The QuickBooks 2011, new Balance Sheet by Class Report has specific requirements for entering Vendor Bills which are assigned to different/multiple classes, then entering a Bill Credit with a different proportion of the same classes created unbalanced classes on a Cash Basis Report and creates Account Payable misclassifications on accrual basis reports.
As of 9/29/2010 there is a “bug” that effects the Profit & Loss by Class report when it displays the final vendor payments, which then also adversely affects the Balance Sheet by Class Report.
I have submitted this “bug” to Intuit and will come back and complete this article when the problem has been fixed.
Previous articles about the QuickBooks 2011 – New Balance Sheet by Class Report articles include:
- Part 1, we touched briefly on the fact that transactions will have to be entered in a very specific manner and there are many data entry transactions that are not supported by the Balance Sheet by Class Report
- Part 2, we discussed how accounting professionals and end users would need to change their procedures when creating journal entries so that they were balanced
- Part 3, we discussed how users and accounting professionals would no longer be able to assign multiple classes to a single paycheck.
- Part 4, we discussed how you would need to classify Payroll Liability Payments in order for them to be appropriately recognized on the final report.
- Part 5, we discussed how you need to classify Sales Tax Liability Payments using a Journal Entry AFTER you actually make the payment.
- Part 6, we discussed the effect of handling customer prepayments when using the Receive Payments window.
- Part 7 – we talked about invoices with multiple classes and how offering customer discounts in the Receive Payments window would cause discrepancies between the Profit & Loss by Class and the Balance Sheet by Class reports.
- Part 8 – we discussed entering a single Vendor bill with multiple classes and taking advantage of vendor discounts in the Pay Bills window causes discrepancies between the Profit & Loss by Class and the Balance Sheet by Class reports and how to correct this.
- Part 9 – we discussed how the Balance Sheet by Class does not support the use of multiple currencies.
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The Balance Sheet by Class Report is new in QuickBooks 2011 and it gives users the option of selecting “Classes” (fund, location, profit center, or other category) as their column/class grouping.
Over the last several days, I’ve been discussing and sharing some information about how we all will need to change our data entry procedures in order to utilize the Balance Sheet by Class Report available in QuickBooks 2011; little did I realize when I started delving into the specifics of this report, that making it work would be so complex.
Previous QuickBooks 2011 – New Balance Sheet by Class Report articles include:
- Part 1, we touched briefly on the fact that transactions will have to be entered in a very specific manner and there are many data entry transactions that are not supported by the Balance Sheet by Class Report
- Part 2, we discussed how accounting professionals and end users would need to change their procedures when creating journal entries so that they were balanced
- Part 3, we discussed how users and accounting professionals would no longer be able to assign multiple classes to a single paycheck.
- Part 4, we discussed how you would need to classify Payroll Liability Payments in order for them to be appropriately recognized on the final report.
- Part 5, we discussed how you need to classify Sales Tax Liability Payments using a Journal Entry AFTER you actually make the payment.
- Part 6, we discussed the effect of handling customer prepayments when using the Receive Payments window.
- Part 7 – we talk about invoices with multiple classes and how offering customer discounts in the Receive Payments window would cause discrepancies between the Profit & Loss by Class and the Balance Sheet by Class reports.
In this article, we’ll talk about how entering a single Vendor bill with multiple classes and taking advantage of vendor discounts in the Pay Bills window causes discrepancies between the Profit & Loss by Class and the Balance Sheet by Class reports and how to correct this.
Many business owners make it a policy to take advantage of any early payment discounts offered by their vendors; after all in this tough economy every penny counts! However, paying and taking an early payment discount for a vendor bill that has multiple classes causes a difference in net income between the Balance Sheet by Class and the Profit & Loss by Class reports.
Entering the bill itself doesn’t cause an issue on either report and is recorded correctly on both.
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Paying the bill and actually taking the discount in the Pay Bills window causes the problem because the discount can only be assigned to a single class.
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The solution to this discrepancy is to enter a bill for each class, even if the vendor sends you a single bill.
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That way when you pay each bill individually and take the discount, you can assign the discount to the appropriate class.
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You can then pay the invoices using a single bill payment check IF you select each individual bill and apply the discount with the appropriate class assigned to it.
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When handled in this fashion, the Profit & Loss by Class accurately reflects your expense and the amount of the discount taken for each class.
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While Net Income is accurately reflected and classed on both the Profit & Loss by Class and the Balance Sheet by Class reports.
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Accounts Payable personnel who work for business owner’s who make it a practice to take advantage of vendor early payment discounts will need to put in place new procedures and protocols that include the requirement of entering vendor bills that are internally assigned to different classes individually. This will cause additional data entry time.
Additional procedures will include a method of tracking class that is assigned to each bill so that the same class can be assigned to the discount.
One way to track this is to enter the Class in the Memo field of each bill and then starting with a standard Unpaid Bills Detail report (Reports menu -> Vendors & Payables -> Unpaid Bills Detail) OR a Vendor Balance Detail (Reports menu -> Vendors & Payables -> Vendor Balance Detail). Once either of these reports are displayed, click the Modify Report button and on the Display tab in the Columns section choose (check) Memo, Terms, and Class so that you have record of this information.
NOTE: You must enter the Class information in the Memo field for each bill, because even though both of these reports offer to display Class information, the class information that is entered in the Bills windows does not flow through into these reports. Personally, I feel this is a bug in Intuit’s code and will report it as such.
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Once you are satisfied with the information being displayed in these reports, Memorize them so that you do not have to customize them each time you use them.
As with the other special requirements required to ensure the accuracy of the Balance Sheet by Class report, make sure that you inform your tax preparer so that any year end journal entries they make do not negatively effect the accuracy of this report.
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Request our FREE 142-page “What’s New in QuickBooks 2011? eBook, by completing a simple request form.
This eBook will provide you with with all the information I’ve posted here in our blog, plus MORE! Once you’ve completed our simple request form, you’ll have instant access to this 142-page .pdf eBook, designed to be duplex printed and put in a binder for future reference. |
The Balance Sheet by Class Report is new in QuickBooks 2011 and it gives users the option of selecting “Classes” (fund, location, profit center, or other category) as their column/class grouping.
Over the last several days, I’ve been discussing and sharing some information about how we all will need to change our data entry procedures in order to utilize the New Balance Sheet by Class Report available in QuickBooks 2011.
In previous articles:
- QuickBooks 2011 – New Balance Sheet by Class Report – Part 1, we touched briefly on the fact that transactions will have to be entered in a very specific manner and there are many data entry transactions that are not supported by the Balance Sheet by Class Report
- QuickBooks 2011 – New Balance Sheet by Class Report – Part 2, we discussed how accounting professionals and end users would need to change their procedures when creating journal entries so that they were balanced
- QuickBooks 2011 – New Balance Sheet by Class Report – Part 3, we discussed how users and accounting professionals would no longer be able to assign multiple classes to a single paycheck.
- QuickBooks 2011 – New Balance Sheet by Class Report – Part 4, we discussed how you would need to classify Payroll Liability Payments in order for them to be appropriately recognized on the final report.
In this article, we’ll discuss how Sales Tax Liability Payments must be handled.
When you create an invoice, the sales tax that you owe will be accurately displayed on the Balance Sheet by Class report under the appropriate class heading.
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However, when you create the Sales Tax Liability check, the amount will appear in the Unclassified column of the Balance Sheet by Class Report in both cash and accrual based reports.
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The reason that your Sales Tax liability payment is not accurately allocated is because there is not a Class column available in the Sales Tax check form.
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The resolution in the QuickBooks Help file provides pretty clear instructions on how you, as the QuickBooks user or accounting professional, can manually allocate classes to the payment AFTER you create the Liability Check, through the use of a Journal Entry. However, you must follow the instructions carefully in order for your Balance Sheet by Class report to be accurate.
In order to resolve this problem, you will need to create a journal entry to move the sales tax payment amount from unclassified to the correct class. In order to accomplish this, you’ll need to:
Create a special “Clearing” Bank account in your Chart of Accounts, if you currently do not have one.
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Run a Balance Sheet by Class report as of the date that you will be paying the Sales Tax through, (1/31/2010) to determine the amount of Sales Tax that you owe for each class ($108.00 liability for the Installation class).
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Make a journal entry to move the payment from the unclassified column to the appropriate class, using the Clearing Account.
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The Clearing Account should ALWAYS have a zero balance.
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While this work around will provide an accurate Balance Sheet by Class Report, procedures will need to be changed, documented, and followed carefully. Business owners will need to inform the accounting professionals that they work with of these new procedures.
How will this procedure impact you, as a business owner or accounting professional?
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Request our FREE 142-page “What’s New in QuickBooks 2011? eBook, by completing a simple request form.
This eBook will provide you with with all the information I’ve posted here in our blog, plus MORE! Once you’ve completed our simple request form, you’ll have instant access to this 142-page .pdf eBook, designed to be duplex printed and put in a binder for future reference. |
The Balance Sheet by Class Report is new in QuickBooks 2011 and it gives users the option of selecting “Classes” (fund, location, profit center, or other category) as their column/class grouping.
Over the last several days, I’ve been discussing and sharing some information about the limitations of the New Balance Sheet by Class Report available in QuickBooks 2011 which may make using this report unsuitable for some users.
In previous articles:
- QuickBooks 2011 – New Balance Sheet by Class Report – Part 1, we touched briefly on the fact that transactions will have to be entered in a very specific manner and there are many data entry transactions that are not supported by the Balance Sheet by Class Report
- QuickBooks 2011 – New Balance Sheet by Class Report – Part 2, we discussed how accounting professionals and end users would need to change their procedures when creating journal entries so that they were balanced
- QuickBooks 2011 – New Balance Sheet by Class Report – Part 3, we discussed how users and accounting professionals would no longer be able to assign multiple classes to a single paycheck.
In this article, we’ll discuss another one of the limitations that I was disappointed in – that the report could not automatically allocate payroll liability payments to classes.
The Balance Sheet by Class report, when created in either cash or accrual basis, doesn’t automatically allocate payroll liability payment to classes; this causes amounts to show in the unclassified column on the report.
The resolution in the QuickBooks Help file provides pretty clear instruction on how you, as the QuickBooks user or accounting professional, can manually allocate classes to payroll liability checks when you create them. However, you must follow the instructions carefully in order for your Balance Sheet by Class report to be accurate.
If you assigned all of your employees to a single class (Labor), the task is not difficult. However, if you assigned different employees to different classes (Service and Contracts as we discussed in Payroll allocated to multiple classes), then the task becomes more detailed and difficult.
When you have assigned different classes to employees, BEFORE you actually create the payroll liability check, run the Balance Sheet by Class Report – dating it for the last day of the period for which you will be paying liabilities and print it out as you’ll be referring to the amounts that you owe for each class.
NOTE: While becoming familiar with this procedure I discovered that in order to EASILY determine the employee and employer dollar amounts for Social Security and Medicare by class; that you need to have separate accounts for them on your chart of accounts.
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Next, you’ll go to the Payroll Center (Employees Menu -> Payroll Center OR from the Home Page click the Pay Liabilities icon).
In the Pay Scheduled Liabilities section, select the payroll liabilities that you want to pay.
Click View/Pay.
In the Liability Payment window, review the payment and add line items so that you have one line item per class for each class that you assigned employees to, and using the information from the Balance Sheet by Class report, enter the appropriate amounts for each liability for each individual class.
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If you have only assigned a single class to all of your employees (Labor) in the Liability Payment window, in the Class column, select Labor for each line item.
Companies that use this report will have to implement strict procedures to ensure the accuracy of the final report and accounting professionals and QuickBooks trainers will need to be aware of these guidelines.
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Request our FREE 142-page “What’s New in QuickBooks 2011? eBook, by completing a simple request form.
This eBook will provide you with with all the information I’ve posted here in our blog, plus MORE! Once you’ve completed our simple request form, you’ll have instant access to this 142-page .pdf eBook, designed to be duplex printed and put in a binder for future reference. |
Many companies fail to set up their charts of accounts correctly in QuickBooks. Over the years I have seen charts of accountants that look like a collage of accounts in helter skelter format without any logical order, containing duplicate if not triplicate accounts, inconsistent protocols, and even inappropriate, if not undecipherable, names.
At tax time, when their CPA receives either a backup or Accountants copy of the file like OR reports that have been created from the file, it becomes an even bigger mess. The trial balance that must be created by the tax preparer requires countless hours of reclassifications and groupings to mesh and coordinate the amounts within the file to the classifications required on tax returns and financial statements. Business owners then bear the costs of needless and expensive clean ups, often tacking on an additional $500 to $1000 per year to their annual accounting bills.
There is no excuse for not having a QuickBooks chart of accounts set up in a format compatible with what is reported on a company’s tax return as well as their financial statement. Once set up, a simple click in QuickBooks prints a readable and well-organized financial report for internal management, bankers, other creditors, bonding companies, shareholders, etc. In addition, with some mapping to an Intuit tax software program, the client’s trial balance amounts can be exported to the company’s tax return by the tax preparer with another click of the mouse.
In order to minimize the costs associated with having their tax returns prepared, as well as interim and year-end financial reports, businesses owners would be well advised to adopt account names, groupings, and an overall format required by their tax returns. A good chart of accounts can accommodate the requirements of both internal and external financial reporting, since subaccounts would provide any necessary detail required by management and interested outside parties – while a simple click of the Modify Report button in QuickBooks re-arranges the expense accounts in alphabetical order – often the desired presentation for banks.
Many Certified Public Accountants (CPA’s) and Certified Public Bookkeepers (CPB) prefer to have their clients set up the chart of accounts using account numbers. Many clients do not want to use numbers because they find them cumbersome.
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A compromise is to turn on the “Use account numbers” preference (Edit menu -> Preferences -> Accounting -> Company Preferences tab -> Use Account Numbers) when setting up the chart of accounts. Then, turn off the account numbers preference. When the preference is off, account numbers are not eliminated, simply hidden from view. At the end of the year, the CPA can turn the preference back on and add account numbers to any accounts created by the client during the year.
When the “Use account numbers” and “Reports-Show accounts by Name only” preferences (Edit menu -> Preferences -> Reports & Graphs -> Company Preferences tab -> Reports – Show Accounts by: Name Only option) are activated, account numbers appear next to the account name in QuickBooks financial reports.
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Many users prefer not to have account numbers display on financial reports. If, instead, the preference “Reports-Show accounts by Description only” is activated, the account description entered when the account was setup is used. Therefore, when using account numbers, enter an account description. (This description can be identical to the account name.)
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