
Getting the big welcome 79
Supplying company information 80
Customizing QuickBooks 82
Setting your start date 83
Reviewing the suggested chart of accounts 84
Adding your information to the company file 85
Identifying the Starting Trial Balance 87
A simple example to start 87
A real-life example to finish 89
Chapter 2: Loading the Master File Lists 91
Setting Up the Chart of Accounts List 92
Setting Up the Item List 96
Working with the Price Level List 97
Using Sales Tax Codes 98
Setting Up a Payroll Item List 98
Setting Up Classes 100
Setting Up a Customer List 101
Setting Up the Vendor List 106
Setting Up a Fixed Assets List 109
Setting Up a Price Level List 111
Setting Up a Billing Rate Level List 111
Setting Up Your Employees 112
Setting Up an Other Names List 112
Setting Up the Profile Lists 112
Chapter 3: Fine-Tuning QuickBooks 115
Accessing the Preferences Settings 116
Setting the Accounting Preferences 118
Using account numbers 118
Setting general accounting options 119
Setting the Bills Preferences 121
Setting the Calendar Preferences 121
Setting the Checking Preferences 121
Changing the Desktop View 123
Setting Finance Charge Calculation Rules 125
Setting General Preferences 126
Controlling Integrated Applications 128
Controlling Inventory 129
Controlling How Jobs and Estimates Work 130
Dealing with Multiple Currencies 131
Starting Integrated Payment Processing 132
Controlling How Payroll Works 132
Telling QuickBooks How Reminders Should Work 134
Specifying Reports & Graphs Preferences 135
Setting Sales & Customers Preferences 139
Specifying How Sales Are Taxed 140
Setting the Search Preferences 141
Setting the Send Forms Preferences 142
Fine-Tuning the Service Connection 143
Controlling Spell Checking 143
Controlling How 1099 Tax Reporting Works 144
Setting Time & Expenses Preferences 145
Book 3: Bookkeeping Chores 147
Chapter 1: Invoicing Customers 149
Choosing an Invoice Form 149
Customizing an Invoice Form 150
Choosing a template to customize 150
Reviewing the Additional Customization options 150
Moving on to Basic Customization 155
Working with the Layout Designer tool 157
Working with the web-based Forms Customization tool 160
Invoicing a Customer 160
Billing for Time 166
Using a weekly time sheet 166
Timing single activities 167
Including billable time on an invoice 169
Printing Invoices 171
Emailing Invoices 171
Recording Sales Receipts 172
Recording Credit Memos 175
Receiving Customer Payments 177
Assessing Finance Charges 179
Setting up finance-charge rules 179
Calculating finance charges 180
Using Odds and Ends on the Customers Menu 181
Chapter 2: Paying Vendors 185
Creating a Purchase Order 185
Creating a real purchase order 186
Using some purchase order tips and tricks 189
Recording the Receipt of Items 189
Simultaneously Recording the Receipt and the Bill 192
Entering a Bill 194
If you haven’t previously recorded an item receipt 194
If you have previously recorded an item receipt 196
Paying Bills 198
Reviewing the Other Vendor Menu Commands 201
Vendor Center 201
Sales Tax menu commands 202
Inventory Activities menu commands 203
Print/E-file 1099s 203
Item List 204
Chapter 3: Tracking Inventory and Items 205
Looking at Your Item List 206
Using the Item Code column 206
Using the Item List window 206
Using inventory reports 207
Adding Items to the Item List 208
Adding an item: Basic steps 209
Adding a service item 210
Adding an inventory part 211
Adding a noninventory part 213
Adding an other-charge item 214
Adding a subtotal item 215
Adding a group item 216
Adding a discount item 217
Adding a payment item 218
Adding a sales tax item 218
Setting up a sales tax group 219
Adding custom fields to items 219
Editing Items 221
Adjusting physical counts and inventory values 222
Adjusting prices and price levels 225
Using the Change Item Prices command 225
Using price levels 226
Enabling advanced pricing 228
Managing Inventory in a Manufacturing Firm 229
Handling manufactured inventory the simple way 229
Performing inventory accounting in QuickBooks 230
Managing multiple inventory locations 233
Chapter 4: Managing Cash and Bank Accounts 235
Writing Checks 236
Recording and printing a check 236
Customizing the check form 241
Making Bank Deposits 243
Transferring Money between Bank Accounts 246
Working with the Register 247
Recording register transactions 248
Using Register window commands and buttons 251
Using Edit Menu Commands 254
Reconciling the Bank Account 258
Reviewing the Other Banking Commands 262
Order Checks & Envelopes command 263
Enter Credit Card Charges command 263
Bank Feeds command 264
Loan Manager command 265
Other Names list 265
Chapter 5: Paying Employees 267
Setting Up Payroll 267
Signing up for a payroll service 269
Setting up employees 269
Setting up year-to-date amounts 273
Checking your payroll setup data 274
Scheduling Payroll Runs 274
Paying Employees 274
Editing and Voiding Paychecks 276
Paying Payroll Liabilities 277
Book 4: Accounting Chores 279
Chapter 1: For Accountants Only 281
Working with QuickBooks Journal Entries 281
Recording a journal entry 282
Reversing a journal entry 283
Editing journal entries 284
Updating Company Information 284
Working with Memorized Transactions 284
Reviewing the Accountant & Taxes Reports 285
Creating an Accountant’s Copy of the QuickBooks Data File 288
Creating an accountant’s copy 288
Handling the accountant’s copy manually 288
Sending the accountant’s copy electronically 291
Using an accountant’s copy 292
Reusing an accountant’s copy 292
Exporting client changes 293
Importing accountant’s changes 294
Canceling accountant’s changes 295
Troubleshooting accountant’s copy transfers 295
Using the Client Data Review Commands 295
Chapter 2: Preparing Financial Statements and Reports 297
Some Wise Words Up Front 298
Producing a Report 298
Working with the Report Window 299
Working with Report window buttons 299
Using the Report window controls 306
Modifying a Report 308
Using the Display tab 308
Using the Filters tab 310
Using the Header/Footer tab 312
Formatting fonts and numbers 313
Processing Multiple Reports 314
A Few Words about Document Retention 315
Chapter 3: Preparing a Budget 319
Reviewing Common Budgeting Tactics 319
Top-line budgeting 320
Zero-based budgeting 320
Benchmarking 321
Putting it all together 322
Taking a Practical Approach to Budgeting 323
Using the Set Up Budgets Window 323
Creating a new budget 323
Working with an existing budget 325
Managing with a Budget 327
Some Wrap-Up Comments on Budgeting 329
Chapter 4: Using Activity-Based Costing 331
Reviewing Traditional Overhead Allocation 332
Understanding How ABC Works 334
The ABC product-line income statement 334
ABC in a small firm 338
Implementing a Simple ABC System 339
Seeing How QuickBooks Supports ABC 341
Turning On Class Tracking 341
Using Classes for ABC 342
Setting up your classes 343
Classifying revenue amounts 343
Classifying expense amounts 343
Making after-the-fact classifications 345
Producing ABC reports 346
Chapter 5: Setting Up Project and Job Costing Systems 347
Setting Up a QuickBooks Job 347
Tracking Job or Project Costs 350
Job Cost Reporting 353
Using Job Estimates 354
Progress Billing 355
Book 5: Financial Management 359
Chapter 1: Ratio Analysis 361
Some Caveats about Ratio Analysis 362
Liquidity Ratios 363
Current ratio 363
Acid-test ratio 364
Leverage Ratios 365
Debt ratio 365
Debt equity ratio 366
Times interest earned ratio 367
Fixed-charges coverage ratio 368
Activity Ratios 369
Inventory turnover ratio 370
Days of inventory ratio 371
Average collection period ratio 371
Fixed-asset turnover ratio 372
Total-assets turnover ratio 373
Profitability Ratios 373
Gross margin percentage 374
Operating income/sales 374
Profit margin percentage 375
Return on assets 375
Return on equity 376
Chapter 2: Economic Value Added Analysis 379
Introducing the Logic of EVA 379
Seeing EVA in Action 380
An example of EVA 382
Another example of EVA 382
Reviewing Some Important Points about EVA 383
Using EVA When Your Business Has Debt 385
The first example of the modified EVA formula 385
Another EVA with debt example 387
Presenting Two Final Pointers 389
And Now, a Word to My Critics 390
Chapter 3: Capital Budgeting in a Nutshell 393
Introducing the Theory of Capital Budgeting 393
The big thing is the return 394
One little thing is maturity 394
Another little thing is risk 395
The bottom line 395
Calculating the Rate of Return on Capital 396
Calculating the investment amount 397
Estimating the net cash flows 397
Calculating the return 401
Measuring Liquidity 405
Thinking about Risk 406
What Does All This Have to Do with QuickBooks? 408
Book 6: Business Plans 409
Chapter 1: Profit-Volume-Cost Analysis 411
Seeing How Profit-Volume-Cost Analysis Works 412
Calculating Break-Even Points 414
Using Real QuickBooks Data for Profit-Volume-Cost Analysis 415
Sales revenue 415
Gross margin percentage 416
Fixed costs 417
Recognizing the Downside of the Profit-Volume-Cost Model 418
Using the Profit-Volume-Cost Analysis Workbook 420
Collecting your inputs 420
Understanding the Break-Even Analysis Forecast 424
Understanding the Profit-Volume Forecast 425
Looking at the profit-volume-cost charts 427
Chapter 2: Creating a Business Plan Forecast 431
Reviewing Financial Statements and Ratios 432
Using the Business Plan Workbook 433
Understanding the Workbook Calculations 442
Forecasting inputs 443
Balance Sheet 443
Common Size Balance Sheet 450
Income Statement 451
Common Size Income Statement 455
Cash Flow Statement 455
Financial Ratios Table 461
Customizing the Starter Workbook 466
Changing the number of periods 467
Performing ratio analysis on existing financial statements 467
Calculating taxes for a current net loss before taxes 467
Combining this workbook with other workbooks 468
Chapter 3: Writing a Business Plan 469
What the Term “Business Plan” Means 469
A Few Words about Strategic Plans 470
Cost strategies 470
Differentiated products or services strategies 471
Focus strategies 471
Look, Ma: No Strategy 472
Two comments about tactics 473
Six final strategy pointers 473
A White-Paper Business Plan 474
A New-Venture Plan 477
Is the new venture’s product or service feasible? 477
Does the market want the product or service? 478
Can the product or service be profitably sold? 478
Is the return on the venture adequate for prospective investors? 479
Can existing management run the business? 480
Some final thoughts 481
Book 7: Care and Maintenance 483
Chapter 1: Administering QuickBooks 485
Keeping Your Data Confidential 485
Using Windows security 486
Using QuickBooks security 486
Using QuickBooks in a Multiuser Environment 487
Setting up additional QuickBooks users 488
Changing user rights in Enterprise Solutions 494
Changing user rights in QuickBooks Pro and Premier 497
Using Audit Trails 497
Enabling Simultaneous Multiuser Access 498
Maintaining Good Accounting Controls 499
Chapter 2: Protecting Your Data 503
Backing Up the QuickBooks Data File 503
Backing-up basics 504
What about online backup? 507
Some backup tactics 508
Restoring a QuickBooks Data File 509
Condensing the QuickBooks Company Files 512
Cleanup basics 514
Some cleanup and archiving strategies 519
Chapter 3: Troubleshooting 521
Using the QuickBooks Help File and This Book 521
Browsing Intuit’s Product-Support Website 523
Checking Another Vendor’s Product-Support Website 525
Tapping into Intuit’s Online and Expert Communities 525
When All Else Fails 526
Book 8: Appendixes 527
Appendix A: A Crash Course in Excel 529
Starting Excel 529
Stopping Excel 530
Explaining Excel’s Workbooks 530
Putting Text, Numbers, and Formulas in Cells 531
Writing Formulas 532
Scrolling through Big Workbooks 533
Copying and Cutting Cell Contents 534
Copying cell contents 534
Moving cell contents 535
Moving and copying formulas 535
Formatting Cell Contents 536
Recognizing That Functions Are Simply Formulas 538
Saving and Opening Workbooks 541
Saving a workbook 541
Opening a workbook 542
Printing Excel Workbooks 543
One Other Thing to Know 544
Appendix B: Government Web Resources for Businesses 545
Bureau of Economic Analysis 545
Finding information at the BEA website 545
Downloading a BEA publication 546
Uncompressing a BEA publication 547
Using a BEA publication 548
Bureau of Labor Statistics 548
Finding information at the BLS website 549
Using BLS information 549
Census Bureau 552
Finding information at the Census Bureau website 553
Using the Census Bureau’s publications 554
Using the Census Bureau search engine 554
Using the Census Bureau Subjects index 555
Securities and Exchange Commission 555
Finding information through EDGAR 556
Searching the EDGAR database 556
Federal Reserve 558
Finding information at the Federal Reserve website 558
Using the Federal Reserve website’s information 559
Government Publishing Office 559
Information available at the GPO website 560
Searching the GPO database 560
Internal Revenue Service 561
Appendix C: Glossary of Accounting and Financial Terms 563
Index 593
