Accounting Basics Using

QuickBooks ®

Presented by Mike Kimutai

Accounts in QuickBooks

Balance Sheet Accounts

Profit and loss statement

accounts
 Debits and Credits

The type of account determines how the debit or credit affects it

 Double entry bookkeeping

Assets = liabilities + equity

Debit and Credit for Purchase of Office Furniture
Debit and credit accounts payable

Debit and credit when using the Bill form in QuickBooks

The Chart of Accounts

Chapter 2
 The Chart of Accounts

A list of all the accounts a business has, organized in a specific order

Balance Sheet

Income Statement
 Organization and Structure of the COA

Balance Sheet Accounts Income Statement Accounts

• Current Assets • Revenue

• Long-term Assets • Cost of Goods Sold
• Current Liabilities • Expenses
• Long-term Liabilities
• Equity
• Make Sure Your Company Stays in Good Health
– QuickBooks isn't just about day-to-day financial
management. The customisable reports, Company Snapshot
and forecasting features can help you monitor the overall
state of your company.
– The Company Snapshot shows the health of your business,
at a glance
– Use reports to identify where you can cut costs or boost
profits
– Analyse expenses and forecast your future spending
– You can learn a lot from examining the past performance of
your business. QuickBooks makes it easy to identify the
nuggets of knowledge in your records, then displays them in
a format you can really use.
 All the Accounting You Need to
Know
About the chart of accounts
• Chart of accounts
– The chart of accounts is a complete list of your business’
accounts and their balances.
• When you keep books for a company, you want to track:
– Where your income comes from
– Where you put it
– What your expenses are for
– And what you use to pay them
• You track this flow of money through the chart of accounts
 All the Accounting You Need to
Know
About assets, liabilities, and equity
• Assets
– Includes what you have and what people owe you.
• Liabilities
– What your company owes to other people.
• Equity
– Equity is the difference between what you have and what
you owe.
– Equity = Assets – Liabilities
 All the Accounting You Need to
Know
Cash versus accrual bookkeeping
• Cash basis
– Income is recorded when money from sales is received
and expenses when bills are paid.
• Accrual basis
– Income is recorded at the time of the sale and
expenses when you receive the bill.

Important: When you create reports in QuickBooks,

you can switch between cash and accrual reports at
any time, regardless of which bookkeeping method you
have chosen for tax purposes.
 All the Accounting You Need to
Know
• Measuring business profitability
• The balance sheet
– A snapshot of your company on one date. It shows:
• What you have (assets)
• What people owe you (accounts receivable)
• What your business owes (liabilities and accounts payable)
• The net worth of your business (equity)
• The profit and loss statement (income statement)
– A profit and loss statement or income statement
shows income, expenses, and net profit or loss
• Statement of cash flows
– Shows receipts and payments during a specific
accounting period
 All the Accounting You Need to
Know
• General journal transactions
– Traditional accounting method

– Total amount in the Debit column equals the total

amount in the Credit column

– Each amount is assigned to an account in the chart of

accounts

– To view the journal entry for a transaction, select the

transaction and press Ctrl-Y.

– Modify the report and choose to display the Credit and

Debit columns if they do not appear in the report.
 QUICKBOOKS JOURNAL ENTRY RULES

Debit and credit are the two aspects of every financial transaction. Their
use and implication is the fundamental concept in the double-entry
bookkeeping system, in which every debit transaction must have a
corresponding credit transaction(s) and vice versa.

ACCOUNT INCREASE DECREASE

Assets Debit Credit
Liabilities Credit Debit
Revenue/Income Credit Debit
Expense Debit Credit
Equity/Capital Credit Debit
Ac Receivable Debit Credit
Ac Payable Credit Debit
 Accounts pertaining to the five accounting
elements
• Asset accounts
– Cash, Bank, Receivables, Inventory, Land, Stock, Debtors, Buildings
(Plant), Furniture, Equipment, Vehicles, Machinery etc...
• Liability accounts
– Payables, creditors, bank overdrafts, deposits owed to depositors,
trust accounts, accrued expenses, etc...
• Equity accounts
– Capital, Drawings, Accumulated funds etc...
• Income/Revenue accounts
– Services rendered, Sales, Interest income, Membership fees, Rent
income etc...
• Expense accounts
– Telephone, Water, Electricity, Repairs, Salaries, Wages,
Depreciation, Bad debts, Stationery, Entertainment, Honorarium,
Rent, Fuel etc...