Don’t get irritated with the lack of personalization, however. This almost total lack of individually personalized preferences makes sense, if you think about it. Accounting for a business needs to work the same way for Jane as it does for Joe and for Susan.
You do have the option to set several company preferences for accounting, however. Again, this makes sense if you think about it. Different companies run their accounting systems in different ways.
This figure shows the Company Preferences tab of the Accounting Preferences dialog box.
The Company Preferences tab of the Accounting Preferences dialog boxUsing account numbers in QuickBooks
By default, QuickBooks lets you use names to identify accounts in the Chart of Accounts list or in the accounts list. The account that you use to track wages expense may be known as “wages,” for example, but you can select the Use Account Numbers check box to tell QuickBooks that you want to use account numbers rather than account names for identifying accounts. Larger businesses and businesses with very lengthy lists of accounts often use account numbers. When you use numbers, you can more easily control both the ordering of accounts on a financial statement and the insertion of new accounts into the Chart of Accounts list.The Show Lowest Subaccount Only check box (refer to the preceding figure) lets you tell QuickBooks that it should display the lowest subaccount rather than the higher parent account in financial statements. QuickBooks allows you to create subaccounts, which are accounts within accounts. You can also create sub-subaccounts, which are accounts within subaccounts. You use subaccounts to more finely track assets, liabilities, equity amounts, revenue, and expenses.
Setting general accounting options in QuickBooks
The Company Preferences tab (not shown) provides the following five general accounting check boxes, as well as date warnings and closing date settings. The check boxes are probably self-explanatory to anybody who has done a bit of accounting with QuickBooks, but for new QuickBooks users, here's a brief description of what each one does:- Use Account Numbers: The Use Account Numbers check box, if selected, enables you to enter an account number for a transaction. The associated check box, Show Lowest Subaccount Only, tells QuickBooks to display only the name and account number of a subaccount (if you’re using one) instead of the full heritage of the account. If you use a lot of levels of subaccounts, this option can really clean up views, making it easier to tell what account you’re looking at.
- Require Accounts: The Require Accounts check box, if selected, tells QuickBooks that you must specify an account for a transaction. This makes sense. If you aren’t using accounts to track the amounts that flow into and out of the business, you aren’t really doing accounting. It would never make sense, in my humble opinion, to deselect the Require Accounts check box.
- Use Class Tracking for Transactions: The Use Class Tracking for Transactions check box lets you tell QuickBooks that you want to use not only accounts to track your financial information, but also Classes let you split account-level information in another way. This sounds complicated, but it’s really quite simple. The account list, for example, lets you track revenue and expenses by categories of revenue and expense. You may track expenses by using categories such as wages, rent, and supplies. Classes, therefore, provide you a way to track this information in another dimension. You can split wages expense into those wages spent for two locations of your business, for example. A restaurateur with two restaurants may want to do this. Note that QuickBooks also provides boxes you can check to indicate that QuickBooks should prompt you to assign classes and to assign classes to accounts, items, or names.
- Automatically Assign General Journal Entry Number: This check box tells QuickBooks to assign numbers to the general journal entries that you enter by using the Make General Journal Entries command. You want to leave this check box selected. General journal entries, by the way, are typically entered by your CPA or your professional on-staff accountant.
- Warn When Posting a Transaction to Retained Earnings: This check box tells QuickBooks to display a warning message whenever you attempt (or someone else attempts) to directly debit or credit its retained earnings account. (Normally, you don’t want to directly debit or credit the retained earnings account, and only skilled accountants would enter transactions directly into retained earnings in any case.)
- Hide Opening Balance Fields in Names and Items: Check this box to tell QuickBooks to hide opening balance information for customers, vendors, other names, and for items.
- Date Warnings: The Date Warnings boxes tell QuickBooks to warn you when you enter (or someone else enters) a transaction with a date too far in the past or too far into the future. If you check either of the Date Warnings boxes, you also want to specify how many days are too far into the past or too far into the future.
- Closing Date setting: The Closing Date box lets you identify a date before which your QuickBooks data file can’t be changed. In other words, if you set the closing date to December 31, 2021, you’re telling QuickBooks that you don’t want any changes made to the QuickBooks data file before this date. This means that someone can’t modify a transaction that’s dated before your closing date without getting a scary warning message. It also means that someone can’t enter a transaction by using a date before this closing date. You can click the Set Date/Password button to display a dialog box that lets you specify a closing date and create the password required when someone wants to add an old transaction or modify an old transaction.
Long ago, past versions of QuickBooks let you turn an audit trail feature on and off by using the Company Preferences tab of the Accounting Preferences dialog box. All recent versions of QuickBooks provide an always-on audit trail, however, so you don’t see an Audit Trail check box accounting preference anymore. An audit trail, by the way, simply keeps a list of who makes which changes to transactions. Accountants, predictably, love audit trails. Audit trails enable someone, such as your CPA or an Internal Revenue Service auditor, to come in after the fact and figure out why an account balance is what it is.