by Stephen L.Nelson, MBA, CPA
QuickBooks
®
ALL-IN-ONE DESK REFERENCE
FOR
DUMmIES
‰
2ND EDITION
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01_576623 ffirs.qxd 12/22/04 7:24 PM Page ii
QuickBooks
®
ALL-IN-ONE DESK REFERENCE
FOR
DUMmIES
‰
2ND EDITION
01_576623 ffirs.qxd 12/22/04 7:24 PM Page i
01_576623 ffirs.qxd 12/22/04 7:24 PM Page ii
by Stephen L.Nelson, MBA, CPA
QuickBooks
®
ALL-IN-ONE DESK REFERENCE
FOR
DUMmIES
‰
2ND EDITION
01_576623 ffirs.qxd 12/22/04 7:24 PM Page iii
QuickBooks
®

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Library of Congress Control Number: 2004117536
ISBN: 0-7645-7662-3
Manufactured in the United States of America
10987654321
2B/RS/QR/QV/IN
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About the Author
Stephen L. Nelson is a CPA in Redmond, Washington. He provides accounting,
business advisory, and tax planning and preparation services to small busi-
nesses such as manufacturers, retailers, professional service firms, and startup
technology companies. He also teaches CPAs how to help their clients use
QuickBooks more effectively and is an Adjunct Professor of Tax at Golden Gate
University where he teaches S corporation and LLC tax law.
Curiously enough, Nelson is also the most prolific computer book writer of all
time, according to a recent feature in The Wall Street Journal. He’s also the
bestselling author of books about how to use computers to manage one’s per-

located at
www.dummies.com/register/.
Some of the people who helped bring this book to market include the following:
Acquisitions, Editorial, and
Media Development
Project Editor: Christine Berman
Acquisitions Editor: Bob Woerner
Copy Editor: Christine Berman
Technical Editor: David Ringstrom
Editorial Manager: Carol Sheehan
Media Development Manager:
Laura VanWinkle
Media Development Supervisor:
Richard Graves
Editorial Assistant: Amanda Foxworth
Cartoons: Rich Tennant
(
www.the5thwave.com)
Production
Project Coordinator: Emily Wichlinski
Layout and Graphics: Andrea Dahl,
Lauren Goddard, Joyce Haughey,
Stephanie D. Jumper, Melanee Prendergast,
Jacque Roth, Heather Ryan,
Julie Trippetti
Proofreaders: Leeann Harney, Jessica Kramer,
Linda Quigley
Indexer: Anne Leach
Publishing and Editorial for Technology Dummies
Richard Swadley, Vice President and Executive Group Publisher

Chapter 4: Using Activity-Based Costing 317
Chapter 5: Setting Up Project and Job Costing Systems 333
Book V: Financial Management 345
Chapter 1: Ratio Analysis 347
Chapter 2: Economic Value Added Analysis 365
Chapter 3: Capital Budgeting in a Nutshell 379
Book VI: Business Plans 395
Chapter 1: Profit-Volume-Cost Analysis 397
Chapter 2: Creating a Business Plan Forecast 417
Chapter 3: Writing a Business Plan 453
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Book VII: Care and Maintenance 467
Chapter 1: Setting Up a Peer-to-Peer Network 469
Chapter 2: Administering QuickBooks 483
Chapter 3: Protecting Your Data 499
Chapter 4: Troubleshooting 513
Book VIII: Appendixes 519
Appendix A: A Crash Course in Excel 521
Appendix B: Government Web Resources for Businesses 537
Appendix C: Glossary of Accounting and Financial Terms 559
Index 595
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Table of Contents
Introduction 1
About This Book 1
How to Use This Book 2
Foolish Assumptions 3
How This Book Is Organized 4
Part I: An Accounting Primer 4
Part II: Getting Ready to Use QuickBooks 4

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Almost a Real-Life Example 38
Rent expense 38
Wages expense 39
Supplies expense 39
Recording sales revenue 39
Recording cost of goods sold 40
Recording the payoff of accounts payable 41
Recording the payoff of a loan 41
Calculating account balance 41
Using T-account analysis results 43
A Few Words about How QuickBooks Works 45
Chapter 3: Special Accounting Problems . . . . . . . . . . . . . . . . . . . . . . . .47
Working with Accounts Receivable 47
Recording a sale 48
Recording a payment 48
Estimating bad debt expense 49
Removing uncollectible accounts receivable 50
Recording Accounts Payable Transactions 51
Recording a bill 51
Paying a bill 52
Some other accounts payable pointers 52
Inventory Accounting 53
Dealing with obsolete inventory 54
Dealing with inventory shrinkage 55
Accounting for Fixed Assets 57
Purchasing a fixed asset 57
Dealing with depreciation 58

Identifying your income items 83
Setting up your inventory balances 84
Setting up opening balances for customers 85
Providing vendor opening balances 86
Setting your other account balances 87
Completing the What’s Next section of the interview 89
Looking at the QuickBooks Learning Center window 89
Fixing the EasyStep Interview Errors 90
Chapter 2: Loading the Master File Lists . . . . . . . . . . . . . . . . . . . . . . . . .93
Setting Up the Chart of Accounts List 94
Setting Up the Item List 98
Working with the Price Level List 98
Using Sales Tax Codes 99
Setting Up a Payroll Item List 99
Setting Up Classes 101
Setting Up a Customer List 103
Setting Up the Vendor List 106
Setting Up a Fixed Assets List 109
Setting Up Your Employees 110
Setting Up Another Names List 111
Setting Up the Profile Lists 111
Chapter 3: Fine-Tuning QuickBooks . . . . . . . . . . . . . . . . . . . . . . . . . . . .115
Accessing the Preferences Settings 116
Setting the Accounting Preferences 117
Using account numbers 118
General accounting options 118
Setting the Checking Preferences 120
Changing the Desktop View 122
Setting Finance Charge Calculation Rules 124
Setting General Preferences 124

Recording a Sales Receipt 165
Recording Credit Memos 167
Receiving Customer Payments 169
Assessing Finance Charges 171
Setting up finance charge rules 172
Calculating finance charges 173
Customer Odds and Ends 174
Chapter 2: Paying Vendors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .177
Creating a Purchase Order 177
A real purchase order 178
Purchase order tips and tricks 181
Recording the Receipt of Items 181
Simultaneously Recording the Receipt and the Bill 184
Entering a Bill 185
If you haven’t previously recorded item receipt 186
If you have previously recorded item receipt 187
Recording a credit memo 189
Paying Bills 189
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Reviewing the Other Vendor Menu Commands 193
The Vendor Navigator 193
The Vendor Detail Center 193
The Sales Tax Menu commands 195
Print 1099s 195
Vendor List 196
Item List 196
Purchase Orders List 196
Online Vendor Services 196

Making Bank Deposits 234
Transferring Money between Bank Accounts 237
Working with the Register 239
Recording register transactions 239
Using Register window commands and buttons 242
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Using Edit Menu Commands 245
Reconciling the Bank Account 250
Reviewing the Other Banking Commands 253
Banking Navigator command 253
Order Checks & Envelopes command 253
Record Credit Card Charges command 254
Make Journal Entry command 255
Set Up Online Financial Services command 256
Create Online Banking Message command 257
Inquire About Online Banking Payment command 257
Online Banking Center command 257
Chart of Accounts command 258
Other Names list 258
Memorized Transactions list 258
Online Banking Services command 258
Chapter 5: Paying Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .259
Setting Up Do-it-yourself Payroll 259
Choosing a payroll option 260
Signing up for a payroll service 260
Setting up company information 262
Setting up employees 262
Describing an employee 262

Working with Report window buttons 290
Using the Report window boxes 294
Modifying a Report 296
Using the Display tab 297
Using the Filters tab 298
Using the Header/Footer tab 300
Formatting fonts and numbers 301
Processing Multiple Reports 303
A Few Words about Document Retention 303
Chapter 3: Preparing a Budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .305
Reviewing Common Budgeting Tactics 305
Top-line budgeting 305
Zero-based budgeting 306
Benchmarking 307
Putting it all together 308
Practical Approaches to Budgeting 308
Using the Set Up Budgets Window 309
Creating a new budget 309
Working with an existing budget 312
Managing with a Budget 313
Some Wrap-Up Comments on Budgeting 315
Chapter 4: Using Activity-Based Costing . . . . . . . . . . . . . . . . . . . . . . .317
Revealing Traditional Overhead Allocation 317
How ABC Works 320
The ABC product line income statement 320
ABC in a small firm 323
Implementing a Simple ABC System 325
How QuickBooks Supports ABC 326
Turning on Class Tracking 327
Using Classes for ABC 328

Total assets turnover ratio 358
Profitability Ratios 359
Gross margin percentage 359
Operating income/sales 360
Profit margin percentage 360
Return on assets 361
Return on equity 361
Chapter 2: Economic Value Added Analysis . . . . . . . . . . . . . . . . . . . . .365
Introducing the Logic of EVA 365
EVA in Action 366
An example of EVA 367
Another example of EVA 368
Some Important Points about EVA 369
Using EVA When Your Business Has Debt 370
The first example of the modified EVA formula 371
Another EVA with debt example 372
Two Final Pointers 374
And Now a Word to My Critics 376
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Chapter 3: Capital Budgeting in a Nutshell . . . . . . . . . . . . . . . . . . . . .379
Introducing the Theory of Capital Budgeting 379
The big thing is the return 380
One little thing is maturity 380
Another little thing is risk 381
Putting It All Together 381
Calculating the Rate of Return on Capital 382
Calculate the investment amount 382
Estimate the net cash flows 383

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Customizing the Starter Workbook 450
Changing the number of periods 451
Ratio analysis on existing financial statements 451
Calculating taxes for a current net loss before taxes 451
Combining this workbook with other workbooks 452
Chapter 3: Writing a Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . .453
What the Term Business Plan Means 453
A Few Words about Strategic Plans 453
Cost strategies 454
Differentiated products and services strategies 454
Focus strategies 455
Look, Ma: No Strategy 455
Two comments about tactics 456
Six final strategy pointers 457
Writing a White Paper Business Plan 457
Writing a New Venture Plan 461
Is the new venture’s product or service feasible? 461
Does the market want the product or service? 461
Can the product or service be profitably sold? 462
Is the return on the venture adequate
for prospective investors? 462
Can existing management run the business? 463
Some final thoughts 464
Book VII: Care and Maintenance 467
Chapter 1: Setting Up a Peer-to-Peer Network . . . . . . . . . . . . . . . . . .469
Can Your Business Benefit from a Network? 470
What Is a Peer-to-Peer Network? 470

Archiving basics 507
Some archiving strategies 510
Chapter 4: Troubleshooting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .513
Using the QuickBooks Help File and This Book 513
Browsing Intuit’s Product Support Web Site 514
Checking Another Vendor’s Product Support Web Site 515
Tapping into Intuit’s Product Support System 516
Trying an Internet Newsgroup 517
When All Else Fails . . 518
Book VIII: Appendixes 519
Appendix A: A Crash Course in Excel . . . . . . . . . . . . . . . . . . . . . . . . . .521
Starting Excel 521
Stopping Excel 523
Explaining Excel’s Workbooks 523
Putting Text, Numbers, and Formulas into Cells 524
Writing Formulas 524
Scrolling through Big Workbooks 525
Copying and Cutting Cell Contents 526
Copying cell contents 526
Moving cell contents 527
Moving and copying formulas 527
Formatting Cell Contents 529
Functions Are Simply Formulas 530
Saving and Opening Workbooks 533
Saving a workbook 533
Opening a workbook 534
Printing Excel Workbooks 534
One Other Thing to Know 536
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