Melissa Melvin 2 years, 11 months ago
chart of account inquiry
Thank you so much for your videos. I have worked in QB for a long time, but am not an accountant. My husband has a business and I have some questions regarding the chart of accounts. In Pauls Plumbing you used Service/Income Account. However, my husband is in the sign industry. He fabricates signs, buys signs wholesale to buy to customers, etc. AR vs AP Accounts Vs Income. I am confused on. AR is account receivable, but is this the right place to say Labor for installation? He installs, buys, sells, and fabricates. Some jobs are mostly labor like vinyl on window and some are huge jobs with a product (sign) and labor. I hope I am not confusing you, but I need to know how to set up when we receive payment from a customer does it go in as income not asset and income not AR? Thanks for any help with this.1 Reply
Crystalynn SheltonParticipant2 years, 11 months ago
Hi Melissa, so glad you like the QuickBooks tutorial videos! You’ve asked some really great questions.
I have provided a link to the QuickBooks video tutorials that will help you complete the steps I have outlined in my responses below. If for some reason the links don’t work, just type the topic into the search field on our website.
How to set up products and services in QuickBooks
How to create invoices in QuickBooks
How to create sales receipts in QuickBooks
How to receive payment in QuickBooks
Based on the information you have provided, I have provided my response to your questions by dividing them into 3 groups:
Setting up Service Items, Product Items and Accounts:
Set up installation and fabrication as service items in QuickBooks. Link them to an Income account called Service Income. You may have to create this account if it is not already on your chart of accounts list.
Set up the signs as non-inventory items in QuickBooks. Link them to Sale of product income account. You may have to create this account if it is not already on your chart of accounts list.
If you charges sales tax for the signs, set up the sales tax rate as an item in QuickBooks. Link it to a sales tax payable account. You may have to create this account if it is not already on your chart of accounts list.
Invoicing and Receiving Payment from Customers:
If your husband provides his services and then the customer pays at a later date, then create an invoice in QuickBooks selecting the appropriate items you created (i.e. installation, fabrication, signage).
When the customer sends in payment for the invoice, you will receive the payment against the open invoice. Behind the scenes, QuickBooks will debit and credit the appropriate accounts.
If your customers pay you immediately after your husband provides the service then create a sales receipt (not an invoice), select the appropriate items you created (i.e. installation, fabrication, signage).
Behind the scenes, QuickBooks will debit and credit the appropriate accounts.
Purchase of Signs from Wholesaler:
When you purchase signs, you can put them to an account called Supplies or create a more specific account called Signs and it should be set up as an expense account.
Good luck to you and thanks for reading!