Mike Branch's Blog About QuickBooks and Everything

I’ve been promising for a while now that I would document some of the things that accounting professionals (usually bookkeepers) need to know about QuickBooks Point of Sale. This article is the first in a series that will do just that. Topics that I’ll cover will include:

1. Mapping transactions to the chart of accounts in QuickBooks
2. Sales tax
3. Banking
4. Purchasing and receiving inventory
5. Inventory adjustments
6. Accounts Receivable

I’ll leave that list open-ended for now, since I’m sure some other questions and ideas will come up as the series progresses.

[Note that I’ll refer to QuickBooks Point of Sale software as “POS” and QuickBooks financial software (Pro, Premier, or Enterprise) as “QBF”.]

I frequently talk to accounting pros who are experts with QBF but know little or nothing about POS. This is not surprising, because when POS is properly configured and integrated with QBF, there’s rarely a need for a bookkeeper to access POS. Still, it’s useful to understand what information is sent from POS to QBF, and how to deal with occasional problems and questions.

The focus of this series is on ongoing bookkeeping, not on how to set up POS, although some ongoing maintenance tasks will be covered, such as what to do when sales tax rates change. The articles will assume that your POS system has already been integrated with QBF. If you need help with this, please contact me or a local QuickBooks ProAdvisor.

If you’re a bookkeeper who is new to POS, please keep in mind that some of the processes I’ll describe may be different from what you’re used to when using QBF for a retailer who rings up sales manually or with an ECR (electronic cash register). There may be a number of different ways to accomplish a task in QBF (including good old-fashioned journal entries), but when you throw POS into the mix, you and your client can save a lot of time and money by letting POS do some of the work for you. For $800 to $1,700 per workstation (and that’s just for the POS software), your client is going to expect to save some money on bookkeeping. This should free up some of your time to take on new clients or expand your practice into new areas.

Working with the QuickBooks chart of accounts

OK, so let’s dive into the main topic of this article, which is how POS uses QBF’s chart of accounts.

I’d like to start out by pointing out the difference between management reporting and income tax or financial reporting. When it comes to managing a retail business, some of the most useful reports are available within POS. Top sellers, sales by vendor or department, and inventory levels are examples of information available in POS. Furthermore, POS works with QBF’s built-in sales tax reporting to track everything you need for state and local tax reporting. The reason I point this out is that you should not need to clutter up the chart of accounts in QBF in order to produce most of your management and sales tax reports. To the extent possible, try to keep your chart of accounts simple, and let POS do the heavy lifting when it comes to retail management reporting.

Account Preferences

In POS, click on Accounts under Company Preferences (Edit menu -> Preferences ->Company), as shown in Figure 1. Note that when you click on “Accounts” POS will take a few moments to connect to QBF.

Figure 1: Account Preferences in QuickBooks Point of Sale

Under the Basic tab, you’ll see 3 sets of accounts for each different type of item that the business can sell. (Group items are like gift baskets, consisting of other types of items, so they don’t have their own accounts.) Each type of item has an income account, a cost of goods account, and an asset account. These settings apply to any new items that are created in the future, and you can apply them to the entire item list by clicking the button at the bottom labeled “Apply accounts to existing items” (don’t click this unless you really mean it!). In the next section we’ll talk about how to change these settings for individual items.

You’ll notice that, by default, Non-Inventory and Service items have the same account in the cost of goods column and the asset column. The net effect of this is that the COGS and Inventory transactions cancel each other out, and only the income is sent to QBF. Expenses for these items are usually tracked directly within QBF at the time of purchase.

Some account names are displayed with angle brackets, such as “<Merchandise Sales>”. This means that the account does not exist in QuickBooks. The account will be created the next time POS sends activity for this account to QBF, or you may select another account.

At this point I’d like to remind you to try to keep your chart of accounts simple. In many cases you won’t need multiple income or cost of goods accounts, because the need for that information can often be addressed with built-in POS reports. However, if your investors, lenders, or owners need to see this information in the financial reports, feel free to change the settings as needed. Some businesses will also need to break out certain types of merchandise, like alcohol, for reporting to regulatory agencies, and may need to see this breakdown on the P&L rather than in POS reports. Also note that at the bottom of the Basic tab in Account preferences, you can automatically create sub-accounts based on stores and/or departments.

Finally, let’s take a look at the Advanced tab. Here you’ll see many other types of accounts that POS uses, such as Freight In, Shipping Income, Sales Tax liability, etc. A bookkeeper should become familiar with this list so you know where the dollars are ending up in QBF. There’s probably no need to change these accounts, unless you’re adding POS to an existing QBF company file and have other accounts that you’d like to keep using. Note also that if you’re tracking Freight and Shipping Costs (Freight In) under Cost of Goods Sold, you may need to change the account type from Expense to Cost of Goods in QBF. Otherwise it will show up under operating expenses rather than cost of goods on your P&L.

Account settings for items

When POS is integrated with QBF, you can modify the cost of goods, income, or inventory asset account associated with individual items. In POS, open the item list, double-click on an item, and click the Additional Info tab. You’ll see a section labeled “QuickBooks Information” as shown in Figure 2.

Figure 2: Account Settings for Items

This allows you to make changes to individual items that don’t use the default settings that you set up in Company Preferences. If you have a large number of items that you need to change, you may find it easier to do this on the item list as follows:

1. In the POS item list, right-click anywhere on the column headings, and select “Customize Columns” from the pop-up menu.
2. Configure the column display to include the account columns (COGS, Income, Asset) that you need to modify. Click “Save”.
3. If possible, sort the list in such a way that the items you want to edit are grouped together.
4. Turn on List Edit Mode (Edit menu -> Turn List Edit On).
5. Edit item accounts as needed on the item list. Keep in mind that if you’re changing a value in a sorted column, the sort order will change whenever you make a change.
6. When finished, turn off List Edit Mode (under the Edit menu).

Conclusion

I hope you find this information helpful. Please feel free to make comments or ask questions so that I can be sure to provide information that is useful to you. If you need more extensive help, email me at mike@mikebranchqb, or contact your local QuickBooks ProAdvisor.

In the next article, I’ll talk about how to manage sales tax between POS and QBF.