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How to Create an Interest Account in Quickbooks

Does your business earn interest on its deposited money? Most banks, of course, pay interest on savings accounts. Many of them also pay interest on certain types of checking accounts. Whether your business has a savings account or a checking account, it may earn interest. In Quickbooks, you can create an interest account to record this earned interest.

What Is an Interest Account?

An interest account is a special type of account in Quickbooks that, as the name suggests, is designed specifically for earned interest. Earned interest is still considered revenue. Interest accounts are where you record this earned interest. You can create one or more interest accounts, after which you can use them to record your business’s earned interest.

Like all forms of revenue, you must record it. Quickbooks offers interest accounts as a way for businesses to record earned interest. You can create an interest account, after which you can use that account to record how much money your business earned from interest.

Steps to Creating an Interest Account

To create an interest account in Quickbooks Online, click the “Accounting” tab on the left-hand menu and choose “Chart of Accounts,” followed by “New.” Next, look for the column labeled “Account Type.” Under this column, you should see an option for “Other Income.” Selecting this option will bring up a new list of options. You’ll need to find the option for “Detailed Type.” Select “Detailed Type” and then choose “Interest Earned.”

When creating an interest account, you’ll need to give it a name. You can choose any name for an interest account. However, it’s recommended that you give it a descriptive and meaningful name so that you can easily identify it. After entering a name for your interest account, select “Save and close” to complete the process.

How to Record Interest in an Interest Account

Now that you know how to create an interest account, you might be wondering how to record interest in this account. You can record int erest by pulling up the “Bank Deposit” section in Quickbooks Online. For the “Adds Funds” option, select the name of your interest account. You can then enter a description for the interest payment as well as an amount. To complete the process, select “Save and close.” That’s all it takes to record interest in an interest account.

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Vendors vs Customers in Quickbooks: What’s the Difference?

When recording transactions in Quickbooks, you’ll need to select either a vendor or a customer. There are different versions of Quickbooks, some of which include Quickbooks Desktop and Quickbooks Online. Regardless of which version you use, though, you’ll have to enter certain information about your business’s transactions. One of the required pieces of information is whether the other party is a vendor or customer. What’s the difference between vendors and customers exactly?

What Is a Vendor?

A vendor is a person or business from which you purchase goods or services. They are also known as suppliers. When running a business, you’ll probably have to purchase certain goods and services to execute its money-making operations. The people or other businesses from which you purchase these goods or services are known as vendors.

Quickbooks is equipped with a vendor center. From the vendor center, you can add, remove and manage all of your business’s vendors.

What Is a Customer?

A customer, on the other hand, is a person or business that purchases goods or services from your own business. Customers are sometimes known as clients. All businesses make money by selling goods or services. The people or businesses that purchase these goods or services from your business are customers. When your business generates a sale, you’ll need to record the transaction with the customer’s information.

Like with vendors, Quickbooks has a center for customer. The customer center offers a platform where you can manage your business’s customers. You can find the customer center in Quickbooks by navigating to the “Customers” option on the main menu, followed by selecting “Customer Center.” The customer center will reveal a list of all of your business’s customers as well as options to manage them.

Differences Between Vendors and Customers

As you can see, vendors and customers aren’t the same. Vendors are business-to-business (B2B) entities that sell goods and services to your business. Customers, conversely, are entities that purchase your business’s goods or services.

Your business will probably have more customers than vendors. Some businesses only have a half-dozen vendors, in fact. Regardless, chances are your business will have both vendors and customers. It will just have more customers. You can access vendors and customers in Quickbooks. Vendors are accessed from the vender center. Customers are accessed from the customer center.

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What Is an Accounting Period? Here’s What You Should Know

Accounting periods are an important element of an accounting strategy. They are used by all types of businesses, including small businesses and large businesses. The term “accounting period” is fairly straightforward. It refers to a period of time during which financial transactions are recorded. With that said, there are several things you should know about accounting periods when using them in your business’s accounting strategy.

Overview of Accounting Periods

An accounting period refers to a period of time during which financial transactions are recorded. A calendar year, for example, can be an accounting period. When using a calendar year as an accounting period, you’ll need to group your business’s transactions by the year in which they occurred. Each calendar year starts on January 1 and ends on December 31. Therefore, calendar years are commonly used as accounting periods.

Why Accounting Periods Are Important

You might be wondering why accounting periods are important? For starters, they serve as the foundation for a given business’s accounting strategy. With accounting periods, you can easily review all of your business’s transactions for a particular period of time. If you know what a transaction occurred, you can pull up the accounting period for that time. Doing so will reveal all of the transactions for that time.

There are also requirements regarding which type of accounting period some businesses can use. Publicly traded businesses, for instance, must release four earnings reports each year. Therefore, they are required to use four accounting periods for each calendar year.

The Different Types of Accounting Periods

There are different types of accounting periods. As previously mentioned, calendar years are commonly used as accounting periods. Most small businesses use calendar year-based accounting periods because it’s simple and convenient.

Fiscal years can be used as accounting periods as well. A fiscal year isn’t the same as a calendar year. A fiscal year is defined as any year-long period consisting of 12 whole months. It doesn’t have to begin on January 1, nor does it have to end on December 31. A fiscal year can start on any day of the year, but it must end exactly 12 months later, resulting in a complete fiscal year.

Accounting periods can be quarterly as well. Publicly traded businesses are required to use quarterly accounting periods. Quarterly accounting periods consist of three-month periods. Businesses can use multiple types of accounting periods. Some publicly traded businesses, for example, use either calendar or fiscal year accounting periods in conjunction with quarterly accounting periods.

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How to Use the Memorized Reports Feature in Quickbooks

Quickbooks doesn’t require you to use the same template for all of your business’s reports. Rather, you can create multiple, custom reports. Assuming you intend to reuse one of these custom reports in the future, you may want to memorize it as well. Memorizing a custom report will essentially save it. Therefore, you won’t have to create it again. You can simply choose the memorized custom report.

Steps to Memorizing a Custom Report

You can memorize a custom report from the reports window in Quickbooks. Just pull up the reports window and select the “Memorize” option. From there, you should see a window titled “Memorize Report.” You’ll need to enter a name for the memorized custom report. Alternatively, you can enter the same name of an existing report to overwrite it.

Quickbooks allows you to categorize memorized reports into groups. Just click the option for “Save in Memorized Report Group,” after which you can choose one or more groups in which to save it. You can also share memorized reports with other users. This is done by clicking the option for “Share this report template with others.” If there’s an accountant who works on your business’s finances, for instance, you may want to share the memorized report with him or her. After completing the required field, select “OK.”

The Different Ways to Access a Memorized Report

There are several ways that you can access a memorized report in Quickbooks, one of which is from the “Report Center.” From the “Reports” menu, select “Report Center.” Under the list of available tabs, you should see an option for “Memorized.” Clicking this tab will allow you to access all of your memorized reports. It will load your report groups on the left-side menu. Just select a group, after which you can see all of the memorized reports assigned to that group. Another way to access a memorized report is from the “Memorized Report List.” Go back to the “Reports” menu and select “Memorized Reports,” followed by “Memorized Report List.”

How to Edit a Memorized Report

Of course, you can also edit a memorized report. Editing is done by opening the memorized report and changing one or more fields of information. When finished, click the “Memorize” option. Quickbooks will typically ask you if you want to create a new report or replace an existing report. If you choose the latter option, the old report will be deleted and replaced with the new report.

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Why You Shouldn’t Mix Business and Personal Finances

One of the most common accounting mistakes small business owners make is mixing their business and personal finances. Rather than using two separate accounts — an account for their business finances and another account for their personal finances — they use a single account. They’ll use this single account to receive money from their business’s customers, and they’ll also use this account to pay for both business- and personal-related expenses. While mixing business and personal finances may sound harmless, it can lead to several problems.

Missed Tax Deductions

Mixing personal and business finances can result in missed tax deductions. As you may know, most business-related purchases can be deducted from your taxes. Whether it’s cleaning supplies, shipping services, insurance, inventory, etc., you can typically deduct them from your taxes. You’ll need to identify them, however. And with mixed personal and business finances, you may overlook some of these tax deductions. The end result is a higher tax liability that cuts into your business’s annual profits.

Increased Risk of Tax Audit

Speaking of taxes, mixing personal and business finances can increase the risk of a tax audit. The Internal Revenue Service (IRS) doesn’t explicitly prohibit business owners from mixing their business and personal finances. It does, however, require them to maintain complete accounting records. Mixing business and personal finances can make it difficult to create complete accounting records. All of your business-related transactions will be tied to the same account as your personal transactions. The end result is messy and incomplete accounting records that place you at a greater risk of a tax audit.

Unprofessional Brand Image

Another reason to avoid mixing personal and business finances is that it creates an unprofessional brand image. You may need to write checks on behalf of your business. Maybe you’re purchasing inventory from a supplier, or perhaps you’re refunding a client or customer. Regardless, if you mix your personal and business finances, you’ll have to write checks from your personal account, which will also be used for your business-related transactions. The supplier, client or customer will see your personal name on the check rather than the name of your business.

The bottom line is that you should use separate accounts for your business and personal finances. Mixing these finances together under a single account can lead to missed tax deductions, an increased risk of a tax audit and an unprofessional brand image.

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When to Use Journal Entries in Quickbooks

Do you use Quickbooks to track your business’s finances? The popular accounting software offers dozens of helpful features, one of which is journal entries. You can create journal entries to post transactions directly to your business’ general ledger. Being that Quickbooks can automatically update itself with your business’s transactions, though, you might be wondering when to use journal entries.

Transferring Funds Between Income and Expense Accounts

You may want to use journal entries when transferring funds between income and expense accounts. Income accounts, of course, are those that are used to receive money from customers. Expense accounts, on the other hand, are those used to pay for your business’s expenses. When transferring funds between these two types of accounts, you can use journal entries. Journal entries allow you to record the transfer of funds between an income account and an expense account.

Manually Record Debits

Another instance in which you may want to use journal entries is to manually record debits. Some accounting methods revolve around manually recording transactions. If you use one of these accounting methods, you should take advantage of journal entries. You can create journal entries to manually record debits. As you may know, a debit is a transaction that involves funds leaving your business and going to a vendor, supplier or another party.

Manually Record Credits

Like with debits, you can use journal entries to manually record credits. Journal entries support both debits and credits. While debits involve funds leaving your business, credits involve funds entering your business. Regardless, you can use journal entries to manually record both debits and credits.

Tips on Creating Journal Entries

Creating journal entries in Quickbooks is a breeze. In Quickbooks Online, you can create them by clicking the “+ New” button at the top of the screen, followed by “Journal entry.” All journal entries require an account. When creating a journal entry, you’ll need to choose an existing account under the “Account” drop-down menu.

You’ll also need to enter an amount for each journal entry. Journal entries for credits should have a positive amount, whereas journal entries for debits should have a negative amount. After completing all of the required fields, click “Save and close.” The journal entry should now be added to your business’s general ledger.

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Pros and Cons of Using the Cash Basis Accounting Method

There are different accounting methods that you can use to track your business’s finances. Two of the most popular include the accrual method and the cash basis method. The accrual accounting method involves recording transactions — both revenue and expense transactions — when they occur. The cash basis accounting method, on the other hand, involves recording transactions your business receives the payment or sends the payment. There are several pros of cons of using the cash basis accounting method.

Pro: Easier

When compared to the accrual accounting method, the cash basis accounting method is easier. You can use it by evaluating your business’s bank account. The cash basis accounting method focuses on recording transactions when your business receives payments or sends payments. If you discover a new transaction in your business’s bank account, you can record it. The cash basis accounting method is particularly easy, making it a popular choice among small businesses.

Con: Doesn’t Reveal All Liabilities

One of the disadvantages to using the cash basis accounting method is that it doesn’t reveal all liabilities. Liabilities can occur when your business purchases a product or service but doesn’t immediately pay for it. With the cash basis accounting method, you’ll only record expense transactions when your business makes a payment. Therefore, liabilities such as this may go unnoticed — at least for a short period of time.

Pro: Tax Savings

You may be able to take advantage of tax savings by using the cash basis accounting method. The Internal Revenue Service (IRS) doesn’t necessarily offer lower tax rates to businesses that use the cash basis accounting method. Nonetheless, it may lower your business’s taxes. With the cash basis accounting method, you can wait to record transactions when the money enters or leaves your business’s bank account.

Con: Restricted Usage

There are restrictions regarding which businesses can use the cash basis accounting method. The IRS, for instance, typically prohibits businesses from using this alternative accounting method if they are classified as a corporation You can still use the cash basis accounting method if your business is a sole proprietorship or an LLC. If it’s a corporation, though, you’ll have to use the accrual accounting method.

When choosing an accounting method, you should weigh the pros and cons. The cash basis accounting method is easy and potentially offers tax savings benefits. With that said, it fails to reveal all liabilities and it’s allowed by the IRS for some businesses.

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How Do Snapshots Work in Quickbooks Desktop?

Quickbooks Desktop offers several Snapshot tabs. Using them, you can view certain types of information about your business in a single place. It’s a simple but useful feature that many business owners overlook. Even if you’ve encountered the Snapshots tabs in Quickbooks Desktop, though, you might be wondering how they work. This post offers an introduction to the Snapshots tab by revealing what they are and how they work.

The 3 Types of Snapshot Tabs

In Quickbooks Desktop, you’ll find three Snapshot tabs. They include the Company Snapshot tab, the Payments Snapshot tab and the Customer Snapshot tab. The Company Snapshot tab features information about your business. The Payments Snapshot tab features information about your recorded payments. Finally, the Customer Snapshot tab features information about your customers. You can switch between these Snapshot tabs by clicking your desired tab at the top of the screen. Quickbooks Desktop shows the three Snapshot tabs in the upper-left corner.

Steps to Adding Content to a Snapshot Tab

You can add content to any of the Snapshot tabs in Quickbooks Desktop. When you add content to a given Snapshot tab, you’ll customize it. Adding content to a Snapshot tab will change its layout by updating it with new types of information or content.

To add content to a Snapshot tab, click the “Add Content” button. This should expand the content gallery within the Snapshot tab. Once the content gallery has loaded, click “Show preview” to see a list of all available types of content. Go through this list until you see the type of content that you want to add to the tab. After finding the desired type, click “Add” next to it. Quickbooks Desktop will then add the content to the Snapshot tab. Just remember to save your changes by clicking “Done” when you are finished.

Steps to Removing Content From a Snapshot Tab

In addition to adding content to a Snapshot tab, you can remove content from a Snapshot tab. Removing content from a Snapshot tab is a breeze. All you have to do is pull up the Snapshot tab in Quickbooks Desktop, followed by clicking the “X” button in the corner of the content. Each piece of content should have an “X” button. Clicking this button will remove the content from the Snapshot tab.

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An Introduction to Company Files in Quickbooks

If you’re planning to use Quickbooks to track your business’s finances, you should familiarize yourself with company files. The popular accounting software supports over a dozen different types of files. One of the most important types of Quickbooks-supported files, however, is company files. You can’t use Quickbooks without at least one company file. What are company files exactly, and how do they work in Quickbooks?

The Basics of Company Files

A company file is a digital document that contains all of a business’s financial transactions and account data. It uses the QBW extension. You can identify company files by looking for this extension. If a file has the QBW extension, it’s a company file.

When you set up your business on Quickbooks, the software will automatically generate a company file for your business. Any changes that you make to your business’s financial transactions will be reflected in this file. If you record a new transaction, for instance, Quickbooks will update your business’s company file so that it features the new transaction. If you add a new bank account, the bank account will be added to your business’s company file.

Company Files vs Backup Files

Keep in mind that company files aren’t the same as backup files. Company files use the QBW extension, whereas backup files use the QBB extension. They both consist of similar data, but they are designed for different purposes.

Backup files, as you may have guessed, are designed for backups. When you use the backup feature in Quickbooks Desktop, the software will automatically generate a backup file. You can restore your account using this backup file. If there’s a problem with your Quickbooks account, a backup file offers a solution. Company files, on the other hand, are designed for backups. Company files are standard files that contain all of your business’s financial transactions and account data.

Opening a Company File

You can typically open a company file by right-clicking it on your computer and selecting “Open.” Assuming you use Quickbooks Desktop, the company file should open in Quickbooks Desktop. There are instances, however, in which a company file may fail to open.

Using an outdated version of Quickbooks Desktop may prevent a company file from opening. Outdated versions are more likely to contain bugs, technical errors and vulnerabilities than the most recent version. If you’re still using an outdated version of Quickbooks Desktop, consider updating it to the most recent version.

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How to Record a Supplier Credit in Quickbooks

Has your business received a refund from a vendor? Vendors, of course, are product suppliers. They are responsible for supplying businesses with products so that the businesses can resell them to their customers. It’s not uncommon, however, for vendors to issue refunds. Maybe you ordered the wrong products, or perhaps the vendor overcharged your business. Regardless, when a vendor issues a refund, you’ll need to record it.

What Is a Supplier Credit?

You can record vendor-issued refunds in Quickbooks Online by creating supplier credits. A supplier credit is exactly what it sounds like: a credit given to your business by a vendor or supplier. It’s designed to eliminate the debt incurred by the refunded transaction. Whether your business has received a single refund or a dozen refunds from vendors, you can create a supplier credit for each of them.

Steps to Creating a Supplier Credit

To credit a supplier credit in Quickbooks Online, click the “+ New” button on the home screen of your account, followed by “Supplier Credit.” Quickbooks Online will then prompt you to enter some basic information about the refund. You’ll need to choose the name of the supplier, and you’ll need to enter the amount of the refund, the date of the refund and the billing account used for the refund. After entering this information, select “Save and close.”

Now that you’ve created the supplier credit, you can enter the refund in the “Bank Deposits” section of your Quickbooks Online account. Go back to the home screen account of your account and select the “+ New” button. Rather than choosing “Supplier Credit,” though,” choose “Bank Deposit.” You should see an option to add deposits. Recording a supplier credit requires adding a deposit for the refund.

When adding a deposit, you’ll need to enter the name of the vendor that issued the refund in the “Received from” field. You’ll also need to select the Accounts Payable account associated with the refund. Finally, you’ll need to enter the amount of the refund in the “Amount” field. You can then choose “Save and close” to finish the process.

Assuming you followed these steps, the supplier credit should now be recorded. Keep in mind that you’ll need to repeat these steps for each supplier credit. Supplier credits are refunds issued by vendors. When a vendor issues a refund, you’ll need to record a supplier credit.

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