Tip #9 of 30:  Customize the icon bar

The nice thing about the icon bar is that you can totally customize it and make it your own.  Just go to the “View” menu and click on “Customize Icon Bar”.  You will see the list of icons currently included on the bar.  You can delete any that you don’t want and you can drag them up and down to reposition them.  You can add new icons here too, but I think there’s a better way to do it.

Close the Customize Icon Bar window and return to your QuickBooks desktop.  Open the screen that you want to add to the icon bar.  For example, if you want to add an icon that open up the “Transfer Funds” screen you first open up that screen.  Now that it is open in front of you, go up to the “View” menu and select “Add Transfer Funds Between Accounts to Icon Bar…”.  You will get to choose an icon graphic, a label and a description.  Bam!  You just added your own shortcut icon to the icon bar!  By default it goes all the way over on the right so you may need to go into the “Customize Icon Bar” screen to move it to the position that you want it.

This technique works for just about any window, including reports.  So you can put icons on your icon bar for easy, one click access to the reports that you use most often.  It is a huge time saver!  And your report gets saved along with any filters or custom columns that you have set up, making it even more useful.

Did you find this tip useful?  If so, I would love for you to leave a comment below.  I would also love to hear some of your favorite QuickBooks tips!

Tip #8 of 30: Remove unwanted icons from your home page

You know how when you first install QuickBooks you get a bazillion icons on the QuickBooks Home page?  It looks chaotic and is very overwhelming.  You can easily remove the icons that you don’t need or want though.

Just go to the “Edit” menu, then choose “Preferences”.  Click on the “Desktop View” section, then switch to the “Company Preferences” tab.  There are some checkboxes there and links that you can click to toggle different features on and off.  Don’t worry if you remove something that you need later, you can always go back and turn it back on at any time.

If you aren’t using the QuickBooks payroll features you can get rid of those icons as well by going into the “Payroll & Employees” section of the Preferences.  On the Company Preferences tab select “No payroll” and most of the Employee icons will be removed.

Once you pare down the number of icons on your home page, it looks much less cluttered and can help you focus on getting things done!

Did you find this tip useful?  If so, I would love for you to leave a comment below.  I would also love to hear some of your favorite QuickBooks tips!

Tip #7 of 30:  If you’ve entered a bill, don’t pay it with a regular check

There are 2 ways of dealing with bills in QuickBooks.  You can enter the bill into QuickBooks and then pay it at another time (a 2 step process).  Or you can choose to not enter the bill at all (just leave it in a pile on your desk or in a folder or something like that) and simply write a check to pay it when the time comes (a 1 step process).

I don’t really care which way you do it, but you have to remain consistent.  If you have entered a bill in QuickBooks using the “Enter Bills” function, that bill must be paid using the “Pay Bills” function.  If you use the “Write Checks” function it will not clear out the bill and it will still be left in your Accounts Payable balance.  Not to mention the fact that you have now duplicated the expense and distorted your accounting.

So it’s very simple – if you “Enter Bills” then you must “Pay Bills”.

For a more detailed look at these processes, check out episode 4 “Entering Bills” and episode 5 “Paying Bills in QuickBooks“.

Did you find this tip useful?  If so, I would love for you to leave a comment below.  I would also love to hear some of your favorite QuickBooks tips!

Tip #6 of 30:  Enter individual credit card charges, not monthly totals

A lot of small businesses use a business credit card to pay for expenses such as gas, office supplies, travel and meals.  And a lot of bookkeepers don’t enter each charge individually, they just wait until the credit card statement comes in the mail and they enter the total amount onto a bill or check.  Sometimes they break it down into multiple expense accounts but for many businesses there is an expense account called “Credit card expense” and the whole amount goes there.

This is not a good bookkeeping practice for several reasons.  Most importantly, there needs to be a proper accounting of all expenses.  So if there are 10 transactions on a credit card statement for gasoline purchases, 3 transactions for restaurants and 3 transactions for office supplies, then at least 3 separate expense accounts should be posted to (Auto Expense, Meals, and Office Supplies).  Also, there is a problem with the timing of the transactions.  If everything gets entered on the same date (the date of the credit card statement) it could distort reality for 2 different accounting periods.  Say your credit card statement starts on the 15th of the month and ends on the 14th of the next month.  If all the charges get posted as totals on the date of the 14th, then expenses aren’t getting charged to the proper periods.

Another issue is that of reporting and tracking.  If individual credit card charges aren’t getting recorded with the actual vendor names then you are losing a whole layer of information that could be useful.  You’ll never know which vendor you spend the most money with and it will be more difficult to track down the details of any one specific charge.  And you’ll have a much harder time discovering any bogus charges if you never see any actual paper receipts.

So my tip is this:  enter each credit card charge individually, using the real vendor name and the real date of the transaction and post it to the proper expense account.  Devise a system to make sure you get the credit card receipts from the person(s) that are using the credit cards and just do it.  It only takes about a minute to record a charge and it has many benefits, as mentioned above.

Did you find this tip useful?  If so, I would love for you to leave a comment below.  I would also love to hear some of your favorite QuickBooks tips!

Tip #5 of 30: Backup your data every day!!!!

A lot of QuickBooks users only backup their data once a week, and that day is usually Friday.  That is a fine schedule but I believe you should really back up your data more often than that, like every day!

Think about what would happen if your data file suddenly backup corrupted and unusable, or there was a fire in your office and the computer was destroyed.  As long as you have that backup you can restore it on another computer and continue working.  But depending on how old that backup is you may have some info to re-enter.  If your backup is one week old then you will have to re-input one week’s worth of transactions.  That may not be a good thing if you have a lot of activity!

Backing up is quick and easy and with the prices for USB flash drives being so low, there is no good reason for not backing up at the end of each day.  If you’re not sure how to do the backup and restore, check out episode 9 of my QuickBooks podcast titled “QuickBooks Backup and Restore“.

Tip #4 of 30: Use the “Tab” key on your keyboard to navigate from field to field when entering information in QuickBooks

There is no doubt in my mind that the fastest and easiest way to move around in QuickBooks is to use the Tab key.  Any time you are filling out a form such as the “Enter Bills” or “Create Invoice” screens, tap the Tab key to move forward one field at a time.  After you use the Tab key for a  while you will develop a rhythm and know exactly how many taps of the key it takes to get to the next relevant field.  If you need to go backwards, hold down the Shift key and then press Tab.  It will move you back one field at a time.

I see so many QuickBooks users fill out the first field on a form and then grab their mouse, click in the next field and then use the backspace or delete key to remove the default date or text that is in the input box, then start typing their input.  It takes at least 3 or 4 times as long as just hitting the Tab key and start typing your input.  When you tab into a field, it automatically highlights or selects the text that is already in that field so you can either tap the delete key to instantly clear the field or start typing and it will replace whatever default value was there.  This is a huge time saver!  So if you’re not currently using the Tab key to move around with QuickBooks, you are really missing out and I highly recommend that you start using it right away.

Did you find this tip useful?  If so, please leave a comment below!  Also, I would love to hear about your favorite QuickBooks tips or tricks!

Tip #3 of 30: Clean up your QuickBooks lists by merging duplicate entries.  This actually quite simple.  Just edit the list item that you want to get rid of of change the name to be exactly the same as the item that you want to keep.  QuickBooks will pop up a message that says “This name is already being used.  Would you like to merge them?”.  If you click “Yes” then it will merge them together under the name that you entered and all of the historical transactions will appear under that merged name.

Did you find this tip helpful?  Please let me know in the comments section.  I would also love to hear some of your favorite tips

Tip #2 of 30: When you open most reports, your cursor is automatically in the “Dates” field.  You can type the first letter of the pre-defined dates to make that selection.  For example, on QuickReports I usually want to see all the transactions.  So as soon as the report comes up on my screen I tap the “a” key on my keyboard to switch the date selection to “all”.  You can hit the “t” key to cycle through “today”, “this week”, “this week to date”, “this month”, etc., etc.  Use the “l” key to cycle through the “Last Week”, “Last Month” and other “Last….” dates.  The ‘n” key cycles through the “Next…” dates.

Feel free to comment and let me know if you found this tip to be useful.  Also, I would love to know some of your favorite QuickBooks tips.

So, here is my QuickBooks tip for day #1.  It has to do with working with date fields in QuickBooks.

Tip #1 of 30: When you are in a date field anywhere in QuickBooks, you can press the “t” on your keyboard to automatically insert today’s date.

That’s it!  I told you they were going to be short, quick little tips!  Be sure to come back tomorrow for tip #2.

Here’s a quick overview of the seminars that are being presented tomorrow:

2010 What’s New for Accounting Professionals from Intuit Proline
Intuit QuickBooks Premier Accountant 2010 from Intuit ProLine helps accounting professionals save time, save money and grow your practice! QuickBooks 2010 is designed to make you and your client’s work easier, faster and more accurate. Your suggestions inspired new features and big improvements. Discover in this course how QuickBooks 2010 can help you work more efficiently with your clients data and enable them to get more from QuickBooks.
Innovation for Accounting Professionals
Technology is constantly moving at a lightening pace.  Innovation for Accounting Professionals is designed to give you the latest information on changes in technology and how these trends can impact both small businesses and accounting professionals.  You will also get to see the latest and exciting offerings from Intuit designed to help you be more productive in this fast-paced environment.
2009 Lacerte Annual Update Seminar (Lacerte is the tax preparation software that my firm uses and is owned by Intuit)
Lacerte program features and functionality changes that are focused on making Lacerte run faster and you more productive. We also update you on the basics like changes to tax law and e-filing.  Find out why Lacerte is now part of the new Intuit ProLine, designed to help you improve your productivity and achieve your goals for growth.

I’ll let you all know what nuggets of wisdom I pick up tomorrow.  If you’re in the Boston area and want to attend you might still be able to register at the Intuit site here.

Microsoft Office Accounting will no longer be distributed after November 16, 2009.

We would like to thank the many dedicated users and partners who have been enthusiastic supporters of Office Accounting over the years

I wish I could say that I am surprised by this, but I’m really not at all.  In my 12 years of working in public accounting, working directly with small businesses I have never once encountered a business that used the Microsoft accounting products.  Intuit owns this space and it will take a company more focused than Microsoft to unseat it as the King of small business accounting software.

If exploited, this vulnerability could allow a hacker to access the data on the user’s computer.

TWO FILES NOW PROTECTED

With current releases, two ActiveX controls are now protected that would otherwise retain potential vulnerabilities:
1.    HtmlHelper.dll
2.    QBInstanceFinder.dll
For the identified versions of QuickBooks, enabling and approving automatic updates, or manually downloading the update and then applying the updates, will eliminate potential risk.

WHERE TO FIND THE QUICKBOOKS UPDATES

For information on the most recent updates available for QuickBooks 2007, 2008, and 2009, including access to manual downloads, can be found at this link; users are asked to identify the product they need to update:
http://support.quickbooks.intuit.com/support/productupdates.aspx

They included a lot of questions and answers in the email which I have copied and pasted below:

________________________________________

FAQ1. Are any other Intuit products subject to this vulnerability?
A1. At this time and to the best of our knowledge, other Intuit products do not have this vulnerability. If we learn otherwise, we will provide further guidance as soon as possible.
________________________________________
FAQ2. Does this issue affect QuickBooks 2010?
A2. No. Neither QuickBooks 2010, nor Enterprise Solutions 10.0, released in September 2009, are exposed to this vulnerability. Of course, we still encourage users to accept the most current releases for the software.
________________________________________
FAQ3. What are the updates or releases that are required for 2007, 2008, and 2009?
A3. Releases are cumulative in nature, and over time the most current release will have even a higher number. But for each of the following versions of QuickBooks, the release number shown marks the first introduction of the resolution of the security vulnerability:
•    QuickBooks 2009: R8
•    QuickBooks 2008: R10
•    QuickBooks 2007: R13
The updates are also requested for the following versions of Enterprise Solutions: 7.0, 8.0, and 9.0.
________________________________________
FAQ4. What if I have multiple Intuit products? Do I need to download and install the patch for each one?
A4. If you have installed more than one of the identified versions of Quickbooks (2007-2009), you should apply patches for each version. This is because there are unique updates for each version to address the HtmlHelper.dll file. (The QBInstanceFinder.dll file is in the Common Programs folder, and one update will update all installed versions for that DLL file.)
________________________________________
FAQ5. Are older versions of QuickBooks, that is, QuickBooks 2006 or earlier, subject to the ActiveX vulnerability?
A5: Yes. Because these earlier versions are no longer supported, Intuit is unable to provide a tested solution to the vulnerability. See also the next two related questions.
________________________________________
FAQ6. What if my client is still running an earlier, nonsupported version of QuickBooks?
A6. Intuit strongly recommends that all users move to a currently supported version of QuickBooks. This recommendation will be clearly stated in the Intuit communications going to your clients on the topic. The Frequently Asked Questions that are meant to be posted for the benefit of QuickBooks users will also identify this need in the face of the potential vulnerability of QuickBooks 2006 and earlier.
This means that there is no good solution to recommend to clients who continue to run QuickBooks 2006 and earlier, and the ProAdvisors who may grudgingly support them. Possibly the potential vulnerability will encourage such clients to upgrade at this time.
So-Called “Kill Bit” Solution Not Recommended. In the case of systems administrators of networks where QuickBooks may have once been installed but is no longer used, Intuit has prepared some instructions that involve editing the Registry to disable calls to the Internet Browser. See here. Sometimes this approach is informally called the “kill bit” solution.
•    NOT Recommended for Clients. This solution is not recommended for clients running an earlier version of QuickBooks. Besides the riskiness of editing the Windows registry, the kill bit solution has not been tested in earlier versions and could possibly interfere with some areas of functionality.
•    Especially NOT Recommended for ProAdvisors. For ProAdvisors running multiple versions of QuickBooks, including QuickBooks 2006 and earlier, the kill bit solution is not recommended for the above reasons and also because the solution would also disable one of the DLL files used by ALL versions of QuickBooks, including those otherwise updated.
Developing: Please understand that Microsoft continues to work on security updates for its ActiveX implementation, so more general solutions may be forthcoming from that source. If so, those general solutions may address vulnerabilities in QuickBooks 2006 and earlier.
________________________________________
FAQ7. If I run an update for QuickBooks 2007, 2008, or 2009, won’t that resolve the problem for ALL versions using the ActiveX controls? Including 2006 and earlier?
A7. No. Of the two ActiveX control files identified above, one is maintained in common across versions of QuickBooks, but the other is specific to each QuickBooks version.
Therefore running an update for one of the recent versions of QuickBooks does not remove the potential vulnerability for an earlier version of QuickBooks.
________________________________________
FAQ8. I have one or more clients who are using a version of QuickBooks from outside the United States. What should I do?
A8. The U.S. version of QuickBooks has cousins developed for local markets in Canada, the United Kingdom, Australia, and South Africa. The security issue is being addressed for these versions too; for more information, see the Support websites for these versions. See also the list of versions in the question below, on “How do I make sure I have the patch?” In the answer, we list specific versions from these countries.
Websites for downloading the update for several countries are shown above. The following phone numbers are also available:
•    Canadian customers: 1-888-829-1722
•    U.K. customers: 0845 606 2161

Anticipated Questions Posted for All Users
For your reference, here are the FAQs posted for all users by Intuit about the security updates.
________________________________________
Q1. What if I’ve uninstalled one of these products and no longer use it? Do I still need the patch?
A1. If you have uninstalled QuickBooks, you should not be vulnerable to these vulnerabilities. If you have installed multiple versions of QuickBooks, you will be vulnerable if any affected version is still installed. Uninstalling all affected versions of the software will remove the vulnerability from your system.
________________________________________
Q2. How do I download and install the update?
A2. All users of an identified version of QuickBooks should download the security update at:
http://support.quickbooks.intuit.com/Support/ProductUpdates.aspx. Canadian users can also download the update from: http://support.intuit.ca/quickbooks/en-ca/kb/update/update-quickbooks-to-new-product-update/Update_main.html
When the page appears:
1.    Choose your product by clicking the product selector link.
2.    Click the Update button to start the download and click Go.
3.    Select Open or Run This Program from its Current Location to begin installing the update immediately. Restarting your computer is not required.
4.    If you don’rt have time to install the update, you can select Save or Save This Program to Disk and the update file, called qbwebpatch.exe, will download to your hard drive. You’ll need to open that file to run the update.
________________________________________
Q3. How do I check that the security update has been applied?
A3. To make sure the patch has been applied and is installed on your system, open QuickBooks, and press the F2 key.  In the display, you should see the product version information in the first line. Versions of QuickBooks with the patches applied are the following:
•    QuickBooks 2009 R8 US
•    QuickBooks 2008 R10 US
•    QuickBooks 2007 R13 US
•    QuickBooks 2006 R12 UK
•    QuickBooks 2008 R12 UK
•    QuickBooks 2009 R6 CAN
•    QuickBooks 2008 R8 CAN
•    QuickBooks MC R24 CAN
•    QuickBooks 2009 French R6 CAN
•    QuickBooks 2007 French R7 CAN
•    QuickBooks 2009/10 AU (v18)
________________________________________
Q4. What operating systems are supported?
A4. The security update is available for all operating systems used by any identified versions of the Quickbooks applications: Windows XP, Windows Vista, and Windows 2000.
[If you are running Windows 98 or Windows ME, you need to have Internet Explorer 6.0 or later installed before you can install the update. Go to the Internet Explorer 6 Downloads Web page to install a more recent version of IE. ]
Note: Intuit products for Apple MacOS X are not affected.
________________________________________
Q5: What if I have multiple Intuit products? Do I need to download and install the update for each one?
A5. If you have installed more than one identified version of Quickbooks, you should apply an update for each version.
________________________________________
Q6. I still have a trial version of Quickbooks installed on my system. Do I still need to apply the security update?
A6. Yes. If you have any trial versions of one of the identified versions of Quickbooks installed on your system, you should download and install the security update.
________________________________________
Q7. I only use the Internet on a periodic basis. Do I still need to download the security update?
A7. Yes. If you installed an identified version of Quickbooks on your computer, the vulnerability poses a security risk regardless of whether you are currently connected to the Internet. We recommend that all users of an identified version download and install the security update.
________________________________________
Q8. How do I ensure that my computer has not already been compromised?
A8. If you have anti-virus software installed and have updates run automatically, the anti-virus software should detect the presence of any malware on your computer.  If you want to determine if your computer has malware on it, run a complete scan of your computer using an anti-virus software product.
________________________________________
Q9. I’m the administrator of my office network. Some machines have had QuickBooks installed at some point but don’t any longer, and aren’t getting automatic updates. What should I do to secure my network?
A9. If you have had QuickBooks installed on some computers at some point, and are no longer running QuickBooks on those machines and receiving automatic updates, you can secure these machines by following these steps to edit the Windows Registry. Please back up the Registry before you implement the following changes:
1.    Copy the following text to a file with the “.REG” suffix.
Windows Registry Editor Version 5.00
[HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Internet Explorer\ActiveX
Compatibility\{596801D8-2C9D-4627-9C67-195CB81B655A}]
“Compatibility Flags”=dword:00000400
[HKEY_LOCAL_MACHINE\SOFTWARE\Microsoft\Internet Explorer\ActiveX
Compatibility\{03C3A013-02F2-4e56-87A8-B74A7C5DC75B}]
“Compatibility Flags?=dword:00000400
2.    Import this into the registry by double-clicking on the .REG file and it will automatically be imported.  This will disable the affected ActiveX controls.
________________________________________
Q10. What if I use QuickBooks 2006 or a previous version?
A10. Intuit wants your data to be safe. We recommend you upgrade to a newer version of QuickBooks (2007 or later) as soon as possible and follow the instructions to update that version. QuickBooks 2006 and prior versions are no longer supported and Intuit does not release updates for these products.

My initial thought was to release a new episode every Monday, but I usually have a lot of family activities on the weekends so I would probably have a hard time keeping up with that schedule.  I teach a live QuickBooks class on Monday nights, so Tuesday is out.  So Wednesday is the next logical choice!  As a comic book geek, Wednesday holds a special place in my heart as new comic book day so now the day has new meaning for me.

So from this week forward, new episodes will come out on Wednesday.  I can’t commit to any particular time yet but I will attempt to get it out before Noon (Eastern Time in the U.S.).  As I gain more experience and get even more proficient at this I’ll have a more strict release schedule.  All of my favorite podcasts come out on a regular schedule and I feel like it’s a sign of a quality show.

So now you can go to the iTunes store and find 2 different listings for Full Contact Accounting in the podcasts section:  the default video podcast and the new Audio Edition which is in MP3 format.  Here is the link to open up iTunes to the correct page:  Full Contact Accounting – Audio Edition.

I think these 2 formats should cover just about everyone, but if you would like the podcast distributed in some other format or have any other suggestions for me, please let me know!

The main new features look to be the following:

An updated Client Data Review with 4 new tools to help clean up client data (this is a feature in the Premiere Accountant Edition only)

Document management allows you to electronically “paperclip” documents to QuickBooks transactions.  Not sure exactly how this will work since they don’t give all the details of it, but this could be a fantastic new feature!

The ability to add/edit multiple list entries.  You will be able to copy and paste from Microsoft Excel directly into some QuickBooks lists.

Create financial statements (with Premiere Accountant Edition) with the new improved Intuit Statement Writer 2010.

There are several other improvements listed on the site and these new features vary by product (some new features are only available in Premiere, while other may be in Pro or only Enterprise, etc.)  It will be a while before I have any detailed info on these new features, but as soon as I do I will pass the info on to you here.  Also, as soon as I get my ProAdvisor copy of the software I will put together a video walkthrough highlighting some of the new features.

http://www.staples.com/QuickBooks-Pro-2009-Edition/product_758686_HC2?cmArea=SEARCH

Intuit has been very tight-lipped about QuickBooks 2010 so far. I have heard of no new features or improvements and they have not yet announced a release date. Usually by this time in the year several new features have leaked out and have been discussed on the various message boards, but I’ve seen nothing this year. I’m hoping that this doesn’t mean that there are no new features worth talking about!

If the Staples sale price is true, I will post a link to it tomorrow.

But as I was thinking about how to explain the accounts payable process in QuickBooks, it hit me from out of nowhere – if you use QuickBooks correctly then you really shouldn’t need to know the accounting that is going on behind the scenes.  Let me rephrase that – if you ALWAYS use QuickBooks correctly (100% of the time) then you really shouldn’t need to understand the accounting that is going on behind the scenes.

The problem isn’t that the bookkeepers didn’t understand accounting (although if they did, they would have realized that they weren’t doing something right), the problem is that they didn’t understand how to use QuickBooks properly!

This caused me to rethink my whole teaching style – I’ve always tried to explain the concepts behind why you do things a certain way in the software.  I like to show people the accounting effects of recording certain transactions and make them see the debits and credits in action.  In the past when I’ve shown people this level of detail, it’s about a 50/50 split.  Half of them totally get it and understand what I’m saying (or at least they seem to understand it) and the other half totally don’t get it at all.  Their eyes start to glaze over and they go into an accounting coma.

I’ve finally realized that if I just focus on the QuickBooks processes themselves, that should be enough for most people.  QuickBooks is designed for non-accountants and has always been marketed as user friendly and easy to use.  “If you can write a check, you can use QuickBooks!” was the old advertising slogan!

There are easy ways to check your work without going down to the general ledger detail level.  For instance, if you want to know if you applied a customer’s payment properly, it’s simple to pull up a Customer Balance Detail report, double-click on the payment in question and trace it’s history to see how it was applied.  Also, if the customer’s accounts receivable balance (as seen on the Open Invoices report) agrees to what you think it should be, then you are probably OK.  All without analyzing any debits or credits!  There are similar built-in reports for almost every area of the program that allow you to review your work and see if you’ve made any mistakes.

So the bottom line is this – you don’t need to be an accounting whiz to be good at using QuickBooks.  You do need to have a solid understanding of the correct way of recording transactions in the software.  In some cases, there are 3 ways to record an entry – the right way, the wrong way, and the QuickBooks way!  If you can make all of your entries properly, QuickBooks will take care of the accounting without you ever knowing about it.  This is all dependent on the software being set up properly though.  If your chart of accounts or items aren’t set up the right way to begin with your accounting will never be correct.  That’s why you should always work with a QuickBooks ProAdvisor to get your company file set up right the first time!

From now on, I’m going to concentrate on the mechanics of using QuickBooks (how to fill out an invoice or bill correctly, how to apply payments, post adjustments, etc.) and not worry so much about teaching hardcore accounting.  I think most of my students will be grateful!  Of course, if you do want to learn the nitty-gritty accounting concepts don’t worry – we’re going to cover that here too!

First of all, online learning is just so much more convenient that it’s not even funny.  You can log on anytime and learn at your own pace.  If you want something repeated, just rewind the video or scroll up through the text again and re-read.  In the real world you have to get dressed, fight your way through traffic, find a parking spot, walk to the classroom and hope that the computers are working.  To learn online, you don’t even have to be wearing pants!

In the classroom, I am using a projector to show my screen to the class.  They have to turn around in their seats in order to see what I’m doing and they can’t face their monitors and watch me at the same time (poor room design).  The online learning environment is usually pretty flexible and you can control what you see and where.  If you have multiple monitors you can have the lesson on one screen while you have QuickBooks open on the other.  Also, the internet is the perfect vehicle for multimedia presentations which can incorporate sound, video, graphics, screencasts, etc.  To work all of that into a physical classroom situation would be quite difficult.

The last major difference that I thought about last night is the cost for taking the class.  This particular class was between $400 and $500 and ran for 24 classroom hours.  Many online learning websites are totally free or charge a small monthly fee in the $30 – $75 range.  That is a much better value!

So this experience has reinforced what I already knew anyway.  That the future of education is not in stuffy old classrooms with outdated audio/visual equipment, but on the internet where you can interact with the lessons in the comfort of your own home while wearing only your boxer shorts.

Today’s article is the first in a series titled “Balance Sheet Basics”.  Throughout this series I’m going to state my case as to why the Balance Sheet is important and maybe I’ll be able to convince you that it’s even more important than the P+L!

First off, let me define exactly what the Balance Sheet is.  It is a financial report that presents all of a company’s assets, liabilities and equity accounts as of a certain date.  It is often referred to as a “snapshot” of the company’s financial position since it does only provide the balances as of one particular point in time (unlike the Profit + Loss report which covers activity for a range of dates).

There are three main sections of any Balance Sheet, Assets, Liabilities, and Equity.  The total of the asset section minus the total of the liabilities equals the total of the Equity section (that’s the “balance” part of “Balance Sheet”).  Just to repeat that one more time:

ASSETS – LIABILITIES = EQUITY

This equation is one of the fundamental concepts that you must know in order to work in accounting.  It should just be second nature to you to understand how this works.  Even though most of your work will be on the computer and it will take care of the balancing for you, it will help you immensely if you know and understand this concept.

To put it in a simple example, let’s say that ABC Company owns a building that cost $700,000 and that is the only asset that it has on the books.  It also has a mortgage with a balance of $250,000 at the end of the year.  We are ignoring a lot of other details for this example, but for the sake of this lesson, let’s assume that there are no other account balances at all.  Using the accounting equation we can calculate that ABC Company has equity of $450,000.

$700,000 – $250,000 = $450,000

Each main section of the Balance Sheet is further divided into “sub-sections”.  Some of the most commonly used ones are listed below.  I will cover each of these in more detail in the future since they all deserve their own write up.

Assets

• Current Assets:  Assets that are expected to be sold or used up within the next 12 months such as cash, inventory and accounts receivable
• Fixed Assets:  Tangible assets that are expected to last for more than one year such as equipment, land and furniture
• Intangible Assets:  Non-monetary assets that cannot be physically touched such as patents, copyrights and trademarks

Liabilities

• Current Liabilities:  Debts and obligations expected to be paid off within the next 12 months such as accounts payable
• Long-Term Liabilities:  Debts and obligations not expected to be paid off within the next year such as a 30-year mortgage

Equity

• The Equity section doesn’t really have any “sub-sections”.  It just has accounts like Common Stock and Retained Earnings

Within each of these sub-sections are the individual account balances.  For example the Current Liabilities section might contain three line items: Accounts Payable, Accrued Payroll and Sales Tax Payable.  Some of the accounts presented on the Balance Sheet may represent several accounts on the company’s Trial Balance.  For example, the Company might have 3 accounts on the Trial Balance for various accrued expenses such as Accrued Payroll, Accrued Payroll Taxes and Retirement Plan Contribution Payable.  These three individual accounts balances may be grouped together into one single line item on the Balance Sheet called “Accrued Expenses”.  This makes for a cleaner, more compact presentation and is acceptable as long as the groupings make logical sense.

The Equity section of the Balance Sheet contains accounts that deal with ownership of the company and how much capital has been invested.  Some common accounts are:  common stock, preferred stock, treasury stock, additional paid-in capital, shareholder distributions and retained earnings.

Here is a sample Balance Sheet from QuickBooks for you to review (click the image to view a PDF):

I have much, much more to say about the Balance Sheet but this post has already gone on far too long!  If you have any questions or comments, please leave them in the comments section below.