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In QuickBooks Pro 2010 Essential Training, author Bonnie Biafore shows how to most efficiently use this popular business accounting software to manage business finances. The course covers core QuickBooks features that business owners need to know, from recording typical bookkeeping transactions like bills and invoices, to reconciling accounts and managing company files. Exercise files accompany the course.
Service items are aptly named because they're great for the services you sell, things like time and attorney bills by the minute, the hours your construction crew work on building, a monthly subscription for Internet service or the fixed-price you charge to clean a chimney. You can set up a rate that you charge for the service, whether it's taxable or not, and the income account you want to use to track the service's income. If you hire someone else to perform a service, you can also tell QuickBooks how much you pay your subcontractors or partners and the account to track those expenses.
To create a service item, start in the Item List window. On the homepage, click Items & Services. Then click Item and choose New on the dropdown menu. QuickBooks automatically picks Service, so you can click that and continue. In the Item Name/Number box, type a name for the service. Keep the name short, but also long enough to identify the service. For example, Painting-interior for painting the inside walls on a construction job.
You can use parent items and sub- items to keep your item list organized. To make an item a sub-item, turn on the Subitem of the check box. Then you can choose the parent item, say Construction, from the dropdown menu. For now, skip the check box for services performed by a subcontractor or partner. The next set of boxes tells QuickBooks about the service you sell to customers. In the Description box, type the description that you want to appear on invoices.
Describe the service in terms your customers will understand. In the Rate box, type how much you charge for the service. The rate can be a flat fee like $200 to clean a chimney, or a time-based fee like $39.95 you pay for a month's Internet service. You can also charge based on the amount of time someone works, providing a service, like the $4 a minute if you're a lawyer, $10,000 a month as a contractor, or in this construction example, $60 an hour for painting. When you use a time-based service item on an invoice, you enter the quantity of time in the Quantity field and QuickBooks multiplies the rate times the quantity to calculate the total charge.
Here you see the Tax Code box. This box appears only if you turn on the Sales Tax feature. Most service items are nontaxable, so be sure to choose Non in the Tax Code dropdown menu. In the Account dropdown list, choose the account for tracking the income for the service, for example, Services Income. If you're done, click OK to add the item to the Item list. But suppose you hire a subcontractor to do work for you or you pay partners in your company for their work.
You charge the customer a rate for painting but you also have to pay a subcontractor or partner too. This is when you turn on the This service is used in assemblies or is performed by a subcontractor or partner check box. The dialog box displays a set of boxes to define the purchase side of the service. In the Description on Purchase Transactions box, type the description that you want to appear on purchase orders to your subcontractors. In the Cost box, type what you pay for the service, say $40 for an hour from your painting subcontractor.
If you charge by time unit, make sure the Cost box and the Sales Price boxes have values for the same unit of time. Like the account for income, you choose the expense account you want to use to track what you pay your subcontractor. If you don't see the expense account that you want, scroll to the top of the menu and click Add New. Then you can create a new expense account. Name the account. You can add a description or a note and a tax-line mapping if you want and then click Save & Close to add the account.
If you choose a vendor in the Preferred Vendor dropdown list, QuickBooks automatically fills in a purchase order for this service item with that vendor. If you want to create another item, just click Next. To close the dialog box and save the item, click OK. Now that you've created this service item, you can add it to an invoice or if you use a subcontractor, a purchase order.
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