Quicken Budget Report using Accrual Basis
Dave4252
compared to budgeted amounts) on an accrual basis. Can this be done
in Q2006? Could I do it by upgrading to Quicken Home & Business 2010?
TomYoung
Yes, it can be done in Q2006. Not matter what anybody says, Quicken
is essentially a double entry system that can accommodate most any
accounting entry you want to make.
Probably most people maintain their accounts on a cash basis, meaning
that no accounting entry is made until cash moves. Quicken encourages
you to do your accounting on a "semi-accrual" basis by providing
accounts styled as "credit accounts", a form of liability account, and
by supporting these accounts with automatic downloads. If you enter
each and every credit card charge in the related credit card account
you're performing accrual accounting with respect to these accounts.
That is, you're creating expenses and assets *before* cash moves,
i.e., before you pay the monthly credit card statement.
To expand this to full accrual basis you need to create "asset" and
"liability" accounts as needed. I, for example, have a receivable
accounts to capture my wife's bills for her independent contractor
teaching and for various "prepaid" expenses such as annual home
owner's insurance. In the same vein I create liability accounts that
capture true liabilities before I end up funding them.
You only need to create a Budget Report that pulls from *all* the
relevant accounts the create a true accrual budget and a true accrual
actual.
Tom Young
Mr.Jan
I agree with Tom but my approach is a bit different (I think).
I post the accrual every bi-weekly paycheck to expense and accrual
account.
When the actual bill comes in, I pay it (cash,check, or credit card
account) and post the offset (dr) to the accrual account.
If the expense is higher than my accrual, I post the difference to
expense. If it is lower, I reverse part of the first expense/accrued
posting.
I run my budget report against my expense account which starts out as
the same as my accrual and then becomes the actual expense when the
bill arrives.
Mr. Jan
Dave4252
Thanks. My main concern is dealing with prepayments sent to me for a
job that occurs in the following fiscal year. I am trying to get the
prepayments to appear in the same year as the job. Similar to your
suggestion, I set up a Receivables Account and created invoices for
these prepayments. Now I've made the invoice date the same as the job
date, and my Quicken budget report shows the prepayments in the same
year as the job.
Problem solved, except for two quirky things:
1. I had to refund one of the prepayments. The refund occured in the
same year as the prepayments. When I do an Itemized Category report
for the prepayment year on cash basis, the refund amount is added to
my other received amounts (not subtracted).
2. When I do an Itemized Category report for the job year on cash
basis, the prepayments disappear (as they should), but they are still
included in the Total Amount, with the error in the refund amount
described in point 1.
I suspect I should avoid using cash basis reports if I am using the
Business features in Quicken.
Robert Neville
> Not matter what anybody says, Quicken is essentially a double entry system
Please expand. In every double entry system I've ever used, you *must* assign an
entry to two accounts - and that doesn't mean two bank accounts. Quicken will
allow you to enter transactions all day long without enforcing this rule.
TomYoung
I looked up "Business features" in my Quicken 2007 Deluxe help file
and read the following : "If you purchased Quicken Home & Business,
you can track personal and business accounts in the same Quicken
file." So, it sounds like you're using Quicken 2006 Home &
Business?
I don't have Quicken H&B so I can't directly help you do what you want
to do, but I can discuss the accounting and how I'd work your
situation in Quicken 2007 Deluxe. (Briefly reading the help page that
deals with "Business features" it sounds like Q H&B enhances
"ordinary" Quicken, such as adding subsidiary ledgers that make it
easier to track certain detail like Accounts Receivable and Accounts
Payable and also provides support for the generation of Invoices, and
so on. Not to worry, it's all double entry accounting.)
If you're sending out invoices for prepayments on jobs to be performed
at a later date the essential accounting is a debit (increase) in your
"accounts receivable" account and a credit (also an increase) in a
*liability* account, *not* a revenue account; the liability might be
called "prepayments received" or "deferred revenue." The subsequent
receipt of cash debits (increases) your cash account and credits
(decreases) your accounts receivable account. All these entries
affect balance sheet accounts, not income and expense accounts
("categories" in Quicken-speak), so you can do away with the
finagling of the dates on your invoices. The date on the invoice
should reflect when you sent out your bill, to allow a proper aging of
accounts receivable. The date on the invoice has nothing to do with
the recognition of revenue because the accounting reflecting the
mailing of the invoice never touches the P&L.
If you refund a client's prepayment before you perform the job the
accounting entry is a debit (decrease) in the liability account
("prepayments received" or "deferred revenue") and a credit (decrease)
to the cash account. Again, no P&L effect to this entry so it will
never show up on an accrual basis P&L.
When you actually earn the money, i.e., perform the work, the
accounting entry is a debit (decrease) to your liability account and a
credit (increase) to whatever revenue account you're using, like "Job
Revenue." This is the only accounting entry that will show up in your
P&L, as it should, and *when* it shows up in your P&L is entirely
dependent on when you make the accounting entry.
Using only the accounts and categories I've mentioned above, I'd set
this up in Quicken 2007 Deluxe by inserting budget amounts in the Job
Revenue category by month, and then creating a budget report that
pulled its information from the accounts receivable and deferred
revenue accounts.
Tom Young
TomYoung
Quicken gives you "Flexibility" in this regard. If you enter a check
in your bank account and don't assign a category (Quicken-speak for an
account that gets reflected in the P&L statement, not the Balance
Sheet) Quicken assigns a category called "uncategorized. There's a
warning when you do this, but you can turn this warning off. The
category "uncategorized" shows up as a line item in an "Income/Expense
by Category" report and as a reduction in "Overall Total" (i.e., net
worth) in a "Net Worth" or "Account Balances" report.
If you write a check in your bank account and charge it back into the
same bank account the entry properly doesn't show up in a "Income/
Expense by Category" report (no "category" has been affected) but does
show up as a reduction in "Overall Total" (i.e., net worth) in a "Net
Worth" or "Account Balances" report. In this instance you've in
effect made a direct entry to equity. Debits always equal credits,
the books always balance.
Tom Young
Tom Young
Dave4252
>
> I looked up "Business features" in my Quicken 2007 Deluxe help file
> and read the following : "If you purchased Quicken Home & Business,
> you can track personal and business accounts in the same Quicken
> file." So, it sounds like you're using Quicken 2006 Home &
> Business?
>
> I don't have Quicken H&B so I can't directly help you do what you want
> to do, but I can discuss the accounting and how I'd work your
> situation in Quicken 2007 Deluxe.
I am using Quicken 2006 XG. I made a copy of my Quicken file with the
Business Centre inactive, to try your method. Now when I deposit a
prepayment that will be carried over to the next year, I enter the
Quicken category as a transfer to the liability account: "Prepayments
Received". When the job is done, I make an entry decreasing
"Prepayments Received" to zero, using the category I've assigned to
that income stream. So far, my reports look OK.
Have I done what you intended?
TomYoung
Poifect!
I'm not sure what the effect of having Business Centre inactive is but
I'm going to go out on a limb and say that if elements of Business
Centre are important to you (generation of invoices? AR tracking?
Something else?) you most likely can get the same results with
Business Centre active. Quicken is flexible enough in its reporting
that you should be able to prepare budgets and generate reports on a
full accrual basis. Probably the most difficult part of the exercise
is setting up the reports correctly since the accounting - as you can
see - is pretty darn simple.
Tom Young
Dave4252
>
> - Show quoted text -
This is a lot simpler than using the Business Centre. Thanks.