©2014 pearson education, inc. publishing as prentice hall 7-1 chapter focus: general accounting...

copy2014 Pearson Education Inc publishing as Prentice Hall7-1

Chapter Focus General Accounting Procedures for a Merchandising

Business and Partnership

bull General Accounting procedures include Customization of the Chart of Accounts Maintaining a Fixed Asset Item list Recording adjusting entries for Accrual Basis Accounting Bank and credit card reconciliations

bull Partnership Company owned by two or more individuals Partners do not receive a salary Rather than issuing paychecks owner withdrawals are recorded Each owner receives a portion of the profits based on the

percentage of hisher investment Net Income to Ownersrsquo Capital accounts will be distributed

based on percentage of ownership


Fixed Assets

bull Fixed assets are long-lived assets such as land buildings furniture equipment and vehicles

bull Fixed assets are kept longer than one yearbull QuickBooks can keep track of fixed assets

in one place


Fixed Asset Item List

bull To track fixed assets you create a Fixed Asset Item listbull Fixed Asset Item List keeps records for each assetbull This includes

Asset Name Date of purchase Cost Location Warranty information Serial number Asset account etc

bull Fixed Asset Item List does not record depreciation or book value


Fixed Asset Manager

bull The Accountant or Enterprise versions of QuickBooks include a Fixed Asset Manager

bull More comprehensive than a list of fixed assetsbull When used the Fixed Asset Manager pulls

information about the fixed assets from an open company file

bull The accountant can determine the depreciation for the assets and post a journal entry back to the company file

bull The Fixed Asset Manager also integrates with Intuitrsquos ProSeries Tax products and must have tax forms identified prior to use


Create a Fixed Asset Item Listbull To create click the Lists menu then click Fixed Asset

Item Listbull To create a new fixed asset item

Use the keyboard shortcut Ctrl+N or Click the Item button on the Fixed Asset Item screen and click

New


Add Fixed Asset Itembull Enter the

information for Asset Name

Store Fixtures

Purchase and Asset Description Store Fixtures

Item is new Date

123112 Cost $4500 Asset

Account 1520 ndash Store Fixtures

bull Click OK


View the Fixed Asset Item List

bull The Fixed Asset Item List shows Store Fixtures as a fixed asset


Credit Card Reconciliation

bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity

accounts Income expense and cost of goods sold accounts

are not balance sheet accounts and may not be reconciled

bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account

bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now


Reconcile Credit Card

bull Click the Reconcile icon

bull Account 2100 ndash Visa

bull Statement Date 01312013

bull Ending balance $122198

bull Finance Charge $000

bull Click Continue


Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow

Supplies and Winter Sports Accessories Do not select Shoes amp More

bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now


Enter Adjustment for the Credit Card Reconciliation

bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your

statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account



bull Click Enter Adjustment

bull On the Make Payment screen click Cancel

bull Select Detail for the Reconciliation Report

bull Click Display



bull Note the General Journal entry for -400

bull Close the Report


View the Adjustment for the Credit Card Reconciliation

bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies

bull Double-click the account to see a QuickReport


Undo Last Reconciliation

bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation


Undo Last Reconciliationbull Click Continuebull The screen

Recommends that the file be backed up

Tells you the Current Beginning Balance and the Previous Beginning Balance

Removes the cleared status of transactions service charges interest and balance adjustments



bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges

interest or balance adjustments entered on the previous reconciliation

bull Click OK


Redo Credit Card Reconciliationbull Redo the

reconciliation Account 2100 ndash Visa


bull Ending Balance $122198

bull Click Continue


Redo Credit Card Reconciliation

bull Click Mark All to select all of the Charges and Cash Advances Redoing a

reconciliation does not remove the Journal entry entered previously

bull Go to the Journal entry from the previous reconciliation Click the

013113 transaction for 400

Click Go To


Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut

Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal


Redo Credit Card Reconciliationbull The previous

Journal entry is no longer shown because it has been deleted

bull The Ending Balance and Cleared Balance match

bull The Difference is 000

bull Click Reconcile Now


bull Click OK on the Make Payment screen

bull Display or Print the Reconciliation Report

bull Print the Check



Organize Individual Partner Equity Accounts

bull QuickBooks groups the partner accounts together by account number

bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner



bull Each partner will have a separate capital account with subaccounts for investments and withdrawals

bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital



bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title

Example Horne amp Muir Capitalbull Click Save amp Close



bull Use the keyboard shortcut Ctrl+N to create a New account

bull Account type Equity

bull Click Continue



bull Enter the new Equity account information Number 3110 Account Name First

and Last Name Capital

bull This should be your full name Example Janet Horne Capital

Subaccount of 3100 ndash Your Last Name amp Muir Capital

bull Click Save amp New



bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital

bull Click Save amp Close



bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment

Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment

Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital



bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110

bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120

bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120



bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts

bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner


Partner Withdrawal of Funds

bull An owner in a partnership does not receive a paycheck

bull If an owner relies on the income from the partnership for his individual income a withdrawal is made

bull An owner withdrawal is recorded on a check


Withdrawal of Funds by Partner

bull Click Write Checks icon

bull Complete the Check Face Pay to the Order

First and Last Name

Click QuickAdd and add the your name to the Other list

Click OK



Date 013113 Amount $1000 Memo Owner Withdrawal January



bull Complete the check detail Account 3112 ndash First and Last Name Drawing

Click Save amp New Repeat to issue a withdrawal check to Larry Muir


Distribute Capital to Each Owner

bull View Equity section of the Balance Sheet

bull Notice the total value of 3110 ndash First and Last Name Capital is $19000

bull The total value of 3120 - Larry Muir Capital is also $19000

bull 3100 Your Last Name amp Muir Capital Other shows $2615944

Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the

Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts




bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal

bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital

should be equally divided between First and Last Name Capital and Larry Muir Capital



bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners



bull Review the Equity section of the Balance Sheet

bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount

bull Each ownerrsquos total capital is $3207972

bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner

Closing Entries

bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity

bull When given a closing date QuickBooks closes Income and expenses

bull You must Close Drawing and transfer net incomeloss into ownersrsquo

equity



Transfer Net Income to Partners

bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally

bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner



bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for

$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of

an odd number in the amount


View Equity Section of the Balance Sheet

bull Note Retained Earnings shows -276675 and Net Income shows 276675

bull Note the value of the equity section for each owner

bull After the distribution of Net Income the Total Equity amount remains the same

Close Drawing

bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry

bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for

$1000


Close Drawing

bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for

$1000


Balance Sheet After Closing Ownersrsquo Drawing Accounts

bull Drawing accounts no longer show

bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)



Merchandise Inventory

bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken

bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory


Prepare Adjustment for Merchandise Inventory

bull 013113 Found two damaged hats for $8 each that need to be discarded

bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27

bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not

sold is treated as an expense Damaged merchandise that is not salable is

considered an expense of doing business



bull Click the Inventory Activities icon

bull Click Adjust QuantityValue On Handhellip

bull Adjustment Type Quantity

bull Enter the Adjustment Date 013113

bull Click the drop-down list arrow for Adjustment Account

bull Click ltAdd Newgt


Add Account for Merchandise Adjustment

bull Account Type Expense A reduction to inventory because of damage is an increase in the cost

of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close



bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2



bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600

This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced

Net Income and Retained Earningsbull Click Save amp Close when finished


Adjust Retained Earnings for Merchandise Adjustment

bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings

bull Access the Journal entry for Retained Earnings



bull Click Company on the Menu bar

bull Click Make General Journal Entrieshellip

bull Click Previous until you find the transaction for Retained Earnings

bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)

bull One-half of the adjustment is 800

bull Deduct $800 from each ownerrsquos capital account

bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537

Chapter Focus General Accounting Procedures for a Merchandisin

Fixed Assets


Fixed Asset Manager

Create a Fixed Asset Item List

Add Fixed Asset Item




Reconcile Credit Card (2)


Enter Adjustment for the Credit Card Reconciliation (2)




Undo Last Reconciliation (2)



Redo Credit Card Reconciliation (2)





Organize Individual Partner Equity Accounts (2)











Withdrawal of Funds by Partner (2)


Distribute Capital to Each Owner (2)




Closing Entries


Transfer Net Income to Partners (2)


Close Drawing

Close Drawing (2)




Prepare Adjustment for Merchandise Inventory (2)





Adjust Retained Earnings for Merchandise Adjustment (2)


Fixed Assets

bull Fixed assets are long-lived assets such as land buildings furniture equipment and vehicles

bull Fixed assets are kept longer than one yearbull QuickBooks can keep track of fixed assets

in one place







Fixed Asset Manager










New




Store Fixtures


Item is new Date

123112 Cost $4500 Asset


bull Click OK


















bull Click Continue














bull Click Display





















bull Click OK






bull Click Continue







Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)
















Fixed Asset Manager










New




Store Fixtures


Item is new Date

123112 Cost $4500 Asset


bull Click OK


















bull Click Continue














bull Click Display





















bull Click OK






bull Click Continue







Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)














New




Store Fixtures


Item is new Date

123112 Cost $4500 Asset


bull Click OK


















bull Click Continue














bull Click Display





















bull Click OK






bull Click Continue







Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)













Store Fixtures


Item is new Date

123112 Cost $4500 Asset


bull Click OK


















bull Click Continue














bull Click Display





















bull Click OK






bull Click Continue







Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)



























bull Click Continue














bull Click Display





















bull Click OK






bull Click Continue







Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)























bull Click Display





















bull Click OK






bull Click Continue







Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)






























bull Click OK






bull Click Continue







Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)















bull Click Continue







Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)
















Click Go To































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)








































bull Click Continue



































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)












































First and Last Name


Click OK































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)








































Closing Entries




equity
















Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)
























Close Drawing



$1000


Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)










Close Drawing


$1000



















































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)



























































Fixed Assets


Fixed Asset Manager





































Closing Entries




Close Drawing

Close Drawing (2)










©2014 pearson education, inc. publishing as prentice hall 7-1 chapter focus: general accounting...

Documents

fixed asset itementer

fixed asset item listto

fixed asset item listrecording

fixed asset item screen

new fixed asset itemuse

asset description

track of fixed assets

fixed assetsfixed assets