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What Is a Profit and Loss Statement?

Have you heard of profit and loss statements? They are commonly used in accounting. Businesses of all sizes and in all industries use them in their accounting strategies. They generate profit and loss statements so that they can track their profitability or lack thereof. If this is your first time hearing about them, there are a few things you should know about profit and loss statements.

The Basics of a Profit and Loss Statement

A profit and loss statement is an accounting document that, as the name suggests, reveals a business’s financial profits or financial losses over a predetermined period. Most businesses generate them quarterly. At the end of each quarter, they’ll generate a profit and loss statement. With that said, some businesses generate them per calendar year or fiscal year. Regardless, all profit and loss statements outline a business’s financial profits or financial losses over a predetermined period.

Cash vs Accrual Method

Profit and loss statements can be created in one of two ways: the cash method or the accrual method. The cash method involves recording transactions at the time when money enters or leaves a business. The accrual method, on the other hand, involves recording transactions when they are generated. Transactions can be generated before money enters or leaves a business, which is why the accrual method is available.

Why Profit and Loss Statements Are Important

Profit and loss statements are important for many reasons. As a business owner, you can use them to gain insight into your business’s cash flow. Generating profit and loss statements on a regular basis will allow you to see how much money is entering your business and how much is leaving your business. With this information, you can determine your business’s cash flow.

You can use profit and loss statements to reduce or eliminate unnecessary expenses. All businesses have expenses. No matter what type of products or services your business sells, you’ll probably incur operational expenses. With profit and loss statements, you can see firsthand how much money your business spends. You can then seek to reduce or eliminate unnecessary expenses.

Some businesses are legally required to generate profit and loss statements. Quarterly and annual profit and loss statements are required for publically traded businesses. If your business is publicly traded — meaning it’s not privately owned — you’ll have to generate profit and loss statements to comply with federal regulations.

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How to Manually Add Transactions in Quickbooks

Transactions are the building blocks of accounting records. When running a business, you’ll need to keep records of all business-related transactions. Some of these transactions may be classified as expenses, whereas others may be classified as revenue. Regardless, you’ll need to keep records of them.

Quickbooks, of course, can automatically record your business’s transactions. When you create an invoice, for example, it will track the transaction as revenue. With that said, you can manually add transactions in Quickbooks as well. It’s a quick and easy process that consists of the following steps.

Step #1) Access the Account

All transactions are tied to an account. To manually add a transaction in Quickbooks, you’ll need to access the respective account.

You can access accounts in Quickbooks by navigating to the Chart of Accounts. In Quickbooks Online, the Chart of Accounts is found under the “Accounting” menu. Click the “Accounting” menu on the homepage and choose “Chart of Accounts.”  You can then search through the available accounts to find the one for the transaction. After locating the appropriate account, click the “Actions” column for it and choose “Account history.

Step #2) Add the Transaction

You can now add the transaction to the account. Assuming you’ve already accessed the account, you should an option to “Add journal entry, Add deposit or Add cheque.” Click this option and search for the transaction that you want to add.

Quickbooks will require you to enter some information about the transaction. There are several fields that you’ll need to complete. After completing the required fields, click “Save.” The transaction should now be added to the account. That’s all it takes to manually add transactions in Quickbooks.

What About Editing Transactions?

Along with manually adding transactions in Quickbooks, you can edit transactions as well. Editing a transaction is easy. You can search for the transaction in your account register. After pulling it up, you can then edit any of the transaction’s fields.

Keep in mind that some fields may be grayed out. To edit these fields, you’ll need to click the “Edit” link. Just go through the fields while editing adding or removing the necessary information. Like with adding transactions, you’ll need to save your changes by clicking “Save.” Hopefully, this gives you a better idea on how to manually add and edit transactions in Quickbooks.

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Quickbooks Primary Admin vs Company Admin: What’s the Difference?

How many users have access to your business’s Quickbooks account? If you operate a sole proprietorship business, you may be the sole user. LLC and S-Corp businesses, on the other hand, often allow multiple users to access their respective Quickbooks account. You can create users for your business’s Quickbooks while assigning them specific roles. Two of the most common roles supported by the popular accounting software include primary admin and company admin. What’s the difference between a primary admin and a company admin exactly?

What Is a Primary Admin?

A primary admin is the main, admin-level user for a Quickbooks account. Every Quickbooks account must have a primary admin. When initially setting up your business’s Quickbooks account, you’ll have to create a primary admin. Primary users have unrestricted access to all data and tools. As the primary admin, you can run reports, view balances, pay bills and even create or remove other users.

What Is a Company Admin?

A company admin is a secondary user for a Quickbooks account. Secondary admins can perform many of the same processes as primary admins. Among other things, they can run reports, view balances, pay bills and create or remove some — but not all — other users. Secondary admins are simply optional users that are under the primary admin.

Differences Between Primary Admins and Company Admins

You might be wondering how primary admins differ from company admins. While they can perform many of the same processes, they aren’t the same. A primary admin is required for each Quickbooks account. You can’t set up Quickbooks for your business without creating a primary admin. More importantly, you can only create a single primary admin for your business’s Quickbooks account. Quickbooks accounts don’t support multiple primary admins.

Company admins, on the other hand, are optional. You aren’t required to create a company admin when setting up your business’s Quickbooks account. You’ll have to create a primary admin, but secondary admins are optional. You can either create secondary admins, or you can omit them from your business’s Quickbooks account.

Company admins also have a slightly lower level of permissions than their primary admin counterparts. Company admins, for instance, can’t remove the primary admin associated with their Quickbooks account. They can add or remove other users, such as standard users, but company admins can’t modify or remove the primary admin.

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How to Track Billable Expenses in Quickbooks

Does your business have billable expenses? All businesses have expenses. Expenses are products or services that your business purchases to facilitate its operations. Billable expenses, however, are a specific category of expenses. Billable expenses are those incurred by your customers and billed to your business. If your business has billable expenses, you’ll need to track them. Fortunately, you can easily track billable expenses using Quickbooks.

The Basics of Billable Expenses

As previously mentioned, billable expenses are expenses incurred by your business and billed to your business. It’s not uncommon for businesses to allow their customers to purchase products or services, after which the businesses will reimburse the customers for those purchases. Billable expenses such as this are particularly common among business-to-business (B2B) companies. The problem with billable expenses is that they require extra work to track. You’ll need to keep a record of which customers made these purchases and how much money they spent so that you can reimburse them.

Enable Billable Expense Tracking

To track billable expenses in Quickbooks, you must enable this feature. The option to enable expense tracking is found under the “Account and Settings” menu. When logged in to Quickbooks, click the gear icon and choose “Account and Settings.” From there, select the “Expenses” link. Look for the option labeled “Bills and expenses” and click the pencil-shaped icon next to it.

Assuming you followed these steps correctly, you should see an option for “Track billable expenses and items as income.” Make sure the box adjacent to this option is unchecked. If there’s a checkmark in the box, click the box so that the checkmark is removed. You don’t want Quickbooks to track billable expenses as income. Rather, you want Quickbooks to track it as debt. As long as there’s no checkmark in the box, Quickbooks shouldn’t track the billable expenses as income. You can complete the process by clicking the “Save” button.

In Conclusion

Billable expenses are common among businesses. Many businesses, especially B2B companies, allow their customers to make purchases while reimbursing them at a later date. If your business falls under this category, you’ll need to track its billable expenses. You can track billable expenses using Quickbooks. There’s an option to enable billable expense tracking in the “Account and Settings” menu. Once enabled, Quickbooks will automatically track all of your business’s billable expenses.

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What Is an Exempt Employee? Here’s What You Should Know

Employees are often classified as either exempt or non-exempt. Both types of employees work for businesses. Exempt and non-exempt employees, however, aren’t the same. If you’re planning to hire one or more employees in the near future, you might be wondering whether they are considered exempt or non-exempt. This post explains the meaning of exempt employees and how they differ from their non-exempt counterparts.

Overview of Exempt Employees

Exempt employees are hired workers who don’t qualify for minimum wage or overtime pay. Under the Fair Labor Standards Act (FLSA), most employees are eligible for minimum wage and overtime pay. You’ll have to pay them a minimum wage set, and if they work for more than 40 hours in a given week, you’ll have to pay them overtime. There are exceptions, though. Employees who don’t qualify for minimum wage and overtime pay are considered exempt.

Exempt vs Non-Exempt Employees

As you may have guessed, the main difference between exempt and non-exempt employees is that the former don’t qualify for minimum wage or overtime pay, whereas the latter do qualify for minimum wage and overtime pay.

Exempt employees aren’t the same as independent contractors. Independent contractors are freelancers. Like exempt employees, independent contracts don’t qualify for minimum wage or overtime pay. Independent contractors, though, are paid on demand. Businesses usually pay them based on how much work they complete. At the same time, independent contractors don’t follow a schedule when performing work. They can choose when to work and what jobs or tasks they wish to complete. In comparison, exempt employees are paid a salary and, in most cases, they follow a schedule.

Requirements for Exempt Employees

Not all employees can be classified as exempt. Rather, there are specific requirements regarding this classification. Exempt employees, for instance, must be paid a salary. If you pay an employee an hourly wage, he or she will be classified as a non-exempt employee. Only employees who are paid a salary are eligible for the non-exempt classification.

The FLSA also lists categories for exempt employees. For an employee to be classified as exempt, he or she must typically work in a particular profession. Some of the eligible professions for exempt employees include executive, administrative, computer-related and outside sales. Only employees who work in one of these categories can be classified as exempt.

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How to Record a Guaranteed Payment in Quickbooks

Are you trying to record a guaranteed payment? Guaranteed payments are used to provide compensation to partners or other individuals for performing work. While most businesses have employees, some of them have partners as well. These partners aren’t on the business’s payroll. Instead, the business will pay its partners by using guaranteed payments. In Quickbooks, you can record a guaranteed payment in just a few simple steps.

Step #1) Create a Check

The first step to recording a guaranteed payment in Quickbooks is to create a check. You’ll essentially use a check to pay the partner, after which you can choose the option to save it as a guaranteed payment. This is done by selecting the “Banking” menu in Quickbooks Desktop and choosing the “Write Checks” option. From there, you can select the bank account associated with the check from the “Bank Account” menu.

Step #2) Choose the Partner

You’ll also need to choose the partner for whom you are recording the guaranteed payment. As previously mentioned, guaranteed payments are those used to compensate partners, as well as other individuals, who perform work on behalf of your business. You can choose the partner by selecting the “Pay to the Order Of” menu. After selecting this menu, you should see a list of all known partners, vendors and other business associates. Just scroll through the list until you find the partner for whom you are recording the guaranteed payment.

Step #3) Choose the Account

The third step to recording a guaranteed payment in Quickbooks is to choose the account. Assuming you followed the steps listed above, you should see an “Action” column. Under this column is a list of accounts. Choose the guaranteed payment account that you created. Quickbooks will require you to enter some other basic information in the available fields. When finished, select “Save & Close.”

That’s all it takes to record a guaranteed payment in Quickbooks. If you aren’t comfortable recording guaranteed payments yourself, you may want to hire an accountant to do it. Nonetheless, Quickbooks simplifies the otherwise complex task of recording guaranteed payments. It only takes a few steps. Recording a guaranteed payment involves creating a check, choosing the partner and choosing the account. Once recorded, the guaranteed payment will show up your business’s general ledger. Just remember to double-check the partner to make sure it’s correct.

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How to Record Credit Card Purchases in Quickbooks

Do you use a credit card for your business-related purchases? There’s no denying the fact that credit cards are convenient. When used for business-related purchases, they’ll keep all of your expenses organized so that they aren’t mixed together with your personal expenses. You’ll still need to record these purchases, however. In Quickbooks, you can record credit card purchases in just a few easy steps.

Steps to Recording Credit Card Purchases

Recording credit card purchases in Quickbooks involves the use of a record. You’ll need to create a bank transfer record for each credit card purchase. To do so, log in to your Quickbooks account and click the “Banking” menu, followed by “Transfer Funds.” You should then see a list of all your bank accounts. Choose the bank account that you wish to use for the credit card purchase from the available list.

After choosing your bank account, look for the “Transfer Funds to” option. For this section, you’ll need to choose the credit card that you used to make the purchase. You may only have a single credit card, or you may have a half-dozen or more credit cards. Regardless, find the credit card that you used to make the purchase and select it in the “Transfer Funds” section.

You can repeat these steps for each credit card purchase that you make. Just remember to create a bank transfer record, followed by a transfer record to the appropriate credit card. Quickbooks makes it easy to record credit card purchases.

The Basics of Recording Credit Card Purchases in Quickbooks

When you record credit card purchases using this method, Quickbooks will assume that you paid for the credit card purchase using the bank selected that you previously selected. With that said, you’ll still need to match the credit card purchase with the event. Check out this help article from Intuit for more information on how to match transactions. t

In Conclusion

Many businesses use credit cards to purchase inventory, supplies, equipment and over products or services related to their operations. If your business falls under this category, you’ll need to record the credit card purchases. Fortunately, Quickbooks makes it easy to record credit card purchases. You can create a bank transfer record, after which you can choose the option to transfer funds from that bank account to the credit card.

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Did You Know? How Projects Work in Quickbooks

Are projects are a part of your business’s money-making operations? If so, you may want to track them. Quickbooks offers a solution for tracking, as well as managing, projects. In the popular accounting software, you’ll find an option to enable projects. This feature will allow you to track all of your business’s projects. How do projects work in Quickbooks exactly? For a better understanding of this feature and how to use it, keep reading.

Overview of Projects

Projects is a tracking feature available in Quickbooks Online. As the name suggests, it’s designed specifically for projects. When you create a project, you can add material and labor expenses to it, add transactions to it and run reports for the project. Assuming you use Quickbooks Online Plus, Quickbooks Online Advanced or Quickbooks Online Accountant, you can take advantage of this tracking feature.

How to Enable Projects

To use projects, you must enable this feature in your Quickbooks account. The projects feature is disabled by default. Fortunately, you can turn it on in just a few simple steps. Click the “Settings” menu and choose “Company Settings.” Under the “Advanced” tab, search for “Projects” and choose “Edit.” You should see an option labeled “Use project financial tracking.” Click this option so that it toggles to the “on” position.” When finished, click “Save.” Projects should now be enabled in your Quickbooks account.

How to Create Projects

Once enabled, you can create projects for tracking purposes. This is done by selecting “Projects” and then “New Project.” Quickbooks will prompt you to enter a name for the project. You can enter any name in this field. With that said, it’s recommended that you should descriptive and memorable name for the project. Next, click the “Customer” drop-down menu and choose the customer for whom you are performing the project. You can add optional notes to the “Notes” section, followed by clicking “Save” to complete the process.

You’ll probably want to add transactions to the project. Transactions can consist of expenses, invoices and estimates, all of which can be added to projects. To add a transaction to the project, go back to the “Projects” section in Quickbooks and select your project. Next, click the option labeled “Add to project.” You can then choose the type of transaction that you want to add to the project. After filling in the required information, click “Save and close.” The transaction will now be added to the proejct.

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The 3 Parts of a Balance Sheet for Accounting

A balance sheet is an important document that’s used for business accounting purposes. Whether you operate your business as a sole proprietorship, an S-corp or an LLC, you should consider using it. With a balance sheet, you’ll have a better idea of how much your revenue your business generates versus its expenses. While creating a balance sheet may sound difficult, it’s actually relatively easy. All balance sheets consist of three basic parts, which include the following.

#1) Assets

You’ll need to include your business’s assets on the balance sheet. Assets, of course, are items of monetary value. They can include cash or other physical as well as non-tangible items of monetary value. When creating a balance sheet, go through your business’s assets while listing them on this document.

Some of the most common types of assets are:

  • Money
  • Real estate
  • Inventory
  • Equipment
  • Accounts receivables
  • Vehicles
  • Patents and other intellectual property
  • Market securities

#2) Liabilities

In addition to assets, you’ll need to include your business’s liabilities on the balance sheet. Liabilities are essentially the opposite of assets. While assets are items of monetary value, liabilities are debt-based items. They are items that involve an obligation to pay another person or entity. Payroll taxes, for instance, are considered a liability. You’ll have to pay taxes on your business’s payroll. Because it’s money owned by your business, it’s considered a liability.

Interest fees on loans are also considered liabilities. If you have one or more outstanding loans with which you use to finance your business, you’ll probably have to pay the lender interest. These interest fees are a form of debt. Therefore, they are considered liabilities. When creating a balance sheet, be sure to list all of your business’s liabilities so that you’ll have a clearer picture of its financial health.

#3) Owner’s Equity

The third and final part of a balance sheet is owner’s equity. While you might be familiar with assets and liabilities, owner’s equity is a little more confusing. It’s essentially the monetary value of your business that you own — or other individuals own — after accounting for both assets and liabilities.

You can calculate owner’s equity by taking your business’s assets and subtracting that number by your business’s liabilities. If your business has $500,000 in assets and $100,000 in liabilities, its owner’s equity would be $400,000. When creating a balance sheet, you’ll need to include owner’s equity.

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5 Reasons to Switch From Quickbooks Online to Quickbooks Desktop

What version of Quickbooks do you currently use to track your business’s finances? If you currently use the cloud-based version, you may want to consider switching to one of the desktop versions. Intuit offers several desktop versions of its popular accounting software, including Quickbooks Pro 2021, Quickbooks Premier 2021 and Quickbooks Enterprise 2021. Upgrading to a desktop version can prove beneficial for the following reasons.

#1) Work Offline

Quickbooks Desktop allows you to work offline. This alone is reason enough to consider upgrading. With Quickbooks Online, you’ll only be record transactions and make other changes to your business’s finances if you have an active internet connection. Quickbooks Desktop is locally installed, so it doesn’t require an active internet connection.

#2) One-Time Cost

As you may know, Quickbooks Online requires a subscription. The entry-level version of Quickbooks Online is about $15 per month, but some of the higher-tiered versions of it can cost over $50 per month. Quickbooks Desktop, on the other hand, doesn’t use a subscription payment model. You’ll only have to pay a one-time fee, after which you can use it indefinitely.

#3) Features

Both Quickbooks Online and Quickbooks Desktop are loaded with features. With that said, Quickbooks Desktop has more features than its cloud-based counterpart. Whether you choose Quickbooks Pro 2021, Quickbooks Premier 2021 or Quickbooks Enterprise 2021, you’ll probably discover that it offers more features with which to track your business’s finances than Quickbooks Cloud. By switching to Quickbooks Desktop, you can take advantage of these features.

#4) Payroll

You can use Quickbooks Desktop to manage your business’s payroll. Quickbooks Online doesn’t offer payroll management. Payroll management is exclusive to Quickbooks Desktop. It allows you to set up automatic deposits for your employees, perform time tracking, generate send tax forms, and much more. You can learn more about payroll management by clicking this link. Regardless, payroll management requires Quickbooks Desktop. You won’t find this option available in Quickbooks Online.

#5) Hosting Available

It’s also worth noting that hosting is available for Quickbooks Desktop. Hosting is an optional service that involves a third-party company hosting the Quickbooks Desktop on your behalf. With hosting, you’ll essentially get the benefits of both Quickbooks Online and Quickbooks Desktop. The third-party company will install and host the software on its own server. You can then access Quickbooks Desktop over the internet.

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