Using a Bank Account to Track Journal Entries in QuickBooks

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• September 2004 Issue
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Unlike many accounting programs, QuickBooks does not have a General Journal. Although the newer versions of the program allow you to see the list of journal entries on a portion of the journal entry screen, I have a suggestion for tracking journal entries that, over the years, has served us and our clients quite well.

Since QuickBooks keeps a register for all balance sheet accounts, you can use a bank account called Journal Entries to keep track of the journal entries you make. It's best to use a bank account, because you may need to use this account on zero dollar forms as described later in this article.

Start by creating a bank account called 'Journal Entries' in the Chart of Accounts.
Use the 'Journal Entries' account on the first line of each journal entry. Enter only the account and a memo on the first line, and leave the debit and credit columns blank (or zero).

Later, when you need to find or edit a journal entry, it will be very easy to find the entry by viewing the register for the Journal Entries account.

Beware of the Name Column on Journal Entries
Using the Journal Entries account also helps you to protect the accuracy of job cost reports. When a multi-line journal entry has a name entered on the top line, and not entered on a subsequent line, the name on the top line is applied to each line with a blank name column (i.e., when the name field on a line is left blank). In the example shown in Figure 3, Academy Computer uses a journal entry to enter summary Year-to-Date amounts as part of a mid-year setup. They are also using customer names so that job cost reports will be complete and accurate. However, because Bob Mason's name is on the top line, and since some expense lines do not have a customer name (Cost of Goods Sold, Payroll Expenses and Office Supplies), QuickBooks allocates those lines to his job on job cost reports. So in this case, Bob Mason's job will show $8,000 in Cost of Goods Sold, even though you didn't enter his name on the Cost of Goods Sold line.

To make sure you never run into this problem, use the 'Journal Entries' account on the first line of every journal entry. Enter the memo in the first line, but don't enter any name or amounts. This way, you avoid the problem, and your job cost reports will remain accurate.

Use Zero-Dollar Checks as Journal Entries
Occasionally, it is necessary to make an adjustment in QuickBooks that affects one or more items. For example, quite often I recommend against using inventory tracking in QuickBooks for one reason or another. So to handle the transactions when the client has inventory (i.e., when you use the periodic adjustment method to adjust the balance in the inventory asset account), I suggest that all purchase transactions use two-sided 'non-inventory part' items that point to Cost of Goods Sold (or purchases). Then, at the end of the period, to adjust the balance sheet for financial statements, yet still provide for accurate Item Profitability reporting, we use a zero-dollar check to make an adjustment that debits Inventory and credits Cost of Goods Sold (or purchases).

Assume you have several purchases recorded on checks and/or bills that are coded to the 'HardDiskDrive' item. This item is a two-sided item and it points to Cost of Goods Sold on the purchase side of the item. Since journal entries do not include an Item column, you cannot use a journal entry to make the periodic inventory adjustment between Cost of Goods Sold and Inventory. At least you cannot do this if you want your item profitability reports to work. Instead, use Write Checks to record the adjustment in the Journal Entries bank account.