For individual accounts, you can perform a few actions. Balance Sheet accounts have registers; you can view the transactions in the account by clicking View Register in the Action column. You can identify Balance Sheet accounts by looking in the Type column. Balance Sheet accounts display one of the following account types:
Bank
Accounts Receivable
Other Current Assets
Fixed Assets
Other Assets
Credit Card
Other Current Liabilities
Long Term Liabilities
Accounts Payable
Equity
For other accounts — the ones without registers — you can run reports for the account by clicking Run Report in the Action column.
You also can edit any account and you can delete an account you have not yet used. Click the down arrow in the Action column (at the right edge of the account’s row) to display a short menu of the actions you can take for the account.
To turn on account numbers, click Gear ⇒ Advanced ⇒ Chart of Accounts and then turn on the slider for Enable Account Numbers. When you return to the Chart of Accounts list, click the Batch Edit icon (it looks like a pencil and appears just above the Action column). The appearance of the Chart of Accounts page changes to enable you to quickly assign account numbers (see Figure 3-30).
FIGURE 3-30: The Chart of Accounts page in Batch Edit mode.
Type a number for each account; when you finish entering all the numbers, click the Save button at the top of the page. QBO displays the account number as part of the account name on the Chart of Accounts screen. You also can establish budgets for accounts; see the appendix for details.
The screens you use to add or edit an account look almost exactly alike. Because you’ll need a Bank account for your company, examine the screens as you create your Bank account. If you plan to connect your QBO Bank account to its corresponding account at a financial institution, don’t follow these steps; instead, see Chapter 8 for details on creating the account. And, if you decide now that you don’t want to connect and later you decide that you do want to connect, all isn’t lost. Once again, see Chapter 8 for details on merging the Bank account you create here with an online version.
A FEW NOTES ON PAYING OWNERS
Many small business owners wonder about the accounts they should use to pay themselves. Owners and partners typically are not considered employees and therefore are not paid through payroll. To pay an owner or partner, use the Chart of Accounts page to set up a Draw account (Owner’s Draw, Partner’s Draw, whatever is appropriate; if you have multiple partners, set up Draw accounts for each partner) and use it to pay owners. The Draw account is an equity account. Similarly, owners and partners sometimes put their own money into the business; to account for these contributions, set up equity accounts (again, one for each owner or partner) called Owner’s Contribution, Partner’s Contribution — again, whatever is appropriate.
Note that you use the Draw account not only to pay the owner but also to account for personal items an owner might buy using the business’s money. You record the withdrawals using the appropriate bank account and the appropriate Draw account. Note that these transactions don’t show up on your Profit and Loss report because they are not business expenses. To find out the total amount paid to an owner, run a report for the Draw account.
And, finally, housekeeping about the Draw and Contribution accounts: At the end of your fiscal year, you need to enter a journal entry, dated on the last day of your fiscal year, that moves the dollar amounts from the appropriate Draw or Contribution account to Retained Earnings — another equity account. If we just lost you, talk to your accountant about how to handle closing the year.
To ensure an accurate bank balance in QBO, reconcile your bank account before you set up the account in QBO. Follow these steps to create an account in QBO:
1 Click the New button on the Chart of Accounts page to open the Account dialog box (see Figure 3-31).
2 Open the Category Type list and choose Bank.
3 Click the entry in the Detail Type list that most closely matches the type of account you want to add.QBO uses the choice you make in the Detail Type list as the account’s name, but you can change the name to something else. For our example, we chose Checking, changed the account name to Checking-My Bank Name, and supplied Checking-My Bank Name account as the description.
4 If you’re using account numbers, supply a number for the new account.You can, optionally, supply a description for the account. If you’ve enabled the Multicurrency feature, the dialog box you use to create a Bank account — or any type of asset or liability account except an Accounts Receivable (A/R) or Accounts Payable (A/P) account — also contains a list box from which you select the currency for the account. QBO automatically creates currency-related A/R and A/P accounts when you create transactions for foreign customers and vendors.FIGURE 3-31: The dialog box you use to create an account.
5 You can enter your account’s balance as it appears on the last statement you received from your bank.Our example company is just starting out and has no opening balance yet, so we’re not entering an opening balance. See the sidebar “Proper account balances” for details on what to do here.
6 Click Save.QBO redisplays the Chart of Accounts page and your new account appears in the list.
PROPER ACCOUNT BALANCES
If you’ve been in business for a while, transactions have occurred. To ensure accurate account balances, you need to account for these transactions in QBO.
To make sure that you start your work in QBO with correct account balances, begin by deciding on the first date you intend to use QBO. This date determines the “as of” date of historical information you need to collect. Try to start using QBO on the first day of an accounting period — either on the first day of your company’s fiscal year or on the first day of a month. If you start using QBO Payroll (QBOP) on January 1, you do not need to enter any historical payroll information.
Although it might seem like more work, we suggest that the easiest way for you to ensure proper account balances is to enter $0 as your Bank account’s opening balance in Step 5 in the preceding steps for creating a Bank account. Then, enter all transactions that have occurred so far this year.
If you’ve been in business since before the beginning of the year, enter $0 for your Bank account’s balance and ask your accountant for opening amounts for your Balance Sheet accounts as of December 31 of last year.