[SOLVED] Chapter 6 New Company Setup Detailed Start Case Problem – Business Finance

Case Problem 1 on pages 189 – 245Chapter Review and Assessment
Procedure Review
To begin the New Company Setup and create a new company file using
the Detailed Start method and the EasyStep Interview window:
1. Open QuickBooks.
2. At the No Company Open window, click Create a new company, or
click File and then click New Company. The QuickBooks Desktop
Setup window appears with the Let’s get your business setup quickly!
page displayed. This is the page where you select the method of New
Company Setup.
3. At the QuickBooks Desktop Setup window, at the Let’s get your
business set up quickly! page, click the Detailed Start button. The
EasyStep Interview window appears.
4. At the EasyStep Interview window, read and complete each page.
Click Next after completing each page.
5. At the Congratulations! window, click Go to Setup. Continue the New
Company Setup using the QuickBooks Desktop Setup window, or exit
the QuickBooks Desktop Setup window and go directly into the new
company file.
To leave the EasyStep Interview window:
1. Click the Leave button.
2. Click OK at the EasyStep Interview message.
You should not leave the EasyStep Interview window until the new
company file has been saved.
To re-enter the EasyStep Interview window:
1. At the No Company Open window, click Open or Restore an existing
company, or click File and then click Open Company.
2. Open the new company file.
3. Enter the password at the QuickBooks Desktop Login window.
4. Click OK at the QuickBooks Desktop Information message.
When you open the company file, you are returned to the page
you used last.
To enter the QuickBooks Desktop Setup window:
1. At the main menu bar, click Company and then click Bulk Enter
Business Details.
To add customers to the Customer Center using the QuickBooks Desktop
Setup window:
1. At the QuickBooks Desktop Setup window, at the Get all the details
into QuickBooks Desktop page, in the Add the people you do business with section, click the Add button.
2. At the next Add the people you do business with page, click the Paste
from Excel or enter manually button and then click Continue.
3. At the next Add the people you do business with page, in the Customer
column, click Select all to fill in all the circles in the Customer column.
4. Enter the information for the customers in the appropriate columns.
5. After entering all the customer information, click Continue.
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6. At the next Add the people you do business with page, click the Enter
opening balances link.
7. At the Enter opening balances for customers and vendors page, enter
the balances for the customers and enter the correct date.
8. Click Continue. You are returned to the Add the people you do business with page.
9. Click Continue. You are returned to the QuickBooks Desktop Setup
window—Get all the details into QuickBooks Desktop page.
10. Click Add More to enter additional customers, vendors, or items, or
close the QuickBooks Desktop Setup window.
To add vendors to the Vendor Center using the QuickBooks Desktop
Setup window:
1. At the QuickBooks Desktop Setup window, at the Get all the details
into QuickBooks Desktop page, in the Add the people you do business with section, click the Add or Add More button.
2. At the next Add the people you do business with page, click the Paste
from Excel or enter manually button and then click Continue.
3. At the next Add the people you do business with page, in the Vendor
column, click Select all to fill in all the circles in the Vendor column.
4. Enter the information for the vendors in the appropriate columns.
5. After entering all the vendor information, click Continue.
6. At the next Add the people you do business with page, click the Enter
opening balances link.
7. At the Enter opening balances for customers and vendors page, enter
the balances for the vendors and enter the correct date.
8. Click Continue. You are returned to the Add the people you do business with page.
9. Click Continue. You are returned to the QuickBooks Desktop Setup
window—Get all the details into QuickBooks Desktop page.
10. Click Add More to enter additional vendors, customers, or items, or
close the QuickBooks Desktop Setup window.
To add service items to the Item List using the QuickBooks Desktop Setup
window:
1. At the QuickBooks Desktop Setup window, at the Get all the details
into QuickBooks Desktop page, in the Add the products and services
you sell section, click the Add button.
2. At the Add the products and services you sell page, click the Service
button and then click Continue.
3. Enter the information for the service items in the appropriate
columns.
4. After entering all the service items information, click Continue. You
are returned to the Add the products and services you sell page.
5. Click Continue. You are returned to the QuickBooks Desktop Setup
window—Get all the details into QuickBooks Desktop page.
6. Click Add More to enter additional items, customers, or vendors, or
close the QuickBooks Desktop Setup window.
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To add inventory part items to the Item List using QuickBooks Desktop
Setup:
1. At the QuickBooks Desktop Setup window, at the Get all the details
into QuickBooks Desktop page, in the Add the products and services
you sell section, click the Add or Add More button.
2. At the Add the products and services you sell page, click the
Inventory part button and then click Continue.
3. Enter the information for the inventory part items in the appropriate
columns and choose the correct date.
4. After entering all the inventory part items information, click
Continue. You are returned to the Add the products and services you
sell page.
5. Click Continue. You are returned to the QuickBooks Desktop Setup
window—Get all the details into QuickBooks Desktop page.
6. Click Add More to enter additional items, customers, or vendors, or
close the QuickBooks Desktop Setup window.
To correct an error in the Journal report:
1. In the Journal report, double-click the transaction with the error. The
Invoice type will bring you to the Create Invoices window. The Bill
type will bring you to the Enter Bills window. The Inventory Adjust
type will bring you to the Adjust Quantity/Value on Hand window.
2. Make the correction in the appropriate window and then click Save
& Close.
3. At the warning, click Yes.
To activate the account numbers feature:
1. At the main menu bar, click Edit and then click Preferences.
2. In the left panel of the Preferences window, click the Accounting icon.
3. Click the Company Preferences tab.
4. In the ACCOUNTS section, insert a check mark in the box to the left
of Use account numbers to turn on the account numbers feature.
5. Click OK.
To customize the accounts on the Chart of Accounts List created in the
EasyStep Interview and QuickBooks Desktop Setup windows and change
account numbers and names:
1. At the main menu bar, click Lists and then click Chart of Accounts.
2. Select the account to edit.
3. Click the Account menu button.
4. At the Account button drop-down menu, click Edit Account.
5. Make any necessary changes to the account and then click Save
& Close.
To allow QuickBooks to create system default accounts:
1. Open and close Activities windows, such as the Create Invoices, Enter
Sales Receipts, and Enter Bills windows. Also open the Item List and
the New Item window and then select Inventory Part.
This process creates the system default accounts Undeposited
Funds, Inventory Asset, and Cost of Goods Sold. After QuickBooks
creates these accounts, you can edit each account number and name.
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If you created an accounts receivable-type account and an accounts
payable-type account, QuickBooks will accept the accounts. If you
did not previously create them, when you open and close the Create
Invoices and Enter Bills windows, QuickBooks will create the accounts
receivable and accounts payable accounts, respectively.
2. Follow the steps to customize the Chart of Accounts List and to
customize the numbers and names of the system default accounts
created by QuickBooks.
To customize the payment terms created in the EasyStep window:
1. At the main menu bar, click Lists and then click Customer & Vendor
Profile Lists.
2. At the Customer & Vendor Profile Lists submenu, click Terms List.
3. At the Terms List window, click the Terms menu button.
4. At the Terms button drop-down menu, click New.
5. At the New Terms window, type the appropriate information for any
terms QuickBooks did not create that you wish to create.
6. Click Next or OK.
7. At the Terms List window, select the terms created by QuickBooks
that you wish to delete.
8. Click the Terms menu button and then click Delete Terms. Click OK at
the warning.
9. At the Terms List window, select the terms created by QuickBooks
that you wish to edit.
10. Click the Terms menu button and then click Edit Terms.
11. Change the appropriate information and then click OK.
To update the Chart of Accounts List:
1. At the main menu bar, click Lists and then click Chart of Accounts.
2. Click the Account menu button.
3. At the Account button drop-down menu, click New.
4. At the Add New Account: Choose Account Type window, choose the
type and then click Continue.
5. At the Add New Account window, type in the information and then
click Save & New or Save & Close.
To edit the Item List for service items created in the QuickBooks Desktop
Setup window:
1. At the main menu bar, click Lists and then click Item List.
2. At the Item List window, double-click the service item. The Edit Item
window appears.
3. At the Tax Code field, click Non Non-Taxable Sales.
4. At the Account field, click the correct account.
5. If the information is correct, click OK.
6. At the warning, click Yes.
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To edit an inventory part item created in the QuickBooks Desktop Setup
window:
1. At the main menu bar, click Lists and then click Item List.
2. At the Item List window, double-click the inventory part item. The
Edit Item window appears.
3. At the COGS Account field, click the correct account.
4. At the Tax Code field, click Tax Taxable Sales.
5. At the Income Account field, click the correct account.
6. At the Asset Account field, click the correct account.
7. If the information is correct, click OK.
8. At the warning, click Yes.
To edit the Item List for sales tax created in EasyStep Interview:
1. At the main menu bar, click Lists and then click Item List.
2. At the Item List window, double-click the sales tax item to display the
Edit window for that item.
3. Review the sales tax information and make any necessary changes.
4. Click OK.
To enter opening balances in the Make General Journal Entries window:
1. At the main menu bar, click Company and then click Make General
Journal Entries.
2. Choose the date and make or accept the entry in the ENTRY NO. field.
3. Remove the check mark next to ADJUSTING ENTRY.
4. Enter the accounts and amounts to be debited.
5. Enter the accounts and amounts to be credited.
6. Record the balancing amount as a credit (or debit) to the capital
account.
7. Click the Save & Close button.
To reverse the Uncategorized Income account:
1. At the main menu bar, click Company and then click Make General
Journal Entries.
2. Choose the date and check the entry in the ENTRY NO. field.
3. Remove the check mark next to ADJUSTING ENTRY.
4. Debit the Uncategorized Income account for the full amount in that
account, and credit the Capital account for the same amount.
5. Click the Save & Close button.
To reverse the Uncategorized Expenses account:
1. At the main menu bar, click Company and then click Make General
Journal Entries.
2. Choose the date and check the entry in the ENTRY NO. field.
3. Remove the check mark next to ADJUSTING ENTRY.
4. Debit the Capital account for the full amount in the Uncategorized
Expenses account, and credit the Uncategorized Expenses account
for the same amount.
5. Click the Save & Close button.
To view and print accounting reports from the Reports menu:
1. At the main menu bar, click Reports and then click Accountant & Taxes.
2. At the Accountant & Taxes submenu, choose a report.
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3. Indicate the start and end dates for the report.
4. Print the report.
5. Close the report.
To view and print financial statements from the Reports menu:
1. At the main menu bar, click Reports and then click Company &
Financial.
2. At the Company & Financial submenu, choose a financial report.
3. Indicate the start and end dates for the report.
4. Print the report.
5. Close the report.
Key Concepts
Select the letter of the item that best matches each definition.
a.
b.
c.
d.
e.
f.
System default accounts
g.
EasyStep Interview
Account numbers
h.
Uncategorized Expenses
i.
Customizing the Chart of
j.
Accounts List
Inventory Asset and Cost of
Goods Sold
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Lists – Customer & Vendor
Profile Lists – Terms
Uncategorized Income
Edit – Preferences
Dimmed account type
1. The way QuickBooks identifies system default accounts.
2. A feature in a company file to identify accounts; must be activated in the Preferences window.
3. Menu choice used to customize payment terms.
4. Window where a new company file is created when using the
Detailed Start method of New Company Setup.
5. Account created by QuickBooks as an offsetting amount for
Accounts Receivable.
6. Accounts created by QuickBooks to be used in the Activities
windows and journal entries.
7. Menu choice used to make account numbers active.
8. Adding and editing account numbers and names.
9. Accounts created by QuickBooks as an offsetting amount of
Accounts Payable.
10. System default accounts QuickBooks looks for when an inventory part item is set up.
Procedure Check
1. What is New Company Setup? What is one method of New Company
Setup?
2. You have switched your company accounting records to QuickBooks
using the EasyStep Interview window and QuickBooks Desktop Setup
window. What would you do to customize the Chart of Accounts List
created by QuickBooks?
3. How and why would you adjust the Uncategorized Income and
Uncategorized Expenses accounts?
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4. You are reviewing the new company file you created in QuickBooks
using EasyStep Interview and QuickBooks Desktop Setup, and
you notice that there are no balances in the revenue and expense
accounts. Why is this, and how would you correct it?
5. You have created an Inventory account and a Cost of Goods Sold
account, but every time you add a new inventory part item to the Item
List, QuickBooks creates an Inventory Asset account and Cost of Goods
Sold account. Why does this happen, and how can you correct it?
6. Your manager is just learning QuickBooks. She has asked you to
explain EasyStep Interview and QuickBooks Desktop Setup. Provide
the manager with a written explanation of the EasyStep Interview
and QuickBooks Desktop Setup windows. Be sure to explain what is
included in the EasyStep Interview window and QuickBooks Desktop
Setup window, and describe the additional procedures necessary to
complete the New Company Setup after completing the EasyStep
Interview and QuickBooks Desktop Setup windows.
Case Problems
Demonstrate your knowledge of the QuickBooks features discussed in this
chapter by completing the following case problems.
Case Problem 6–1
On April 1, 2019, Lynn Garcia began her business, Lynn’s Music Studio.
In the first month of business, Lynn set up the music studio, provided
guitar and piano lessons, and recorded month-end activity. In May, the
second month of business, Lynn started purchasing and selling inventory
items of guitars, keyboards, music stands, and sheet music. In April and
May, Lynn recorded the financial activities using a manual accounting
system. On June 1, 2019, Lynn decides to switch her accounting method
to QuickBooks. Lynn has organized the information about the company
but has hired you to convert the accounting records to QuickBooks.
1. Use the following information to create the company file and record
the information for the company using the Detailed Start method
and the EasyStep Interview window. Where no specific information is
given, accept the EasyStep Interview window default setting.
Company Name: CH6 [Your Name] Lynn’s Music
Studio
Tax ID:
45-6123789
Address:
228 Pearl Street
Scranton, PA 18501
Country:
U.S.
Phone:
570-555-0400
Fax:
570-555-0500
E-mail:
LYNN@ppi-edu.net
Industry:
General Product-based Business
Company:
Sole Proprietorship
Fiscal Year Start:
January
Password:
Student1
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Save As:
CH6 [Your Name] Lynn’s Music
Studio
Sell:
Both services and products
Sales Tax:
Yes
Estimates:
No
Tracking Customer
Orders:
No
Statements:
No
Invoices:
Yes
Progress Invoicing:
No
Bills You Owe:
Yes
Tracking Inventory:
Yes
Tracking Time:
No
Employees:
No
Start Tracking:
06/01/2019
Remove the check mark from each of the following accounts:
Shipping and Delivery Income
Freight and Shipping Costs
Merchant Account Fees
Product Samples Expense
Purchases – Resale Items
Advertising and Promotion
Automobile Expense
Bank Service Charges
Computer and Internet Expenses
Dues and Subscriptions
Meals and Entertainment
Postage and Delivery
Professional Fees
Repairs and Maintenance
Travel Expense
Ask My Accountant
Insert a check mark to the left of the following account:
Sales Discounts
2. Use the information in Table LMS—Customers to create and update
the Customer Center using the QuickBooks Desktop Setup window.
Be sure to use the date June 1, 2019.
TABLE LMS Customers
Address/
City, State, Zip
Customer/Company Name
Name/Contact
Phone
Douglaston Senior Center
Herbie
Richardson
570-555-7749
574 S Beech Street
Scranton, PA 18506
Highland School
Asst. Principal
Office
570-555-6963
115 Forrest Street
Waymart, PA 18472
Jefferson High School
Music
Department
570-555-9600
500 Apple Street
Dunmore, PA 18512
Balance
$175.00
…continues
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TABLE LMS Customers…continued
Address/
City, State, Zip
Customer/Company Name
Name/Contact
Phone
Mulligan Residence
Adam Smith
570-555-3325
299 Hickory Lane
Scranton, PA 18504
Musical Youth Group
Dana
Thompson
570-555-6642
550 Marion Lane
Scranton, PA 18504
Patel Family
Ari Patel
570-555-1132
574 Kenwood Drive
Dickson City, PA 18519
Patterson Family
Jonathan
Patterson
570-555-6321
650 Memory Lane
Dickson City, PA 18519
Schroeder Family
Betty
Schroeder
570-555-1897
98 Belmont Rd.
Carbondale, PA 18407
Twin Lakes Elementary
Miss Brooks
570-555-4474
570-555-4485
515 Hobson Street
Honesdale, PA 18431
Balance
1575.90
3. Use the information in Table LMS—Vendors to create and update
the Vendor Center using the QuickBooks Desktop Setup window. Be
sure to use the date June 1, 2019.
TABLE LMS Vendors
Phone
Address/
City, State, Zip
Vendor/Company Name
Name/Contact
Computer Town
Customer
Service
570-555-1500
1000 Carbondale Highway
Scranton, PA 18502
Katie’s Keyboards
Katie Shea
570-555-7777
158 Clay Road
Scranton, PA 18505
Melody Music Equipment
Melody
Arhmand
570-555-1120
780 Roselyn Ave.
Scranton, PA 18505
Mills Family Furniture
Edna Mills
570-555-7144
150 Amelia Street
Scranton, PA 18503
Music Instruments, Inc.
Matilda Molloy
570-555-9630
25 Monroe Ave.
Scranton, PA 18505
Mutual Insurance
Company
Bob Maxwell
570-555-5600
1 Main Street
Honesdale, PA 18431
Paper, Clips, and More
Justin Daves
570-555-8558
157 Waymart Lane
Waymart, PA 18472
Pioneer Phone
Customer
Service
570-555-6000
1000 Route 6
Carbondale, PA 18407
Steamtown Electric
Customer
Service
570-555-2500
150 Vine Lane
Scranton, PA 18501
Strings, Sheets & Such
Manuela Perez
570-555-3636
250 Lincoln St.
Scranton, PA 18505
Tune Tones
Tony Tune
570-555-1111
500 Monroe Ave.
Dunmore, PA 18512
Viewhill Realty
Matt Snyder
570-555-1000
100 Commerce Blvd.
Scranton, PA 18501
Balance
$2,000.00
1,500.00
Lynn Garcia
1,500.00
1,200.00
PA Dept. of Revenue
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350.00
4. Use the information in Table LMS—Items to update the Item
List using the QuickBooks Desktop Setup window. Be sure to use the
date June 1, 2019.
TABLE LMS
Items
Item Name and Description
Price
Cost
On Hand
Total Value
Service Items:
Guitar Lessons
$ 30
Piano Lessons
35
Inventory Part Items:
Guitars
100
$50
6
$ 300
Keyboards
150
75
17
1,275
Music Stands
40
20
17
340
Sheet Music
6
3
165
495
5. Activate the account numbers feature. Use the following information
to customize the Chart of Accounts List:
QuickBooks
Edited
Number Account Name
Number Account Name
12100 *Inventory Asset
1260
Inventory of Guitars
15000 Furniture and
1700
Music Instruments
Equipment
17000 Accumulated
1750
Accum. Dep., Music
Depreciation Instruments
[Subaccount of 1700
Music Instruments]
30800 Owners Draw
3020
Lynn Garcia, Drawings
Sales Income
4060
Sale of Guitars
48300 Sales Discounts
4100
62400 Depreciation Expenses
6075
Deprec. Exp., Music
Instruments
63300 Insurance Expense
6200
63400 Interest Expense
7000
[Account Type: Other
Expense]
64900 Office Supplies
6325
Office Supplies
Expense
67100 Rent Expense
6400
68100 Telephone Expense
6450
68600 Utilities
6500
Utilities Expense
6. Delete the following account:
47900 Sales
7. Open and close the following windows to allow QuickBooks to create
default accounts:
Create Invoices
Enter Sales Receipts
Enter Bills
Item List: New Item: Inventory Part
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8. Customize the system default accounts:
QuickBooks
Number
11000
12000
12100
20000
25500
30000
32000
50000
Edited
Account Name
Number Account Name
Accounts Receivable
1200
Undeposited Funds
1250
*Inventory Asset
1260
Inventory of Guitars
Accounts Payable
2010
Sales Tax Payable
2200
Opening Balance Equity
3010
Lynn Garcia, Capital
Owners Equity
3030
Accumulated Earnings
*Cost of Goods Sold
5060
Cost of Guitars Sold
9. Customize the payment Terms List to list only the following:
2/10, Net 30 Days
Net 10 Days
Net 15 Days
Net 30 Days
10. Use the information in Table LMS—New Accounts to update the
Chart of Accounts List.
TABLE LMS
New Accounts
Account Type
Number
Account Name
Bank
1010
Cash – Operating
Other Current Asset
1265
Inventory of Keyboards
Other Current Asset
1270
Inventory of Music Stands
Other Current Asset
1275
Inventory of Sheet Music
Other Current Asset
1300
Music Supplies
Other Current Asset
1305
Office Supplies
Other Current Asset
1410
Prepaid Advertising
Other Current Asset
1420
Prepaid Insurance
Fixed Asset
1725
Music Instruments, Cost [Subaccount of 1700]
Fixed Asset
1800
Furniture
Fixed Asset
1825
Furniture, Cost [Subaccount of 1800]
Fixed Asset
1850
Accum. Dep., Furniture [Subaccount of 1800]
Fixed Asset
1900
Computers
Fixed Asset
1925
Computers, Cost [Subaccount of 1900]
Fixed Asset
1950
Accum. Dep., Computers [Subaccount of 1900]
Other Current Liability
2020
Notes Payable
Other Current Liability
2030
Interest Payable
Income
4010
Piano Lessons
Income
4020
Guitar Lessons
Income
4065
Sale of Keyboards
Income
4070
Sale of Music Stands
Income
4075
Sale of Sheet Music
…continues
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TABLE LMS
New Accounts…
continued
Account Type
Number
Account Name
Cost of Goods Sold
5065
Cost of Keyboards Sold
Cost of Goods Sold
5070
Cost of Music Stands Sold
Cost of Goods Sold
5075
Cost of Sheet Music Sold
Cost of Goods Sold
5900
Inventory Adjustment
Expense
6085
Deprec. Exp., Furniture
Expense
6095
Deprec. Exp., Computers
Expense
6150
Instrument Tuning Expense
Expense
6300
Music Supplies Expense
11. Use the information in Table LMS—Update Item List to update the
Item List for items created as part of the QuickBooks Desktop Setup.
TABLE LMS
Update Item List
Item Name and Description
COGS
Account
Income
Account
Asset
Account
Service Items (nontaxable):
Guitar Lessons
4020
Piano Lessons
4010
Inventory Part Items (taxable):
Guitars
5060
4060
1260
Keyboards
5065
4065
1265
Music Stands
5070
4070
1270
Sheet Music
5075
4075
1275
After updating the Item List, you can delete the Inventory Asset
account and Cost of Goods Sold account (the accounts with no
numbers).
12. Edit the Item List for the sales tax item created in the EasyStep Interview:
Sales Tax Name:
Description:
Tax Rate:
Tax Agency:
PA Sales Tax
Sales Tax
7%
PA Dept. of Revenue
13. Make three journal entries on June 1, 2019 (accept the default
Entry Nos.):
a. Enter the opening balances listed below. Enter the following
accounts and amounts as debits:
Number
Account Name
Balance
1010
Cash – Operating
$14,615.18
1300
Music Supplies
430.00
1305
Office Supplies
300.00
1420
Prepaid Insurance
1,100.00
1725
Music Instruments, Cost
4,000.00
1825
Furniture, Cost
2,500.00
1925
Computers, Cost
3,000.00
…continues
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…continued
Number
3020
4100
5060
5065
5070
5075
5900
6075
6085
6095
6150
6200
6300
6325
6400
6450
6500
7000
Account Name
Lynn Garcia, Drawings
Sales Discounts
Cost of Guitars Sold
Cost of Keyboards Sold
Cost of Music Stands Sold
Cost of Sheet Music Sold
Inventory Adjustment
Deprec. Exp., Music Instruments
Deprec. Exp., Furniture
Deprec. Exp., Computers
Instrument Tuning
Insurance Expense
Music Supplies Expense
Office Supplies Expense
Rent Expense
Telephone Expense
Utilities Expense
Interest Expense
Balance
1,000.00
188.92
1,150.00
2,475.00
460.00
1,305.00
50.00
60.00
40.00
35.00
100.00
100.00
70.00
50.00
600.00
50.00
70.00
15.00
Enter the following accounts and amounts as credits:
Number
1750
1850
1950
2020
2030
4010
4020
4060
4065
4070
4075
Account Name
Accum. Dep., Music Instruments
Accum. Dep., Furniture
Accum. Dep., Computers
Notes Payable
Interest Payable
Piano Lessons
Guitar Lessons
Sale of Guitars
Sale of Keyboards
Sale of Music Stands
Sale of Sheet Music
Balance
$ 60.00
40.00
35.00
2,000.00
15.00
3,535.00
2,910.00
2,300.00
4,950.00
920.00
2,610.00
b. Make a journal entry to reverse the Uncategorized Income account.
c. Make a journal entry to reverse the Uncategorized Expenses account.
14. Display and print the following reports for June 1, 2019:
a. Journal
b. Trial Balance
c. Profit & Loss Standard (04/01/2019–06/01/2019)
d. Balance Sheet Standard
e. Item Listing
f. Customer Contact List
g. Vendor Contact List
15. Make a backup copy of the new company file. Use the name LMS6
[Your Name] Lynn’s Music Studio. Restore the backup copy and change
the company name to LMS6 [Your Name] Lynn’s Music Studio.
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Case Problem 6–2
On June 1, 2019, Olivia Chen began her business, Olivia’s Web Solutions.
In the first month of business, Olivia set up the office, provided web page
design and Internet consulting services, and recorded month-end activity.
In July, the second month of business, Olivia began to purchase and sell
inventory items of computer hardware and software. In June and July,
Olivia recorded the financial activities using a manual accounting system.
On August 1, 2019, Olivia decides to switch her accounting method to
QuickBooks. Olivia has organized the information about the company but
has hired you to convert the accounting records to QuickBooks.
1. Use the information below to create the company file and record
the information for the company using the Detailed Start method
and the EasyStep Interview window. Where no specific information
is given, accept the EasyStep Interview window default setting.
Company Name: CH6 [Your Name] Olivia’s Web Solutions
Tax ID:
55-5656566
Address: 547 Miller Place
Westport, NY 11858
Country:
U.S.
Phone:
516-555-5000
Fax:
516-555-6000
E-mail:
LIV@ppi-edu.net
Industry:
General Product-based Business
Company:
Sole Proprietorship
Fiscal Year Start:
January
Password:
Student1
Save As: CH6 [Your Name] Olivia’s Web Solutions
Sell:
Both services and products
Sales Tax:
Yes
Estimates:
No
Tracking Customer
Orders:
No
Statements:
No
Invoices:
Yes
Progress Invoicing:
No
Bills You Owe:
Yes
Tracking Inventory:
Yes
Tracking Time:
No
Employees:
No
Start Tracking:
08/01/2019
Remove the check mark from each of the following accounts:
Shipping and Delivery Income
Freight and Shipping Costs
Merchant Account Fees
Product Samples Expense
Purchases – Resale Items
Automobile Expense
Bank Service Charges
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259
Computer and Internet Expenses
Dues and Subscriptions
Meals and Entertainment
Postage and Delivery
Professional Fees
Repairs and Maintenance
Travel Expense
Ask My Accountant
Insert a check mark to the left of the following account:
Sales Discounts
2. Use the information in Table OWS—Customers to create and update
the Customer Center using the QuickBooks Desktop Setup window.
Be sure to use the date August 1, 2019.
TABLE OWS Customers
Customer/
Company Name
Name/Contact
Artie’s Auto Repair
Leon Artie
516-555-1221
32 W. 11th Street
New Hyde Park, NY 11523
Breathe Easy
A/C Contractors
Allen Scott
516-555-6868
556 Atlantic Ave.
Freeport, NY 11634
Long Island Water
Works
Customer
Service
516-555-4747
87-54 Bayview Ave.
Glen Cove, NY 11536
Miguel’s Restaurant
Miguel Perez
516-555-3236
30 Willis Ave.
Roslyn, NY 11541
Schneider Family
Johnny
Schneider
516-555-8989
363 Farmers Rd.
Syosset, NY 11547
Sehorn & Smith
Attorneys
Jerry Sehorn
212-555-3339
510 Fifth Ave.
New York, NY 10022
Singh Family
David Singh
718-555-3233
363 Marathon Parkway
Little Neck, NY 11566
South Shore School
District
Joseph Porter
516-555-4545
3666 Ocean Ave.
South Beach, NY 11365
Thrifty Stores
William Way
718-555-2445
718-555-2446
23 Boston Ave.
Bronx, NY 11693
Phone
Address/
City, State, Zip
Balance
$
800.00
1,000.00
800.00
12,056.00
1,500.00
3. Use the information in Table OWS—Vendors to create and update
the Vendor Center using the QuickBooks Desktop Setup window. Be
sure to use the date August 1, 2019.
TABLE OWS Vendors
Phone
Address/
City, State, Zip
Vendor/Company Name
Name/Contact
ARC Management
Alvin R. Clinton
516-555-6363
668 Lakeville Ave.
Garden City, NY 11678
Chrbet Advertising
Chris Chrbet
212-555-8777
201 E. 10th Street
New York, NY 10012
Balance
$1,200.00
…continues
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TABLE OWS Vendors…continued
Address/
City, State, Zip
Vendor/Company Name
Name/Contact
Phone
Balance
Comet Computer
Supplies
Customer
Service
631-555-4444
657 Motor Parkway
Center Island, NY 11488
Computec Computers
Customer
Service
702-555-6564
3631 Gate Blvd.
Greenboro, NC 27407
Eastel
Customer
Service
212-555-6565
655 Fifth Ave.
New York, NY 10012
Eastern Mutual
Insurance
Customer
Service
212-555-6363
55 Broadway Room 55
New York, NY 10001
InterSoft Development
Co.
Customer
Service
361-555-3634
556 Route 347
Hauppauge, NY 11654
Lewis Furniture Co.
Manny Lewis
631-555-6161
1225 Route 110
Farmingdale, NY 11898
LI Power Company
Customer
Service
516-555-8888
5444 Northern Ave.
Plainview, NY 11544
Martin Computer
Repairs
Ken Martin
516-555-7777
366 N. Franklin St.
Garden City, NY 11568
Netsoft Development
Co.
Customer
Service
974-555-7873
684 Mountain View Rd
Portland, OR 68774
Customer
Service
516-555-3214
45 Jericho Tpke.
Jericho, NY 11654
Scanntronix
Customer
Service
617-555-8778
2554 Bedford Rd.
Boston, MA 02164
Systems Service
Jeremy Jones
516-555-2525
516-555-2526
36 Sunrise Lane
Hempstead, NY 11004
Textpro Software, Inc.
Customer
Service
615-555-4545
615-555-4546
877 Route 5
Ft. Lauderdale, FL 70089
10,000.00
350.00
1,700.00
1,600.00
NYS Tax Dept.
Office Plus
375.00
Olivia Chen
4. Use the information in Table OWS—Items to update the Item List
using the QuickBooks Desktop Setup window. Be sure to use the date
August 1, 2019.
TABLE OWS
Items
Item Name and Description
Price
Cost
On
Hand
Total
Value
Service Items:
Internet Consulting Services
$100
Web Page Design Services
125
Inventory Part Items:
Computers
2,000
$1,000
10
$10,000
Scanners
600
300
12
3,600
HTML Software
150
75
18
1,350
Desktop Pub. Software
200
100
10
1,000
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261
5. Activate the account numbers feature. Use the following information
to customize the Chart of Accounts List:
QuickBooks
Edited
Number Account Name
Number Account Name
15000 Furniture and
1700
Computers
Equipment
17000 Accumulated
1750
Accum. Dep., Computers
Depreciation
Subaccount of 1700]
30800 Owners Draw
3020
Olivia Chen, Drawings
Sales Income
4060
Sale of Computers
48300 Sales Discounts
4100
60000 Advertising and
6050
Advertising Expense
Promotion
62400 Depreciation Expense
6075
Deprec. Exp., Computers
63300 Insurance Expense
6100
63400 Interest Expense
7000
[Account Type: Other
Expense]
64900 Office Supplies
6325
Office Supplies Expense
67100 Rent Expense
6400
68100 Telephone Expense
6450
68600 Utilities
6500
Utilities Expense
6. Delete the following account:
47900 Sales
7. Open and close the following windows to allow QuickBooks to create
default accounts:
Create Invoices
Enter Sales Receipts
Enter Bills
Item List: New Item: Inventory Part
8. Customize the system default accounts:
QuickBooks
Number
11000
12000
12100
20000
25500
30000
32000
50000
Edited
Account Name
Number Account Name
Accounts Receivable
1200
Undeposited Funds
1250
*Inventory Asset
1260
Inventory of Computers
Accounts Payable
2010
Sales Tax Payable
2200
Opening Balance Equity
3010
Olivia Chen, Capital
Owners Equity
3030
Accumulated Earnings
*Cost of Goods Sold
5060
Cost of Computers Sold
9. Customize the payment Terms List to list only the following:
2/10, Net 30 Days
Net 10 Days
Net 15 Days
Net 30 Days
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10. Use the information in Table OWS—New Accounts to update the
Chart of Accounts List.
TABLE OWS
New Accounts
Account Type
Number
Account Name
Bank
1010
Cash – Operating
Other Current Asset
1265
Inventory of Scanners
Other Current Asset
1270
Inventory of HTML Software
Other Current Asset
1275
Inventory of Desktop Pub. Soft.
Other Current Asset
1300
Computer Supplies
Other Current Asset
1305
Office Supplies
Other Current Asset
1410
Prepaid Advertising
Other Current Asset
1420
Prepaid Insurance
Fixed Asset
1725
Computers, Cost [Subaccount of 1700]
Fixed Asset
1800
Furniture
Fixed Asset
1825
Furniture, Cost [Subaccount of 1800]
Fixed Asset
1850
Accum. Dep., Furniture [Subaccount of 1800]
Fixed Asset
1900
Software
Fixed Asset
1925
Software, Cost [Subaccount of 1900]
Fixed Asset
1950
Accum. Dep., Software [Subaccount of 1900]
Other Current Liability
2020
Notes Payable
Other Current Liability
2030
Interest Payable
Income
4010
Web Page Design Fees
Income
4020
Internet Consulting Fees
Income
4065
Sale of Scanners
Income
4070
Sale of HTML Software
Income
4075
Sale of Desktop Pub. Software
Cost of Goods Sold
5065
Cost of Scanners Sold
Cost of Goods Sold
5070
Cost of HTML Software Sold
Cost of Goods Sold
5075
Cost of Desktop Pub. Soft. Sold
Cost of Goods Sold
5900
Inventory Adjustment
Expense
6085
Deprec. Exp., Furniture
Expense
6095
Deprec. Exp., Software
Expense
6300
Computer Supplies Expense
Expense
6350
Online Service Expense
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263
11. Use the information in Table OWS—Update Item List to update the
Item List for items created as part of QuickBooks Desktop Setup.
TABLE OWS
Update Item List
Item Name and Description
COGS Account
Income
Account
Asset Account
Service Items (nontaxable):
Internet Consulting Services
4020
Web Page Design Services
4010
Inventory Part Items (taxable):
Computers
5060
4060
1260
Scanners
5065
4065
1265
HTML Software
5070
4070
1270
Desktop Pub. Software
5075
4075
1275
After updating the Item List, you can delete the Inventory Asset
account and Cost of Goods Sold account (the accounts with no
numbers).
12. Edit the Item List for the sales tax item created in the EasyStep Interview:
Sales Tax Name:
Description:
Tax Rate:
Tax Agency:
NY Sales Tax
Sales Tax
8%
NYS Tax Dept.
13. Make three journal entries on August 1, 2019 (accept the default
Entry Nos.):
a. Enter the opening balances listed below. Enter the following
accounts and amounts as debits:
Number
1010
1300
1305
1410
1420
1725
1825
1925
3020
4100
5060
5065
5070
5075
5900
6050
6075
6085
6095
6100
Account Name
Balance
Cash – Operating
$24,489.16
Computer Supplies
350.00
Office Supplies
325.00
Prepaid Advertising
1,000.00
Prepaid Insurance
1,650.00
Computers, Cost
5,000.00
Furniture, Cost
3,200.00
Software, Cost
3,600.00
Olivia Chen, Drawings
500.00
Sales Discounts
179.84
Cost of Computers Sold
10,000.00
Cost of Scanners Sold
2,400.00
Cost of HTML Software Sold
75.00
Cost of Desktop Pub. Soft. Sold
500.00
Inventory Adjustment
75.00
Advertising Expense
200.00
Deprec. Exp., Computers
75.00
Deprec. Exp., Furniture
50.00
Deprec. Exp., Software
100.00
Insurance Expense
150.00
…continues
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…continued
Number
6300
6325
6350
6400
6450
6500
7000
Account Name
Computer Supplies Expense
Office Supplies Expense
Online Service Expense
Rent Expense
Telephone Expense
Utilities Expense
Interest Expense
Balance
250.00
50.00
150.00
800.00
350.00
125.00
25.00
Enter the following accounts and amounts as credits:
Number
1750
1850
1950
2020
2030
4010
4020
4060
4065
4070
4075
Account Name
Accum. Dep., Computers
Accum. Dep., Furniture
Accum. Dep., Software
Notes Payable
Interest Payable
Web Page Design Fees
Internet Consulting Fees
Sale of Computers
Sale of Scanners
Sale of HTML Software
Sale of Desktop Pub. Software
Balance
$
75.00
50.00
100.00
2,500.00
25.00
9,750.00
6,600.00
20,000.00
4,800.00
150.00
1,000.00
b. Make a journal entry to reverse the Uncategorized Income account.
c. Make a journal entry to reverse the Uncategorized Expenses account.
14. Display and print the following reports for August 1, 2019:
a. Journal
b. Trial Balance
c. Profit & Loss Standard (06/01/2019–08/01/2019)
d. Balance Sheet Standard
e. Item Listing
f. Customer Contact List
g. Vendor Contact List
15. Make a backup copy of the new company file. Use the name OWS6
[Your Name] Olivia’s Web Solutions. Restore the backup copy and
change the company name to OWS6 [Your Name] Olivia’s Web
Solutions.
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265
C HAP T ER
6
New Company Setup—
Detailed Start
EasyStep Interview and
QuickBooks Desktop Setup
Objectives
• Create a new company file and establish preferences using the QuickBooks Detailed
Start method and EasyStep Interview window
• Set up the Customer Center, Vendor Center, and Item List using the QuickBooks
Desktop Setup window
• Review information recorded in the EasyStep Interview and QuickBooks Desktop Setup
windows
• Customize the Chart of Accounts List, System Default Accounts, and Terms List
• Update the Chart of Accounts and Item Lists
• Update the Customer and Vendor Centers
• Adjust the new company file to follow the accrual basis of accounting
• Display and print accounting reports and financial statements
189
In this chapter, you will learn how to create a new company file in
QuickBooks. As you know, the four levels of operation for QuickBooks
are New Company Setup, Lists/Centers, Activities, and Reports. In
Chapters 2 through 5, you learned and used the Lists/Centers, Activities,
and Reports levels for both a service company and a merchandise
company. In those chapters, you opened an existing company file,
updated Lists/Centers, recorded Activities in the various windows, and
viewed and printed Reports. You will now learn the first level of operation
for QuickBooks: New Company Setup.
QuickBooks provides two methods of New Company Setup: Detailed
Start and Express Start. Chapter 6 presents the Detailed Start method, and
Chapter 7 presents the Express Start method.
QuickBooks provides two windows to help with New Company Setup.
One window is the EasyStep Interview window. When you choose the
Detailed Start method, you are moved to the EasyStep Interview window,
which is designed to assist you in creating and setting up a new company
file. The EasyStep Interview window allows you to enter basic company
information and answer questions about your company. QuickBooks also
provides a QuickBooks Desktop Setup window. The QuickBooks Desktop
Setup window is first used to select the method of New Company Setup
(Detailed Start or Express Start). But then, the QuickBooks Desktop
Setup window further assists you in setting up your new company file. The
QuickBooks Desktop Setup window allows you to enter information on
customers, vendors, service items, and inventory part items. You do not
have to use the QuickBooks Desktop Setup window to enter information
after using the EasyStep Interview window, but the QuickBooks Desktop
Setup window will be used in this chapter. Using the EasyStep Interview
and QuickBooks Desktop Setup windows is only part of the process of
setting up a new company file. You then take the information set up in the
EasyStep Interview and QuickBooks Desktop Setup windows and customize and update it according to your company’s preferences. Finally, the
new company file is prepared for the accrual basis of accounting.
In this chapter, you will create and set up a new company file for our
sample company, Kristin Raina Interior Designs. It is assumed that Kristin
Raina Interior Designs was recording accounting activities using a manual
accounting system and now will convert the company accounting records
to QuickBooks.
QuickBooks versus Manual Accounting:
New Company Setup
In a manual accounting system, a company’s records are set up by creating
the Chart of Accounts and the general ledger. The Chart of Accounts is
the list of accounts (assets, liabilities, equity, revenues, and expenses) the
company intends to use. The general ledger is the book of all accounts
with the beginning balance for each account. If desired, subsidiary ledgers
are also created and beginning balances recorded. The subsidiary ledgers
typically include accounts receivable and accounts payable. If the perpetual inventory system is used, an inventory subsidiary ledger is also created.
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In QuickBooks, a company’s records are set up by creating a new
company file and establishing the Chart of Accounts List. As the opening
balances are entered, QuickBooks simultaneously sets up the general
ledger. The Customer Center and Vendor Center are set up; these centers
are equivalent to the accounts receivable and accounts payable subsidiary ledgers. The Item List is set up, which is equivalent to an inventory
subsidiary ledger. However, in QuickBooks, the Item List includes service
revenue items and sales tax items in addition to inventory items.
In this chapter, you will first use the EasyStep Interview window to
create a new company file, establish some preferences, and begin the
Item List and Chart of Accounts List. After creating the company file,
you leave the EasyStep Interview and then use the QuickBooks Desktop
Setup window to enter information on customers, vendors, and inventory part items. This sets up the Customer Center and Vendor Center and
adds to the Item List, which begins in EasyStep Interview. You will next
customize and update the company file. Finally, you need to make three
journal entries to complete the New Company Setup. One journal entry
records the opening balance in the accounts that were not included in the
EasyStep Interview or QuickBooks Desktop Setup windows; the other two
journal entries reverse accounts QuickBooks sets up during New Company
Setup that are not used in the accrual basis of accounting.
Chapter Problem
In this chapter, there is no prepared company file to open from the
company files. Instead, you will create and set up the company file for
Kristin Raina Interior Designs.
Assume that Kristin Raina began operating her interior design business
in January 2019 and has maintained accounting records with a manual
accounting system for January through March. Effective April 1, 2019,
Kristin Raina will convert the company’s accounting records to QuickBooks
using the Detailed Start method.
Before creating a new company file, gather all the information you
need, including company information (name, address, tax identification numbers); general ledger account names and account numbers;
customer information (name, address, telephone numbers, and so on)
and outstanding balances; vendor information (name, address, telephone
numbers, and so on) and outstanding balances; service items and billing
amounts; inventory part items (name, cost, selling price, and quantity on
hand); and sales tax information. Enter this information into QuickBooks
as you create and set up the new company file.
To begin New Company Setup:
1. Open QuickBooks.
2. At the No Company Open window, click Create a new company or click
File and then click New Company. The QuickBooks Desktop Setup
window appears with the Let’s get your business set up quickly! page
displayed. This is the page where you select the method of New
Company Setup. See Figure 6–A.
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New Company Setup—Detailed Start
191
FIGURE 6–A
QuickBooks Desktop
Setup Window—Let’s
Get Your Business Set
Up Quickly! Page
Detailed
Start button
Detailed Start and EasyStep Interview Window
New Company Setup
See Appendix F for a
summary of using the
Detailed Start method for
New Company Setup.
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In New Company Setup, the first level of operation in QuickBooks, you
will enter the information needed to create and set up a company file for
Kristin Raina Interior Designs using the Detailed Start method, which uses
the EasyStep Interview window.
The EasyStep Interview window is designed to guide you through the
steps needed to create and set up a new company file. (EasyStep Interview
is not the only way to create a company file in QuickBooks; an alternative
method is covered in Chapter 7.)
With EasyStep Interview, you proceed through a series of pages by clicking the Next button. On each page, you enter basic company information
and answer questions that QuickBooks uses to create the new company
file. As you answer the questions, QuickBooks establishes some preferences for your company. Company preferences enable or disable features
available in QuickBooks. When a feature is enabled, you will see that
choice listed on the drop-down menu and on the Home page. If a feature
is disabled, you will not see that choice on the drop-down menu or Home
page.
The company information can later be edited by clicking Company
and then My Company. The preferences can be edited by clicking Edit and
then Preferences.
At any time, you can click the Leave button to leave the EasyStep
Interview window. However, you are advised not to leave before saving the
company file. If you leave the window before saving the company file, all
the information will be lost.
If you leave the EasyStep Interview after saving the company file,
QuickBooks goes to the No Company Open window. The next time you
open the company file, you return to the EasyStep Interview window at the
same page you left.
New Company Setup—Detailed Start
If you type the letter M
in the State field, the
first state that begins
with M (MA) is displayed. To choose MN,
keep pressing the M key.
You will scroll through
all the states beginning
with M. An alternative is
to click the drop-down
arrow to display the list
of states.
To create a new company file using the Detailed Start method and the
EasyStep Interview window:
1. At the QuickBooks Desktop Setup window, at the Let’s get your
business set up quickly! page, click the Detailed Start button. The
EasyStep Interview window appears with the Enter your company
information page displayed.
2. At the Enter your company information page, at the Company name
field, type the company name CH6 [Your Name] Kristin Raina Interior
Designs.
When you tab to the Legal name field, the same name is automatically filled in. The legal name is the name that will be used on
tax forms. If the company name and legal name are not the same,
you can make any necessary changes. For our sample company, the
company name and legal name are the same.
3. At the Enter your company information page, type the following
information:
Tax ID:
Street address:
City:
State:
Zip:
Country:
Phone:
Fax:
E-mail address:
33-4777781
25 NE Johnson Street
Minneapolis
MN
53402
U.S.
651-555-1000
651-555-2000
KRID@ppi-edu.net
See Figure 6–B.
FIGURE 6–B
EasyStep Interview
Window—Enter Your
Company Information
Page
If you want to activate
the Next button using the
keyboard, press Alt + N.
4. If the information is correct, click Next. You are moved to the Select
your industry page.
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New Company Setup—Detailed Start
193
5. At the Select your industry page, scroll down the INDUSTRY list and
click General Product-based Business. See Figure 6–C.
FIGURE 6–C
EasyStep Interview
Window—Select Your
Industry Page
When you are in the
EasyStep Interview window, all the choices at
the main menu bar are
inactive.
If you do not enter a
password here and
leave the company file,
the next time you open
the new company file,
you will need to enter
a password, a challenge question, and an
answer before you will
be able to open the new
company file. Refer to
Chapter 7, “Company
File Password” section,
page 272, if you leave
the company file without
creating a password.
QuickBooks provides several sample-type industries to assist in
creating your new company file. Based on the industry you select,
QuickBooks inquires if you wish to use particular features or recommends that you use certain features. In addition, QuickBooks creates
the Chart of Accounts List, which includes some accounts typical for
the industry you chose. Later in the EasyStep Interview, you have the
opportunity to review and edit the suggested revenue and expense
accounts to be included in the Chart of Accounts List.
6. If the information is correct, click Next.
7. At the How is your company organized? page, click Sole Proprietorship
and then click Next.
8. At the Select the first month of your fiscal year page, at the My fiscal
year starts in field, click January and then click Next.
9. At the Set up your administrator password page, in the Administrator
text box and the Retype text box, type Student1 (or a password of your
choosing).
In business, it is advisable to protect access to financial records
with a password. QuickBooks has the ability to password-protect not
only the entire company file but also specific sections of the company
file. This allows a company to limit employees’ access to their respective areas of responsibility. For instance, the accounts receivable bookkeeper may be permitted to access only the information pertaining to
the customers’ accounts; the payroll bookkeeper may be permitted to
access only the payroll information; and so on.
10. Click Next.
See Appendix J for information on how to set up
users.
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In the File name text
box, use the arrow keys
to scroll through the
entire name.
11. At the Create your company file page, click Next. The Filename for
New Company dialog box appears.
12. Choose your subfolder in the Save in text box, and accept the file
name CH6 [Your Name] Kristin Raina Interior Designs.QBW.
13. If the information is correct, click Save. The new company file has
been created and saved.
At this point, the company file has been saved. It is now safe to use the
Leave button at any time from this point on. If you do leave the EasyStep
Interview at this point, QuickBooks closes the company file. The next
time you open QuickBooks and the company file, you are returned to
the EasyStep Interview window and the last page you opened.
14. At the Customizing QuickBooks for your business page, read the page
and then click Next.
15. At the What do you sell? page, click Both services and products and then
click Next.
16. At the Do you charge sales tax? page, click Yes and then click Next.
17. At the Do you want to create estimates in QuickBooks? page, click No
and then click Next.
18. At the Tracking customer orders in QuickBooks page, click No and
then click Next.
19. At the Using statements in QuickBooks page, click No and then click Next.
20. At the Using invoices in QuickBooks page, click Yes and then click Next.
21. At the Using progress invoicing page, click No and then click Next.
22. At the Managing bills you owe page, click Yes and then click Next.
23. At the Tracking inventory in QuickBooks page, click Yes and then click
Next.
24. At the Tracking time in QuickBooks page, click No and then click Next.
25. At the Do you have employees? page, click No and then click Next.
26. At the Using accounts in QuickBooks page, read the page and then
click Next.
27. At the Select a date to start tracking your finances page, click Use
today’s date or the first day of the quarter or month and then choose
04/01/2019.
This identifies the date the company began to use QuickBooks. For
our sample company, Kristin Raina Interior Designs, the fiscal start
date is January 1, 2019. The QuickBooks start date is April 1, 2019.
You will enter the balances as of April 1, which represent January 1
to March 31 activities, in the new company file as part of the New
Company Setup. See Figure 6–D.
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195
FIGURE 6–D
EasyStep Interview
Window—Select a Date
to Start Tracking Your
Finances Page
28. If the information is correct, click Next.
The Review income and expense accounts page appears. See
Figure 6–E.
FIGURE 6–E
EasyStep Interview
Window—Review
Income and Expense
Accounts Page
This page lists common Chart of Accounts income and expense
accounts names. Each account with a check mark to the left of the
account name is an account that QuickBooks recommends for your
company based on the industry type you selected earlier in the
EasyStep Interview window. You can remove the check mark for any
account your company does not use, and you can insert a check mark
for any account your company does use. At any time, you can click
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New Company Setup—Detailed Start
the Restore Recommendations button to replace the original check
marks inserted by QuickBooks.
Any account checked is created in the Chart of Accounts List by
QuickBooks. After you finish the EasyStep Interview window, you can
add, delete, and modify any account on the Chart of Accounts List
using the procedures presented in Chapter 4.
29. Remove the check mark from each of the following accounts by clicking on the check mark, since Kristin Raina Interior Designs does not
use them:
Shipping and Delivery Income
Freight and Shipping Costs
Merchant Account Fees
Product Samples Expense
Purchases – Resale Items
Automobile Expense
Bank Service Charges
Computer and Internet Expenses
Dues and Subscriptions
Meals and Entertainment
Postage and Delivery
Professional Fees
Repairs and Maintenance
Travel Expense
30. Insert a check mark to the left of each of the following accounts, as
these are accounts Kristin Raina Interior Designs uses:
Sales Discounts
Janitorial Expense
31. Click Next. The EasyStep Interview is complete. The Congratulations!
page appears.
32. Click Go to Setup.
After completing the EasyStep Interview window, you are returned
to the QuickBooks Desktop Setup window with the Get all the details
into QuickBooks Desktop page displayed. See Figure 6–F.
FIGURE 6–F
QuickBooks Desktop
Setup Window—Get
All the Details into
QuickBooks Desktop
Page
The Add button may
change to Add More.
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197
New Company Setup
See Appendix F for a
summary of using the
QuickBooks Desktop
Setup window to enter
data in New Company
Setup.
If you leave the QuickBooks Desktop Setup
window and the New
Feature Tour window
appears, click the X to
close it. You can remove
the Left Icon bar by
clicking View and then
clicking Hide Icon Bar.
You can close the Home
page by clicking the X.
QuickBooks Desktop Setup Window
You can use the QuickBooks Desktop Setup window—Get all the details
into QuickBooks Desktop page to enter your customers (Customer
Center), vendors (Vendor Center), service items and inventory items
(Item List), and banking (Cash – Operating) information, or you can go
directly into QuickBooks (Start Working).
For Kristin Raina Interior Designs, you will use the QuickBooks Desktop
Setup window to continue setting up the new company file and to create
the Customer Center, create the Vendor Center, and add to the Item List
that begins in EasyStep Interview.
If you wish to leave the QuickBooks Desktop Setup window, click the
X. You will enter QuickBooks in the new company file. To return to the
QuickBooks Desktop Setup window, click Company at the main menu bar
and then click Bulk Enter Business Details.
Setting Up the Customer Center
The Customer Center records the information for all the customers with
whom the company does business. Kristin Raina has 10 customers. Two of
the customers have outstanding balances. When you record the outstanding balance, QuickBooks creates the accounts receivable for that customer.
To add customers to the Customer Center using the QuickBooks Desktop
Setup window:
1. At the QuickBooks Desktop Setup window, at the Get all the details
into QuickBooks Desktop page, in the Add the people you do business with section, click the Add button.
2. At the next Add the people you do business with page, click the Paste
from Excel or enter manually button and then click Continue.
3. At the next Add the people you do business with page, in the Customer
column, click Select all and all the circles are filled in the Customer
column.
4. At the Name field in the first row, type Alomar Company. Press the
Tab key to move to the next field.
5. Enter the following information in the appropriate columns:
Company Name:
First Name:
Last Name:
Phone:
Address:
City, State, Zip:
Contact Name:
See Figure 6–G.
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New Company Setup—Detailed Start
Alomar Company
Oliver
Alomar
612-555-5757
1001 Oak Lake Ave.
Minneapolis, MN 55401
Oliver Alomar
FIGURE 6–G
Add the People You Do
Business With Page—
Customers—Partially
Completed
Select all
6. Add the remaining customers using the information in Table 6–1.
TABLE 6–1
Customers
If you have information
in an Excel spreadsheet,
you can copy an entire
column and paste it into
the Add the people you
do business with page.
If you have difficulty
pasting, press CTRL + V
to paste.
Customer/
Company Name
Name/Contact
Phone
Address/
City, State, Zip
Barrera Bagel
Barn
Belinda
Barrera
612-555-1233
148 46th Ave. N
Plymouth, MN 53406
Berger Bakery
Company
Barry Berger
612-555-2240
18 N. Grand Ave.
Minneapolis, MN 55403
Cook Caterers
Stephen Cook
612-555-7896
275 Oak Lake Ave.
Minneapolis, MN 55401
Franco Films
Co.
Fred Franco
612-555-4566
100 Pleasant Ave. S.
Minneapolis, MN 55409
Guthrie, Jennie
Jennie Guthrie
651-555-1515
165 Terrace Ct.
St. Paul, MN 55101
Hamilton Hotels
Hilda Hamilton
651-555-1050
1000 York Ave.
St. Paul, MN 55101
Jones, Beverly
Beverly Jones
612-555-7778
333 York Circle
Bloomington, MN 54603
Omari, Maria
Maria Omari
612-555-9999
210 NE Lowry Ave.
Minneapolis, MN 54204
Plaza Pizza
Palace
Mikey Plaza
612-555-9000
360 Border Ave. N
Minneapolis, MN 46877
After entering the information in Table 6–1, your screen should
look like Figure 6–H.
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199
FIGURE 6–H
Add the People You Do
Business With Page—
Customers—Completed
7. If the information is correct, click Continue. At the next Add the
people you do business with page, it should indicate that 10 contacts
are ready to be added. If that is incorrect, you will have an
opportunity to make corrections later. See Figure 6–I.
FIGURE 6–I
Add the People You Do
Business With Page—
Enter Opening Balances
Link
Enter opening
balances link
Exercise care in clicking
the Enter opening balances link. If you do not
click the Enter opening
balances link here, then
you will subsequently
have to re-enter the customers with balances.
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8. Click the Enter opening balances link. At the Enter opening balances for
your customers and vendors page, enter the balances for the following customers and change all the dates to 04/01/2019:
Berger Bakery Company
Franco Films Co.
See Figure 6–J.
New Company Setup—Detailed Start
$600
940
FIGURE 6–J
Enter Opening Balances
for Your Customers
and Vendors Page—
Customers—Completed
If a System Runtime error
occurs after entering
the opening balances
for customers, click OK
at the error message.
You are returned to the
Get all the details into
QuickBooks Desktop
page. Following the
steps on pages 191–201,
re-enter the names for
only two customers:
Berger Bakery Company
and Franco Films Co.
Enter their opening
balances of $600 and
$940, respectively, for
April 1, 2019. It may
take a few tries. If
you continue to have
difficulty with this step,
refer to your instructor.
9. If the information is correct, click Continue. You are returned to the
Add the people you do business with page. Click Continue.
10. You are returned to the QuickBooks Desktop Setup window—Get all
the details into QuickBooks page.
ACCOUNTING CONCEPT
1200
Accounts Receivable
Dr
49900
Uncategorized Income
Cr
Dr
Cr
600
600
940
940
Bal 1,540
Bal 1,540
Setting Up the Vendor Center
The Vendor Center records the information for all the vendors with whom
the company does business. Kristin Raina has 17 vendors. Seven of the
vendors have outstanding balances. When you record the outstanding
balance, QuickBooks creates the accounts payable for that vendor.
To add vendors to the Vendor Center using the QuickBooks Desktop Setup
window:
1. At the QuickBooks Desktop Setup window, at the Get all the details
into QuickBooks Desktop page, in the Add the people you do business with section, click the Add More button.
2. At the Add the people you do business with page, click the Paste from
Excel or enter manually button and then click Continue.
3. At the next Add the people you do business with page, in the Vendor
column, click Select all and all the circles are filled in the Vendor column
on the displayed page. You may need to check the Vendor column
again if you add more vendors than fit on this first page.
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201
4. At the Name field in the first row, type Ace Glass Works. Press the Tab
key to move to the next field.
5. Enter the following information in the appropriate columns:
Company Name:
Ace Glass Works
First Name:
Archie
Last Name:
Ace
Phone:
612-555-9812
Address:
25 SE Como Ave.
City, State, Zip: Minneapolis, MN 53602
Contact:
Archie Ace
See Figure 6–K.
FIGURE 6–K
Add the People You Do
Business With Page—
Vendors—Partially
Completed
Select all
6. Add the remaining vendors using the information in Table 6–2.
TABLE 6–2
Vendors
Vendor/
Company Name
Name/Contact
Phone
Address/
City, State, Zip
Bell Carpet Design
Bill Bell
651-555-8823
55 North Main Ave.
St. Paul, MN 54603
Cuza and Carl
Associates
Carrie Cuza
651-555-8855
23 W. University Ave.
St. Paul, MN 54603
Darren Tapestry
Donna
Darren
612-555-2221
10 W. Larpenteur Ave.
Minneapolis, MN 52604
Galeway
Computers
Roger Rivera
617-555-4747
33 Route 10
Springfield, MA 24105
Grayson Graphics
Gregg
Grayson
612-555-0002
56 Amity Way
Bloomington, MN 53608
Jeter Janitorial
Services
Jason Jeter
612-555-4444
233 Lilac Rd.
Minneapolis, MN 54302
Kristin Raina
Kristin Raina
Lumiare Lighting
Company
Larry Lyght
612-555-4790
123 Glenwood Ave.
Minneapolis, MN 53609
…continues
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TABLE 6–2
Vendors…continued
Vendor/
Company Name
Name/Contact
Phone
Address/
City, State, Zip
Mike Mills
805-555-4545
805-555-4546
3566 Broadway
Chicago, IL 58303
Minneapolis
Electric & Gas Co.
Jack Watts
651-555-4949
651-555-4950
150 Douglas Ave.
St. Paul, MN 55303
Nordic Realty
Melanie
Marx
612-555-3232
612-555-3233
23 N. 12th St.
Minneapolis, MN 53604
TwinCityTelCo
Terry
Ameche
651-555-6667
651-555-6668
3223 River Dr.
St. Paul, MN 53908
Weaver Fabrics
Jon Weaver
612-555-8777
612-555-8778
355 W. 70th St.
Minneapolis, MN 53604
Williams Office
Supply Company
Bernard
Williams
612-555-2240
612-555-2241
15 Grand Ave. S
Minneapolis, MN 55404
[Your Name]
Accounting Service
[Your Name]
612-555-2222
612-555-2223
One Main Plaza
St. Paul, MN 53602
Midwest Mutual
Insurance Co.
Minn. Dept.
of Revenue
Note: In the event that you do not have a person’s name but instead have a department as a contact, you can still enter the information on the Address Info tab in
the FULL NAME field. For example, if the contact is Customer Service, you can
enter Customer in the First Name field and Service in the Last Name field.
After entering the information in Table 6–2, your screen should
look like Figure 6–L.
FIGURE 6–L
Add the People You Do
Business With Page—
Vendors—Completed
Confirm that this number
is 17. Scroll down the
list of vendors and make
sure the Vendor option
is selected in each line.
7. Scroll down the list of vendors and make sure the Vendor option is
selected in each line. If the information is correct, click Continue. At
the next Add the people you do business with page, it should indicate
that 17 contacts are ready to be added. If that is incorrect, you will
have an opportunity to make corrections later.
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203
8. Click the Enter opening balances link. At the Enter opening balances
for customers and vendors page, enter the balances for the following
vendors and change all of the dates to 04/01/2019:
Exercise care in clicking
the Enter opening balances link. If you do not
click the Enter opening
balances link here, you
will subsequently have
to re-enter the vendors
with balances.
Ace Glass Works
Bell Carpet Design
Cuza and Carl Associates
Galeway Computers
Midwest Mutual Insurance Co.
Minneapolis Electric & Gas Co.
Williams Office Supply Company
$1,500
2,000
400
2,600
2,400
450
400
See Figure 6–M.
FIGURE 6–M
Enter Opening Balances
for Your Customers
and Vendors Page—
Vendors—Completed
9. If the information is correct, click Continue. You are returned to the
Add the people you do business with page. Click Continue.
10. You are returned to the QuickBooks Desktop Setup window—Get all
the details into QuickBooks Desktop page.
ACCOUNTING CONCEPT
69800 Uncategorized Expenses
Dr
Cr
1,500
2,000
400
2,600
2,400
450
400
Bal 9,750
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New Company Setup—Detailed Start
2010 Accounts Payable
Dr
Cr
1,500
2,000
400
2,600
2,400
450
400
Bal 9,750
Adding to the Item List
The Item List stores information about the service items, the inventory
part items, and the sales tax. As transactions are recorded in the Activities
windows, QuickBooks uses information in the Item List to record the transaction in the correct accounts. Kristin Raina has two service items and four
inventory part items. When you record the quantity on hand for an inventory part, QuickBooks creates the inventory asset for that inventory part.
To add service items to the Item List using the QuickBooks Desktop Setup
window:
1. At the QuickBooks Desktop Setup window, at the Get all the details
into QuickBooks Desktop page, in the Add the products and services
you sell section, click the Add button.
2. At the Add the products and services you sell page, click the Service
option and then click Continue.
3. At the Name field in the first row, type Design Services.
4. At the Description field, type Design Services.
5. At the Price field, type 60.
6. Enter the following information for the next service item:
Name:
Description:
Price:
Decorating Services
Decorating Services
50
See Figure 6–N.
FIGURE 6–N
Add the Products
and Services You Sell
Page—Services Items—
Completed
7. If the information is correct, click Continue. You are returned to the
Add the products and services you sell page, which should indicate
2 Items are ready to be added. If that is incorrect, you will have an
opportunity to make corrections later.
8. Click Continue. You are returned to the QuickBooks Desktop Setup
window—Get all the details into QuickBooks Desktop page.
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205
To add inventory part items to the Item List using the QuickBooks
Desktop Setup window:
1. At the QuickBooks Desktop Setup window, at the Get all the details
into QuickBooks Desktop page, in the Add the products and services
you sell section, click the Add More button.
2. At the Add the products and services you sell page, click the
Inventory part button and then click Continue.
3. At the Name field in the first row, type Carpets.
4. At the Description field, type Carpets.
5. At the Price field, type 400.
6. At the Cost field, type 200.
7. At the On Hand field, type 4. When you move to the next field, the
amount in the Total Value field is computed automatically based on
cost multiplied by quantity.
8. At the As of date field, choose 04/01/2019.
9. Add the remaining inventory part items using the information in
Table 6–3.
TABLE 6–3
Inventory Part Items
Name and Description
Price
Cost
On Hand
Total Value
$250
$125
8
$1,000
Lamps
200
100
10
1,000
Mirrors
300
150
6
900
Draperies
After entering the information in Table 6–3, your screen should
look like Figure 6–O.
FIGURE 6–O
Add the Products
and Services You Sell
Page—Inventory Parts—
Completed
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10. If the information is correct, click Continue. You are returned to the
Add the products and services you sell page, which should indicate
4 Items are ready to be added. If that is incorrect, you will have an
opportunity to make corrections later.
11. Click Continue. You are returned to the QuickBooks Desktop Setup
window—Get all the details into QuickBooks Desktop page.
ACCOUNTING CONCEPT
Inventory Asset
Dr
Recall that you can
change the default so
the Home page does not
appear when opening a
company file. Click Edit
at the main menu bar
and then click Preferences. In the left panel,
click the Desktop View
icon. Choose the My
Preferences tab. Remove
the check mark to the
left of Show Home
page when opening a
company file and then
click OK.
Opening Balance Equity
Cr
Dr
Cr
800
800
1,000
1,000
1,000
1,000
900
900
12. Exit the QuickBooks Desktop Setup window by clicking the X. You
enter QuickBooks in the new company file. If the New Feature Tour
window appears, click the X to close it. The QuickBooks Home page
and the Left Icon bar appear. Close the Home page by clicking the X,
and remove the Left Icon bar by clicking View and then clicking Hide
Icon Bar.
Reviewing EasyStep Interview and
QuickBooks Desktop Setup Information
The EasyStep Interview created the Chart of Accounts List and the Item
List. It also established preferences that enabled certain features in
QuickBooks. The activated preferences provide for choices to be listed on
the drop-down menus and the Home page, and they allow for accessing
activity windows. The QuickBooks Desktop Setup created the Customer
Center and Vendor Center and added the service items and inventory part
items to the Item List.
Chart of Accounts List
Reviewing the Chart of Accounts List allows you to see the accounts set up
as part of the EasyStep Interview and QuickBooks Desktop Setup.
To view the Chart of Accounts List:
1. At the main menu bar, click Lists and then click Chart of Accounts. The
Chart of Accounts List appears. See Figure 6–P.
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|
New Company Setup—Detailed Start
207
FIGURE 6–P
Chart of Accounts List
Window
system default accounts
created by QuickBooks
as part of the EasyStep
Interview and QuickBooks
Desktop Setup
You can correct any errors by adding, deleting, or editing an
account, as illustrated in Chapter 4.
Upon reviewing the Chart of Accounts List, observe that Kristin
Raina Interior Designs uses many more accounts that are not
included in the Chart of Accounts List created by the EasyStep
Interview and QuickBooks Desktop Setup or uses different account
names. Notice also that an account number was not assigned to each
account.
2. Close the Chart of Accounts List.
Item List
Reviewing the Item List allows you to see the items set up as part of the
EasyStep Interview and QuickBooks Desktop Setup.
To view the Item List:
1. At the main menu bar, click Lists and then click Item List. The Item
List appears. See Figure 6–Q.
FIGURE 6–Q
Item List Window
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At the QuickBooks Desktop Setup window, at the Add new products and services page, when you added service items and inventory
part items, these items were added to the Item List.
2. Double-click the Decorating Services service item. The Edit Item window
appears. See Figure 6–R.
FIGURE 6–R
Edit Item Window—
Service Item
When this service item was created, QuickBooks Desktop Setup
recorded Sales Income in the Account field. If you double-click Design
Services at the Item List window, you will see that QuickBooks Desktop
Setup also uses Sales Income as the account for Design Services.
3. Close the Edit Item window.
4. At the Item List window, double-click the Carpets inventory part item.
The Edit Item window appears. See Figure 6–S.
FIGURE 6–S
Edit Item Window—
Inventory Part Item
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New Company Setup—Detailed Start
209
When this inventory part item was created, QuickBooks Desktop
Setup recorded the COGS Account as Cost of Goods Sold, the Income
Account as Sales Income, and the Asset Account as Inventory Asset. If
you double-click each of the other inventory part items—Draperies,
Lamps, and Mirrors—you will see that QuickBooks Desktop Setup also
used Cost of Goods Sold, Sales Income, and Inventory Asset as the
accounts for these inventory part items.
5. Close the Edit Item window.
At the EasyStep Interview window, when you indicated Yes, you do
charge sales tax, the Item List was created with this sales tax item.
6. At the Item List window, double-click the Sales Tax item. The Edit
Item window appears. See Figure 6–T.
FIGURE 6–T
Edit Item Window—
Sales Tax Item
The EasyStep Interview created this item in the Item List, but it
does not include an appropriate name for the Kristin Raina Interior
Designs tax item, a tax rate, or a tax agency. These will be added later.
7. Close the Edit Item and Item List windows.
There are different ways to correct the errors in the Item List. If there
is an error in the type, name, cost, or price amounts in any of the service
items, inventory part items, or sales tax, you can correct it in the Edit Item
window. If there is an error in the quantity on hand, you can correct it
when viewing journal entries. If there is no quantity on hand for an inventory part item, delete the inventory part item and then go back to the
QuickBooks Desktop Setup—Add the products and services you sell page.
To return to the QuickBooks Desktop Setup, click Company and then
click Bulk Enter Business Details. At the Add the products and services you
sell section, click Add More and then re-enter the inventory part item with
the correct quantity on hand and the correct date, as previously illustrated.
Customer Center
Reviewing the Customer Center allows you to see the customers set up as
part of the QuickBooks Desktop Setup.
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To review the Customer Center:
1. At the main menu bar, click Customers and then click Customer Center.
The Customer Center appears. See Figure 6–U.
FIGURE 6–U
Customer Center Window
2. Double-click Berger Bakery Company. The Edit Customer window
appears. See Figure 6–V.
FIGURE 6–V
Edit Customer Window
QuickBooks created this customer based on the information
entered in QuickBooks Desktop Setup—Add the people you do business with pages. If you entered an opening balance, the balance is
displayed in the CURRENT BALANCE field. If you did not enter an
opening balance, the CURRENT BALANCE field indicates a zero. You
can correct all the information in the Edit Customer window except
the current balance.
3. Close the Edit Customer window and the Customer Center window.
There are different ways to correct the errors in the Customer Center.
If there is an error in the name, address, or phone number for any of
the customers, you can correct it in the Edit Customer window. If there is
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211
an error in the current balance, you can correct it when viewing journal
entries. If there is no current balance for a customer with an outstanding balance, delete the customer and then go back to the QuickBooks
Desktop Setup—Add people you do business with pages.
To return to the QuickBooks Desktop Setup, click Company and then
click Bulk Enter Business Details. At the Add the people you do business
with section, click Add More and then re-enter the customer. Continue to
the Enter opening balances page and enter the correct balance and the
correct date, as previously illustrated.
Vendor Center
Reviewing the Vendor Center allows you to see the vendors set up as part
of the QuickBooks Desktop Setup.
To review the Vendor Center:
1. At the main menu bar, click Vendors and then click Vendor Center. The
Vendor Center appears. See Figure 6–W.
FIGURE 6–W
Vendor Center Window
2. Double-click Ace Glass Works Company. The Edit Vendor window
appears. See Figure 6–X.
FIGURE 6–X
Edit Vendor Window
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QuickBooks created this vendor based on the information entered
in QuickBooks Desktop Setup—Add the people you do business with
pages. If you entered an opening balance, the balance is displayed
in the CURRENT BALANCE field. If you did not enter an opening
balance, the CURRENT BALANCE field indicates a zero. You can
correct all the information in the Edit Vendor window except the
current balance.
3. Close the Edit Vendor window and the Vendor Center window.
There are different ways to correct an error in the Vendor Center. If
there is an error in the company name, address, or phone number for any
of the vendors, you can correct it in the Edit Vendor window. If there is
an error in the current balance, you can correct it when viewing journal
entries. If there is no current balance for a vendor with an outstanding
balance, delete the vendor and then go back to the QuickBooks Desktop
Setup—Add people you do business with pages.
To return to the QuickBooks Desktop Setup, click Company and then
click Bulk Enter Business Details. At the Add the people you do business
with section, click Add More and then re-enter the vendor. Continue to
the Enter opening balances page and enter the correct balance and the
correct date, as previously illustrated.
Journal Report
Reviewing the Journal report allows you to see the journal entries created
as part of the QuickBooks Desktop Setup.
To view and print the Journal report:
1. At the main menu bar, click Reports and then click Accountant & Taxes.
2. At the Accountant & Taxes submenu, click Journal. If the Collapsing
and Expanding Transactions message appears, read the message,
insert a check mark in the box to the left of Do not display this message
in the future, and then click OK.
3. At the From and To fields, choose 04/01/2019 and 04/01/2019 and
then click the Refresh button at the top of the report.
4. Print the report. Your printout should look like Figure 6–Y.
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213
FIGURE 6–Y
Journal Report
There should be 13 journal entries. If all the journal entries do not appear
in the Journal report,
change the From date to
01/01/2019. The date on
each journal entry should
be 04/01/2019. If the
date or the amount on a
journal entry is incorrect,
double-click the journal
entry. At the window that
displays, change the date
to 04/01/2019, correct
the amount if necessary,
and then click the Save &
Close button. Click Yes at
the warning. Then in the
Journal report, change
the From date back to
04/01/2019, and all 13
journal entries should be
there.
If the Future Transactions
message appears, click
Yes. To change this preference, click Edit at the
main menu bar and then
click Preferences. In the
left panel of the Preferences window, click the
Accounting icon. Choose
the Company Preferences tab. Remove the
check marks in the DATE
WARNINGS field and then
click OK.
If the Report needs to
be refreshed message
appears, insert a check
mark in the box to the left
of Do not ask again (apply
to all reports and graphs)
and then click Yes.
QuickBooks created the
Opening Balance Equity,
Owners Draw, and Owners Equity accounts.
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As you added customers, vendors, and inventory part items at the
appropriate pages in QuickBooks Desktop Setup, behind the scenes,
QuickBooks recorded the information in general journal format and
updated the appropriate balances.
In the Journal report, QuickBooks recorded 13 journal entries
based on information recorded in the QuickBooks Desktop Setup.
The journal entries can be categorized as follows:
• The two journal entries labeled as Invoice were created when
customers with balances were recorded at the Add people
you do business with pages. QuickBooks debits the Accounts
Receivable with the customers’ outstanding balances and credits
an account called Uncategorized Income.
• The seven journal entries labeled as Bill were created when
vendors with outstanding balances were recorded at the Add
people you do business with pages. QuickBooks credits the
Accounts Payable with the vendors’ outstanding balances and
debits an account called Uncategorized Expenses.
• The four journal entries labeled as Inventory Adjust were created
when the inventory part items with balances were recorded at
the Add new products and services page. QuickBooks credits
the Opening Balance Equity account and debits the Inventory
Asset account with the total value for each inventory part item.
5. Close the Journal report. If you receive the Memorize Report message,
insert a check mark to the left of Do not display this message in the future
and then click No.
New Company Setup—Detailed Start
If you determine there is an error in the Journal report, you can drill
down to the original source, as shown in prior chapters. The original
source you drill down to is based on the transaction type. The transaction
type is the same as shown in prior chapters.
For a transaction type of Invoice, if you double-click that transaction,
you are drilled down to the Create Invoices window. You can make corrections to a customer’s opening balance or date in this window.
For a transaction type of Bill, if you double-click that transaction, you
are drilled down to the Enter Bills window. You can make corrections to a
vendor’s opening balance or date in this window.
For a transaction type of Inventory Adjust, if you double-click that
transaction, you are drilled down to the Adjust Quantity/Value on Hand
window. You can make corrections to an inventory part quantity on hand
or date in this window. The value of the inventory part item is automatically computed by QuickBooks as the quantity on hand multiplied by the
cost for the inventory part. If you change the quantity on hand in the
Adjust Quantity/Value on Hand window but the value does not change to
the correct amount, go to the Item List, edit the inventory part item, and
make sure the cost is the correct amount.
Trial Balance
Reviewing the Trial Balance allows you to see the balances in the accounts
you created as part of the QuickBooks Desktop Setup.
To view the Trial Balance:
1. At the main menu bar, click Reports and then click Accountant & Taxes.
2. At the Accountant & Taxes submenu, click Trial Balance.
3. At the From and To fields, choose 04/01/2019 and 04/01/2019 and
then click the Refresh button at the top of the report. See Figure 6–Z.
FIGURE 6–Z
Trial Balance April 1, 2019
(after the EasyStep
Interview and QuickBooks
Desktop Setup)
Note the following on the Trial Balance:
• The amount in the Accounts Receivable account equals the
amount in the Uncategorized Income account.
• The amount in the Inventory Asset account equals the amount
in the Opening Balance Equity account.
• The amount in the Accounts Payable account equals the
amount in the Uncategorized Expenses account.
4. Close the report.
CHAPTER 6
|
New Company Setup—Detailed Start
215
Figure 6–AA shows the Trial Balance from EX5 [Your Name] Kristin
Raina Interior Designs. It reflects the activities of January 1 to March 31,
2019, which were recorded in Chapters 2 through 5. Compare the Trial
Balance of April 1, 2019 (Figure 6–Z, page 215) with the Trial Balance of
March 31, 2019 (Figure 6–AA).
FIGURE 6–AA
Trial Balance
March 31, 2019
(from Chapter 5)
EX5 [Your Name] Kristin Raina Interior Designs
Trial Balance
As of March 31, 2019
Mar 31, 19
Debit
1010 · Cash – Operating
1200 · Accounts Receivable
1250 · Undeposited Funds
1260 · Inventory of Carpets
1265 · Inventory of Draperies
1270 · Inventory of Lamps
1275 · Inventory of Mirrors
1300 · Design Supplies
1305 · Office Supplies
1410 · Prepaid Advertising
1420 · Prepaid Insurance
1700 · Furniture:1725 · Furniture, Cost
1700 · Furniture:1750 · Accum. Dep., Furniture
1800 · Computers:1825 · Computers, Cost
1800 · Computers:1850 · Accum. Dep., Computers
2010 · Accounts Payable
2020 · Notes Payable
2030 · Interest Payable
2200 · Sales Tax Payable
3010 · Kristin Raina, Capital
3020 · Kristin Raina, Drawings
4010 · Design Services
4020 · Decorating Services
4060 · Sale of Carpets
4065 · Sale of Draperies
4070 · Sale of Lamps
4075 · Sale of Mirrors
4100 · Sales Discounts
5060 · Cost of Carpets Sold
5065 · Cost of Draperies Sold
5070 · Cost of Lamps Sold
5075 · Cost of Mirrors Sold
5900 · Inventory Adjustment
6020 · Accounting Expense
6050 · Advertising Expense
6175 · Deprec. Exp., Furniture
6185 · Deprec. Exp., Computers
6200 · Insurance Expense
6300 · Janitorial Expenses
6325 · Office Supplies Expense
6400 · Rent Expense
6450 · Telephone Expense
6500 · Utilities Expense
7000 · Interest Expense
TOTAL
50,855.38
1,540.00
0.00
800.00
1,000.00
1,000.00
900.00
200.00
250.00
500.00
2,200.00
12,000.00
3,600.00
0.00
400.00
84.62
1,200.00
500.00
600.00
450.00
150.00
300.00
100.00
100.00
60.00
200.00
125.00
150.00
800.00
275.00
450.00
50.00
80,840.00
Credit
100.00
60.00
9,750.00
7,000.00
50.00
50,000.00
4,980.00
3,400.00
2,400.00
1,000.00
1,200.00
900.00
80,840.00
Although the EasyStep Interview and QuickBooks Desktop Setup guide
you in creating a new company file, they do not enter all the information for a company. Upon completion of the next parts of New Company
Setup—customizing and updating the new company file­and preparing for
the accrual basis of accounting—the trial balance of April 1 in this chapter
will be the same as the trial balance of March 31 from Chapter 5.
Profit & Loss Standard (Income Statement) Report
Page 1
Reviewing the Profit & Loss Standard report allows you to see the balances
created as part of the QuickBooks Desktop Setup that flow into the Profit
& Loss Standard report.
216
CHAPTER 6
|
New Company Setup—Detailed Start
To view the Profit & Loss Standard report:
1. At the main menu bar, click Reports and then click Company &
Financial.
2. At the Company & Financial submenu, click Profit & Loss Standard.
3. At the From and To fields, choose 01/01/2019 and 04/01/2019
and then click the Refresh button at the top of the report.
See Figure 6–BB.
FIGURE 6–BB
Profit & Loss Standard
Report
The Profit & Loss Standard report indicates only Uncategorized
Income and Uncategorized Expenses. These amounts are offsetting
amounts of the Accounts Receivable and Accounts Payable accounts,
respectively. This is not a proper representation of the income and
expenses of this company.
4. Close the report.
Balance Sheet Standard Report
Reviewing the Balance Sheet Standard report allows you to see the balances created as part of the QuickBooks Desktop Setup that flow into the
Balance Sheet Standard report.
To display the Balance Sheet Standard report:
1. At the main menu bar, click Reports and then click Company &
Financial.
2. At the Company & Financial submenu, click Balance Sheet Standard.
3. At the As of field, choose 04/01/2019 and then click the Refresh
button at the top of the report. See Figure 6–CC.
CHAPTER 6
|
New Company Setup—Detailed Start
217
FIGURE 6–CC
Balance Sheet Standard
Report
Note the following on the balance sheet:
• The only assets recorded so far are Accounts Receivable and
Inventory Asset.
• The only liability recorded so far is Accounts Payable.
• The balance in the Opening Balance Equity account is the
amount in Inventory Asset.
• The net income is incorrect as seen in the Income Statement
(Profit and Loss report) because of incomplete information.
4. Close the report.
New Company Setup
Customizing the New Company File
When you use the EasyStep Interview and QuickBooks Desktop Setup
windows, only part of the New Company Setup is completed. The EasyStep
Interview window is used to create the new company file; enable or disable
some preferences; record a sales tax item, which begins the Item List; and
begin the setup of the Chart of Accounts List. When you enter information in the QuickBooks Desktop Setup window, you create the Customer
Center, create the Vendor Center, and update the Item List to include
service items and inventory part items. At the same time, the information
entered in the QuickBooks Desktop Setup window records opening balances for Accounts Receivable, Accounts Payable, and Inventory Asset.
The next part of the process is to continue with the information set
up in the EasyStep Interview and QuickBooks Desktop Setup windows to
customize the new company file according to your company’s preferences,
update the Lists/Centers as needed, and prepare the company file for the
accrual basis of accounting by recording three journal entries.
Customizing the Chart of Accounts List
You will customize the Chart of Accounts for Kristin Raina by enabling
the account numbers feature and then editing the account numbers and
names assigned by QuickBooks.
218
CHAPTER 6
|
New Company Setup—Detailed Start
Adding Account Numbers
By default, QuickBooks does not use account numbers. This can be seen
in the Chart of Accounts List and in the individual accounts.
To view an account in Edit mode:
1. At the main menu bar, click Lists and then click Chart of Accounts.
2. At the Chart of Accounts window, select the Accounts Receivable account.
3. Click the Account menu button.
4. At the Account button drop-down menu, click Edit Account. Notice
that there is no field in which to place an account number.
5. Close the Edit account and Chart of Accounts List windows.
To add account numbers to the Chart of Accounts List, you must activate the account numbers feature in the Preferences window.
To activate the account numbers feature:
1. At the main menu bar, click Edit and then click Preferences. The
Preferences window appears.
In the left panel of the window are 23 icons, which represent
the different categories of features. For each category, there is a
My Preferences tab and a Company Preferences tab. The Company
Preferences tab is used for most customizations when setting up a
new company file. The My Preferences tab records the preferences
for each user on his or her own personal computer. When using the
EasyStep Interview window, most preferences are established based on
the responses to the questions in the EasyStep Interview.
2. In the left panel of the Preferences window, click the Accounting icon.
3. Click the Company Preferences tab.
4. In the ACCOUNTS section, insert a check mark in the box to the left
of Use account numbers to turn on the account numbers feature. See
Figure 6–DD.
FIGURE 6–DD
Preferences Window—
Accounting—Company
Preferences Tab
Use account
numbers option
warning
options
If you receive warnings
about dates, remove
the check marks from
the DATE WARNINGS
options.
5. If the information is correct, click OK. The account Number field now
appears in the New Account and Edit Account windows in the Chart
of Accounts List.
CHAPTER 6
|
New Company Setup—Detailed Start
219
Editing Account Numbers and Names
When you activate the account numbers feature, QuickBooks assigns account
numbers to most accounts. You can change or delete these numbers.
To edit the account numbers and names:
1. At the main menu bar, click Lists and then click Chart of Accounts.
2. At the Chart of Accounts window, select the Furniture and Equipment
account.
3. Click the Account menu button.
4. At the Account button drop-down menu, click Edit Account. Notice
that a Number field has been added.
5. At the Number field, type 1700, and at the Account Name field, delete
the text and Equipment. See Figure 6–EE.
FIGURE 6–EE
Edit Account Window—
Furniture—Number
Added and Account
Name Edited
To edit an account in
the Chart of Accounts
List window, select
the account, click the
Account button, and
then click the Edit button. Do not double-click
the account.
220
CHAPTER 6
|
6. If the information is correct, click the Save & Close button.
7. Edit each of the accounts created by QuickBooks, changing the
account number and name as listed on the next page. If an edited
name is not listed, keep the name assigned by QuickBooks.
8. Close the Chart of Accounts List.
New Company Setup—Detailed Start
QuickBooks
Edited
Number Account Name
17000 Accumulated
Depreciation
As an alternative to
selecting an account
and then clicking the
Account button, you can
right-click an account
and then choose Edit
Account from the shortcut menu.
30800 Owners Draw
Sales Income
48300 Sales Discounts
60000 Advertising and
Promotion
62400 Depreciation Expense
63300 Insurance Expense
63400 Interest Expense
63500
64900
67100
68100
68600
80000
Janitorial Expense
Office Supplies
Rent Expense
Telephone Expense
Utilities
Ask My Accountant
Number Account Name
1750 Accum. Dep., Furniture
[Subaccount of 1700
Furniture]
3020 Kristin Raina, Drawings
4060 Sale of Carpets
4100
6050 Advertising Expense
6175
6200
7000
6300
6325
6400
6450
6500
6020
Deprec. Exp., Furniture
[Account Type: Other
Expense]
Office Supplies Expense
Utilities Expense
Accounting Expense
[Account Type: Expense]
Deleting an Account
As part of the EasyStep Interview and QuickBooks Desktop Setup,
QuickBooks created two sales accounts: Sales Income and 47900 Sales.
The Sales Income account was not assigned an account number by
QuickBooks but was the revenue account QuickBooks used in the Item
List whenever an income account was needed. This account now has the
number 4060 and the name has been changed to Sale of Carpets. Kristin
Raina does not need the 47900 Sales account and will delete it.
To delete an account:
1. At the main menu bar, click Lists and then click Chart of Accounts.
2. At the Chart of Accounts window, select the 47900 Sales account.
3. Click the Account menu button.
4. At the Account button drop-down menu, click Delete Account.
5. At the Delete Account warning, click OK. The account is now deleted
from the Chart of Accounts.
The customized Chart of Accounts List appears in Figure 6–FF.
CHAPTER 6
|
New Company Setup—Detailed Start
221
FIGURE 6–FF
Chart of Accounts List—
Customized with Account
Numbers and Names
6. Close the Chart of Accounts List window.
Customizing System Default Accounts
As you saw in prior chapters, QuickBooks establishes default accounts and
uses those accounts when recording transactions in the Activities windows.
QuickBooks looks for these accounts in the Chart of Accounts List; if it cannot
find an account, it creates one. Some system default accounts you have learned
so far are Accounts Receivable, Undeposited Funds, Accounts Payable, Sales
Tax Payable, Inventory Asset, and Cost of Goods Sold. Other system default
accounts include the equity accounts (capital and accumulated earnings).
When you created the company file using the EasyStep Interview and
QuickBooks Desktop Setup, QuickBooks created some of the system
default accounts (Accounts Receivable, Accounts Payable, Sales Tax
Payable, and the equity accounts) as part of the Chart of Accounts, as
shown in Figure 6–P on page 208. You will customize the system default
accounts that were created as part of the EasyStep Interview (Sales
Tax Payable and the equity accounts) and QuickBooks Desktop Setup
(Accounts Receivable and Accounts Payable) by editing the account
names and numbers to follow the company’s pattern for naming and
numbering accounts on the Chart of Accounts List. You will then learn
how to force QuickBooks to create additional system default accounts that
were not created as part of the EasyStep Interview or QuickBooks Desktop
Setup (Undeposited Funds, Inventory Asset, and Cost of Goods Sold).
After QuickBooks creates the additional system default accounts, you will
then customize these account names and numbers.
222
CHAPTER 6
|
New Company Setup—Detailed Start
Customizing System Default Accounts Created
in a New Company File
When you created the company file and indicated the company was
a sole proprietorship, QuickBooks automatically created three equity
accounts: Opening Balance Equity, Owners Draw, and Owners Equity.
When you activated the sales tax feature in the EasyStep Interview
window, QuickBooks created a Sales Tax Payable account. When you
added each customer in QuickBooks Desktop Setup, QuickBooks created
the Accounts Receivable account. When you added each vendor in
QuickBooks Desktop Setup, QuickBooks created the Accounts Payable
account. When you added each inventory part in QuickBooks Desktop
Setup, QuickBooks created the Inventory Asset and Cost of Goods Sold
accounts. The numbers and names for all these accounts can be edited.
The Opening Balance Equity account will be renamed as Kristin Raina,
Capital, and the Owners Draw account was already renamed Kristin Raina,
Drawings. QuickBooks uses the Opening Balance Equity account as an
offsetting account when certain opening balances are entered in the
accounts. The Owners Equity account is created to capture net income
at the end of the fiscal year. In Chapter 12, you will see how QuickBooks
uses the Owner’s Equity account in a company file. This account will be
renamed Accumulated …
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