by Marie | Mar 19, 2016 | Banking Setup & Management, Importing Files & Forms To QuickBooks, QuickBooks for Mac, QuickBooks for Windows, QuickBooks Online, Reconciliations
Obviously, if you are merging two bank or credit card accounts, it means they are for the same credit card or bank account. You have either lost or misplaced your credit card and have received a new one, or have had your current bank account changed due to fraud, etc. and now having trouble with the banking downloads in QuickBooks.
Not sure why merging two bank or credit card accounts unreconciles previous reconciliations in QuickBooks, but it does. So, if there are a lot of transactions in the old credit card account, do not use this method. Instead, create a new bank or Credit Card account, move the balance over and make a note in the old account to indicate that it is the old one. When you link this new bank or CC account in QuickBooks with the bank or credit card company, all the new transactions will come in so you can reconcile from there. This is the best option as it does not change previous reconciliations in any way.
How to Merge Credit Card Accounts That are Setup for Online Banking
Before you embark on this merger, be sure that there are no pending transactions to send and no unmatched transactions in the old account. Also, do not deactivate the old account from online banking services. Deactivating online services can cause errors to occur during the merge process.
1) Create a new account:
a) From the Company menu, click Chart of Accounts
b) In the Chart of Accounts, click the Account drop-down and select New
c) In the Add New Account window, choose Bank and click Continue
d) Enter a name for the account. (Be sure to give the account a new name. You can change the name back when you have completed the merge)
e) Click Save & Close
2) Set up Online Banking and connect the new account to the appropriate financial institution
3) Accept any transactions that downloaded and record them into the register
4) You should now have both accounts connected for Online Banking. To avoid issues, you must merge the old account into the new account
5) In the Chart of Accounts, select the old account that will be merged into the new account, click the Account button in the lower left corner of the window, then select Edit Account
6) Change the Account Name to the exact name of the new account that you are merging into
7) Click YES when prompted by the Merge warning dialog box
8) The new account should have the entire transaction history of the old account along with any newly downloaded transactions
9) If appropriate, you can now rename the new account to the most appropriate name:
a) If you performed the merge because your credit card company has changed names, then name the account whatever is most appropriate for the credit card company new name
b) If you performed the merge because you are switching from direct connect to web connect (or vice versa) or as a troubleshooting step, then it may be appropriate to change back to the original account name
10) Because previous reconciliations were undone by the merge, mark all transactions as cleared, then refer to the previous reconciliation record that you saved from the old account and uncheck those transactions that were not previously reconciled as well as any new transactions downloaded when the new account was created.
11) Re-create pending transactions and recurring or memorized transactions as appropriate.
by Marie | Mar 19, 2016 | Bookkeeping 101, Business Types & Accounting, QuickBooks Compatibility & Industry Types
There are a few specific challenges with using QuickBooks for law firm accounting:
- Tracking advanced costs correctly when paid out of the Operating account
- Billing for those advanced costs to the client
- Tracking and billing for time, using as much or as little detail as required by the particular firm
- Tracking and billing for miscellaneous costs for example, phone, fax, copies, etc that are not directly billable to the client
- And most importantly, tracking and reporting the trust accounting to meet the requirements of the state/bar
For trust accounting, you need to be able to answer “yes” to the following questions:
- Does the trust bank account balance matches with the trust liability account balance as at any given date?
- Do you have a detailed ledger, for each client, which shows the specifics of the ins and outs of the trust monies as at any given date?
- Do you have a report listing each client’s trust balance, the total of which equals the trust bank account balance as at any given date?
All of the above can be accomplished using QuickBooks PC or Mac, but specific procedures need to be followed and reports need to be created to meet the required standards. (I do not recommend using QuickBooks Online for trust accounting, due to the reporting limitations of that program). Trust accounting in QuickBooks is a little tricky and needs to be tracked using specific procedures in order to get good reporting for the Funds Held in Trust (escrow) detail by client. Here is my general procedure for tracking trust accounts in QuickBooks:
Deposit the retainer/settlement check into the Trust/Escrow bank account, using a Funds Held in Trust (Escrow) liability account with the client name in the name field. I do this directly in the Make Deposit form, but you can enter a sales receipt, using an item which points to the liability account.
Write checks for any disbursements of those funds, using the Funds Held in Trust (Escrow) account on the expense tab of that check – with the client name in the name field on that line. Or, if you want the detail of how those disbursements are made, create separate items, all pointing to that account, to indicate what that “paid out” is for – taxes, insurance, fees, etc.
If applicable, invoice the client for the professional fees – time or flat fee billings, and any advanced costs – previously paid out of the operating account, as separate items.
Cut a check from the Trust/Escrow bank account to the law firm, using the Funds Held in Trust (Escrow) account on the expense tab of that check – with the client name in the name field on that line.
Receive the payment using the “Receive payment” option, with the client name, and attach that payment to the open invoice.
Deposit the funds into the operating checking account – either directly from the payment, or via Undeposited Funds.
I have created a group of memorized reports to show the client trust activity and balances to use when reconciling and reporting client balances and/or the bank statement. These provide the necessary 3-way reconciliation as at any given date:
Trust Bank = Funds Held in Trust (liability) = Total of individual Client Fund Balances with ledger detail
These are two completely separate areas of your business and the transactions need to be recorded as such, so much so that some law firms track their trust accounting in a separate QuickBooks file – although I do not see the need for this myself.
Note: There is no way to automatically show the trust balance on an invoice; however, you can create a custom field, or enter a line in the description field, noting the remaining trust fund balance. The amount will have to be manually entered on each invoice. If you put the amount remaining in the memo field, it will not print on the invoice, but will show up on statements and in the customer center.
So, is QuickBooks an ideal accounting software for a law firm? My answer is no, but it can definitely be used.
by Marie | Mar 2, 2016 | Bookkeeping 101, Employee Setup & Management, Payroll Setup & Management, QuickBooks for Mac, QuickBooks for Windows, QuickBooks Online
The best and most accurate way to enter third party payroll into QuickBooks is to enter them via Journal Entries. First, you want to setup the expense as well as the liability items of the payroll in the Chart of Accounts. Then you want to enter one journal entry for each pay period, using the payroll items you created in the Chart of Accounts on their correct debit and credit sides, making sure you enter the actual check dates of the paychecks. You will include the employees names in the Name field, and a memo with the pay period as well as net, gross or taxes on each transaction line.
Entering Third Party Payroll into QuickBooks:
Create the Payroll Expense Items in the Chart of Accounts as sub of Payroll Expenses to record company expenses
Payroll Expenses
Gross Payroll
Soc Sec Company
Medicare Company
FUTA
NYSUI
Create the Liability Items in the Chart of Accounts as sub of Payroll Liabilities to record employees withholdings
Payroll Liabilities
Federal Withholding
Soc Sec Employee
Medicare Employee
State Employee NYS
City Employee NYC
NY Disability
The Result: (click image to enlarge)
In Bank Register: (click image to enlarge)
Entering third party payroll this way will allow every aspect of the payroll to be accurately accounted for; each paycheck will be listed separately with the gross, employee paid taxes, employer paid taxes, and the net payroll. The paychecks as well as the tax payments made will be easily tracked in the bank account register, and the amounts in QuickBooks will be on par with the third party company figures. Entering third party payroll this way will also make it easily identifiable in the reconcile window when you go to reconcile your bank account, and will show a balance on the balance sheet for any withholding that was not paid over to the relevant tax authority.
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by Marie | Feb 26, 2016 | Banking Setup & Management, Bookkeeping 101, Deposits & Undeposited Funds, QuickBooks for Mac, QuickBooks for Windows, QuickBooks Online, Reconciliations
Since the accounts were reconciled for the period in which the deposits relate, it means that the same revenues were reentered directly to a bank account register without realizing that they were already entered, and are in the “undeposited funds” account waiting to be deposited to the bank from there.
The fix will depend on the number of transactions involved. If not many deposit entries, here is what you do:
Few Deposits Fix
1) Locate the previous corresponding deposits in the bank account register and make note of their dates.
2) Make sure they are each the same amount as the deposits in the “Make Deposit” window. (You want to keep the deposits in the month they belong so as not to throw off the previous reconciliations).
3) Check to ensure that the dates in the “Make Deposit” window match the dates in the register, or at the very least, are in the same month. (The aim is to remove the entries from the “make Deposit” window without throwing off the previous reconciliations).
4) Now, go ahead and make the deposit(s) from the “Make Deposit” window for each amount(s) that were previously entered in the register, making sure you change the deposit date to reflect the previous deposit in the register as well.
5) Go back to the bank register and delete the previous deposits that were reconciled. (NOTE: Your deposits that you just made from the “Make Deposit” window should be shown either above or below the previous corresponding deposit with the same date).
6) Next, for QuickBooks Mac Pro or QuickBooks Online: checkmark each corresponding deposit that you have just deposited, as reconciled. (With the exception of the switching of the deposits, the previous reconciliations will remain the same, with accurate opening balances for each month). For QuickBooks Windows Pro/Premier: undo the previous reconciliation(s) to the first month affected by the deposits you deleted, and re-reconcile from there onward. All the deposits you entered will be there in the reconcile window for you to check off, and you will be in balance in minutes if you deposited them all accurately. (You can use the “Mark All” feature in the reconcile window by checking the box “Hide transactions after statement end date” and clicking “Mark All”. In most cases, this will reconcile the account for that month and show a $0 difference in the reconcile window. If there is a difference, and it is not obvious what amount(s) is throwing it off, use the “Unmark All” button and reconcile one by one with the statement.)
As you can see, if the deposits in the “Make Deposit” window are a lot – possibly spanning multiple years, the above-mentioned method of clearing the deposits from the “Make Deposit” window would be very time consuming and impractical.
If there are a multitude of deposits here is what you do:
Too Many Deposits Fix
1) First, you want to check to see if the deposits that were previously entered directly into the bank register that made the accounts reconcile, and the invoice that the payments in the “Make Deposit” window are for, went to the same Income account. So, locate the previous deposits as well as the corresponding Invoice(s) and check to see where they went. (If there is only one Income account, then they most likely went to the same account).
2) Go ahead and make the deposit(s) for each year, using the year end date for each year’s total deposit. (It’s always good practice to make adjustments at the beginning or ending of a period).
3) Next, create a journal entry for each year end with the total deposit amount you just put in for each year.
- Debit the Income Account associated with the deposit(s)
- Credit the bank account that the deposits were made to
This will reduce the amount in the bank account as well as the Income account – as it should, and the “Make Deposit” window will now be cleared. When next you go to reconcile, the journal entry amounts for the deposits will be in the reconcile window. Check each on the debit and corresponding credit side to remove them from the reconcile window. This of course will be a zero effect on your current reconciliation.
Because there were transactions left in the undeposited funds, the revenue for the period(s) associated with those deposits were overstated. It is possible that they were already taken care of by the CPA or tax preparer as far as tax filing; however, you will need to bring this to their attention if taxes were already filed for the affected period(s). Although you have already corrected this on the books in QuickBooks, amended returns may need to be filed, to make the correction tax-wise.
Using the “Too Many Deposits Fix” option above will allow your financials to be accurate, but not your books in the sense that the deposits were not broken down in months which will throw monthly reports off. Using the “Few Deposits Fix” option above will allow your books as well as your financials to be accurate on either the cash or accrual basis.
by Marie | Feb 23, 2016 | Banking Setup & Management, Bookkeeping 101, QuickBooks for Mac, QuickBooks for Windows, QuickBooks Online, Reconciliations
If you are using QuickBooks Pro for Mac or Windows, go to Banking then Reconcile and select the bank account you are looking to reconcile from the dropdown menu. (If you are using QuickBooks Online, click on the gear icon at top right of screen where your company name is, then Reconcile and select the bank account from the dropdown menu).
Next, enter the statement ending date and the statement ending balance, and the bank service charge and interest earned – if any. The beginning balance should be the same as the beginning balance on the statement. If it is the same, click ok and start your reconciliation process. Click on each item that matches with the same item on the statement for both debits and credits. You may also check the button that says, “Hide transactions after statement end date” then select “Mark All”.
When your account is reconciled, there should not be a difference. The amount at the “Difference” button should show $0.00. If it shows a balance, it means that there is a discrepancy, and you will need to go over each transaction to locate the discrepancy. The difference could be one or more transactions that are entered with the incorrect amount such as $2,900 entered as $2,090, or a transaction entered on the debit side when it should have been on the credit side – and vice versa.
Also, a good thing to do at this point, is to double check to ensure the beginning and ending balance in the reconcile window matches with the beginning and ending balances on the bank statement. You may click the “Unmark All” button so you can mark them individually as you cross check each item with your statement.
If you recognize the transaction that is causing the discrepancy, and feel that you have already entered it, use the “Find” feature to try and locate it. Go to Edit then Find and search for the amount. It may have been mistakenly entered with the wrong date and thus hiding in another month or period.
If you previously did a reconciliation and it was accurate, and now you want to continue reconciling current months but the beginning balance is off, click on the “Discrepancy Report” button to see what transactions were changed since your last reconciliation. If it was deleted, you will need to reenter it. If it was unchecked in the register – which makes it un-reconciled, you will need to recheck it in the register. After doing so, your beginning balance will be back on par with your statement again.
TIP:
I highly recommend using the “Download Transactions” feature in QuickBooks. Not only will it save you time entering data, but it will help you to avoid entering incorrect transaction amounts as well as making incorrect debit or credit entries.
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