This article was written by Dick Ginnaty, CPA
For the last two versions (2007 and 2008) of QuickBooks, there has been an expense account automatically set up by QuickBooks for new companies called “Ask My Accountant” (in the “Other Expense” portion of the chart of accounts). This account should be used as a temporary holding account for transactions in QuickBooks that you are not sure where it goes. Whenever you are unsure of the accounting on a particular transaction, assign it to this account.
Transactions such as down payments on equipment purchases, loan payments, loan proceeds, proceeds from the sale of assets, refunds, or rebates received, and credit card payments should be charged to this account. I encourage you to schedule a review with your accountant early in your adoption of QuickBooks (say after the first month and first quarter). Usually by reviewing these troublesome transactions with your accountant a couple of times, you will learn to account for them correctly and will not have to consult your accountant again. I also encourage a review of your QuickBooks accounting one or two months before year end. This will enable you to correct any erroneous entries, and facilitate a year end tax review at the same time.
(If there is any area in accounting or tax that you think needs to be addressed in this newsletter please e-mail Dick at Ginnatycpa@aol.com and if it is of general interest, he will address it in future articles)
Contrary to the marketing hype, there are transactions such as those listed above which are not simple, and are often misunderstood and incorrectly accounted for by the typical small business person. Even most automated payroll information downloads have to be analyzed, and redistributed before the financial statements will be correct. So don’t be embarrassed. It just isn’t that intuitive or easy.
Good luck and here’s hoping it “all adds up” for you.