“Setting up for Success” is a series of snack-sized, task-oriented articles curated around specific accounting workflows and the fundamental concepts behind them.
We recommend watching all of the videos in order as a set so you can confidently complete the specified tasks in QuickBooks Online. If you do decide to skip ahead to specific sections, set aside time to go back and read the article in its entirety so you have a firm grasp of the fundamental process end-to-end.
For this set of videos, there are no exercises to follow along with. Instead, we insist you simply absorb the broader accounting and workflow concepts introduced in this article. Taking a few minutes to contextualize your business within the broader “how’s” and “why’s” of accounting will go a long way in preparing you for sustain success. So sit back, relax, and let it all sink in.
Resist the urge to jump right into processing transactions. We know you’re excited, but be patient -- make sure you understand each step of the process end-to-end.
QuickBooks takes care of the complex accounting work that goes on behind-the-scenes so you don’t have to worry about T-accounts or double-entry accounting formulas.
However, everyone who does bookkeeping should learn the basics. You’ve probably heard of the two terms below. They both refer to transactions in-progress:
The next two are terms may sound familiar, but you may not know how they related to accounting. Debits and credits essentially describe how transactions impact an account – debits refer to money drawn from an account while credits refer to the opposite, money put into another. Luckily, you don’t have to know these because QuickBooks does all the heavy lifting for you.
If you want to learn more account terms, check out “QuickBooks Encyclopedia – Basic Accounting Definitions” and Understanding the Basic Accounting Formula with ProAdvisor Scott Meister (@ScottMeisterCPA).
The Chart of Accounts (also referred to as the CoA) is a powerful tool – it's essentially the database for all your accounts that dictates how transactions are categorized. This is where you organize existing accounts or create new ones.
As a first time user, you won’t have to do much work in the CoA since the default accounts in QuickBooks Online can handle most common transactions. While the CoA may seem like an accounting-heavy roadblock, once you understand how it works, you’ll feel confident making judicious changes when the occasion arises.
The tutorial does an excellent job of visualizing the complex accounting that goes on behind-the-scenes every time you process a transaction. You notice when the instructor enters the loan, the checking account increases (credit) by $15,000. Here’s the tricky part, the liability account also increases by $15,000 (credit). You might assume the number would be negative since you a liability means you owe money, but since the account is tracking your liability total, the number actually increases.
The tutorial also demonstrates a very common use of the "Add New Deposits" feature on the bottom of the Bank Deposit module. This is where you enter transactions outside the daily norm of sales forms, such as business assets or loans.
As our narrator notes, accounting is cyclical, meaning most tasks need to be completed on a regular basis (daily, weekly, monthly, quarterly and annually). You may want to do these more or less frequently depending on your business needs.
Keeping a regular cadence will make working with your accountant and reporting taxes much easier. Don’t let work pile up. Take out your calendar and set up reminders for these common bookkeeping tasks.
We cover financial reports in greater detail in “Setting Up for Success with QuickBooks Online – Financial Reports and Reporting Features,” but this video provides a great introduction.
Setting up for Success in QuickBooks Online
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