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Archive for the tag “Penny”

QuickBooks and the Case of the Disappearing Penny!

When I was a little girl, my dad used to buy a bag of uncirculated pennies every year and stow them in a secret hiding place in our home. Not sure what ever became of those pennies, but he sure collected a lot of them. This likely inspired my fondness for coins. I have a tiny collection of my own, and to this day, I’m often treasure hunting my loose change. Also when I was little, I couldn’t get enough of the Encyclopedia Brown novels. Solving those tricky mysteries kept me busy on many a dreary winter day. For Leroy Brown, no case was too small, and so, I’d like to offer you my rounding workarounds in QuickBooks and the Case of the Disappearing Penny!

On February 4th, the Royal Canadian Mint will stop distributing the one-cent coin to Canadian banks, and Canadian businesses will be “encouraged” to begin rounding cash transactions to the nearest nickel.  Apparently, “encouraged” means when “pennies aren’t available.” We’ll soon see how business will interpret this change. In any case, all debit card, cheque, and credit card transactions will continue to be processed at their exact amount. No rounding here. It’s when cold, hard CASH is involved that things will be different. If your cash transaction ends in one, two, six, or seven cents, you round down. If your cash transaction ends in three, four, eight or nine cents, you round up. Fear not…the government isn’t trying to scam you and there’s no effect on GST/HST. It’s simply a rounding issue. Check out this informative article from the Department of Finance for more information: http://www.fin.gc.ca/1cent/index-eng.asp

PennyGraph01_e

So – does your POS provider have this all figured out? What about your financial software? I personally don’t have a lot of clients that deal in cash outside of a POS system, so I’m counting on those POS guys to figure this out! But for those of you who use QuickBooks and need to know what to do, here are some ideas that I’ve come up with. I welcome your comments and other workarounds. (Just don’t be all Bugs Meany about it!)

But first, a humble plea to the Intuit programmers. Someone at Intuit needs to implement a ROUNDING button so I don’t have to work so hard! LOL! However, I don’t think that’s in the cards just yet. Perhaps one day. In the meantime, here are my:

DISAPPEARING PENNY WORKAROUNDS

Complete these two simple steps and you’ll be all set up for rounding, up and down, on sales and purchases.

STEP ONE

You’re going to need a new EXPENSE ACCOUNT on your chart of accounts. Go ahead and set up an “Other Expense” account called ROUNDING.

Rounding Other Expense

STEP TWO

You’re going to need a new two-sided ITEM called ROUNDING. Set it up as an “Other Charge” item and point it to the ROUNDING expense account on both sides.

Rounding Item

PART I. SALES

OPTION ONE – ROUNDING AT THE BANKING LEVEL

Whether you issue an INVOICE or a SALES RECEIPT, rounding will always be done    in the MAKE DEPOSITS window. Do not adjust for rounding on the sales forms themselves, only in the MAKE DEPOSITS window. Here are the examples:

INVOICE

To receive payment on an Invoice and account for rounding, create Invoice and Receive Payment as you normally would. Make sure you ‘DEPOSIT TO’ the UNDEPOSITED FUNDS account (if you deposit straight to the CASH account, you won’t be able to adjust for rounding).

Inv to UFpng

Choose “MAKE DEPOSITS” from the Banking menu, select the correct payment(s), and adjust for rounding:

Make Deposit Round Down Invoice

SALES RECEIPT

To adjust for rounding on a Sales Receipt, create Sales Receipt as you normally would. In the DEPOSIT TO window, you can choose either the CASH account or UNDEPOSITED FUNDS. I will use the UNDEPOSITED FUNDS account for this example, to be consistent:

Bobby Jones Cash SR

Choose “MAKE DEPOSITS” from the Banking menu, select the correct payment(s), and adjust for rounding:

Bobby Jones Dep round up

NOTE: For Sales Receipts only, you can choose to DEPOSIT TO your CASH account. The only difference here is that next step won’t be to MAKE DEPOSITS, as the deposit is already entered. Find the deposit and edit for rounding.

What is key to remember is that you will always adjust for rounding in the MAKE DEPOSITS window.

PROS: The above method of rounding is easily handled at the banking level. You can combine several customer payments into one deposit. Does NOT affect Line 101 of your sales tax return.

CONS: The Invoices and Sales Receipts you give to your customers do not show the rounding. Could be easy to lose track of what’s been rounded.

OPTION TWO – ROUNDING AT THE SALES FORM LEVEL

Use the ROUNDING item you set up in step two to adjust for rounding directly on your Invoices and Sales Receipts. Although it affects Line 101 of a Sales Tax Return, I prefer this method. Here’s what an Invoice rounded up will look like:

Rounding Up on Invoice

And here’s what a Sales Receipt rounded down will look like:

Rounding Down Sales Receipt ii

What is key to remember is that you will always adjust for rounding directly on the SALES RECEIPT or INVOICE.

PROS: The above method of rounding is easily handled at the sales form level. You’ll never forget if you’ve rounded or not. Most importantly, the customers gets a form that shows the rounding.

CONS: This method will change Line 101 of your sales tax return by the total amount of all rounding done on sales forms for the period. For some businesses, this will be only a few pennies and hence, immaterial. Despite this hitch, there’s no effect on Line 109 Net Tax – the amount owing for GST/HST remains correct.

PART II. PURCHASES

If you receive a receipt from a vendor that’s been adjusted for rounding, here’s a way to enter that cash purchase into QuickBooks using a cheque. You can use a bill in the same manner. Let’s say you buy some office supplies for $32.97. You pay the rounded amount of $32.95. Enter the cheque as you normally would, selecting the correct CASH account, DATE, and VENDOR. In the AMOUNT box, record the rounded amount. Tab down to your expense area. On the first line, select the ROUNDING Expense account. Then enter the amount of the rounding. In this example, we’re rounding down. Enter -.02 and use the Z tax item. Then, if you simply tab to the next line, QuickBooks will automatically fill in the rest of your numbers including GST/HST.

Rounding Down on Cheque w exp tab

You can also use the ITEM tab to enter the expense. You’ll use the ROUNDING item you set up earlier which points to the ROUNDING expense account. The only drawback to using this method is that the second line doesn’t automatically calculate. You’ll have to manually enter the subtotal of your receipt and confirm that the GST/HST amount is correct.

Write Checks w item Rounding Down

Of course, if the vendor issues a receipt for the pre-adjusted amount and the rounding happens “off” the receipt, here’s a super easy way to handle it: adjust your CASH account via journal entry to the ROUNDING Expense account to address the missing/extra pennies.

These are not perfect workarounds, but they’ll do until we get that awesome ROUNDING button I’m hoping for! What will you do with your extra pennies? Save, spend, or donate to charity?

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