QuickBooks: Bill Entry vs. Writing Checks

Write Checks is the correct option for businesses using the Cash-based accounting method. It recognizes expenses as they are paid creating a debit to the expense account(s) and an offsetting credit to cash recorded as of the check date.

Example: Write check # 3404 on 6-1-14 for office supplies received on 5-1-14:

6-1-14         Debit Account 6310 Office Supplies $129.56

6-1-14                        Credit Account 1010 Corporate Checking $129.56

In this example, an order of supplies was received on May 1st with Net 30 day payment terms. No entry was made in May when the goods were received; it will be an expense on the June Income Statement when the check was actually written.

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For companies using Accrual-based accounting, using Enter Bills is the first of a two-part transaction that will recognize the expense when it is incurred. Subsequently, when the bill is due for payment, the Pay Bills function will relieve Cash when the check is printed. The purpose in this case is to show the obligation to pay when goods or services are received, and record the payment when it is issued.

Example: Enter Bills for a shipment of office supplies from Office Depot with Net 30 terms:

5-1-14            Debit Account 6310 Office Supplies $129.56

5-1-14                          Credit Account 2000 Accounts Payable $129.56

Pay Bills and print check # 3404 to Office Depot

6-1-14             Debit Account 2000 Accounts Payable $129.56

6-1-14                            Credit Account 1010 Corporate Checking $129.56

In this example, the Income Statement will show the expense in May, carrying an equal amount in Accounts Payable on the 5-31-14 Balance Sheet. In June, the Balance Sheet Cash account will decrease as the Accounts Payable account is relieved.

The danger of not understanding the differences in these processes is that if a bill is entered via Enter Bills but Write Checks is used to record payments, the expense will be recorded twice and the Accounts Payable liability will not be relieved. The solution is to have qualified guidance in setting up your procedures to insure correct and consistent recording of all transactions.

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