Sample QuickBooks Pro Transactions

Disclaimer: every transaction is unique, so please use the information in this article only as a guide. No guarantee whatsoever is made or implied that these examples pertain to the reader's environment. Please consult with an accounting professional for assistance with your unique requirements.

Example 1: Owner invests $5,000 in the company. Analysis: Since money will be deposited into the checking account, Cash is debited (the balance increased by $5,000). Therefore, the other account will receive a credit. It will be an Equity account called Owner’s Equity, or Capital Contribution. Equity accounts are ‘negative’ accounts, so by crediting the Equity account you increase its balance by $5,000.

debit Cash (increase its balance)

credit Owner’s Equity (increases its balance)

Example 2: The Company borrowed $8,000 from a bank. Analysis: Since the money will be deposited into the checking account, Cash is debited (the balance increased by $8,000.) The account to receive the credit is a Liability account called Loans Payable (you may create a separate account for each loan). Liability accounts are credit accounts, so crediting the Liability account increases its negative balance by $8,000 (move to the left on the number line).

debit Cash (increases its balance)

credit Loans Payable (increases its balance)

Example 3: Your bank charges you a $14 a month statement fee. Analysis: Since money will be removed from the checking account, Cash is credited (the balance decreased by $14.) Therefore, the other account will receive a debit. It is the Expense account called Bank Service Charges.

debit Bank Fees (increases its balance)

credit Cash (decreases its balance)

Example 4: You write a check for a loan payment of $540 for the $8,000 loan you acquired in Example 2. Of this amount, $500 goes to principal, and $40 is loan interest. Analysis: The $40 of interest is an expense. The $500 principal payment is not, but it decreases the balance in your Loans Payable liability account. (Remember, if you add a positive number to a negative number, you get a smaller negative number.). So this transaction results in two debits and one credit.

debit Loans Payable $500 (decreases its balance)

debit Interest Expense $40 (increases its balance)

credit Cash $540 (decreases its balance)

Example 5: the Company wrote a check for $8,500 of equipment. Analysis: Since a check was written, QBP will automatically credit Cash. We will debit an Asset account called Equipment or something similar. Note: Remember, if you purchase an item for more than about $500, you must depreciate the item; you cannot write it off as an expense. The $500 cutoff is rule of thumb many folks use, but I am not suggesting you use it. Please consult your accountant regarding the purchase of company assets.

debit Equipment (increases its balance)

credit Cash (decreases its balance)

[Remember: A debit adds a positive number and a credit adds a negative number. But you NEVER put a minus sign on a number you enter into QBP.]

Example 6: the Company wrote a check for $318 of office supplies. Analysis: Since a check was written, QBP will automatically credit Cash. We debit the Expense account called Office.

debit Office (increases its balance)

credit Cash (decreases its balance)

Example 7: the Company purchased $318 of office supplies on credit and you entered a bill into QBP. Analysis: When you enter a bill, QBP automatically credits the Liability account called Accounts Payable. And since you purchased office supplies, the Office expense account is debited.

debit Office (increase its balance)

credit Accounts Payable (increases its balance)

Example 8: You paid the bill for $318 of office supplies purchased in Example 7. Analysis: When the bill was entered, Office was debited and A/P was credited. Now as we write a check to pay the bill, QBP will automatically credit Cash. And QBP will debit Accounts Payable - in effect, reversing the earlier credit.

debit Accounts Payable (decreases its balance)

credit Cash (decrease its balance)

Example 9: the Company paid $450 cash for Product A - a COGS part. Analysis: When you write the check, QBP will automatically credit Cash. In the check window, choose the COGS account from the Expenses tab, or choose an Item from the Items tab and then the COGS account associated with the Item will be debited.

debit COGS (increase its balance)

credit Cash (decrease its balance)

Example 10: the Company sold Product A for $650 cash. Analysis: When you enter the cash sale, QBP automatically debits Cash (or you could choose to deposit to Undeposited Funds - see Example 14). You will have to choose an Item for the sale … it might be “Prod A income” and associated with the Sales account.

debit Cash (increases its balance)

credit Sales (increases its balance)

Example 11: the Company sold Product A for $650 on credit. Analysis: When you create an invoice, you must specify an Item for each separate charge on the invoice. QBP will automatically credit the revenue account(s) associated with these Items. And QBP automatically debits the Invoice amount to A/R.

debit Accounts Receivable (increases the balance)

credit Sales (increases the balance)

Example 12: the Company received a payment for the $650 invoice above. Analysis: When you created the invoice, QBP automatically debited the A/R account. When you post the invoice payment, QBP will automatically credit A/R - in effect reversing the earlier debit. QBP will debit Cash.

debit Cash (increases the balance)

>credit A/R (decreases the balance)

Example 13: The owner’s writes himself a check for $1,000. Analysis: When an owner takes money out of the business, the amount must be posted to Owner/Shareholders Draw or Distribution. Since a check was written, QBP will automatically credit Cash. The account you chose for the debit is Owner/Shareholder Draw.

debit Owner’s Draw (increases its balance)

credit Cash (decrease its balance)

Example 14: the Company has many customer payments to post each day. Scenario: You receive about 20 payments each day, put them in the cash drawer, and take them to the bank at day’s end for one large deposit. However, if each time you receive the payment in QBP you post to Cash, you will have 20 separate deposits in your check register. It would be nice if the deposits we saw in the QBP check register were in sync with the actual deposits we made to the checking account. (It could make balancing our checkbook easier!) Well, we can accomplish this if we use the Undeposited Funds account - the “cash drawer” - of QBP.

The Undeposited Funds account acts as a temporary holding place. When you Receive Payments or enter Cash Sales in QBP, you have the option of debiting Cash or Undeposited Funds. In the scenario above, you would choose Undeposited Funds. Then, at day’s end, you would transfer the money from Undeposited Funds to Cash as one deposit. How? Click Deposits. On the ‘Payments to Deposit’ window you should see all the payments you posted to Undeposited Funds. To deposit them to Cash, click “select them all” and click OK. You will now have one large deposit in your QBP check register … just like the actual deposit you’ll be taking to the bank on your way home.

Example 15: How QBP handles payroll. Please click here for a PDF file which analyses in detail what accounts are debited and credited by QBP.

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