Learning How To Use QuickBooks® Online

Published October 14, 2024 

WHAT'S IN THIS ARTICLE
Creating Custom Internal Control Reports | Performing Period End Closing Entries | Tracking GST/HST as a Registrant |  Tracking GST/HST as a Non-Registrant

NEXT IN SERIES >> More QBO Tips About Learning How To Use QuickBooks Online

Introduction

We'll begin by taking a look at how to customize reports in QuickBooks Online to meet your managerial information needs for special types of transactions. We'll end the chat with QBO closing procedures and how GST/HST is handled for registrants and non-registrants.

While you don't have to have formal bookkeeping training to use QuickBooks Online, you do need to have a basic understanding of accounting principles to ensure you have accurate data ... and there are certain procedures you must follow to ensure you have captured all your data properly. If you don't follow the procedures, you could end up double counting revenue or expenses.

I have found over the years that the more input accountants have had in this product, the less user friendly it has become ... but for good reason. So like you, I can get frustrated learning how to use QuickBooks Online each time a new version comes out. As with most things, the frustration goes away as I climb up the learning curve.

Learning how to use QuickBooks Online requires patience especially if you have been using QuickBooks Desktop for years and are extremely proficient in it.

JUMP TO >> Create Custom Internal Control Reports

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When learning how to use QuickBooks Online, make sure you take time to learn how to customize reports tailored to your informational needs. Here are four that might come in handy.

1. Top Customers
2. Customer Deposits or Customer Prepayments
3. Construction Holdbacks
4. Track Cheques Issued (or Invoices Issued) by Number

More >> Do Your Current Reports Meet Your Needs? 4 Secrets

Customizing Bookkeeping Reports

1. How to Use QuickBooks Online To Track Your Top Customers

Purpose: Monitoring Concentrated Credit Risk

Customizing Bookkeeping Reports

3. How to Use QuickBooks Online To Track Construction Holdbacks

Purpose: Tracking Special Types of Transactions

Holdbacks are not revenue ... and not subject to tax until the holdback amounts are billed. So it's important when accounting for holdbacks to have a way to track and monitor them.

Here is how to use QuickBooks Online to track and bill construction holdbacks.

QBO One Time Setup Requirements:

1. Begin by setting up an other current liability account named "Holdbacks" in your Chart of Accounts (COA).
2. To facilitate invoice preparation, create two Service items named "Holdbacks" and "Holdbacks Released". Under income, code both items to the current liability account you created in step one above.

How to prepare an invoice when a holdback is required:

When you invoice your customer, show your customer the holdback by selecting the Holdback item in your drop down list. Enter your holdback amount as a negative amount. For example if your percentage of work completed to date is $5,000 with a 10% holdback, enter -500.00 as your holdback amount.

On your final invoice to bill your customer for the completion of the job, select the Holdback Released item ... but this time ... enter the amount as a positive number. This will clear out your holdback account and reclassify it to sales where it now becomes taxable.

Finally, setup up your QuickBooks® accounting system to create a customized report so you can easily keep track of the status of the holdbacks. I think these instructions will work but there are so many versions now, you may have to modify the instructions slightly to accommodate your version of QBO.

Here is how to use QuickBooks Online to get your customized Construction Holdbacks report:

• Create a Transaction Detail by Account report found under Reports > For My Accountant.
• With the report open, customize the report. Begin with a click on Modify Report.
• Look for Group By in the columns section. Select Customer.
• Click on Filters tab.
• Filter the report by account and select the Holdback account in the liability section.
• Under General Options, click and format the way you want your number presentation. I prefer to have negative numbers show in brackets rather than the default of a - sign.
• Click Columns and remove or add them. I usually customize the columns to be Customer, Account, Date, Transaction type, #, Name, Memo/Description, Amount, Balance. 
• Resize the columns so all the information is readable and not cutoff.
• Click on the existing report title (there is a "pencil" beside it for editing). Change the Report Title to Construction Holdbacks.
• Click on ok.
• Click on the Memorize button to save the report for easy use ... consider adding it to your icon bar by going to the View drop down menu.

If you have done everything correctly, the report should look very similar to the example report shown below.

Customizing Bookkeeping Reports

4. How to Use QuickBooks Online To Track Cheques Issued

Purpose: Internal Audit Control

Have you been wondering how to use QuickBooks Online to track the cheques issued during the month in your QBO accounting system?

This report isn't as useful as it once was as the use of cheques in Canada has decreased sharply since the pandemic. We now make the majority of our payments using online transfers such as Interac e-transfers or PayPal.

What I'm really hoping for is for Intuit to create a Bank Register report that summarizes payments made by online transfers such as Interac and deposits received by Interac.

Learn how to use QuickBooks MODERN VIEW

QBO doesn't actually seem to have any banking reports like QBD. It did have an Cheque Detail report (under the Expenses and Suppliers section) but I didn't find it useful because I couldn't collapse the "cheque detail" as a group. It would have to be done individually by cheque. The group collapse collapsed it by account instead of cheque. I guess they need to create a Cheque Summary.

I was able to create my Cheque Register report in Modern View to provide the same information as I had in Classic View. I create this report as an internal control measure (because I like to make sure that all cheques are accounted for ... even voided ones). Here's what I did:

1. Go to Transaction Detail by Account Report under the For My Accountant section.
2. Set Report Period to 'All Dates' or just the period you are reviewing and the Accounting Method to 'Accrual'.
3. Click on Group By and select 'Account' if it is not showing in the selection field.
4. Under Filter, (i) set Transaction Type equals 'Cheque' and (ii) Account equals the bank account you want the cheque register for. You have the option to select more than one account if necessary. The Modern View does not have 'All Bank Accounts' option.
   
   I didn't include it my example, but it would be wise to also select 'Bill Payment (Cheque)' in addition to 'Cheque' so your report includes cheques issued to pay bills. The downside here is Interac bill payments will show up as well as QBO records all bill payments as cheques. I haven't figured out how to filter to not include Interac payments from my Cheque Register.
5. Under General Options, I like to change the negative number presentation from -100 to (100). That's just my personal preference.
6. Under Columns, you can customize the columns displayed. I chose Date, Transaction Type, #, Name, and Amount for this report. I placed them in the order I wanted them to show by dragging the icon at the far end of the column.
7. Next, change the title of the report from 'Transaction Detail By Account' to 'Cheque Register'. To do this, you have to click on the 'pencil' at the top of the report header.
8. Set sort by to 'Default' ... in ascending order. You'll find this feature to the left of the report title. You can also sort columns right in the report by double clicking on the column header. So I also clicked on the '#' column and sorted it by ascending order. 
   
9. Before saving, I adjusted the column size to ensure everything was showing in the column and not cutoff from view. You do this by hovering over the column marker in the headers until you get the tow bars ... then drag it to the size you need. 
10. I then clicked on 'Save As' to save my custom report. Once saved, a customized report is found under the Custom Reports tab.

Learn how to use QuickBooks CLASSIC VIEW

When I was using QuickBooks Desktop, my starting point for this report was the 'Missing Cheques' report. QBO doesn't have a report like that so I created a custom report in QBO. I like to have this report as an internal control report when a business writes a lot of cheques (checks).

I've provided an example of the Classic view custom report so you can compare it to the Modern View. They are identical except for (1) the transaction type description, and (2) the negative number presentation. This feature didn't work in Classic View but it does in Modern View which is awesome.

Here's how I created my Classic View Cheque Register report:

1. Going to Transaction Detail by Account Report under the For My Accountant section.
2. Click on Customize.
3. Set Transaction Date to 'All Dates' or just the period you are reviewing.
4. Leave the default setting to the accrual accounting method but change Rows/Columns Group by to 'Account'.
5. Under Filter, set transaction type to "Cheque Expense" and distribution account to the bank account you want the cheque register for or you could set it to "All Bank Accounts".
6. Under Header/Footer, change the title from "Transaction Detail by Account" to "Cheque Register".
7. If you don't like the default columns displayed, you can click on the "Change Columns" button and customize it to your preference. I always change the negative number presentation from -100 to (100).
8. Set sort by to "#" ... in ascending order. You'll find this feature on the upper left hand side of the report content.
9. I then saved my customizations. A customized report is found under the Custom Reports tab.

Track Your Invoice Numbers
I used to create a similar report to track my invoice numbers ... because again I want to ensure all numbers are accounted for ... even voided invoices. This means I never delete an invoice because I want the numerical sequence accounted for. However, QBO has a standard report here that does the job called 'Invoice List by Date'. I just customize and save it to sort by '#' instead of 'Date'. I also revise the title to "Invoice List by Number'.

Audit Ready
You already know I'm going to tell you that I investigate all missing or duplicate numbers shown in the Cheque Register or the Invoice Listing.

The whole point to the exercise when learning how to use QuickBooks Online data that you've painstakingly entered is to:

• manage and monitor your financial health;
• help you make better business decisions ... and;
• to safeguard your business assets. 

Learning how to use QuickBooks Online to track GST/HST depends on whether you are a GST/HST registrant or not. We'll look at both. Please keep this in mind while learning how to use the QuickBooks Online sales tax module.

Learning How To Use QuickBooks Online Accounting System

Handling HST/GST If You Are NOT A Registrant With CRA

As a non-registrant, your bookkeeping process will be slightly different than CRA registrants since you don’t need to track GST or HST collected or paid. In this scenario, you will not be collecting GST/HST (since it's unauthorized for non-registrants) and you won’t qualify for input tax credits, making it unnecessary for your accounting system to track the sales tax you pay separately.

If you are not registered with the CRA for collection of GST/HST, do not activate the GST/HST sales tax module in QuickBooks Online (QBO). Your sales taxes will be automatically recorded as an expense when you enter your transactions.

When recording purchases or expenses with sales taxes, the tax amount should either be expensed (day-to-day operating costs) or capitalized (when you purchase assets). For instance, if you purchase printer toner for $150 before taxes in Alberta, you will record $157.50 as an expense in the Office Supplies account (GST is 5%). In Saskatchewan, the recorded amount would be $166.50 because GST is 5% and the PST rate is 6%.

Tip for GST/HST in Canada:
Though not mandatory, you might want to track the GST you pay. This can help you gauge the financial impact of not being registered for GST/HST. To manage this, create a separate expense account in your chart of accounts called "Sales Taxes" or "GST Paid." For each purchase, record the GST amount (excluding PST as it is not eligible for an input tax credit) in this account. Doing so can provide valuable management information to help make informed business decisions.

MORE >> Posting Expenses When Not GST Registered - Two Options

Learning How To Use QuickBooks Online Accounting System

Handling HST/GST If You ARE A Registrant With CRA

In the QuickBooks Online accounting system, it is not necessary to have three accounts like you do when you handle GST/HST manually. QBO Canada creates tho liability accounts automatically once the sales tax module is activated. One liability account called 'GST/HST Payable' tracks everything. A second liability account called 'GST/HST Suspense' moves sales tax amounts filed with CRA to the suspense accounts.

As long as you are properly booking your entries and managing your sales tax in the sales tax windows, the QuickBooks Online accounting system keeps track of your GST collected and input tax credits for you. When you need to determine the amounts to report to CRA, you run your sales tax report for the details.

Example of QBO Sales Tax Setup

Setting up sales tax in QuickBooks Online (QBO) for an Alberta business involves a few straightforward steps. Alberta (and the territories) is unique in Canada as it does not have a provincial sales tax, and businesses typically only deal with the federal Goods and Services Tax (GST). Here is an example of the sales tax codes setup in QBO Canada.

Here’s how you can set up your sales tax for an Alberta business in QBO Canada:

1. Sign on to QuickBooks Online: Log in to your QBO account.
2. Navigate to the Taxes Setup: On the left-hand side menu, go to the 'Taxes' tab and select 'Sales Tax'.
3. Set Up Sales Tax: If it's your first time visiting this module, click on 'Setup Sales Tax'.
4. Start Tracking Your Province: Since you are in Alberta, choose Alberta as your province and save. QuickBooks Online understands Alberta's tax structure and will set up the tracking with just the click. QBO Canada will typically auto-populate GST information since Alberta businesses generally only need to account for GST. Ensure that GST at the rate of 5% is selected. This is the general tax for Alberta as of the latest known rates.
5. Add The Tax Agency and Business Information: This step requires choosing starting period, a filing frequency, and reporting method. Provide your business number (BN - usually ends with RT001), the reporting method (accrual or cash - if you are unsure select accrual), and the filing frequency (monthly, quarterly, annually) when prompted. For your starting period, choose January if you are a sole proprietor. If you are a corporation, choose the start of your fiscal year. Once completed, click on 'Next' then 'OK'.
6. Review and Make Changes: If you want to make any changes to your setup, click on the 'Manage Sales Tax' button. Your sales tax codes created by QBO will be listed here. In this example, you should see GST, Exempt (for bank charges, interest, insurance, etc.), and Zero-rated (for out of country customers). You can see what the screen looks like above. Review the tax settings shown, especially the tax rate, to ensure everything is correct. As QBO has done the setup for you, it is unlikely you will have to make any changes.
7. Add Additional Provinces:  If you have out-of-province customers, you will also have to setup the sales tax for those provinces / territories in the same way. You would click on 'Add Tax'. Don't setup all the provinces if you don't have customers (or suppliers) in those provinces. We will ignore this for this example.
8. Create Custom Tax Codes (if needed): If your business needs custom tax codes (e.g., municipal taxes on specific goods, accommodation taxes, tourism levy, etc. ), this is where you may need to add them manually. I will ignore group tax rates in this example. However, for most businesses in Alberta, GST is the sole concern.
9. Complete Setup: Once you’ve verified that all information is accurate, finalize the setup by clicking on 'Done'. Your sales tax setup is complete. QuickBooks will now handle tax calculations automatically for transactions. Your QuickBooks Online account is now configured to handle sales tax correctly for an Alberta business.
10. Keep Updated: Intuit takes care of any changes in sales tax rates. However, you will want to regularly check with official sources like the Canada Revenue Agency (CRA) for any changes in tax rules that might affect apply and manage your sales tax.

This setup process should ensure your sales transactions in Alberta are correctly taxed in compliance with federal guidelines. If there are any peculiarities or complexities specific to your business, consulting with a local tax professional might be beneficial.

Filing and Paying Sales Tax To CRA

When it's time to file and pay your sales tax, you will go to the 'Sales Tax' Filings tab. 

• To find out what you need to report on from GST34-2 and how much you owe, run your sales tax liability reports.
• It's important to run the GST/HST Summary report, the GST/HST Detail report, and the GST/HST Exception report (shows what transactions changed to periods already filed). Keep a PDF copy of them for your records in the event you have to explain the numbers in your report filed.
• It's pretty intuitive but if you need help, go to the QuickBooks Support articles or use the Help feature in QBO.

TIP
Pay your sales tax to CRA using the Sales Tax module. It is very important to pay your liability through the sales tax window NOT expense, cheque, or pay bills windows. If you use any supplier module payment form, your liability reports will be incorrect.

Key Takeaway - QBO Sales Tax

• As long as you are entering your data correctly, the QuickBooks Online accounting system automatically tracks your sales taxes for you.
• A payable or receivable is automatically setup when you use the Sales Tax Filings tab> Prepare Return > Mark as Filed function.
• When you get your GST/HST refund from CRA, find the applicable period and use the Record Payment drop down menu under the Sales Tax tab to record your CRA refund deposit. (See the screenshot above.) Once you've done this, your bank feed should update to 'matched'. 
• If you owe, use Record Payment drop down menu under the Sales Tax tab for the applicable period to record your GST/HST payment to CRA.  (See the screenshot above.) Once you've done this, your bank feed should update to 'matched'.
• If you owe interest or penalty charges, there is a 'Add Interest / Penalty' button on the bottom of the Sales Tax Payment screen. You get to this screen by clicking on the Record Payment link. I setup an adjustment account called 'CRA Penalties and Interest', a sub account of bank charges as your tax preparer needs this information when filing your income tax return as they are not tax deductible expense. You should set the default sales tax code to 'Exempt'.

To organized and accurate record keeping in your accounting system! 

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