Making Journal Entries in QuickBooks 2015
 
 
 
Making Journal Entries in QuickBooks 2015

 

 

A journal entry is a logging of transactions into an accounting journal. Each of the transactions recorded is either a debit or credit. The total amount for the debits must equal the total number of credits or the journal is unbalanced. This is called double entry accounting.

You really don't need to know double entry accounting to use QuickBooks because QuickBooks takes care of it for you.   All you have to do is write checks, receive payments, and etc., and QuickBooks does the actual accounting for you. However, there may be times when you need to do some of your own accounting using journal entries.

Examples of When to Use Journal Entries

If you're not accountant, you may be asking why you even have to worry about journal entries. QuickBooks seems to do everything for you.    That is true; however, there are some reasons why you may want to use journal entries in QuickBooks.

These reasons are listed below:

  • To set up an opening balance in accounts. You can use a single journal entry to enter the opening balance for most balance sheet accounts based on the trial balance from another system. 

  • To reassign accounts. You may start out tracking all income in one account, but realize you want to divide income into two different accounts.   To move income from one account to another, you would use a journal entry to debit the income from the first account and credit it to the second. 

  • To reassign jobs. If a customer has a credit from one job and wants you to apply that credit to another, you would use a journal entry. 

  • To fix account assignments. You can reassign an expense to another expense account using a journal entry.  

  • To depreciate assets. You decrease the value in an asset account each year that you own a depreciable asset.   You can do this with a journal entry. 

  • To reassign classes. Use a journal entry to transfer income or expenses from one account to another. 

  • Recording transactions for an outside payroll service such as ADP. 

  • Recording Year-End Transactions. This is the most common reason to use journal entries.

Balancing Debits and Credits

In double entry accounting, if you increase the amount in one account, you have to decrease it in another.   If you increase the amount in one account without decreasing the amount in another account, the transactions won't balance. These changes in the values are called debits and credits. Whether the increase or decrease is a debit or credit depends on the type of account.

Take a look at the table below:

Account Type

Debit Increases Balance / Credit Decreases Balance

Debit Decreases Balance/ Credit Increases Balance

Asset Account

Yes

---

Liability Account

---

Yes

Equity Account

---

Yes

Income Account

---

Yes

Expense Account

Yes

---

Debits and credits can be confusing because most of us are used to the way the bank uses them. A debit is a decrease, and a credit is an increase.

Creating a Journal Entry

To create a journal entry, go to Company>Make Journal Entries.

You will then see the Make General Journal Entries window.

 

If you want to use a journal entry to reassign income or expenses, today's date should be in the Date field. If you are making end-of-year entries or adding to the year's depreciation, use the last day of the fiscal year.

QuickBooks automatically assigns journal entry numbers to your journal entries. If you want to change that number, enter it into the Entry No. field.

 

Now we will start adding lines to the table.   Under Account, select the account that you want to either debit or credit. You must assign an account.

 

If you want to debit the account, type the amount under Debit in the same row.   If you want to credit the account, type the amount under credit.

 

Under Memo, write a description of the journal entry.

 

Select an option under Name if you are debiting or crediting an AR or AP account. In addition, fill in the cell if you're creating a journal entry for billable expenses, and the expenses need to be assigned to a customer or job. QuickBooks will put a checkmark in the Billable column for you.

Enter a class if you want.

 

As you can see, QuickBooks added a credit to the second line to balance out the debit in the first line.

Choose the account for the second row.

 

Click Save & Close.

Reassigning an Account

In the last section, we debited our first income account and credited another income account. This was pretty basic and easy, and QuickBooks even did some of the work for us. 

The snapshot below shows you how to make a journal entry where you credit the first expense account to decrease the balance, then debit the new expense account to increase its balance. 

 

Checking Journal Entries

Making journal entries can be a stressful thing if you've never done them before. If you're the type of person who loves QuickBooks because it does everything for you, and you are hesitant to actually do any double entry accounting yourself, you may question yourself as you make journal entries even though QuickBooks makes them simple.

You don't have to be hesitant or even afraid to work with journal entries though.   There is an easy way to check your journal entries to make sure everything you entered was correct.

If you want to check your journal entries and make sure your values were moved around as you intended, run a Profit & Loss Report by going to Report>Report Center.

In the Company & Financial Category, choose the Profit & Loss Standard. Click the green arrow icon below the report to run it.

 

We've circled the increase in our Service Sales income account above, which matches our reason for the journal entry.

Correcting Errors

If you need to correct a journal entry, it is easy enough to do. Go back to Company>Make General Journal Entries.

 
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Go to the List of Selected General Journal Entries dropdown box, and choose the date range for the journal entries you want to see.  

We have chosen This Month.

 
 

Click on the entry that contains an error as we did above. 

You can then make any changes you need to in the top half of the window. 

When you are finished, click Save & Close.

If you need to, you can run another Profit & Loss Report to double check your work.

Deleting a Journal Entry

To delete a journal entry, right click on the entry, then choose Delete General Journal as circled in red below.

 
End of Year Tasks

Keeping up with accounting tasks throughout the year is a job all on its own. Then comes the end of the year, and you suddenly find yourself overwhelmed with even more accounting tasks. The good news is that QuickBooks will do most of your year-end tasks for you. All that you have to do is prepare it.

Reports to Run and Check for Problems

If your company uses an accountant, you may never need to run these reports.   However, if you do your own tax returns, these reports will help you check for any problems at the end of the year.

To run these reports, go to Reports>Accountant and Taxes, then select the report that you want to run.

Audit Trail shows changes to transactions, as well as who made them and when.

Voided/Deleted Transactions Summary and Voided/Deleted Transactions Detail.   This shows transactions that have been voided or deleted, as well as who made the deletions.

Dealing with Unreconciled Transactions

As you are getting things ready for year-end tasks, you may find unreconciled transactions from previous years for which you've already filed tax returns.   QuickBooks can help you clear up those transactions. Best yet, it won't screw up your tax returns or reconciliation.

To find unreconciled transactions, go to the Home page, then click Check Register in the Banking section.

 

 

Go to the Sort By dropdown box located at the bottom left of the window, and select Cleared Status.

 

Find uncleared transactions in the register.

Look at the column with a checkmark at the top.   Any transaction that has been reconciled has a checkmark. Any transaction that has cleared has an asterisk. An uncleared transaction will be blank.

To get rid of these uncleared transactions, you will have to offset them.   To do that, you can use a journal entry.

Go to Company>Make General Journal Entries.

Put today's date in the Date field.

In the first line, under the Account column, select the bank account that contains the unreconciled transaction.   In the Debit column, enter the value of the transaction. 

In the second row, under Account, select the account used in the transaction. By account, we mean expense account, etc. 

Repeat these steps for all unreconciled transactions.

When you are finished, click Save & Close.

Go to the Banking Section of the Home again. This time, click Reconcile.

Select the date from the previous reconciliation as the date in the Statement Date field.

Put the Beginning Balance value in the Ending Balance field, then click Continue. 


 

In the Reconcile – Bank Account Name window, put checkmarks beside the old unreconciled transactions, as well as the transactions you created with journal entries.

Click Reconcile Now.

The Trial Balance Report

The Trial Balance report is where you can see all your accounts and balances. 

To run the report, go to Reports>Accountant & Taxes>Trial Balance.  

You will then see the Trial Balance report for the prior month.

To see the report for the entire fiscal year, click the Dates dropdown menu toward the top of the report.

 

Financial Reports

There are three reports you need to run that will show you what you're company is doing right, what it's doing wrong, what it could do to be even better, and what it needs to pay in taxes.

Let's talk about these reports and what you need to look at when you run them.

1.       The Profit & Loss report shows you if your company is making or losing money. At the top of the report, you will see your revenue or income.   Your expenses all fall below that. When you get to the bottom of the report, you can see if you have profit – or loss.

 

Our report is shown above.   As you can see, we ran our report for the fiscal year. We ended up with a profit for our fictional company.

2.       The Balance Sheet shows what your company owns, as well as how much it owes.   In other words, it shows your assets and liabilities. It also shows the equity that is in your company at any point in time.   The Balance Sheet gives you a picture of your company's financial strength. To see your company's Balance Sheet report, go to Reports>Company & Financial>Balance Sheet Standard.

 

3.       Statement of Cash Flows. The Statement of Cash Flows lets you know if you are generating enough cash to stay in business. Your balance sheet might look okay. However, if you don't have money in the bank to pay bills, your business is in trouble. To see the Statement of Cash Flows report, go to Reports>Company & Financial>Statement of Cash Flows.

 

Generating Tax Reports

Making sure that your company file is ready for your accountant will save you some money in fees.   You will want to be sure that each account in your chart of accounts links to the correct tax line and tax form.

To make sure it does, go to Reports>Accountant & Taxes>Income Tax Preparation. 

 

As you can see in our report, some of our accounts have the correct tax line and form, but some are unassigned.   If you want to correct this, you will have to go to your chart of accounts, then edit the accounts with the incorrect tax lines and forms.  

The Edit Account window is pictured below.

 

Click the dropdown beside Tax-Line Mapping and choose the correct tax line. If you do not know which to choose, click the How Do I Choose the Right Tax Line link.

This will open QuickBooks Help:

 

Once all your accounts are assigned tax lines, you can run the Income Tax Summary report. This report will contain the values needed for your tax return. To run this report, go to Reports>Accountant & Taxes>Income Tax Summary.

Creating a Review Copy for Your Accountant.

QuickBooks offers you two ways to share your company file with your company's accountant (if you have one). You can set up an external accountant user.   This will mean that your accountant can view anything in your company file except customer information such as credit card numbers. With this method, your accountant can log into your file and review all your data.   Your accountant can make changes, then track which changes are made by the accountant and by you.

You can also create a review copy for your accountant. You will both have a copy of the company file with an accountant's review copy.   You get to perform your daily accounting tasks. Your accountant can clean up earlier things. What the accountant can or can't clean up is decided by a cutoff date. QuickBooks calls it the dividing date.   Any transactions before that date are available to your accountant for cleanup. Transactions after that date are yours to work with and stay in the original company file.   When the accountant sends a file with changes to you, you can merge those changes with the original company file.

To create an accountant's copy, you need to be in single-user mode first. To do this, make sure everyone but you is logged out, then go to File>Switch to Single-user Mode. 

Next, go to File>Send Company File>Accountant's Copy>Save File.  

 

Select Accountant's Copy, then click Next.

 

Set the Dividing Date using the Dividing Date dropdown.

Click Next.

 

Choose where you want to save the copy, then click Save.

When your accountant sends you changes, open your company file and back it up before importing the changes. 

Once you've backed up your company file, go to File>Send Company File>Accountant's Copy>Import Accountant's Changes from File. 

Find the file on your computer or on an external disk. Double click the filename.

You can then review the changes.   To make the changes, click the Incorporate Accountant's Changes button. If you don't want to import the changes, click Close.

Set Up an External Accountant User

To set up an external accountant user, log in as an administrator. You must be logged in as an administrator to create an external accountant user.  

Next, go to Company>Set Up Users and Passwords>Set Up Users.

Enter your password. You will then see the User List dialogue box. 

Click Add User.

The Set Up User Password and Access dialogue box then opens.

Type the name for the external accountant user in the User Name field.   This is the username for your accountant. 

Type the password and then confirm it.  

Click Next.

You will then see the Access for User screen.

Select External Accountant.

Click Next.

Confirm that you want to give access to your accountant by clicking Yes.

Click Finish.

Creating 1099 Reports

If you have independent workers or contractors, you will need to generate 1099 reports for them.

To view how much you've paid 1099 vendors, go to Reports>Vendors & Payables, then choose either the 1099 Summary or 1099 Detail. Check to make sure all the data is correct in the report. Look for obvious errors in transactions. When you're sure that all the data is correct, you can then print the 1099's.

The first thing you will need before you can print 1099's for your 1099 vendors is the forms. You can order printable 1099-MISC and 1096 forms, or you can purchase them at a business supply store.

When you're ready to print, load the forms into your printer.

Go to Vendors>Print>E-file 1099s>1099 Wizard. 

When the Wizard window opens, click Get Started.

 

 

Next, put a checkmark in the box beside each vendor who gets a 1099.

 

Click Continue.

Verify your vendors' tax information.

 

As you can see in the snapshot above, there is data missing for our vendor. We can simply enter the missing information into the cell, then press Tab.

 

Click Continue.

Next, map the accounts in your chart of accounts to the box on the 1099 form. You can do this by clicking the downward arrow under Apply Payments to this 1099 Box and select the appropriate 1099 box.

 

Click Continue.

Follow the instructions in the Review Payments for Exclusions screen, as shown below.

 

When "Check Payments Included on Forms 1099-Misc" report shows check payments only, then click Continue.

Next, make sure the vendors and their compensation is correct.

 

Click Continue.

Now you can choose to either print your 1099's or use Intuit's e-file service (for a fee).

 

Let's choose Print.

Click OK in the Printing 1099-MISC and 1096 Forms dialogue box.

 

You will then see the Select 1099s to Print dialogue box.

Once the Valid Address and Valid ID columns have the word YES, you can click Preview 1099 to preview the forms before printing them.

Click Close.

Click Print 1099. This will open the Print 1099 window. 

Click Print.

Closing the Books

When you close the books for the year, you lock transactions that have been reported on tax returns and financial results.

To close the books in QuickBooks, you will first need to be in single-user mode.

Next, go to Edit Preferences.

Click Accounting on the left, then the Company Preferences tab.

 

In the Closing Date section, click on the Set/Date Password button.

 

Fill out the information requested in the Set Closing Date and Password dialogue box (shown above).

Click OK. 
 
 
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