Chapter 9 Accounting
Big Business simplifies your accounting by letting you choose Categories as defaults to be used automatically for your Customers, Items, Vendors, Banking, or Stores.
For example, you can have Sales Income for products you sell and Service Income for your services. Or, have Retail Income or Wholesale Income, determined by customer.
You must have defaults, to start, and you can simply use these along with reporting by customer or by item, to see where you stand and keep the flexibility and you grow.
Accounting Toolbar
The Accounting Toolbar is reorganized to show Accounts and Categories, together.
Account Card and Accounts Search
General Journal and Journals Search
Category Card and Categories Search
Postings Search
Accounting Preferences
Account Card
Use the Account Card tool to enter information for new or existing accounts.
The Account Card can access all accounts, including:
- Accounts Receivable, Accounts Payable - for posting Customer or Vendor balances.
- Bank Accounts - record Bank Transactions to reconcile and Postings for accounting
- Categories - used to organize Income and Expense and other postings
- Inventory - for posting Total Costs for Inventoried Items
- Retained Earning, Current Year Earnings - calculated accounts for financial reporting
Accounts Search
Use the Accounts tool to find and manage accounts.
Most Accounts have a time sensitive Balance that you would review on a financial report such as the Balance Sheet or Profit and Loss Statement to show accurate results.
Categories
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This Chapter has recent additions to Big Business Documentation including:
• Assigning Default Categories
• Understanding Automatic Categories
• Customer Categories
• Vendor Categories
• Item Categories
• Bank Categories
Understanding Automatic Categories
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Five categories have special status because their balances are automatically calculated based on other information you enter. The five Automatic categories are:
• Receivables - the sum of open customer balances
• Payables - the sum of open vendor balances
• Inventory - the sum of items' total costs
• Retained Earnings - prior years' earnings
• Current Year’s Earnings -this years earnings
Automatic Categories cannot be posted to directly with the General Journal tool. Adjustments can only be made by changing the detail that contributes to the Automatic Category's total.
You can specify more than one Receivables, Payables, or Inventory Category. Only a category without a balance can be added as an Automatic Category. Likewise, an Automatic Category with a balance cannot be removed, nor can there be less than one.
The Retained Earnings Category applies to money retained from prior years' earnings. This category can only be selected during Setup. Its Account Type should be Equity.
The Current Year Category applies to money earned this year. This category can only be selected during Setup. Its Account Type should be Equity.
Customer Categories
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The Sales Tax Collected Category applies to sales tax amounts you collect from Customers. Postings are created for this category when you generate Invoices that have a sales tax amount. Its Account Type should be Current Liability.
The Discounts Allowed Category applies to discounts given to Customers (usually for prompt payment). Its Account Type should be Cost of Goods Sold.
The Default Income Category applies to sales made to Customers. It is automatically inserted into the Income Category when you create new Customer Cards. Different Customers can be assigned different Income Categories. Postings are created for this Category when you generate Invoices or Miscellaneous Sales. Its Account Type should be Income.
Default Other Charges applies to amounts entered in the Other Charges field of Invoices. Postings are created when you generate Invoices that have an Other Charges amount according to the definition of the Other Charge selected. Use the Show List option to define Other Charges. Account Types should be Income.
The Finance Charge Category applies to finance charges accrued by Customers. Its Account Type should be Income.
The Default Receivables Category applies to unpaid Customer balances from Invoices. It is automatically inserted into the Receivables Category when you create new Customer Cards. Different Customers can be assigned different Receivables Categories. Postings are created for this Category when you generate Invoices, Miscellaneous Sales, or Receive Money from a customer. Its Account Type should be Current Asset.
Vendor Categories
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The Sales Tax Paid Category applies to sales taxes you pay. Postings are created for this category when you generate Bills that have a sales tax amount. Its Account Type should be Expense.
The Discounts Taken Category applies to discounts taken on Bills. For example, if you take a discount for early payment, the discount will be assigned to this Category. Its Account Type should be Cost of Goods Sold.
The Finance Charge Category applies to finance charges you pay. Its Account Type should be Expense.
The Other Charges Category applies to amounts entered into the Other Charges field of Bills. Postings are created for this category when you generate Bills that have an other charges amount. Its Account Type should be Expense.
The Default Expense Category applies to Miscellaneous Bills for a Vendor. It is automatically inserted into the Income Category when you create new Vendor Cards. Different Vendors can be assigned different Expense Categories. Postings are created for this Category when you generate Miscellaneous Bills. Its Account Type should be Expense.
The Default Payables Category applies to unpaid balances you owe to Vendors. It is automatically inserted into the Payables Category when you create new Vendor Cards. Different Vendors can be assigned different Payables Categories. Postings are created for this Category when you generate Bills, Miscellaneous Bills, or Make Payments for Bills you have entered. Its Account Type should be Current Liability.
Item Categories
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The Default Expense Category applies to Item purchases for non-inventoried Items. It is automatically inserted into the Expense Category when you create new Item Cards. You can change this category for individual Items. Postings are created for this category when you generate Bills containing this item. This default will usually be Supplies Expense or a related expense category. Its Account Type should be Expense.
The Default Asset Category applies when an item is added to inventory. Default Asset is an Automatic Category. It is automatically inserted into the Asset Category when you create new Item Cards. You can change this category for individual Items. Postings are created for this Category when you generate Invoices and Bills which contain the item. Its Account Type should be Current Asset.
The Default Cost of Goods Category is applied when an inventoried item is sold. You can change this category for individual Items. Postings are created for this Category when you generate Invoices which contain the Item. Its Account Type should be Cost of Goods Sold.
The Default Item Adjustment Category applies to Inventory Adjustments. You can override the default value for individual adjustments. This default will usually be Inventory Adjustment Expense. Its Account Type should be Expense.
Bank Categories
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The Undeposited Funds Category applies to money that has been received but not yet deposited. Postings are created for this category when you Receive Money from Customers or when you generate Deposits. This Category cannot be changed after use and is grayed out. Its Account Type should be Current Asset.
The Default Other Expense Category applies to miscellaneous payments. You can override the default value for individual miscellaneous payments. This default will usually be Miscellaneous Expense. Its Account Type should be Expense.
The Default Miscellaneous Receipts Category applies to miscellaneous income. Postings are created for this category when you generate a miscellaneous receipt. This Category will usually be named Other Income. Its Account Type should be Income.
The Bank Fees Category applies to fees you pay to your bank. Postings are created for this Category when you generate a Reconciliation that has a bank fee. Its Account Type should be Expense.
The Bank Interest Category applies to the interest payments you receive. Postings are created for this Category when you generate a reconciliation that has bank interest. Its Account Type should be Income.
Using Budgets in Big Business
Big Business has built in Budgeting and Budget Reporting with the following features:
-Establish Budgets by Category by Period (Categories are all Accounts except Special Status Accounts: A/P, A/R, Bank Accounts, Inventory, Current Year Earnings, and Retained Earnings)
-Import Budgets
-Report Budgeted vs. Actual for a range of periods for a selection of Categories (3056)
Use the Category Card on the Category toolbar for manually inputting Budget Amounts.
Use the Category Group field on the Category Card to create groups of Categories to simplify reporting. Use the QuickChange tool on the Category QuickSearch to assign Category Groups to a set of Categories.
Use the Report tool on the InfoCenter toolbar (or from the File menu) to run a Budget Report. Switch to the Bookkeeper Reports and select Budget Report. In the first dialog, specify the Categories to be included in the Report (e.g. All, or “Category Type is Expense”)
Use the Import tool on the Maintenance toolbar to import a tab-delimited text file saved from a spreadsheet. Using an Export from the Category Search gives you a head start on this operation by creating a spreadsheet with correct Account Codes. Use the QuickSearch to narrow your export to desired Accounts (i.e. Expense Accounts only using an "Account Type Is Expense" search). Excel's powerful AutoFill options (i.e. you can readily turn the column heading "Period 1" into column headings "Period 1, Period 2, etc.") may be useful for creating your import spreadsheet.
Modifying Beginning Balances After Setup
Overview:
This document describes the process to adjust the balance for accounts after SetUp is complete.
Details:
The account balances entered during the SetUp are stored in a General Journal entry. This General Journal #0 will be given the data you specified during SetUp and is locked and cannot be adjusted once you have completed the SetUp Checklist. It is locked because of the complexity of the data contained inside. This journal will typically contain calculated amounts for the following accounts:
Accounts Receivable (the sum of your Customer balances)
Accounts Payable (the sum of all your Vendor balances)
Inventory (the sum all you Item Total Costs)
Current Year Earnings (all Income minus all Expenses for the Current Year)
Retained Earnings (Assets minus Liabilities minus other Equity)
Note: You should verify that the balances for these Accounts are correct before completing the SetUp process. (3122)
Modifying Balances for Most Accounts:
Most Account balances can be adjusted or created using the General Journal tool. With the General Journal tool, you cannot create an entry for Accounts Receivable, Accounts Payable, Inventory, Current Year Earnings, Retained Earnings, or a Bank Account (all are controlled Accounts). See using the General Journal in the User’s Guide for more information on creating new General Journal entries.
Modifying Balances for Bank Accounts:
Bank Account balances can be modified using the Balance Adjustment tool. This tool allows you to increase or decrease the balance of a Bank Account and offset the adjustment to one of your other Categories (except for controlled Accounts). See Making a Balance Adjustment in the User’s guide, Solution#3006, or Solution#3007, for more information. As of Big Business 2.6, this Balance Adjustment tool is now on the Banking Toolbar.
Modifying balances for Automatic Accounts:
The balance for Accounts Receivable can be adjusted by increasing or decreasing the balance of your outstanding Customer Invoices. The balance for Accounts Payable can be adjusted by increasing or decreasing the balance of your Vendor Bills. Inventory balances can be adjusted by creating Invoices or Bills, or by creating Item Adjustments for a particular Item. Current Year Earnings and Retained Earnings are calculated and adjusted depending on the type of transactions generated.
What If I Didn’t Enter the Correct Balances During SetUp:
If you did not enter the correct beginning balances during the SetUp process it becomes more complicated to enter them inside of the application. You may need to create an “adjusting” account to offset several of the transactions you will need to generate. This “adjusting” account will typically offset your Retained Earnings (an equity account). Some people choose to make the “adjusting” account an income or expense account so that it rolls over into Retained Earnings for the next fiscal year.
After creating this “adjusting” account, you can then create the necessary Misc. Sales (for Account Receivable), Misc. Bills (for Accounts Payable), Item Adjustments (for Inventory), Balance Adjustments (for Bank Accounts), and General Journal entries, all posted against this “adjusting” account. Entering a current year Invoice, for example, you would use a Misc. Sale, to avoid an Inventory change, and use the Posting Tool ("quill") to specify the "adjustment" account to avoid a change to Sales Income.
Caution: Please work with your accountant or Big Business Consultant to assist you in setting up and entering the necessary transactions.
One final consideration is to back date entries. If you enter a Misc. Sale dated in the prior fiscal year, the Sales Income will automatically roll into Retained Earnings on a current year Balance Sheet. Keep in mind that a prior year's Balance Sheet will then be invalid. This technique can also be applied as follows: If the "adjustment" account you create is an Equity account, after completing all entries, you can enter a back dated General Journal entry between your "adjustment" account and any Income Statement account (Income, Expense) to zero out the "adjustment" account. If posted in the prior year, the Journal entry will zero your "adjustment" account (if it is an Equity account) and the Income Statement posting on the back dated Journal Entry will roll into Retained Earnings.