Accounting Exercise 1
bkb-20
quickbooks_project_b_2013_version-1.docxQUICKBOOKS PROJECT
2013 Version
Prepared by
Jack H. Gambill
&
Ayako Kuniya
Winter Quarter 2015
INTRODUCTION
This QuickBooks project is intended to acquaint the student with computerized accounting software. QuickBooks is the leading off-the-shelf computer program for small business. QuickBooks has historically been one of the easiest computerized software programs to use. My intent in having you do this QuickBooks project is for you to become familiar with off-the-shelf accounting software. It is not intended for you to become an expert in Quickbooks but rather to acquaint you with the basic features of computerized software. Accounting software programs are basically the same so what you learn by doing this project will be of benefit when learning any of the other off-the-shelf accounting software programs.
There are several reasons for those of you who are not accounting students to become familiar with an accounting system like QuickBooks. One reason is federal law which requires a business to maintain some common-sense an accounting system that clearly reflects income and allows the business to have the ability to compute taxable income. This requirement is outlined in Section 446 (General Rule for Methods of Accounting) of Title 26 of the (Internal Revenue Code) of the United States Code. If a business should decide to ignore this requirement, the Internal Revenue Service (IRS) can do your accounting the way it wants which usually means the business pays more taxes and earlier than the business would have otherwise.
The major reason is to reinforce the accounting concepts being presented in the course and apply the concepts to an on-going business. In the text, the chapters present basic accounting concepts in a systematic fashion but there is no continuity thread among the chapters when the student just does assigned homework problems. This project is intended to show the student how each chapter’s concepts relate to those previously learned and how they are applied in a business environment. Again, this basic course exposes the student to the basic financial reports that are necessary to successfully manage a business. It is critical the student understand the classifying, recording, summarizing and reporting of financial information. Success in business requires accurately measuring a company s profits and losses and knowing where the business stands financially. It is important that you as an employee and/or business owner understand the company’s accounting system and the financial reports that can be provided by the system for the long-run success of the business.
I am using the information presented in the Great Adventures problem that is located after each chapter in your textbook. This problem is a continuing problem and each chapter has a required assignment that covers the material covered in that chapter. However, some chapter requirements are not adaptable for QuickBooks so there is a blend of written assignments and QuickBooks assignments. Also, I have assigned only the first six chapters of the Great Adventures problem in this project.
LOADING QUICKBOOKS
You need to plan on spending about a half hour installing the QuickBooks software. I have provided the necessary steps to complete the installation. After installing QuickBooks, you will need to run through an EasyStep Interview process to load the company information. It should take about an hour to complete all the necessary steps asked in the interview. I have provided the necessary information on how I want you to enter the company information. The main point is I want the company name to be your name—NOT Great Adventures .
Now, let’s load QuickBooks. Remember, this disc will only work on a PC computer. You will need to complete the project using the QuickBooks 2012 version that is found on EWU Vertuallabs if you have a MAC computer or bought a used textbook. The instructions on how to use Vertuallabs is located in a module on canvas. Be sure to store the information on Netstorage or a personal USB drive. The instruction on how to do this is included in the QuickBooks module in canvas. Now, insert the QuickBooks disc that came with the text into your computer. Windows will recognize that you have inserted the QuickBooks CD and will display a message box that says “Welcome to QuickBooks.” Click Next in the “Welcome to QuickBooks” box and a dialog box will appear requiring you to indicate your acceptance of the QuickBooks licensing agreement. You will do this by checking the “I accept the terms of the license agreement” box located at the left hand corner of the license agreement and then clicking Next. The Choose Installation Type window will appear and you must choose either the Express (recommended) or Custom and Network options. Choose the express option (it will be already selected as the preferred method) and then click the Next button. The installation program will then use the default installation settings that are provided by Intuit. The License and Product Numbers window will then appear and you will then need to enter a license number and product code. This information is located on the sticker on the sleeve of the QuickBooks disc package. Click Next and the computer will then display the Ready to Install window with the prompt to Install or Print. Select the Install option and begin the 15 to 20 minute wait for the program to load. The Congratulations window will now appear and inform you that you have successfully installed Intuit QuickBooks. There are two options in this window which have been preselected – Open QuickBooks and Help me get started. De-select the Help me get started and click finish. The program will ask you to reboot the computer so click ok and you will be ready to begin loading the information
THE EASY STEP INTERVIEW
The easy step interview will begin with a “Let’s get your business set up quickly” dialog box. Click the Express Start button. QuickBooks will then display the “Tell us about your business” dialog box. In this dialog box, enter your name in the Company Name. From the Select an industry from the list box, scroll down on the listed businesses and select General Service-based Business. It will be the next-to-last-one shown in the Industry listings. The next field is the Company type. Here, select Corporation (also known as Regular or C Corporation). I would have liked to select the LLC form as it is the fastest growing form of business in the United States. However, Tony and Suzie decided on the Corporation form and the transaction data in the following chapters requires the selection of this form. Leave the Tax ID field blank. In the do you have employees field, select the “No, but I might have in the future” option. Click the continue button and the “Enter your business contact information” dialog box will appear. In the address field, enter 526 5th Street, Cheney, WA 99004 and in the telephone field (509) 359-0000. Leave the email and website fields blank. Next, click the “Create Company File” button. The “You’ve got a company file! Now add your info.“ box will appear. Since there is no data to enter right now, click the “Start Working” button.
Setup
To add accounts, click on the Chart of Accounts on the right-side of the screen. Then, click on Account and chose New to add an account. The screen will prompt you by indicating you are to “choose one account type and click Continue". Since Cash is the first asset on the balance sheet select Bank and click on Continue. The Add New Account screen will appear on the left-hand side of the screen and type in Cash in the Account Name block. After typing in the account title, click on the Save & Close button. The cash account will now be added to the company’s Chart of Accounts. If for some reason the Chart of Accounts covers the entire screen, click the middle button in the top right hand corner and the Chart of Accounts screen will appear so you can add new accounts. The next account to add is Accounts Receivable. To do this, in the Chart of Accounts screen click on Account and then New. In the Add New Account screen, select the Other Account Types at the bottom of the screen. Click on the <select> button next to the Other Account Types and one of the selections will be Accounts Receivable. Click on the continue button and Accounts Receivable will be listed as the account type on the Add New Account screen. Type in Accounts Receivable in the Account Name block and click Save & New and Accounts Receivable will be added to the Chart of Accounts. Since the firm offers credit to its clients, you will need to add an Allowance for Uncollectable Accounts account. The next screen has Accounts Receivable at the top of the screen so type in Allowance for Uncollectibles as the Account Name and make it a subset of Accounts Receivable. If for some reason the general journal entry asks for a customer name, create a customer called N/A.
The next accounts that need to be added are the other current assets. To do this, click on the Account and in the Add New Account screen select the Other Account Types at the bottom of the screen. Then select Other Current Asset and click continue. In the New Account screen type in Prepaid Insurance in the Account Name and click the Save & New button. You should add the following additional current assets: Notes Receivable, Prepaid Rent, Racing Supplies and Inventory. Unfortunately, the account title Office Supplies was used without the word Expense in the expense section of the preselected accounts. So the program precludes you from typing in Office Supplies as an Other Current Asset. Therefore, before you can enter Office Supplies as an Other Current Asset, it will be necessary to change the account title in the expense section to Office Supplies Expense. To do this, select Office Supplies in the expense section and under Account in the Chart of Accounts screen select edit. This will bring up the edit screen with the Office Supplies listed and you can add the word Expense to the Account title. Click the Save and Close button and the new Office Supplies Expense account title will be in the Chart of Accounts. Now you can click New under the Account in the Chart of Accounts screen and add Office Supplies as an Other Current Asset. This completes the addition of the necessary current assets to the Chart of Accounts.
The next set of accounts to be added are the fixed assets. Again, in the Chart of Accounts click Account and New and select Fixed Asset (major purchases) in the Add New Account screen. The three account titles to be added here are Equipment (Bikes), Equipment (Kayaks) and Equipment (Outdoor).
The Liabilities section of the Balance Sheet is next. The first current liability to be added is Accounts Payable. Again, this account is listed under the Other Account Types <select>. Click on Accounts Payable and the continue button and type in Accounts Payable in the Add New Account screen block titled Account Name. The following current liabilities will be used in subsequent chapters and should be added now. In the Add New Account: Choose Account Type select Other Account Types <select> and click on Other Current Liability. The following accounts should be added in this area: Salaries Payable, Interest Payable, Income Tax Payable, Unearned Revenue, and Dividends Payable. There are two long term liability accounts and they can be created by selecting the Other Account Types <select> and choosing the Long Term Liability category. The two accounts to be entered are Notes Payable and Mortgage Note Payable. This completes the liability section the Chart of Accounts.
The next section is the Equity section of the Balance Sheet. First, the Opening Equity Balance account needs to be deleted. To accomplish this, click on the account, select account, and then the Delete Account option. The program will then ask if you “Are sure you want to delete this account?” Click OK and the account will be deleted. You will then need to change the Capital Stock account to Common Stock. Use the edit function in the Account and change Capital to Common in the Account Name block and click Save and Close.
The next section is the income statement accounts. In the Choose one account type and click Continue, select Income and add these four accounts in the Account Name block: Service Revenue (Clinic), Service Revenue (Racing), and Service Revenue (TEAM). The company will offer a sales discount for early payment so you need to add a sales discount account. The company will also have interest revenue so select the Other Account Types as the account type for this account and enter Interest Revenue in the Account Name block.
The expense portion of the income statement will require quite a few new accounts. Again, in the Chart of Accounts select new and in the Add New Account screen select Expense in the “Choose one account type and click Continue” tab. Enter the following expense accounts in the Account Name block: Legal Fees Expense, Salaries Expense, Racing Supplies Expense, Income Tax Expense, Service Fee Expense, Miscellaneous Expense and Bad Debt Expense. For the Cost of Goods Sold, in the Add New Account screen select Other Account Types and select Cost of Goods Sold and on the Add New Account screen type in Cost of Goods Sold in the Account Name. The company will sell an asset at a loss so you will need to create a Loss on Sale Account to record the loss. To do this, select the Other Expense category and create the Loss on Sale account. This completes the loading of the QuickBooks Program. Now the accounting work begins by entering the data.
Exercise #1
This is the first exercise using the Great Adventures continuing problem. The problem begins on page 50 of the text and you need to answer all four of the required items. This is a writing assignment and will be forwarded to me for grading by email or handed in with the first test.
Exercise #2
This is the first exercise using QuickBooks. At first, you will probably be overwhelmed with the number of commands, bells, whistles and buttons displayed in the QuickBooks window. At this point, don’t be concerned with all the features as this exercise is to record the transactions that are listed for Great Adventures in chapter 2 on page 103 and prepare a trail balance. I have provided the necessary journal entries for all the exercises in this QuickBooks module or in the exercise information. The QuickBooks program will automatically post to the “T” accounts so there is no need to do this requirement.
Journalizing the Data
Before you begin entering the data, you will need to click on the edit button in the top left-hand corner of the screen. This will bring up a list of possible actions and you will need to select the bottom one called preferences. From that pop-up list, select accounting which will be the top one. When the next screen appears, select company preferences which is in the middle of the screen at the very top. When the list of preferences appears, go to the item labeled Date Warnings and de-select the two preferences in that block. The warning that says “Warn if transactions are 30 day(s) in the future” will pop-up after each transaction unless you turn off this feature since the company’s fiscal year begins in July 2015.
Now you are ready to begin journalizing the data. To do this, click on the Accountant button which is located at the top of the main QuickBooks screen. (Sixth one from the left) From the list of possible actions, select “Make General Journal Entries”. When the Make Journal Entries window appears, change the date to 07/01/2015. Be sure the adjusting entry block located to the right of the date and entry number is not checked!! Then click on Account and click on the triangle at the right-hand side of the account block. This will bring up all the accounts in the General Ledger. Since the first entry is to record the receipt of $10,000 cash from Suzie. Select Cash and type in $10,000 in the debit column. Then click on the next line down and $10,000 will appear in the credit column and type Common Stock and click save and new at the bottom of the screen. You have now completed your first journal entry in QuickBooks. Continue do the next 10 entries and you will have completed the journalizing of the chapter 2 transactions. On transaction #5, you will need to put a name as the vendor. I selected Staples but feel free to put any name you like as the vendor. For transactions #6 and #10 use the Advertising and Promotion expense account in the Chart of Accounts. The next step is to prepare a trial balance. This is accomplished by click on Reports which is on the top line between Banking and Online Services. Scroll down on the drop-down menu to Accountant and Taxes and select Trial Balance and the Trial Balance will appear. Be sure to change the from and to dates to July 1 and July 31 respectfully. Also, click on the date in the title of the Trial Balance and it will change the date to July 31, 2015. Print out the Trial Balance (the print button is located on the top of the Trial Balance screen).
Send me the completed Trial Balance by EWU email, by canvas, or turn-in when you take the test.
Exercise #3
This exercise will use the data that is presented in Great Adventures chapter 3 page 159. Note you will need to enter a compound journal entry on August 10th. The entry should be to debit Cash and unearned Revenue and credit Service Revenue (Clinic). On August 24th, the firm will pay off the account payable for the Office Supplies it purchased on account on July 4th. You will need to enter the name of the vendor the company purchased the supplies from on July 4th. You will need to create another vendor for the racing supplies the company purchases on December 12th. The journal entry making the dividend payment on December 31st should be a debit to Dividends Paid and a credit to cash for $4,000. Do not record the purchase of the engagement ring by Tony as this is a personal expenditure and not a business transaction. Next, you will need to make the December 31st adjusting entries a through g. When you make these entries, be sure to check mark the adjusting entry box located to the right of the date and journal entry number blocks. When you finish the adjusting entries, go Reports and the Accountant & Taxes file and select Adjusted Trial Balance. You will need to change the From date to July 1, 2015 and the To date to December 31, 2015.
Unfortunately, Susie did not reconcile the company’s cash balance with that of bank before running an adjusted trial balance on December 31, 2015. She will realize the mistake in chapter 4 and make the necessary journal entries to record the interest received of $500 and the service charge of $200 paid during the 6 months the business has been in operation. Therefore, do not complete requirements 5 through 8 at this time. You will complete requirement number 5 after you make the necessary journal entries in exercise #4 to reflect the correct December 31, 2015 cash balance. Requirements 6-8 will be completed automatically on December 31, 2015.
Exercise #4
The chapter 4 exercise on page 207 will be limited to making the following two general journal entries in QuickBooks as of December 31, 2015. Be sure there is no check mark in the adjusting entry box.
Cash $500
Interest Revenue $500
Service Fee Expense $200
Cash $200
After posting the above two journal entries, print out a corrected December 31, 2015 Adjusted Trial Balance. You can now complete requirement 5 from chapter 3. To print the required reports, go to Reports and select the Company & Financial file. First, print out a Profit and Loss Statement (called the Profit and Loss Standard in QuickBooks) for the period July 1 2015 to December 31, 2015. Enter July1, 2015 in the From block and December 31, 2015 in the To block. Click on the body of the report and the data will appear. QuickBooks does not provide a Statement of Stockholders’ Equity so go to the next statement which is the classified Balance Sheet. Select Balance Sheet Standard and change the “as of date” to December 31, 2015. The last report to print is the Cash Flow Statement and it is the next to last item on the list. This statement is for a period of time so enter July1, 2015 in the From block and December 31, 2015 in the To block.
Provide the completed financial statements to me at the end of the exercise.
Exercise #5
Complete requirement one by entering the transactions from chapter 5 page 256 into the general journal. Record the June 1-30 TEAM event revenue as of June 30, 2016. In requirement 2, only complete part 2a by debiting bad debt expense and crediting Allowance for Uncollectable. (Be sure to check mark the adjusting entry box. The journal entry kept asking for a customer when I credited the Allowance for Uncollectable account so I made a customer with the name N/A.
Go to Reports and print out the Profit and Loss Standard and the Balance Sheet Standard for the first half of the fiscal year and provide me the completed exercise #5 financial statements.
Exercise #6
Chapter six of the Great Adventures problem on page 314 is the final one you will journalize using QuickBooks. Starting in July 2016, the company enters into the retail business by selling MU watches.
The company uses the FIFO perpetual inventory method to value the inventory. I have calculated the Cost of Goods Sold for each sale using the FIFO method. I have provided the necessary general journal entries for you as the textbook did not do these.
When you finish the journalizing, print out a Trial Balance as of December 31, 2016, a Profit and Loss Statement for the period from July 1, 2016 to December 31, 2016 and a December 31,2016 Balance Sheet. Then, make the journal entry to reflect the current market value of the inventory at $100 per watch. (The lower-of-cost-or-market method) This journal entry is the December 31 debit Cost of Goods Sold $5,600 and a credit Inventory $5,600 on the chapter six list of journal entries. Then, Print out a new Profit and Loss Statement for the period July 1, 2016 to December 31, 2016.
This completes the QuickBooks Project.
