QuickBooks 2011 offers a new advanced Balance Sheet by Class Report that differs from other QuickBooks reports because it gives users the option of selecting “Classes” (fund, location, profit center, or other category) as their column grouping. This will enable QuickBooks users to perform divisional accounting with QuickBooks, which was previously impossible or required significant duplication of effort.
While this report has been one that has been requested by many QuickBooks users and the accounting professionals who support them, it is not without limitations and drawbacks, making this a report that will be able to be used by some companies and in some instances but not all.
In our 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; and in 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.
In this article, we’ll discuss one of the limitations that I was most disappointed in – and that is being unable to assign multiple classes in timesheets and then ultimately in paychecks.
Think of a company that has two “profit centers, divisions or crews” which they want to track using classes – a Service Crew that does smaller installations and a Contracts crew that does the bigger job; with a few employees bouncing back and forth between the crews. If they need a Balance Sheet by Class Report, they might be out of luck IF they also want a Profit & Loss by Class Report; because the Balance Sheet by Class report doesn’t support the ability to use multiple classes on timesheets and ultimately paychecks and QuickBooks will display the transaction – bank accounts and payroll liabilities in an “unclassified” column on the report.
The resolution that the QuickBooks Help file provides may not be a satisfactory one for contractors, and other businesses, who want or need to track employees under multiple classes – in our example a Service Department and crew in addition to a Contracts Department and crew; and will require users to change their QuickBooks setup.
The first setting that has to be changed is found in the Payroll & Employees Preference (Edit menu -> Preferences -> Payroll & Employees -> Company Preferences). Here you will need to look at the option to look at the Job Costing, Class and Item tracking for paycheck expenses option and verify or change it to Assign one class per -> Entire paycheck. Previously such a company would have had the Assign one class per Earnings item option selected.
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Next, you will need to Edit each employee record (Employee Center -> Employees tab -> select Employee -> Edit -> Payroll & Compensation Info) and assign each employee to a SINGLE class (Service or Contracts, from our example).
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This is where some QuickBooks users will run into trouble; they may be able to assign some employees to a specific class/profit center/crew/or division.
My questions are these:
- What about the employees who “float” between the two in a single pay period? Do they tell these employees that they are now only on an “on-call” status and that they will be called into work only on those days that they can work in a specific crew?
- Do the companies change their scheduling practices to accommodate for the required changes?
- Do the companies reduce their workforce and lay off the employees who “float” between jobs?
- Will the companies change their scheduling practices and leave it to the payroll clerks to change the Class of several employees each week?
Business owners such as these will have to make a choice between a Profit & Loss by Class Report and the Balance Sheet by Class Report.
Stay tuned for our next article which discusses unbalanced Payroll Liability payments.
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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. |
QuickBooks 2011 offers a new advanced Balance Sheet by Class Report that differs from other QuickBooks reports because it gives users the option of selecting “Classes” (fund, location, profit center, or other category) as their column grouping. This will enable QuickBooks users to perform divisional accounting with QuickBooks, which was previously impossible or required significant duplication of effort.
While this report has been one that has been requested by many QuickBooks users and the accounting professionals who support them, it is not without limitations and drawbacks, making this a report that will be able to be used by some companies and in some instances but not all.
In our previous article, 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.
The first limitation that we will discuss is Journal entries with “unbalanced” classes. This limitation will affect CPA’s and other accounting professionals; and will require that they change the manner in which they create journal entries in client files – if they or their client chooses to use the Balance Sheet by Class Report.
An “unbalanced” journal entry occurs when you as the CPA or other accounting professional creates a journal entry that changes ONLY one side of the balance sheet for a specific class. This creates an “unbalanced” balance sheet for the class.
For example, your company purchased some computers, and you want to create a journal entry moving $500.00 worth of the computers from Class 2 to Class 1. You would normally create a journal entry as follows:
| Account | Debit | Credit | Class |
| Computer & Office Equipment | 500.00 | Class 1 | |
| Computer & Office Equipment | 500.00 | Class 2 |
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While the overall entry balances – meaning debits equals credits – from the “class” perspective the entry is NOT in balance because it increases assets in Class 1 while decreasing assets in Class 2. When using classes in Journal entries Debits MUST equal credits for EACH class.
Procedure to “balance” the journal entry
You will need to make a journal entry where debits equal credits for each class. This procedure will require accountants to perform additional data entry and change their journal entry procedures.
To do this, in your chart of accounts create an Other Expense type account called Other Expenses Clearing Account. Once you have created the account you will then use it to balance the classes in the journal entry, like this:
| Account | Debit | Credit | Class |
| Computer & Office Equipment | 500.00 | Class 1 | |
| Other Expenses Clearing Account | 500.00 | Class 1 | |
| Computer & Office Equipment | 500.00 | Class 2 | |
| Other Expenses Clearing Account | 500.00 | Class 2 |
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Just remember, that the balance in the Other Expenses Clearing Account should ALWAYS be zero – debits and credits (or money in & money out amounts) are equal.
View this video by Intuit demonstrating the Balance Sheet by Class Report in action.
Our next article will discuss how to handle paychecks that are allocated to multiple classes.
NOTE: Most of the information contained in this article has been based on information found in the QuickBooks In-program help. Intuit has done a very good job documenting the required procedures to successfully implement the Balance Sheet by Class 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. |
QuickBooks 2011 offers a new advanced Balance Sheet by Class Report that differs from other QuickBooks reports because it gives users the option of selecting “Classes” (fund, location, profit center, or other category) as their column grouping. This will enable QuickBooks users to perform divisional accounting with QuickBooks, which was previously impossible or required significant duplication of effort.
While this report has been one that has been requested by many QuickBooks users and the accounting professionals who support them, it is not without limitations and drawbacks, making this a report that will be able to be used by some companies and in some instances but not all.
QuickBooks calculates the class allocations for the report each time you run the report. Because of this, you must enter transactions in a very specific way. Follow these guidelines to ensure an accurate report. If you enter transactions differently, the report can produce unexpected results.
General Guidelines for Using the Balance Sheet by Class Report:
Verify/enable class tracking: From the QuickBooks Edit menu -> choose Preferences -> select Accounting -> and click on the Company Preferences tab. Here you will want to make sure that the Use class tracking and Prompt to assign classes are checked – turned on.
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Set up/modify your Class List: From the Lists menu -> choose Classes, this displays a list of your current classes.
- If you are new to QuickBooks this list might be empty and you will need to create your list of classes.
- If you have been using QuickBooks for a long time there may be entries in the List window.
Be aware 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; which still cause additional data manipulation and work, for example:
- Each transaction can only have a single class.
If you enter one class on every transaction, you’ll avoid most unexpected results.
There are a few transactions where you can’t enter a class. In these cases, QuickBooks assigns the class based on the “original” transaction in the work flow.
Important: although you can enter multiple classes on certain transaction, it is NOT recommended that you do so. If you do enter multiple classes you will see unexpected results in the report.
- Use standard work flows in QuickBooks
When entering transactions, use the windows and order suggested on the QuickBooks Home Page. For example, standard workflows in QuickBooks include:
- Enter Bills -> Pay Bills
- Create Estimates -> Create Invoices -> Receive Payments -> Record Deposits
- Enter Time -> Pay Employees -> Pay Liabilities -> Process Payroll Forms
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The biggest hurdle to using the Balance Sheet by Class Report is knowing which transactions are unsupported and learn how to solve the problems they produce.
- Journal entries with “unbalanced” classes.
- Paychecks allocated to multiple classes.
- Payroll liability payments.
- Sales Tax payments.
- Prepayments from customers entered in Receive Payments window.
- Discount entered in Receive Payments Window.
- Discounts entered in Pay Bills Window.
- Using multiple currencies.
- Pay bills with credit (with different classes).
- Use Funds Transfer window to transfer funds between classes.
View this video by Intuit demonstrating the Balance Sheet by Class Report in action.
Over the next few articles we’ll be discussing each of these unsupported transactions and how to work with them.
|
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. |
QuickBooks automatically prefills the date field in every transaction you create (Enter Bill, Write Checks, Create Estimate, etc.) and report that you generate. You should always verify that the date specified by QuickBooks is the correct date for the particular transaction or report.
In many cases, the date that QuickBooks provides you with is not the correct date that you need. Additionally, you should verify that you are not posting transactions to a date in a period that has been “closed”. Unfortunately, QuickBooks allows users to post new transactions to a prior period if they have access to change or delete transactions recorded before the closing date.
Report Dates
Every QuickBooks report automatically specifies a default date range each time the report is created. You should always verify that the default date range is correct.
You can change the date range by:
- Selecting a different preset date range (e.g., today, this month, this fiscal quarter, this fiscal year-to-date, last fiscal year, etc.) from the “Dates” drop-down list at the top of the report.
- Entering a time period not specified by one of the preset date ranges in the “From” and “To” fields at the top of the report, by entering the dates manually or by clicking the calendar symbol to the right of the dates and then clicking the arrows on the calendar to select the applicable month and year and then clicking on the applicable day.
NOTE: You should click the “Refresh” button at the top of the report after changing the date range. *
Check Dates
QuickBooks allows users to pay bills or write checks on a particular day but not print the checks until a subsequent day. In that case, QuickBooks automatically prints the payment date specified in the “Pay Bills” window or the date specified in the “Write Checks” window as the check date.
Users can print the actual check date by selecting “Preferences” from the “Edit” menu and then selecting “Checking” from the “Preferences” scroll box. Users then should check the “Change check date when check is printed” box in the “Company Preferences” tab.
Changing Source Documents
QuickBooks allows users to correct or otherwise change transactions by changing source documents (such as bills, checks, invoices, etc.). In fact, many of the QuickBooks help screens and user guides encourage users to correct transactions simply by changing the source document. Consequently, many QuickBooks users change source documents when a more accurate method for changing a transaction should be followed.
For example, many users change Estimate or invoice amounts in QuickBooks rather than issuing credit memos to their customers. Likewise, many users change bills that have been entered in QuickBooks rather than entering vendor credits as negative bill amounts. In addition to changing amounts on source documents, QuickBooks users also may change accounts, dates, or other information after the transaction has been posted. When users alter source documents, QuickBooks retains a record of the change with the audit trail feature. Practitioners should encourage their QuickBooks clients to enter new transactions (such as credit memos) or record journal entries when applicable rather than changing source documents.
Accounts Receivable and Accounts Payable
QuickBooks requires that a “Customer:Job” be specified in journal entry postings to accounts receivable and accounts payable. Consequently, practitioners who wish to make correcting entries to accounts receivable or accounts payable without correcting individual customer or vendor accounts often specify the “Customer:Job” as “dummy” or “adjusting.” While that practice may be a quick and efficient way to adjust the accounts receivable or accounts payable balance, the authors caution that the adjustment method will result in incorrect individual customers and vendors accounts. The practitioner should advise his or her clients that the individual customer and vendor accounts will be incorrect.
*Users can choose a personal preference that automatically refreshes reports. To turn on that preference, select “Preferences” from the “Edit” menu. Select the “My Preferences” tab under “Reports & Graphs” and then select “Refresh automatically.”
