The Family Business
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The Family Business


Our story follows the lives of the infamous Calzone family and their various business interests. This is a fictitious story designed to entertain and to teach the reader how to use QuickBooks and perform the accounting routines necessary to run several businesses.

Any references to actual people, places or events are merely coincidental.

The Calzone family, in their day, had been one of the major crime families on the West Coast. For more than 75 years they had a piece of every illegal business you could possibly think of. The family’s business interests seemed to cover everything from booze, gambling, prostitution, drugs and more. If there was a profit in it, they were involved.

The head of the family was Anthony Calzone. I say was, because today, Anthony or “Big Tony” as he was known, is being laid to rest along with his best friend and accountant , Anthony “Little Tony” Romano. They had been friends since childhood and had inherited the Family business from their fathers, so maybe it was only fate that dictated they should die together.

The police investigation said that they died under suspicious circumstances. The car crash that took their lives could not be explained with any certainty. After all how does a mechanically sound Mercedes just fly off the road?

Regardless of what happened to “Big Tony” and “Little Tony” here we are at their funeral trying to make sense of it all. The remaining family members and friends have gathered to say farewell. The wives and grown children of both men as well as politicians have come to pay their respects. Even the other notable crime families have turned out for this occasion.

My name is Mike Romano. I’m the son of “Little Tony” and the next family member in line to take over the accounting duties. My father trained me in the specific tasks of each business entity within the Family and I have attended college studying accounting and music.

The new head of the Calzone family is Margarite Calzone, “Big Tony’s” wife. Big Tony and Margarite never had a son so the responsibility of the Family business now falls to her. Margarite has her own ideas on how the Family business should be run and with the help of her daughter, Celeste; they intend to take the business in a totally different direction.

Margarite and Celeste have been arguing for years now that the Family Business should become totally legit and pull away from any illegal activity. The other West Coast families have known how Margarite feels and would gladly welcome this new change because it would mean that they could control all of the businesses that “Big Tony” has always monopolized.

The Family, in the past has always kept their accounting books manually.  “Little Tony” cringed at using computers, he was an old school accountant who never warmed up to the idea of automating the accounting work and even taught me   how to do everything manually.

Margarite and I both want to be more modern with running the Family Business and both agree that it was time to start using a good computer program for the accounting work.

Margarite has asked me to find the best computer program I can and immediately start setting up the businesses she wants to retain. Margarite plans on negotiating with the other families to sell them those business entities that she and Celeste find objectionable.

They want a new direction for the family and they don’t want to see anymore family members dying under suspicious circumstances. The family has already made a sizable fortune over the years so Margarite wants all business dealings to be legitimate so if they are ever audited there will be no problems.

I will find the best computer accounting program I can and report back to Margarite with my findings tomorrow.


Which version of QuickBooks should you use?
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There are several versions of the QuickBooks program. Each one offers different features that you may or may not require for your specific business so it’s important to choose the correct one.

Beginning in 2011, the Simple Start Edition ceased to be available as a desktop solution.  Intuit recommends that smaller companies use the entry level version of QuickBooks Online, which has similar features.

QuickBooks Pro

Intuit claims that the typical QuickBooks Pro or Premiere user has fewer than 20 employees and annual sales of less than 1 million. In reality, this really depends on the number of transactions you record. I have seen larger companies use the Pro version but a common complaint is that the file becomes too large and slows down.

QuickBooks Pro allows you to do any of the following;

  • Allow up to five users simultaneous access to a data file
  • Track Accounts Payable (enter and pay bills)
  • Track Job Costing
  • Track Inventory (average cost only)
  • Send progress invoices
  • Track time and vehicle mileage
  • Produce 1099 (misc only) and 1096 forms
  • Use multiple price levels on sales forms
  • Export data to Microsoft Excel
  • Write letters in Microsoft Word using QuickBooks data
  • Synchronize list information with Microsoft Outlook
  • Track multiple currencies
  • Perform online banking and full bank reconciliation

My only complaint with the bank reconciliation is that the Pro version drops off the previous month’s reconciliation when you begin doing the next months reconciliation.  You have to be sure to print out a hard copy before proceeding to the next month’s reconciliation or saving it as a PDF copy if you ever want to see it again.

Of course, the Pro version of QuickBooks also prints all the great financial reports like the Profit and Loss Statement, the Balance Sheet, The Statement of Cash Flows, Accounts Payable, Accounts Receivable, Payroll, Inventory etc.

The Pro version doesn’t have all the bells and whistles of the higher versions but it computes and prints all the basic reports you would need for a business doing approximately 1 million in sales volume.

QuickBooks Premiere

QuickBooks Premiere allows you all the features of the Pro version as well as the following;

  • Build inventory assemblies (for manufacturing)
  • Create and track sales orders and backorders
  • Track current availability and not just quantity on hand
  • Use price levels based on “per item” prices
  • Create sales orders or purchase orders from estimates
  • Create Bill of Materials for inventory assemblies
  • Billing rate levels
  • View unbilled Time and Expenses from one window
  • View or print past bank reconciliations
  • Export report templates
  • Forecasting and business planning
  • Convert units of measure
  • Create reversing Journal Entries
  • Remote access (unattended) for 1 year

Both the Pro and Premiere versions of QuickBooks allows up to 5 simultaneous users. Both programs can handle up to two billion transactions in a single file.  If your company requires an inventory method other than the average cost method you will have to use an add-on software.

The Pro and Premiere versions allow you to have up to 14,500 combined names on any of their lists. Such as Employees, Vendors, Customers, Jobs, Items etc. You can have up to 10,000 Payroll Items, Price levels, Templates, Units of Measure and more.

I generally recommend clients to buy the Premiere version instead of the Pro just because you get a lot more reporting. The price difference is not that great between the Pro and Premiere versions so why not buy the version that includes more features.

My favorite version of QuickBooks is really the Enterprise Version. It has more features than the Pro or Premiere.


Enterprise Solutions

Intuit refers to the Enterprise version as QuickBooks on steroids. This version allows a company to have up to 30 multiple users accessing the file at one time. It has double the capacity for lists (29,000) and basically runs twice as fast.

Enterprise is generally for larger businesses having in excess of 1 million in yearly sales. They might have from 20 – 250 employees and enter a higher volume of transactions.

The Enterprise version offers the most comprehensive set of features of any QuickBooks product. It contains all the features of the Pro and Premiere editions. Enterprise Solutions also includes the Fixed Asset Manager and Intuit Statement Writer, which are normally only found in the QuickBooks Accountant Edition.

Consider using Enterprise Solutions if;

  • You need up to 30 simultaneous users
  • Want enhanced access restrictions
  • Want to connect multiple locations and remote workers
  • Need to combine financial statements from multiple company files
  • Want the ability to store and use QuickBooks on the Linux Server as well as the Windows application
  • Have revenues that exceed 1 million
  • Have long Customer, Vendor, or Item lists
  • Are currently using middle-market solutions or think they may need a middle-market solution
  • Need to host QuickBooks in a Terminal Service environment
  • Need employee organizer
  • Need ODBC reporting capabilities

I really like the Enterprise version. It has just about any feature you would want and it runs faster than all the other versions. This is the version I use for my own business.

QuickBooks for Mac

Using QuickBooks on a Mac is still a little new. The Mac version is more like the Pro version of QuickBooks but each year there are more and more features being added.

The Mac version of QuickBooks includes;

  • The ability to now process credit cards faster
  • New and improved company set up guide
  • Improved, customizable Company Snapshot
  • Save time, reduce data entry errors  and easily invoice clients for billable time with the included My Time application
  • Multi-user functionality
  • User profiles and permissions
  • Redesigned report customization
  • Mileage tracking by job and billable status
  • Register sorting
  • Export reports to spreadsheets
  • iChat integration to communicate between co-workers
  • Improved Layout Designer for form customization
  • Additional templates for ready-to-use-forms
  • Web access: Sync Manager allows web applications you choose to exchange information with QuickBooks

Intuit QuickBooks for Mac is built for Mac OS X v 10.6 (Snow Leopard)


QuickBooks Online

Your business might benefit from QuickBooks Online if:

  • Your business is similar in size to a typical Pro or Premiere user
  • Want to access company data from multiple locations
  • Need up to 25 simultaneous users
  • Want to allow time entry from the field
  • Don’t need to create sales orders or job types
  • Don’t want to maintain their own multi-user network
  • Don’t need to integrate QuickBooks data with Microsoft Word
  • Use Smart Phones
  • Need Purchase Orders (available in QBO Plus)
  • Create invoices, statements and sales orders
  • Create estimates (no progress invoicing available)
  • Run up to 65 preset reports with the ability to customize and export to Excel
  • Track sales tax
  • Issue 1099’s
  • Integrate financial and payroll data in one place
  • Download bank and credit card information automatically each night using the available online banking service
  • Need FIFO inventory tracking (available in QBO Plus)

The Online Version is especially good for those businesses that have multiple locations, traveling timekeepers and/or decision makers. These users would have relatively simple reporting needs and possibly share bookkeeping responsibilities with others.

There are several other versions of QuickBooks that are industry specific, like;

  • Contractor Edition
  • Nonprofit Edition
  • Manufacturing & Wholesale Edition
  • Professional Services Edition
  • Retail Edition
  • Point of Sale Edition

These versions of QuickBooks are basically like the Premier version but they have industry specific language and features.

There are also Accountants Versions for both Premiere and Enterprise, which include all other versions of QuickBooks. These are the versions Certified QuickBooks Pro Advisors use because they include every feature of QuickBooks.

Only the Accountants versions allows the Pro Advisor to work in a clients file, make changes to that file, and then return the file to the client while the client continues to work normally in the same file.

As you can see, there are a few versions of QuickBooks to choose from so look them over and make the right choice for your company. If you need any help choosing a version you can contact us at

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Cash Basis Accounting or Accrual Basis. Which one is right for your Business?
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Before anyone starts keeping books for any business entity they have to decide which method of accounting they are going to use.

Luckily, there are only two methods available to choose from; the Cash Basis method or the Accrual method. The difference between the two methods is dependent on when we recognize income and expenses in our set of books. In formal accounting this is referred to as the Matching Principle.

The Cash Basis Method of Accounting


If you are going to keep your company books on the Cash Basis Method of Accounting you recognize income only when it is received. This means you have to receive cash, check or a credit card payment from your customer before you record income in your books. Having a customer owe you money is not income on the Cash Basis Method of Accounting.

The only time you can record an expense in your books is when you actually make a payment by cash, check or credit card. Simply owing money to your vendors or anyone else is not considered an expense until paid.

The Cash Basis Method of Accounting is the easiest form of accounting to utilize. It doesn’t require you to know as much about formal accounting. This method is especially useful for small businesses that pay their bills in the same month they receive them and who receive payments from their customers in the same month as the work is performed.

This method of accounting is used a lot by small contractors and other service based businesses because of its simplicity.

The Cash Basis Method of Accounting is also used by accountants everywhere when a client brings in an entire year of work, in a box, that needs to be put together. Many small businesses will wait to do their bookkeeping after a number of months have gone by. When this happens the only practical method of doing the company books is by the Cash Basis Method of Accounting.

The Cash Basis Method of Accounting is illustrated and described with detailed lessons in the eBook QuickBooks Made Fast and Simple, which is available at

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Most taxpayers in America also file their income taxes each year on a Cash Basis   so this is an ideal method of accounting to follow if your company does business in the manner described above.

The Accrual Method of Accounting.


The accrual method of accounting recognizes income, when it is earned. You don’t have to receive a payment from a customer to record income on the accrual basis. If you have done the work and you invoice your customer it is recorded as income earned in that month.

It is the goal of the accrual method to invoice customers for money earned in the month the work was performed. This has nothing to do with when the money is actually collected.

The monies your customers owe you, but have not paid, stay in an account called accounts receivable, until they are paid.

We record expenses on the accrual method when the expense is actually incurred. This means you record every bill and expense your company receives, in the month it is actually received. Regardless of when you pay the bill. You might not pay a bill for 30 days or more, but on the accrual basis it is recognized as an expense in the month it is incurred.

The reasoning behind the accrual method is that we are trying to accurately match the income the company earns for a specific time period with the expenses the company incurs for that same time period.

If this is done correctly we will get an accurate measurement of the profit or loss for a business for any given month. This is considered the more accurate of the two methods of accounting because it strives to match income and expenses for the same period of time.

The accrual method of accounting requires more knowledge of accounting procedures than the cash basis method and does require more work, but is generally regarded as the more accurate.

Analysis of both methods of accounting


Some company’s who utilize the cash basis method still achieve the same accuracy with their financial statements as the accrual method, if they receive their income and pay their expenses in the same time period.

Lending institutions almost always want to see the company financial statements prepared on the accrual basis. If your business keeps their books on the cash basis method it is not very difficult to adjust the books to include all the necessary accruals and therefore satisfy the needs of the lenders.

A lot of businesses keep their books on the accrual basis but file their income taxes on the cash basis. In this case it becomes necessary to adjust the books back to the cash basis of accounting for tax purposes.

QuickBooks has an automatic feature that will adjust your books to the cash basis method if you have been keeping your books on the accrual method. This automatic feature does not work in reverse.

Larger companies will generally use the accrual method so they can track their accounts receivable and accounts payable accounts more accurately. These larger businesses will also want to accrue other expenses each month like depreciation and interest expenses that are not recorded the same way on the cash basis.

Smaller companies can use either method but most really keep their books on the cash basis method since it requires less knowledge of accounting and it is the method they need to file their income taxes.

As you have seen with the previous examples it is possible to keep your books using either method of accounting and simply adjust the books to the other method if needed.

QuickBooks was designed to be used on the accrual basis and there are hundreds of books on the market designed to help teach you this method.

However, if you feel the cash basis of accounting is better suited for your business and your knowledge of accounting then take a look at the only book in the world that shows you how to use QuickBooks on the cash basis at

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The Accounting Equation Simplified
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Many people mistakenly shy away from learning accounting because they get confused with the explanation of Debits and Credits. I would like to unravel this mystery for you and make you aware of the fact that accounting is actually a financial language used all over the world. Once you learn this financial language, you could conceivably work anywhere in the world. All you would need to learn is the monetary system used by the country where you care to work.

The type of universal accounting work I am referring to is called a duel-entry system. There are many duel-entry accounting systems on the market today; however, in my opinion, QuickBooks is the easiest for the beginner to learn and operate. I believe, as of this writing, QuickBooks has about 70-80% of the market share for all small to medium sized businesses.

The duel-entry system of accounting is quite different from a single-entry system. An example of a popular single-entry system would be Quicken, another excellent product put out by Intuit. The single-entry system was basically designed to record income and expenses, and was originally thought of as an accounting system that would be used primarily by individuals to monitor their household budgets. The single-entry system has major limitations for businesses that want and need to produce better management information in order to run their businesses.

Our discussion will concentrate on the duel-entry accounting system because it is by far the most accurate and once again, the universal language of finance. I learned in college that credit has been given to the Egyptians for the invention of the duel-entry accounting system. Hieroglyphics found in the pyramids, are believed to be the oldest evidence on record of anyone using a duel-entry accounting system. This dates back to around 1300 B.C. or earlier.

A duel or double-entry accounting system is based off what is called the “Chart of Accounts”. This chart of accounts is a listing of all the individual accounts in your companies set of books. This is not a fixed list by any means. You always have the ability to add, edit, delete or make inactive from this list as the need arises. If you were to go to your bank and start up a new savings account you can easily come back to your QuickBooks program and set up a new savings account in the Chart of Accounts. Generally speaking, as your business grows so will your Chart of Accounts.

The Chart of Accounts in a double-entry accounting system is defined by only 3 major categories. These categories are; Assets, Liabilities and Equity. This also happens to be the infamous accounting equation.

Assets = Liabilities + Equity

Let’s define some of these terms so that we have a clear understanding of their meaning. You have probably heard all of these words used before so they are not new.

Assets are those things you own in your company. Namely; bank accounts, accounts receivable, tools & equipment, inventory, autos & trucks, undeposited funds, etc. These asset accounts are broken down further in QuickBooks to include; other current assets, fixed assets and other assets.

Liabilities are those things you owe to others from your company. For example; accounts payable and credit cards. Liability accounts can be further broken down into; other current liabilities and long-term liabilities.

Equity is the difference between what you owe to others and what you own in your business. As I like to say to my students, “ If you were to stop all business as of today and collected all the money all your customers owed to you and then paid out what you owed to everyone else, the difference or what is left over is your equity”. Equity accounts for sole-proprietors are normally their Capital and Drawing accounts. In a Partnership, each partner will have a Capital account and a Drawing account. Corporations call their equity account Retained Earnings.

These 3 major categories Assets, Liabilities and Equity refer to one of the main financial statements known as the Balance Sheet. The other main financial statement we will concern ourselves with is called the Profit & Loss Statement, or Income Statement. Now let’s define some of the terms we will find on a typical Profit & Loss Statement.

Income is the money you derive from the sale of services or products to your customers.

Cost of Goods Sold is where a business combines all of its’ direct job costs needed to produce its’ products or services.

Expenses can be for various business purposes, but they must be necessary expenses incurred during the production of income.

Other Income is that amount of money your company receives from others but is not your main source of business income. Like Workman’s Compensation Dividends or Material Discounts.

Other Expense is that amount of expense that is not a part of your normal business operation. Like Federal & State Corporate Taxes.

Now that we have defined the categories of accounts we are dealing with I can explain where all the confusion over debits and credits comes from. You will see in the following diagram that sometimes you will debit an account to increase it and sometimes you might credit an account to increase it. How do we know what to do and when?





























All of the accounts listed on the left are increased by debiting them and decreased by crediting. Just the opposite is true for the accounts listed on the right hand side of the page. All of these accounts are increased by crediting them and decreased by debiting. This is how the accounting equation stays in balance.

When I show this to my students in the class invariably a couple of students will immediately say that this cannot be correct because when they go to their bank they see a sign at the drive-up window that says “All deposits received after 4PM will be credited to your account on the following business day”.

The students ask, “How can your chart say that when I deposit money it is suppose to be a debit but the bank says they are going to credit my account”. This is the main reason most people get frustrated with accounting.

You have to remember that first, the chart I have laid out showing what to debit and credit to increase and decrease is correct and should be memorized. Second, when businesses talk about accounting they are more than likely talking about their set of books and not yours. What the bank means when they say they will credit your account, is that, in their books they will debit their cash account, to show they received the money and then credit a liability account to show that the money is owed back to you. In your books, when you deposit money, you will debit your bank account for the amount deposited and then credit an income account if the money was received from a customer or undeposited funds in QuickBooks.

See how the use of the terms debit and credit can be confusing if you don’t consider whose set of books you are talking about. One of the aspects of accounting I enjoy the most is knowing that the above chart will never change. When I write a check out of my checking account it will always be a credit to that account and when I put money into that bank account it will always be a debit.

When banks first came out with debit cards I believe they might have been originally designed only for making deposits into your account. This language works because when you deposit money to your account it is a debit in your books. It also happens to be a debit in the bank’s books. But when you use your debit card to withdraw money you are actually crediting your account. The language that banks, television and movies use have thoroughly confused the general public about accounting terms to the point that most folks get it backwards. Now that you know how this terminology is misused. You can listen for it on television and in the movies. Listen for all the accounting terms that are used in crime dramas or trials when they are,” following the money trail”.

To summarize, you should memorize what accounts you debit and credit to increase and decrease. This is not a waste to time, it will never change. There are very few absolutes in the world but this is one of them. Also recognize that accounting is considered more of an art form than a science. Just think of the Enron scandal. When you are recording information in your set of books you want to be consistent in the way you record income and expenses. I hope you are no longer confused by what to debit or credit. At least now you have a chart to refer to for the right answer. Keep it next to you when you are working in QuickBooks. Hopefully, you will no longer be confused by that sign at the bank.

This is a copyrighted article that is available as a free PDF down load from my other web site

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