Assets are what the business owns. They can be items in inventory, furniture, cash, accounts receivable, and other things. An account receivable is a debt that is owed to you, it has value, you own it and you can sell it. Basically the easiest way to decide if something is an asset or not is to ask the question, “Can you sell it?”, if the answer is yes then it is an asset.

Average Cost – QB uses average cost over the lifetime of the item. Purchases are added to the value on hand, the quantity purchased is added to the number on hand, and then the total value for that item is divided by the total number on hand. QB keeps average cost to five (5) decimal places ( i.e. cost = 2.12345) and uses all 5 in calculations even though it displays dollars and cents in reports (i.e. cost on report = 2.12).

Balance Sheet shows the total of everything the business owns, and the total of what the business owes. That should always be equal, in balance. The reason is that the business has one or more debts but whatever remains after the value of the debts is subtracted from the assets should equal what the business owes to the owners (equity).

Barter (trading goods and services) When you trade goods or services from your business to another for something, an exchange of value occurs, that exchange is accountable and might be taxable. Bartering is at fair market value, not cost, for accounting and tax purposes.

BOM (Bill of Materials) is nothing more than the list of items used to create an assembly in QB.

Clearing Account – This is an expense account that normally carries a zero balance, it is used to make adjustments. A holding account so to speak. You enter a value as the result of a transaction, and then you take that value out to add it to a previous transaction. Most often used during inventory value adjustments.

Contra Account – This is an account that is used to offset an associated account so it’s normal balance is opposite of what that kind of account should be. i.e. Accumulated Depreciation is an asset account (asset accounts are normally a debit balance), but because it offsets the asset account its’ balance is normally a credit (the asset is the debit). Contra – opposite of what it should be.

Contra accounts are of a type and they list in the financial reports according to the type. So if you have a contra income account it will show up there with the other income accounts even though it decreases income.

Cost of Goods Sold (COGS) - any cost involved in acquiring an item for resale, or in building an item for resale is COGS. That includes taxes, shipping, import duties, etc. COGS for an item must be expensed during the year the item is sold. [Sold not purchased.]

Credit – is considered a minus, or a decrease in the accounting world.

Debit – is considered a plus, or an increase in the accounting world.

Depreciation is the amount of value that something loses as it ages.

End of Year (EOY) – You tell QB in preferences what date the accounting year ends for your business. QB then watches for that date, and the next day (the beginning of the new accounting year) QB automatically starts a new accounting period where all expenses are zero as well as income. Assets, payables, receivables and equity get carried forward into the new year, but income and expense for the past year are rolled up to show profit or loss and become one number shown as retained earnings.

Equity is also a business liability, the business owes you the owner some portion of what it owns. Because Equity is special in that it shows what the owner deserves, it is seperate from and not called a liability – but make no mistake, to the business that is what it is – a liability.

Invoice – sends the amount of the sale to accounts receivable, the balance in that account shows what you are owed.

Item – QB uses items to show what the business does, an item in QB is NOT what you sell.

Inventory Items show what you sell and/or stock
Service Items are used for income activities that do not involve selling an inventory item.
Assembly Items are several inventory items put together to make something to sell
Non-Inventory Items are used to buy things you do not stock or track.
Fixed Asset Item is an item that lasts more than a year and usually costs a lot
Other Charge Item is used to charge a customer for something like labor, overhead, etc
Group Item is used to combine several inventory items and sell them as a group, this does NOT make a new item for sale, it merely is a short cut to listing a bunch of inventory items at one time.
Discount Item allows you to lower the price by x-percent
Sales Tax Item must be used for QB to calculate sales taxes
Sales Tax Group Item is used to charge more than one sales tax rate at one time, it does not combine them into one overall tax rate, each member of the group is calculated separately and then totaled.

Item List – An item list is just that a list of all items mentioned above. In QB items are segregated by type, so all inventory is together, all assemblies, etc. But within each type you can drag and drop them to the order you want, or of course you can click sort.

Liabilities are what the business owes other people or other businesses. And guess what? You are an other person as far as the business is concerned.

Markup -  The percent above the cost you price things at when selling.

Margin -  The difference between the cost and the selling price in dollars.

Price List – QB allows you to create price lists which allow you to change the normal selling price of one or more items. The price list is interesting, you can:

Click the “Mark all” to select all the items in the list – that is pretty obvious.
Click on one or more of the items (you have to click in the check mark column to select an item) and you can do interesting things to only the items clicked:
Click in the custom price column and enter the price you want to put there for each and every item selected.
Use the adjust up/down by a percentage to change all selected items by that percent
Tell QB how to round the result. Click adjust and it does just that.

When you are done entering the price changes for this list click OK and it will be saved in the name you give it. To use it, just select it on the invoice or sales receipt and the price from the price list will replace the normal retail price you have on the item screen. You can also use the price list to give special prices to a specific customer(s) – in the customer screen, on the “Additional Info” tab is a drop down box where you can select the price level to always use for this customer.

Profit and Loss Statement shows the money coming in and the money going out for a given period.

Retained Earnings – Retained earnings is an accounting entry that happens automatically on the first day of the new accounting year. All retained earnings is the answer of last years work, the sum of income less expense rolled up into one number instead of being separated out into a lot of entries. Retained earnings is what should be rolled up (distributed) to the owners at the beginning of the new year (last years profit).

Sales Receipts post right away because you have the money right away.

Tax Agency – This is a vendor, the place that you pay the sales tax to when you file your sales taxes.

Undeposited Funds- All money received is sent to this account, sales receipts and invoice payments. It is a holding account so to speak. Basically if you think of it as a drawer where you are holding checks and cash until you manage to go to the bank, it will be easier to understand.

Use Tax – The tax (basically the same rate as the sales tax) that the business owes when it buys items for business use and does not pay sales tax when making the purchase. Use tax is also due on inventory items that were purchased without paying sales tax if the inventory item is pulled out of inventory for use in the business or pulled out of the business for personal use.