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How to Enable Multicurrency in Quickbooks

Does your business accept payments in multiple currencies? Whether you sell products online or locally, customers may want to pay using a non-U.S. currency. If you’re planning to accept multiple currencies, however, you’ll need to track those transactions accordingly. Thankfully, Quickbooks offers a Multicurrency feature that’s designed specifically for tracking foreign currencies.

Steps to Turn on Multicurrency

In Quickbooks Desktop, you can enable multicurrency in just a few easy steps. After logging in to your Quickbooks account and accessing the home screen, click the “Edit” menu and choose “Preferences.” Next, find and click the link for “Multiple Currencies” on the left-hand menu. You can then select the “Company Preferences” tab and choose “Yes, I use more than one currency.” Finally, choose your home currency — the currency with which your business’s primary audience uses — in the drop-down menu.

How to Add Currencies to Customers

After enabling multicurrency, you’ll need to add the appropriate foreign currency to your customers. This is done by clicking the “Customers” menu and selecting “Customer Center.” Next, choose “New Customer: job,” followed by “New Customer.” You can then choose the option to assign a customer name and currency, followed by clicking “OK.”

Keep in mind, Quickbooks only allows you to add one currency to any customer. If a customer uses multiple currencies, you must create a separate foreign currency profile. So, how do you set up a new foreign currency profile? This is done by clicking the “Lists” menu and selecting “Chart of Accounts.” Next, right-click on an open area in the chart of accounts and choose “New.” You’ll then be prompted to give the account a type and name, after which you can click “Save & Close” to complete the process.

Downloading Exchange Rates

In Quickbooks, only the exchange rates for your business’s active currencies are downloaded automatically. You can manually download exchange rates, however, by accessing the “Lists” menu, followed by “Currency List,” and selecting the “Activities” button. After clicking the “Download Latest Exchange Rates,” you’ll have an up-to-date profile of the latest exchange rates.

Don’t let your business lose sales because it only accepts a single currency. Take advantage of Quickbooks’s Multicurrency feature to attract and retain more customers. Available in Quickbooks Desktop, it’s a highly useful feature that will foster long-term success for your business.

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Gross Profit: What You Need to Know

Gross profit is a performance metric used in financial accounting that provides insight into a business’s profitability. From small family-owned businesses to Fortune 500 companies, all businesses should calculate their gross profit. Doing so can help entrepreneurs and business owners optimize their operations for higher profits. In this post, you’ll learn more about gross profit, including what it means and how it’s calculated.

What Is Gross Profit?

Also known as gross income, gross profit refers to the profit generated by a business during a specific time frame. In other words, it’s the revenue a business generates minus certain expenses. Gross profit specifically takes into account the business’s cost of goods sold (COGS) during the given time frame.

How to Calculate Gross Profit

As a business owner, you can calculate your organization’s gross profit by subtracting COGS from your revenue. If you want to calculate your business’s gross profit from 2018, for example, take your business’s total revenue from 2018 and subtract it by your business’s COGS.

COGS includes all variable expenses that can either increase or decrease depending on your business’s operations. If an expense is directly associated with your business’s operations — and it can fluctuate depending on your business’s level of output — it’s considered a variable expense and, thus, used in the gross profit formula. Common examples of variable expenses classified as COGS include the following:

  • Labor
  • Credit card transaction fees
  • Shipping
  • Packaging supplies
  • Sales commissions
  • Inventory
  • Materials
  • Equipment
  • Utilities

Let’s say your business generated $1 million in revenue in 2018 and its COGS for that year was $200,000. Using the aforementioned formula, your business’s gross profit for 2018 would be $800,000. You subtract $200,000, which is your business’s COGS, from $1 million, which is your business’s revenue, resulting in a 2018 gross profit of $800,000. As you can see, calculating gross profit is relatively simple and straightforward. If you know your business’s revenue and COGS, you can calculate its gross profit.

Gross Profit vs Net Profit: What’s the Difference?

Gross profit is often confused with net profit, but they aren’t necessarily the same. Net profit is calculated by taking your business’s revenue and subtracting it by all your business’s expenses, whereas gross profit is calculated by taking your business’s revenue and subtracting it by your business’s COGS. Regardless of the market or industry in which your business operates, it will probably incur expenses besides COGS. Net profit takes into account all your business’s expenses, whereas gross profit only takes into account your business’s COGS.

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Fixed Assets vs Current Assets: What’s the Difference?

The terms “fixed asset” and “current asset” are often used interchangeably in financial accounting. While they both refer to resources owned by a business, though, they aren’t the same. Fixed assets are different than current assets, and it’s important to familiarize yourself with their nuances. Only then can you properly record your business’s finances.

What Is a Current Asset?

A current asset is a resource owned by your business that you intend to convert into cash or spend within 12 months. Inventory, for example, is typically considered a current asset. If you operate a retail store, your business probably owns inventory that it plans to sell within 12 months.

Cash is another example of a current asset. Most businesses don’t hold onto their cash. Rather, they invest it back into their business’s operations by purchasing relevant products and services. Regardless, the defining characteristic of a current asset is that it’s spent or converted into cash within 12 months.

Current assets are considered critically important to a business’s operations. Without them, you won’t have the means of funding your business and purchasing necessary products or services. Therefore, you should closely track your business’s current assets so that you’ll have a better understanding of its financial health.

What Is a Fixed Asset?

A fixed asset, on the other hand, is a resource owned by your business that you do not intend to sell or otherwise convert into cash in a short period of time.

Fixed assets differ from current assets in the sense that they can’t be easily converted into cash in a short period of time. Real property, for example, is considered a fixed asset. It’s a resource that’s essential to a business’s operations, yet it’s also something that can’t be easily converted into cash.

There are both tangible and intangible fixed assets. As you may have guessed, real property is a tangible asset because it’s something that you can see and touch. Trademarks and other forms of intellectual property are considered intangible assets because you can’t see or touch them.

It’s also worth noting that fixed assets depreciate over time, whereas current assets generally retain their value. The depreciation of fixed assets is recorded in journal entries by debiting the appropriate depreciation expense account. The good news is that asset depreciation is tax deductible — but only if you record it properly.

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Home Office Tax Deduction: Simplified vs Regular Method

Are you a business owner or freelancer who works out of a home office? If so, you should take advantage of the home office deduction when filing your federal income taxes. In the United States, business owners and freelancers who use a home office — or any other area of their home — for business-related purposes can deduct some of the associated expenses from their federal taxes. With that said, the Internal Revenue Service (IRS) supports two different methods when claiming a home office: the simplified method and the regular method.

What Is the Regular Method?

If you’ve claimed the home office tax deduction in a year prior to 2012, you should already know the regular method. It wasn’t until 2013 when the IRS began offering the simplified method.

The regular method involves calculating the cost of your home office, and using that figure as the basis for your deduction. In other words, if your home office consists of 25% of your home’s total space, and you use your home office 100% of the time for business-related purposes, you can claim one-quarter of your total mortgage or rental payments. Additionally, you can claim an appropriate amount for related expenses like insurance, utilities and maintenance.

What Is the Simplified Method?

The simplified method lives up to its namesake by offering an easier and simpler way to calculate the home office tax deduction. Under the simplified method, you’ll receive a deduction of $5 per square feet of home office space — with a maximum of 300 square feet.

Many business owners prefer the simplified method because it doesn’t require calculating the cost of rental or mortgage payments. With that said, you should compare the total deduction of both methods to determine which one is the highest.

What Are the Requirements for Claiming the Home Office Tax Deduction?

Whether you use the regular method or the simplified method, the IRS has a few requirements for claiming the home office tax deduction. First, your home office must be the primary place in which you run your business. If you spend most of your work hours in a commercial office while performing just a fraction of your work in a home office, you won’t be eligible for the home office tax deduction. Rather, you must perform most of your business’s work in your home office.

Second, your home office must be used exclusively for business-related purposes. You cannot use your home office for personal or recreational purposes if you want to claim the home office tax deduction on your federal taxes.

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Should You Lease or Buy Your Business’s Equipment?

Whether you’re planning to start a new business or expand your existing business, you’ll need to secure the right equipment. Nearly all businesses use some type of equipment in their respective operations. Without the necessary equipment, you may struggle to sell your business’s goods or services.

Contrary to what some business owners believe, however, there are ways to secure equipment besides purchasing it. While purchasing equipment is always an option, an alternative solution is to lease it. Both options have their own pros and cons. You can learn more about the nuances between leasing and buying equipment below.

Purchasing Equipment

When you purchase equipment for your business, you’ll retain full ownership of it. This is in stark contrast to leasing equipment, in which the lessor retains ownership. If you lease your business’s equipment, you’ll have to return it to the lessor after the end of the lease (or secure an additional lease).

If you intend to use a piece of equipment for multiple years, purchasing it may prove cheaper than leasing it. Leasing, of course, requires you to make regular payments to “use” the equipment. Therefore, as long your business uses the equipment, you’ll have to pay for it.

On the other hand, however, purchasing equipment requires a high monetary investment. Equipment costs can vary drastically from industry to industry, but it’s not uncommon for businesses to spend $10,000 or more on equipment purchases.

Leasing Equipment

There are still reasoners to consider leasing your business’s equipment. First and foremost, leasing requires a significantly lower monetary investment. Many lessors will allow you to lease equipment with no down payment. You simply make regular payments, typically per month, to use the leased equipment.

You can also upgrade your business’s equipment more easily if you choose to lease rather than buy it. Lessors offer a variety of equipment upgrades from which you can choose. If your business outgrows its current equipment, the lessor may offer to upgrade your equipment.

You might be surprised to learn that lease payments are typically tax deductible. When you file taxes for your business, you can write off the lease payments as a business-related expense. Claiming this deduction will then offset the cost of the equipment lease, allowing your business to save more money.

The biggest disadvantage of leasing equipment is that you won’t own it. Considering the benefits it offers, though, many business owners will agree that it’s a smart way to secure equipment.

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How to Transfer Funds Between Two Accounts in Quickbooks

If you have multiple bank or financial accounts recorded in Quickbooks, you might be wondering how to transfer funds between them. Some business owners assume that it’s okay to perform two transfer transactions. Unfortunately, if both the accounts are listed in the chart of accounts, this doesn’t work. Instead, the correct way to record this transfer is to enter it as a single transaction. Below, we’re going to walk you through the process of recording a funds transfer between two accounts in Quickbooks.

Transferring Funds Using the Transfer Method

Quickbooks actually supports several methods to transfer funds between two or more accounts, one of which involves using the Transfer method. Start by logging in to your Quickbooks account and clicking the (+) icon at the top of the screen. Next, choose “Transfer” under the “Other” menu. Go to the “Transfer Funds From” menu and select the bank account from which the funds are being withdrawn.

There are a few steps left in the process. After choosing the bank account, enter the amount of the transfer in the “Transfer Amount” field. Finally, enter the date of the transfer, followed by “Save and close.”

Transfer Funds Using an Imported Bank Transaction

Another way to record a funds transfer in Quickbooks is to use an imported bank transaction. This method, however, only works if you imported the two transactions but haven’t entered a Transfer.

To record a funds transfer using this method, log in to Quickbooks and click the “Banking” link on the left-hand sidebar menu. From here, choose the bank account from which you want to transfer the funds. Now scroll through the listings and select the transaction. Click the “Transfer” button and then choose the other account to which you want to transfer the funds, followed by “Transfer.” You can then click the “Recognized tab” button to find the transaction, which should yield a match

Transferring Funds Using a Check

Of course, another way to record a funds transfer is to use a check. If you performed the transfer using a check, you can use this method. Basically, it involves selecting the “Write Check” window and then recording the amount of the transfer and the check number.

When transferring funds using a check, make sure the bank accounts are correct. In the “Bank Account” field, look to ensure that it’s the appropriate account.

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How to Cancel a Credit Applied to a Bill in Quickbooks

It’s not uncommon for businesses to apply credit to their customers’ or clients’ bills. Maybe a customer accidentally overpaid, or perhaps the business overcharged them. Regardless, businesses can solve problems such as these by applying a credit to the customer’s or client’s bill. At the same time, it’s important for businesses to use caution when handing out these bill credits. If you accidentally apply a credit to the wrong customer’s or client’s bill, you’ll need to fix it as soon as possible. The good news is that you can easily cancel credits applied to a bill if your business uses the Quickbooks accounting software.

Steps to Canceling a Credit Applied to a Bill

To cancel a credit applied to a bill in Quickbooks, pull up the credit and click the “Credit” button. Next, change the type of transaction to a bill, after which you can click “Save & Close .” You should see a warning indicating that this will unlink the credit from the bill. After confirming, Quickbooks will then remove the credit from the bill.

Can I Cancel a Credit Applied to an Invoice?

Quickbooks also allows you to cancel credits applied to an invoice, though it requires a set of different steps. If you applied a credit to an invoice and want to reverse it, pull up the credit memo associated with which it’s associated and press Ctrl+H on your keyboard to open its history.

Next, find the invoice to which it was applied in the history and double-click to open it. From here, choose “Apply Credits,” followed by clearing the details about the credit on the following screen. When finished, click “Save & Close” to complete the process.

You may want to create a backup of your Quickbooks company file before proceeding with either of these processes. Backing up your company file ensures that if something goes wrong, you can revert your account back to its original state.

It’s frustrating when you apply a credit to the wrong customer’s or client’s bill. Mistakes are bound to happen when running a business, however, which is why it’s important to know the steps on how to cancel such transactions. Whether you applied it to a bill or invoice, you can remove an erroneous credit in Quickbooks by following the steps outlined here.

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What Is a Suspense Account in Accounting?

Countless businesses use a suspense account to temporary record financial transactions. It’s a useful tool that can help businesses avoid accounting errors by providing them with an opportunity to analyze potentially inaccurate entries. If you’re a business owner, though, you might be wondering how suspense accounts work and if they’re really worth using. While there’s no better way to find out than by trying a suspense account for yourself, we’re going to explore this accounting tool in this blog post.

Suspense Accounts Explained

A suspense account, by definition, is an account in which discrepancies and other potentially inaccurate transactions are placed for a temporary period of time so that they can be further analyzed to determine an appropriate categorization.

In other words, a suspense account is a ledger where financial transactions that “could” be wrong are placed until you can verify where they are accurate or inaccurate.

A suspense account can also be used if you don’t know the appropriate general ledger for a transaction when you record the transaction. Rather than simply placing it in a random general ledger, you can place the transaction in a suspense account. This allows you to identify the appropriate general ledger at a later date, and after doing so, you can then move the transaction from the suspense account to that general ledger.

How to Set Up a Suspense Account in Quickbooks

You can create a suspense account using the accounting software Quickbooks. This is done by logging in to your Quickbooks account and choosing Lists > Chart of Accounts > Account > New. Next, choose the “Account Type” Expense, followed by “Continue. Quickbooks will then ask you to enter a name for the account. While you can use any name that you’d like, it’s recommended that you name the account something memorable and associated with suspense accounts, such as “Suspense Account A.” You can then enter any account numbers to include in the suspense account. To finish setting up your suspense account, click “Save & Close.”

Not all businesses will benefit from using suspense accounts. If you know the appropriate general ledger in which to place a transaction, there’s no reason to use a suspense account. In fact, placing the transaction in a suspense account only adds another step to the accounting process, as you’ll have to go back and move it to the general ledger. But if you’re unsure of which general ledger to place a transaction, a suspense account is a useful tool that can help keep your business’s accounting practices in order.

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Matching Downloaded Bank Transactions in Quickbooks

If you use Quickbooks to keep track of your business’s financial transactions, you might be wondering how the accounting software handles matched banking transactions. When you download transactions, you can access the “For Review” menu to see and review the transactions. However, you also have the option to match those transactions with the transactions listed in your company file. So, how exactly does Quickbooks handle these matched transactions?

Assuming you use Quickbooks Online and not the desktop version of Intuit’s popular accounting software, Quickbooks will try and match the transactions within 90 days of the specified transaction date. This is done to allow ample time for checks to clear. A customer may pay you on Monday, for example, but his or her check might not clear your bank for another one or two weeks. To overcome this challenge, Quickbooks Online will automatically search for all matching transactions within 90 days of the specified date. If a transaction is older than 180 days, it will not match it.

When Quickbooks Online attempts to match your bank deposit and credit transactions, it will search for several different things, including payments for the respective invoice, sales receipts, journal entries, unpaid customer invoices and deposits that you’ve made. When attempting to match checks, expenses and debits, Quickbooks will search for payments made to vendors, expenses for vendors, debits listed in your bank or credit card account and journal entries with debit transactions.

So, how do you assign categories to these transactions? To do this, log in to your Quickbooks account and select the “Banking” menu at the top of the screen. From here, click an open area in the transaction row so that Quickbooks provides you with more information about it. You can then assign a payee to the transaction. If Quickbooks finds a matching customer or vendor, it will automatically display the customer’s or vendor’s name. If it doesn’t find one, you can add one by clicking the “+Add new” drop-down menu and selecting the appropriate customer or vendor.

In the event that you don’t add a customer or vendor to the transaction, Quickbooks won’t include a name in the transaction when it adds it to the register. Finally, choose a category for the transaction under the “Category” drop-down menu. By default, many transactions use the “Uncategorized Income” category, which is too general for proper accounting. So, choose a more specific category for the transaction.

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How to Record Bank Fees in Quickbooks

Have you been hit with a bank fee? It’s no secret that banks charge a heft amount for overdrafts, late payments on loans, and other fees. In fact, it’s not uncommon for customers to incur $39 for each of these fees. When this occurs, however, you should record the fee in your Quickbooks account. The fee is technically an expense, so you should record it appropriately in your Quickbooks account. Failure to do so may result in the fee throwing off your business’s books. So, what’s the right way to record bank fees in Quickbooks?

To begin, log in to your Quickbooks account and click the “File” menu at the top of the page, followed by “Open or Restore Company.” As you may already know, this will allow you to open your company file. You’ll need to navigate to the location of your Quickbooks company file. Whether it’s located on the cloud or locally on your computer, find and select your company file, after which you should click “Open.”

Next, you should see your Quickbooks company file opened. Go to the “Banking” menu, click it, and choose “Use Register” from the main menu. You can then scroll to the bottom of the check register, where you can click an empty area on a blank transaction. Next, click any area of the date field to enter your own date. It’s important that you choose the date on which you incurred the bank fee. If you don’t remember when you were hit with this fee, go back over your bank records. This typically won’t have an effect on the overall outcome of the fee, but it’s still a good idea to record bank fees using their appropriate date.

Under the “Payment” column, enter the total amount for the fee that you were charged by the bank. There are a few more steps in the process, however. Under the “Account” drop-down menu, you’ll need to choose “Bank Service Charges.” This tells Quickbooks that the charge came from a bank and not a vendor or customer. When you are finished, you can then click “Record” to finish the process. Congratulations, you’ve just recorded a bank fee in Quickbooks! Hopefully, it rarely or never happens, but when you incur any additional bank fees in the future, follow these steps to record them in Quickbooks.

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