Project 1: Lena Becker, Consultant 1

Project

1 / Lena Becker, Consultant

You can complete this project using either an installed version of QuickBooks or the 15-use free trial version of QuickBooks Pro 2004. You can use QuickBooks’s free trial version 15 times.

To obtain a copy of the free trial version by going online, follow the steps below. Or, call 888-729-1996 to order the trial version of QuickBooks Pro 2004.

  1. Go online to link to Trials. (As of this writing, the “Trials” link was in the Related Linkssection.)
  2. In the For Accountants section, click on the CD-ROM version.

3.Click . The View Your Order screen appears. Click .

4.Complete the Address Information screen. Click to process your order. Your Trial Version CD should arrive within 10-15 business days.

You should be able to complete Project 1 in about six hours. You do not need to order the trial version of QuickBooks if you already have an installed version of QuickBooks on your computer. Remember, after installing the trial version, you have 14 more times to start QuickBooks and use it.

Comment
QuickBooks Pro 2004 was used to write the instructions that follow. You can use other versions of QuickBooks to complete Project 1. If you use a different version of QuickBooks, you may need to make some minor adjustments to the steps.

In Project 1, you will complete the computer accounting cycle for Lena Becker, Consultant. Ms. Becker started her consulting business on December 1, 2004 in Mesa, AZ. Ms. Becker employs one consulting technician and one administrative assistant. Ms. Becker’s employees are independent contractors.

In this project you will complete the accounting cycle for the month of December 2004. Lena Becker's balance sheet, checkbook register, and bank statement are provided as source documents.

At the end of this project, a checklist is shown listing the printed reports you should have. The step-by-step instructions also remind you to print reports at certain intervals. Your instructor may require these printouts for grading purposes. Remember to make backups at periodic intervals.

Before we start using QuickBooks, let’s check default settings in Windows. The Read Me box below explains what to do. Follow steps a. through c. below.


Read Me
In the project that follows, extensions are shown for filenames. For example, when you set up a company up in QuickBooks, the filename ends in the extension .QBW. Depending on how your Windows defaults are set up, your screen may or may not show these extensions. In order to see file extensions, do the following (these steps are consistent with Windows XP).
  1. Go to Windows Explorer. (Hint:Click Start; All Programs; Accessories; Windows Explorer.)
  2. From the Windows Explorer menu bar, select Tools; Folder Options, View tab. If necessary, scroll down the screen. Uncheck Hide extensions for known file types. .
  3. Click . Close Windows Explorer.

Follow these steps to complete Project 1.

Step 1:Start QuickBooks Pro 2004.

Step 2:At the Welcome to QuickBooks Pro 2004 (or at the No Company Open screen), click . The instructions that follow were written with QB Pro 2004. Other versions of QB may also be used. For example, if you are using the trial version of QB, click “Create Your Own Company File. Then, click “Create.”)

(Hint: You may also select File; New Company from QuickBooks’s menu bar.)

Step 3:The EasyStep Interview screen appears. Click on the Company Info tab. Compare your screen to the one shown.

Step 4:Read the information on the General: Company Information screen; click .

Step 5:Complete the following fields:

Company Name:Lena Becker, Consultant(use your first and last name so that reports will include your name). Press the <Tab> key.

Legal Name:Lena Becker, Consultant (automatically completed)

Step 6:Click . Complete the following fields:

Address:200Broadway

City, State, ZipMesa, AZ85032

Country:USA

Phone #:480-555-9132

Fax #:480-555-9133

E-mail:

Web Site:

Step 7:Click . Leave the Other company information field blank. Complete the following fields:

Enter the first month of your income tax year:January

Enter the first month of your fiscal year:December

Step 8:Click . In the What income tax form does your company use? field, select Form 1040 (Sole Proprietor).

Step 9:Click . In the Industry list, select Consulting.

Step 10:Click . The Setup Tips for your business screen appears. Read the information on this screen, click .

Step 11:Read the We’re ready to create your company file now screen. Click .

Step 12:The Filename for New Company screen appears. This is an important screen. It saves your company in the QuickBooks Pro program directory. Observe that when a new company is set up in QuickBooks, the extension .QBW is automatically added to the filename.

Step 13:If you used your own first and last name, your File name will differ. Click . After a few moments, the title bar for your company appears: Lena Becker, Consultant – QuickBooks Pro 2004. The EasyStep Interview screen is also shown. Compare your screen to the one shown below. Read the information on this screen.

Step 14:Accept the default for Your income and expense accounts (Yes) by clicking .

Step 15:Accept the default for Accessing your company (0), by clicking .

Step 16:Accept the default for Accessing your company: users and passwords (Admin) by clicking . When the user password screen appears, click No. Notice that a checkmark is placed next to the Company Info tab. This means you have completed the company information.

Step 17:Click on the Preferences tab. Read the information on the What are preferences? screen.

Step 18:Click . The Inventory window appears.

Step 19:Accept the default for Inventory (No) by clicking .

Step 20:Accept the default for Sales tax (No) by clicking .

Step 21:Accept the default Your invoice format (Service) by clicking .

Step 22:The Using QuickBooks for Payroll screen appears. In answer to the question “Do you want to use QuickBooks to manage your payroll activities?,” select No.

Step 23:After selecting No, click .

Step 24:Accept the default for estimates (Yes), by clicking .

Step 25:Accept the default for Progress Invoicing (No), by clicking .

Step 26:Accept the default for Time tracking (Yes), by clicking .

Step 27:Accept the default for tracking segments (No), by clicking .

Step 28:The Two ways to handle bills and payments screen appears. Select Enter the checks directly.

Step 29:After selecting Enter the checks directly, click .

Step 30:Accept the default Reminders list (When I ask for it) by clicking .

Step 31:Accept the default for Accrual-based reports by clicking . Notice that Preferences is now checked. This means you have completed the Preferences.

Step 32:Click on the Start Date tab. Click on the I want to start entering detailed transactions as of field. Type 12/01/2004,or click the Calendar icon and select 12/01/2004.

Step 33:Click . Notice that the Start Date tab has a check mark in it and that 12/01/2004 is shown as the start date for entering transactions.

Step 34:When you are through, click (If you have the choice to “Begin Using QuickBooks,” click on it.)

CHART OF ACCOUNTS

In the section that follows you will add and change accounts. Follow these steps to display account numbers.

  1. On the left side of your screen there is a Navigators list. Click on Company. The Company Navigator appears. Click . The chart of accounts list appears. Let’s add account numbers.
  2. From the QuickBooks menu bar, select Edit; Preferences. On the left side of the Preferences screen, select Accounting. Click on the Company Preferences tab.
  3. In the Account Numbers area, click on the box next to Use account numbers.
  1. After making sure that Use account numbers is checked, click . The chart of accounts screen shows account numbers. A partial Chart of Accounts screen is shown below.

Add accounts. Follow these steps to add accounts.

  1. At the bottom of the Chart of Accounts screen (left side), click on the down arrow on the button; then select New.
  1. The Type filed shows Bank. This is correct for the Mesa Bank account. Press <Tab> to move between fields, or click on the field with your mouse. Complete the following fields:

Number:1020

Name:Mesa Bank

Description:Mesa Bank

Opening Balance:29,500.00

as of:12/1/2004

  1. Click . Add the accounts shown on the next page.

Type / Number / Name/Description / Balance / As of
Other Current Asset / 1100 / Accounts Receivable / $11,500.00 / 12/1/04
Other Current Asset / 1400 / Prepaid Rent / $4,000.00 / 12/1/04
Other Current Asset / 1450 / Supplies / $3,300.00 / 12/1/04
Fixed Asset / 1500 / Computer Equipment / $12,600.00 / 12/1/04
Fixed Asset / 1505 / Accum. Depr.-Computer Equipment / 0.00 / 12/1/04
Fixed Asset / 1510 / Furniture & Fixtures / $15,000.00 / 12/1/04
Fixed Asset / 1515 / Accum. Depr.-Furniture & Fixtures / 0.00 / 12/1/04
Fixed Asset / 1520 / Automobile / $21,500.00 / 12/1/04
Fixed Assets / 1525 / Accum. Depr.-Automobile / 0.00 / 12/1/04
Other Current Liability / 2000 / Accounts Payable / 11,200.00 / 12/1/04
Other Current Liability / 2300 / Notes Payable / 8,400.00 / 12/1/04
Equity / 3050 / Lena Becker, Withdrawals (use your name) / 0.00 / 12/1/04

Add these additional expense accounts:

Type / Number / Name
Expense / 6152 / Dep Exp-Furn & Fix
Expense / 6154 / Dep Exp-Automobile
Expense / 6325 / Internet Service Provider
Expense / 6400 / Utilities Expense
Expense / 6600 / Wages Exp-Adm Asst
Expense / 6630 / Wages Exp-Cons Tech

Change account names:

  1. Click on 3000Opening Bal Equity to highlight it.
  2. Select Account; Edit.
  3. In the Name field, highlight Opening Bal Equity. Type Lena Becker, Capital (oruse your name, Capital) in the Name field.
  4. Type Lena Becker, Capital (or your name, Capital) in the Description field.
  5. Click . Change the accounts shown on the next page.

Number / Name/Description / Change to
4100 / Service Revenue / Consulting Fees
6150 / Depreciation Expense / Dep Exp-Computer Equipment
6180 / Insurance / Insurance Expense
6560 / Payroll Expense / Payroll Tax Expense

Delete Accounts: To delete an account, select the account (for example, 1150 Owner’s Draw), then click Account; Delete, OK. Delete account numbers 1140 and 1130. (Hint: Delete subaccounts first.)

DECEMBER 1, 2004 BALANCE SHEET

Follow these steps to make sure that you recorded the appropriate beginning balances.

  1. In the Navigators list, select Reports. The Report Finder screen appears.
  2. Make sure Company & Financial is selected in the Select a type of report field. In the Select a report list, select Balance Sheet Standard.
  3. Type 12/1/04 in the From field.
  4. Type 12/1/04 in the To field.
  5. Click . Compare your balance sheet with the one shown on the next page.

The balance sheet shown on the next page represents the starting balances for Lena Becker, Consultant as of December 1, 2004.

BACKING UP DATA

Follow these steps to back up Ms. Becker’s beginning data. The suggested file name is Lena Becker Begin.

  1. From QuickBooks’s menu bar, select File, Back Up.
  2. The Back Up Company File screen appears.
  3. Type Lena Becker BEGIN.QBB in the Filename field. Compare your screen to the one shown.The filename field should show Lena Becker BEGIN.QBB (if you used your name it will show instead of Lena Becker.)Observe QuickBooks automatically adds the extension .QBB to back up filenames.
  1. Click . When the Backup screen pops up, read it, then click.
  2. The Your data has been backed up successfully screen appears, click .

BANKING

The checkbook register on pages 16−18provides you with the information necessary for December's transactions. Detailed steps are shown for the first two transactions; then you should record the remaining transactions.

Before you write a check or record a deposit, let’s set default accounts for recording transactions from the check register.

  1. From the menu bar, click Edit; Preferences. Make sure the My Preferences tab is selected.
  2. On the left side of the screen, select Checking.
  3. Click on the box next to Open the Write checks; in the form with field, select account 1020 Mesa Bank.
  4. Click on the box next to Open the Make Deposits. In the form with field, select 1020 Mesa Bank as the account.
  1. Click .

Write Checks[1]

A partial check register is shown below.

Check
Number / Date / Description of Transaction / Payment/Dr.
(-) / Deposit/Cr.
(+) / Balance
Balance Brought Forward / 29,500.00
8001 / 12/1 / Bank Corp. (Notes Payable) / 2,500.00 / 27,000.00

Follow these steps to issue Check No. 8001.

  1. From the Navigators list, select Banking; . The Write Checks-Mesa Bank screen appears. Observe that the Bank account field shows 1020 Mesa Bank. The Ending Balance shows 29,500.00 which agrees with the balance brought forward on the partial check register above.
  2. Uncheck the To be printed box. Then, type 8001 in the No. field. Press the <Tab> key.
  3. If necessary, type 12/1/04 in the Date field. Press <Tab>.
  4. Type Bank Corp.in the Pay to the Order of field. Press <Tab>. When Name Not Found screen pops up, click . When the Select Name Type screen appears, select Other; then click.[2]
  5. Observe that the Expenses tab is selected.
  6. Click on the Account field. A down-arrow appears. Select Account No. 2300 Notes Payable.
  7. Click on the Amount field. Type 2500 in the Amount field. Press <Tab>. Observe that the check is completed.
  8. ClickSave & Close.

Deposits

A partial check register is shown below.

Check
Number / Date / Description of Transaction / Payment/Dr.
(-) / Deposit/Cr.
(+) / Balance
8001 / 12/1 / Bank Corp. (Notes Payable) / 27,000.00
12/1 / Deposit (consulting fees) / 3,950.00 / 30,950.00

Follow these steps to record the 12/1/04 deposit for $3,950.

  1. From the Navigators list, select Banking; . Observe that the Deposit To field shows 1020 Mesa Bank. If necessary, type 12/1/04 in the Date field.
  2. Click on the From Account field. Select Account No. 4100 Consulting Fees.
  3. Click on the Amount field. Type 3950 in the amount field. Press <Tab>.
  4. Click Save & Close.
  5. Starting with Check No. 8002 below, record the checks and deposits from the check register shown on this page and page 18. Remember to type the correct date. When you are finished recording the check, click Save & New to go to the next Write Checks screen. (Hint:Since Check No. 8002 is for computer equipment, a Tracking Fixed Assets screen will pop up. Click on the box next to “Do no display this message in the future,” then click .)

Check
Number / Date / Description of Transaction / Payment/Dr.
(-) / Deposit/Cr.
(+) / Balance
8002 / 12/1 / Office Place - laser printer (computer equipment) / 620.32 / 30,329.68
8003 / 12/6 / Jessica Lowe; Wages-- Administrative Asst. / 1,250.00 / 29,079.68
8004 / 12/6 / Matt Wood; Wages--Consulting Technician / 690.00 / 28,389.68
8005 / 12/11 / Mesa Office Supplies
(Account No. 1450, Supplies) / 115.85 / 28,273.83
8006 / 12/13 / Jessica Lowe; Wages-- Administrative Asst. / 1,250.00 / 27,023.83
8007 / 12/13 / Matt Wood; Wages--Consulting Technician / 690.00 / 26,333.83
12/15 / Deposit (consulting fees) / 4,000.00 / 30,333.83
8008 / 12/17 / Southwestern Telephone Service (telephone bill) / 74.99 / 30,258.84
8009 / 12/19 / U.S. Post Office (stamps) / 37.00 / 30,221.84
8010 / 12/19 / Consultant’s Journal (dues and subscriptions) / 505.00 / 29,716.84
8011 / 12/20 / Jessica Lowe; Wages-- Administrative Asst. / 1,250.00 / 28,466.84
8012 / 12/20 / Matt Wood; Wages--Consulting Technician / 620.00 / 27,846.84
12/23 / Deposit (consulting fees) / 3,950.00 / 31,796.84
8013 / 12/24 / Maricopa Electric Co. (utilities bill) / 145.20 / 31,651.64
12/26 / Deposit (consulting fees) / 3,500.00 / 35,151.64
8014 / 12/27 / Jessica Lowe; Wages-- Administrative Asst. / 1,250.00 / 33,901.64
8015 / 12/27 / Matt Wood; Wages--Consulting Technician / 750.00 / 33,151.64
12/29 / Deposit (payment received from client on account –accounts receivable) / 1,500.00 / 34,651.64
8016 / 12/29 / Internet Service Provider / 68.66 / 34,582.98

RECONCILE THE BANK STATEMENT

Lena Becker' bank statement is shown on the next page. (Hint:Remember to record the bank service charge.)

  1. From the Banking navigator, select Reconcile.
  2. Observe that the Account field shows 1020 Mesa Bank. Type or select 12/31/2004 in the Statement Date field.
  3. Type 34418.64 in the Ending Balance field.
  4. Type 25 in the Service Charge field for 12/31/2004. Select Account No. 6115 Bank Service Charge.
  5. Click Continue. The Reconcile – Mesa Bank screen appears. The bank statement on the next page shows the checks and deposits that have cleared. Click on the Checks or Deposits column to place a check mark next to the appropriate checks and deposits that have cleared.

Statement of AccountLena Becker, Consultant
Mesa Bank200 Broadway
December 1 to December 31, 2004 Account #4753-05-234Mesa, AZ85032
REGULAR CHECKING
Previous Balance / 11/30/04 / 29,500.00
4 Deposits(+) / 15,400.00
12 Checks (-) / 10,456.36
Service Charges (-) / 12/31/04 / 25.00
Ending Balance / 12/31/04 / 34,418.64
DEPOSITS
12/3/04 / 3,950.00 / 12/26/04 / 3,950.00
12/17/04 / 4,000.00 / 12/30/04 / 3,500.00
CHECKS (Asterisk * indicates break in check number sequence)
12/10/04 / 8001 / 2,500.00
12/11/04 / 8002 / 620.32
12/15/04 / 8003 / 1,250.00
12/15/04 / 8004 / 690.00
12/15/04 / 8005 / 115.85
12/15/04 / 8006 / 1,250.00
12/15/04 / 8007 / 690.00
12/21/04 / 8008 / 74.99
12/21/04 / 8011* / 1,250.00
12/19/04 / 8012 / 620.00
12/29/04 / 8013 / 145.20
12/30/04 / 8014 / 1,250.00
  1. When you complete reconciliation, the “Difference” field on the Reconcile screen shows 0.00.This is important. Check this field before you continue.
  2. Click when you are through. To see your report, click , then . Your ending balance shows $34,557.98.
  3. Display the check register and compare it to the entries that you have made. (Hint: Select Banking; . The 1020 – Mesa Bank check register displays. Compare your screen to the one shown on the next page.

9.Close the 1020 – Mesa Bank screen by clicking on its title bar. Your screen returns to the Banking Navigator.

Comment
Observe that the check register shown above lists all the deposits and checks entered using the “Write Checks – Mesa Bank” and “Make Deposits” screens. QuickBooks posted these entries to the check register. As mentioned earlier, you can also use the Banking Navigator’s Check Register selection to record checks and deposits.

PRINT THE TRIAL BALANCE

Follow these steps toprint the trial balance.

  1. From the menu bar, select Reports; Accountants & Taxes, Trial Balance.
  2. In the As of field, type or select 12/31/04.
  3. Click ; if the pop-up screen appears, click OK. Then, make the selections to print the unadjusted trial balance.

USING THE GENERAL JOURNAL FOR ADJUSTING ENTRIES