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 13
Balance sheet 16
Statement of cash flows 19
Other accounting statements 22
Putting it all together 23
The Philosophy of Accounting 25
Revenue principle 25
Expense principle 25
Matching principle 26
Cost principle 26
Objectivity principle 26
Continuity assumption 27
Unit-of-measure assumption 27
Separate-entity assumption 28
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 39
Recording supplies expense 40
Recording sales revenue 40
Recording cost of goods sold 41
Recording the payoff of accounts payable 41
Recording the payoff of a loan 42
Calculating account balance 42
Using T-account analysis results 44
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 54
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 64
Making a loan payment 64
Accruing liabilities 65
Closing Out Revenue and Expense Accounts 68
The traditional close 68
The QuickBooks close 70
One More Thing 71
Book 2: Getting Ready to Use QuickBooks 73
Chapter 1: Setting Up QuickBooks 75
Planning Your New QuickBooks System 75
What accounting does 75
What accounting systems do 76
What QuickBooks does 76
And now for the bad news 77
Installing QuickBooks 78
Dealing with the Presetup Jitters 79
Preparing for setup 79
Seeing what happens during setup 81
Running the QuickBooks Setup Wizard 81
Getting the big welcome 81
Supplying company information 82
Customizing QuickBooks 83
Setting your start date 84
Reviewing the suggested chart of accounts 86
Adding your information to the company file 87
Identifying the Starting Trial Balance 89
A simple example to start 89
A real-life example to finish 91
Chapter 2: Loading the Master File Lists 93
Setting Up the Chart of Accounts List 94
Setting Up the Item List 98
Working with the Price Level List 99
Using Sales Tax Codes 100
Setting Up a Payroll Item List 100
Setting Up Classes 101
Setting Up a Customer List 103
Setting Up the Vendor List 107
Setting Up a Fixed Assets List 111
Setting Up a Price Level List 112
Setting Up a Billing Rate Level List 112
Setting Up Your Employees 113
Setting Up an Other Names List 113
Setting Up the Profile Lists 114
Chapter 3: Fine-Tuning QuickBooks 117
Accessing the Preferences Settings 118
Setting the Accounting Preferences 120
Using account numbers 121
Setting general accounting options 121
Setting the Bills Preferences 123
Setting the Calendar Preferences 123
Setting the Checking Preferences 123
Changing the Desktop View 126
Setting Finance Charge Calculation Rules 128
Setting General Preferences 128
Controlling Integrated Applications 131
Controlling Inventory 132
Controlling How Jobs and Estimates Work 133
Dealing with Multiple Currencies 134
Starting Integrated Payment Processing 135
Controlling How Payroll Works 135
Telling QuickBooks How Reminders Should Work 137
Specifying Reports and Graphs Preferences 139
Setting Sales and Customers Preferences 142
Specifying How Sales Are Taxed 144
Setting the Search Preferences 145
Setting the Send Forms Preferences 146
Fine-Tuning the Service Connection 147
Controlling Spell Checking 148
Controlling How 1099 Tax Reporting Works 149
Setting Time and Expenses Preferences 149
Book 3: Bookkeeping Chores 151
Chapter 1: Invoicing Customers 153
Choosing an Invoice Form 153
Customizing an Invoice Form 154
Choosing a template to customize 154
Reviewing the Additional Customization options 154
Moving on to basic customization 159
Working with the Layout Designer tool 161
Working with the web-based Forms Customization tool 164
Invoicing a Customer 164
Billing for Time 170
Using a weekly time sheet 171
Timing single activities 172
Including billable time on an invoice 173
Printing Invoices 175
Emailing Invoices 176
Recording Sales Receipts 177
Recording Credit Memos 179
Receiving Customer Payments 181
Assessing Finance Charges 183
Setting up finance-charge rules 184
Calculating finance charges 185
Using Odds and Ends on the Customers Menu 186
Chapter 2: Paying Vendors 189
Creating a Purchase Order 189
Creating a real purchase order 190
Using some purchase order tips and tricks 193
Recording the Receipt of Items 193
Simultaneously Recording the Receipt and the Bill 196
Entering a Bill 198
If you haven’t previously recorded an item receipt 198
If you have previously recorded an item receipt 200
Paying Bills 202
Reviewing the Other Vendor Menu Commands 205
Vendor Center window 205
Sales Tax menu commands 206
Inventory Activities menu commands 207
Print/E-file 1099s commands 207
Item List command 208
Chapter 3: Tracking Inventory and Items 209
Looking at Your Item List 210
Using the Item Code column 210
Using the Item List window 210
Using inventory reports 211
Adding Items to the Item List 212
Adding an item: Basic steps 213
Adding a service item 214
Adding an inventory part 215
Adding a noninventory part 217
Adding an other-charge item 217
Adding a subtotal item 220
Adding a group item 221
Adding a discount item 221
Adding a payment item 223
Adding a sales tax item 223
Setting up a sales tax group 224
Adding custom fields to items 226
Editing Items 227
Adjusting physical counts and inventory values 228
Adjusting prices and price levels 231
Using the Change Item Prices command 231
Using price levels 231
Enabling advanced pricing 233
Managing Inventory in a Manufacturing Firm 234
Handling manufactured inventory the simple way 235
Performing inventory accounting in QuickBooks 235
Managing multiple inventory locations 239
Chapter 4: Managing Cash and Bank Accounts 241
Writing Checks 242
Recording and printing a check 242
Customizing the check form 247
Making Bank Deposits 249
Transferring Money between Bank Accounts 253
Working with the Register 254
Recording register transactions 254
Using Register window commands and buttons 258
Using the Edit Menu Commands 261
Reconciling the Bank Account 266
Reviewing the Other Banking Commands 270
Order Checks & Envelopes command 270
Enter Credit Card Charges command 270
Bank Feeds command 271
Loan Manager command 272
Other Names list 272
Chapter 5: Paying Employees 273
Setting Up Payroll 273
Signing up for a payroll service 275
Setting up employees 275
Setting up year-to-date amounts 279
Checking your payroll setup data 280
Scheduling Payroll Runs 280
Paying Employees 280
Editing and Voiding Paychecks 282
Paying Payroll Liabilities 283
Book 4: Accounting Chores 285
Chapter 1: For Accountants Only 287
Working with QuickBooks Journal Entries 287
Recording a journal entry 288
Reversing a journal entry 289
Editing journal entries 290
Updating Company Information 290
Working with Memorized Transactions 290
Reviewing the Accountant and Taxes Reports 291
Creating an Accountant’s Copy of the QuickBooks Data File 293
Creating an accountant’s copy 294
Handling the accountant’s copy manually 294
Sending the accountant’s copy electronically 297
Using an accountant’s copy 298
Reusing an accountant’s copy 298
Exporting client changes 298
Importing accountant’s changes 299
Canceling accountant’s changes 300
Troubleshooting accountant’s copy transfers 301
Using the Client Data Review Commands 301
Chapter 2: Preparing Financial Statements and Reports 303
Some Wise Words Up Front 304
Producing a Report 304
Working with the Report Window 305
Working with Report window buttons 305
Using the Report window controls 312
Modifying a Report 314
Using the Display tab 314
Using the Filters tab 316
Using the Header/Footer tab 318
Formatting fonts and numbers 319
Processing Multiple Reports 321
A Few Words about Document Retention 322
Chapter 3: Preparing a Budget 325
Reviewing Common Budgeting Tactics 325
Top-line budgeting 326
Zero-based budgeting 326
Benchmarking 327
Putting it all together 328
Taking a Practical Approach to Budgeting 329
Using the Set Up Budgets Window 329
Creating a new budget 329
Working with an existing budget 331
Managing with a Budget 333
Some Wrap-Up Comments on Budgeting 335
Chapter 4: Using Activity-Based Costing 337
Reviewing Traditional Overhead Allocation 338
Understanding How ABC Works 340
The ABC product-line income statement 340
ABC in a small firm 344
Implementing a Simple ABC System 345
Seeing How QuickBooks Supports ABC 346
Turning On Class Tracking 347
Using Classes for ABC 348
Setting up your classes 348
Classifying revenue amounts 349
Classifying expense amounts 349
Making after-the-fact classifications 351
Producing ABC reports 352
Chapter 5: Setting Up Project and Job Costing Systems 353
Setting Up a QuickBooks Job 353
Tracking Job or Project Costs 356
Job Cost Reporting 359
Using Job Estimates 360
Progress Billing 361
Book 5: Financial Management 365
Chapter 1: Ratio Analysis 367
Some Caveats about Ratio Analysis 368
Liquidity Ratios 369
Current ratio 369
Acid-test ratio 370
Leverage Ratios 371
Debt ratio 371
Debt equity ratio 372
Times interest earned ratio 372
Fixed-charges coverage ratio 373
Activity Ratios 375
Inventory turnover ratio 376
Days of inventory ratio 376
Average collection period ratio 377
Fixed-asset turnover ratio 378
Total-assets turnover ratio 379
Profitability Ratios 379
Gross margin percentage 380
Operating income/sales 380
Profit margin percentage 381
Return on assets 381
Return on equity 382
Chapter 2: Economic Value Added Analysis 385
Introducing the Logic of EVA 385
Seeing EVA in Action 386
An example of EVA 388
Another example of EVA 388
Reviewing Some Important Points about EVA 389
Using EVA When Your Business Has Debt 391
The first example of the modified EVA formula 391
Another EVA with debt example 393
Presenting Two Final Pointers 395
And Now, a Word to My Critics 396
Chapter 3: Capital Budgeting in a Nutshell 399
Introducing the Theory of Capital Budgeting 399
The big thing is the return 400
One little thing is maturity 400
Another little thing is risk 401
The bottom line 401
Calculating the Rate of Return on Capital 402
Calculating the investment amount 403
Estimating the net cash flows 403
Calculating the return 408
Measuring Liquidity 412
Thinking about Risk 413
What Does All This Have to Do with QuickBooks? 414
Book 6: Business Plans 415
Chapter 1: Profit-Volume-Cost Analysis 417
Seeing How Profit-Volume-Cost Analysis Works 418
Calculating Break-Even Points 420
Using Real QuickBooks Data for Profit-Volume-Cost Analysis 422
Sales revenue 422
Gross margin percentage 422
Fixed costs 424
Recognizing the Downside of the Profit-Volume-Cost Model 424
Using the Profit-Volume-Cost Analysis Workbook 426
Collecting your inputs 426
Understanding the Break-Even Analysis Forecast 430
Understanding the Profit-Volume Forecast 431
Looking at the profit-volume-cost charts 433
Chapter 2: Creating a Business Plan Forecast 437
Reviewing Financial Statements and Ratios 438
Using the Business Plan Workbook 439
Understanding the Workbook Calculations 446
Forecasting inputs 446
Balance Sheet 446
Common Size Balance Sheet 454
Income Statement 455
Common Size Income Statement 459
Cash Flow Statement 460
Financial Ratios Table 467
Customizing the Starter Workbook 472
Changing the number of periods 473
Performing ratio analysis on existing financial statements 473
Calculating taxes for a current net loss before taxes 473
Combining this workbook with other workbooks 474
Chapter 3: Writing a Business Plan 475
What the Term “Business Plan” Means 475
A Few Words about Strategic Plans 476
Cost strategies 476
Differentiated products or services strategies 477
Focus strategies 477
Look, Ma: No Strategy 478
Two comments about tactics 479
Six final strategy pointers 479
A White-Paper Business Plan 480
A New-Venture Plan 483
Is the new venture’s product or service feasible? 483
Does the market want the product or service? 484
Can the product or service be profitably sold? 485
Is the return on the venture adequate for prospective investors? 485
Can existing management run the business? 486
Some final thoughts 487
Book 7: Care and Maintenance 489
Chapter 1: Administering QuickBooks 491
Keeping Your Data Confidential 491
Using Windows security 492
Using QuickBooks security 492
Using QuickBooks in a Multiuser Environment 494
Setting up additional QuickBooks users 494
Changing user rights in Enterprise Solutions 500
Changing user rights in QuickBooks Pro and Premier 502
Using Audit Trails 504
Enabling Simultaneous Multiuser Access 505
Maintaining Good Accounting Controls 506
Chapter 2: Protecting Your Data 511
Backing Up the QuickBooks Data File 511
Backing-up basics 512
What about online backup? 515
Some backup tactics 516
Restoring a QuickBooks Data File 517
Condensing the QuickBooks Company Files 521
Cleanup basics 522
Some cleanup and archiving strategies 527
Chapter 3: Troubleshooting 529
Using the QuickBooks Help File and This Book 529
Browsing Intuit’s Product-Support Website 531
Checking Another Vendor’s Product-Support Website 533
Tapping into Intuit’s Online and Expert Communities 533
When All Else Fails 534
Book 8: Appendixes 535
Appendix A: A Crash Course in Excel 537
Starting Excel 537
Stopping Excel 538
Explaining Excel’s Workbooks 538
Putting Text, Numbers, and Formulas in Cells 539
Writing Formulas 540
Scrolling through Big Workbooks 541
Copying and Cutting Cell Contents 542
Copying cell contents 542
Moving cell contents 543
Moving and copying formulas 543
Formatting Cell Contents 544
Recognizing That Functions Are Simply Formulas 546
Saving and Opening Workbooks 549
Saving a workbook 549
Opening a workbook 550
Printing Excel Workbooks 551
One Other Thing to Know 552
Appendix B: Government Web Resources for Businesses 553
Bureau of Economic Analysis 553
Finding information at the BEA website 554
Downloading a BEA publication 554
Uncompressing a BEA publication 556
Using a BEA publication 556
Bureau of Labor Statistics 557
Finding information at the BLS website 557
Using BLS information 558
Census Bureau 560
Finding information at the Census Bureau website 560
Using the Census Bureau’s publications 563
Using the Census Bureau’s search engine 563
Using the Census Bureau’s Subjects index 563
Securities and Exchange Commission 563
Finding information through EDGAR 564
Searching the EDGAR database 564
Federal Reserve 566
Finding information at the Federal Reserve website 566
Using the Federal Reserve website’s information 568
Government Publishing Office 568
Information available at the GPO website 568
Searching the GPO database 568
Internal Revenue Service 569
Appendix C: Glossary of Accounting and Financial Terms 571
Index 601
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