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.
Less: Cost of Goods Sold
Net Ordinary Income
Add: Other Income
Less: Other Expenses
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.
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.
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 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.
Software: Intuit QuickBooks Desktop accounting software
Credit Memo (aka Credit Note or Adjustment Note) is an accounting document given by the seller to the buyer for goods or services returned. A refund of the credit amount can be given or offset against the future purchase.
Use the “Create Credit Memo/Refund” feature in QuickBooks to record the return of goods/services from a customer. QuickBooks gives the user an option to retain as an available credit to offset against the future purchase, give a refund immediately, or apply to an invoice when the credit memo saved. Among the three options, “Retain as an available credit” is most commonly used.
“Retain as an available credit” is use to contra the credit memo against the future purchases. Let’s say you have issued a credit memo and some invoices for a customer. When making payment, the customer can opt to apply the credit memo to the outstanding sales invoices. In the QuickBooks’ Receive Payment transaction, click the “Discount & Credit” button after you have highlighted the sales invoice and apply the credit memo to an invoice accordingly.
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