QuickBooks Desktop 2023 company preferences, accounting. Let’s do it with Intuit QuickBooks Desktop 2023. Here we are in QuickBooks Desktop. If you’ve been following along,
we set up the get great guitars, which I misspelled and we’ll fix shortly in the prior presentation, a new company file our practice file,
if you don’t have this company file, that’s okay, you could follow along with another company file, because we are in essence, just simply going to be going through the preferences down here.
The thing that’s great about having a new company file to look through those preferences, as you can see what the general default preferences are, and then determine when you would need to change those default preferences. If you were to set up a new company file.
If you’re working with a company file that has already been set up, then it’s quite possible those preferences have already been changed from the default preferences.
So first, let’s just change the spelling up top here. So you probably if you did watch the prior presentation, we’re like, Hey, you misspelled guitars, okay, so I’m gonna go into my company, company, and then my company.
And then we’ve got our information up top that I would like to change. So I’m going to say edit that information in, I think I just need to change that to an A.
So if I misspell anything, I apologize, not my not my strong suit, the spelling, that spelling thing, the whole spelling thing, let’s go ahead and make this maximize to the gray area as typically is our custom.
Now note that when you first set up the company file, some of the preferences will be set automatically, depending on the choices that you use, such as the company type.
And you’ll have some things that will be set up such as if we go to the lists drop down the Chart of Accounts, we can see that we have a chart of accounts that has already been populated based on the type of industry that we chose. And we chose a particular industry that’s going to use inventory.
So we’ve got the cost of goods sold, accounts down below. Note what it did not even though we have these cost of goods sold accounts, if I close this back out, it didn’t add the inventory line item, so it doesn’t add the item for us tracking inventory. That’s one of the things we’ll have to change.
So now we’re gonna go into the edit, drop down up top, and look through the preferences. Now there’s a whole lot of preferences, and many of the default preferences will be fine. So we’ve got all these categories on the left hand side for the company preferences.
And then in each category, we typically have two tabs up top, my preferences and company preferences, we’re going to go through each one of these in some detail to get an idea of the things that are included in them.
And when you might be changing some of the key components of these preferences. Which of these preferences might be by default, and may need changing, and so on.
So I’m going to start up top with the accounting up top, of course, where are we going to start at the beginning at the beginning with the most important stuff, the accounting stuff, of course.
So we got the my preferences tab, and then the company Preferences tab. Now before I go too much further, just remember that I have increased the size of the screen again, which is something that you could find in the Preferences here. But typically, it’s a window setting.
So you can I mean, you could go to like the desktop view, not the desktop view, you could go to Yeah, it is the desktop view and then to my preferences and the display settings.
But really, you’re just opening up your window settings if you’re using a Windows computer, which is what I have experience with.
And then within your settings, you go to the display options. And then I’ve got the screen I’m working on that I’ve increased to 150 so that it’s a bit more zoomed in. So if you’re looking at your screens, and it’s a bit smaller over here,
you can zoom that in. Okay, back to the accounting company preferences. So we’ve got this is going to be checked off by default default will typically be what you want here, this one over here use account numbers, that’s going to be an important component. That could be quite useful to be having account numbers, but it’s not on by default, because the account numbers can be confusing. So just just do a quick recap of that here.
I think we have a whole course on how to use account numbers if you want to turn them on. But to understand them. Let’s go to the lists dropdown chart of accounts. You can see they populated the chart of accounts here.
Now if there’s no account numbers, you might think well the chart of accounts should be an order by name. But no, it’s not an order by name. It’s an order by type of account. It’s an order of balance sheet accounts, then income statement or profit and loss accounts and further broken out into cash,
accounts receivable, fixed assets, and then equity type of accounts income cost of goods sold and expense accounts. So if you add account numbers, then you can have a little bit more control especially within each category.
So for example the expenses down here are then going to be in alphabetical order after Order by class by type So so you could then if you don’t want advertising to be the first one,
you can have a different account number and so on. And that can help you to group certain accounts together, possibly you’ve got, you’ve got like an automobile.
And then you’ve got fuel capacity, you got repairs and stuff, and you want to group them together. account numbers can help with that. Although you can also do that kind of thing with sub accounts that we’ll talk about later as well.
So they can be a useful tool. The problem with account numbers is that you have to add an account number and think about where the account number should be every time you put an account number in place. And if you miss, miss allocate and account number, and you have it out of order,
let’s say you, you make the asset account 1000, and you make the the expense account 500 or something, it’s going to be out of order in terms of the numbering, because it’s first going to be a numbered by the type. So that’s what you got to keep aware of first,
and then you also have to make sure that you’re leaving space between the account numbers, so that if I wanted to add another account number between these two accounts,
for example, I don’t want to limit myself by having the account numbers that I chose right next to each other.
This is number one, this is number two, well, what am I going to do make a 1.5 in the middle, so you got to kind of think about those things when you’re setting up the account numbers. So you probably want like five digit account numbers, or at least four digit account numbers that are at least you know,
10 numbers spaced apart more like like 100 spaced apart, if you could, at least so that you can have a whole lot of space in the middle in the case that you want to add more accounts in them in the future.
Okay, so if you were to turn them on, and let’s just see what it looks like. If I go into the Edit Preferences, and say I’m going to turn my account numbers on and say, Okay, now they’ve got the account numbers.
Now notice that they added like kind of a default account system for numbers, meaning they got five digit numbers, notice they’re well spaced even within the same category of fixed assets here, so there’s a lot of room in between them,
and then the liabilities start with a two instead of a one, equity starts with a three, still a five digit number, sale starts with a four, and then cost of goods sold five and automobile six, that’s the general idea of it.
And then even with the expenses, you can see there’s a lot of space in between each of them. So that whenever you add a new account,
you shouldn’t run into any problems in that the account numbers are going to restrict you, the account numbers should give you more control, not limit your control over the orderings of your accounts. Okay, let’s turn that back off, though,
we’re not going to use the counting numbers for our practice problem, we’ll turn them off, which is the default, then you’ve got the Use class tracking for transactions.
This is a specialty area that could be used for multiple different things, you might use it, for example, in a job cost type of system.
And it will basically allow you to give you the income statement or profit and loss in in a class by class calculation. So to do that, you would have to assign a class to each transaction,
you also could use it if you’re using the same QuickBooks file for personal and business uses, then you might try to assign all of your expenses to either personal or business.
And you can generate a business an income statement for both personal and business and then the total as well. So we won’t go into that in detail because, again, it’s a specialty area, it might be used in not for profit organizations and stuff as well.
So there’s a lot of different applications for it. But just to get an idea of it, every transaction you enter, so if I was to enter like an invoice, notice I have a pretty simple invoice entry, I don’t have any class field here.
If I turn on the classes, and I go to the Edit, Preferences, company file and turn on the classes prompt to assign classes, that’s going to be a thing that’s gonna say, Hey, you didn’t assign a class. So here now we have a class field that we have to enter.
And we have to assign a class every transaction so that the system can know which column to put it in place, if I ran a Profit and Loss by Class, notice also that the classes are usually first thought of as something that can break out the income statement or profit and loss on a class by class basis.
And if you have a more advanced version of QuickBooks, desktop, then you can also do it with a balance sheet, breaking the balance sheet out by class.
But that gets complicated to break out the balance sheet by class because you get into issues with the balance sheet balancing, and so on and so forth. So typically your thinking Income Statement broken out in a class by class situation, when might that be useful?
Okay, I’m going to turn that back off, edit drop down classes we’re not we have courses on classes for different uses, in and of themselves, like job costs, not for profit courses, courses where you do personal,
use the QuickBooks for your personal and business if you have a small business, so you can take a look Get those if you so choose automatically assigned general journal entry numbers. So when we make a journal entry, notice that when we enter data into the system, we’re typically going to be using the form.
So the general idea of the accounting system will be, we’ve got the underlying foundational stuff in place so that we can do the data input as easily as possible with data input forms, possibly making it easily easy enough. So I can assign someone or hire someone that doesn’t understand the setup process, or the end result, financial statements, how forms impact them can still do the data input.
So the underlying stuff are things like the chart of accounts that we want to have set up, then the items that we’ll have set up, which we’ll talk about as we go in the future, so that we can create invoices and these kinds of things as easily as possible.
These kinds of things will create the financial transactions, which include for a double entry accounting system, journal entries, every,
every form is going to have an impact on at least two accounts impacting the balance sheet and the income statement in such a way that it remains in balance assets equal liabilities, plus equity, that’s going to be the general idea.
Now, if you have an accounting background, you might try to think of things not as a as a form. But you might think about things in just terms of journal entries.
So you might say why don’t I just enter a journal entry for each time I enter a transaction, you don’t want to do that, because the forms do other things other than just enter the journal entries such as tracking the invoice tie in the invoice to the receive payment.
So the general idea is that you want to first think Is there a form that is designed to use and use that typically, if not, then I default to a journal entry.
So a journal entry would just be going to like a company dropped down. And if I say I want to make a journal entry, so now I’ve just got my debits and credits here, debit credit, and I can enter things directly as a debit and credit instead of using a form.
And then you can have the journal entry has been assigned a number, and they’re pre assigned a number. And that’s what that setting is doing. It’s pre assigned in the numbers of typically,
we’ll keep that on by default, Edit Preferences, what else we got in here, warned when posting a transaction to retained earnings, the retained earnings is and this this is the account that basically we use for the income statement to roll into the balance sheet.
So it’s kind of a really important account, notice that you might call retained earnings, something different depending on the type of company that you are in. So if you’re in a sole proprietorship, you might just call it owner’s equity account or the capital account, if it’s a partnership,
then you’ve got kind of two partnerships, the two partners or more that you have to deal with that have capital accounts and the rollover process becomes more complex,
because you’re gonna have to then assign to the partners in accordance to their partnership agreement. But you’ve got the same kind of general process of the income statement rolling into the balance sheet.
And then for a corporation, that’s when it’s called retained earnings, meaning it’s the income that the company has generated, that they have not given back to the owners in the form of dividends in the form,
if it was a sole proprietorship, it would be the income that the sole proprietor business has generated, that has not been given back to the owner in the form of just draws same for basically a partnership.
So the thing is that normally you don’t post something to the retained earnings account. So so it’s going to give you a warning when you do so.
So you could just give yourself a check a second reminder of like, do I really want to post something to retained earnings. So we’ll leave that on for now.
Although when we set up the company file, we will need to do some posting to the retained earnings. And we’ll see that warning pop up. And then it says warn if transactions are 90 days in the past, warn transactions are 30 days in the future.
These are usually really good warnings if you’re working in real time, if you’re working in an accounting department, and you’re entering transactions each day, you know, as transactions happen, then these are great Warnings If on the other hand,
you’re a bookkeeper or something like that, and someone comes to you and says, Hey, I need you to do a whole year’s worth of data input into into QuickBooks so that I can do my taxes, then you’re gonna have a whole lot of transactions that are going to be 90 days past in the past,
if you’re working on a practice problem that somehow in the future, for whatever reason, then you might have transactions in the future. So this is generally a really good internal control.
And you might even want to limit it more than 90 days to like 30 days, if you’re working in real time. If you’re doing a whole year’s worth of data input
so that someone can get their taxes done or something, then you’re going to want to turn these off. Otherwise, every time you enter a transaction, it’s going to give you a warning. We are working on a practice problem.
So I’m going to take it off here just in case you’re working in a different time frame than I am And because we’re working, not real time necessarily, I’ll take it off. So then we’ve got a date through which books are closed.
So you could set the closing dates. Now, this is a standard kind of thing for managing your, your accounting. So if you’re working in like an accounting department, then it’s nice to be able to say, Okay, we’ve closed this period, this month, or this year, for example.
And if you do anything to the prior month or year, we need to be I’m going to click on it, we need to be quite careful. So, and this becomes you can see this on a year by year basis quite clearly.
Because for example, if in 2000, let’s say last year 2021, you created your balance sheet and your income statement, you use that to create your taxes based on that. And then in 2022, they made a change to the prior year data, a common change might be,
you voided a check, you had a check that never cleared, you had to void the check. If you avoid the check, just as of the prior period, it’s going to remove the expense account that was on the income statement, which lowered net income, which then rolled into the balance sheet and the equity side of things.
Now, that’s a problem, because you already recorded, you already finalized last year, you already made your tax return based on last year. And that’s going to mess things up. What you really want to do then is basically make that adjustment that change in the current year,
so that you don’t mess up the prior year. Now, oftentimes, small businesses get this kind of messed up a lot, because they’re trying to fix certain things as they go forward,
like accounts receivable gets out of whack, or they don’t know what’s going on with undeposited funds, or they’ve got these checks that are outstanding that haven’t cleared, and then we start deleting stuff, and then the retained earnings gets gets messed up.
And sometimes it doesn’t even get caught. So your taxes are our little kind of wonky, because now you got these timing differences that might not be accounted for properly.
Because when you do the tax return, it only looks at the income statement if you’re a sole proprietorship, because you’re doing a Schedule C.
So if you’re doing taxes for at the end of the year, for like a business that needs to record the the balance sheet for the taxes, you’re going to end up with situations where the prior year retained earnings doesn’t match up to the current year retained earnings, that’s probably because they adjusted something in the prior period.
So larger companies get better and better at this. And they basically do so by kind of restricting their accounting staff from posting stuff to the prior period. Because it messes stuff up and they can get quite quite agitated,
you know, and controlling in this regard, because it does cause kind of problems. So in any case, to keep your financial data secure, QuickBooks rec recommends assigning all other users their own username and password in company set up users.
So if you got multiple people working in QuickBooks, you can have the different people set up their users and you can set up their settings differently. And as you get a larger company,
then assigning different users to have their own tasks and their own capacities in terms of what they can do in the software’s and limits to those capacities, is what we call separation or segregation of duties is a huge internal control, which allows hopefully the reduction of errors and things like that.
So QuickBooks will display a warning or require a password when saving transactions dated on or before the closing date. So you can see more details here. You got the checkbox, exclude estimates, sales orders and purchase orders from closing date restrictions, which you could turn on or off.
And then you’ve got the closing date that you can set here, QuickBooks strongly recommend setting a password to protect transactions dated on or before the closing date.
So if you’re if you have multiple people working in the software, you can turn on these restrictions, and hopefully at least give a warning to people. If they’re trying to post something to a prior presentation and restrict people from doing that.
If you’re working on your own and the software, then you might want to do it for yourself just to have give a warning to yourself. Or I mean, just be mindful that if you delete something in the prior period, it’s causes a problem.
Generally QuickBooks if you don’t turn this on, QuickBooks is very forgiving in terms of deleting transactions and stuff like that, which isn’t usually what you want to do from a full accounting perspective.
You usually want to keep the transactions you entered, and then enter something into the future to give yourself an audit trail of what has happened in the past and have you’ve you fixed it and Why you fixed it with memos and whatnot, going forward.
But sometimes that flexibility can be the easiest way to fix things. So but you just have to be careful, and we’ll talk about that as we do the data input. So that’s main stuff in the accounting area.We’ll go on to each one of these in future presentations in some detail.