Transactions Flashcards
When creating an Inventory item in Products and Services, why should you enter 0 for the Initial quantity on hand?
So QB won’t automatically create a balance in the Opening Balance account
When creating an Inventory item in Products and Services, where does Description entered show up?
The description on all of the sales forms given to all customers
When creating an Inventory item in Products and Services, where does Purchasing information entered show up?
On the POs (Purchase Orders) to all the vendors
When creating an Inventory item in Products and Services, what are Non-inventory items?
Either items expensed to the customer or items used to create products or services sold to the customer
What does Invoice/More/Void do and why is it better than Delete?
Voiding keeps a record of the invoice for future reference without affecting the financial statements. Deleting eliminates the record altogether.
What is a Credit Memo used for?
To issue credit to a customer, either as future credit or to credit back some of an outstanding bill (e.g. for dissatisfaction of a product or service)
What QBO option is used to credit an invoice on an account for some or all of a payment due?
Receive Payment
What report shows everything all customers owe you?
Accounts Receivable Aging Summary/Detail
What report shows which customers are most delayed in paying you?
Accounts Receivable Aging Summary/Detail which shows 1-30, 31-60, 61-90 and 91 AND OVER days late
When issuing a reimbursement to a customer, what is the critical last step to ensure it is recorded and the Amount to Credit is zeroed out?
Edit the transaction in the Transaction List for the customer where the credit was applied and check the box for the line item, then save and close
What are these examples of?
1) Items used to create good/service
2) Expenses billed directly to customer
Two examples of Non-Inventory Items
When an inventory item is returned, what account is affected?
Inventory Asset
What account is affected when you issue a refund for a customer’s overpayment?
Accounts Receivable
When do you move an inventory asset to the COGS account?
When the inventory is sold to the consumer
What is the difference between an Accounts Payable and an Expense?
Accounts Payable are paid in the future
Expenses are paid immediately
In an Expense/Bill, what is the difference between the Category detail and the Item detail?
Category detail is a Non-Inventory Item (i.e. a product or service bought from the vendor that is NOT resold)
Item detail is an Inventory Item (i.e. a product or service bought from the vendor that IS resold)
What is a COGS Account?
Cost Of Goods Sold Account
What is the difference between an expense and a bill?
An expense is paid for immediately and a bill is paid for later
When creating an inventory item in a bill, what section is used?
Item details
What’s the next step after creating a Bill with an inventory item for a customer?
You must create an Invoice for that bill in order for the customer to be charged.
When issuing a Vendor Credit, what account is credited in the Category details?
The same account that was debited when the item was purchased against which this credit is being issued
What is the difference between a Vendor credit and a Vendor refund?
A Vendor credit is a credit from the vendor against an outstanding bill (e.g. dissatisfaction with a product or service)
A Vendor refund is refund to the vendor for an item being returned
When issuing a Vendor refund, what option is used?
Bank Deposit
There is no “vendor refund” option
When issuing a Vendor refund using a Bank Deposit what is the ACCOUNT field used to identify?
The account being CREDITED (i.e. the account debited when the purchase was made)
Who issues the 1099?
If cash or check was used in the purchase, the company that paid. If credit card, the credit card company.
What is a 1099?
The IRS requires amounts over $600 paid for non-employment income in the taxable year to be reported. The 1099 is the form used.
When creating a bill received from a vendor, which two accounts are affected?
Credit Accounts Payable
Debit the expense account for the good or service that was purchased on credit
What’s the next step after creating a Vendor Credit?
The Bill and Vendor Credit were created, now they need to be linked. Select the Bill Payment (Check) line item and add the Vendor Credit.
What does QB call the Income Statement?
Profit and Loss
What account should a Vendor Credit be applied to for inventory not received?
Inventory Asset
When would you create a Bill for inventory from a Vendor in the accounting software?
When the company receives a bill from a vendor for an amount not yet paid.
What accounts on the Chart of Accounts are affected and how when you pay a bill for inventory from the checking account?
Credit the checking account and debit Accounts Payable
What is a billable expense?
An expense passed on to customers
When a bill is created for an inventory item being received from a vendor, what accounts are affected on the COA?
Credit Accounts Payable and debit Inventory Asset
What is a Vendor Credit?
A refund FROM a vendor
What accounts on the Chart of Accounts are affected when the company purchases inventory on their credit card?
Credit the credit card account and debit Inventory Asset
What is a Vendor Refund
A refund TO a vendor
When would you enter an Expense, as opposed to a Bill, for inventory from a vendor in the accounting software?
When the company has paid a vendor for items or services received
When paying for and receiving inventory from a vendor, what accounts are affected?
Debit Inventory Asset and credit whatever account was used to pay for it (i.e. checking, credit card, or cash accounts)
When inventory is sold on account to a customer, which two accounts are affected?
Debit Accounts Receivable and credit COGS
NOTE: Inventory cost is an asset until it is sold; after merchandise is sold, the cost becomes an expense, called Cost of Goods Sold (COGS)
When you do an inventory quantity adjustment, what accounts are affected?
Debit Cost Of Goods Sold, credit Inventory Asset
What is an Inventory Adjustment?
Inventory is adjusted when the quantity of items on location is not the same as the quantity of items recorded (due to damage or loss, for example)
What account is affected by the Initial quantity on hand?
The Opening Balance Equity account
Do POs (Purchase Orders) affect the Financial Statements?
No. The Financial Statements are only affected whey the inventory is billed, paid for and/or received.
What order of inventory sales does QB use?
FIFO - First In First Out. The first inventory items bought are the first sold. So if first 10 items were first bought for $10 and the next 10 were bought at $20 and 15 items were sold, the COGS for the first 10 would be $10 and the next five would be $20 for a total of $200.
What is included in the COGS of an inventory item?
The cost of the the item + shipping + tax
What five accounts are affected when you create an invoice for a customer that includes inventory products?
Accounts Receivable, Sales of Product Income, Inventory Asset, Sales Tax Liability, COGS
NOTE: Sales of Product Income is the profit after COGS is deducted
When you do an inventory quantity adjustment for inventory that was sold, what accounts are affected?
Debit COGS and credit Inventory Asset
How do you determine the allocation percentage for each type of inventory item when allocating product costs?
Divide the cost of each type of inventory item by the subtotal of the cost of inventory (before sales tax and shipping/handling).
How do you add an initial quantity on hand to an existing inventory item?
Journal entry to appropriate accounts
What are fixed assets?
A long-term tangible property or piece of equipment that a company owns and uses in its operations to generate income (e.g. land, buildings, equipment, etc.)
What is depreciation?
An accounting method for estimating the decrease in value of an asset over time
What is a depreciation schedule
It charts the loss in value of an asset over the period you’ve designated as its useful life
What is a Depreciation Expense?
It is the cost of an asset that has been depreciated for a single period, and shows how much of the asset’s value has been used up in that year
What is Accumulated Depreciation?
It is the total amount of depreciation expense that has been allocated for an asset since the asset was put into use
What is a contra account?
An account that offsets the balance in the respective asset account that it is paired with on the balance sheet. It will always be zero OR NEGATIVE.
What is the Net Book Value and what is its formula?
It is the current value of all Fixed Assets
Fixed Asset total - Accumulated Depreciation total
What is the one way it’s possible to create a Fixed Asset but should be avoided?
A Journal entry
What are the three recommended ways to create a Fixed Asset?
Bill, an Expense or a Check
What Account Type is used for revenue from sources outside normal business?
Other Income
How is bookkeeping depreciation dissimilar from depreciation for tax purposes?
Bookkeeping depreciation tracks the monthly decrease in value of the fixed asset. Tax depreciation is used for tax write-offs.
What does the Is Adjusting Journal Entry? check box indicate?
That you are logged into a business account as a ProAdvisor. Only accountants and bookkeepers see that checkbox.
What is an Adjusting Journal Entry used for?
It’s used to track value that will change over time that doesn’t involve moving real money (e.g. amortization or depreciation schedules)
What is used to create a Depreciation Expense?
NOTE: not how it’s created
An Adjusting Journal Entry. First create a new Journal entry, then select the Is Adjusting Journal Entry? checkbox.
How often must Depreciation Expenses be MANUALLY entered?
Adjusting Journal Entries must be entered every month. As of now, there’s no way in QB to set them up as a Recurring transaction.
When selling fixed assets for cash, what four accounts are affected on the COA?
Debit Cash
Debit Accumulated Depreciation
Credit the fixed asset account
Credit Gain on Sale OR debit Loss on Sale
NOTE: Accumulated Depreciation is debited when selling because it is a CONTRA asset account
What accounts are affected when you record the monthly depreciation expense?
Debit Depreciation Expense and credit Accumulated Depreciation
What three costs make up the value of a fixed asset?
1) Purchase price of the asset
2) Taxes paid on the asset purchase
3) Costs associated with making the asset useable (e.g. repairs and installation)
What is the amount of long-term debt due within the next 12 months?
The Current Portion of Long Term Debt (CPLTD)
What is long-term vs short-term or current debt?
Long-term is more than 12 months, short-term or current debt is 12 months or less
What is CPLTD?
The Current Portion of Long-Term Debt (the 12 month rolling balance of debt)
What are two reasons it is important to separate long-term from short-term (or current) debt in bookkeeping?
1) Because the CPLTD needs to be paid by highly liquid assets, such as cash
2) The CPLTD is an important tool for creditors and investors to use to identify if a company has the ability to pay off its short-term obligations as they come due
How is a loan (long-term liability) for a fixed asset entered into the books?
Create a journal entry debiting the fixed asset (e.g. Machinery & Equipment) and crediting Notes Payable
How is a loan payment (Notes Payable) entered into the books?
Create an Expense for both the principle payment as a Notes Payable and the interest payment as an Interest Expense for the monthly payment according to the amortization table
What three things must you record when accounting for new long-term debt?
1) A one-time Journal entry with two line items for the Fixed Asset
2) A monthly Expense entry with two line items for the monthly loan payment
3) A monthly Adjusting Journal entry with two line items for the CPLTD
How is the CPLTD for a new loan initially recorded?
(#3 in the answer for the question: What three things must you record when accounting for new long-term debt?)
By creating a monthly Adjusting Journal entry with two line items: one debiting the Less - Current Portion of Long-Term Debt for the initial CPLTD total, the other crediting the Current Portion of Long-Term Debt for the initial CPLTD total
NOTE: Current Portion of Long-Term Debt is a liability account. Less CPLTD is a contra liability account.
How is the loan for a Fixed Asset initially recorded?
(#1 of 3 in the answer for the question: What three things must you record when accounting for new long-term debt?)
By creating a one-time Journal entry with two line items for the Fixed Asset: one debiting the Fixed Asset (e.g. Machinery & Equipment) and the other crediting Notes Payable
