QuickBooks is a great accounting program for home-based businesses to track their income and expenses. It is easy to learn and simple to use. It has a great Help file. You do not need an accounting background to be able to generate reports such as a Profit and Loss and Balance Sheet needed for tax preparation and managing your business. I have listed a few key points to consider when using QuickBooks.
Cash or Accrual Basis of Accounting? The first step in setting up your company in QuickBooks is to determine if you will track income and expenses on the "Cash Basis" or "Accrual" basis. Most small businesses operate on the cash basis of accounting. What this means is you record your expenses when you write the check or charge your credit card, and you record your sales or income when you take the money to the bank and deposit it into your account. This is the easiest way to account for your transactions. Some businesses are required by the IRS to report on the accrual basis. This normally pertains to large publicly traded companies and/or some manufacturing entities. On the accrual basis, you record income at the time of sale, not at the time you receive payment. You also enter expenses when you receive the bill, not when you pay it. The choice is yours on which basis to use. QuickBooks supports both accounting methods.
Simplify the Chart of Accounts!! The most important list in your accounting system is your Chart of Accounts. You track your flow of money through this list of accounts which includes where your income comes from, where you put it, what your expenses are for, and what you use to pay them. QuickBooks' EasyStep Interview walks you through setting up your accounts. The system also offers sample business templates that already have accounts set up for you. You can later delete or add any accounts that were initially setup in this interview to make it match your income and expenses better. Keep your chart of accounts SIMPLE! Too many accounts result in messy reports that are hard to read and analyze. Also, use descriptions for your account id's, not numbers. If you assign account numbers for each account, you will have to memorize the numbers for fast data entry. It is much easier to type in the name of the account when entering transactions. This is a key timesaver!
Utilize Reports QuickBooks has many reports you can run for daily management of your business. The most widely used reports are the Profit
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About the Author: Kimberly Bagley. Kimberly Bagley is a Certified Public Accountant in Texas and owner of Mom's World Online at http://www.momsworldonline.com where she offers financial guidance, inspiration, organizational resources, and other products to help make mom's life a little simpler! Sign up for her bi-weekly newsletter at http://www.momsworldonline.com/newsletter.html