Tag Archives: QuickBooks Singapore

Shall I be using class or location in QBO (QuickBooks Online)?

Class is a powerful feature available in QuickBooks Online (QBO). Although originated from QuickBooks Desktop accounting system, there is a slight difference in reporting.

How to use class in QuickBooks?

You may use the class as a departmental account. Set up marketing, R&D, production, etc. as a class; then, tag it to each income or expense account when creating an invoice or bill. The profit and loss report shows the income and expense breakdown by class once the transaction saved. QuickBooks class feature is a unique way of analysing the business account and less tedious in setting up compared to the sub-ledger method used by other accounting systems.

There are many other ways of using the class feature in QuickBooks:

  • A Law firm uses the class to allocate income and expense of each lawyer.
  • Use it to track the running cost of the sales team or vehicle.
  • Property management business uses the class feature to analyse the profitability of each property.
  • Or you may use the class to track local and overseas sales.

The class feature is flexible and is up to your imagination to apply it into your business account.

QBO class or location?
Location tag to header, whereas the class tag to detail.

Each transaction consists of a header and a detail section. For payment transaction, the payee and bank are part of the header section, whereas the accounts used at the bottom of the transaction are the detail section. Each of the expense account at the detail tagged to a class, and pick up by the Profit & Loss by Class report once transaction saved. But if you print the Balance Sheet by Class from QuickBooks Online, the amount paid from the bank account will group under the unassigned classification since there is no class field available at the header. 

QuickBooks Profit and Loss by Class report
QuickBooks Profit & Loss by Class

You may consider using a location feature, for branches or retail outlets, in QuickBooks Online instead of a class. The data entered will show in both Profit & Loss and Balance Sheet.

QuickBooks Profit and Loss by Location report
QuickBooks Profit and Loss by Location

The location field is at the transaction header section, which breaks down the accounts used in both the header and detail section. Location is a better choice for businesses that have multiple branches, but you cannot have multiple locations in one transaction (at this moment). You may have to get the supplier to change the way they bill or change the internal workflow if they bill you more than one branch in a single invoice.

QBO Balance Sheet by Location
QuickBooks Balance Sheet by Location

Technology is evolving, QuickBooks introduces new feature from time to time. Who knows? Maybe someday there might be a better way of using or reporting by class and location 🙂

Discuss with your QuickBooks consultant, sign up a demo or trial to test drive before you switch over from QuickBooks Desktop to QuickBooks Online.

Change of account type in QuickBooks Desktop accounting software

The account type of each account has to be correctly specified when you create it. QuickBooks uses the account type to form financial report; below is a sample structure of a Profit & Loss report.

Sales
Less: Cost of Goods Sold
————————–
Gross Profit

Less: Expenses
————————–
Net Ordinary Income

Add: Other Income
Less: Other Expenses
————————–
Net Income
————————–

The presentation of the report gets affected when a wrong account type used. For example, Transport allowance will group with Cost of Sales if you created it as a Cost of Goods Sold account type instead of Expenses; hence, affecting the Gross Profit. QuickBooks does allow the user to edit the wrongly created account type such as from Cost of Goods Sold to an Expenses account type but not from a Bank type to an Expense. You may have to pass journals to rectify the transactions when a mistake made on a non-editable account.

Change QuickBooks account type

You get a “You cannot change the type of a subaccount. It must be the same type as its parent account” warning message if you try to amend an account type of a subaccount. For example, Transport Allowance has accidentally created under Purchases (which is a cost of goods sold account), to change the type to an Expenses you need to remove Transport Allowance as a subaccount of Purchases first, then change the account type. You should not change the account type if it affects the previous year or prior month’s financial report which you have already filed; instead, you may consider reclassifying the account with a journal.

Traceability and accountability should be the priority before consider making any amendment to the account.

 

Year-end home currency revaluation

Software: Intuit QuickBooks accounting software

Home Currency Revaluation is a task which you have to do during financial year-end closing. It revalues the foreign currency bank balances and any outstanding foreign currency’s receivable and payable.

You should not record any more foreign currency transactions in the year-end closing period once revaluation has done.

The home currency revaluation process includes:
– Set the year-end closing exchange rate
– Print a Unrealised Gains and Losses report
– Process home currency adjustment
– Reverse the home currency adjustment journal on the following period.

The Unrealised Gains and Losses report is in the Company & Financial, a sub-menu of the Reports menu. This report shows the gains and losses of each foreign currency account and will use as a supporting document for the adjustment.

You can find the Home Currency Adjustment feature under the Manage Currency, a sub-menu of the Company menu. Set the adjustment date and change the exchange rate if required, then select the accounts/names (you can click the Select All button at the bottom to select all foreign currency accounts) and hit the Save & Close button to proceed with the home currency adjustment. An exchange journal will create automatically to debit/credit the foreign currency account and credit/debit the exchange gains/losses account.

QuickBooks Home Currency Adjustment

QuickBooks captures the realised exchange gains or losses when the payment or receipt of the outstanding bill or invoice has recorded; therefore, the unrealised exchange journal which created during the home currency revaluation has to reverse on the first day of the following period. QuickBooks Premier and Enterprise Desktop version have a Reverse feature which located at the top of the journal, just click the Reverse button of the exchange journal to reverse it.

Discuss with your accountant to find out more about home currency revaluation if you are not sure about it.