QBO Year End Guide

Document Sample
QBO Year End Guide Powered By Docstoc
					QBO Year End Guide
Closing the year and beginning a
new one

The end of the fiscal year can be a busy time. In an effort to help make
year-end tasks go as smoothly and efficiently as possible, we’ve compiled
information on the most common activities that are done during the close of
one business year and the beginning of a new one.
You can go to the sections that pertain to you or read the entire guide,
whichever you find the most helpful!

Reconciling your Accounts

Close the Books

Sending Statements

Reporting for year end

1099 & 1096 Forms


Taxes and your accountant


Paying Sales Tax

Reconciling Your Accounts

If you haven’t been reconciling your bank accounts on a monthly basis, you’ll
need to do so now or financial reports won’t be correct when preparing your

To get started, choose Banking > Reconcile, then select the bank or credit
card account that you need to reconcile. Fill out the Reconcile Statement
window. (If you don’t see the Reconcile Statement window, you or another
user has already begun to reconcile that account.)

If you’ve never reconciled, don’t worry. Just start with the oldest statement
you have, and consult our KnowledgeBase article KB 1164, How do I
reconcile for the whole year?

We have excellent self-help on the reconcile process if you find that you
need more help in this area. Our KnowledgeBase article KB 2910, Why is
my reconciliation wrong?, contains useful information on how to solve basic
reconcile issues.
                                            Back to Table of Contents

Closing the books
Closing the books is optional. QuickBooks Online doesn’t require you to
close the books at the end of an accounting period. In fact, you don’t
need to do anything to “close” your income and expense accounts.

On the first day of the next fiscal year, QuickBooks Online will
automatically transfer net income from your Balance Sheet into your
Retained Earnings account. That way, you’ll know how much money you
made in the previous period. In addition, income and expense accounts
will be "zeroed out." This allows the new year’s Net Income account to
begin to accumulate new totals for the new year’s profits.

You’ll see a feature in QBO called Closing the Books which restricts
access to transactions in prior accounting periods. Closing the Books
doesn’t “close out” the income and an expense account since that’s done

1.    Choose Company > Preferences.

2.    Click on the Company link on the left.
3.   Click on the Closing the Books link on the left.

4.   Check the box next to Closing the Books and enter a date through
which your books will be closed.

5.    You can select Only warn, which will warn you and any other user
when attempting to edit or delete a transaction that’s dated before the
closing date.

     Or you can choose Warn and require password which requires a
     password of your choosing before anyone can make a change to any
     of the transactions dated prior to the closing date.

6.   Click Save.
 IMPORTANT: Make sure you don’t set the Closing Date in the future. This will
     cause you to be warned or to enter your password when entering today’s
          transactions, since they will fall within the closing date range.

                                                        Back to Table of Contents

Sending Customer Statements

The end of the year is a good time to remind your customers of any
outstanding balances that they owe you, or to send them a statement of
their activity throughout the year.
Customizing your statements

You have a few options when creating statements. You can add aging
information that indicates how far unpaid balances are past their due dates.
You can also choose to show each line item on the sales transaction or just
the memo.

1.   Choose Company > Preferences.

2.   Click on the Form Delivery link on the left.

3.   Click on the Statements link at the bottom of this section.

4.   Select your options and then click Save.

Creating statements one at a time

If you only need a few statements, you can create them one at a time.

1.   Choose Customers > Customer Center.

2.   Highlight the customer for whom you want to create the statement.

3.   Select Statement from the New Transaction menu.

4.    Select the Statement Type and date. A Balance Forward
statement provides a history of all activity (invoices, payments, credit
memos, etc.) between Start and End Dates you choose. An Open Balance
statement shows only invoices that have an amount owed.

5.    Click OK. Then scroll to the bottom and either Print or Send the
statement by email.

Creating statements in a batch

If you need statements for a lot of customers, you can create them all at
once in a batch. You can also choose to send statements only to customers
who owe you more than a certain amount, or other criteria.

1.   Choose Customers > Statements.
2.    Choose either a Balance Forward or Open Item statement and
enter the statement dates.

3.    (Optional) Set your additional statement criteria.

4.    Click OK.

A list of customers who meet the criteria will appear. Preview or Edit the
statements one by one, or create and/or send all of the selected statements
by clicking the Create/Send Selected Statements button.

                                                       Back to Table of Contents

Reporting for Year-End

The end of the year is a natural time to run reports and evaluate how your
business has performed over the last year. Running reports is also an
essential part of preparing for taxes.

The two most important reports that you and your accountant will need are
the Profit & Loss and the Balance Sheet reports. Both of these reports
are available directly from the Reports tab menu.

Make sure that you customize these reports for your previous fiscal year.
For example, if your business runs on a calendar year and today is January
10th, then set the dates on the report for Last Year or manually enter the
dates in the To and From fields at the top of the report.

Profit & Loss report
IMPORTANT: Don’t worry if your Profit & Loss report is totally or
partially blank. Chances are that you are running it for “this year-to-date”
and if today’s date is January 10 th, then the report is only capturing the
last 10 days of transactions.

Profit and Loss accounts are referred to as “transitory accounts.” That is,
at the end of each fiscal year, QuickBooks Online will automatically zero
out Income and Expense accounts and transfer the net amount (the Net
Income or Loss) to the Retained Earnings account on the Balance Sheet.
This allows the new year’s Net Income account to begin to accumulate
new totals for the new year's profits.

Retained Earnings account

You will notice that your Balance Sheet has an account near the bottom
called Retained Earnings. This amount normally stays the same over the
course of your fiscal year; however, if you run your Balance Sheet report at
the beginning of a new year (dated as of the new year) the amount in the
Retained Earnings account will be different.

Retained Earnings is a special Equity account that tracks your company's
net worth, accumulated over the previous fiscal years. At the end of your
fiscal year, QuickBooks Online automatically transfers your net profit (or
net loss) to Retained Earnings.
There is no actual transaction that takes place. Net Income (income minus
expenses) from the previous year moves into the Retained Earnings account.
To find out how it was calculated, simply run a Profit & Loss report from the
previous fiscal year.

                                                      Back to Table of Contents
1099 and 1096 Forms
What is a 1099-MISC Form?

The IRS requires you to file a 1099-MISC form for each vendor to whom you
make certain types of payments. The form is called 1099 Miscellaneous
Income because your vendor will need to claim these payments as income.

You must mail these forms to vendors by January 31 for payments made in
the previous tax year. You must also mail these forms to the IRS by
February 28 along with a Form 1096. For more information on which types
of vendors require 1099-MISC forms, consult with your accountant, or see
the IRS website ( and type in “1099-MISC” in the
Search field. Then click on the link for Instructions for Form 1099-MISC.

You’ll need to have pre-printed 1099-MISC forms before you can create the
1099 forms in QuickBooks Online. You can purchase these forms from Intuit
by calling 1-800-433-8810 or from other office supply stores.

Important things to remember about 1099 forms

     QBO supports only the 1099-MISC form. There are many different
1099 forms, the most common being the 1099-MISC.

       QBO can’t print state ID# in box 17 or additional state information;
this is not required by the I.R.S.

      Intuit’s 1099 forms are recommended for printing. 1099 forms must
be laser- type forms; tractor feed forms do not work with QBO.

      1099s are always active in QBO with no preference setup required.

      1099s are reported on a cash basis.

     Income and Equity type accounts can’t be assigned to a box on the
1099-MISC form.

      QBO can only print 50 1099s at a time.

Creating 1099s in QBO

1.    Choose Vendors > Vendor List.
2.    Click the Prepare 1099-MISC Forms button on the bottom-left of
the Vendor List.

3.    The Prepare 1099-MISC Forms screen will open.
4.     Click the Select Vendors button. All vendors that you have marked
for 1099 tracking will appear in the right-hand column. You can add
additional vendors by using the Add button. Click OK.

5.    Click the Assign Accounts button.

6.    Select the checkbox for the box needed.
7.    Select the drop down arrow in the Account column and select the
account you would like to use for that box.

IMPORTANT! If needed, you can have multiple accounts for the same box.
Use Select Multiple from the drop-down list. Select the accounts you want
to use.

NOTE 1:     Income and Equity accounts are not listed.

NOTE 2:      Selecting a parent account will not select its subaccounts. If you
made payments made to 1099 vendors and used subaccounts, you must
also select those exact subaccounts. To include all subaccounts, you must
click Select Multiple and choose each subaccount under the parent

NOTE 3:      You can’t assign the same account to different boxes. You’ll need
to edit individual transactions related to that account if you need to assign
the same account.

You’ll need to obtain the advice of your accountant to determine which boxes
to use if you are unsure; you can also consult the IRS website and find
instructions for Form 1099-MISC.

Preview 1099 and 1096 information

A.    Verify that the Tax Year field is showing the correct year.

B.    The Show field is set to show vendors/contractors that meet the
threshold. Thresholds are set by the IRS, are unique to each box and cannot
be changed.

C.    The Total All Payments column shows a total of all payments you
made to each 1099 vendor. A difference between the Total 1099 Payments
and the Total All Payments indicates that you used other accounts on
transactions with that particular vendor. This could mean that there may be
other accounts that you should also associate with 1099-MISC form boxes.

D.    You will see columns for each Box that you checked. In this
screenshot we see Box #1 and Box #7. This is where you can see the
threshold amount for each box.

E.   Items in red are missing information. You can click on the red item to
update from this screen.
The 1099 Transaction Detail by Vendor report shows all payments you
made to a particular vendor. You can use this report to make sure that all
payments to 1099 vendors have been accounted for before printing your

To get to this report:

1.   Click the Reports tab.

2.   Click Vendors on the left-hand column.

3.    Click Transaction List by Vendor under the section titled What are
the transactions for each vendor?
1099 Print Alignment and Setup

 This step helps you make sure the 1099s print properly. You can print a
sample 1099 on blank paper to check alignment before printing on blank

The Buy 1099-MISC forms link will take you to the website where you can
buy the 1099 kit in different quantities and prices.
You can solve most printing problems by making sure that you have selected
the proper settings in the Print window for your printer. You can click the
Which options should I set? link on the Preview Printing window to see
the proper settings to select in the Print window for your printer.

Printing the forms
Click Print 1099 Information Sheet at the bottom of the Prepare 1099-
MISC screen. It’s a good idea to print this although it’s not required.
Now you’re ready to print the 1099-MISC forms. We recommend that you
print a sample on blank paper to get the alignment set correctly. As with
printing checks, your version of Acrobat can cause the alignment to be off.

Preparing the 1096 form

Form 1096 summarizes the information from the 1099 forms you are
sending for the tax year. It is a form that you send only to the IRS. It must
accompany the 1099-MISC forms that you submit to the IRS. When you
purchase your 1099 pre-printed packet, you’ll receive a 1096 form to fill out.

To prepare the 1096 form and its accompanying 1099-MISC forms, go to the
Vendor list and click on the Prepare 1099-MISC Forms button at the
bottom left. After you have verified that you have correctly entered all the
information for 1099s for the tax year, refer to the Summary for 1096
table for figures to enter onto your 1096 form.

QuickBooks Online does not print on the 1096 form. You
need to fill it out yourself based on that Summary for 1096 table.
                                                      Back to Table of Contents
Payroll Basics for Year End
Payroll is more than just writing checks to your employees. Business
operators with employees are required to prepare and file both quarterly
and annual payroll tax forms.

For more information about payroll tasks for year end, you can find our
Payroll Year-End Guide here:

If you signed up for QuickBooks Online Payroll before June 7, 2010 use
this link instead:
                                                      Back to Table of Contents

Taxes and Your Accountant

QuickBooks Online does not integrate with Turbo Tax or any other tax
software, but it can create reports that help you fill out the TurboTax
Interview or a tax return. Profit & Loss as well as the Profit & Loss
Detail reports will be the most helpful.

You should consult your accountant to determine if transactions have been
accurately assigned and to confirm the amounts used for filling out tax
forms. You can give your accountant access to your QuickBooks Online
company so that he/she can either view or actually make adjustments to the

1.    Choose Company > User List.

2.    Click the New button at the bottom right.

3.   Choose which level of access to give your accountant (accountants can
have any of the access rights, but it makes most sense to give them
Company administrator access).

4.    Check the box next to This user is my Accountant. Click Next.

5.    Enter your accountant’s email address and name and click Next.
6.     To complete this process, click Finish. Your accountant will receive an
email notifying them that they’ve been invited as a user into a QuickBooks
Online company. They’ll also be prompted to create a user ID and password
(if they don’t have a QuickBooks Online user ID/password already) and then
they can access the company.

      Note: It’s important not to share your own user ID and password with
      your accountant. If a user ID and password is shared, QuickBooks
      Online won’t be able to track who makes which changes in both the
      Activity Log and the Audit Trail.

Making asset depreciation entries

Fixed assets such as furniture, computers, vehicles, and buildings contribute
to the operating capacity of a business over many years. Because of their
long-term value, fixed assets are treated differently than other expenses.
Typically, business owners expense the purchase price of the fixed asset over
its useful life, not just the year in which the purchase was made. This is
referred to as depreciation.

You should depreciate assets if you want the depreciation to be reflected on
financial statements. If an accountant calculates the depreciation it would
be easiest if they make those depreciation entries by accessing the
QuickBooks Online company themselves. If you are going to handle this
yourself, we have an article to help you. Check out our KnowledgeBase
article KB 2705, Recording and depreciating assets, and click the How
do I record the depreciation of my asset? link.

                                                      Back to Table of Contents


It’s not mandatory, but you can choose to distribute profits (retained
earnings) to one owner’s equity account or to multiple partners at the end of
the year.
Partner Distributions

Below is an example of a General Journal Entry for distributing earnings
between two partners.

The partners’ equity accounts need to be credited and the Retained Earnings
account should be debited. There may be tax consequences for such a
distribution, so you need to check with your accountant before doing so.

Owner Distributions

Taking funds from the business and paying the owner is called an owner’s
draw. To record this draw, create a check to the owner (make them a
vendor) and select the Owner’s Equity account at the bottom. (To record a
payment to a partner, a partner’s equity account would be selected.)

                                                      Back to Table of Contents
Paying Sales Tax

You need to pay your sales tax at a minimum on an annual basis. If you’ve
been using the Sales Tax feature you can run the Taxable Sales reports.

Note: QBO does not have an automated way to track multiple sales tax
rates. If you need to track multiple tax rates, consult our KnowledgeBase
article KB 1050, How do I pay sales tax for multiple tax rates?

                                                      Back to Table of Contents


The end of the year is a perfect time to think about budgeting for next year.
The following is an overview of how budgets work in QuickBooks Online.

What is a budget and how does it work in QuickBooks Online?

QuickBooks Online budgets are used to estimate future income and
expenses. A basic budget includes a row for each income and expense
account you want to budget for. As time goes by, the Budget vs. Actuals
report compares actual income and expense activity with the “expected,” or
budgeted, income and expense amounts.

Important information about budgets:

     Budgets are available in QBO Plus only
     Budgets can be created from scratch or from prior year data
     Budgets can contain annual, quarterly, or monthly data
     A budget can be subdivided for each class, location, or customer
     Balance Sheet accounts can’t be budgeted in QBO
     Only income and expense accounts can be included in a budget

To create a budget:

1.     Choose Company > Budgets.
2.     The Creating a Budget interview begins. Note that this page gives
you information about checking some settings.
3.     Click Next.
4.     Choose between using actual amounts from a fiscal year, starting
from scratch, or copying an existing budget.
5.     Click Next.
6.     Choose between subdividing by customers or not subdividing.
7.     Click Next.
8.      Choose the fiscal year to track for the budget and enter a budget
9.      Click Finish.

The new budget will now open. To make better sense of the data in the
budget uncheck the Show Blank Rows checkbox. The budget shows only
those accounts that have data in them.

     Note: Creating a budget from scratch means you must enter all the
     data yourself for each month, quarter or year. You can use the Copy
     Across button to repeat the same amount across all months or

To delete an unneeded account:

1.   Highlight the account.
2.   Click the Clear button to clear all data.
3.   Click the Save & Next button.

Running Budget Reports

When you have all the information entered in your budget, you can run a
report. Here’s how:

1.   Click the Reports tab.

2.   Click on the Budgets vs. Actuals report from the Budgets section.
3.    Notice that you can choose which budget appears on this report.
Click Run Report.

For more information about budgets including Budget FAQs, see our
KnowledgeBase article KB 2949, Budgets.

                                                    Back to Table of Contents

Shared By: