Question

In the Customer and Vendors Centers, you were introduced to several features that QuickBooks uses in place of ledgers. Features and give examples on how a company might use them. Specifically, I am referring to the following features: Enter Bills, Pay Bills, Create Sales Receipt, Create Invoices, Jobs, Make Deposits, Undeposited Funds, and Receive Payment. What accounting is going on in the background of these features?

Answer 1

Vendor center:

1. This is the Accounts payable sub ledger. New vendors are created in this module. We can see the list of all vendors created, the main page also provides us the balance owed to each vendor. The software also allows us to sort on various factors like, name, balance owed. We can also include inactive vendors in this list. Clicking on any vendor name , shows the transactions that have taken place. This also can be filtered and sorted to view the necessary data easily.

2. Enter bills - This section is used to record purchase of goods or services made by the organization. In this screen we see the fileds relevant to the purchasing department. We record the bill under a specific vendor name, enter date; invoice number; due date and amount due. We must also select the appropriate account code for each invoice. Once the entry is saved, the following entries are made in Accounts payable and posted to the general ledger at the same time.

Purchases or Expense account Dr

To Accounts Payable

3. Pay bills - this section is used to select the bills that need to be paid, apply discounts or credits as applicable and make the payment to the vendor by way of check/ ACH / Credit card. When this action is performed, the Accounts payable account for the vendor selected will be deboted and Bank or credit card account will be credited. The entries are posted in A/P and G/L at the same time. However, please note the actual payment has not happened until we print and send the check or make a wire trasnfer to the vendor.

4. Customer center: Similar to the vendor center, this is the A/R sub ledger. The entries made here are posted to the G/L simultaeneoulsy. We can create customers, enter invoices and receive payments in this module.

5. Sales receipt: This is one of the ways of recording sales entry. This can be used when the sales made are usually for cash. For ex: In a retail store like CVS pharmacy. This is also very useful if the client for whom we are doing the book keeping deals in various items. This method can also be used to make a bulk sales entry, say for a day or for a week. The sales data in a retail store could be captured in point of sale system and then at the end of each day or week one sales receipt could be entered.When an entry is made using the sales receipt, the following entry happens:

Cash / Bank account Dr

To Sales account

To Sales tax payable account

The module has the capacity to auto calculate sales tax as well, so the tax payable is credited up on entry.

6. Invoice - This is another way of recording sales and usually used when a sale is made on credit. the following entry is posted:

Accounts receivable (particular customer) Dr

To Sales

To Sales tax

7. Receive payment, Undeposited funds and make deposits - These are used to record the payment recived from a customer and then the actual deposit. Usually, businesses make one deposit in to the bank per day or depending on the volume sometimes 2-3 times in a week. The customer center (or the AR module) has features which facilitate us to record them accurately.

When payments are received from Customers, they are applied to the invoices against which the payment has been made, the entry will be

Undeposited funds dr

To Accounts receivable (particular customer)

At the end of each day or week, all such deposits will be accumulated and one deposit is made into the bank, the make deposits feature helps us here, the entry happening will be.

Bank account Dr

To Undeposited funds.

8. Jobs - these are specific projects or tasks done for a customer. For ex: If the client is a software service provider, each development project could be a job. For a single customer, we can create more than one job and make entries accordingly. This helps us track progress of each project, helps in revenue recognition.