QuickBooks 2011 – New Balance Sheet by Class Report – Part 8

The Balance Sheet by Class Report was first introduced with QuickBooks 2011, however, it is also available in QuickBooks 2012, 2013, and 2014; has specific requirements for handling many or our normal day-to-day transactions; 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.

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.

The solution to this discrepancy is to enter a bill for each class, even if the vendor sends you a single bill.

That way when you pay each bill individually and take the discount, you can assign the discount to the appropriate class.

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.

When handled in this fashion, the Profit & Loss by Class accurately reflects your expense and the amount of the discount taken for each class.

While Net Income is accurately reflected and classed on both the Profit & Loss by Class and the Balance Sheet by Class reports.

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.

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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