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Fixing Item Errors in QuickBooks

This chapter has shown some effective ways of determining whether your items were incorrectly set up. In this section you learn the methods of fixing these item setup errors in QuickBooks.

As with any data correction in QuickBooks, you should make a backup of the data before attempting these methods. The preferred backup method is a QuickBooks backup, or a file with the extension of .QBB. You can create a data backup by choosing File, Save Copy or Backup. If the result after fixing items is not what you expected you can easily restore the backup file.

Also, these methods might affect your financials for prior accounting periods. You should take care when selecting a method that does not impact financial periods that have already been used to prepare your tax documents. Discuss these choices with your accountant before making the changes.

Correcting One-Sided Items

A one-sided item is an item that has only one account assigned. See Figure 3.12, which shows the Framing item setup. Notice the only account assigned to this item is Income:Labor. When this item is used on a customer invoice it increases the Income:Labor amount. However, if the same item is used on a vendor check or bill, the amount of the expense will record directly to the Construction Labor income account as a negative number. This would cause your income to be understated and your cost of goods sold to be understated.

Figure 3.12

Figure 3.12 An example of a one-sided item in QuickBooks.

You should never have one-sided items if you plan to use the item on both purchase documents and sales documents.

You might have several items on your list that can qualify to be one-sided because they are used only on sales forms and never on purchase forms, or always on purchase forms and never on sales forms. What can become problematic is that at some time, a user will mistakenly use the item on the other form.

I recommend to all of my clients to make all items two-sided (see Figure 3.13). You do so by selecting the check box labeled This Service Is Used in Assemblies Or... (the rest of the label depends on what item type is selected) in the New or Edit Item dialog box. The results are new Purchase Information and Sales Information panes. Now the "Account" has become an "Income Account" and you have a new Expense Account field to assign your proper expense account. This way, if you use the item on both a purchase and sales form, your financials will show the transaction in the proper account.

Figure 3.13

Figure 3.13 The one-sided item is now two-sided for accounting.

If you are editing an existing item making it two-sided QuickBooks now provides an Account Change warning, as shown in Figure 3.14. The decision made at this time is critical to your financials. Saying Yes to updating existing transactions causes all previous transactions to now report to the new account assigned. If you are attempting to fix historical transactions, this can be a timesaving feature because you do not have to change each individual transaction manually.

Figure 3.14

Figure 3.14 The QuickBooks warning that appears when you change the accounts in the Edit Item dialog.

Click No if you do not want to update prior period transactions. This option may be recommended if you have already prepared your tax data with QuickBooks financial information. The change will then take effect only for future transactions.

Carefully selecting the appropriate choice here determines whether the correction provides the result you were looking for. Beginning with QuickBooks version 2007, users are given a second chance to say No to affect prior-period financials (see Figure 3.15). Reference is given in this warning to setting a closing date password. Although setting a closing date password is recommended, doing so will not prevent changes to prior-period financials when you are modifying the accounts assigned to an item that has previously been used.

Figure 3.15

Figure 3.15 QuickBooks provides another warning when you change accounts on existing items.

If you disregard the message, QuickBooks posts the expense to the revenue account selected in the Edit Item dialog. The effect of this is to understate revenue (an expense is a negative amount in the revenue account) and to understate your costs (because no cost was recorded to an expense account). Both of these negatively impact your financial detail, so be sure you don't disregard this important message.

Making an Item Inactive

If you have found errors in your item list, a safe method of fixing them is to make the incorrect items inactive. An inactive item will still appear in reports but will not be included in any drop-down menus on sales and purchase forms.

To mark an item as inactive:

  1. Click Lists, Item List.
  2. Select the item you want to make inactive by clicking it once.
  3. Click on the Items button and select Edit Item.
  4. Place a check mark in the Item is inactive box.

Making an item inactive does not correct any errors on the company's financials. If you want to correct your financials you will need to choose one of two options:

  • Edit the account assignment on each item. This will give you the option to retroactively fix all previous transactions that used this item. (Use this cautiously because it will change prior period financials.) The effect of changing an account assignment on an item is the same as was discussed in detail in the section of this chapter titled "Correcting One-Sided Items."
  • Create a General Journal Entry transaction to reassign the numbers from one account to another. This method is typically done by your accountant.

Discuss the method you choose with your accountant before making the changes.

Marking most items inactive is okay. The exception is inventory items. Only inventory items with a zero quantity on hand should be made inactive. See Chapter 10, "Reviewing and Correcting Inventory Errors," for more details on handling inventory errors.

Merging Items

If you have duplicated items, one easy method for fixing the problem is to merge like items. When merging two items, you first need to decide which item is going to be merged into the other item. The item merged will no longer exist on your item list.

To merge two items:

  1. Click Lists, Item List.
  2. Review the list for duplicate items; note the name of the item you want to remain.
  3. Double-click the item you want to merge into another item. The Edit Item dialog appears.
  4. Type in the Item Name/Number field the name exactly as you noted it in step 2.
  5. Click OK to save your change. QuickBooks provides the warning message in Figure 3.19 that you are merging items.
    Figure 3.19

    Figure 3.19 A warning appears when you merge two items.

Carefully consider the consequences of merging before you do it (and be sure you have a backup of your QuickBooks file). All the historical transactions will merge into the remaining list item. QuickBooks keeps no record of what the item was originally.

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