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How to Switch Between Cash and Accrual Basis in Quickbooks

When setting up Quickbooks for your business, you’ll need to choose one of the two supported accounting methods. Intuit’s popular accounting software offers cash basis and accrual basis accounting. To learn more about these two different accounting methods, as well as how to switch between them in Quickbooks, keep reading.

What Is Cash Basis Accounting?

Cash basis accounting is an accounting method in which you record cash income and expenses at the time you receive them. Also known as the cash method of accounting, it involves recording cash payments when your business receives them and cash expenses when your business pays them.

The primary benefit of cash basis accounting is its simplicity. When compared to accrual basis accounting, cash basis accounting is easier, making it a popular choice among small businesses. With cash basis accounting, you record all cash income when you receive payment and all cash expenses when you make the cash payment.

What Is Accrual Basis Accounting?

Accrual basis accounting, on the other hand, is an accounting method in which you record income and expenses when your business earns them. A landscaping company, for example, may record income after completing a landscaping project for a customer — even if the customer paid several ways prior to the project’s completion.

While cash basis accounting is more popular among small businesses, many medium and large businesses prefer accrual basis accounting. Since it doesn’t recognize income or expense until they are earned, it’s a more accurate way to record financial transactions.

How to Switch Between Cash and Accrual Basis Accounting in Quickbooks

You can easily switch between cash basis and accrual basis accounting in Quickbooks. To do so, open your company file as the administrator while in single-user mode. Next, click the “Edit” menu, followed by “Preferences.” You can then choose “Reports & Graphs,” followed by “Company Preferences.” To switch from cash basis to accrual basis accounting, click “Accrual” under the “Summary Basis” menu. To switch from accrual basis to cash basis accounting, click “Cash” under this menu. When finished, click “OK” to complete the process and save your changes.

Keep in mind that your preferred accounting method can affect the way in which Quickbooks calculates your business’s sales tax. With accrual basis accounting, Quickbooks will calculate your business’s sales tax at the same time when you invoice a customer. With cash basis accounting, Quickbooks will calculate your business’s sales when you receive payment from a customer.

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Common Tax Deductions for Rideshare Drivers

Ridesharing has become increasingly popular in recent years. According to to the Pew Research Center, roughly one in three Americans have used a ridesharing service — a number that’s expected to increase in the following years. If you’re thinking about becoming a rideshare driver, though, you’ll need to take advantage of all available tax deductions. Like with all businesses, you can deduct the cost of certain expenses from your income taxes.

Mileage

Not surprisingly, you can deduct the cost of mileage from your income taxes. The Internal Revenue Service (IRS) supports two different methods for calculating mileage deductions: standard or actual car expense. Standard mileage involves multiplying the number of miles you drove in the given year by the IRS’s standard rate for that year. In comparison, the actual car expenses method involves keeping track of all-driving related expenses, such as insurance, gas, maintenance, repairs and even automotive depreciation.

Smartphone

You can also deduct the cost of a smartphone from your income taxes, assuming you use your smartphone for ridesharing purposes. Whether you drive for Uber, Lyft or any other ride-sharing service, you’ll probably use your smartphone to find customers to pick up. You may even be required to call or text these customers prior to picking them up. Regardless, the IRS allows ride-sharing drivers to deduct the cost of their smartphone from their income taxes.

Dash Cam

If you recently purchased a dash cam to use in your vehicle, you can deduct it from your income taxes as well. It’s not uncommon for ride-sharing drivers to install a dash cam in their vehicles. With a dash cam present, ride-sharing drivers can rest assured knowing that their trips are recorded. At the same time, many insurance companies offer premium discounts for ride-sharing drivers who install a dash cam in their vehicle.

Free Items

Do you offer free bottled water, mints, gum, snacks or items to passengers? If so, you should keep track of the receipts for tax purposes. Any complementary items such as these can be deducted from your income taxes. And while you probably won’t spend hundreds or thousands of dollars on complementary items, claiming this deduction can still lower your tax liabilities as a ride-sharing driver.

Accounting Software or Services

You can deduct the cost of accounting software or services from your income taxes. Whether you use Quickbooks Online, Quickbooks Desktop or any other type of accounting software or service, you claim it as a deduction.

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What Are The Generally Accepted Accounting Principles (GAAP)?

Are you familiar with the Generally Accepted Accounting Principles (GAAP)? Most business owners have at least heard of this term, but few knew its true meaning. Whether you run a small, medium or large business, though, it’s important to familiarize yourself with GAAP. Doing so will help you create cleaner records of your business’s financial transaction while subsequently driving your business’s future growth and success.

GAAP Explained

GAAP refers to a set of accounting standards used by businesses, nonprofits, government institutions and other organizations. They were created by the Financial Accounting Standards Board (FASB) as well as the Governmental Accounting Standards Board (GASB) for the purpose of standardizing financial accounting.

The purpose of GAAP is to assist businesses and other organizations with their accounting activities. Rather than using their own custom-made accounting processes, for example, businesses can use the processes defined in GAAP.

What Are GAAP Principles?

While GAAP covers a wide range of topics associated with financial accounting, it focuses primarily on accounting principles. The principle of consistency, for example, states that business owners and accountants should use the same methods for their accounting activities. In other words, you shouldn’t use different methods of accounting for the same process. The principle of consistency requires you to use the same method.

The principle of non-compensation, on the other hand, states that positive and negative transactions should be recorded. Whether it’s a credit or debit, all transactions should be recorded in your business’s general ledger. Other common GAAP principles include the principle of continuity, the principle of periodicity, the principle of sincerity and the principle of prudence.

Benefits of Using GAAP

There’s no rule, written or unwritten, stating that you must use GAAP for your business’s financial accounting activities. With that said, following the GAAP principles is beneficial for several reasons. First and foremost, it allows for faster and more efficient accounting. After all, GAAP principles were developed by some of the leading accounting institutions, so it’s safe to assume they are effective.

Second, GAAP allows for greater transparency to ensure that no financial transaction goes unnoticed. As a business owner, you probably know the importance of recording each and every transaction. Mistakes are bound to happen, though. If you don’t use GAAP, you could miss a critical transaction that ultimately costs your business money.

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How to Record Opening Balance in Quickbooks

In accounting, an opening balance is the amount of money in an account, either when it was initially created or at the beginning of the fiscal year. Regardless of the type of account, it’s important to record the correct opening balance; otherwise, your entire books will be thrown off. Thankfully, Quickbooks simplifies the process of recording opening balances, which we’re going to explore in this blog post.

Before we begin, it’s important to note that you should not enter an opening balances on accounts that did not have a balance before the date specified on your “Quickbooks start date.” If the account had a balance after the date listed here, however, you should record that balance.

There are several ways to record an opening balance in Quickbooks, one of which is by clicking F1. Alternatively, you can select “Should I enter an opening balance” when setting up either an account, customer, or vendor in Quickbooks. This will bring up a new window that walks you through the process of recording an opening balance. This is arguably the easiest way to record opening balances, as you simply need to complete the fields and proceed with the steps listed on screen.

Furthermore, you can record an opening balance when using a general journal entry created from the Balance Sheet for the previous year. However, there are a few things you should know when recording opening balances from a general journal entry.

According to Intuit, business owners and accountants should consider using an Opening Balance Equity when recording opening balances from a general journal entry. The Opening Balance Equity works to offset the account; thus, ensuring the journal entries are balanced.

If you are recording balances for the start of the fiscal year, you may want to consider entering a balance for the previous year’s retained earnings instead of recording every account for income, expense and cost of goods sold (COGS).

Keep in mind that you can only record one accounts receivable or accounts payable transaction for every general journal entry. As such, you’ll have to create multiple journal entries to have the balances for your accounts. Also, be sure to specify a vendor or customer name in the “Name” field of your general journal entries to accounts payable, receivable and sales tax payable.

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Dealing with Damaged Data in Quickbooks

database-1954920_960_720Have you encountered damaged data in your Quickbooks account? If so, you should take the necessary steps to find and fix the problem. Damaged damage can prevent otherwise essential tasks from occurring, such as matching your books with your financial transactions. So, follow these steps to repair damaged data in Quickbooks.

Before we begin, it’s important to note that you should create a backup of your company file. This reduces the risk of data loss while giving you peace of mind knowing that if you make a mistake — or if you accidentally delete an important item — you’ll still have all of your necessary account information.

When you’re ready to begin, go ahead and log into your Quickbooks account to run the Rebuild Data Utility. As you may already know, this tool is designed to identify and fix common problems associated with Quickbooks. Intuit recommends using it whenever you are prompted to by a the program, or when a Help or knowledge page suggests you do so.

To rebuild your data, access File > Utilities > Rebuild Data, at which you should choose “OK” when a message displays asking you to back up your company file. Keep in mind that your computer may also display a message saying “Quickbooks is not responding,” although this should go away within a few minutes. Be patient and wait for Quickbooks to finish processing the Rebuild Data tool. When it’s finished, you’ll see a new message appear saying “Rebuild has completed.” You should then run the Verify Data tool to check and see if there’s any remaining data damaged.

Of course, if this doesn’t work, you can always restore a backup copy of your Quickbooks company file. Simply insert the disk or drive into your company and access File > Open or Restore Company, at which point Quickbooks should launch the wizard tool. Choose “Restore a backup copy” and proceed by clicking “Next.” Click “Local backup,” followed by Next. This should open a new window, at which point you can choose the location of your backup file and click “Open.” Proceed with the on-screen instructions and Quickbooks will begin to restore your backup company file. Sorry if you were expecting more, but that’s all it takes to restore a backup company file in Quickbooks!

 

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How to Create and Send an Invoice in Quickbooks

information-1931373_960_720If you’re a business owner who uses invoices, you might be wondering if Quickbooks supports them. And if so, how to create and send invoices using the accounting software. Well, Quickbooks does support invoices, and we’re going to walk you through the steps of using them.

To create an invoice in Quickbooks, log into your account and access the Home page. From here, choose Invoices just below the Customers column, at which point you’ll see a new invoice creation form displayed on your screen.

Next, you’ll need to complete the invoice creation form, starting with the customer’s name. In the Customer name field, click the drop-down box to select the respective customer to whom you wish to send the invoice. Granted, if you haven’t added the customer to your Quickbooks account, you can do so by clicking the drop-down menu and scrolling to the top where there’s an “Add New” option.

In the customer email address field, you should notice Quickbooks automatically adding this information. If you did not enter an email address for the customer, however, the field will be left blank. You can enter the email address directly in this field, however, at which point it will automatically update the respective customer’s profile in your Quickbooks account.

For the billing address field, this information should also be automatically added by Quickbooks. Like the email address, however, it will remain blank if you didn’t enter a billing address in the customer’s profile.

Many users struggle with the “Terms” field, which is undoubtedly somewhat confusing, especially to newcomers. The terms field is used to describe the number of days the customer has to pay the invoice. You can change the payment terms by clicking the drop-down menu associated with this field.

In the date date, you should include the date on which you gave the customer the invoice. Normally, Quickbooks will complete this field automatically, meaning you won’t have to add any extra information. If it does not, however — or if it adds the wrong date — you should manually enter the date.

You aren’t out of the woods just yet. There are a few other fields you must complete when creating an invoice, including the Qty (quantity), rate, description, and amount. When you are finished adding this information, you can create the invoice using the specified data.

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How to Record a Wire Transfer in Quickbooks

cash-register-1885558_960_720It’s not uncommon for businesses to send or receive money using wire transfers. Also known simply as a bank transfer, it’s a quick, easy and efficient way to transfer money between two parties. But if you plan on using wire transfers in your day-to-day operations, you’ll need to record it in your Quickbooks account. Keep reading for a step-by-step walkthrough on how to record wire transfers.

You’ll probably notice that Quickbooks doesn’t have a feature specifically for wire transfers. Nonetheless, recording a wire transfer is still a relatively easy and straightforward task, which is accomplished using either a Cash Expense or Deposits feature (depending on whether it’s a payment or earned money).

If you’re making a payment with a wire transfer, you’ll need to use the Cash Expense feature in Quickbooks. This is done by logging into your account and choosing the plus icon > Expense, at which point you should enter “Wire Xfer” or Wire Transfer” in the “Ref no.:” field (this is used strictly for reporting purposes, so feel free to include your own label.”

Next, fill in the “Date” and “Amount” fields with the appropriate information: the Date field should include the date on which the wire transfer took place, while the Amount field should contain the total amount of the wire transfer. You can also enter the vendor or store associated with the wire transfer in the “Payee” field (this step is optional).

In the “Account” field, select the expense account to track this transaction. When you are finished, click “Save” to save the changes.

If you’re receiving money using a wire transfer, you should use the “Make Deposit” feature. This is done by clicking the + icon > Bank Deposit > Deposit To > choose the bank account receiving the deposit > complete the Date, Received From, Account, Payment Method and Account fields. When finished, click “Save” the save the changes.

It’s important to note that fees are often attached to wire transfers, typically to the receiving party. If you have to pay a fee for receiving a wire transfer, you should record it in the Account and Amount fields. Using the Account field to select the expense account that you wish to track the fee, while the Amount field should contain the total amount of the fee, expressed as a negative number.

 

 

Sorry if you were expecting more, but that’s all it takes to record a wire transfer in Quickbooks!

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How to Track Credit in Quickbooks

money-256319_960_720Does your business have one or more lines of credit? Well, you certainly aren’t alone. Most businesses use at least some credit to fund their day-to-day operations. It’s important to keep track of your credit — a task that’s made easy thanks to Quickbooks.

Tracking a line of credit in Quickbooks is pretty much the same as tracking a credit card. In fact, you’ll actually create a new credit card account in Quickbooks. To do this, click the Gear-shaped icon > Chart of Accounts > New. From here, you should choose “Credit Card” for the type of account, followed by Next. You will then need to enter more information about the line of credit. Follow the instructions on screen while leaving the account balance blank (the account balance should start at $0). After entering the required information, click Finish.

Now if you want to record a line or credit that was extended to your business, you’ll need to follow a slightly difference process. This is done by clicking the plus-shaped icon (+), at which point you should double-check to make sure the “Deposit To” account is correct. Next, scroll down to the “Add New Deposit” section at the bottom and select the credit card account you just credit. Next, enter the amount that was deposited into your business’s bank account, followed by Save.

Of course, most lines of credit carry at least some type of interest. After all, this is how lenders earn their money. When they loan a business money, the business must repay the entire balance of the loan plus interest — at least in most cases. Business owners should record the interest charges associated with their line of credit to maintain proper books. This is done by clicking the plus-shaped icon > Expense > Credit Card, at which point you can choose the LOC credit card amount.

In the “Choose a Payee” field, you’ll need to choose the financial institution. In the “Account” drop-down list, choose the interest expense account that is associated with the line of credit interest, after which you can enter the amount of interest that was charged. When you are finished, click Save to complete the changes.

Keep in mind that Quickbooks doesn’t have a dedicated field to enter an approved credit limit. You can, however, enter the limit in the description field of the line of credit account, or you can include the limit in the account name.

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How to Verify and Rebuild Data in Quickbooks

accept-47587_960_72022Intuit’s popular and long-running line of business accounting software Quickbooks features a Verify and Rebuild data tool. Verify Data is used to identify common problems in a company file, whereas Rebuild Data is used to resolve data corruption issues found via the Verify Data tool.

So, when should you use Verify and Rebuild in Quickbooks? There are many instances in which it’s recommended to use these features. If you experience a fatal error when attempting to open or run Quickbooks Desktop, for instance, it’s a good idea to go ahead and run the Verify and Rebuild Data tools. You should also use it when there are discrepancies on your reports; deposited payments appear in the Payments to Deposit window; not all accounts are displayed on your balance sheet reports; names are missing from lists; you have missing transactions; and routinely as part of regular maintenance and checkup to ensure your Quickbooks company file is “healthy.”

Verifying and rebuilding data in Quickbooks is actually easier than it sounds. Start by selecting Windows > Close All, at which point you should choose File > Utilities > Verify Data. Hopefully, the tool won’t detect any problems, in which case it will say “Quickbooks detected no problems with your data.” If the tool discovers a problem, however, it will present a specific error message, which you should reference when searching for a solution.

To rebuild data in Quickbooks, access File > Utilities > Rebuild Data, at which point you’ll receive a message asking you to back up your company file. Assuming you’ve already created a backup of your company file, click OK to proceed. It’s important to note that the rebuild tool requires a company file backup as a safeguard to prevent lost transactions. When performing the Rebuild Data, you’ll be asked to select a location where you want to save your backup. if the backup fails, click “Cancel” at the Rebuild window. The Rebuild Data tool will commence as soon as the backup is complete.

If the Rebuild Data finds damage to your company file, you’ll need to correct the damage manually. On its website, Intuit recommends locating the error by opening the qbwin.log file and searching for resolution at the Quickbooks Desktop Support site. If you run Quickbooks through a third-party hosting service provider, you can also ask your hosting provider for help.

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What is an Assembly Item in Quickbooks?

idea-1616238_960_720When using Quickbooks to keep track of your small business accounting, you may come across something called an assembly item. Based on the name alone, it’s difficult to tell what exactly an assembly item is, let alone how it’s used. So, today we’re going to take a closer look at this feature, revealing everything you need to know about assembly items in Quickbooks.

An assembly item is essentially a type of line item used when creating a sales form. They combine existing inventory part items and assembly items into a single convenient item.

To create an assembly item, you’ll need to perform two separate steps. First and foremost, you must define the Bill of Materials, which specifies the components used to make the assembly item. Next, you’ll need to build a quantity of assembly items in Quickbooks so the software can deduct the components from your inventory while also adding new quantities of the respective assembled item.

Keep in mind that once you build an assembly item, the respective components will be removed from your inventory as separate parts, simply because they are now part of a new inventory item, which is known as an inventory assembly. After defining your assembly items, Quickbooks will automatically move them to your inventory via building them. Assembly builds are required to keep the inventory quantities correct. If the items weren’t moved, the inventory quantities would be wrong. When an assembly item is built in Quickbooks, the inventory parts and assembly items (known as subassemblies) are deducted from the inventory; thus, the quantity of the assembly item increases.

Some business owners and accountants assume that group items and inventory assembly items are the same. While they both allow you to record a group of items as a single entry, there are some stark differences between the two that shouldn’t go unnoticed. A group item, for instance, cannot be included in another group item or in an inventory assembly item, while an inventory assembly item can be included in other inventory assembly items and group items.

You also don’t have to option to run reports for specific group items. With inventory assembly items, however, you can build reports. These are just a few of the many differences between group items and assembly items.

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