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Professional Tips and Workarounds for QuickBooks Online
Professional Tips and Workarounds for QuickBooks Online

Professional Tips and Workarounds for QuickBooks Online: Improve your QuickBooks Online and bookkeeping skills using advanced techniques and best practices

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Professional Tips and Workarounds for QuickBooks Online

Chapter 1: Creating and Reviewing Opening Balances in QuickBooks Online

As described in the preface of this book, QuickBooks Online is a cloud-hosted accounting software solution for small to medium-sized businesses. Accountants and bookkeepers can assist their clients by being able to access all the information they need at any time.

Opening balances reflect the financial position of a business at the point when QuickBooks Online is brought into use. Where a business has only just been set up and they choose to use QuickBooks from the very beginning, there will not be any opening balances to speak of except for cash or equipment introduced by the business owners.

Where a business has been operating for some time and has perhaps used spreadsheets or other accounting software in the past, there will be a financial history that results in values that will affect the balance sheet in different ways.

It is very important, especially when moving from one method of accounting to another, to ensure there is continuity. Without a correcting starting position, future profits could be over or understated, and the values filed in various tax returns could be incorrect.

In this chapter, we will cover the following topics:

  • Should opening balances be in place before using QuickBooks?
  • Opening balances – Customers
  • Opening balances – Suppliers
  • Opening balances – Bank
  • Opening balances – VAT/GST/Sales Tax
  • Other opening balances

Should opening balances be in place before using QuickBooks?

Before we explore opening balances, we need to know whether it is necessary for our opening balances to be in order when we make the switch from our old method of keeping books to QuickBooks.

The simple answer to this question is no. As soon as you have a subscription in place and set QuickBooks Online up with the required settings, you are likely to want to start creating customer invoices before you do much else.

However, it is best to get some opening balances in place as soon as possible. As customers start to pay for products and services supplied before QuickBooks is in use, it is important to have a record of any of those unpaid amounts in place. This will also be the case when it is time to pay suppliers for amounts owed against historic bills.

We can build our opening balances in stages – it is not necessary to do it all at once. In some instances, it is not possible to deal with all the opening balances because all the information required is not readily available. Therefore, we can put into place the values that are easy to deal with, such as the amounts owed by customers and to suppliers.

What dates are used for opening balances?

Before we answer this question, it is important consider the date you start using QuickBooks Online. You can of course start using QuickBooks at any time, but it can generally make life easier to do so when a clear "line in the sand" has been drawn.

The following are good starting points for a new QuickBooks Online file:

  • Any time for a new business (no historical transactions to worry about)
  • Start of new financial year/tax year
  • Start of new VAT/GST/Sales tax period

Using these starting positions can make life a little easier when preparing financial statements and tax returns. Otherwise, data may need to be merged from two systems, which can increase time consumption and the cost of work required.

Once you select the start date, ensure the financial year date is set correctly in QuickBooks. To do this, select the gear icon found in the top right of the main screen menus and choose Account and settings from the YOUR COMPANY list.

Figure 1.1 – Selecting the financial period start date

Figure 1.1 – Selecting the financial period start date

From within the Advanced tab, we select the first month of the financial year. In this example, the year-end is March 31, so the first month is set as April. This company is going to use QuickBooks from April 1, 2021.

Now that we have selected our start date, we will visit some examples of opening balances.

Opening balances – Customers

At any given point, it is highly likely that a business is owed money from customers for goods and services already provided in a previous period; this needs to be considered when a business decides to change its bookkeeping system.

There are various methods to create the opening balances for amounts owed from customers, but we will stick with the one that is advised by most professionals.

A business should have a list of the invoices sent to customers and of those that remain unpaid at the date they start using QuickBooks. Taking that list, we will already have the following:

  • Customer name
  • Invoice date
  • Invoice number
  • Net charge
  • VAT/GST/sales Tax
  • Invoice total

From the preceding list of items, we have pretty much all the information we need to create our opening customer balances in QuickBooks. That will be done by creating invoices in QuickBooks that reflect those that are unpaid. In addition to the items listed, we will need to add either terms or a due date, and we will need to use product/service item information. But how do we decide on which product/service code to use?

Which Product/Service Item to use

Product/Service items dictate how the values entered on invoices are presented in different reports.

You can use one of the default items, but it is advisable to create a specific service item for invoices that are created that form part of your opening balances. This makes them easier to identify and will also assist with the reconciliation process when checking that opening balances have been completed.

The following figure shows how the Product/Service code should be created.

Figure 1.2 – Item/Service code for opening balance

Figure 1.2 – Item/Service code for opening balance

Notice the Income account value selected here is Opening Balance Equity. This account name may vary in different regions and could be Retained profit balance forward account. The important thing to consider here is that this account forms part of our Double-Entry when dealing with our opening balances.

You can create and use your own balance sheet account. If you do, ensure it is an Equity account, with a detail type of Accumulated adjustments.

When we create our opening balances for customers using invoices, the following accounts will be affected:

  • Debit: Debtors/Accounts receivable (total amount of unpaid invoice)
  • Credit: Opening balance equity
  • Credit: VAT/GST/sales tax if applicable

    Important Note

    VAT only needs to be split on the invoice for the opening balances for Cash Accounting purposes. For Standard VAT accounting, the invoices can be entered gross using No VAT. Any further adjustments for VAT on Customer/Supplier balances could be made using Journal entry. (This is explained in the Opening Balances – VAT section.)

If VAT (or the sales tax appropriate for your region) is submitted on a cash basis or for any other reason the invoice was not reported on the previous return, the invoice should be recorded exclusive of tax. Below is an example of a single opening balance customer invoice:

Figure 1.3 – Customer invoice screen

Figure 1.3 – Customer invoice screen

The preceding image reflects one of the invoices owed from a customer named Farscape Applications as of March 31, 2021. The invoice date used is per the original invoice sent that is unpaid.

This invoice is for a company filing VAT/GST on a cash basis, so the sales tax has not been filed. For standard VAT accounting where the tax had already been filed, the amount would be £600 inclusive using NO VAT/NO TAX, which can vary depending on the region you are working in.

If this customer owes £1,800 for 3 months, three separate invoices should be created. Separate invoices should be created because this will help ensure that future payments are allocated correctly. Also, if payment reminders are required, or statements are sent to customers, it will be easier for customers to agree on the values displayed.

To complete the creation of our opening customer balances, separate invoices should be created for each unpaid invoice for all customers. If you have a lot of unpaid customer balances, you can save a lot of time by importing the data using a .csv file.

Depending on your region, you may not have the ability within QuickBooks alone to import invoices. The Import Data option in the UK version appears as follows.

Figure 1.4 – Import Data options (UK)

Figure 1.4 – Import Data options (UK)

If you do have a large amount of unpaid customer invoices and the import feature is not available, it may be worth temporarily subscribing to an app such as SaasAnt Transactions Importer – details can be found at www.apps.com.

After all the customer invoices have been created (by manual input or data import), we must run some reports to check whether our unpaid customer balances are correct:

  • Accounts receivable aging summary report
  • Accounts receivable aging detail report
  • Trial balance

All reports can found within the reports center, which can be accessed from the left-hand navigation pane. You will also be able to search for reports from this area. The first two reports listed above should be run and checked as per the last period. In this chapter, we considered that our company will start using QuickBooks from April 1, 2021, so the reports should be run and checked as of March 31, 2021. The summary will provide the totals owed by each customer and the detailed report will list all unpaid invoices.

The trial balance report will display a summary of accounts used so far, up to the date we run the report, which in this scenario is March 31, 2021:

Figure 1.5 – Trial balance report after customer opening balances are updated

Figure 1.5 – Trial balance report after customer opening balances are updated

  • Debtors: The total owed by customers that will agree to the accounts receivable reports
  • VAT Control: The value of sales taxes not yet filed (GST/sales tax)
  • Opening Balance Equity: The account linked to the product/service used for opening balances

Opening customer balances – Summary

  • Create invoices for all unpaid values that reflect historical invoices sent.
  • Use the original dates and invoice numbers.
  • Enter values gross if taxes filed; enter net + tax if the amounts have not previously been included on VAT/GST returns.
  • Save time importing when there are large volumes to deal with.

With customer balances now complete, it is time to look at opening balances for suppliers.

Opening balances – Suppliers

Dealing with opening balances for suppliers is similar to the method used for our customer balances. This time, we will be creating supplier bills for the amounts due. Again, there are different methods for creating opening balances, but we will stick with one preferred by professional advisors.

Creating supplier bills that reflect exactly what was owed before QuickBooks was put into use means that there will be values that match direct debits that appear on bank feeds, and there will be bills that we can agree to supplier statements:

Figure 1.6 – Supplier bill input screen

Figure 1.6 – Supplier bill input screen

The fields within the red boxes are mandatory when adding the supplier bill. Note the same chart of account code linked to the service item for customer invoices, that is Opening Balance Equity, is being used. All opening balance adjustments should affect the same account.

Just as in the case with customer balances, the VAT/GST will need to be accounted for if the amounts have not been included on previously filed returns. If the bill had already been included within a filed VAT return, it would have been entered as £360 NO VAT.

After all supplier bills have been entered (and if necessary, any supplier credits), the following reports should be checked to the date before the QuickBooks start date. For example, if starting from April 1, 2021, all the reports will be run to the date March 31, 2021:

  • Accounts payable aging summary
  • Accounts payable aging detail
  • Trial balance

The first two reports should be compared to the details held within our old accounting records. It's important that the amount that QuickBooks reports as being owed to suppliers at our chosen start date is as expected.

The trial balance report will now include creditors that will agree to the totals on the accounts payable report. In the example shown in the following figure, VAT Control has been reduced to reflect the purchase tax claimed on supplier bills:

Figure 1.7 – Trial Balance report after supplier balances updated

Figure 1.7 – Trial Balance report after supplier balances updated

With opening balances in place for customers and suppliers, it is now time to look at ensuring the opening balances for any bank accounts are correct.

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Key benefits

  • Broaden your knowledge of QuickBooks Online and accounting concepts
  • Understand how QuickBooks can be adapted to suit different business types using professional techniques
  • Learn best practices for preparing annual accounts before closing the books for the year

Description

Accountants and bookkeepers can sometimes face challenges while coming up with solutions to help their clients. QuickBooks Online, a popular cloud accounting software, comes with a wide range of tools that can take time to learn. This book will show you how to properly combine the tools available in QuickBooks to get the most out of this software. Complete with step-by-step explanations of essential concepts and practical examples, the book will begin by helping you understand how to create opening balances for a new company. You'll then discover essential bookkeeping and accountancy tips and tricks, and find guidance to help make QuickBooks as easy to use as possible. As you advance, you'll explore different scenarios in which QuickBooks Online can be used for various business types. This will help you understand that not every business is the same, but using the wide range of functionalities QuickBooks Online offers, you can customize solutions to really make it work for you. By the end of this QuickBooks book, you'll have gained deep insights into how you can use QuickBooks Online to work for different business types, and you'll have a complete checklist of the different things you should be doing when you start reviewing accounts ahead of tax season.

Who is this book for?

Business owners, company directors, accountants, bookkeepers, certified public accountants (CPAs), and anyone studying accounting and bookkeeping will find this book useful. The book contains general bookkeeping and accountancy tips and is designed to help you get the most out of the tools available in QuickBooks Online. Prior QuickBooks knowledge is necessary.

What you will learn

  • Discover how to correctly set up QuickBooks Online with opening balances
  • Adapt QuickBooks Online to meet specific industry needs, from manufacturing and retail using inventory to helping lawyers and property agents handle client funds
  • Get the most out of features such as Projects and Multicurrency
  • Review reports within QuickBooks Online, understand why errors occur, and learn how to resolve them
  • Get to grips with key accounting principles and concepts tailored for bookkeeping and accounting beginners
  • Find out how the audit trail works and explore all of the information it holds

Product Details

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Publication date : Dec 08, 2021
Length: 344 pages
Edition : 1st
Language : English
ISBN-13 : 9781801815604
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Publication date : Dec 08, 2021
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ISBN-13 : 9781801815604
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Table of Contents

15 Chapters
Section 1 – General Tips and Shortcuts Chevron down icon Chevron up icon
Chapter 1: Creating and Reviewing Opening Balances in QuickBooks Online Chevron down icon Chevron up icon
Chapter 2: Useful Tips and Tricks Every QuickBooks User Should Know Chevron down icon Chevron up icon
Section 2 – Adapting QuickBooks Online to Suit Different Business Types Chevron down icon Chevron up icon
Chapter 3: QuickBooks Online for Manufacturing Businesses Chevron down icon Chevron up icon
Chapter 4: Recording Income for Retail Businesses Chevron down icon Chevron up icon
Chapter 5: Handling Client Money Chevron down icon Chevron up icon
Chapter 6: The Secret to Success with Projects in QuickBooks Online Chevron down icon Chevron up icon
Chapter 7: Handling Foreign Currencies in QuickBooks Online Chevron down icon Chevron up icon
Section 3 – Reviewing and Reporting Data in QuickBooks Online Chevron down icon Chevron up icon
Chapter 8: Best Practices When Reviewing Financial Records Chevron down icon Chevron up icon
Chapter 9: Enhancing the Consistency of Your Financial Statements Chevron down icon Chevron up icon
Chapter 10: Reconciling the Balance Sheet Chevron down icon Chevron up icon
Chapter 11: Closing the Year-End, the Audit Log, and More Chevron down icon Chevron up icon
Other Books You May Enjoy Chevron down icon Chevron up icon

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Annette Pettitt Dec 21, 2021
Full star icon Full star icon Full star icon Full star icon Full star icon 5
Useful tips for QuickBooks, easy to read, no confusing language. Really helping me solve problems as they arise! Definitely worth getting if you are a QuickBooks user.
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Mrs Sally Scott Jan 04, 2022
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I saw this detailed on a Facebook feed and ordered ahead of release. It's an excellent book, so pleased I bought it. I had to set up multi currency and used this book on day one for help on how to action.
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Ashley Leeds Jan 20, 2022
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What a fantastic resource!! Ashley has packed in most of his knowledge into this great book with loads of examples of exactly what you need to make your experience of QuickBooks Online better.It covers the basics but also goes into great detail in all the areas you or your clients will need.Easy to read and with all the screenshots you can easily get to the outcomes that you are looking for. If you want you can even download the colour images in pdf form from instructions in the book in the 'How to use this book' section.If you want to know more about how to use QuickBooks Online, then this book will be your personal guide.
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awright Jan 01, 2022
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Excellent practical resource. Takes the user from set up to tips and tricks on how to use the software efficiently. Someone having never used the software will be able to set up correctly with all the opening balances, file VAT returns and learn really practical tips on how to use the software. Ash comes with years of practical experience and this is displayed brilliantly in this book. Would recommend this resource for anyone wanting to get started with QuickBooks Online or someone with experience but wanting to learn more tips to make practical use of the software.
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This book covers a lot of the functionality of QBO - good reference for those new to using this software.
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