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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.
For many kinds of transactions, QuickBooks takes care of moving money from account to account in your Chart of Accounts. When you write a check, the program moves money from your QuickBooks bank account to the expense account you give it. But there are other times that you have to take over and move money between accounts. Recording depreciation, owner contributions or correcting the accounts you assigned originally are all examples. To accomplish these kinds of movements, you use something called the journal entry. The name comes from the old paper- based accounting days when accountants recorded transactions in a paper journal.
For example, if you decide that you need more income accounts than the one called sales, you might want to re- categorize income in the sales account to the new income accounts you create. To make this happen, you have to credit one account and debit another and that's exactly what journal entries do. In the Company menu, choose Make General Journal Entries. Let's look at journal entry 1. Here is an example of moving dollars from one income account to another.
For income accounts, a debit decreases the balance and a credit increases the balance. So you want to debit the current account to reduce its balance and credit the new account to increase its balance. In this case, I've re-categorized income from sales to Construction Services. The Make General Journal Entries window has a column for account and columns for debits and credits. All you have to do is choose the account and then put the amount of money in the debit or credit cell.
If you move money between several accounts, you have to make sure that the total in the debit column is equal to the total in the credit column. You have to add that up for yourself because QuickBooks Pro and Premier don't do it for you. Depreciation is another common use of journal entries. The value of assets you use in your business decrease over time. To reflect this decrease, you decrease the value in the asset account and assign the money as an expense.
Journal entry 2 shows how to do this. The decrease in asset value is a debit to the Furniture and Equipment asset account. The Depreciation Expense is a credit to the depreciation expense account. If you have a home office, you can record money you spend on home office expenses as contributions of money to your company. This journal entry shows how to do this. The increase in the equity in the company is a credit to the Owner's Contribution equity account.
The expenses are debits to the appropriate expense accounts, Utilities and Repairs and Maintenance in this example. After you fill in the journal entry and save it, QuickBooks shuffles the money around to the correct accounts for you.
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