fnsacc406 set up & operate a computerised accounting...

FNSACC406

Set Up & Operate a Computerised Accounting System User Guide

ISBN Number: 978-1-925527-75-9

Part Number: 281UG

Version: Xero

AUTHOR – Kerryn Maguire

Kerryn has been working with accounting software products for over twenty years. Originally working from 1994 as an accountant with small business when accounting software became mainstream. Kerryn then focused on providing consulting and training services to small business in particular. Expanding from this into providing curriculum based resources to TAFE and private RTOs. From this she established Microstar Publishing and more recently incorporated OfficeLink Learning to provide a wide range of resources for the Accounting and Business Services Certificate courses. Kerryn has a long association with many TAFEs and RTOs across Australia. Kerryn’s fundamental aim is to provide resources that are easy to understand while providing a practical application of skills acquired. Kerryn also co-authors two titles for Cambridge University Press which are in their 4th Edition – first published in 2000. Kerryn has considerable experience and knowledge:

Bachelor of Applied Science Mathematics Diploma of Education Graduate Diploma of Accounting CRI: Criterion Referenced Instruction Member of Institute of Certified Bookkeepers Member of VELG

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All terms or products mentioned in this manual that are known to be trademarks have been

acknowledged. OfficeLink Learning cannot attest to the accuracy of this information. Use of a

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Software Description

This course has been designed for users of the Xero software. All attempts have been made to

provide current information. Instructions are correct at the time of writing.

The case study in this material uses fictional information.

Working with the Chart of Accounts

© Copyright 2017 OfficeLink Learning 51

Unit 4


Lesson outcomes

By the end of this unit you will be able to:

set up the Chart of Accounts

list account classes and types

change account information

move accounts

delete accounts

enter account opening balances

print a Trial Balance report


52 © Copyright 2017 OfficeLink Learning

The Chart of Accounts

A Chart of Accounts contains a list of all the accounts required to record, track, organise and report on your company’s financial activity.

In Xero all accounts are in one of these five Classes: Assets, Liabilities, Equity, Expenses and Revenue.

In Xero these five classes are further divided into 17 specific account types. Numbers are associated with the accounts but they do not determine grouping – the account type determines this.

Account Types

The Account Type determines the layout of reports

Account Class Description Examples Account Type

Asset Items owned by the business.

Cash at bank, debtors, motor vehicles.

Bank

Current Asset

Inventory

Prepayment

Non-current Asset

Fixed Asset

Liability Items owed by the business.

Creditors, Visa, bank loans.

Current Liability

Liability

Non-current Liability

Equity The owner’s share in the business.

Capital, drawings. Equity

Revenue Money earned from sales.

Sales, service income.

Sales

Revenue

Other Income

Expense Costs to run your business. Costs associated with producing a product.

Wages, rent, advertising, stationery. Raw materials, labour costs.

Direct Costs

Expenses

Overhead

Depreciation



The Chart of Accounts

1. Click on Settings Chart of Accounts

The default Chart of Accounts is listed. There are no Bank accounts to begin with. You must enter these yourself – we will cover this later in this unit.

Each Account has a Code, Name, Type and Tax Rate.

You can modify this chart to suit your requirements by deleting, adding, changing the name, code, tax rate etc. Some accounts cannot be changed as they are crucial to proper working of the system – these accounts are indicated with a small padlock symbol.



Liabilities

2. Click on the Liabilities tab to view just those Account types.

3. Notice the Padlock next to the Accounts Payable account and the GST account.

4. Click on the line of Accounts Payable which will display the Edit Account Details window

5. Click on Show on Dashboard Watchlist so a tick appears

6. Click on Save

Show on …

Accounts payable



Changing Account Details

When Clara’s file was set up a set of accounts was selected to automatically create the many accounts required in general. This Chart of Accounts needs to have some existing accounts changed or deleted in order to meet the specific needs of Clara’s business.

Information such as account name, account type, code, description and tax rate can be changed.

Change an Account Name

1. Click on the Assets tab in the Chart of Accounts.

2. Click the line for Office Equipment to display details.

3. Click into the Name box at the start of the text, delete the text Office and then type Production so the name is now Production Equipment.

4. Click into the Description box at the start of the text, delete the text Office and then type Production to match the Name.

5. Click Save.

Name

Description



Your window should now look like the following:

6. Click on the Name for account Less Accumulated Depreciation on

Office Equipment

7. Edit the Name and Description to replace Office with Production

8. Click on Save



Change an Account Code and Type

When you change an account code, all entries that have ever been entered will change as well for all new reports. Any reports that have already been published will not change. In this example we will change the 425 Freight and Courier Account Code to 315 and change the Account type to Direct Costs.

1. Click on the Expenses tab in the Chart of Accounts

2. Click on the account 425 Freight & Courier

3. Click into the Code box and type 315

4. Click on Account Type droplist button and click on Direct Costs

Your window should look like this.

5. Click Save to save your changes.



Change Tax Rate for an Account

All Accounts have a Tax Rate so that the GST or whichever tax is appropriate is calculated and accounted for. Then, when you come to do reporting on GST and other taxes, most of the work is already done for you. Clara has the premises cleaned by a business that while registered with an ABN is not registered for GST as their annual turnover is less than $75,000 ex GST. Therefore the bills from this cleaning business do not include GST so Clara cannot claim GST credits for these expenses.

1. Click on the Expenses tab – you will see the Account Cleaning currently has a Tax rate of GST on Expenses

2. Click the Name link Cleaning

3. Click the Tax droplist button and select GST Free Expenses

4. Click Save to save your changes.

NOTE: If Clara changes who does her cleaning and they charge GST she would need to change the Tax rate back to GST on Expenses.

Also, if Clara had a mixture of Cleaning expenses some with GST and some without then it would be better to have the GST on Expenses tax type and just change individual expenses where no GST tax applies.

Tax



Create a New Account

The default set of accounts provided for Clara just has the one main Sale Revenue account. We will add another account so the sales in the shop are separated from sales to wholesale customers. We will also create another income account for sales to catering events. While Xero does not have sub accounts this is one way we can group accounts in reports.

1. Click on Settings Charts of Accounts if necessary to display it

2. Click on the Add Account button

3. Click on the droplist button for Account Type

4. Scroll down and click on Sales

5. Click into the Code box and type 210

6. Click in the Name box and type Sales Wholesale

7. Click in the Description box and type Sales to wholesale customers who sell the products in their stores or business

8. Check that GST on Income Tax Rate appears in the Tax box

9. Click on Save

Now to add another account for Sales to catering events.

10. Click on the Add Account button

11. Enter the following details:

Account Type: Sales

Code: 220

Name: Sales Catering

Description: Sales for catering and supply to events

Tax: GST on Income

12. Save the account



Practice Exercise 4.1: Edit Account Name and Type

1. Click on the original Sales account

2. Edit the account so the Name is now Sales Shop

3. Click on the Account Type droplist button scroll down and select Sales

4. Click into the Description box and edit the text to read Sales from Shop only

5. Click on Save

Practice Exercise 4.2: Add a New Account

Clara provides EFTPOS transactions and is charged fees by her bank so an Account must be created to record these. Merchant Fees are subject to GST so they are different to normal Bank Fees which are GST Free.

1. Click on Add Account

2. Click on Account Type droplist button, scroll down and select Expense

3. Click into Code and type 405

4. Click into Name and type Merchant Fees

5. Check that GST on Expenses appears in the Tax rate box

6. Click on Save



Practice Exercise 4.3: Add a New Account: Starting Inventory

Clara has quite a bit of stock when she starts using Xero for the Sugar Pie business. She wants to track when it is used in sales. Xero has a special Inventory type account that it uses to track inventory however when initially entering the stock we need to use an Asset account. You will see later how this works. For now lets add an Asset account to be used to enter the Opening balance of Inventory.


2. Click on Account Type droplist button, scroll down and select Current Asset

3. Click into Code and type 635

4. Click into Name and type Inventory Adjustment

5. Click into Description and type Inventory adjustment for opening balances

6. Check that BAS Excluded appears in the Tax rate box

7. Click on Save



Deleting an account

You can only delete an account from the Chart of Accounts if the account fits the following criteria:

The account has not been used in any transactions

The account is not a system or locked account

You can archive an account if you cannot delete it.

1. Click on Settings Charts of Accounts if necessary to display it

2. Click on the tab All Accounts

3. Scroll down to the Account 494 Travel – International and click on the box to the left to select it

4. Scroll back up to the top of the Chart

5. Click on the Delete button

6. Click on OK to the prompt that appears.

Delete



Revision Exercise 4.4

1. What is the purpose of customising the Chart of Accounts?

...................................................................................

...................................................................................

...................................................................................

2. Explain the reason for applying tax rates to accounts.

...................................................................................

...................................................................................

...................................................................................

...................................................................................

...................................................................................

...................................................................................

...................................................................................



Add a Bank Account

Bank accounts are not created automatically with the Chart of Accounts. You add these with a current balance. When you use the Add Bank Account it is automatically added to the Chart of Accounts as an Asset account with the Account type Bank Account.

Bank accounts automatically appear on the Dashboard.


2. Click on Add Bank Account

3. Click on ANZ to put it in the Find your bank box

4. Enter the following details for the Bank Account

5. Click on Continue

Add Bank Account



6. Click on Skip – we will not download the form at this point

The Business Account will appear in the Chart of Accounts.



Adding a Credit Card Account

You can setup the Credit Card account as a Bank account so you can reconcile it. You can also record transfers to the Credit Card from other Bank Accounts.

Credit Cards are added as Bank accounts type which are Asset accounts even though they are liabilities. When used in Reports we can customise the report so they appear in Current Liabilities.

1. Click on Add Bank Account to add another Bank account

2. Start to type ANZ in the Find Your Bank box

3. Click on ANZ(AU) Personal Credit Cards

4. Enter the following details for the credit card

5. Account Name: ANZ Credit Card

6. Account Code 110

7. Enter the 9876 as the last 4 digits of the credit card

8. Click on Continue then click on Cancel – we will not be getting direct bank feeds



Setting Up a Petty Cash Account

A Petty Cash account is for small cash payments made from time to time for incidentals. You can setup the Petty Cash account as a Bank account so you can reconcile it. You can also record transfers to Petty Cash from other Bank Accounts.

1. Click on Setting General Settings Chart of Accounts

2. Click on Add Bank Account

3. Type Petty Cash in the Find Your Bank box and click the link Add it anyway

4. Enter these details:

5. Account Name: Petty Cash

6. Account Code: 120

7. Account Type: Other

8. Account Number BSB: This can be anything but enter 123123 for Clara

9. Account Number: Petty Cash

10. Click on Save

So we have added bank accounts to complete the Chart of Accounts – for now anyway. The next step is to enter Opening Balances for these accounts.



Entering account opening balances

The opening balances of various accounts need to be entered as at the point of conversion from the previous method of recording transactions. For example Clara probably has a balance for Accounts Receivable, Accounts Payable and the balances of the various bank accounts at the very least.

If you bought Xero and then began your data entry from the first day of business, all your opening account balances would be set to zero. Otherwise, you will need to add your opening balances from the conversion date:

The balances for all the accounts in the Chart of Accounts – many of these will be 0.00

All outstanding Sales transactions – Accounts Receivable

All outstanding Purchase transactions – Accounts Payable

Opening balances for Inventory

GST owed to or to be received from ATO

If your business was operating before the conversion month, many of your accounts will already have dollar values. For example, you may have $9,900 in your cheque account. You also know that you have sold $6,600 worth of goods, and that your customers still owe you the money for these goods. This amount needs to be allocated to your Accounts Receivables account.

The Balance Sheet for your data file must eventually balance when completing the opening balances entry.

Equity = Assets – Liabilities

OR

Assets = Liabilities + Equity

It is possible to start using the Xero data file and not have all your opening balances entered. Any imbalances are allocated to the Historical Balancing Account.

In practice you should contact your accountant who may be able to provide the opening balances.



Assets

Code Account Name Opening Balance

100 ANZ Business Bank Ac $10,500

110 ANZ Credit Card -$600

120 Petty Cash $500

635 Inventory Asset $4,700

710 Equip at Cost $25,000

610 Accounts Receivable $6,600

Liabilities


800 Accounts Payable $4,500

820 GST $2,200

900 Bank Loan $30,000

Equity


970 Owner A Share Capital $10,000

Note: Historical Balancing account should be 0.00 if you have entered amounts correctly.



Setting Up Account Conversion Balances

The Conversion Date is 01/07/2017 so balances of Accounts at 30/06/2017 are required.

1. Click on tab Settings General Settings

2. Click on Conversion Balances

At the very least Xero assumes you may have a balance for each Bank account, Accounts payable and Accounts receivable.

3. Click on the Add a new line button – we will add some other accounts first.

4. Type 635 – the code for the starting Inventory Starting Asset account

5. Click on 635-Inventory adjustment to put it into the line

6. Click into the Debit column and type 4700 – the balance of Inventory

7. Tab to set it

Add a new line



8. Click on Add a new line

9. Click on the droplist button and scroll the list until you can see 710- Production equipment

10. Click on it to select it

11. Click in the Debit column and type 25000 then Tab to set it


13. Click on the droplist button and scroll the list until you can see 820- GST

14. Click on it to select it

15. Click in the Credit column and type 2200 then Tab to set it

16. Continue to enter the accounts and balances for 900- Loan and 970- Owner A Share Capital

17. Click into the Debit column for 120-Petty cash and type 500 then Tab to set

18. Click into the Credit column for 110-ANZ Credit Card and type 600 then Tab to set

19. Be very careful to click on Save

We will look at entering an accurate Bank balance, and then entering Accounts Payable and Accounts receivable. These are not just a simple entry of a value.



Bank Account Opening Balance

This is an important step in setting up. Keeping bank accounts reconciled is an important aspect of keeping accurate business records. The most common reason an actual bank account will not be the same as a balance in accounting books is unpresented cheques. Another reason is undeposited income. While bank cheques are not so commonly used as they were a few years ago it is still an important part of bookkeeping to understand. When you first create a company file, it is possible that you will have unpresented cheques and uncleared deposits that will appear on future bank statements in the coming months.

You need to enter the unpresented cheques and deposits that existed at your conversion month into the company file. These cheques and deposits will then be displayed in your Reconcile Accounts window ready to be ticked off as they appear on subsequent Bank Statements.

As at 1 July 2017 Sugar Pie had two unpresented cheques and no uncleared deposits. These transactions need to be entered into an account that when combined with the bank account balance equates to the books bank balance.

Sugar Pie

Bank reconciliation as at 1/07/2017

Balance as per Bank Statement $10,800

Less Unpresented Cheques

Cheque 1010 $125

Cheque 1012 $175 $ 300

Plus Deposits not yet credited ______

Balance as per Business Cheque Account $10,500

The actual bank statement shows that there is $10,800 in the cheque account, whereas Sugar Pie’s own figures show they have $10,500 (this balance assumes the cheques have been presented)



Setting up the Bank Account

In Xero getting the Bank balance correct involves these following steps:

1 Entering the Bank account opening balance with the same balance as the actual Bank Statement from the bank

2 Creating a Liability account called Unpresented cheques with a balance that equals the value of all unpresented cheques – make a list of each unpresented cheque and amount

3 Create an Asset account called Uncleared deposits with a balance that equals the value of all uncleared deposits – make a list of each uncleared deposit – payee and amount

4 Add together the actual balance of the bank account, unpresented cheques and uncleared deposits – it should equal the balance of the bank account in the books

5 When a cheque is presented enter it in the Spend Money –covered later

Step 1 Enter the Business Account Opening Balance

The actual Bank Balance re the Bank Statement is 10,800.

1. Click into the Debit column for Business Account and type 10800 and Tab to set

2. Click on Save to save the balances



Step 2 Create Unpresented Cheques Liability account and enter balance

Sugar Pie has unpresented cheques (number 0001010) for $125 and another (number 0001016) for $175 totalling $300.



3. Enter the following data:

4. Account Type: Liability

5. Code: 101 so it sits with the Bank account it relates to

6. Name: Uncleared cheques

7. Description: Uncleared Cheques for Business Bank Account

8. Tax: BAS Excluded

9. Click on Save

Now to enter a balance for the account.

10. Click on Settings General Settings Conversion Balances


12. Type 101 and then click on the account Uncleared cheques then press Tab

13. Click into the Credit column and type 300 and Tab

14. Click on Save



Step 3 Create Uncleared Deposits account and enter Balance

Clara does not have any uncleared deposits but if there were an Asset account with code say 102 would be created with a Debit balance equal to the amount of uncleared deposits.

Step 4 Check Bank Statement Balance against Books Balance

Add together the balance of the bank account, unpresented cheques and uncleared deposits – it should equal the balance of the bank account in the books.

Sugar Pie

Account balances

Business Account $10,800

Unpresented Cheques -300

Uncleared deposits 0

Balance as per Business Account $10,500

Step 5 When a cheque is presented enter it in the Spend Money

We will cover this later in the unit on Bank Reconciliation.



Conversion Balances Accounts Receivable

Accounts Receivable are the money still owed to you by customers from the previous accounting period.

1. If necessary, click on Settings General Settings Conversion Balances

2. Click into the Debit column for Accounts Receivable and type 6600, press TAB

3. Notice that only 4,500 to go in the Adjustments balance at the base of the box – this is the balance for Accounts payable – we will enter that shortly

4. Click on Save

Invoices and Credit notes need to be added up to the value of $6600.

5. Click on Add Invoice

Add Invoice



6. Click into the To box and type The Pier Events

7. Click on the + Add “The Pier Events’ as a new contact

You will be able to add more details for the Contact later.

30 Jun 2017 will already be entered in the Date box.

8. Click into the Due Date box and type 12 Jul 2017

9. Click into the Invoice # box and edit the number to be INV-00123

10. TAB to the Reference box and type PO#5112

11. Click into the Description box and type Cakes supplied for End of Financial Year event, press Tab

12. Type 1 in the Qty box and Tab

13. Type the Unit Price 4400 and Tab to the Account box

14. Type 220 and click on Sales Catering to use that account

15. Click on the Save droplist button and click on Save & add another



16. Enter the following preconversion sales.

Customer Hamilton Homes Ebb and Flow Café St Jean

Date 30 Jun 2017 17 Jun 2017 21 Jun 2017

Due Date 11 Jul 2017 23 Jun 2017 5 Jul 2017

Invoice# Inv-00119 Inv-00110 Inv-00118

Reference PO# 105 Jean

Description Dessert items for End of Financial Year party

Various cakes Cakes for café

Unit Price 1100.00 440.00 660.00

Account 220 Sales Catering 210 Sales Wholesale 210 Sales Wholesale



17. Enter the last Invoice and click on Save

You will be prompted when your Total Sales Invoices match the Total Accounts Receivable.

18. Click on Next

Prompt

Matched

Next



Conversion Balances Accounts Payable

The next step is to enter the Accounts Payable totalling $4,500.

1. If necessary, click on Settings General Settings Conversion Balances

2. Click into the Credit column for Accounts Payable and type 4500.00, press TAB

3. Notice that the Adjustments balance at the base of the box is now 0.00

4. Click on Save

Bills and Credit notes need to be added up to the value of $4500.

5. Click on Add Bill

Add Bill

Accounts Payable balance

Save



6. Click into From and type Boxed Up Packaging and press TAB

7. Enter the Date as 5 Jun 2017 and Due Date as 5 Jul 2017

8. Enter Reference as Inv# 11055

9. Click into Description and type Cake boxes with logo printing

10. TAB to Qty and type 1

11. TAB to Unit Price and type 1650.00

12. TAB to Account and type 310 and TAB

13. Click on the Save button

The balance is still out by $2,850.

14. Click on Add Bill



15. Click into From and type Panorama Publishing and press TAB

16. Enter the Date as 1 Jun 2017 and Due Date as 14 Jun 2017

17. Enter Reference as D11051

18. Click into Description and type Advertisement in Coastal Living Magazine

19. TAB to Qty and type 1

20. TAB to Unit Price and type 2850.00

21. TAB to Account and type 400 and TAB

22. Click on Save



23. This time Total Bills and Total Accounts Payable matches - Click on Next

The Conversion Balances screen is displayed. You should check that everything balances. You can come back to this screen at any time and make changes or add more accounts.

NOTE: In practice if you don’t have all the balances you can still continue to use Xero to record transactions.

24. Click on Save

Next



Printing a Trial Balance Report

The Trial Balance report displays the total debits and credits for each selected account for the last completed month and for the year to date.

Print a Trial Balance Report

In the following example, we are going to print a Trial Balance to view the opening balances we have entered for Sugar Pie.

1. Click on Reports All Reports

There is an extensive range of reports. The Reports highlighted with a blue star are in the Favourites section of the Reports menu.

2. Scroll if necessary down to the Accounting section

3. Click on the Trial Balance report

4. Click on the Date droplist button and use the Prev and Next button to display the month July 2017 then click on 1

5. Click Update.

6. Click on Publish



7. Click on Publish again

The report is listed in the Published tab under the Reports tab. You will learn more about reports later.



Skills checklist

Tick the skills that you have learnt in this unit.

Skills

Set up the Chart of Accounts

List account types

Change account information

Move accounts

Delete an account

Enter account opening balances

Publish a Trial Balance report

Setting Up Contacts Records


Unit 5


Lesson outcomes


create a contact

create profile information

set selling information

set default credit and tax terms

set payment details

delete a contact



Overview

The Contacts feature is a database that stores information about your customers, suppliers and employees.

When you create a card you can enter information such as contact details, credit terms and tax terms. When you choose a Contact in a transaction, the information stored within it is automatically retrieved, helping speed up your data entry.

Types of contacts

Use Customer contacts to complete sales quotes, orders and invoices.

Use Supplier contacts to complete supplier quotes, purchase orders and bills.

1. Click on the tab Contacts All Contacts

Some basic contacts have already been entered when we set up the Accounts Payable and Receivable. We can edit these contacts to include more details.



You can put as much or as little detail as you need in a Contacts record. As an example we will look at a Card already set up in the Demo Company.

2. Click on the My Xero menu at the top left

3. Click on Demo Company

4. Click on the tab Contacts All Contacts

5. Click into the Search box and start to type Bayside

6. Click on the contact Bayside Club

My Xero

Demo Company



7. Click on the Edit button to view the contact with some details filled out as shown below

8. Click on Save to close the Edit window

Edit



Add a New Contact

Let’s add a couple of contacts to the Sugar Pie data file.

1. Click on the My Xero menu

2. Click on Sugar Pie

3. Click on the + symbol in the menu

4. Click on Contact to add a New contact

5. Start typing Stevenson – you can see suggestions appearing

6. Continue to type Stevenson & Co

7. Click on + Add “Stevenson & Co’ as a new contact

Add New

Contact



8. Enter the following details in the Contact Information section



9. Scroll down to the Financial Details section – you can enter settings that occur for most sales or purchases for this contact

10. Click on Save

Credit Terms



To go back to the main Contacts page:

1. Click on Contacts or the tab Contacts All Contacts

You can see here that now there are 7 Contacts but only 4 Customers and 2 Suppliers. These values for Customers and Suppliers are determined automatically when an invoice is created with the Contact creating a Customer or a Bill is entered from a Contact – creating a Supplier.



Setting up Default Terms for Contacts

Before you enter a lot of contacts you can save yourself some time by setting your default terms for sales. You could also enter the general terms you usually have for Bills you receive.

1. Click on Settings General Settings Invoice Settings

2. Click on Default Settings

3. Enter details as shown here: you can still customise Payment Terms for specific contacts

4. Click on Save



Practice Exercise 5.1: Create a Contact

1. Click on the Add icon + Contact to add a new contact for the Customer Events by Ingrid

2. Type Events by Ingrid then click on the + Add ‘Events by … to start the new contact



3. Click on the link Same as Postal Address to enter the details automatically.

4. Scroll down to Financial Details and the settings here for Sales

5. You do not need to enter details for terms here – the standard default terms will be used unless you want to set them as something different for this customer

6. Click on Save



Edit an Existing Contact

When you add a contact on the run like we did when entering the opening balances of accounts payable and receivable, you can return to the contact later and edit details.

1. Click on Contacts All Contacts to display your current list of contacts

2. Click on the name Boxed up Packaging

The summary of what’s been happening with the Contact is displayed.

3. Click on the Edit button

4. Enter the following details into the Contact boxes

Email: [email protected]

Phone: 02 9852 2589

Website: www.boxedup.com

Postal Address: 1 Alto Street, Paddington, NSW 2021

Street Address Same as Postal Address

Purchase Settings: Tax Inclusive and Account 310 – Cost of Goods Sold

5. Click on Save

6. Click on Contacts to return to the main list of Contacts

Edit



Search and Find Xero offers in-depth searching of the Contacts with search logic such as ‘start with’ and ‘contains’ in the Name field, Email field or Account number if you have used that field.

1. Click into the Search box and type E

Only Contacts that start with E are listed

2. Continue and type v so Ev is in the Search box

Contacts with ev anywhere in the name are listed

3. Delete all text in the Search box and type reception

A Contact with reception as part of the email address is displayed

Clear Search

4. Delete all text in the Search box to display all Contacts again

Search box



Sort Contacts

1. Click on the Sort by Name link

2. Click on They owe and the arrow pointing down

3. Click on the Sort by They owe link and click on Name and the upward arrow to return the list to Alphabetical

They owe



Delete/Archive a Contact

You cannot delete a Contact but you can Archive a contact you no longer do business with.

Archived Contacts and associated transactions can still be viewed.

Archived Contacts and associated transactions are still listed in reports.

Transactions for a Contact will not be deleted.

1. Click on the Select box for the Contact to be archived so a tick appears.

2. Click on the Options button and click on Archive

3. Click on Archive to confirm the action

The Contact is removed from the All Contacts list and put into the Archived list as shown on the following page.

Select

Options

Archive

Archive



Restore an Archived Contact

4. Click on the Archived group to view the Contact details

5. Click on the Name of the Contact

6. The Summary screen for the archived contact appears

7. Click on the Restore button

8. Click on the Restore button to complete the restoration

9. Click Contacts to return to the list of Contacts.

Archived

Restore

Restore



Skills checklist


Skills

Create a Contact

Create profile information

Set selling information

Enter tax and credit terms

Set payment details

Archive a Contact

Restore a Contact

Creating Items


Unit 6

Creating Items

Lesson outcomes


create an item

link accounts to items

enter buying and selling details of an Item

enter inventory opening balances

create inventory reports

create a service item.

Creating Items


Overview

Inventory Items are good or services that you buy and sell. An item can be a physical unit, such as a cake, or it can be a service, such as Event setup - one hour of labour.

When you create an item, you can enter information such as:

the item’s selling price

unit of measure.

Items must be linked to accounts.

If you mark the ‘I purchase this item’ then it must be linked to a cost of sales (or expense) account. When you use the item the amount is automatically allocated to the correct account, for example, 310-Operating Costs.

If you mark the ‘I sell this item’ then it must be linked to an income account. Again, when you use the item the amount is automatically allocated to the correct account, for example, 210 Sales – Catering.

Inventory can be tracked or untracked.

If you mark the ‘I track this item’ then it must be linked to an inventory asset account. Likewise again the inventory list is automatically updated when you buy or sell the item, for example, 630 - Inventory.

There are four basic steps involved in creating an inventoried item:

1 Enter the item with an Item Code and Item name.

2 Linking the item to the appropriate accounts.

3 Setting up the buying details.

4 Setting up the selling details.

Creating Items


Create a Simple Inventory Item for Sale

Each item has both a code and a name. If you begin similar types of items with the same number, it helps you to keep your items list organised.

1. Click on tab Accounts Inventory

2. Click + New Item

3. The Item Information window appears

4. In the Item Code field, enter BT001 then press TAB. This code will identify the item

5. In the Item Name field, type in Blueberry Custard Tart

6. Clear the tick from I purchase this item

7. Check that a tick appears in I sell this item

8. Type 4.00 in Unit Price

9. Click on the droplist button for Sales Account and click on 200-Sales Shop

10. Check that the Tax Rate is GST on Income


Creating Items


Practice Exercise 6.1: Create Simple Inventory Items for Sale

1. Add the two items in the same way

2. Click on Save to return to the Items list.

Creating Items


Add Simple Inventory Items to be Purchased

You can add items that you purchase just to make it easier to fill out order forms.

1. Click + New Item

2. The Item Information window appears

3. In the Item Code field, enter FLWT5000 then press TAB. This code will identify the item

4. In the Item Name field, type in White Flour 5 Kg Bag

5. Check that a tick appears for I purchase this item

6. Clear the tick from I sell this item

7. Type 5.00 in Unit Price

8. Click on the droplist button for Purchases Account and click on 310-Cost of Goods Sold

9. Check that the Tax Rate is GST on Expenses


10. Click Save droplist button and click on Save & add another

Creating Items


11. Add the following item with Item Code SGWT5000 for Item Name White Sugar 5 Kg Bag. The Unit Price is 6.50. The Purchases Account is 310 – Cost of Goods Sold.

12. Click on Save to save the item and return to the list

Creating Items


Creating non-inventory service items

Items don’t always have to be physical objects. These items are referred to as non-inventory or service items. Labour can be defined as a non-inventory item. A service item needs to be linked to an income account for tracking sales, but doesn’t need to be linked to cost of sales account or to the inventory list.

In the following example, we are going to set up one hour of setup assistance at events such as weddings and large corporate affairs.

1. Click on + New Item

2. In the Item Code field, enter LAB001 and press TAB

3. In the Item Name field, enter Labour setup – 1 hour

4. Clear the I purchase this item tick and check that a tick appears in the I sell this item checkbox

5. Click into Unit Price and type 50.00

6. Click on the Sales Account and type 220 then Tab

7. Click into the Sales Description and type Labour setup when catering for weddings and other events


8. Click on Save

Creating Items


Create a Tracked Inventory Item

Tracked Inventory works best when you a buying items and then reselling them.

Clara purchases some products from other smallbatch bakers and some items that will keep long term particularly for catering events.

Before we start we will create another account for Cost of Goods Sold that distinguishes these items from purchases for actually baking the cakes – like flour and sugar.



3. Enter the following details:

Account Type: Direct Costs

Code: 312

Name: Cost of Goods Catering

Description: For purchase of goods to be resold for catering events

Tax: GST on Expenses

4. Click on Save

Now to edit the original Cost of Goods account to be more meaningful.

5. Click on Cost of Goods Sold

6. Edit the Name to be Cost of Goods Sold Baking Supplies

7. Edit the Description to be Cost of Goods Baked onsite

8. Click on Save

Creating Items


Now to create some tracked items.

1. Click on Accounts Inventory

2. Click on + New Item

3. Enter the Item Code as BB020 and the Item Name as Belgium Chocolate Brownies

4. Click on I track this item

5. Check that 630 – Inventory is in the Inventory Asset Account box


Creating Items


Practice Exercise 6.2: Create Tracked Inventoried Items

1. Create the following items:

All are tracked, purchased and sold.

All items are subject to GST. All prices are tax inclusive.

Item Code TB030 CM010

Item Name Triple Chocolate Brownies

Salted Caramel & Chocolate Meringues

Inventory Asset Account 630 630

Cost of Sales Account 312 312

Purchase Price Inclusive of GST $2.00 $2.00

Income Account 220 220

Selling Price Inclusive of GST $3.00 $3.00

Tax Rate GST GST

2. Create the following items

Item Code LM013 VM012

Item Name Lavender & Pistachio Meringues

Vanilla & Rose Water Meringues

Inventory Asset Account 630 630

Cost of Sales Account 312 312

Purchase Price Inclusive of GST $2.00 $2.00

Income Account 220 220

Selling Price Inclusive of GST $3.00 $3.00

Tax Rate GST GST

Creating Items


Search and find items

You can now search and find your items via parts of with the Item Code or Item Name.

1. Click on the Search box and type Choco

2. Click on the Cross in the Search box to clear the search term and display all the items again (or just delete the text)

3. Type Labour in the Search box

4. Click on the Cross in the Search box to clear the search term and display all the items again

5. Type CM in the Search box

6. Click on the Cross in the Search box to clear the search term and display all the items again

Creating Items


Entering inventory opening balances If you have items in stock that you purchased before the conversion period, you need to record their opening values. In Unit 4 we entered the account opening balances for Sugar Pie. We now need to record the inventory balances to match the amounts we entered in the Inventory Adjustment asset account.

Entering inventory opening balances involves the following two steps:

1 Recording existing tracked inventory items and record stock opening balances

2 Checking stock opening balances reconcile with the account opening balances

Step 1 – Record existing inventory items and enter inventory opening balances

As at 1 July 2017 a stocktake was done. The stock adjustment amounts can be entered based on this stocktake. Because we only have a small number of items we can do it manually. If we had a large number we could import the Opening Balances with the Import function.

1. Click on tab Accounts Inventory

2. Click on the name of the Inventory item to be adjusted – Belgium Chocolate Brownies to open the Summary window for that item

3. Click on Options New Adjustment

Options

New adjustment

Creating Items


4. Click on Adjustment type droplist button and click on Increase quantity

5. Click on the Date droplist button and click on 1 Jul 2017 – the conversion date

6. Click into Adjustment or New qty on hand – either will automatically update the other – and type 300

7. Click into Cost Price and type 2.00

When you alter inventory the change in value is applied to an expense account. However when entering opening balances the adjustment needs to be to the Asset 635 Inventory Adjustment.

8. Click on Adjustment Account droplist button

9. Type 635 in the Code box

10. Type Inventory Adjustment in the Name box

The Account 635- Inventory Adjustment should appear in the Adjustment Account box

11. Click into Notes and type Opening balances of tracked inventory items

12. Click on Review Adjustment

The Review Adjustment window appears.

13. Click on Post Adjustment

Creating Items


The summary window for the item is displayed with the new values.

14. Click on Inventory to return to the Item list

15. Click on the next item Salted caramel …

16. Click on the Options button and New adjustment

17. Click on Adjustment type droplist button and click on Increase quantity

18. Click on the Date droplist button and click on 1 Jul 2017 – the conversion date

19. Click into Adjustment and type 620

20. Click into Cost Price and type 2.00

21. Click on Adjustment Account droplist button

22. Type 635 in the Code box

The Account 635- Inventory Adjustment should appear in the Adjustment Account box

23. Click into Notes and type Opening balances of tracked inventory items

24. Click on Review Adjustment

The Review Adjustment window appears.

25. Click on Post Adjustment

Inventory

Creating Items


26. Continue to enter the remaining three tracked Inventory items making sure you enter the Quantity and Cost Price correctly.

The counted Quantity value from the stocktake should be entered in the

Adjustment box.

Item no. Name Quantity Cost Price Cost Value

BB020 Belgium chocolate brownies

300 2.00 600

CM010 Salted caramel and chocolate meringues

620 2.00 1240

TB030 Triple chocolate brownies

250 2.00 500

LM013 Lavender and pistachio meringues

580 2.00 1160

VM012 Vanilla and rose water meringues

600 2.00 1200

TOTAL 2350 $4700

These steps have the effect of putting a value onto the current stock so that

when they are sold in the new year – inventory value will be reduced by the

number sold at the cost price we used.

So we have distributed the opening value of the Asset type account Inventory

Adjustment to the Inventory items and thus the Inventory type account

Inventory.

635 Inventory Adjustment ......................... 0.00

630 Inventory ..................................... 4700.00

Creating Items


Total

Step 2 – Check Inventory Conversion Balances Reconcile with the Account Opening Balances

Once you have entered the inventory opening balances you should check that the totals match the account opening balances. To do this we are going to view the Inventory Item Summary. This report reconciles the balances of your inventory asset accounts with the values of the associated inventoried items as at a particular date.

1. Click the tab Reports

2. In the Inventory section click on the More … button to display extra reports

3. Click on the Inventory Item List

4. Check the date is 1 July 2017– click Update

if necessary

4. Check that the Total figure is $4,700 – the same amount as entered into the Conversion Balances.

More

Creating Items


Skills checklist


Skills

Create an item

Link an item to a cost of sales, income and inventory asset account

Enter an item’s buying details

Enter an item’s selling details

Create a service item

Enter inventory opening balances

Create an Inventory Reconciliation report

Creating Items


Spend Money: Purchases


Unit 7


Lesson outcomes


enter Payments to suppliers through Spend Money

edit an Inventory item

create a Bill received from a supplier

pay Bills

create a batch payment

send a remittance advice

enter and use Repeating Bills

edit a Payment

view transactions in the Bank Account



Overview

Xero is all about accurate records and saving time. You don’t want to go through the process of entering every little purchase as a purchase order or bill and then paying it.

There are three methods of entering money that has been spent:

Paying Bills

Spend Money

Cash Coding

Bills are useful for purchases from Suppliers that you have an account with. Entering Bills helps you keep track of what you owe when and to whom.

Spend Money can be used to enter immediate payments, writing a cheque or using eftpos to pay expenses such as your electricity bill, telephone account, insurance payments etc.

Cash Coding is useful for recording bank charges from a bank statement or paying for fuel, or other payments that happen multiple times in a month. We will look at Cash coding in the Unit on Bank Reconciliation.

Enter payments through Spend Money

Clara has made several purchases during the month.

1. Click on the New + icon and Spend Money.

2. Click on the Business Account in the list of bank accounts then Next

New +

Spend Money

Business Account



You can add New Contacts as you go and edit their details later if needed.

3. Click on Spent as and select Direct Payment if necessary

4. In the To box type Super Stationery Suppliers then TAB

5. In the Date field type 4 July 2017 and press TAB twice

6. In the Total field, enter 320.

7. Check that Amounts are is Tax inclusive

8. Leave Item blank – this is only for Inventory items

9. Click into Description and type Various office stationery and TAB

10. Type 1 in the Qty field and TAB

11. Type 320 in the Unit Price field and TAB

12. Start to type 461 Printing & Stationery and TAB

13. Check the GST on expenses appears in the Tax Rate column

14. Click on Save

The transaction appears in the transaction list.

Spent as

To

Date

Tax

Description

Save

Tax Rate



We will enter another purchase via Spend Money.

15. Click on the + Icon and Spend Money


17. Click on Spent as and select Direct Payment if necessary

18. In the To box type Bell Tel and TAB

19. In the Date field type 6 Jul 2017

20. TAB to the Total field, enter 220

21. Check that Amounts are is Tax inclusive

22. Click into Description and type Monthly internet telephone and TAB

23. Type 1 in the Qty field

24. Type 220 in the Unit Price field and TAB

25. Click on the droplist button and scroll down to 489- Telephone & Internet and click

26. Check the GST on Expenses appears in the Tax Rate column

27. Check that the Total reads 220.00

28. Click on Save



You will now have two transactions in the Account Transactions tab for the Business Account.

You can continue to enter Payments from the same bank account just by clicking on + New Transaction

1. Click on + New Transaction

2. A New Spend Money window appears – enter the following details

3. Click on Save

A blank New Spend Money window appears automatically. You can continue to enter transactions and just click on Save until you are finished and then just click on Cancel to close and return to the Bank Account transactions list.

+ New Transaction



GST Free Purchase

In this transaction we will enter a GST Free purchase. In this instance it is because the products are classified as GST-free food.

1. Click into the To box and type Bakers Mill and TAB

2. In the Date box type 19 Jul 2017

3. TAB to the Total box and type 16.50

4. Click into the Item box and click on the drop list button to display all the inventory items

5. Scroll down and click on FLWT5000 – all the details for this item will be entered into the Line

6. Tab to the Qty column and type 2

7. Tab to the Tax Rate column and click on the droplist button

8. Click on GST Free Expenses


10. Enter the details for 1 of the item SGWT5000 changing the Tax rate here to GST Free Expense as well

11. Click on Save

Add a new line



12. Enter this purchase from Dairy Queen on the 19 July 2017 for Milk and Cream which cost 5.00 – the Tax Rate should be GST Free Expense

Edit an Inventory Item

We will edit the Tax Rate for this item so it doesn’t need to be changed each time it is used in Spend Money or a Bill.

1. Click on the tab Accounts Inventory

2. Click on the line of the item FLWT5000 White Flour 5 Kg Bag to display

3. Click on Edit Item

This will change the Tax Rate just for this item not for the Account.

Edit Item

4. Click on the droplist button for Tax rate and click on GST Free Expenses

5. Click on Save



Practice Exercise 7.1: Editing an Inventory Item

1. Click on the tab Accounts Inventory

2. Click on the line of the item SGWT5000 White Flour 5 Kg Bag to display

3. Click on Edit Item

4. Click on the droplist button for Tax rate and click on GST Free Expenses

5. Click on Save

6. Click on Inventory again to view the Inventory list

Practice Exercise 7.2: Spend Money

1. Click on the + Icon and Spend Money


3. Click into the To box and type Bakers Mill

4. Tab to the Date box and type 24 Jul 2017

5. Click into the Item box and click on the drop list button to display all the inventory items

6. Scroll down and click on FLWT5000 –

7. Tab to the Qty column and type 3

8. Check that GST Free Expenses is in the Tax Rate box then click on Save



Notice all the transactions you have entered so far appear in the Account Transactions tab. The Status for each is unreconciled. We will leave it this way until later when you learn about Bank reconciliations. We will also cover Cash Coding and Bank Rules to help speed up the process.

Notice that at the moment there are two Business Account bank balances – the Statement balance – this is from the opening balance you entered in Unit 4. This will not change until you perform a bank reconciliation. The other balance is the Balance in Xero – this amount is based on the Opening balance less the transactions you have entered so far.

Statement Balance Balance in Xero

Account transactions

Status



Purchases Dashboard

You can also spend money via the Purchases area. Purchases are entered and you can record a payment straight away or they can be paid sometime in the future.

When you entered the Conversion balances in Unit 4 the value of Accounts Payable was entered. At the same time, you also entered outstanding purchases or Accounts Payable.

1. Click on the tab Accounts Purchases

2. Check that the current outstanding purchase are $4500.

At the end of this unit the Purchases Dashboard will have a lot more in it.

3. Click on either the Awaiting Payment or the Overdue

The Bill window appears with the Awaiting Payment tab displayed as displayed on the following page.



Notice the other tabs in this window.

The Bills awaiting payment are those that were entered in Unit 4.

Add a New Bill

Clara has received another bill for advertising from Panorama Publishing for $2850.

1. Click on the New Bill button in the Purchases window

2. Click into From and type Panorama Publishing – as soon as it appears on its own in the list of contacts you can press Tab

3. Type 4 Jul 2017 in the Date box and Tab to Due Date – 18 July 2017 should appear automatically because these terms were set up in Contact details for Panorama Publishing

4. Tab to Reference and type D11089

5. Click on Add last items – this is useful if a supplier usually bills you for mostly the same items

New Bill

Add last items



Details from the last Bill are entered in. You can check them, make any adjustments and Save or Approve.

You have a few choices on how to record this Bill. There are various stages of recording of a Bill or an Invoice.

Approve is the final stage in recording a Bill. You can go straight to this if you have completed all parts of the Bill and you have the authority to Approve its recording and thus payment.

Save a Bill or Invoice is for users who may only have the authority to save and then submit to another user for final approval. Just clicking the Save button will save the Bill as a Draft.

Save as draft will save the Bill or Invoice and the user can return later and add more details or edit it then proceed.

Save will save the entries you have made so far but leave the Bill open for further work

Save & submit for approval will save any changes you have made and put the Bill or Invoice into the Awaiting Approval tab.

Save & add another will Save the current bill in the Draft tab and leave the Bill window open to enter details for a new bill.

6. Click on the Save droplist button and click on Save as draft



The Bill will be listed on the Draft tab.

7. Click on the line of the Bill to display it again

8. Click on the Save droplist button and click on Save & submit for approval

The Bill is moved from the Draft tab to the Awaiting Approval tab. In practice a bookkeeper may record many Bills for final Approval by a head bookkeeper or owner of the business or other person in authority. So imagine ten bills in the Awaiting Approval tab.

9. Click on the Awaiting Approval tab

10. Click on the Select box so a tick appears – you could do this for multiple bills

11. Click on the Approve button

12. Click on OK to confirm the approval

Select



13. Click on the Awaiting Payment tab to view all bills approved for payment so far

We will look at paying Bills shortly.

Awaiting Payment



Repeating Bills

Every month a payment is made for social media work by a business called The IT girl. Rather than typing it each time you can use a Repeating Bill. This feature is for payments that are not made by direct debit. Regular direct debit payments can be recorded using Bank Rules. This is covered in the unit on Bank Reconciliation.

1. Click on the droplist button for New Bill and click on New Repeating Bill

A Repeating Bill is like a Normal Bill except it has extra fields at the top of the window to set the number of times to repeat the Bill and when it is due.

2. Click into the Repeat box and type 1 then Tab to Bill Date

3. Enter the Bill Date 10 Jul 2017 and click OK to the prompt

4. Type 14 in the Due Date box if necessary and Tab

5. Type 10 Jun 2018 in the End Date box

6. Click on Save as Draft

7. Click into Bill from and type The IT girl

8. Click on the Insert Placeholder link and click on Month

9. Click into Total and type 66.00



10. Click into Description and type Social media

11. Tab to Qty and type 1

12. Tab to Unit Price and type 66.00

13. Tab to Accounting click on the droplist button and scroll to 400-Advertising

14. Check that GST on Expenses appears in the Tax Rate column

15. Click on Save

The Bill appears in the Repeating tab. Notice that the Draft tab now has new items.



16. Click on the Draft tab

17. Click on the Select box for July so a tick appears

18. Click on Approve and OK to the prompt that appears

19. Click on the Awaiting Payment tab



Paying Bills

1. Click on Accounts Purchases

2. Click on the Awaiting Payment tab

3. Click on the line for the Bill for Boxed Up packaging

The full amount is already entered.

4. Click into Date Paid and type 15 Jul 2017 and TAB

5. Type 100 for the Business Account and TAB

6. Type Direct Deposit to indicate method of payment

7. Click on Add Payment



Part Payment of Bill

With the Awaiting Payments tab displayed:

1. Click on the Bill with Ref D11051 from Panorama Publishing

2. Click into Amount Paid and type 1000.00

3. Tab to Date Paid and type 15 Jul 2017

4. Tab to Paid From and type B for Business Account then Tab

5. Check that the main Business Account appears in the Paid From box

6. In the Reference box type Cheque# 001013

7. Click on the Add Payment button



Paying Several Bills together for one Supplier

Let’s fast forward a little bit and Clara is able to pay the total outstanding amount for Panorama Publishing.

1. Click on both Select boxes for Panorama Publishing

2. Click on Batch Payment – click on OK to the prompt

3. Enter the Payment Date as 30 Jul 2017

4. Enter the Bank Account as 100 – Business Account

5. In Details type Panorama Chq 1014

6. Click on Make Payments

Batch Payment

Select



7. The transaction appears. Click on Send Remittance.

8. Click on Send

9. Click on Cancel to close the Transaction window

Enter an email address –use your own

You could add some text here to indicate which invoices are being

paid.

Send Remittance

In practice send a copy to yourself as a record of it being sent.



The remittance looks like this.

Because you used a Batch payment and specified the Business bank Account when you are finished you will be returned to the Business Account window.

You can also view this same window at any time by clicking on tab Accounts Bank Accounts Business Account

The Batch payment appears in the list. You can also see other payments you have made.



10. Click on Date link to sort the transactions oldest to most recent.

You can look at any of the payments you have just made.

11. Click on the transaction for Bel Tel for $220

12. Click on the Options button and click on Edit Transaction

Options

Edit Transaction



13. Click into the Total box and type 242

14. Click into the Unit Price and type 242.00 and TAB

15. Check that main Total is also now 242.00

16. Click on Update



17. Click on the Dashboard tab to get an overall view

In the next Unit we will look at Invoicing and Receiving money. Then the following unit will be on Bank reconciliation which will also include entering transactions for purchases and receipts.



Skills checklist Tick the skills that you have learnt in this unit.

Skills

Enter payments through Spend Money

Enter and use a recurring payment using Spend Money

View a bank register transaction

View a banking transaction journal

fnsacc406 set up & operate a computerised accounting...

Documents