Start with the Chart in .NET

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You may have gotten the impression from earlier chapters that the Chart of Accounts is a concept unique to QuickBooks. It is not. All accounting systems utilize a Chart of Accounts as a starting point. It is simply a listing of all of the accounts used by the business entity to categorize different types of transactions. Any accounting system begins with the selection of the accounts to be used for subsequent recording of transactions.
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The processes of setting up and customizing a QuickBooks Chart of Accounts are discussed in detail in s 5 and 6.
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Do you wonder just who is responsible for GAAP GAAP embodies all of the written and unwritten pronouncements and policies of the following: The American Institute of Certi ed Public Accountants (AICPA) Financial Accounting Standards Board (FASB) Securities and Exchange Commission (SEC) American Accounting Association (AAA) Other bodies such as the Financial Executives Institute (FEI), the National Association of Accountants (NAA), and state boards that regulate the accounting profession
4 Accounting Basics for QuickBooks Companies
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When you set up your business using the EasyStep Interview, QuickBooks automatically provides a standard Chart of Accounts for your industry. This saves a lot of time, and you can further customize the Chart of Accounts for your individual business. Figure 4-1 illustrates the Chart of Accounts window for Larry s Landscaping & Garden Supply.
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Figure 4-1: The Chart of Accounts window for Larry s Landscaping displays a special icon to denote online banking or online payment.
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The Chart of Accounts is composed of ve general types of accounts: assets, liabilities, owner s equity, revenue, and expenses. Any account that you establish for your business will fall into one of these broad categories. It is therefore worthwhile to learn the essential characteristics of each type of account and forever commit their names to memory.
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Income accounts are used to track the earnings of your business as measured by both money that comes into the company and the increase in its accounts receivable balance, which re ects money owed to the company by others. Income is a term that is often confused with pro t. A business s pro t (or loss) is determined after subtracting expenses from income. You may also have
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56 Part I The QuickBooks System
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heard the terms gross income and gross pro t. These terms refer to all of the income that comes into the business prior to deducting expenses such as the cost of goods sold.
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Cost of goods sold is a term that refers to the cost of all goods held in inventory to produce the products that were sold. You will note that the income statements for the QuickBooks sample companies subtract cost of goods sold from the business s total income to arrive at a number called gross pro t.
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The portion of the Pro t & Loss Statement re ecting income, cost of goods sold, and gross pro t for Larry s Landscaping is shown in Figure 4-2.
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Figure 4-2: Gross pro t refers to the difference between cost of goods sold and the total income. QuickBooks refers to the process of including a transaction in an account, for the purpose of recalculating the account balance to re ect the transaction, as posting the transaction to the account.
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To view a chronological list of all of the transactions that have been posted to an account, follow these steps: 1. Go to the Company Navigator screen. 2. Click the Chart of Accounts icon located at the top of the Navigator window.
4 Accounting Basics for QuickBooks Companies
3. Select any account in the Chart of Accounts and click the Report button at the bottom of the Chart of Accounts window. A drop-down menu will appear. 4. Select QuickReport. A summary, such as the one shown in Figure 4-3 for the interest expense account of Larry s Landscaping, will appear.
Figure 4-3: All of the transactions that have been posted to the interest expense account are summarized in this QuickReport.