Accounting

QBO project

Project

1

: Small Business Accounting using QuickBooks Online

I. Introduction:

Your good friend Kobe recently opened an art studio, Kobe’s Krafts. He has been creating and selling artwork for years, and subsequently already has a good customer base. In January of this year he started the process of setting up a business and he filed for an EIN in February. He found and rented a studio on March 1st, and has been cleaning, painting, and setting up the space ever since. The grand opening was April 1,

20

19.

Here is a little

back

ground of what Kobe sells in his gallery. Kobe paints and sells his original artwork. He also sells prints, which are reproductions, of his original artwork that he purchases from a print shop. His prints and original artwork are considered his inventory. He also accepts custom orders from customers, which are considered commissioned sales. Commissioned artwork is artwork that is created for a particular person based on their specification. He also has a few artist friends that he agreed to let display and sell their original artwork on consignment. That means the paintings that are not his own, are not considered inventory for Kobe, they are inventory for the artist that created the painting. However, when a consignment artwork is sold, he keeps a percentage of the sale as consignment income.

He knows you are going to school for your master’s degree in accounting and has asked for your help setting up and using QuickBooks Online (QBO). You agree to help set up his QBO business account and complete the first month of transactions. You are not familiar with QBO, but you know it will be beneficial to your accounting career to learn it since QBO is the most widely used accounting platform for small business in the United States, so you agree.

Kobe has is interested in using the following QBO features:

·

Sales Receipts/Invoices

· Purchase Orders/Inventory tracking

· Bills and Bill Pay

Eager to get started, you carefully read the Steps to Completion below and review all QBO learning resources before beginning.

II.

Steps to Completion:
For most of the steps below, you will have the option of viewing a short video or referring to the Intuit Education PPT, all page references given below.

Step 1 – Set up your QBO account.

Go to

http://www.intuiteducation.com/

and follow the instructions for student registration for QuickBooks online.

Step 2 – Download Intuit Education PPT

· Skim over the first part of the PPT to learn about navigating QBO (the dashboard) (Pages 17- 23).

Step 3 – Set up the account and settings

· View the Video:

· “How to Navigate in QuickBooks” –

https://www.youtube.com/watch?v=vNdZmf_nLZs

· Review: Account and Setting, Intuit Education PPT, Pages 27 – 44. NOTE: the important information is how to get to account and settings, which can be found on page 28.

Appendix A

covers all the settings that you need to adjust for Kobe’s Krafts. The purpose of the project is for you to become comfortable with the program, not to become a QBO expert. However, if you want to read all the details, feel free, but it is not required for the purposes of this project.

· Using the information found in Appendix A, set up Kobe’s Krafts account in QBO.

Step 4 – Set up and edit the Chart of Accounts (COA)

· View the Video:

· “How to Edit your Chart of Accounts in QuickBooks” –

· Review: Chart of Accounts, Intuit Education PPT, Pages

5

1 – 56, 59 (subaccounts)

· See

Appendix B

.

Step 5 – Set up sales tax

· View the Video:

· “How to Set Up Sales Tax: Settings, Sales & More”

· Review: Sales Tax Center, Intuit Education PPT, Pages 60 – 61.

· See

Appendix C

.

Step 6 – Set up product items and contributed inventory –

· View the Video:

· “Add Product Information”

https://quickbooks.intuit.com/tutorials/lessons/add-products-information/

· Review: Products and Services, Intuit Education PPT, Pages 62 – 69

· See

Appendix D

.

Step 7 – Create journal entries for all other (non-inventory) owner contributions

· View the Video:

· “Journal Entries in QuickBooks Online”

· See

Appendix E

Step 8 – Add customers and vendors

· View the Video:

· “How to Add Customers and Vendors into QuickBooks”

· Review: Customer Center and Vendor Center, Intuit Education PPT, Pages 95 – 99 (customers), Pages 121 – 124 (vendors)

· See

Appendix F

Step 9 – Add invoices*, purchase orders (POs) and bills.

· View the Video:

· “How to Create A Purchase Order”

https://www.youtube.com/watch?v=lGGUSmFPJok

–
(IMPORTANT NOTE: Create the bill directly from the PO. Notice in the video where the presenter is showing the PO summary screen, to the right of the PO there is a button to “Create bill.” Click the Create bill button to create the bill for the vendor.

· View the Video:

· “How to Enter Bills, Track Expenses, & Record What You Owe”

https://www.youtube.com/watch?v=PGbS7GpdNTo

· Review: Create Invoices and Create Bills, Intuit Education PPT, Page

10

3 (create invoices), Page 127 (creating bills) – NOTE: Do not spend time creating fancy invoices. Use the basic form unless you want to play around with this feature.

·

See

Appendix G

Step 10 – Enter all transactions for the month of April

· View the Video:

· “Create Sales Receipts in QuickBooks”

https://quickbooks.intuit.com/tutorials/lessons/sales-receipts/

· Review: Create Sales Receipt, Intuit Education PPT, page 102

· View the Video:

· “Receive Payments in QuickBooks”

https://quickbooks.intuit.com/tutorials/lessons/receive-customer-payments/

· Review: Receive Payments, Intuit Education PPT, pages 104, 106 -NOTE: make sure you are receiving the payment to Kobe’s Bank account,
not undeposited funds

· View the Video:

· “How to Record & Print Checks”

https://www.youtube.com/watch?v=eNSPai2twcM

· Review: Create Check, Intuit Education PPT, page 126 (& debit charges) –NOTE: Be sure to change the check number to Debit or EFT or something else. QBO will accept duplicate words so pick one and stick with it for consistency. However, make sure that checks are numbered correctly.

· View the Video:

· “How to Record Bill Payments”

· Review: Create Check, Intuit Education PPT, page 128 – NOTE: Make sure you document the check number used to pay the bill.

·

See

Appendix H

Step 11 – Reconcile April Bank Statement –

· View the Video:

· “Reconcile your accounts”

https://quickbooks.intuit.com/tutorials/lessons/reconcile-accounts/

· Review: Intuit Education PPT, pages 142 – 144.

· See

Appendix I

Step 12 – Review and Revise Financial Statements

· View the videos:

· “Understanding Profit & Loss Statement: Income, Cost of Goods”

· “How to Customize Reports: Basics, Sorting & Date Ranges

· Intuit Education PPT, page 77 – 84.

· See

Appendix J

Step 13 – Print Reports

· P&L and Balance Sheet for the current month. Make sure the report basis is
Accrual
.

· Print the General Ledger for “all time”

· Intuit Education PPT, pages 77 – 84

Step 14 – Create a Bank to Book Reconciliation

· Using MS Excel, create a bank reconciliation that explains / reconciles any differences between the bank and book balances of cash.

III.

Deliverables:

1. Submit 1 PDF file by combining multiple PDF documents into 1 PDF file that contains the following files generated from QuickBooks:

A. Profit & Loss, accrual basis for April 2019,

B. Balance Sheet, accrual basis ending April 30, 2019, and

C. General Ledger Report for all time.

2. Submit 1 Excel file that contains the following:

The April bank reconciliation with formulas embedded into all cells that require calculations.

IV. Hints and Tips:

General Hints and Tips:

· Read the entire Project before beginning the project

· Read the Rubric before beginning the project

· Read the Competencies Assessed before beginning the project

· Do not track Classes

· Do not track Locations

· The beginning balance in the Equity account is

$0

because the business was just opened.

· Submit the Project deliverables on or before the due date.

1. Review the Late Policy in advance of the due date

· Ask your supervisor (professor) questions as needed.

Inventory Hints and Tips:

· When first setting up the inventory account, Associate each inventory item with the correct Sales account.

· The Inventory account includes two types of inventory:

· Original artwork created by Kobe

· Prints of Kobe’s original artwork

· When inputting the print inventory items, record the costs incurred to make the prints

Non-Inventory Hints and Tips:

· Kobe’s commissioned (custom) artwork does not pass through the inventory account because these paintings are from custom orders.

· Kobe’s Krafts also sells artwork created by other artists. The items belong to the other artists and therefore do not pass through the inventory account of Kobe Krafts.

Chart of Accounts:

· Do not create account numbers for the accounts

V. Rubric:

Top of Form

You will find the rubric in LEO under Contents>Course Resources>Projects & Rubrics

VI. Competencies Assessed by Project:

Communication Competencies:

1.1 Organize document or presentation clearly in a manner that promotes understanding.

1.2 Provide sufficient, correctly cited support that substantiates the writer’s ideas.

1.3 Tailor communications to the audience.

1.7 Create and employ multimedia supports, visual aids and/or documents appropriate to the needs of the project, the message, and the audience.

1.8 Create clear oral messages.

Critical Thinking Competencies:

2.1 Articulate and frame the issue.

2.2 Collect and evaluate information.

2.3 Evaluate the underlying causes or conditions of elements contributing to issue.

2.4 Use systems thinking to arrive at a decision in the context of an issue.

2.5 Apply ethical principles when determining actions.

Accounting Competencies:

5.2 Measure, analyze and interpret: measure, analyze, and interpret accounting data and information

5.3 Report: report accounting information

5.6 Technology and Tools: Identify and use relevant technology and tools to analyze data, perform requisite tasks efficiently and effectively, and support other competencies required in the profession.

Bottom of Form

Appendices

· Appendix A: QBO – Account and Settings
Appendix B: Chart of Account Changes

· Appendix C: Overview of Sales Tax

· Appendix D: Overview of Inventory

· Appendix E: Owner Contributions

· Appendix F: Customers and Vendors

· Appendix G: Invoices, POs, and Bills

· Appendix H: April Transactions

· Appendix I: Bank Statement

· Appendix J: Financial Statement Review

Appendix A: QBO – Account and Settings

Remember – “QuickBooks is a very forgiving program. Most mistakes can be fixed as you have the ability to go back and make historical changes, however a correct setup will prevent the need in most cases.” (Intuit Education PPT).

The following are the important pieces of information you need to set up Kobe’s Krafts in QBO. Each of the Bolded items are Categories in the Account and Settings page.

COMPANY:

· Company Name: Kobe’s Krafts_YOUR name

· Your name must be part of the Company name

· There are no exceptions

· Example: Kobe’s Krafts_Sharon Levin

· Email: Enter your UMGC email address that appears in our classroom

· Telephone: Enter your phone number associated with your UMGC profile

· EIN: – LEAVE BLANK. EIN not received yet

· Company Type: Sole proprietor

·

Address: 2150 Martin Luther King Jr Blvd

,

Panama City, FL 32405

· Website: Enter UMGC.edu

· Tax form: Sole Proprietor (Form 1040)

· Method of Accounting: Accrual

· Kobe’s Krafts will not be using track classes or track locations.

SALES:

· Kobe’s Krafts sales terms are

Net 30

, unless otherwise stated

· Shipping is available for a fee

· Discounts are offered occasionally

· Kobe’s Krafts requires a 50% deposit on all commissioned artwork / custom orders

· Track the quantity and price/rate for all sales

· Track inventory quantity on hand for the art prints.

EXPENSES:

· Kobe’s Krafts wants to use purchase orders, so make sure you check the box.

· All other default settings are fine.

PAYMENTS:

· This setting is used to allow clients to pay an invoice through their system. Although Kobe’s Krafts is possibly be interested in this feature in the future, he has no current interest.

ADVANCED:

· Kobe’s Krafts is a calendar year taxpayer, but he hasn’t received an EIN yet.

· (The first month of the fiscal year is January).

· Use the tax form: Sole proprietorship Form 1040

· Do not use account numbers

· Do not track classes or track locations.

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Appendix B: Chart of Account Changes

Add:

Name:

Account Type

Detail Type

Subaccount of:

Kobe’s Krafts Bank

Bank

Checking

Refundable Deposits

Other Current Assets

Other Current Assets

Art Displays

Fixed Assets

Furniture & Fixtures

Consignments
Payable

Other Current
Liabilities

Other Current Liabilities

Art Sales

Income

Sale of Product Income

Original Artwork Sales

Income

Sale of Product Income

Art Sales

Print Sales

Income

Sale of Product Income

Art Sales

Commission Sales

Income

Sale of Product Income

Art Sales

Consignment Income

Income

Service/Fee Income

Discounts Given

Income

Discounts/Refunds Given

Group

Art Classes

Income

Service/Fee Income

Print Expense

Cost of Goods Sold

Supplies & Materials – COGS

Art Supplies Expense

Expenses

Supplies & Materials

Shipping Expense

Expenses

Shipping, Freight & Delivery

Gain on Sale of PP&E

Other Income

Other Miscellaneous Income

Loss on Sale of PP&E

Other Income

Other Miscellaneous Income

Edits:

Change from:

Change to:

Owner’s Pay &
Personal Expenses

Owner Distributions

Equity

Owner’s Equity

Opening Balance
Equity

Opening Balance
Equity

Equity

Opening Balance Equity

NOTE: the opening balance = $0

Rent & Lease

Rent Expense

Expense

Rent or Lease of Building

Office Supplies &
Software

Office Supplies

Expense

Office/General
Administrative Expense

Delete:

Job Supplies

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Appendix C: Overview of Sales Tax

NOTE: Sales Tax must be set up in the “TAXES” area in QBO. Proceed with this section carefully. QBO is very user friendly for the most part; however, there are areas that are hard to fix should you set it up incorrectly and Sales Tax is one of those areas so do not rush here. Read all the way through this appendix, watch the how to videos and then proceed with caution.

Kobe’s new art studio is located in Panama City Florida. He is required to pay 7% in sales tax to the State of Florida. Of that 7% state tax, the state of Florida disburses 1% to Bay County.

The State of Florida requires most taxpayers to file monthly sales tax returns, Kobe’s Krafts falls into this category. As of April 1st, Kobe’s Krafts must start collecting taxes and the first return is due no later than May 20th (QBO knows when it is due) for the reporting period of April 1 – April 30.

Kobe’s Krafts needs to make sure he charges customers and remits sales tax for everything he sells except for the group art classes. Florida does not collect taxes on the sale of services.

Address: 2150 Martin Luther King Jr Blvd
Panama City, FL 32405

Go to the “TAXES” area and set up sales tax for the state of Florida. If you entered the business address when you were setting up the account, QBO should suggest the correct tax agency(s). If not, it should ask you for an address here. Make sure you select Florida Department of Revenue from the dropdown list. Again, make sure you find the taxing agency in the dropdown list to select. Do NOT manually add any taxing body. QBO already has all the information it needs to correctly tax products and it will automatically update taxes should laws change but only if it is set up correctly from the beginning.

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Appendix D: Overview of Inventory

The setup of Inventory will be done in the “INVOICING/SALES” area of QBO. Once in SALES, go to the Products and Services tab.

Then click “New” in the upper, right corner. Next click “Inventory” and fill in the name, category, and:

· Fill in the name of the first inventory item.

· Select the category. The first time you will have to add a new category.

· You will be adding these categories: Kobe’s Originals, Prints, and Non-inventory items

· The “initial quantity on hand” will be the owner contributed inventory, see the table below.

· As of date will be 4/1/2019.

· Do not enter a quantity in the “Reorder Point” field for any items.

· The Inventory asset account is “Inventory asset”

· Do not use product codes aka SKU numbers.

· For all items that have a fixed sales price associated with it, enter the Sales price for each item

· Also, make sure you associate the correct Income Account with the correct product.

· i.e. All sales of original artwork should be recorded to Income account: Art Sales: Original Artwork Sales

· Enter the costs to have the prints made.

· Remember, all sales are taxable EXCEPT FOR Group Art Classes.

· Be sure to select “Taxable Standard” under “Sales tax category” for all sales other than group art classes, which will be “Nontaxable.”

Kobe’s Krafts primarily sells 3 types of original artwork and prints – Large, Medium, and Small.

Pricing and Cost of Original Artwork:

Pricing:

Standard pricing for Kobe’s original artwork:

Size of Artwork

Sales Price

Number of Pieces Contributed

Total Value

Large

$1,700

5

$8,500

Medium

$600

12

$7,200

Small

$100

32

$3,200

Sales of Kobe’s original artwork should set the product Income account to: Art Sales: Original Artwork Sales.

Cost:

Kobe was instructed years ago by his tax accountant that his original artwork inventory should not have a COGS associated with it. Instead he needs to expense all of his art supplies purchases. However, the prints in inventory are classified as inventory until sold and then those costs will be classified as COGS. So, although the original artwork inventory will have zero costs associated with it, you will be able to enter the sales price of the inventory Kobe transfers in to the business.

Cost and Pricing of Prints:

He transfers all his print inventory (reproductions of original artwork) to the business April 1st, as follows:

Size of Prints

QTY

Cost per Unit

Sales Price per Unit

24 x 36 Print

10

$80

$210

11 x 14 Print

50

$25

$75

5 x 7 Print

110

$4.50

$12

All of the prints in the table above should have the following setting:

1. Income account to: Art Sales: Print Sales

2. Expense account to: Print Expense, which is a COGS account

In addition to original artwork and prints, Kobe has several non-inventory items that you need to add.

Description

Sales Price

per Unit (student)

Income Account

Service (non-taxable)

Group Art Classes*

$35

Group Art Classes

Non-Inventory Sale

Commission Work

(i.e. custom orders)

N/A

Art Sales: Original Artwork Sales

Non-Inventory Sale

Consignment Artwork**

N/A

Consignment Income

Non-Inventory Sale

Unusual Sales PP&E***

N/A

Gain on sale of PP&E

For all commission artwork, Kobe’s Krafts requires a 50% deposit at time of order and the balance when the buyer picks up the artwork.

* Remember, this is the only non-taxable item.

** Kobe also displays and sells consignment pieces. He earns a 25% commission on each piece sold. The consignee sets the price, so Kobe keeps those records on an Excel spreadsheet and does not enter the prices in QBO until he sells the pieces. In other words, the consignment inventory is not an inventory item, but you need to set up a product item to handle the transaction. However, make note of all consignment sales because in order to complete the sales transaction, you need to make a journal entry (JE) to move 75% of the sale from the P&L to the balance sheet as Consignments Payable.

*** Sales of PP&E will also require a JE to remove the item from the balance sheet and reduce the gain (or increase the loss) on the sale. The transaction is not complete until this JE is made.

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Appendix E: Owner Contributions

To enter all owner contributions, you may create one or multiple JEs. Determine the correct account to debit from the list below and credit: Owner’s Investments.
Remember all of the items below were paid by Kobe from his personal bank account.
Also remember to put the description of each item in the JEs.

Date

Description

Account

Amount

3/1

Owner’s deposit to open a business bank account

Kobe’s Krafts Bank

$10,000

3/1

*Electricity Deposit (refundable)

Refundable deposits

800

3/1

*Phone Company Deposit (nonrefundable)

Utilities

200

3/1

*Rental Deposit (Refundable)

Refundable deposits

2,500

3/1

*1st month rent – March
(prior to opening)

Rent expense

2,000

3/4

*Gallery set up supplies –
paint for walls, cleaning supplies, lumber for
building shelves/racks

Office Supplies

45

0

3/8

*Miscellaneous art supplies for classes

Art Supplies
expense

749.99

3/10

4 large Art displays
(fair market value at time of contribution = $450 each)

Art Displays

1,800

Total

$18,499.99

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Appendix F: Customers and Vendors

Enter all customers in the “SALES” area and all Vendors in the “EXPENSES” area.

Customers:

Name

Phone Number

Email

Address

Candy Thomas

898-474-1111

Candy.Thomas@CT.ct

Kids Love Art

898-474-1111

KidsLoveArt@KLA.bb

1173 Front Beach Rd
Panama City, FL 32412

Shawn Baylor

898-747-5200

Shawn@Baylor.sb

LeBron Barry

897-872-2152

LeBron@LeBron.bk

Kareem Bird

899-421-1478

KBird@KBird.bb

Customers

Kobe uses this “Customer” account to record sales to non-recurring customers and Daily Sales Receipts

Vendors:

Name of company/account managers

Phone Number

Email

Address

Ace Real Estate

–
Laurie is manager

850-393-5555

leasemanager@acerealestate.com

3630 Bay Avenue
Panama City, FL 32542

Salem Prints

Sasha Levin

850-981-0000

Orders@salemprints.com

Dish Network

Ron Primo

850-424-7900

mike.bossie@dish.net

78-541 Wildcat Drive
Dade City, FL 33624

Kobe

USA Art Supply

Jenny

813-771-3161

jennifer.lopez@usaartsupply.com

714 Rose Lane
Brandon, FL 33617

Consignment Vendors:

Name

Phone Number

Email

Address

JoAnne Lopez
Original artwork

904-546-7300

joannelopez@gmail.com

415 Orange Avenue Tampa, FL 33616

Michael Koltes

850-778-2211

mkoltessales@hotmail.com

857 Rose Lane Panama City, FL 32551

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Appendix G: Invoices, POs, and Bills

Date

QTY

Amount

Kids Love Art

10

LeBron Barry

Kids Love Art

Net 30

10%

Art Classes

INVOICES – Purchases from Customer
Customer	Terms	Discount*	Product Purchased
			1-Apr		Net 30		10%		Art Classes	$315
2-Apr	Due on receipt	Commission Work	1	$4,500 + tax
		30-Apr	45	$1,417.50
*Kids Love Art is the only customer that receives a discount because they buy individual art classes in bulk and pay within 15 day.

Description

QTY

5

$80

10

$25

$4.50

PURCHASE ORDERS – Orders to Vendor
Purchases:	Each Price	Totals
Salem Prints* order 4/1/2019	24 x 36 prints	$400
11 x 14 prints	$250
5 x 7 prints	20	$90
Shipping expense	$20
Tax (non-taxable online purchase)	$0
Total Order		$760

* NOTE: Make sure you create the bill for the Purchase Order from the Purchase Order.
It is very easy make sure the dates are correct, see table below.

Amount

1-Apr

1-Apr

1-Apr

Dish Network

Salem Prints

$760

USA Art Supply

30-Apr

30-Apr

Ace Real Estate

$2,000

BILLS – Payable to Vendors
Received	Due	To	For
	Ace Real Estate	April Rent		$2,000
16-Apr	Utilities: Telephone and internet bill	$285.64
4-Apr	19-Apr	Print order 4/1
24-Apr	9-May	Purchased large glass art display	$4,001.99
May Rent
* Make sure you create the bill from the P.O.	$9,047.63

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Appendix H: April Transactions

Make sure you pay all bills through the EXPENSES area and receive all invoice payments in the SALES area.

Make sure you pay the sales tax through the TAXES area. If your sales taxes due for the period of April is different than the transaction amount below, there is a problem with your sales tax somewhere along the way.

All receipts that were not invoice payments will require a Sales Receipt. You will create Sales Receipts in the SALES area. All sales should be considered cash sales. Just make sure the dates are correct and the account the money is deposited to is Kobe’s bank account.

Unless Kobe does recurring business with a customer, or it is a special sale, all Sales receipt transactions will be from customer “Customers.”

Write checks for all expenses that are not bill payments. However, if there is no check number associated with the transaction, that means it is a debit card transaction so change the check number to EFT in place of the check number.

Small inexpensive purchases, under $500, should be expensed. Make sure you select the appropriate account for each transaction. Do not add any more accounts as you enter these transactions. Think macro instead of micro. For example, paying for a PO Box or purchasing small, inexpensive items, such as a lamp, should be considered an Office Expense.

QBO is limited in what you can record in a single transaction. This is where journal entries (JEs) will be necessary. Hint: transactions where JEs will be necessary include sale of fixed assets and sale of consignment artwork. I suggest you make the JEs as you go to complete the transactions.

Date

Description

Expenses

Deposits

Method of Entry into QBO

1-Apr

Owner deposit to open bank account
(this was already done in Appendix E as
long as your debit entry was to Kobe’s Krafts Bank)

10,000.00

J/E

1-Apr

Paid April rent (bill) check #1001

(2,000.00)

Bill Payment

1-Apr

Sold one 11 x 14 print

80.25

Sales Receipt

1-Apr

Coffee and fingers foods for grand opening –
Kroger Grocery Store using a debit card (Add Kroger payee while writing check) use Office Supplies account

(180.54)

Check

2-Apr

Sold medium original artwork

642.00

Sales Receipt

2-Apr

Deposit to complete a commissioned piece –
LeBron Barry (Paid ½ of Invoice. Receive partial payment)

$2,407.50

Receive Invoice payment

4-Apr

Sold 4 24 x 36, 2 11 x 14 and 9 5 x 7 prints at art fair

1,174.86

Sales Receipt

5-Apr

USA Art supplies (art supplies) DEBIT

(187.21)

Check

5-Apr

Paid phone bill received 4/1 check# 1002

(285.64)

Bill Payment

12-Apr

Sold 4 5 x 7 art prints

51.36

Sales Receipt

12-Apr

Paid for Post Office box through 4/11/2020 (1 year) using
debit card (Add USPS as a vendor and use
Office Supplies account)

(80.00)

Check

13-Apr

Sold a consignment piece for Lopez $1000 to
Shawn Baylor

1,070.00

Sales Receipt

14-Apr

Received payment from Kids Love Art
for invoiced amount

315.00

Receive Invoice payment

14-Apr

Paid Lopez for consignment sale to Shawn Baylor
check # 1003 (to account Consignment Income)

(750.00)*

Check

14-Apr

Sold 1 large original artwork

1819.00

Sales Receipt

15-Apr

Purchased shelving from IKEA using a debit card
record to office supplies and add IKEA vendor)

(285.24)

Check

19-Apr

Withdrew cash for personal use using a debit card
(This is an Owner Distribution transaction)

(1,500.00)

Check

19-Apr

Paid bill for prints to Salem Prints 4/4 bill check # 1004

(760.00)

Bill Payment

21-Apr

Commission piece completed and picked up for
LeBron Barry – (Receive the remaining invoice amount)

2,407.50

Receive Invoice payment

24-Apr

Sold 1 24 x 36, 5 11 x 14 and 10 5 x 7 prints

754.35

Sales Receipt

25-Apr

Sold 1 large (owner contributed) art displays for $1000

1,070.00

Sales Receipt

30-Apr

Bank Fees

(12.50)

Check

30-Apr

Paid Sales Tax to Fl Dept of Revenue Online-DEBIT
(Pay through TAXES area)

(750.82)

Through Taxes Tab

30-Apr

Paid rent May rent check # 1005

(2,000.00)

Bill Payment

30-Apr

Paid Bill for art display on 04/25 check #1006

(4,001.99)

Bill Payment

Subtotals:

(12,933.94)

$23,931.82

Total:

$10,997.88

*Note, this transaction is instructing you to code an expense item to an income account. However, in the original transaction, the entire sales was added to consignment income. This check is taking out the consignee’s portion of the consignment sale income. The amount that will remain in the Consignment Income account will be Kobe 25% of the sale. There are many different ways to properly record the revenue and this is one of them. You could also create a J/E to move 75% of the consignment sale to a payable account at the time of sale and then record the check against that payable. Following these instructions just skips the J/E step but the end result is the same.

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Appendix I: Bank Statement

Appendix J: Financial Statement Review and Check Figures (JEs)

Review Accounts:

Balance Sheet ACCRUAL BASIS

Check Figures

Report period: ALL DATES

Bank Statement

Book to Bank
Reconciliation Required

Accrual

A/R

$1,417.50

Inventory Asset

$2,581.50

Refundable Deposits

$3,300.00

Fixed Assets

$5,351.99

Total Assets

$21,648.87

All Payables

$0.00

Owner Distributions

– $1,500

Net Income

$2,103.88

Opening Balance Equity

$0.00

Note, make sure the basis for the financial statement is in the correct basis for your comparison. The best practice is to review in both basis to ensure you do not have errors in the statements.

Other than the accounts listed above, make sure you scan and make sure all balances make sense. For example, the only negative numbers in the financials should be the Owner Distributions and Discounts given.

You may notice a balance in the Opening Balance Equity account (QBO “junk” account). QBO made this entry against the owner contributed inventory when you created the product inventory. If there is a balance, you need to create a J/E to move the balance from Opening Balance Equity to Owner Contribution: Debit: Opening Balance Equity to Credit: Owner Investment.

If your fixed asset account is incorrect, another J/E will be required is to remove the art display PP&E that was sold from the books because it hasn’t been done yet: Debit: Gain on Sale of PPE and Credit: Art Displays.

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