Chart of Accounts in QuickBooks Why the Chart of Accounts in QuickBooks is the Most Important List!

How to Back Up Your QuickBooks File Learn how to back up your QuickBooks file with Rhonda Rosand, CPA of New Business Directions, LLC.  

Tax time is probably not your favorite time of year, especially if you have to pay the government your hard-earned dollars. Here are five tips on how we can make it just a bit less painful.

1. Have patience.

Practicing patience will go a long way when you’re dealing with taxes. Keep in mind that for tax professionals, the months of January through April are as crowded and hectic as a shopping mall in December.

Be patient with yourself as well. You have the skills to manage your business and do well in your career, but maybe not for organizing paperwork or dealing with numbers. That’s where we can help.

2. The tax stack.

Set aside a permanent place on your desk to be the tax stack. When you receive something in the mail that is tax-related, place it in the tax stack. You’ll save valuable time later not having to look for documents you need.

Similarly, create a folder on your computer for tax items. Under Documents, create a folder called Taxes. Within that folder, create a folder for the tax year, such as 2017 for the year just ended. Move all of your tax-related computer documents into that file.

At your leisure, scan in or take a cell phone picture of the paper documents in the tax stack and place the digital file in the Tax folder. Now you’ll have everything in one place and you’ll be so organized that your tax accountant will be surprised!

3. Catch up.

If your books or records are behind for 2017, get them caught up now to beat the rush. If you wait until the first week of April, you’ll probably need to file an extension. Keep in mind that an extension only grants a paperwork extension; it doesn’t delay any tax payments that are due. If you wait too late, you’ll have the stress of waiting until the last minute, the stress of paying estimated taxes, and the stress of waiting until your return is finally filed.

4. Early bird.

Connect with us or your tax professional early to agree on what services will be offered and to get your documents turned in as soon as you receive them. Getting your things in early will mean less waiting time for preparation and filing. Wouldn’t it be great to be able to say that you’re done with your taxes in February? Your stress will be less, and your energy can be redirected to new projects.

5. Avoid a large tax payment.

The worst thing about tax time might just be writing a big check, possibly with penalties, to the government in April. Instead, plan ahead and spread out your payments for next year by adjusting your payroll withholding or making quarterly estimated tax payments. Spreading your tax payment throughout the year will have you writing a smaller check, if any, in April.

Try these five tips for tax time, and you’ll have more energy for other, more important things in your business and your life.

Year-end is just around the corner, and that means a couple of administrative tasks are necessary to take care of bookkeeping and tax chores. Here are a couple of tips to make year-end go smoother.

Cleaning up

Things will go a lot smoother if you reach out to your vendors and employees and get their help to update your records.

  • Send a notice to all employees, asking them to verify their address so they will get their W-2s without delay.
  • Make sure you have the right information for vendors that you need to produce a 1099 for. Before you pay your vendors more than $600 in one year, ask them for a W-9 so that you have a current address and taxpayer ID number on file.
  • Check to make sure you have any sales tax exemption certificates from vendors that you are not charging sales tax to.

It’s also time to clean up any account balances that need to be reclassified or corrected.

  • Any clearing accounts, such as undeposited funds, should be zero.
  • Bank reconciliations should be caught up and book balances should match the bank or be explained.
  • Inventory should be adjusted to reflect accurate quantities.
  • Loan balances should be adjusted to correctly reflect interest and principal allocations.
  • Depreciation entries should be made.

Maximizing deductions

Here are a just a few ways to maximize deductions:

  • Any bad debts that aren’t expected to be collected can be written off.
  • Any inventory that is not saleable or worth less than you paid for it can be adjusted on your books.
  • For cash basis taxpayers, pay any large bills before year-end if you have excess profits.
  • Pay employee bonuses prior to year-end.

Getting organized

Create a place in your home or office or a special file on your computer to store tax-related documents, such as W-2s, brokerage statements, and tax returns. Convert them to PDF format if they are not already, and upload them to your accountant’s secure client portal as you get them.

With all this great preparation, you’ll find tax season easier than ever and a chore that you can mark off your to-do list early.

 

How to Use the Same Name on Different Lists in QuickBooks Learn How to Use the Same Name on Different Lists in QuickBooks with Rhonda Rosand, CPA of New Business Directions, LLC.

How to Back Up Your QuickBooks File   Learn how to back up your QuickBooks file with Rhonda Rosand, CPA of New Business Directions, LLC.

Learn How to Navigate the Homepage of QuickBooks with Rhonda Rosand of New Business Directions, LLC.

Your “Chart of Accounts” is the list of accounts in your accounting software and forms the basis for all reports.  It is the foundation of your accounting system.  The accounts are listed in your reports, and the totals allow you to determine how much you’ve spent, made, own, or owe depending on the type of account.

It’s essential to create a list of accounts that you need in order to make better business decisions.  Your chart of accounts needs to be designed intentionally.  It needs to be short, sweet, and to the point.  You don’t need a million accounts.  If it hasn’t been, it’s never too late.

Two Types of Accounts

There are two major types of accounts:

  1. Balance sheet accounts that tell what you own and owe.  These are determined by your checking accounts, inventory, and credit cards.
  2. Income statement accounts that tell you about current period operating results.  These, in turn, have two major categories, income and expenses.  For companies with inventory, expenses are further broken out into cost of goods sold and other expenses.

Three Purposes

A chart of accounts should meet three needs:

  • Make it really fast for you to do your taxes
  • Give you all sorts of “Aha’s”
  • Allow you to spend far more time on revenue analysis than expense analysis because that’s where success lies for small businesses

Taxes

Your accounts should be the same as (or be able to be grouped into) the lines on your tax return.  You can find a copy of the tax form you fill out. For example, a sole proprietor will use a Schedule C of the 1040, and a corporation will complete an 1120.

There are a few special needs, such as meals and entertainment which are only partially deductible, that you need to pay special attention to. We can help you with that.

Aha

As small business owners, we work with a gut feel, but when you see what you’ve made or spent in black and white, it takes on a whole new level of meaning.  Your income statement and other reports should do that for you.  If they don’t you may not have your accounts set up right.

Revenue

Think about how you want to see your revenue:

  • By product line
  • By major supplier
  • By category of solution to the customer
  • By customer type
  • By service type
  • By location (you can also use Class for this)
  • By job
  • By distribution method

We can help you brainstorm based on your industry and type of business.

Actionable Intelligence

If you’ve been putting all your revenue into one revenue account, it will be exciting the first time you see your new Profit and Loss statement.

If you’ve been breaking out your revenue but it hasn’t led to any actionable change in your business, then there may be a better way to break it out.

If you’re happy with the way your revenue is broken out, then think about how you can take it to the next level.

Once you see your new chart of accounts, you will likely have even more questions.  The chart of accounts can be an evolving entity, designed to serve your business needs.

Working with Checks in QuickBooks

Online banking may get all the headlines, but many small businesses still insist on paper checks. QuickBooks can accommodate them.

“I don’t write checks anymore,” you hear a lot of people say these days. Debit cards, smartphone payment apps, and online banking have replaced the old paper checkbook for a lot of consumers.

That’s fine if you’re at Starbucks or the grocery store, but many small businesses still prefer to issue paper checks to pay bills, cover expenses, and make product and service purchases. QuickBooks provides tools that help you create, print, and track checks.

But you don’t just head to the Write Checks window every time something needs to be paid. There are numerous times when you would record a payment in a different area of the program. For example, if you’ve already created a bill in Enter Bills, you’d go to the Pay Bills screen to dispatch a check.

 

Once you’ve recorded a bill in Enter Bills, you need to visit the Pay Bills screen to dispatch a check. The image above shows the bottom of that screen.

Other examples here include:

  • Issuing paychecks (click the Pay Employees icon),
  • Submitting payroll taxes and liabilities (Pay Liabilities icon), and
  • Paying sales taxes (Manage sales tax icon).

Simple Steps

Let’s say you asked an employee to go to an office supply store to pick up some copy paper because you ran short before your normal shipment came in. If you knew the exact amount it would cost, you could write a check directly to the shop. But the employee agrees to pay for it and be reimbursed.

Click the Write Checks icon on the home page. If the BANK ACCOUNT that’s showing isn’t the correct one, click the arrow to the right of that field and select the right one. Unless you’ve written a check to that employee before, he won’t be in the Vendor list that opens when you click the arrow to the right of PAY TO THE ORDER OF. Enter his name in that field.

The Name Not Found window opens. If this was a new vendor that you would be working with again, you’d click Set Up and follow the instructions in the step-by-step wizard that opened. Since this isn’t the case, click Quick Add. In the window that opens, click the button next to Vendor.

Note: If you’re using a payroll application, you already have an employee record for that individual, which would have filled in automatically when you started typing the name. Since this is a Non-Payroll Transaction, it won’t get mixed up with his payroll records as long as you assign the correct account.

If you don’t want to create an entire record for the payee of a check, you can just click Quick Add.

QuickBooks will then return you to the check-writing screen, where you can verify the check number and date, and enter the amount. Fill in the MEMO field so you’ll remember the reason for the payment.

At the bottom of the screen, you’ll see a tabbed register. The Expenses tab should be highlighted and the amount of your check entered. Click the down arrow in the field under ACCOUNT to open the list, and select Office Supplies. The AMOUNT should fill in automatically. Not sure which account to select, and what the remaining three columns mean? Ask us.

Note: You would only enter the expense under the Items tab if you were buying inventory items or paying job-related costs.

Warning: If you’re planning to print the check, be sure to check the Print Later box in the horizontal toolbar at the top of the screen.

When you’re finished, save the transaction. Since you want to pay the employee right away, click the Print Checks icon and click in the field in front of the correct check to select it, then click OK.

Easy, But Tricky

QuickBooks makes the mechanics of writing checks easy. Simple as it is, though, a lot can go wrong if you, for example:

  • Issue a check from the wrong screen,
  • Classify a check incorrectly, or,
  • Skip a step.

We encourage you to set up a learning session with us if you’re new to check-writing in QuickBooks or are confused about any of its attributes. We’ll be happy to help ensure that your accounts payable activities will result in accurate record keeping.

Abandoned Property – What Is It? How Do We Account For It?

            How many times have you written a check to someone, who either loses it or forgets to cash the check? After a certain amount of time, that check is considered stale and can no longer be presented to be cashed. It sits in your QuickBooks file uncleared on the bank statement reconciliation, now what?

            You call the person, ask them to cash it. You may even re-issue the check so they have another chance to get paid, but then you find out they moved away and you don’t have their address, now what?

Uncashed checks to vendors, payroll checks to employees, contractors, dividends, and distributions to stockholders all are potential unclaimed or abandoned property. Every state has their own escheatment laws that require businesses and organizations to hand over to the state, the abandoned property that has been in their possession for a certain period of time. If a check goes uncashed, that does not mean the property no longer belongs to that individual and the obligation that the employer has to compensate the employee does not go away.

            In the state of New Hampshire, you are required to notify the owner of the abandoned property. No more than 120 days prior to filing, all holders must send a written notice to the owner of the property having a value of $50.00 or more. In this notice you must verify the nature of the property and how to retrieve it and avoid abandonment to the state. If this attempt at notifying the owner is unsuccessful, you will then move forward to reporting the abandoned property to the state.

How to Report Abandoned Property in New Hampshire

            To begin the process of reporting abandoned property, you must fill out the State of New Hampshire form for abandoned property which is Form T-1. Below is a link for your convenience to click on and review this form and/or print it.

https://www.nh.gov/treasury/documents/abandonded-propert-t1-form.pdf

            For detailed instructions on how to fill out this form, we have also provided you the necessary link that will walk you through, step-by-step for filling out NH Form T-1.

https://www.nh.gov/treasury/documents/abandonded-property-t1-instructions.pdf

            The first column on the form asks for the correct code for the property type. Here is a link that will show you which code is appropriate for your abandoned property.

https://www.nh.gov/treasury/documents/property-type-codes-t1-a.pdf

 

How to handle Abandoned Property in QuickBooks

            It is important to remember that abandoned property does not belong to the company. That property is either owed to the state or owner. Uncashed checks should never be voided. Making sure your bank accounts are reconciled on a monthly basis will help you monitor uncashed checks. Once that property amount is sent to the state or given to the property owner, it can then be cleared from your bank reconciliation.