Day 22 (CA)

CHAPTER 6 TEST: Download the file below. Print it with your name on each printout.

Accounting with QuickBooks Online

Chapter 1 Getting Started

Learning Objectives

After you have completed this chapter, you will be able to do the following:

  1. Create a new QuickBooks Online account using codes provided with this text
  2. Provide information to QuickBooks Online about your company
  3. Sign out and sign in to QuickBooks Online
  4. Successfully navigate the QuickBooks Online home page
  5. Assign your instructor as your ‘‘Accountant’’ (Optional)

Overview

The focus of this chapter is to introduce you to QuickBooks Online and get your account and company established. The name QuickBooks Online is used to refer to the QuickBooks Online Plus online application from Intuit. This text includes codes, which will allow you to create your own personal account with Intuit and create one and only one company. You will assign your company a name, which includes your name for identification purposes. Welcome to the journey.

The figures and steps provided and described in this supplement were accurate on the day they were captured. Intuit may have changed the location, the description, or the process for recording certain business transactions and thus at any point in time the figures may not match your screen or the steps described may not match those described here. Changes should not be significant but the author does not control or have any influence over QuickBooks Online developers.

Creating a New QuickBooks Online Account

A friend of yours, Richard Lewis, has decided to open a spa to serve his hometown of Waco, Texas. This is a NEW business. He has named the business Magnolia Spa. He will operate the business Monday through Friday from 8:00 am to 8:00 pm. He has asked you to be the accountant for his business using QuickBooks Online.

Before getting started, you will need to establish your account with QuickBooks Online. This text includes access codes for one user. Once you use the codes, they will not work again.

To launch QuickBooks Online and create a new account, and then sign out of QuickBooks Online, do the following:

  1. Copy & paste https://quickbooks.intuit.com/signup/retail into your browser’s address text box to view the Set Up Your Account window
  2. Type your license number and product number (in the back of the text) and then click the checkbox I agree to the Terms of Service and then click Set Up Account.
  3. Enter information about you, changing all the information to your first name, your last name, your email address (which will become your User ID), your mobile number (if you want), and your password.
  4. Click Create Account.
  5. Enter information about your company: Business Name is Magnolia Spa and it has been in business for less than a year.
  6. Click Next.
  7. Do not select any item when asked how you keep track of your business now. Click Next.
  8. Click Get Started
  9. Click the gear icon in the upper right corner and then click Sign Out
  10. This action will close QuickBooks Online. It is important to close QuickBooks Online after every use by following the above sign-out process. When you are ready to come back follow the steps below.

Navigating QuickBooks Online

The Home page provides links to various tasks and resources. The Customers window provides access to adding new customers, viewing existing balances, and highlighting overdue accounts. The Vendors window provides access to adding new vendors, viewing existing balances, and highlighting overdue accounts. The Employees window provides access to adding new employees and viewing payroll information. To begin, you should take a tour of the Home page to learn how to navigate around QuickBooks Online.

To sign in and navigate to QuickBooks Online’s home page:

  1. Type <URL>https://qbo.intuit.com/</URL> into your web browser.
  2. Type your User ID and Password
  3. Click Sign In.
  4. Click on one of the options to verify your account
  5. Click the Create + menu at the top right of the Home page to view the full create menu items available
  6. Under YOUR BOOKS on the left side of the screen click SALES and then click Customers toward the top of the screen to view your company’s Customers page. Customers are people or companies that pay you money for goods you deliver or services you render to them. Remember QuickBooks Online is an online application and Intuit will change it often. Thus the figures in this text may differ from what you see in QuickBooks Online. The Customers page lets you manage your customer list and sales transactions on one page. From there, you can do a variety of things like:
    1. Add customers and edit their information
    2. Keep track of sales transactions, either by type or customer
    3. Work with the Customer money bar to see totals and filter the customer list
    4. Sort customers by name, company, open balance, or overdue balance
    5. Your screen does not reflect any customers but will once you enter customers and sales transactions.
  7. Click EXPENSES on the left side of your screen and then click Vendors from the navigation bar toward the top of the screen. Vendors are people or companies that you pay money to, such as a store, utility, or landlord, or subcontractors who do work for you. The Vendors page lets you manage your vendors list and purchase transactions on one page. From there, you can do a variety of things like:
    1. Add vendors and edit their information
    2. Keep track of purchase transactions, either by type or vendor
    3. Work with the Vendor money bar to see totals and filter the vendor list
    4. Sort vendors by name, company, open balance, or overdue balance
    5. Your screen does not reflect any vendors but will once you enter vendors and purchase transactions.
  8. Click Workers from the navigation bar on the left of the Home page to view your company’s Employees page. Employees are people who do work for you on an hourly or salaried basis. The Employees page lets you manage your employees list and payroll transactions on one page. From there, you can do a variety of things like:
    1. Add employees and edit their information
    2. Keep track of payroll transactions
    3. Your screen does not reflect any employees but will once you enter employees and payroll transactions.
  9. Do not close your company file.

Assigning an Instructor as the Company’s Accountant

Your instructor may require you to assign him or her as your company’s accountant. You do this so he or she, as your accountant, will always have access to your company files for grading and evaluation purposes. This will also assist the instructor in answering questions you may have about your company. The process of assigning an accountant to your company involves a brief interview in which you will provide your instructor’s email address and name. Make sure you have that information before beginning this process. Your instructor will receive an email inviting him or her to be your accountant. Once the instructor accepts your invitation, he or she will have access to your company and the instructor’s name will appear in the Accounting Firms section of the Manage Users page.

To assign an accountant to your company, do the following:

  1. From the Home page, click Team on the left side of your screen
  2. Click Add Users and type TRACY WEBER tracyweber@bellevue.k12.ia.us
  3. Under ACCESS choose FULL
  4. Click NEXT
  5. Click SAVE

Review It with QuickBooks Online

Answer the following in a Google Doc shared with me:

  1. The Customers page in QuickBooks Online lets you manage all of the following except:
    1. Add customers and edit their information
    2. Keep track of purchase transactions
    3. Work with the Customer money bar to see totals and filter the customer list
    4. Sort customers by name, company, open balance, or overdue balance
    5. Keep track of sales transactions, either by type or customer
  2. The Vendors page in QuickBooks Online lets you manage your vendors list and purchase transactions for all of the following except:
    1. Add vendors and edit their information
    2. Work with the Vendor money bar to see totals and filter and vendor list
    3. Add and edit the company information
    4. Keep track of purchase transactions, either by type or vendor
  3. QuickBooks Online allows your instructor access to view your company files if you set up your instructor in the following area:
    1. Add as employee
    2. Add as vendor
    3. Add as customer
    4. Add as company’s team member

End Note

You have now been introduced to QuickBooks Online, its basic features, and how it is similar to but not the same as QuickBooks Desktop. You created your Intuit account and provided basic information about your company and learned how to navigate around the QuickBooks Online application. After assigning your instructor as your accountant you are now ready to modify you company settings and the chart of accounts and to add some customers, vendors, and employees in Chapter 2.

Accounting with QuickBooks Online

Chapter 2 Setting Up a New Company

Learning Objectives

After you have completed this chapter, you will be able to do the following:

  1. Modify company settings
  2. Modify the chart of accounts
  3. Add customers
  4. Add vendors
  5. Add employees

Overview

You began this process in Chapter 1 when you created your account and provided basic information about your company, including the company name, address, etc. Now it’s time to continue that process.

The tasks you accomplish on your company are permanent and will be there after you close your QuickBooks Online browser window. There is no Save File or Save File As command in QuickBooks Online. Everything is saved for you.

The focus of this chapter is to get your QuickBooks Online company ready to accept business transactions. To do so you will need to modify your company settings, modify the chart of accounts, and add customers, vendors, and employees.

Once again you should remember that the figures and steps provided and described in this supplement were accurate on the day they were captured. Intuit may have changed the location, the description, or the process for recording certain business transactions and thus at any point in time the figures may not match your screen or the steps described may not match those described here. Changes should not be significant but the author does not control or have any influence over QuickBooks Online developers.

Modifying Company Settings

There are five sections to consider modifying in QuickBooks Online. All of these sections are accessed from the Gear icon and then by selecting a specific tab. The Company tab includes company name, accounting method, etc. The Sales tab includes invoice terms and other sales form content. The Expenses tab includes options for bills, expenses, and purchase orders. The Payments tab includes options for QuickBooks payments which you will not use. The Advanced tab includes options for a fiscal year, chart of account numbers and other preferences.

You decide to tailor QuickBooks Online to Magnolia’s specific needs by modifying company settings.

To modify company settings:

  1. Type https://qbo.intuit.com/ into your web browser.
  2. Type your User ID and Password as you did in Chapter 1.
  3. Click the Gear icon from the Home page and then click Company Settings
  4. The Company tab should be selected. Your information should be shown here. No changes need to be made for your company.
  5. Click the Sales tab to view the information. No changes need to be made for your company at this time.
  6. Click the Expenses tab to view the information. No changes need to be made for your company at this time. Later we will make purchase orders active.
  7. Click the Payments tab to view the information. No changes need to be made for your company at this time.
  8. Click the Advanced tab to view the information
  9. Click the pencil icon to edit the Accounting section.
  10. Select July as the First month of fiscal year. Do not place a check in the Close the books check box.
  11. Click Save.
  12. Click the pencil icon to edit the Chart of Accounts section, then place a check in the Enable account numbers and the Show account numbers checkboxes
  13. Click Save to save your changes and then click Done to return to the Home page.

Modifying the Chart of Accounts

In this section, you will be adding new accounts to your company, modifying some existing accounts, and deleting other existing accounts. Since you are establishing this QuickBooks Online file for a company at its initial state there is no need to establishing beginning balances. Each account will have a number, name, type, and detail type. Type is later referred to as Category Type, which gives each account specific characteristics, including what financial statement it will appear on and where.

Some accounts are required and cannot be deleted even though they do not apply to your company, for example, Undeposited Funds, Opening Balance Equity, Retained Earnings, and Non Profit Income.

To modify the chart of accounts:

  1. Click the Gear icon and then select Chart of Accounts
  2. A partial view of the Chart of Accounts window is shown
  3. Click New to reveal an Account window.
  4. Select Bank from the Category Type drop-down list
  5. Select Checking from the Detail Type list
  6. Type Cash in the Name text box and 111 in the Number text box
  7. Click Save and Close to view the updated Chart of Accounts
  8. Add the following accounts:
    1. Accounts Receivable…….Accounts Receivable………. Accounts Receivable………. 113
    2. Other Current Asset ………. Development Costs………. PrePaid Insurance………. 117
    3. Other Current Asset………. Undeposited Funds ………. Undeposited Funds………. 118
    4. Income ………. Services/Fees………. Income from Services………. 411
    5. Expenses ………. Rent or Lease of Buildings………. Rent Expense………. 612
    6. Expenses………. Supplies & Materials………. Spa Supplies Expense………. 614
    7. Expenses………. Advertising/Promotional………. Advertising Expense ………. 616
    8. Expenses ………. Utilities ………. Utilities Expense………. 617
    9. Expenses………. Insurance………. Insurance Expense………. 618
    10. Expenses ………. Other Miscellaneous Service Cost………. Miscellaneous Expense………. 630
  9. Click Save to save your changes.
  10. Click the Action down arrow on the Uncategorized Asset account line and select Delete
  11. Click Yes to confirm account deletion.
  12. Delete accounts using the process you just completed until your Chart of Accounts list looks like this:
  13. Click New to add the following accounts. (Note: after you add an account click Save and New to add an additional account until all new accounts are added.)
Category TypeDetail TypeNameNumber
Other Current AssetsOther Current AssetsOffice Supplies114
Other Current AssetsOther Current AssetsSpa Supplies115
Fixed AssetsMachinery & EquipmentOffice Equipment124
Fixed AssetsAccumulated DepreciationAccum. Depr. – Office Equipment125
Fixed AssetsMachinery & EquipmentSpa Equipment128
Fixed AssetsAccumulated DepreciationAccum. Depr. – Spa Equipment129
Accounts Payable (A/P)Accounts Payable (A/P)Accounts Payable211
Other Current LiabilitiesOther Current LiabilitiesWages Payable212
EquityOwner’s EquityLewis, Capital311
EquityOwner’s EquityLewis, Drawing312
ExpensesPayroll ExpensesWages Expense611
ExpensesOffice/General Administrative ExpensesOffice Supplies Expense613
ExpensesSupplies & MaterialsLaundry Expense615
Other ExpensesDepreciationDepr. Expense – Office Equipment619
Other ExpensesDepreciationDepr. Expense – Spa Equipment620

Adding Customers

QuickBooks Online allows you to add customers as you record sales or before you record sales. You decided to add customers as a part of your setup and then add new customers as new sales occur. For this text only customer names will be added. Normally you would include a customer’s address and other contact information.

To add customers:

  1. Click Sales from the Navigation bar on the left side of the screen
  2. Click Customers toward the top of the screen
  3. Type Jill Anson in the name text box
  4. Click Add Customer and then click New customer from the Customers page.
  5. Add the following additional customers. After you click Save you’ll need to click  THE BACK ARROW and then click New customer to add more–ONLY FILL IN THE FIRST NAME & LAST NAME TEXT BOXES
    1. Jack Morgan
    2. Tory Ligman
    3. Judy Wilcox
  6. Click Sales from the Navigation bar and CUSTOMERS to view the Customers Page

Adding Vendors

QuickBooks Online also allows you to add vendors as you record purchases or before you record purchases. You decided to add vendors as a part of your setup and then add new vendors as new purchases occur. For this text only vendor names will be added. Normally you would include a vendor’s address and other contact information.

To add vendors:

  1. Click  Expenses from the Navigation bar.
  2. Click VENDOR
  3. Click Add A Vendor.
  4. Type Spa Supplies, Inc. in the Company text box
  5. Click Save.
  6. Add the following additional vendors using the same process:
    1. Office Equipment Company
    2. Office Staples
    3. Adco, Inc.

Adding Employers

You have chosen not to use Intuit’s payroll service in QuickBooks Online. Instead you choose to calculate payroll manually. QuickBooks Online allows you to add employees as you record payroll or before you record payroll. You decided to add employees as part of your setup and then add new employees as they are hired. For this text only employee names will be added. Normally you would include an employee’s address and other contact and payroll deduction information.

To add employees:

  1. Click Workers from the Navigation bar.
  2. Click Add An Employee.
  3. Type Sarah Polin in the First name and Last name text boxes
  4. Click DONE
  5. Click FINISH THIS LATER
  6. Add the following additional employees using the same process:
    1. Graham Ogilvie
    2. Hector Alvarez
    3. Jen Hansen

Review It with QuickBooks

Answer the following in a Google Doc shared with me:

  1. QuickBooks Online allows for modifications in five different areas. The Advanced tab allows users to modify which of the following:
    1. Company information
    2. Sales
    3. Chart of account numbers
    4. Invoice terms
    5. None of the above
  2. In QuickBooks Online, accounts listed in the chart of accounts include all of the following, except:
    1. Account numbers
    2. Account nonprofit income
    3. Account name
    4. Account type
    5. All of the above
  3. Which of the following accounts in QuickBooks Online cannot be deleted?
    1. Category type accounts
    2. Undeposited Funds
    3. Opening Balance Equity
    4. Retained Earnings
    5. Non Profit Income

 End Note

You have now modified your company settings and chart of accounts, and added customers, vendors, and employees. Next up, in Chapter 3, recording business transactions and preparing a trial balance, income statement, and balance sheet.

Accounting with QuickBooks Online

Chapter 3 Using Journal Entries to Enter Business Transactions

Learning Objectives

After you have completed this chapter, you will be able to do the following:

  1. Prepare journal entries to reflect checkbook entries
  2. Prepare journal entries to record purchases on account
  3. Prepare journal entries to record sales on account
  4. Prepare a trial balance
  5. Prepare an income statement
  6. Prepare a balance sheet

 Overview

You began this process in Chapter 1 when you created your account and provided basic information about your company. In Chapter 2 you modified company settings and the chart of accounts. Remember there is no Save File or Save File As command in QuickBooks Online. Everything is saved for you.

The focus of this chapter is to record your business transactions for June into QuickBooks Online. The source of your information comes from the company’s checkbook and notes taken for sales and purchases on account. The dates for all transactions in this text are set for June, July, and August of 2018. However, you can use any year you’d like. Just remember that the figures in this text will all show 2018.

It is important to note that this QuickBooks Online supplement assumes you have read and understood the accounting concepts and related journal entries in the College Accounting text. This supplement will explain QuickBooks Online steps and processes but will not reiterate how to record specific business transactions.

Once again you should remember that the figures and steps provided and described in this supplement were accurate on the day they were captured. Intuit may have changed the location, the description, or the process for recording certain business transactions and thus at any point in time the figures may not match your screen or the steps described may not match those described here. Changes should not be significant but the author does not control or have any influence over QuickBooks Online developers.

Journal Entries

Business transactions can be recorded into QuickBooks Online in many different ways. One way is to use journal entries for all transactions. The other is to use source documents like sales invoices, purchase invoices, bills, checks, and deposit slips. For this chapter, you’ve decided to enter all transactions as journal entries. You’ll explore alternative ways in future chapters. It is important to note that all journal entries which affect accounts receivable or accounts payable must specify a specific customer or vendor, respectively. For example, Magnolia purchased spa equipment, described below, from a specific vendor (Spa Supplies, Inc.). Thus the purchase and subsequent payment journal entries must be designated as related to that vendor.

To access QuickBooks Online journal entries:

  1. Type https://qbo.intuit.com/ into your web browser.
  2. Type your User ID and Password as you did in Chapters 1 and 2.
  3. Click the Create + icon from the Home page and then click Journal Entry
  4. After clicking Journal Entry, a blank journal entry form labeled Journal Entry #1 should appear
  5. Click the X to close this window

Recording Checkbook Activities

The checkbook is a good place to begin recording business events. A replica of Magnolia’s June 2018 checkbook is provided below, reflecting both deposits and checks. There are 18 business events which need to be recorded so you’ll create journal entry 1 though journal entry 18 below. The first entry will be demonstrated below and the following 17 entries are up to you.

The first entry in the checkbook is a deposit of $15,000.00 from Richard Lewis as his capital contribution. This transaction should be recorded as a debit to account 111 Cash and credit to account 311 Lewis, Capital for 15,000.00.

To record journal entries to reflect checkbook activities:

  1. Refer to the checkbook entries shown above. Click the Create + icon from the Home page and then click Journal Entry as you did earlier.
  2. Type 6/1/18 in the Journal date text box.
  3. Accept 1 as the Journal no.
  4. Click in the Account column of row 1.
  5. Select 111 Cash from the drop-down list
  6. Type 15000 in the Debit column of row #1.
  7. Type Owner invested cash in the business in the Description column of row 1.
  8. Type Richard Lewis in the Name column of row 1.
  9. Click + Add Richard Lewis when prompted.
  10. Select Vendor as the type and then click Save. (Note: while a vendor is not an owner it is the best option available.)
  11. Click in the Account column of row #2.
  12. Select 311 Lewis, Capital from the drop-down list.
  13. Press [Tab] twice to move the active cell to row #2 of the Credits column. 15,000.00 should appear in row #2 of the Credits column.
  14. Type Richard Lewis in the Name column of row 2.
  15. Click Save and new. (If a Closing date warning appears click Yes to save since you are aware that you are entering data before the company’s fiscal year-end.)
  16. Refer to the checkbook entries above. The next checkbook entry requires you to record a journal entry to increase prepaid insurance and decrease cash. Follow the steps you completed above, labeling the entry as Journal no. 2 AND being sure to include Liberty Insurance as a new vendor.
  17. Refer to the checkbook entries above. The third checkbook entry requires you to record the purchase of equipment for cash and accounts payable. Once again, follow the steps you completed above, labeling the entry as Journal no. 3. Click Save and Close after you complete this entry.
  18. Before you continue you should review the transactions recorded so far. You can accomplish that by creating a Transaction List by Date report. Click Reports from the Navigation bar.
  19. Click Accountant Reports
  20. Click TRANSACTION LIST BY DATE
  21. Type 6/1/18 into the From: text box and then type 6/30/18 into the To: text box.
  22. Click the Run Report button to view the report shown in Figure 3.7.
  23. Click Save Customizations to save this report for future use.
  24. Type June 2018 at the end of the suggested name for this report so that it’s revised name is Transaction List by Date June 2018.
  25. Click in the checkbox Add this report to a group and then select the down-arrow in the Start Typing text box
  26. Click ADD NEW.
  27. Type your name in the Name text box (Student Name is used here for illustration. Use your name instead.) and then click Save.
  28. Click in the checkbox Share this report with all company users
  29. Click ALL
  30. Click on Journal Entry 2 from the Transaction List by Date report to view the journal entry you should have recorded based on the checkbook entry dated 6/3/18
  31. Continue the process of recording all of the checkbook entries from above using the journal entry numbers provided. Once you’ve entered the last entry click Save and close

To test your accuracy, you should create a trial balance from QuickBooks Online and compare it to the trial balance below. Investigate any differences and fix them by correcting the errors, if any, that you made in the journal entries.

To create a trial balance and review journal entries:

  1. Click Reports from the Navigation bar.
  2. Click Account Reports
  3. Click Trial Balance
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box and then click Run Report.
  5. Click Save Customizations to save this report for future use.
  6. Type June 2018 like you did previously and save this report in your Student Name Group.
  7. Compare your trial balance to the solution provided below

    Download (TIFF, 18KB)

  8. If you discover an error, click the numerical value of the error to reveal a Transaction Report.
  9. Click the line of the transaction report containing the journal entry causing the error to reveal the journal entry causing the problem.
  10. Fix the problem, save the entry, and compare the trial balances again.
  11. Close the Trial Balance report

Other Activities Not Affecting the Checkbook

Magnolia had other business events that took place in June that had no effect on the checkbook. These included investment of equipment by the owner, purchases on account, and sales on account. You are to record these transactions as journal entries.

Investment of Equipment

  • On 6/1/18 the owner of the company, Lewis, contributed $3,158 of his personal spa equipment to the company. Use journal entry 19 to record this business event.

Purchases on Account

  • On 6/3/18 Magnolia Spas bought $492 of spa supplies on account from Spa Supplies, Inc., receiving their invoice no. 804. Use journal entry 20 to record this business event.
  • On 6/5/18 Magnolia Spas bought $318 of office equipment on account from Office Equipment Company, receiving their invoice no. 3415. Use journal entry 21 to record this business event.
  • On 6/5/18 Magnolia Spas bought $397 of advertising pamphlets on account from Adco, Inc., receiving their invoice no. 512. Use journal entry 22 to record this business event.
  • On 6/5/18 Magnolia Spas bought an additional $832 of office equipment on account from Office Equipment Company, receiving their invoice no. 3445. Use journal entry 23 to record this business event.
  • On 6/5/18 Magnolia Spas bought $120 of office supplies on account from Office Staples, receiving their invoice no. 522. Use journal entry 24 to record this business event.

Sales on Account

  • On 6/7/18 Magnolia Spas provided $325 of services on account to Jill Anson. Use journal entry 25 to record this business event.
  • On 6/14/18 Magnolia Spas provided $486 of services on account to Jack Morgan. Use journal entry 26 to record this business event.
  • On 6/21/18 Magnolia Spas provided $344 of services on account to Tory Ligman. Use journal entry 27 to record this business event.
  • On 6/30/18 Magnolia Spas provided $109 of services on account to Judy Wilcox. Use journal entry 28 to record this business event.

To test your accuracy, you should open the trial balance you customized before and compare it to the trial balance below. Investigate any differences and fix them by correcting the errors, if any, that you made in the journal entries.

To open your saved trial balance and review journal entries:

  1. Click Reports from the Navigation bar.
  2. Click My Custom Reports.
  3. Under your name click Trial Balance June 2018.
  4. Compare your trial balance to the solution provided below

    Download (TIFF, 21KB)

  5. If you discover an error, click the numerical value of the error to reveal a Transaction Report.
  6. Click the line of the transaction report containing the journal entry causing the error to reveal the journal entry causing the problem.Fix the problem, save the entry and compare the trial balances again.
  7. Close the Trial Balance report

Prepare Financial Statements

Once you’ve validated the trial balance it’s time to create the financial statements: income statement and balance sheet. These are easily prepared by using the Reports section. However, in QuickBooks Online, the income statement is known as the Profit and Loss report so you’ll need to search for that name since you’ll never find an income statement. You decide to create and save these for future use like you did for the trial balance.

To prepare an income statement:

  1. Click Reports from the Navigation bar.
  2. Click ACCOUNTANT REPORTS
  3. Click Profit and Loss
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box.
  5. Click the Run Report button to view the report
  6. Click the Customize button and then click the Header/Footer tab on the left.
  7. Change the report title text box from Profit and Loss to Income Statement
  8. Click Run Report to view the modified report
  9. Click Save Customizations and type June 2018 at the end of the name of the custom report so that it reads Income Statement June 2018.
  10. Place this report into a group with your name and share the report as you’ve done before. Then click OK.

To prepare a balance sheet:

  1. Click Reports from the Navigation bar.
  2. Click Accountants Reports.
  3. Click BALANCE SHEET
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box.
  5. Click the Run Report button to view the report
  6. Click Save Customizations and type June 2018 at the end of the name of the custom report so that it reads Balance Sheet June 2018.
  7. Place this report into a group with your name and share the report as you’ve done before. Then click OK.

Review It with QuickBooks Online

Answer the following in a Google Doc shared with me:

  1. If an error is discovered on the trial balance, it can be corrected with all of the following, except:
    1. Click the numerical value of the error to reveal a Transaction Report
    2. Enter the transaction date of the error
    3. Click the line of the transaction report to reveal the desired journal entry
    4. Correct the error and save the entry
  2. In QuickBooks Online, the income statement is known as:
    1. Report of Financial Position Statement
    2. Operating Income Statement
    3. Profit and Loss Report
    4. None of the above
  3. In QuickBooks Online, the financial reports should be completed in the following order:
    1. Profit and Loss, Trial Balance, Balance Sheet
    2. Trial Balance, Profit and Loss, Balance Sheet
    3. Trial Balance, Balance Sheet, Profit and Loss
    4. In cloud-based applications like QuickBooks Online, financial reports can be completed in any order

End Note

You have now recorded business events based on information from your checkbook, and notes from additional owner contributions, purchases on account, and sales on account. Further, you’ve created a trial balance, income statement, and balance sheet. Next in Chapter 4, you will record adjusting entries and create an adjusted trial balance, income statement, and balance sheet.

Accounting with QuickBooks Online

Chapter 3 Using Journal Entries to Enter Business Transactions

Learning Objectives

After you have completed this chapter, you will be able to do the following:

  1. Prepare journal entries to reflect checkbook entries
  2. Prepare journal entries to record purchases on account
  3. Prepare journal entries to record sales on account
  4. Prepare a trial balance
  5. Prepare an income statement
  6. Prepare a balance sheet

 Overview

You began this process in Chapter 1 when you created your account and provided basic information about your company. In Chapter 2 you modified company settings and the chart of accounts. Remember there is no Save File or Save File As command in QuickBooks Online. Everything is saved for you.

The focus of this chapter is to record your business transactions for June into QuickBooks Online. The source of your information comes from the company’s checkbook and notes taken for sales and purchases on account. The dates for all transactions in this text are set for June, July, and August of 2018. However, you can use any year you’d like. Just remember that the figures in this text will all show 2018.

It is important to note that this QuickBooks Online supplement assumes you have read and understood the accounting concepts and related journal entries in the College Accounting text. This supplement will explain QuickBooks Online steps and processes but will not reiterate how to record specific business transactions.

Once again you should remember that the figures and steps provided and described in this supplement were accurate on the day they were captured. Intuit may have changed the location, the description, or the process for recording certain business transactions and thus at any point in time the figures may not match your screen or the steps described may not match those described here. Changes should not be significant but the author does not control or have any influence over QuickBooks Online developers.

Journal Entries

Business transactions can be recorded into QuickBooks Online in many different ways. One way is to use journal entries for all transactions. The other is to use source documents like sales invoices, purchase invoices, bills, checks, and deposit slips. For this chapter, you’ve decided to enter all transactions as journal entries. You’ll explore alternative ways in future chapters. It is important to note that all journal entries which affect accounts receivable or accounts payable must specify a specific customer or vendor, respectively. For example, Magnolia purchased spa equipment, described below, from a specific vendor (Spa Supplies, Inc.). Thus the purchase and subsequent payment journal entries must be designated as related to that vendor.

To access QuickBooks Online journal entries:

  1. Type https://qbo.intuit.com/ into your web browser.
  2. Type your User ID and Password as you did in Chapters 1 and 2.
  3. Click the Create + icon from the Home page and then click Journal Entry
  4. After clicking Journal Entry, a blank journal entry form labeled Journal Entry #1 should appear
  5. Click the X to close this window

Recording Checkbook Activities

The checkbook is a good place to begin recording business events. A replica of Magnolia’s June 2018 checkbook is provided below, reflecting both deposits and checks. There are 18 business events which need to be recorded so you’ll create journal entry 1 though journal entry 18 below. The first entry will be demonstrated below and the following 17 entries are up to you.

The first entry in the checkbook is a deposit of $15,000.00 from Richard Lewis as his capital contribution. This transaction should be recorded as a debit to account 111 Cash and credit to account 311 Lewis, Capital for 15,000.00.

To record journal entries to reflect checkbook activities:

  1. Refer to the checkbook entries shown above. Click the Create + icon from the Home page and then click Journal Entry as you did earlier.
  2. Type 6/1/18 in the Journal date text box.
  3. Accept 1 as the Journal no.
  4. Click in the Account column of row 1.
  5. Select 111 Cash from the drop-down list
  6. Type 15000 in the Debit column of row #1.
  7. Type Owner invested cash in the business in the Description column of row 1.
  8. Type Richard Lewis in the Name column of row 1.
  9. Click + Add Richard Lewis when prompted.
  10. Select Vendor as the type and then click Save. (Note: while a vendor is not an owner it is the best option available.)
  11. Click in the Account column of row #2.
  12. Select 311 Lewis, Capital from the drop-down list.
  13. Press [Tab] twice to move the active cell to row #2 of the Credits column. 15,000.00 should appear in row #2 of the Credits column.
  14. Type Richard Lewis in the Name column of row 2.
  15. Click Save and new. (If a Closing date warning appears click Yes to save since you are aware that you are entering data before the company’s fiscal year-end.)
  16. Refer to the checkbook entries above. The next checkbook entry requires you to record a journal entry to increase prepaid insurance and decrease cash. Follow the steps you completed above, labeling the entry as Journal no. 2 AND being sure to include Liberty Insurance as a new vendor.
  17. Refer to the checkbook entries above. The third checkbook entry requires you to record the purchase of equipment for cash and accounts payable. Once again, follow the steps you completed above, labeling the entry as Journal no. 3. Click Save and Close after you complete this entry.
  18. Before you continue you should review the transactions recorded so far. You can accomplish that by creating a Transaction List by Date report. Click Reports from the Navigation bar.
  19. Click Accountant Reports
  20. Click TRANSACTION LIST BY DATE
  21. Type 6/1/18 into the From: text box and then type 6/30/18 into the To: text box.
  22. Click the Run Report button to view the report shown in Figure 3.7.
  23. Click Save Customizations to save this report for future use.
  24. Type June 2018 at the end of the suggested name for this report so that it’s revised name is Transaction List by Date June 2018.
  25. Click in the checkbox Add this report to a group and then select the down-arrow in the Start Typing text box
  26. Click ADD NEW.
  27. Type your name in the Name text box (Student Name is used here for illustration. Use your name instead.) and then click Save.
  28. Click in the checkbox Share this report with all company users
  29. Click ALL
  30. Click on Journal Entry 2 from the Transaction List by Date report to view the journal entry you should have recorded based on the checkbook entry dated 6/3/18
  31. Continue the process of recording all of the checkbook entries from above using the journal entry numbers provided. Once you’ve entered the last entry click Save and close

To test your accuracy, you should create a trial balance from QuickBooks Online and compare it to the trial balance below. Investigate any differences and fix them by correcting the errors, if any, that you made in the journal entries.

To create a trial balance and review journal entries:

  1. Click Reports from the Navigation bar.
  2. Click Account Reports
  3. Click Trial Balance
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box and then click Run Report.
  5. Click Save Customizations to save this report for future use.
  6. Type June 2018 like you did previously and save this report in your Student Name Group.
  7. Compare your trial balance to the solution provided below

    Download (TIFF, 18KB)

  8. If you discover an error, click the numerical value of the error to reveal a Transaction Report.
  9. Click the line of the transaction report containing the journal entry causing the error to reveal the journal entry causing the problem.
  10. Fix the problem, save the entry, and compare the trial balances again.
  11. Close the Trial Balance report

Other Activities Not Affecting the Checkbook

Magnolia had other business events that took place in June that had no effect on the checkbook. These included investment of equipment by the owner, purchases on account, and sales on account. You are to record these transactions as journal entries.

Investment of Equipment

  • On 6/1/18 the owner of the company, Lewis, contributed $3,158 of his personal spa equipment to the company. Use journal entry 19 to record this business event.

Purchases on Account

  • On 6/3/18 Magnolia Spas bought $492 of spa supplies on account from Spa Supplies, Inc., receiving their invoice no. 804. Use journal entry 20 to record this business event.
  • On 6/5/18 Magnolia Spas bought $318 of office equipment on account from Office Equipment Company, receiving their invoice no. 3415. Use journal entry 21 to record this business event.
  • On 6/5/18 Magnolia Spas bought $397 of advertising pamphlets on account from Adco, Inc., receiving their invoice no. 512. Use journal entry 22 to record this business event.
  • On 6/5/18 Magnolia Spas bought an additional $832 of office equipment on account from Office Equipment Company, receiving their invoice no. 3445. Use journal entry 23 to record this business event.
  • On 6/5/18 Magnolia Spas bought $120 of office supplies on account from Office Staples, receiving their invoice no. 522. Use journal entry 24 to record this business event.

Sales on Account

  • On 6/7/18 Magnolia Spas provided $325 of services on account to Jill Anson. Use journal entry 25 to record this business event.
  • On 6/14/18 Magnolia Spas provided $486 of services on account to Jack Morgan. Use journal entry 26 to record this business event.
  • On 6/21/18 Magnolia Spas provided $344 of services on account to Tory Ligman. Use journal entry 27 to record this business event.
  • On 6/30/18 Magnolia Spas provided $109 of services on account to Judy Wilcox. Use journal entry 28 to record this business event.

To test your accuracy, you should open the trial balance you customized before and compare it to the trial balance below. Investigate any differences and fix them by correcting the errors, if any, that you made in the journal entries.

To open your saved trial balance and review journal entries:

  1. Click Reports from the Navigation bar.
  2. Click My Custom Reports.
  3. Under your name click Trial Balance June 2018.
  4. Compare your trial balance to the solution provided below

    Download (TIFF, 21KB)

  5. If you discover an error, click the numerical value of the error to reveal a Transaction Report.
  6. Click the line of the transaction report containing the journal entry causing the error to reveal the journal entry causing the problem.Fix the problem, save the entry and compare the trial balances again.
  7. Close the Trial Balance report

Prepare Financial Statements

Once you’ve validated the trial balance it’s time to create the financial statements: income statement and balance sheet. These are easily prepared by using the Reports section. However, in QuickBooks Online, the income statement is known as the Profit and Loss report so you’ll need to search for that name since you’ll never find an income statement. You decide to create and save these for future use like you did for the trial balance.

To prepare an income statement:

  1. Click Reports from the Navigation bar.
  2. Click ACCOUNTANT REPORTS
  3. Click Profit and Loss
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box.
  5. Click the Run Report button to view the report
  6. Click the Customize button and then click the Header/Footer tab on the left.
  7. Change the report title text box from Profit and Loss to Income Statement
  8. Click Run Report to view the modified report
  9. Click Save Customizations and type June 2018 at the end of the name of the custom report so that it reads Income Statement June 2018.
  10. Place this report into a group with your name and share the report as you’ve done before. Then click OK.

To prepare a balance sheet:

  1. Click Reports from the Navigation bar.
  2. Click Accountants Reports.
  3. Click BALANCE SHEET
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box.
  5. Click the Run Report button to view the report
  6. Click Save Customizations and type June 2018 at the end of the name of the custom report so that it reads Balance Sheet June 2018.
  7. Place this report into a group with your name and share the report as you’ve done before. Then click OK.

Review It with QuickBooks Online

Answer the following in a Google Doc shared with me:

  1. If an error is discovered on the trial balance, it can be corrected with all of the following, except:
    1. Click the numerical value of the error to reveal a Transaction Report
    2. Enter the transaction date of the error
    3. Click the line of the transaction report to reveal the desired journal entry
    4. Correct the error and save the entry
  2. In QuickBooks Online, the income statement is known as:
    1. Report of Financial Position Statement
    2. Operating Income Statement
    3. Profit and Loss Report
    4. None of the above
  3. In QuickBooks Online, the financial reports should be completed in the following order:
    1. Profit and Loss, Trial Balance, Balance Sheet
    2. Trial Balance, Profit and Loss, Balance Sheet
    3. Trial Balance, Balance Sheet, Profit and Loss
    4. In cloud-based applications like QuickBooks Online, financial reports can be completed in any order

End Note

You have now recorded business events based on information from your checkbook, and notes from additional owner contributions, purchases on account, and sales on account. Further, you’ve created a trial balance, income statement, and balance sheet. Next in Chapter 4, you will record adjusting entries and create an adjusted trial balance, income statement, and balance sheet.

Accounting with QuickBooks Online

Chapter 3 Using Journal Entries to Enter Business Transactions

Learning Objectives

After you have completed this chapter, you will be able to do the following:

  1. Prepare journal entries to reflect checkbook entries
  2. Prepare journal entries to record purchases on account
  3. Prepare journal entries to record sales on account
  4. Prepare a trial balance
  5. Prepare an income statement
  6. Prepare a balance sheet

 Overview

You began this process in Chapter 1 when you created your account and provided basic information about your company. In Chapter 2 you modified company settings and the chart of accounts. Remember there is no Save File or Save File As command in QuickBooks Online. Everything is saved for you.

The focus of this chapter is to record your business transactions for June into QuickBooks Online. The source of your information comes from the company’s checkbook and notes taken for sales and purchases on account. The dates for all transactions in this text are set for June, July, and August of 2018. However, you can use any year you’d like. Just remember that the figures in this text will all show 2018.

It is important to note that this QuickBooks Online supplement assumes you have read and understood the accounting concepts and related journal entries in the College Accounting text. This supplement will explain QuickBooks Online steps and processes but will not reiterate how to record specific business transactions.

Once again you should remember that the figures and steps provided and described in this supplement were accurate on the day they were captured. Intuit may have changed the location, the description, or the process for recording certain business transactions and thus at any point in time the figures may not match your screen or the steps described may not match those described here. Changes should not be significant but the author does not control or have any influence over QuickBooks Online developers.

Journal Entries

Business transactions can be recorded into QuickBooks Online in many different ways. One way is to use journal entries for all transactions. The other is to use source documents like sales invoices, purchase invoices, bills, checks, and deposit slips. For this chapter, you’ve decided to enter all transactions as journal entries. You’ll explore alternative ways in future chapters. It is important to note that all journal entries which affect accounts receivable or accounts payable must specify a specific customer or vendor, respectively. For example, Magnolia purchased spa equipment, described below, from a specific vendor (Spa Supplies, Inc.). Thus the purchase and subsequent payment journal entries must be designated as related to that vendor.

To access QuickBooks Online journal entries:

  1. Type https://qbo.intuit.com/ into your web browser.
  2. Type your User ID and Password as you did in Chapters 1 and 2.
  3. Click the Create + icon from the Home page and then click Journal Entry
  4. After clicking Journal Entry, a blank journal entry form labeled Journal Entry #1 should appear
  5. Click the X to close this window

Recording Checkbook Activities

The checkbook is a good place to begin recording business events. A replica of Magnolia’s June 2018 checkbook is provided below, reflecting both deposits and checks. There are 18 business events which need to be recorded so you’ll create journal entry 1 though journal entry 18 below. The first entry will be demonstrated below and the following 17 entries are up to you.

The first entry in the checkbook is a deposit of $15,000.00 from Richard Lewis as his capital contribution. This transaction should be recorded as a debit to account 111 Cash and credit to account 311 Lewis, Capital for 15,000.00.

To record journal entries to reflect checkbook activities:

  1. Refer to the checkbook entries shown above. Click the Create + icon from the Home page and then click Journal Entry as you did earlier.
  2. Type 6/1/18 in the Journal date text box.
  3. Accept 1 as the Journal no.
  4. Click in the Account column of row 1.
  5. Select 111 Cash from the drop-down list
  6. Type 15000 in the Debit column of row #1.
  7. Type Owner invested cash in the business in the Description column of row 1.
  8. Type Richard Lewis in the Name column of row 1.
  9. Click + Add Richard Lewis when prompted.
  10. Select Vendor as the type and then click Save. (Note: while a vendor is not an owner it is the best option available.)
  11. Click in the Account column of row #2.
  12. Select 311 Lewis, Capital from the drop-down list.
  13. Press [Tab] twice to move the active cell to row #2 of the Credits column. 15,000.00 should appear in row #2 of the Credits column.
  14. Type Richard Lewis in the Name column of row 2.
  15. Click Save and new. (If a Closing date warning appears click Yes to save since you are aware that you are entering data before the company’s fiscal year-end.)
  16. Refer to the checkbook entries above. The next checkbook entry requires you to record a journal entry to increase prepaid insurance and decrease cash. Follow the steps you completed above, labeling the entry as Journal no. 2 AND being sure to include Liberty Insurance as a new vendor.
  17. Refer to the checkbook entries above. The third checkbook entry requires you to record the purchase of equipment for cash and accounts payable. Once again, follow the steps you completed above, labeling the entry as Journal no. 3. Click Save and Close after you complete this entry.
  18. Before you continue you should review the transactions recorded so far. You can accomplish that by creating a Transaction List by Date report. Click Reports from the Navigation bar.
  19. Click Accountant Reports
  20. Click TRANSACTION LIST BY DATE
  21. Type 6/1/18 into the From: text box and then type 6/30/18 into the To: text box.
  22. Click the Run Report button to view the report shown in Figure 3.7.
  23. Click Save Customizations to save this report for future use.
  24. Type June 2018 at the end of the suggested name for this report so that it’s revised name is Transaction List by Date June 2018.
  25. Click in the checkbox Add this report to a group and then select the down-arrow in the Start Typing text box
  26. Click ADD NEW.
  27. Type your name in the Name text box (Student Name is used here for illustration. Use your name instead.) and then click Save.
  28. Click in the checkbox Share this report with all company users
  29. Click ALL
  30. Click on Journal Entry 2 from the Transaction List by Date report to view the journal entry you should have recorded based on the checkbook entry dated 6/3/18
  31. Continue the process of recording all of the checkbook entries from above using the journal entry numbers provided. Once you’ve entered the last entry click Save and close

To test your accuracy, you should create a trial balance from QuickBooks Online and compare it to the trial balance below. Investigate any differences and fix them by correcting the errors, if any, that you made in the journal entries.

To create a trial balance and review journal entries:

  1. Click Reports from the Navigation bar.
  2. Click Account Reports
  3. Click Trial Balance
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box and then click Run Report.
  5. Click Save Customizations to save this report for future use.
  6. Type June 2018 like you did previously and save this report in your Student Name Group.
  7. Compare your trial balance to the solution provided below

    Download (TIFF, 18KB)

  8. If you discover an error, click the numerical value of the error to reveal a Transaction Report.
  9. Click the line of the transaction report containing the journal entry causing the error to reveal the journal entry causing the problem.
  10. Fix the problem, save the entry, and compare the trial balances again.
  11. Close the Trial Balance report

Other Activities Not Affecting the Checkbook

Magnolia had other business events that took place in June that had no effect on the checkbook. These included investment of equipment by the owner, purchases on account, and sales on account. You are to record these transactions as journal entries.

Investment of Equipment

  • On 6/1/18 the owner of the company, Lewis, contributed $3,158 of his personal spa equipment to the company. Use journal entry 19 to record this business event.

Purchases on Account

  • On 6/3/18 Magnolia Spas bought $492 of spa supplies on account from Spa Supplies, Inc., receiving their invoice no. 804. Use journal entry 20 to record this business event.
  • On 6/5/18 Magnolia Spas bought $318 of office equipment on account from Office Equipment Company, receiving their invoice no. 3415. Use journal entry 21 to record this business event.
  • On 6/5/18 Magnolia Spas bought $397 of advertising pamphlets on account from Adco, Inc., receiving their invoice no. 512. Use journal entry 22 to record this business event.
  • On 6/5/18 Magnolia Spas bought an additional $832 of office equipment on account from Office Equipment Company, receiving their invoice no. 3445. Use journal entry 23 to record this business event.
  • On 6/5/18 Magnolia Spas bought $120 of office supplies on account from Office Staples, receiving their invoice no. 522. Use journal entry 24 to record this business event.

Sales on Account

  • On 6/7/18 Magnolia Spas provided $325 of services on account to Jill Anson. Use journal entry 25 to record this business event.
  • On 6/14/18 Magnolia Spas provided $486 of services on account to Jack Morgan. Use journal entry 26 to record this business event.
  • On 6/21/18 Magnolia Spas provided $344 of services on account to Tory Ligman. Use journal entry 27 to record this business event.
  • On 6/30/18 Magnolia Spas provided $109 of services on account to Judy Wilcox. Use journal entry 28 to record this business event.

To test your accuracy, you should open the trial balance you customized before and compare it to the trial balance below. Investigate any differences and fix them by correcting the errors, if any, that you made in the journal entries.

To open your saved trial balance and review journal entries:

  1. Click Reports from the Navigation bar.
  2. Click My Custom Reports.
  3. Under your name click Trial Balance June 2018.
  4. Compare your trial balance to the solution provided below

    Download (TIFF, 21KB)

  5. If you discover an error, click the numerical value of the error to reveal a Transaction Report.
  6. Click the line of the transaction report containing the journal entry causing the error to reveal the journal entry causing the problem.Fix the problem, save the entry and compare the trial balances again.
  7. Close the Trial Balance report

Prepare Financial Statements

Once you’ve validated the trial balance it’s time to create the financial statements: income statement and balance sheet. These are easily prepared by using the Reports section. However, in QuickBooks Online, the income statement is known as the Profit and Loss report so you’ll need to search for that name since you’ll never find an income statement. You decide to create and save these for future use like you did for the trial balance.

To prepare an income statement:

  1. Click Reports from the Navigation bar.
  2. Click ACCOUNTANT REPORTS
  3. Click Profit and Loss
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box.
  5. Click the Run Report button to view the report
  6. Click the Customize button and then click the Header/Footer tab on the left.
  7. Change the report title text box from Profit and Loss to Income Statement
  8. Click Run Report to view the modified report
  9. Click Save Customizations and type June 2018 at the end of the name of the custom report so that it reads Income Statement June 2018.
  10. Place this report into a group with your name and share the report as you’ve done before. Then click OK.

To prepare a balance sheet:

  1. Click Reports from the Navigation bar.
  2. Click Accountants Reports.
  3. Click BALANCE SHEET
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box.
  5. Click the Run Report button to view the report
  6. Click Save Customizations and type June 2018 at the end of the name of the custom report so that it reads Balance Sheet June 2018.
  7. Place this report into a group with your name and share the report as you’ve done before. Then click OK.

Review It with QuickBooks Online

Answer the following in a Google Doc shared with me:

  1. If an error is discovered on the trial balance, it can be corrected with all of the following, except:
    1. Click the numerical value of the error to reveal a Transaction Report
    2. Enter the transaction date of the error
    3. Click the line of the transaction report to reveal the desired journal entry
    4. Correct the error and save the entry
  2. In QuickBooks Online, the income statement is known as:
    1. Report of Financial Position Statement
    2. Operating Income Statement
    3. Profit and Loss Report
    4. None of the above
  3. In QuickBooks Online, the financial reports should be completed in the following order:
    1. Profit and Loss, Trial Balance, Balance Sheet
    2. Trial Balance, Profit and Loss, Balance Sheet
    3. Trial Balance, Balance Sheet, Profit and Loss
    4. In cloud-based applications like QuickBooks Online, financial reports can be completed in any order

End Note

You have now recorded business events based on information from your checkbook, and notes from additional owner contributions, purchases on account, and sales on account. Further, you’ve created a trial balance, income statement, and balance sheet. Next in Chapter 4, you will record adjusting entries and create an adjusted trial balance, income statement, and balance sheet.

Accounting with QuickBooks Online

Chapter 3 Using Journal Entries to Enter Business Transactions

Learning Objectives

After you have completed this chapter, you will be able to do the following:

  1. Prepare journal entries to reflect checkbook entries
  2. Prepare journal entries to record purchases on account
  3. Prepare journal entries to record sales on account
  4. Prepare a trial balance
  5. Prepare an income statement
  6. Prepare a balance sheet

 Overview

You began this process in Chapter 1 when you created your account and provided basic information about your company. In Chapter 2 you modified company settings and the chart of accounts. Remember there is no Save File or Save File As command in QuickBooks Online. Everything is saved for you.

The focus of this chapter is to record your business transactions for June into QuickBooks Online. The source of your information comes from the company’s checkbook and notes taken for sales and purchases on account. The dates for all transactions in this text are set for June, July, and August of 2018. However, you can use any year you’d like. Just remember that the figures in this text will all show 2018.

It is important to note that this QuickBooks Online supplement assumes you have read and understood the accounting concepts and related journal entries in the College Accounting text. This supplement will explain QuickBooks Online steps and processes but will not reiterate how to record specific business transactions.

Once again you should remember that the figures and steps provided and described in this supplement were accurate on the day they were captured. Intuit may have changed the location, the description, or the process for recording certain business transactions and thus at any point in time the figures may not match your screen or the steps described may not match those described here. Changes should not be significant but the author does not control or have any influence over QuickBooks Online developers.

Journal Entries

Business transactions can be recorded into QuickBooks Online in many different ways. One way is to use journal entries for all transactions. The other is to use source documents like sales invoices, purchase invoices, bills, checks, and deposit slips. For this chapter, you’ve decided to enter all transactions as journal entries. You’ll explore alternative ways in future chapters. It is important to note that all journal entries which affect accounts receivable or accounts payable must specify a specific customer or vendor, respectively. For example, Magnolia purchased spa equipment, described below, from a specific vendor (Spa Supplies, Inc.). Thus the purchase and subsequent payment journal entries must be designated as related to that vendor.

To access QuickBooks Online journal entries:

  1. Type https://qbo.intuit.com/ into your web browser.
  2. Type your User ID and Password as you did in Chapters 1 and 2.
  3. Click the Create + icon from the Home page and then click Journal Entry
  4. After clicking Journal Entry, a blank journal entry form labeled Journal Entry #1 should appear
  5. Click the X to close this window

Recording Checkbook Activities

The checkbook is a good place to begin recording business events. A replica of Magnolia’s June 2018 checkbook is provided below, reflecting both deposits and checks. There are 18 business events which need to be recorded so you’ll create journal entry 1 though journal entry 18 below. The first entry will be demonstrated below and the following 17 entries are up to you.

The first entry in the checkbook is a deposit of $15,000.00 from Richard Lewis as his capital contribution. This transaction should be recorded as a debit to account 111 Cash and credit to account 311 Lewis, Capital for 15,000.00.

To record journal entries to reflect checkbook activities:

  1. Refer to the checkbook entries shown above. Click the Create + icon from the Home page and then click Journal Entry as you did earlier.
  2. Type 6/1/18 in the Journal date text box.
  3. Accept 1 as the Journal no.
  4. Click in the Account column of row 1.
  5. Select 111 Cash from the drop-down list
  6. Type 15000 in the Debit column of row #1.
  7. Type Owner invested cash in the business in the Description column of row 1.
  8. Type Richard Lewis in the Name column of row 1.
  9. Click + Add Richard Lewis when prompted.
  10. Select Vendor as the type and then click Save. (Note: while a vendor is not an owner it is the best option available.)
  11. Click in the Account column of row #2.
  12. Select 311 Lewis, Capital from the drop-down list.
  13. Press [Tab] twice to move the active cell to row #2 of the Credits column. 15,000.00 should appear in row #2 of the Credits column.
  14. Type Richard Lewis in the Name column of row 2.
  15. Click Save and new. (If a Closing date warning appears click Yes to save since you are aware that you are entering data before the company’s fiscal year-end.)
  16. Refer to the checkbook entries above. The next checkbook entry requires you to record a journal entry to increase prepaid insurance and decrease cash. Follow the steps you completed above, labeling the entry as Journal no. 2 AND being sure to include Liberty Insurance as a new vendor.
  17. Refer to the checkbook entries above. The third checkbook entry requires you to record the purchase of equipment for cash and accounts payable. Once again, follow the steps you completed above, labeling the entry as Journal no. 3. Click Save and Close after you complete this entry.
  18. Before you continue you should review the transactions recorded so far. You can accomplish that by creating a Transaction List by Date report. Click Reports from the Navigation bar.
  19. Click Accountant Reports
  20. Click TRANSACTION LIST BY DATE
  21. Type 6/1/18 into the From: text box and then type 6/30/18 into the To: text box.
  22. Click the Run Report button to view the report shown in Figure 3.7.
  23. Click Save Customizations to save this report for future use.
  24. Type June 2018 at the end of the suggested name for this report so that it’s revised name is Transaction List by Date June 2018.
  25. Click in the checkbox Add this report to a group and then select the down-arrow in the Start Typing text box
  26. Click ADD NEW.
  27. Type your name in the Name text box (Student Name is used here for illustration. Use your name instead.) and then click Save.
  28. Click in the checkbox Share this report with all company users
  29. Click ALL
  30. Click on Journal Entry 2 from the Transaction List by Date report to view the journal entry you should have recorded based on the checkbook entry dated 6/3/18
  31. Continue the process of recording all of the checkbook entries from above using the journal entry numbers provided. Once you’ve entered the last entry click Save and close

To test your accuracy, you should create a trial balance from QuickBooks Online and compare it to the trial balance below. Investigate any differences and fix them by correcting the errors, if any, that you made in the journal entries.

To create a trial balance and review journal entries:

  1. Click Reports from the Navigation bar.
  2. Click Account Reports
  3. Click Trial Balance
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box and then click Run Report.
  5. Click Save Customizations to save this report for future use.
  6. Type June 2018 like you did previously and save this report in your Student Name Group.
  7. Compare your trial balance to the solution provided below

    Download (TIFF, 18KB)

  8. If you discover an error, click the numerical value of the error to reveal a Transaction Report.
  9. Click the line of the transaction report containing the journal entry causing the error to reveal the journal entry causing the problem.
  10. Fix the problem, save the entry, and compare the trial balances again.
  11. Close the Trial Balance report

Other Activities Not Affecting the Checkbook

Magnolia had other business events that took place in June that had no effect on the checkbook. These included investment of equipment by the owner, purchases on account, and sales on account. You are to record these transactions as journal entries.

Investment of Equipment

  • On 6/1/18 the owner of the company, Lewis, contributed $3,158 of his personal spa equipment to the company. Use journal entry 19 to record this business event.

Purchases on Account

  • On 6/3/18 Magnolia Spas bought $492 of spa supplies on account from Spa Supplies, Inc., receiving their invoice no. 804. Use journal entry 20 to record this business event.
  • On 6/5/18 Magnolia Spas bought $318 of office equipment on account from Office Equipment Company, receiving their invoice no. 3415. Use journal entry 21 to record this business event.
  • On 6/5/18 Magnolia Spas bought $397 of advertising pamphlets on account from Adco, Inc., receiving their invoice no. 512. Use journal entry 22 to record this business event.
  • On 6/5/18 Magnolia Spas bought an additional $832 of office equipment on account from Office Equipment Company, receiving their invoice no. 3445. Use journal entry 23 to record this business event.
  • On 6/5/18 Magnolia Spas bought $120 of office supplies on account from Office Staples, receiving their invoice no. 522. Use journal entry 24 to record this business event.

Sales on Account

  • On 6/7/18 Magnolia Spas provided $325 of services on account to Jill Anson. Use journal entry 25 to record this business event.
  • On 6/14/18 Magnolia Spas provided $486 of services on account to Jack Morgan. Use journal entry 26 to record this business event.
  • On 6/21/18 Magnolia Spas provided $344 of services on account to Tory Ligman. Use journal entry 27 to record this business event.
  • On 6/30/18 Magnolia Spas provided $109 of services on account to Judy Wilcox. Use journal entry 28 to record this business event.

To test your accuracy, you should open the trial balance you customized before and compare it to the trial balance below. Investigate any differences and fix them by correcting the errors, if any, that you made in the journal entries.

To open your saved trial balance and review journal entries:

  1. Click Reports from the Navigation bar.
  2. Click My Custom Reports.
  3. Under your name click Trial Balance June 2018.
  4. Compare your trial balance to the solution provided below

    Download (TIFF, 21KB)

  5. If you discover an error, click the numerical value of the error to reveal a Transaction Report.
  6. Click the line of the transaction report containing the journal entry causing the error to reveal the journal entry causing the problem.Fix the problem, save the entry and compare the trial balances again.
  7. Close the Trial Balance report

Prepare Financial Statements

Once you’ve validated the trial balance it’s time to create the financial statements: income statement and balance sheet. These are easily prepared by using the Reports section. However, in QuickBooks Online, the income statement is known as the Profit and Loss report so you’ll need to search for that name since you’ll never find an income statement. You decide to create and save these for future use like you did for the trial balance.

To prepare an income statement:

  1. Click Reports from the Navigation bar.
  2. Click ACCOUNTANT REPORTS
  3. Click Profit and Loss
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box.
  5. Click the Run Report button to view the report
  6. Click the Customize button and then click the Header/Footer tab on the left.
  7. Change the report title text box from Profit and Loss to Income Statement
  8. Click Run Report to view the modified report
  9. Click Save Customizations and type June 2018 at the end of the name of the custom report so that it reads Income Statement June 2018.
  10. Place this report into a group with your name and share the report as you’ve done before. Then click OK.

To prepare a balance sheet:

  1. Click Reports from the Navigation bar.
  2. Click Accountants Reports.
  3. Click BALANCE SHEET
  4. Type 6/1/18 in the From: text box and then type 6/30/18 in the To: text box.
  5. Click the Run Report button to view the report
  6. Click Save Customizations and type June 2018 at the end of the name of the custom report so that it reads Balance Sheet June 2018.
  7. Place this report into a group with your name and share the report as you’ve done before. Then click OK.

Review It with QuickBooks Online

Answer the following in a Google Doc shared with me:

  1. If an error is discovered on the trial balance, it can be corrected with all of the following, except:
    1. Click the numerical value of the error to reveal a Transaction Report
    2. Enter the transaction date of the error
    3. Click the line of the transaction report to reveal the desired journal entry
    4. Correct the error and save the entry
  2. In QuickBooks Online, the income statement is known as:
    1. Report of Financial Position Statement
    2. Operating Income Statement
    3. Profit and Loss Report
    4. None of the above
  3. In QuickBooks Online, the financial reports should be completed in the following order:
    1. Profit and Loss, Trial Balance, Balance Sheet
    2. Trial Balance, Profit and Loss, Balance Sheet
    3. Trial Balance, Balance Sheet, Profit and Loss
    4. In cloud-based applications like QuickBooks Online, financial reports can be completed in any order

End Note

You have now recorded business events based on information from your checkbook, and notes from additional owner contributions, purchases on account, and sales on account. Further, you’ve created a trial balance, income statement, and balance sheet. Next in Chapter 4, you will record adjusting entries and create an adjusted trial balance, income statement, and balance sheet.