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What Are the Effects of Running the Clean Up Utility?

Chief Mechanic · April 9, 2010 ·

When the Clean Up utility is run, the effects on a company file (.qbw) can be significant. The goals of the Clean Up utility are to shrink the company file size and to make using that file more efficient. These gains come with some trade-offs.

Important considerations when using the Clean Up utility are:

Transaction details from the cleaned up period will no longer exist in the company file (.qbw), so detail reports will not be available for the cleaned up period
Financial statements and summary reports for the cleaned up period will be accurate to a given month but not a shorter interval of time, because the clean up process summarizes transactions with a monthly journal entry
Inventory transactions up until the first inventory transaction that can’t be removed will be summarized in an inventory adjustment using the average cost of the items on that date; clean up of inventory items stops after the first inventory item that can’t be cleaned up
Cash basis reports for a cleaned up period will not be accurate because detail transactions are required to determine a transaction’s paid status
Sales tax reporting for the cleaned up period will be accurate because QuickBooks does not delete information required to produce reports on sales tax liabilities
Regardless of the end date specified for the clean up, QuickBooks retains payroll transactions for both the current and prior years based on the current setting of your computer’s clock
Only Estimates with a job status of Closed are deleted; Estimates with any other job status are preserved
Lists elements for 6 lists may be optionally removed if they’re not used in a transaction

The principal trade-off is that detail history for the period cleaned up will no longer be in your primary company file (.qbw). You’ll have to open an archive or a copy to review details from the cleaned up period or run reports that aren’t accurate for a cleaned up period, such as a cash basis report.

The Clean Up utility optionally can remove lists elements from 6 lists that are no longer used in a transaction. These lists are:

accounts
customers
vendors
other names
invoice items
To Do notes

Each of the 6 lists can be selected for clean up individually, as shown in the screenshot below.

QuickBooks 2010 Clean Up Select Unused List Items

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What Is Class Tracking and How Do I Enable It?

Chief Mechanic · April 4, 2010 ·

A class in QuickBooks is a single-purpose tool to classify income and expense transactions. Class tracking is not used for balance sheet accounts. It’s also not a way to group customers, jobs, or vendors. To do that, use a Type, which can be managed on the Lists->Customer & Vendor Profile Lists menu selection.

To use class tracking, it first must be enabled on the Accounting sub-menu of the Company Preferences tab on the Edit->Preferences menu selection; just check the box for Use class tracking. To have QuickBooks request the appropriate class for a transaction, check the box for Prompt to assign classes.

Keep in mind that class tracking is a single purpose tool – it can’t be used to track unrelated aspects of your business. Proper use of classes depends largely on your business reporting needs. Classes can be used to track:

locations
product lines or service types
partners in a professional services firm
funds for a public sector or non-profit enterprise

Since classes can be applied to both income and expense transactions, class tracking enables producing a Profit & Loss statement for each class.

QuickBooks supports sub-classes, or nested classes, up to 5 levels deep.

If you use class tracking, you’ll want to:

carefully consider your reporting requirements before you use class tracking
assign classes to both income and expenses
create a “miscellaneous” or “other” class to classify transactions that don’t fit another, more specific class
consistently assign a class to all transactions so that your class-level reports are accurate
create an “unclassified” class for transactions not yet classified – QuickBooks reporting won’t allow you to filter for transactions that have no class assigned

To manage your classes, click on the Lists->Class List menu selection.

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How Do I Record a Gain or Loss On Funds I Transferred To a Foreign Bank Account?

Chief Mechanic · April 4, 2010 ·

Recording a gain or loss on funds transferred to a foreign bank account is accomplished by the Company->Manage Currency->Home Currency Adjustment menu selection.

First, enter the Date for the currency adjustment and choose the Currency whose value you want to update. Click the Calculate Adjustment button to locate those balances potentially impacted by the changed exchange rate. Enter the updated exchange rate.

QuickBooks Premier 2009 Multicurrency Home Currency Adjustment

In this example, we started with an exchange rate of 1 British pound (GBP) = 1.705 US Dollars (USD). We’ll record a new exchange rate of 1 GBP = 1.905 USD. Click the Calculate Adjustment button a second time to calculate the exchange-related gain or loss based on the updated exchange rate. Select the balances to adjust based on the new exchange rate by placing a check mark to the left of each balance. If you need to better describe the adjustment, enter a Memo. Click the Save & Close or Save & New button to record the adjustment.

QuickBooks Premier 2009 Multicurrency Home Currency Adjustment Updated

QuickBooks will post a General Journal entry to the Exchange Gain or Loss account in the amount of the adjustment.

QuickBooks Premier 2009 Multicurrency Home Currency Adjustment Report

See our related article for more information on transferring funds to a foreign bank account.

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How Can I Transfer Funds Between 2 Bank Accounts Maintained In Different Currencies?

Chief Mechanic · April 4, 2010 ·

QuickBooks 2009 and Enterprise Solutions 9.0 (and later) support transactions in multiple currencies. Each account, customer, and vendor has an associated currency. Multi-currency support in QB does not extend to employees.

Therefore, when you set up a bank account, you’ll specify the Currency used for that account, as shown below.

QuickBooks Premier 2009 Multicurrency British Bank Aaccount

In a company file (.qbw) that has already been set up to use multiple currencies, set up each bank account with the single currency in which the account is maintained.

QuickBooks Premier 2009 Multicurrency Chart of Accounts

To transfer funds from 1 bank account in 1 currency to another bank account in another currency, there are 3 basic methods:

Create a vendor for the foreign bank and write a check to that vendor where the account is the foreign bank itself
Use the Transfer Funds function
Use a General Journal Entry

See our related article for more information on recording gains and losses on funds transferred to a foreign bank account.

Method 1 – Create a Vendor for the Foreign Bank and Write a Check

Create a Vendor for the bank account that will receive funds, and be sure to include the currency in which the account is maintained.

QuickBooks Premier 2009 Multicurrency Edit Vendor

Next, simply write a check from the account denominated in 1 currency (the Bank Account in USD below) to the Vendor whose records are maintained in the currency of the account receiving the funds (British Bank below). On the Expenses tab, set the Account to the bank account receiving the funds.

QuickBooks Premier 2009 Multicurrency Write Check Bank Transfer

Method 2 – Use the Transfer Funds Function

First, make sure you have already created both bank accounts – the bank account that is the source of funds and the bank account that will be the recipient of funds.

Open your General Ledger Chart of Accounts by clicking on the menu selection Lists->Chart of Accounts or using the keyboard shortcut Ctrl + A. Click once on the bank account that will be the source of funds. Be sure to click just once to select the source account, because double clicking will open a register for that account. If you don’t select the correct account, you’ll have a chance to review and correct the account selection before making the transfer.

With the source account selected, right click on the source account to invoke the context menu. Chose Transfer Funds from the context menu.

QuickBooks Premier 2009 Multicurrency Bank Transfer

The Transfer Funds Between Accounts window will allow you to transfer funds between 2 bank accounts. Verify that the source bank account – the one providing the funds – is selected in the Transfer Funds From pulldown and that the recipient bank account – the one receiving the funds – is selected in the Transfer Funds To pulldown. Until you select a recipient account in a currency other than your home currency, the Transfer Currency will be set to your home currency, and you won’t be able to change it. Once you select a recipient account in a foreign currency, you can record an amount to transfer either in that foreign currency or your home currency – QuickBooks will automatically do the conversion for you. Unfortunately, you can’t transfer funds between 2 accounts, both of which are maintained in foreign currencies.

QuickBooks Premier 2009 Multicurrency Transfer Funds

Enter a Memo for the transfer and click either Save & Close or Save & New. According to Intuit as discussed in this Intuit knowledge base article, because of a product limitation in QuickBooks the Memo for the recipient account is not set to the value entered on the Transfer Funds Between Accounts window when viewed on reports such as the Custom Transaction Detail Report. However, our own tests on QuickBooks 2009 don’t confirm this behavior. QuickBooks correctly sets the Memo field on both the source and recipient (target) accounts, and the Memo correctly displays on the Custom Transaction Detail Report.

Once the transfer is recorded, it will appear in the registers for both bank accounts as a TRANSFR transaction type. Here’s the register from the foreign bank account after recording the transaction:

QuickBooks Premier 2009 Multicurrency Foreign Bank Register

It’s always important to remember that QuickBooks will use exchange rates on file in QuickBooks before you record the transfer. If there’s no exchange rate recorded in QuickBooks at all for the 2 currencies involved, the exchange rate will be set to 1:1 unless you manually enter a new Exchange Rate in the Transfer Funds Between Accounts window before recording the transfer. If there is an exchange rate for the 2 currencies involved as of an earlier date, QuickBooks will use that exchange rate unless you manually enter a new one.

The Transfer Funds function is not unique to company files with multi-currency enabled or to transfers exclusively between bank accounts. With or without multi-currency enabled, you can use the Transfer Funds function to transfer funds between any 2 accounts.

One small advantage this second method offers is that it doesn’t require adding a Vendor to transfer funds between accounts, although in many cases you may have other reasons to create a vendor for a bank account, such as recording bank charges.

For those using or planning to use third-party addons for QuickBooks, the Transfer Funds function has an important limitation. Many third-party addons use the Intuit Software Developers Kit (SDK) to access QuickBooks data, and versions of the SDK up to 8.0 do not provide access to transfer transactions. For example, a custom report built from QuickBooks data gathered using the QODBC driver would not have access to transfer transactions, since the QODBC driver itself can’t access those transactions in QuickBooks. If transactions were recorded with this method, a custom report that relied on this information would be incomplete and inaccurate. Of course, if you don’t plan to use any addons or extract data from QuickBooks, this limitation is irrelevant, because the QuickBooks program itself can display and report on transfers.

Method 3 – Use a General Journal Entry

Another direct method is to use a general journal entry to accomplish the transfer. The account receiving funds is debited, and the account providing funds is credited.

QuickBooks Enterprise Solutions 10 General Journal Bank Transfer

When using this method, it’s important to understand an important limitation: the Currency of the general journal entry must be the Currency of the foreign bank account. Likewise, since most exchange rates in QuickBooks are expressed as a conversion from a home currency to a foreign currency, the exchange rate for a general journal entry is the reciprocal (i.e., 1 divided by the normal exchange rate) of the normal exchange rate.

Through QuickBooks 2010 release 5, general journal entries recorded in the home currency would incorrectly record home currency units in the foreign bank account – instead of converted home currency units.

Because of these limitations, this method is only recommended for advanced users exercising care when recording the transfer.

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What Is a Sales Receipt and When Should I Use One?

Chief Mechanic · April 3, 2010 ·

In QuickBooks a Sales Receipt is a form to simultaneously record credits increases) to the accounts associated with the Items entered on the Sales Receipt and a single, offsetting debit to either the Undeposited Funds account (if that preference is selected) or another user-selected account, which must be either a Bank, Accounts Receivable, or Other Current Asset account. It’s typically used when a customer pays in full at they time they receive a firm’s goods or services. Because Items can be associated with liability accounts (such as a current liability account for customer deposits), sales receipts can also be used to record funds received from customers that increase a firm’s liabilities.

Recording a Sales Receipt is accessed on the Customers->Enter Sales Receipts menu selection. It’s similar to the Create Invoices function in that it can record a sale transaction, but unlike an unpaid invoice, which is sent to an Accounts Receivable account and increases a customer’s outstanding balance, the Sales Receipt is paid in full and doesn’t change the customer’s balance.

When a Sales Receipt is saved, a credit to the account associated with each item is recorded for the amount of that line item. In the example below, the account associated with the Item “Upfront Deposit” will be credited $1000. A single, offsetting debit is recorded in an asset account, depending on your setting for the Use Undeposited Funds as a default deposit to account preference. For more information, see our article on setting the Undeposited Funds preference.

If that preference is checked, the Enter Sales Receipt form will appear similar to the one below. You won’t be asked in which account the single debit should be recorded, because it will automatically be recorded in the Undeposited Funds account.

QuickBooks Premier 2009 Enter Sales Receipt Use Undeposited Funds

On the other hand, if that preference is turned off, you can select the asset account to which the debit is recorded, provided that the asset account is either a Bank, Accounts Receivable, or Other Current Asset account.

QuickBooks Premier 2009 Enter Sales Receipt Do Not Use Undeposited Funds

Here’s a saved Sales Receipt in the transaction list for a customer in the Customer Center:

QuickBooks Premier 2009 Customer Center Sales Receipt

The Transaction Journal can report the debits and credits made by QuickBooks for the Sales Receipt recorded. The Transaction Journal can be displayed by clicking the Journal button on the Enter Sales Receipts form or clicking Ctrl + Y while that form is open.

QuickBooks Premier 2009 Sales Receipt Transaction Journal

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