I see people saying it should always be zero, or that when you are done creating your accounts and their associated opening balances the account Opening Balance Equity should be zero, and all kinds of other things.

Opening Balance Equity is an account that shows just what it says. The value of ownership when you start.

Equity is the total value of all assets (bank accounts, inventory, receivables) minus the total value of all debts (loans, credit cards, payables).

When you first start your company’s books and you enter the stuff the company owns, that is where QB puts the ownership value. When you first start your books there will be a value in that account.

One reason QB puts it all there is because QB has no way of knowing if there is more than one owner, and has no way of knowing how much of that equity belongs to each owner. That is something you do as the accountant, you move the balance in Opening Balance Equity to each owner’s main Equity account after all opening balance entries have been made.

I prefer to do it at year end when you “roll up” retained earnings and the other Equity accounts into one main Equity account (see the other Equity entries on the left on how and why), but you can move the Opening Balance Equity value to the owner’s accounts at anytime after all opening entries have been made.

Once the first year is out of the way (or you roll up Opening Balance Equity to the owner’s accounts), then and only then should Opening Balance Equity be zero and stay zero.

If the car is on the company books, you should have an accumulated depreciation account associated with the car, make this journal entry:

• Debit the accumulated depreciation account for the full amount that is in the account
• Credit the car asset account for the same amount.

That sets the current value of the car.

If the car is a personal car and not on the company books, ignore the above.

1. Create a dummy bank account called trade-in.

2. (If the car in not on the books – ignore this) Use a sales receipt and sell the old car for the amount you receive as the trade in, deposit the “money” in the dummy bank account.

3. Create an inventory item called new car (name it correctly, brand year etc), use the asset account Fixed Assets instead of inventory asset on the inventory item screen.  Give it a quantity of one, do NOT enter a value.

4. Create a current or long term liability account called car loan, do NOT enter a starting balance.

5. Bring up the chart of accounts, double click on the new car asset account, that will bring up the account register.

• If you traded in a company car (one that is on the books) add the current value of the old car to the amount of the purchase for the new car.  The purchase amount BEFORE they deduct any down payments you made.  Enter that amount in the deposit column and in the account block for the entry enter the car loan liability account.

6. (If the trade in was not on the books – ignore this) Double click on the dummy bank account, and enter a check in the amount of the trade in, the full amount in the account, and in the account block for that entry enter the car loan liability account.

7. Double click on the bank account that you used to make a down payment and enter the check, in the account block on that entry use the car loan liability account.

Done.

The fixed asset new car shows the cost of the car, the liability account shows the amount financed and also records the trade in value and the down payment.

Usually you issue an RMA when you get a call saying something is being returned. A list of those numbers is not kept in QB.

My g/f keeps the list on paper and used the date + a sequence number, ie  31 Jan is the 31st day of the year so she would use 31-1 as the RMA number for the first return of the day.  Each day the day number changes and the sequence starts back with a one for the first one that day.

Then I customized her sales documents to include a box for the RMA number.  When she issues a number, she brings up the sales document and enters that number in the block and prints it out.  It goes into a suspense file so she knows what is coming back and why.

Then she waits for the item to be received.

There is basically three ways to do it.

1. For each item that is damaged, create a sub-item with the item name-dmgd. Then use inventory adjust as a value adjustment and move the item and cost out of resale inventory to the damaged item.  You have to use a value adjustment to move the cost since when you lower the qty of the resale item the cost will go to the expense account you choose and to bring it back out and associate it with the damaged good item in inventory you have to tell QB to do that using a value adjustment.

2. Create a dummy item called damaged goods. Create sub items for each damaged goods item, then do the value adjustment to move the item as mentioned above.  This puts them all in one location on the item list, that might be handy then again it might not depending on how you use the list.

3. Create one inventory item called damaged goods. Do a value adjustment to move all damaged items to this one item. The downside of this is that all items costs will be averaged so the sales COGS number will not be right for the damaged item sold.

When you sell use the damaged goods inventory item. If you find that you can’t sell the damaged item, then use inventory adjust to lower the qty, and use a COGS-damage expense account as the adjusting account.

This is a complicated work around, but the only way I can find to do it.

Assume you have salesmen named: Jim, Bill, and Tony.

Each gets a different commission rate: Jim 10%, Bill 8%, and Tony 9%

What you want is to track commission expense per salesman, and of course the amount payable per salesman.

First create the account structure  (>> indicates a sub account)
Commissions Payable (current liability accounts)
>>cmsn-Payable-Jim
>>cmsn-Payable-Bill
>>cmsn-Payable-Tony

Commission Expense (expense accounts)
>>cmsn-Exp-Jim
>>cmsn-Exp-Bill
>>cmsn-Exp-Tony

Next create the items, actually a pair of items per salesman
Other Charge items
cmsn-Jim (set the rate, in this case 10%)
cmsn-Bill (set the rate, in this case 8%)
cmsn-Tony (set the rate, in this case 9%)

Create Discount items
cmsn-exp-Jim
cmsn-exp-Bill
smsn-exp-Tony

And finally create the group item that will do the work name it Thank You, and in the description block enter the words “Thank you for shopping with us.”
Make sure the print all items is unchecked
Do not put anything in the group item list

In this screen shot I am selling an item that has a price of 42.00 each and a qty of 10

In the next screen shot I have entered the group item Thank You.

Click on the line that has the message Thank you for shopping with us and right click and select insert line. Do that again so you have inserted two lines.

Now it looks like this

On the first of the inserted lines select the cmsn-Jim Other charge item (or whoever the commission for this sale goes to)
On the second of the inserted lines select the cmsn-exp-Jim discount item
and it looks like this

Notice that while the commission item shows a 10% commission, it does not calculate – I have no idea why, even adding a subtotal in there does not do it.  So you have get your hand calculator out and do the math.  total sale * commission, 420.00 * .10 = 42.00

Enter 42 in the cmsn-Jim amount column
Enter a negative 42 in the cmsn-exp-Jim amount column

What this does is send $42 to the commission payable Jim account and $42 to the commission expense Jim account.
Now use print preview so you can see what the customer will see on the invoice, it looks like this

The P&L will show $42 in the commission expense Jim account, and the balance sheet will show $42 in the commission payable Jim account as it should.

With warranty work typically …

1. you take back a part and issue a part immediately

• 1a. you fix the part you took back and return it to stock
• 1b. you trash the part you took back
• 1c. you return the part to the vendor for credit

QB does not make any of the above easy.

1. you take back a part and issue a part immediately

Create a sales receipt put the part on it that is good, then put the same part on it again that is bad but use a negative 1 as the quantity. That results in a zero price sales receipt. I would either use a class and tag the receipt as warranty exchange, or at least put that information in the memo block.

Now you have a bad part in inventory. Create an expense account called warranty-work.

1a. you fix the part you took back and return it to stock
Bring up inventory adjust and select the warranty-work expense account as the adjusting account and lower the qty of the item by one.  That sends the cost of the item to the expense account and your on hand qty reflects parts that are ready for sale. If you use other inventory parts to repair the item, use the same adjustment procedure to move the cost of the inventory items used to the warranty-work expense account. If you spend money to buy repair parts use that warranty-expense account to record the expense.

Now the part is fixed and the total cost of the repair sits in the warranty-work expense account, write that total down. Bring up inventory adjust and mark it as a value adjustment, select the warranty-work expense account as the adjusting account.  Add the total that was in the warranty-work expense account to the old total value and enter it in the new total column, then increase the quantity on hand by one and enter it in the new quantity column.

That moves the cost of the repaired item and the quantity back to inventory.

1b. you trash the part you took back
The bad part is in inventory and you need to get it out. Bring up inventory adjust and select the COGS or the COGS-warranty expense account as the adjusting account. Lower the quantity on hand by one.

That removed the item from inventory and the cost went to the selected expense account. Trash the item.

1c. you return the part to the vendor for credit
Bring up Receive inventory with bill, at the top left select credit, select the vendor you will be retuning the bad part to, enter the part in the item list, save.  Physically send the part back to the vendor.

That removed the part from inventory and set a credit for the price of the part with the vendor.

1. If you have entered depreciation expense over the years of ownership that has to be cleared first.

• Bring up the general journal and
• debit accumulated depreciation for the total in the account
• credit the asset for the same total.

That entry sets the current cost of the asset.

2. (optional) I would create an income account titled “Asset Sales” but you can also use the “Other Income account”

If you sold at a profit, sales price is greater than the cost shown in the asset account
3. Bring up the general journal

• Debit the bank account for the amount of the sale
• Credit the asset account for the cost of the asset
• Credit the income account for the remaining amount

If you sold at a loss, sales price is lower than the cost shown in the asset account
4. Bring up the general journal

• Debit the bank account for the amount of the sale
• Credit the asset account for the cost of the asset
• Debit the income account for the remaining amount

If you have a catastrophic loss and are writing the asset off the books
5. Bring up the general journal

• Credit the asset account for the cost of the asset
• Create a Loss expense account
• Debit the Loss expense account  for the remaining amount

Since you don’t know the interest amount when you pay the payment it gets hard. Interest is determined by the company receiving the payment as of the date of receipt. Normally when you get next months payment request it shows you how much of last months payment was for interest and principal.

To have a reaonably correct loan balance in the liability account, this is what needs to happen

• 1. Post the total payment to the loan liability account.
• 2. When next months statement comes in

2a. Bring up the general journal
** debit the interest expense account with the amount of interest paid last month
** credit the loan liability account with the amount of the interest paid last month
** set the date of the journal entry to the date of last months payment

2b. Do step 1.

Basically what you are doing here is removing the interest portion of the payment from the loan liability account when you get the statement that shows how much it was.

The questions was asked about how to put inventory items on the invoice and yet not have them print, they didn’t want the contents of the “kit” to be seen. And the kit was variable so an assembly was not applicable.

• 1. Create a group and call it Kit, put at least two items in the group item list, and remove the check mark that says to print all items.
• 2. Put the group on the invoice.
  • 2a. Click on the last line of the group item, and use the main menu Edit>Insert Line to insert a blank line in the center of the group.
  • 2b. Use the drop down to select your item that you want added.
  • 2c. Do steps 2a and 2b for each new item.
• 3. Since QB adds all item prices in a group to find the total price, you may have to enter a discount item, or just click in the price column for an item and adjust the price so that the total is equal to the overall sales price you want.

This fools QB into thinking all items you inserted were part of the group. You can use print preview to see how the group item looks on a printed invoice.

This works in 2010 Premier, I have not tried it in other years or other versions.

Another way to do it, is to create a group with all possible items (this can only work if the items are few since a group has a limit in the number of item it will contain). And then when you use the group, click in the qty column of the item not used and enter a zero.

As a note here – my preference is to create a Fixed asset sub-account for each item. I do this so that the actual book value of the item can be easily determined. But you do not have to, you can buy your fixed assets and lump them all together in one account.

First you have to create two accounts:

Accumulated Depreciation-name – a fixed asset account (where -name is the name of the asset)
Depreciation Expense – an expense account

Then you have to determine the amount of annual depreciation you are allowed for that asset. You do that, or your tax guy does that, by classifying your asset according to the definitions in the IRS publication dealing with depreciation (Pub 946). Once the classification is clear, that leads you to a table which tells you what percentage of the item cost is allowable for each years depreciation over the useful life of the asset.

When you have the percentage figure, lets use 3.6%, You take the cost of the item and on your calculator, you multiply the cost times 0.036 (3.6%) and get the amount of annual depreciation allowed.

Then use the main menu Company>Make Journal Entries to bring up the general journal. You Debit the depreciation expense account for that amount, and credit the accumulated depreciation-name account for the same amount.

Then if you wish you can make the depreciation entries in the fixed asset list, assuming you have also entered the fixed asset in that list. The fixed asset list is just that, a list, nothing posts from or to it in terms of the financial accounts. (Unless you have the fixed asset manager installed in enterprise – so I understand)