Items in QuickBooks

Using items in QuickBooks is one of the major places that new users have trouble with.   Just today there was a post:

I entered my invoice, applied my payment, made my deposit and my checking account did not increase!  What is wrong?

It is probably due to an item being used in an invoice that is pointing directly to the checking account.

Click any photo to enlarge

 

What happens when you do this is that you make a direct deposit to your bank by using the item on an invoice.  Then when you enter the payment to clear the invoice and record the deposit, this happens:

 

It creates a deposit (by entering the invoice) and then when you enter the customer payment and deposit it, it creates a payment and it zero's out the entire transaction.  

The proper setup of an item for use in an invoice is for the item to point to your income account:

 

This will put the transaction in the proper place, in your income account.  Now when you record the  customer payment, it will clear the invoice and be deposited into the bank account, which will increase the balance and record it as a deposit:

And that is it.  The proper set up of an item used in invoicing. Items are "behind the scenes" transactions so it is important to have them set up properly.



Lynda 

Check out my website www.artesanibookkeeping.com