General Questions

Quickbooks and Sales Tax Tracking: What You Should Know

As a business owner, it’s important that you calculate — and charge — sales tax on all purchased products and services. When a customer in your business’s state makes a purchase, you are legally required to charge him or her sales tax. Although different states and municipalities have different sales tax rates, most fall somewhere between 4% and 9%, meaning a customer who spends $100 must pay an additional $4 to $9 in sales tax. There’s no denying the fact that sales tax adds a new challenge for business owners. But if you use Quickbooks, you’ll be pleased to hear that it does most of the work on your behalf.

How Sales Tax Rate Is Calculated in Quickbooks

Quickbooks  is able to automatically calculate sales tax based on the region in which your business operates. As previously mentioned, there’s no universal sales tax rate for the United States. Rather, it varies depending on the state, city or county, with most places requiring businesses to charge between 4% and 9%. Quickbooks, however, contains an updated list of thousands of tax code rates for U.S. municipalities. Regardless of where your business operates, Quickbooks can automatically calculate your correct sales tax rate.

Charging Customers Sales Tax in Quickbooks

Of course, you’ll need to charge customers sales tax. While it’s best to consult with a professional tax accountant, businesses in the United States are generally required to charge sales tax for all products or services delivered in their respective state or municipality. If you use Quickbooks, however, you can easily charge customers sales tax by adding it to their invoices. Simply pull up the customer’s invoice, at which point you’ll see an option to add sales tax. And because Quickbooks automatically calculates sales tax rate based on your region, you don’t have to worry about trying to find the correct rate.

The Sales Tax Center

Quickbooks actually has a built-in feature that’s designed specifically for sales tax tracking: the Sales Tax Center. Using this feature, you can analyze and report your business’s sales tax. The Sales Tax Center even allows you to receive notifications for when sales tax is due. As you may know, most states require businesses to pay sales tax four time a year — once per quarter. With notifications enabled, you’ll receive an email before the due date of each quarter so that you don’t accidentally miss a tax payment.

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What Is Current Ratio in Accounting?

Financial accounting is an important task associated with running a business. If you don’t know how much money you spend and how much you generate, you won’t be able to optimize your business’s operations, resulting in lower profits. But there are a number of metrics used to measure a business’s financial health, one of which is current ratio. As a business owner, you should familiarize yourself with current ratio so that you can effectively use this metric in your financial accounting efforts.

Current Ratio Explained

Current ratio is a financial metric used to determine if a business has the adequate amount of money and resources needed to cover its short-term expenses. It’s calculated by taking a business’s current assets and dividing it by the business’s current liabilities. If your business has $500,000 in current assets and $300,000 in current liabilities, its current ratio would be 1.66.

A current ratio above 1.0 indicates that your business’s assets are worth more than the cost of its liabilities. Of course, that’s a good thing. If your business’s liabilities are higher than its assets, your business may spend more money than what it earns. In this regard, current ratio is primarily used to measure a business’s liquidity.

Current Ratio Vs Quick Ratio

Current ratio is often confused with quick ratio. Both of these financial metrics reveal a business’s liquidity by comparing its assets with its liabilities. However, that doesn’t necessarily mean they are the same. The difference between current ratio and quick ratio is that the former takes into account all assets, whereas the latter only takes into account highly liquid assets that can be easily converted to cash in a short period of time. Examples of assets used in the quick ratio formula include cash and accounts receivables.

How to Improve Your Business’s Current Ratio

There are several steps you can take to improve your business’s current ratio. First, try to keep your liabilities to a minimum. In other words, avoid taking out loans or using credit cards to fund your business. Second, work to increase your business’s current assets. With more assets, you’ll achieve a higher current ratio. There are countless ways to increase assets, such as exploring new markets or releasing new products or services. With a little work, you can improve your business’s current ratio, allowing for greater liquidity.

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What Is Detail Type in Quickbooks?

When using Quickbooks to keep track of your business’s finances, you may come across “detail types.” Intuit’s popular business accounting software allows you to select from one of several account types when you create an account, some of which include expense, income and liability. Depending on the account type, it will place the account into a new subcategory so that it’s properly recorded as per the Generally Accepted Accounting Principles (GAAP). To learn more about detail types in Quickbooks and how to use them, keep reading.

Detail Types Are Chosen Automatically

As previously mentioned, Quickbooks automatically places new accounts into a specific subcategory. Cash, for example, is placed on the Balance Sheet as an asset. Payroll, on the other hand, is placed as a payroll expense. Quickbooks automatically selects the most appropriate detail type for the respective account, meaning you don’t have to worry about choosing a detail type. As long as you select the right account, Quickbooks will categorize it with the appropriate detail type.

How to View Detail Type of an Account

So, how do you view the detail type of a specific account in Quickbooks? To view the detail type of an account, log in to Quickbooks and click the gear icon at the top of the page, followed by “Chart of Accounts.” From here, you should see a list of all your accounts along with their respective detail type.

How to Change the Detail Type

While Quickbooks automatically selects detail types for new accounts, you can change it in a few easy steps. To change the detail type of an account, click the gear icon at the top of the page, followed by “Chart of Accounts.” Next, click “View Register” below the “Action” menu, followed by “Edit.” You can then select “Detail Type” in the pop-up window. After choosing your preferred detail type, click “Save and Close” to complete the process. Quickbooks will ask you to confirm the change before proceeding. It’s recommended that you double check to make sure you’ve selected the right detail type. Assuming everything looks good, choose “Yes” to confirm, at which the account will have a new detail type.

After reading this, you should have a better understanding of detail types in Quickbooks. Selecting the right detail type is essential to your business’s accounting practices because it governs the way in which transactions are recorded.

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What Is Single-User Mode In Quickbooks?

In Quickbooks, you can switch between two different user modes: single or multi. Although they both allow you to perform basic accounting tasks, there are some key differences between the two modes that shouldn’t be ignored. Therefore, it’s important for business owners and accountants to familiarize themselves with single-user and multi-user mode. Only then will you be able to take full advantage of Intuit’s popular, award-winning accounting software.

Single-User vs Multi-User Mode: The Basics

The primary difference between single-user and multi-user mode in Quickbooks, as you may have guessed, is that the former prevents anyone else from accessing your Quickbooks company file at the same time that you access it. If you are logged in to Quickbooks and viewing or otherwise accessing your company file, anyone else who attempts to access your company file will be blocked — at least until you log out. In comparison, multi-user mode allows multiple people to log in and access your company file. It’s typically used by large businesses where multiple executives, accountants and other workers need to record financial transactions.

It’s important to note that some Quickbooks activities can only be performed single-user mode, whereas others can be performed in either single-user or multi-user mode. If you want to create a portable company file, for example, you’ll need to log in to Quickbooks using the single-user mode. Quickbooks prohibits users from creating a portable company file in multi-user mode. The same applies for rebuilding data — you’ll need to use the single-user mode to rebuild data in Quickbooks.

How to Switch Between Single-User and Multi-User Mode

Now that you know the differences between single-user and multi-user mode in Quickbooks, you might be wondering how to switch between these two different modes. Well, it’s actually a quick and easy process. To switch between single-user and multi-user mode, simple log in to the main Quickbooks interface, at which point you can click the “File” tab at the top of the page, followed by “Switch to Single-user Mode” or “Switch to Multi-user Mode.”

You can learn more about single-user and multi-user mode by searching for “single-user” or “multi-user” in the Quickbooks search bar. This should bring up a Quickbooks help article with information about the two modes and how they differ. As previously stated, though, the primary difference is that single-user mode prevents anyone else from accessing your company file at the same time you access it.

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What Are Classes in Quickbooks?

No, a Quickbooks “class” isn’t a training course where you learn how to use Intuit’s popular accounting software. Although this would make sense, classes in Quickbooks actually refer to something entirely different. So, if you’re planning to use Quickbooks to keep track of your business’s financial transactions, it’s important to familiarize yourself with classes. Only then will you be able to use this feature.

Class Tracking: The Basics

Classes are used to track transactions based one on or more criteria. If you operate a business with multiple locations, for example, you can create a class for each unique location. This way, you can see exactly how many sales one store generated compared to other stores. Class tracking is a relatively simple feature that opens up a world of new possibilities with Quickbooks. In addition to tracking by location, you can use classes to track transactions by account balances, bills and other factors.

Keep in mind that you aren’t required to use class tracking in Quickbooks. On the contrary, most small businesses owners never use this feature. But if you need to separate the financial metrics of some transactions from the rest, using this feature may prove helpful. Class tracking is a highly versatile and customizable feature that simplifies the process of separating transactions into groups.

How to Create Classes

To use class tracking in Quickbooks, you’ll first need to create a class. This is done by logging in to Quickbooks and clicking Edit > Preferences > Accounting. From here, click the “Company Preferences” tab at the top of the screen, followed by “Use Class Tracking.” After ticking the box for “Use Class Tracking,” click “OK” to complete the process.

Now that your class has been created, you can set up the appropriate categories for your accounts. This is done by clicking your lists from the main menu, followed by “Class List.” Next, click the green arrow icon adjacent to the “Class” button. From here, you can click “New” to create a new class for expense accounts, departments or other criteria. You’ll also have the opportunity to enter a name for the class, so choose something that will help you remember what it’s for.

Creating classes in Quickbooks is a pretty simple and straightforward process. However, it’s important that you associate any newly created classes with an expense.  If you need assistance with class tracking, contact your Quickbooks hosting provider for assistance.

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What Is a Billable Expense in Quickbooks?

When using Quickbooks to keep track of your business’s financial records, you may come across “billable expense.” Some business owners assume that billable expenses are any business-related expense, but this isn’t necessarily true. It’s a special type of expense, and recording it requires a different method. So, what is a billable expense, and how to find them using Quickbooks?

Overview of Billable Expenses

A billable expense is a product or service that you, as the business owner, purchases on behalf of a customer or client for the purpose of performing work. It’s called a “billable expense,” because it’s just that: an expense that you can bill. You initially incur the expense because you purchase it on behalf of the customer or client. Later, however, the customer should send you payment for the amount of the expense.

It’s important for business owners to use billable expenses if they purchase products or services on behalf of their customers or clients. Failure to bill customers or clients for the amount of the expense means that your business will end up paying more money, essentially giving the customer or client the purchased item for free. As a business owner, you must collect payment where payment is due, and that includes when purchasing products or services on behalf of your customers or clients — a process that’s easily checked using billable expenses.

How to Access Billable Expenses in Quickbooks

In Quickbooks, you can mark bills, expenses and even checks as billable. Once marked as billable, you’ll have the option of attaching the expense to an invoice. So, if you want to create a billable expense for a customer, simply create a bill or expense, mark it as billable, and attack it to invoice for the appropriate amount.

If you’re having trouble using billable expenses in Quickbooks, you should check to make sure this feature is turned on. This is done by logging in to your Quickbooks account and clicking “Account and Settings.” Next, click “Expenses,” followed by the pencil icon below “Bills and expenses.” You should see a small box labeled “Track billable expenses and items as income.” Click it so that it creates a check mark box, after which you can click “Save” to complete the process. Quickbooks will now allow you to create billable expenses for your customers or clients.

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What Is the Audit Log in Quickbooks?

If you use Quickbooks for your business’s accounting needs, you may come across the term “audit log” when using the software. While some business owners are familiar with this feature, others are not. And unless you know what exactly the audit log is, you won’t be able to take advantage of this Quickbooks feature. So, what is the audit log in Quickbooks, and how do you use it?

Overview of the Audit Log

The audit log is a Quickbooks feature that displays a list of all changes made to your Quickbooks account. Whenever you receive a payment from a customer, make a payment to a vendor, create a new document or perform any other change, Quickbooks creates a record of it in an audit log. You may never need to view your business’s audit log. But if a problem arises with your books, you can use this feature to see a list of all changes made to your account. As a result, the audit log is an invaluable accounting feature for business owners that can be used to find problems within a business’s financial records.

How to View the Audit Log in Quickbooks

You can view the audit log in just a few simple steps. If you use Quickbooks Online — the cloud-based version of Intuit’s accounting software — log in to your account and click the gear icon at the top of the page, followed by “Audit Log.” You can then click the drop-down menu to select the user, date and event. After choosing your desired settings for the audit log, click Apply. Quickbooks Online will then create a report containing all the changes that you or someone else made to your business’s financial records.

Audit log is also offered in the Quickbooks Desktop, but you’ll need to follow a different set of steps to access it. For Quickbooks Desktop, log in to your account and select Reports > Accountant and Taxes > Audit Trail. Quickbooks will then bring a new menu for the Audit Trail. From here, you can choose your desired settings to customize the report, followed by pressing “OK.” Quickbooks will create a report based on these settings, allowing you to see all changes made to your business’s financial records. Whether you use Quickbooks Online or Quickbooks Desktop, you can run an audit log in just a few easy steps as described here.

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What Are Projects in Quickbooks?

When using Quickbooks Online to record your business’s financial transactions, you may come across projects. Available exclusively in Quickbooks Online Plus — the premium version of Intuit’s cloud accounting solution — projects is designed to help organize your financial transactions and reports. Using it, you can curate all work-related information into a single portal, link invoices and expenses to their respective project, view open jobs to analyze costs, and much more. Projects is a versatile feature that’s sure to have a positive impact on your business’s bookkeeping efforts.

So, how do you use projects in Quickbooks? To take advantage of this feature, you’ll need to log in to your Quickbooks Online Plus account, followed by clicking the gear icon at the top of the page and choosing “Accounts and Settings.” Next, click “Advanced,” followed by “Turn on projects.” Sorry if you were expecting more, but that’s all it takes to enable projects in Quickbooks.

Of course, you won’t see this option if you’re using a different version of Quickbooks. Only Quickbooks Online Plus supports projects. All other versions of Intuit’s accounting software do not. You can upgrade your Quickbooks Online subscription to the Plus version by logging in to your account and clicking the gear icon, followed by “Account and Settings.” Next, choose “Billing and Subscription,” and then “upgrade.” From here, you can choose the version of Quickbooks that you’d like to upgrade to. After selecting “Plus,” double check the information to make sure it’s correct, followed by choosing “Done.” to complete the process. Once you’ve upgraded to Quickbooks Online Plus, you can go back into your account and proceed to enable to projects using the steps previously mentioned.

After enabling projects in your account, you should create your first project by logging in to Quickbooks and selecting “Projects” from the menu on the left-hand side. From here, choose “New project,” and then give your project a name. You’ll want to select a client for the project, and while optional, you can add a memo or note to the project. After completing this information, click “Save” to save your new project.

Keep in mind that you can add invoices to projects. This is done by choosing “Add to project,” followed by “Invoice.” Quickbooks also allows you to add transactions to projects. To add a transaction to a project, choose “Add to project,” followed by “Expense,” “Time,” “Bill” or “Purchase Order.”

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What Are Account Detail Types in Quickbooks?

If you’re planning to keep track of your business’s financial records using Quickbooks, you’ll need to familiarize yourself with the accounting software’s detail types. Whenever you create an account in Quickbooks — expense account, income account, liability account, etc. — you’ll be prompted to choose a detail type. It’s important that you choose the right detail type because this will affect the subcategory in which the account is placed.

How to View Detail Types for an Account

You can view the detail types for an account that you’ve already created in Quickbooks by logging in to your account and clicking the gear icon at the top of the page. Next, look under “Settings” and click “Chart of Accounts.” From here, click “New” in the upper-right corner, at which point you should see a popup window appear on the page. In this window, click the “Account Type” for the respective account. You should then be able to see the account type in this window. If it’s not available, go back and repeat the steps previously mentioned. Keep in mind, however, that these steps are designed to work with Quickbooks Online. If you use Quickbooks Desktop — the desktop version of Intuit’s business accounting software — you’ll have to follow a different process to view detail types.

How to Change Account Type

But what if you want to change the account type for one or more accounts in Quickbooks? Thankfully, this is a quick and easy process. To change the account type, log in to your Quickbooks account and click the gear icon at the top of the main page, followed by “Chart of Accounts.” From here, you should see a drop-down menu next to the account, which you can click to edit. You can then choose a new account type in the popup window, followed by clicking “Save and Close.” Quickbooks will prompt you to confirm the change by warning that changing account type can affect your business’s financial records. Assuming you’re comfortable with the changes, click “Yes” to confirm the process and complete the account type change. Quickbooks will now recognize the account as the newly specified type.

You can avoid the headache of changing account types by selecting the right type initially when creating new accounts. If you need to go back and change an account type, though, refer to the steps listed here.

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What Is Inventory Assets and COGS in Quickbooks?

You’ll probably come across the terms “inventory asset” and “COGS” when using the Quickbooks accounting software for your business. Unfortunately, many business owners are unfamiliar with these terms, resulting in bookkeeping errors when they record and manage transactions. If you plan on using Quickbooks to handle your business’s financial transactions, you should understand inventory assets and COGS. Otherwise, you won’t be able to properly track inventory. So, what do these terms mean exactly?

Inventory Account

The first element that we’re going to discuss is inventory account. Assuming you set up an inventory list in Quickbooks, you’ll see this in your account. The Quickbooks accounting software automatically creates an inventory account as well as a COGS when you set up an inventory list.

Inventory Asset

Not to be confused with an inventory account, there’s also an inventory asset. When you buy an inventory item, the respective account will debit the item inventory asset account while subsequently crediting your bank account. This isn’t debited to your expense account, simply because it’s an asset  that you can sell at a later time. Basically, though, inventory assets are used for tracking inventory purchases. This makes it an essential element for retailers — local and online — as well as other businesses that sell a physical product to customers. Of course, not all businesses have inventory, nor do they need to worry about inventory assets. But if your business does sell a physical product, you should consider using inventory assets in Quickbooks to track your inventory purchases.

COGS

COGS stands for “Cost of Goods Sold,” which lives up to its namesake by reflecting the total cost of purchased goods. When your business sells an inventory item, you’ll see the COGS updated to reflect this transaction. You can run a Transaction Journal report to see the sales receipt, which also reveals the COGS. Intuit explains that COGS affects many elements of a business’s Quickbooks account. It affects the Balance Sheet, Profit and Loss statement and more.

Hopefully, this gives you a better understanding of inventory accounts, inventory assets and COGS. To recap, these three elements are used primary for inventory tracking in Quickbooks. If your business needs to track inventory, you should consider using them. They are available in all versions of Quickbooks Desktop.

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