Accounting Project

Accounting project

Project 1: Small Business Accounting using QuickBooks Online

I. Introduction:

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Your good friend Kyra recently opened an art studio, Kyra’s Krafts, LLC. She has been creating and selling art work for years, and subsequently already has a good customer base. In January of this year she started the process of setting up an LLC, filing for an EIN in February. She found and rented a studio on March 1st, and has been cleaning, painting, and setting up the space ever since. Her grand opening was April 1, 2019.

 

She knows you are going to school for your master’s degree in accounting and has asked for your help setting up and using QuickBooks Online (QBO). You agree to help her set up her QBO business account, complete her first month of transactions, and then teach her how to do it. You are not very familiar with QBO, but you know that it will be beneficial to you in your accounting career to learn the program, since it is the most used accounting platform for small business in the United States, so you agree.

 

She has heard about and is interested in using the following features:

 

· Sales Receipts/Invoices

· Purchase Orders/Inventory tracking

· Bills and Bill Pay

 

Details of this project can be found below.

 

II. Steps to Completion:

For most of the steps below, you will have the option of viewing a short video or referring to the Intuit Education PPT, all page references given below.

Step 1 – Set up your QBO account.

Go to http://www.intuiteducation.com/ and follow the instructions for student registration for QuickBooks online.

 

Step 2 – Download Intuit Education PPT

· Skim over the first part of the PPT to learn about navigating QBO (the dashboard) (Pages 17- 23).

Step 3 – Set up the account and settings

· View the Video:

· “How to Navigate in QuickBooks” – https://www.youtube.com/watch?v=vNdZmf_nLZs

· Review: Account and Setting, Intuit Education PPT, Pages 27 – 44. NOTE: the important information is how to get to account and settings which can be found on page 28. Appendix A covers all the settings that you will need to adjust for Kyra’s Krafts. The purpose of the project is not to learn all the ins and outs of QBO but for you to get comfortable with the program. However, if you want to read all the details, feel free. It is just not required for the purposes of this project.

· Using the information found in Appendix A, set up Kyra’s Krafts account in QBO.

 

Step 4 – Set up and edit chart of accounts (COA)

· View the Video:

· “How to Edit your Chart of Accounts in QuickBooks” – https://www.youtube.com/watch?v=xp-rcPZtUc0

· Review: Chart of Accounts, Intuit Education PPT, Pages 51 – 56, 59 (subaccounts)

· See Appendix B.

 

Step 5 – Set up sales tax

· View the Video:

· “How to Set Up Sales Tax: Settings, Sales & More” https://www.youtube.com/watch?v=CiIfTi0tSk0

· Review: Sales Tax Center, Intuit Education PPT, Pages 60 – 61.

· See Appendix C.

 

Step 6 – Set up product items and contributed inventory –

· View the Video:

· “Add Product Information” https://quickbooks.intuit.com/tutorials/lessons/add-products-information/

· Review: Products and Services, Intuit Education PPT, Pages 62 – 69

· See Appendix D.

 

Step 7 – Create journal entries for all other (non-inventory) owner contributions

· View the Video:

· “Journal Entries in QuickBooks Online” https://www.youtube.com/watch?v=Ud0de5gGJL8

· See Appendix E

Step 8 – Add customers and vendors

· View the Video:

· “How to Add Customers and Vendors into QuickBooks” https://www.youtube.com/watch?v=MJK63XmrJ1E

· Review: Customer Center and Vendor Center, Intuit Education PPT, Pages 95 – 99 (customers), Pages 121 – 124 (vendors)

· See Appendix F

Step 9 – Add invoices*, purchase orders (POs) and bills.

· View the Video:

· “How to Create A Purchase Order” https://www.youtube.com/watch?v=lGGUSmFPJok – (NOTE: you should create the bill directly from the PO. If you notice in the video where he is showing the PO summary screen, to the right of PO there is a button called “Create bill”. You should use that button to create the bill to the vendor.

· View the Video:

· “How to Enter Bills, Track Expenses, & Record What You Owe” https://www.youtube.com/watch?v=PGbS7GpdNTo

· Review: Create Invoices and Create Bills, Intuit Education PPT, Page 103 (create invoices), Page 127 (creating bills) – NOTE: Do not spend time on fancy invoice. Just go with the basics, unless you want to play with this feature.

· See Appendix G

 

Step 10 – Enter all transactions for the month of April

· View the Video:

· “Create Sales Receipts in QuickBooks” https://quickbooks.intuit.com/tutorials/lessons/sales-receipts/

· Review: Create Sales Receipt, Intuit Education PPT, page 102

· View the Video:

· “Receive Payments in QuickBooks” https://quickbooks.intuit.com/tutorials/lessons/receive-customer-payments/

· Review: Receive Payments, Intuit Education PPT, pages 104, 106 -NOTE: make sure you are receiving the payment to Kyra’s Bank account, not undeposited funds

· View the Video:

· “How to Record & Print Checks” https://www.youtube.com/watch?v=eNSPai2twcM

· Create Check, Intuit Education PPT, page 126 (& debit charges) –NOTE: Be sure to change the check number to Debit or EFT or something else. QBO will accept duplicate words so pick one and stick with it for consistency. However, make sure that checks are numbered correctly.

· View the Video:

· “How to Record Bill Payments” https://www.youtube.com/watch?v=zan6MC0zSYY

· Review: Create Check, Intuit Education PPT, page 128 – NOTE: Make sure you document the check number used to pay the bill.

 

Step 11 – Reconcile April Bank Statement –

· View the Video:

· “Reconcile your accounts” https://quickbooks.intuit.com/tutorials/lessons/reconcile-accounts/

· Review: Intuit Education PPT, pages 142 – 144.

· Appendix I

 

 

Step 12 – Review and Revise Financial Statements

 

· View the videos:

· “Understanding Profit & Loss Statement: Income, Cost of Goods” https://www.youtube.com/watch?v=nSGeKUO4HHE

· “How to Customize Reports: Basics, Sorting & Date Ranges https://www.youtube.com/watch?v=Hy5MQAPDa-U

· Intuit Education PPT, page 77 – 84.

· Appendix J

 

Step 13 – Print Reports

· P&L and Balance Sheet for the current month. Make sure the report basis is Accrual.

· Print the General Ledger for “all time”

· Intuit Education PPT, pages 77 – 84

 

Step 14 – Create a Bank to Book Reconciliation

· In other Excel worksheet, create a bank to book reconciliation.

 

III. Deliverables:

1. Submit 1 PDF file by combining multiple PDF documents into 1 PDF file that contains the following files generated from QuickBooks:

A. Profit & Loss, accrual basis for April 2019,

B. Balance Sheet, accrual basis ending April 30, 2019, and

C. General Ledger Report for all time.

2. Submit 1 Excel file that contains the following:

A. The April bank reconciliation with formulas embedded into all cell that require calculations.

 

 

IV. Hints and Tips:

· Appendix A: QBO – Account and Settings

· Appendix B: Chart of Account Changes

· Appendix C: Overview of Sales Tax

· Appendix D: Overview of Inventory

· Appendix E: Owner Contributions

· Appendix F: Customers and Vendors

· Appendix G: Invoices, POs, and Bills

· Appendix H: April Transactions

· Appendix I: Bank Statement

· Appendix J: Financial Statement Review (JEs)

· Review and refresh your memory of APA style formatting.

· Prepare a draft version of your report and ask a classmate, friend, or family member to read your report before submitting it to the Graduate Writing Center.

· Submit your draft to the Graduate Writing Center at least 1 week before this project is due. This FREE resource can be accessed in your LEO classroom.

· Make edits to your report after reviewing feedback from the writing center tutors.

· Submit the Project deliverables on or before the due date.

· Ask your supervisor (professor) questions as needed.

 

 

V. Rubric:

Top of Form

You will find the rubric in LEO under Contents>Course Resources>Projects & Rubrics

 

VI. Competencies Assessed by Project:

 

Communication Competencies:

1.1 Organize document or presentation clearly in a manner that promotes understanding.

1.2 Develop coherent paragraphs or points so that each is internally unified and so that each function as part of the whole document or presentation.

1.3 Provide sufficient, correctly cited support that substantiates the writer’s ideas.

 

1.4 Tailor communications to the audience.

1.5 Use sentence structure appropriate to the task, message, and audience.

1.6 Follow conventions of Standard Written English.

1.7 Create and employ multimedia supports, visual aids and/or documents appropriate to the needs of the project, the message, and the audience.

1.8 Create clear oral messages.

 

 

Critical Thinking Competencies:

2.1 Articulate and frame the issue.

2.2 Collect and evaluate information.

2.3 Evaluate the underlying causes or conditions of elements contributing to issue.

2.4 Use systems thinking to arrive at a decision in the context of an issue.

2.5 Apply ethical principles when determining actions.

 

Accounting Competencies:

5.2 Measure, analyze and interpret: measure, analyze, and interpret accounting data and information

5.3 Report: report accounting information

5.6 Technology and Tools: Identify and use relevant technology and tools to analyze data, perform requisite tasks efficiently and effectively, and support other competencies required in the profession.

 

 

 

Bottom of Form

 

Appendix A: QBO – Account and Settings

 

Remember – “QuickBooks is a very forgiving program. Most mistakes can be fixed as you have the ability to go back and make historical changes, however a correct setup will prevent the need in most cases.” (Intuit Education PPT).

 

The following are the important pieces of information you need to set up Kyra’s Krafts, LLC in QBO. Each of the Bolded items are Categories in the Account and Settings page.

 

 

COMPANY:

· Owner Name: Kyra Forester

· Email: use your email address

· Telephone: use your phone number

· Company Name: Kyra’s Krafts, LLC

· EIN: – LEAVE BLANK. EIN not received yet

· Company Type: Limited Liability Company (Form 1065)

· Address: 94-1278 Front Beach Road, Suite 1703

Panama City Beach, FL 32413

· Tax form: 1065

· She will not be using track classes or track locations.

 

 

SALES:

· Kyra’s terms are Net 30 unless otherwise stated

· She does offer shipping, which she charges for

· She does offer occasional discounts

· She does commission work and takes 50% upfront deposits for all commission work.

· She tracks quantity and price/rate.

· She also tracks inventory quantity on hand for her art prints.

 

EXPENSES:

· She wants to use purchase orders, so make sure you check the box. All other default settings are fine.

 

 

PAYMENTS:

· This setting is used to allow clients to pay an invoice through their system, right on the invoice. Although Kyra is possibly be interested in this in the future, she has no current interest.

 

ADVANCED:

· She is a calendar year tax payer. She received her LLC paperwork but hasn’t received her EIN yet. (First month of fiscal year stays January).

· Accounting method she will be using is Cash.

· Tax form: 1065

· She does not want to use account numbers and she will not be using track classes nor track locations.

 

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Appendix B: Chart of Account Changes

Add: Name: Account Type Detail Type Subaccount of:
  Kyra’s Bank Bank Checking  
  Refundable Deposits Other Current Assets Other Current Assets  
  Art Displays Fixed Assets Furniture & Fixtures  
  Consignments Payable Other Current Liabilities Other Current Liabilities  
  Art Sales Income Sale of Product Income  
  Original Artwork Sales Income Sale of Product Income Art Sales
  Print Sales Income Sale of Product Income Art Sales
  Commission Sales Income Sale of Product Income Art Sales
  Consignment Income Income Service/Fee Income  
  Discounts Given Income Discounts/Refunds Given  
 

 

Group Art Classes Income Service/Fee Income  
  Print Expense Cost of Goods Sold Supplies & Materials – COGS  
  Art Supplies Expense Expenses Supplies & Materials  
  Shipping Expense Expenses Shipping, Freight & Delivery  
  Gain on Sale of PP&E Other Income Other Miscellaneous Income
  Loss on Sale of PP&E Other Income Other Miscellaneous Income
       
Edits:  
Change from: Change to:      
Owner’s Pay & Personal Expenses Owner Distributions Equity Owner’s Equity  
Opening Balance Equity Add “DO NOT USE” Equity Opening Balance Equity  
Rent & Lease Rent Expense Expense Rent or Lease of Building  
Office Supplies & Software Office Supplies Expense Office/General Administrative Expense
Delete:  
Job Supplies        

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Appendix C: Overview of Sales Tax

NOTE: Sales Tax must be set up in the “TAXES” area in QBO. Proceed with this section carefully. QBO is very user friendly for the most part; however, there are areas that are hard to fix should you set it up incorrectly and Sales Tax is one of those areas so do not rush here. Read all the way through this appendix, watch the how to videos and then proceed with caution.

 

Kyra’s new art studio is located in Panama City Beach Florida. She is ONLY required to pay 7% to the State of Florida. The State of Florida is responsible for the disbursement of 1 % of that 7% to Bay County.

 

The State of Florida requires most taxpayers to file monthly sales tax returns, Kyra falls into this category. April 1st she must start collecting taxes and her first return is due no later than May 20th (QBO knows when it is due) for the reporting period of April 1 – April 30.

 

Kyra needs to make sure she charges customers and remit sales tax for everything she sells except her group art classes. Those are not taxed because they are for services only.

 

Address: 94-1278 Front Beach Road, Suite 1703

Panama City Beach, FL 32413

 

Go to the “TAXES” area and set up sales tax for the state of Florida. If you entered the business address when you were setting up the account, QBO should suggest the correct tax agency(s). If not, it should ask you for an address here. You must select the Florida Department of Revenue from the dropdown list. Again, make sure to select ONLY the Florida Department of Revenue from the dropdown list.  Do NOT select or manually add any other taxing authority.  QBO already has all the information it needs to correctly tax products and it will automatically update taxes should laws change but only if it is set up correctly from the beginning.

 

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Appendix D: Overview of Inventory

The setup of Inventory will be done in the “SALES” area of QBO. Once in SALES, got to the Products and Services tab.

 

Then click “New” in the upper, right corner. Next click “Inventory”. Fill in the name, category, and

 

· Fill in the name of the first inventory item.

· Select the category. The first time you will have to add a new category. The categories you will add are: Originals, Prints, Non-inventory item and Unusual Sales.

· The “initial quantity on hand” will be the owner contributed inventory, see table below.

· As of date will be 4/1/2019.

· Do not put any quantity in the “Reorder Point” field for any items.

· The Inventory asset account is “Inventory asset”

· She does not use product codes aka SKU numbers.

· She does want you to put the Sales price in for each item for all items that have a fixed sales price associated with it.

· Also, make sure you associate the correct Income Account with the correct product. i.e. All original artwork should be going to Income account: Art Sales:Original Artwork Sales

· She also wants you to put in the costs price for the prints.

· Remember, all EXCEPT FOR Group Art Project, is taxable so make sure you click the “Is taxable” box. NOTE: Just click the “Is taxable” box. Do not put anything in to the “Sales tax category” nor “What you sell”. These should stay blank.

 

Kyra primarily sells 3 types of original artwork and prints – large, medium, and small.

Pricing and Cost of Original Artwork:

Pricing:

 

Standard pricing for Kyra’s original artwork:

 

Size of Artwork Sales Price Owner Contributed Quantity Total Value
Large 24″ x 36″ $1,700 5 $8,500
Medium 11” x 14” $600 12 $7,200
Small 5” x 7“ $100 32 $3,200

 

 

Sales of Kyra’s original artwork should set the product Income account to: Art Sales: Original Artwork Sales.

 

Cost:

She was instructed years ago by her tax accountant that her original artwork inventory should not have a COGS associated with it. Instead she needs to expense all of her art supplies purchases. However, if she buys a painting or has prints in her inventory, the cost of those items should be considered COGS. So although her original artwork inventory will have zero cost associated with it, you will be able to enter the sales price of the inventory she transfers in to the business.

Cost and Pricing of Prints:

She transfers all her print inventory (reproductions of original artwork) to the business April 1st, as follows:

Size of Prints QTY Cost per Unit Sales Price per Unit
Large 24″ x 36″ 10 $80 $210
Medium 11” x 14” 50 $25 $75
Small 5” x 7“ 110 $4.5 $12

 

All of the prints in the table above should have the following setting:

 

1. Income account to: Art Sales: Print Sales

2. Expense account to: Print Expense

 

In addition to original artwork and prints, Kyra has several non-inventory items that you will need to add.

 

Service item:   Sales Price per Unit Income Account
  Group Art Classes* $35 Group Art Classes
Non-Inventory Items: Commission Work   Art Sales: Original Artwork Sales
  Consignment Artwork**   Consignment Income
  Unusual Sales PP&E***   Gain on sale of PP&E

 

 

For all commission work, Kyra requires 50% deposit due at time of order and the remainder due at time of pickup.

 

* Remember, this is the only non-taxable item.

 

** She also displays and sells consignment pieces. She gets 25% commission on each piece sold. The consignee sets the price, so Kyra keeps those records on an Excel spreadsheet and won’t put them in QBO until she sells the pieces. In other words, the consignment inventory is not an inventory item but you need to set up a product item to handle the transaction when you do. However, make note of all consignment sales because in order to complete the sales transaction, you will need to make a JE to move 75% of the sale from the P&L to the balance sheet as Consignments Payable.

 

*** Sales of PP&E will also require a JE to remove the item from the balance sheet and reduce the gain (or increase the loss) on the sale. The transaction is not complete until this JE is made.

 

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Appendix E: Owner Contributions

To enter all owner contributions you will need to create one or multiple JEs, your choice. You will need to select the correct expense account to debit for the list below and the credit entry will be to: Owner’s Investments. Remember all of the items below were paid by Kyra from her personal accounts. Also remember to put the description of each item in the JEs.

 

Owner deposit to open bank account-use Kyra’s Bank $ 10,000.00
*Electric Deposit (refundable)-use Refundable deposits $ 800.00
*Phone Company Deposit (nonrefundable)- use Utilities $ 200.00
*Rental Deposit (Refundable)- use Refundable deposits $ 2,500.00
*1st month rent – March (prior to opening)- use Rent expense $ 2,000.00
*Gallery set up supplies – paint for walls, cleaning supplies, lumber for building shelves/racks- use Office Supplies $ 450.00
*Miscellaneous art supplies for classes-use Art Supplies expense $ 749.99
4 large Art displays (fair market value at time of contribution- $450 each)-use Art Displays $ 1,800.00
Total $18,499.99

 

 

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Appendix F: Customers and Vendors

Enter all customers in the “SALES” area and all Vendors in the “EXPENSES” area.

Customers  
Name Phone Number Email Address  
Sherry Thomas 850-474-1111 Sherry.Thomas@lookout.com    
Lifetime Learning 850-474-1111 admin@lifetimelearning.com 1173 Front Beach Road; Panama City, FL 32412  
Joy McMasterson 850-747-5200 joyous@mail.com    
Kevin Smith 905-872-2152 ksmith@example.com    
Debbie Reynolds 619-421-1478 debbier112@getgoing.com    
Customers She uses this to capture sales to non-recurring customers and Daily Sales Receipts  
         
Vendors
Ace Real Estate – Stacy is manager 850-393-5555 leasemanager@acerealestate.com 3630 Bay Avenue, Panama City, FL 32542  
Salem Prints – Craig Stevens 850-981-0000 Orders@salemprints.com    
Dish Network – Mike Bossie 850-424-7900 mike.bossie@dish.net 78-541 Wildcat Drive, Dade City, FL 33624  
Kyra        
Verizon – Joe 888-867-7521      
USA Art Supply – Jenny 813-771-3161 jennifer.lopez@usaartsupply.com 714 Rose Lane, Brandon, FL 33617  
Consignment Vendors:  
JoAnne Lopez original artwork 904-546-7300 joannelopez@gmail.com 415 Orange Avenue, Tampa, FL 33616  
Michael Koltes 850-778-2211 mkoltessales@hotmail.com 857 Rose Lane, Panama City, FL 32551  

 

 

back Appendix G: Invoices, POs, and Bills

INVOICES – Purchases from Customer
Date Customer Terms Discount* Product Purchased QTY Subtotal
1-Apr Lifetime Learning Net 30 10% Art Classes 10 $315
2-Apr Kevin Smith Due on receipt   Commission Work 1 $6,500
30-Apr Lifetime Learning Net 30 10% Art Classes 45 $1,417.50
*Lifetime Learning is the only customer that receives a discount because they buy individual art classes in bulk and pay within 15 day.

 

PURCHASE ORDERS – Orders to Vendor
Purchases:   Description QTY Each Price Totals
Salem Prints order 4/1/2019 24 x 36 large prints 5 $80 $400
    11 x 14 medium prints 10 $25 $250
    5 x 7 small prints 20 $4.50 $90
    Total Order $740

 

NOTE: Make sure you create the bill for the Purchase Order from the Purchase Order. It is very easy. Just make sure the dates are correct, see table below.

 

BILLS – Payable to Vendors
Received Due To For Amount  
1-Apr 1-Apr Ace Real Estate April Rent $2,000  
1-Apr 16-Apr Dish Network Telephone and internet bill $285.64  
4-Apr 19-Apr Salem Prints Print order 4/1 *plus $20 shipping $760  
24-Apr 9-May USA Art Supply Purchased large glass art display $4,001.99  
30-Apr 30-Apr Ace Real Estate May Rent $2,000  
    *Make sure you create the bill from the P.O. $9,047.63  

 

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Appendix H: April Transactions

 

Make sure you pay all bills through the EXPENSES area and receive all invoice payments in the SALES area.

 

Make sure you pay the sales tax through the TAXES area. If your sales taxes due for the period of April is different than the transaction amount below, there is a problem with your sales tax somewhere along the way.

 

All receipts that were not invoice payments will require a Sales Receipt. You will create Sales Receipts in the SALES area. All sales can be considered cash. Just make sure the dates are correct and the account the money is deposited to is Kyra’s bank.

 

Unless Kyra does recurring business with a customer, or it is a special sale, all Sales receipt transactions will be from customer “Customers”

Write checks for all expenses that are not bill payments. However, if there is no check number associated with the transaction, it is a debit card transaction so change the check number to sometimes like EFT, DEBIT or something like that. Just be consistent.

 

Small purchases, under $500, are usually expensed. Make sure you select the appropriate account for each transaction. You should not have to add any more accounts as you enter these transactions. Think macro instead of micro. For example, paying for a PO Box or making small furniture purchases should be considered an Office Expense.

 

QBO is sometimes limited in what you can do in a single transaction. This is where JEs will be necessary. Make note of the transactions where JEs will be necessary (hint: sale of fixed assets, sale of consignment artwork). I suggest you make the JEs as you go to complete the transactions; however, you can also take care of all adjusting journal entries after the bank reconciliation during the financial statement review.

 

 

 

 

 

Date Description Expenses Deposits Method
1-Apr Owner deposit to open bank account (this was already done in Appendix E as long as your debit entry was to Kyra’s Bank)   10,000.00 J/E
1-Apr Paid April rent (bill) check #1001 (2,000.00)   Bill Payment
1-Apr Sold medium print   80.25 Sales Receipt
1-Apr Coffee and fingers foods for grand opening – Kroger DEBIT (Add Kroger payee while writing check) use Office Supplies account (180.54)   Check
2-Apr Sold medium original artwork   642.00 Sales Receipt
2-Apr Deposit to complete a commissioned piece – Kevin Smith (Paid ½ of Invoice. Receive partial payment)   3477.50 Receive Invoice payment
4-Apr Sold 4 large, 2 medium and 9 small prints at art fair   1,174.86 Sales Receipt
5-Apr USA Art supplies (art supplies) DEBIT (187.21)   Check
5-Apr Paid phone bill received 4/1 check# 1002 (285.64)   Bill Payment
12-Apr Sold 4 small art prints   51.36 Sales Receipt
12-Apr Paid for Post Office box through 4/11/2020 (1 year) DEBIT (Add PO vendor and use Office Supplies account) (80.00)   Check
13-Apr Sold a consignment piece for Lopez $1000 to J. McMasterson   1,070.00 Sales Receipt
14-Apr Received payment from Lifetime Learning for invoiced amount   315.00 Receive Invoice payment
14-Apr Paid Lopez for consignment sale to J. McMasterson check # 1003 (to account Consignment Income) (750.00)*   Check
14-Apr Sold large original artwork   1819.00 Sales Receipt
15-Apr Goodwill – Purchased shelving to store art supplies DEBIT (put to office supplies) (add Goodwill vendor) (285.24)   Check
19-Apr Took out cash for personal use DEBIT (1,500.00)   Check
19-Apr Paid bill for prints to Salem Prints 4/4 bill check # 1004 (760.00)   Bill Payment
21-Apr Commission piece completed and picked up for Kevin Smith – (Receive the remaining invoice amount)   3,477.50 Receive Invoice payment
24-Apr Sold 1 large, 5 medium and 10 small prints   754.35 Sales Receipt
25-Apr Sold 1 large (owner contributed) art displays for $1000   1,070.00 Sales Receipt
30-Apr Bank Fees (12.50)   Check
30-Apr Paid Sales Tax to Fl Dept of Revenue Online-DEBIT (Pay through TAXES area) (890.82)   Through Taxes Tab
30-Apr Paid rent May rent check # 1005 (2,000.00)   Bill Payment
30-Apr Paid Bill for art display on 04/25 check #1006 (4,001.99)   Bill Payment
  Subtotals: (12,933.94) $23,931.82  
    Total: $10,997.88  

 

*Note, this transaction is instructing you to code an expense item to an income account. However, in the original transaction, the entire sales was added to consignment income. This check is taking out the consignee’s portion of the consignment sale income. The amount that will remain in the Consignment Income account will be Kyr’a 25% of the sale. There are many different ways to properly record the revenue and this is one of them. You could also create a J/E to move 75% of the consignment sale to a payable account at the time of sale and then record the check against that payable. Following these instructions just skips the J/E step but the end result is the same.

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Appendix I: Bank Statement

Business Checking Statement: Kyra’s Krafts, LLC

 

April 1, 2019 to April 30, 2019 Account number: 0001247588
       
Account summary  
Beginning Balance on March 31, 2019 $0.00  
Deposits and other additions 23,931.82  
Withdrawals and other subtractions (2,232.99)  
Checks (3,795.64)  
Service fees (12.50)  
Ending Balance on April 30, 2019 $17,890.69  
       
Deposits and other additions  
Date Description Amount  
1-Apr Counter Deposit 10,000.00  
1-Apr Counter Deposit 80.25  
2-Apr Counter Deposit 642.00  
2-Apr Counter Deposit 3,477.50  
4-Apr Counter Deposit 1,174.86  
12-Apr Counter Deposit 51.36  
13-Apr Counter Deposit 1,070.00  
14-Apr Counter Deposit 315.00  
14-Apr Counter Deposit 1,819.00  
21-Apr Counter Deposit 3,477.50  
24-Apr Counter Deposit 754.35  
25-Apr Counter Deposit 1,070.00  
Total deposits and other additions $23,931.82
       
Withdrawals and other subtractions  
1-Apr Kroger (180.54)  
5-Apr USA Art Supplies (187.21)  
12-Apr United States Post Office (80.00)  
15-Apr Goodwill (285.24)  
19-Apr Counter Withdrawal (1,500.00)  
Total withdrawals and other subtractions ($2,232.99)
       
Checks  
1-Apr #1001 (2,000.00)  
5-Apr #1002 (285.64)  
14-Apr #1003 (750.00)  
19-Apr #1004 (760.00)  
Total checks ($3,795.64)
Total # of checks 4

 

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Appendix J: Financial Statement Review (JEs)

Review Accounts:    
Balance Sheet ACCRUAL BASIS Check Figures  
Report period: ALL DATES    
Bank Statement Book to Bank Reconciliation Required  
  Accrual Cash
A/R $1,417.50 $0.00
Inventory Asset $2,581.50 $2,545.00
Refundable Deposits $3,300.00 $3,300.00
Fixed Assets $5,351.99 $5,351.99
Total Assets $23,648.87 $22,194.87
All Payables $0.00 $0.00
Owner Distributions – $1,500 – $1,500
Net Income $4,103.88 $2,649.88
Opening Balance Equity (DO NOT USE) $0.00 $0.00

 

Note, make sure the basis for the financial statement is in the correct basis for your comparison. The best practice is to review in both basis to ensure you don’t have errors in the statements.

 

Other than the accounts listed above, make sure you scan and make sure all balances make sense. For example, the only negative numbers in the financials should be the Owner Distributions and Discounts given.

 

You may notice a balance in the Opening Balance Equity account (QBO “junk” account). QBO made this entry against the owner contributed inventory when you created the product inventory. If there is a balance, you will need to create a J/E to move the balance from Opening Balance Equity to Owner Contribution. (Debit: Opening Balance Equity DO NOT USE to Credit: Owner Investment)

 

If your fixed asset account is incorrect, another J/E will be required is to remove the art display PP&E that was sold from the books because it hasn’t been done yet. (Debit: Gain on Sale of PPE and Credit: Art Displays.)