Lesson 1. Exploring QuickBooks INTRODUCTION OBJECTIVES

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1 Exploring QuickBooks INTRODUCTION This first lesson is an introduction to the QuickBooks software program and the chart of accounts, and it contains two reading assignments. Assignment 1 takes you on a tour of the QuickBooks software program, starting with the installation of the program on your computer. You ll then work through an introduction to the program s menus and features. The main goal of this assignment is to give you a big-picture view of the way the program works. Assignment 2 delves more deeply into the QuickBooks features, and describes how to customize the program for the specific needs of the company you work for. You ll get an overview of basic accounting practices and learn how to modify QuickBooks for the different financial needs of various types of businesses. OBJECTIVES When you complete this lesson, you ll be able to n Install and start the QuickBooks software n Open a company, save company files, and backup files n Navigate the Home page using the Icon bar and the Menu bar n Use the QuickBooks Help features n Customize QuickBooks using the Preferences feature n Describe the Chart of Accounts and its contents n Display and navigate the Chart of Accounts n Explain how the QuickBooks Company Snapshot is used Lesson 1 9

2 ASSIGNMENT 1 Read this introduction to Assignment 1. Then, read Chapter 1, Quick Tour of QuickBooks 2011, on pages in your textbook Computer Accounting with QuickBooks Introduction One of the biggest challenges in accounting is organizing a business s everyday financial activities in a way that allows the information to be useful. Accounting information is said to be useful when it allows the user to make practical, timely, and accurate decisions. This course focuses on the QuickBooks accounting software, and how you can put it to work providing your business or your employer s company with useful accounting information. In a typical business, a large number of transactions will occur every day, such as sales to customers and purchases from suppliers. Businesses also need to pay bills, manage employee payrolls, and balance their bank statements. Without careful organization, all of this varied financial information will be very difficult to work with, and the business owner or manager won t know the current status of the business or be able to make decisions about future operations. In years past, businesses recorded all of their transactions on paper, in accounting ledgers. Today, however, accountants use powerful software programs to manage financial information in an organized way on computers. The QuickBooks software program provides an easy way to collect and summarize accounting information for businesses, and to compile a variety of financial reports for management purposes. Accounting Information Systems An accounting information system is a set of components that are designed to gather, organize, store, process, and communicate financial information. Accounting software streamlines standard accounting functions by handling basic tasks for you. For example, suppose that you re performing the common transaction of writing a check to pay for office supplies. 10 Computer Applications in Accounting QuickBooks

3 Using QuickBooks, you can fill out a form (that looks like a check) displayed on your computer screen. The software then makes the appropriate balancing journal entries that are required for a double-entry accounting system, crediting (reducing) the Cash account and debiting (increasing) the Office Supplies Expense account. The underlying check register and expense journal (which in pre-computing days were maintained in written form in hardback ledgers) are then stored in a computer database. Later, the check register and expense journal can be easily accessed to present the accounting information in different formats, including tax returns and financial statements. Computerized accounting information systems make things a lot easier for the accountant in many ways. However, it s important to remember that the very ease and speed of using a computerized system also makes it very easy for mistakes to occur! That s why it s critical to understand the fundamental accounting processes very thoroughly. When you re using QuickBooks, pay careful attention when you re setting up new accounts, and enter the initial information correctly. Also, focus on entering transactions accurately on a consistent schedule. Following these simple guidelines will help ensure your success as you use the program. The QuickBooks Accounting System Like any accounting system, QuickBooks is based on data, some of which is nonfinancial. Some examples of important nonfinancial information include your company s name, the names of accounts for income and expense transactions, the types of goods and services the company sells, the names of your customers, the names of other businesses and individuals you do business with (your vendors), and the names of your employees. This nonfinancial data forms the framework that surrounds your financial transactions, and supports the reports you ll produce. Once you ve established the nonfinancial framework of accounts and the lists of items, customers, vendors, and employees that are specific to your company, you re ready to enter financial information into QuickBooks. When you Lesson 1 11

4 use onscreen forms to enter the information, the images on your computer resemble the actual forms you would use if you were preparing the documents by hand. For example, when you prepare a check in QuickBooks, you ll see an image on the computer screen that looks like a business check. After you input financial information, you can produce reports to monitor business activity and help with decision making. One standard financial statement is the balance sheet, which shows what the business owns (its assets), what the business owes (its liabilities) and the owners stake in the business (the owners equity) on a particular date. Another important report that can be produced from QuickBooks data is the income statement, which shows how much the business earned and spent over a period of time. A trial balance is a report that lists all of the company s open debits and credits (with totals at the bottom) and is a useful starting point for preparing income tax forms. As this course progresses, you ll follow the standard workflow of setting up company information, entering transactions, and creating reports as you work through practice exercises and graded projects. Installing the QuickBooks Software The first step in learning to use the QuickBooks software will be to install the program on your computer. Your textbook provides excellent instructions that will make this task easy. You ll find detailed installation instructions on how to install and register the software in Appendix A at the back of your textbook, on pages A-1 through A-4. There are two CDs included with your textbook. One CD contains the QuickBooks accounting program, and the other CD contains the student data files you ll use with the program. You ll need the student data files for self-study and graded projects as you progress through the course. At this time, following the instructions on page A-1 in the textbook, install QuickBooks on your computer using the program CD. Also, copy the QuickBooks student data files from the other CD. 12 Computer Applications in Accounting QuickBooks

5 After the QuickBooks program is installed, read Chapter 1 in the textbook. The first few pages of the chapter provide a brief introduction to accounting systems and the QuickBooks software. Then, on page 1.9, your textbook begins to guide you through the QuickBooks program. Follow the instructions carefully and complete the activities as directed to familiarize yourself with the screens and menus in QuickBooks. Software Note QuickBooks 2011 is compatible with Windows 7 OS only when it s in Windows XP compatibility mode, also known as 32-bit mode. If you experience issues with QuickBooks 2011 and Windows 7, you can switch to compatibility mode. Click on the Start button at the lower left-hand corner of your screen, click on Windows Help and Support and type 32 bit compatibility mode in the Search box. Click on the link for Make Older Programs Run in This Version of Windows. You ll see two ways to change the compatibility mode; you can use either the Program Compatibility troubleshooter or the To change compatibility settings manually link. Check periodically for software updates at the online learning center Starting QuickBooks and Opening a Company At this point, you should have opened the QuickBooks data file for Chapter 1 and looked at the company file. As you proceed through this assignment, you may want to keep QuickBooks open, with Rock Castle Construction on your screen. Then, as you read the rest of this assignment, you can look at the screen images to refresh your memory on the various features as they re discussed. Here s a tip for moving quickly between open windows in QuickBooks. If you ve maximized a window that you re working on, you ll see only that window on the computer screen. Any other windows that you have open are still there, but hidden from view on your screen. To see all of the windows that are open, go to View on the top menu, and click on Open Window List. This will open a sidebar that lists all Lesson 1 13

6 the forms and reports that you have open. You can then click on any one to view it, and shift between forms easily. If you want to close the sidebar, just click on the X in the upper right-hand corner of the Open Windows box. Change a Company Name Starting on page 1.14 of your textbook, the first task you ll complete is to change the company information. Simple as it seems, this is one area where it s important to avoid making errors, because the data found in this section affects all your reports and tax filings. For example, the federal employer identification number (EIN) or Social Security number identify the company to the Internal Revenue Service when tax returns are filed. (To see Rock Castle Construction s EIN, from the Menu bar, click on Company and then Company Information, and look at the center of the right-hand side of the box that appears.) If the company s EIN in this box is incorrect, any reports that you create will include the incorrect data. If you re sending reports to regulatory agencies on official forms, it could be costly and time-consuming to fix errors after the incorrect numbers have been reported. It s also very important to input the correct starting month in the Report Information section (on the bottom left of the Company Information box) to ensure that your reports contain the financial data for the proper accounting period. QuickBooks Navigation The section of your textbook beginning on page 1.17 reviews the three different ways to navigate in QuickBooks: n The Home page n The Icon bar n The Menu bar Let s take a brief look at each of these types of navigation. Be sure to refer to the QuickBooks program on your computer screen as you read through the information. 14 Computer Applications in Accounting QuickBooks

7 The Home Page The Home page is one of the three ways in which you can access the features in QuickBooks to perform your accounting work. The Home page is a pictorial, flowchart-style representation of the accounting tasks you can perform, grouped by the type of activity (Figure 1). To view the QuickBooks Home page, click on the Home icon in the upper left-hand corner of your computer screen. As you look at the Home page, you ll see three horizontal sections with flowcharts, with tabs labeled Vendors, Customers, and Employees. FIGURE 1 The QuickBooks Home page is a pictorial, flowchart-style representation of the accounting tasks you can perform. Lesson 1 15