Peachtree for dummies, 2nd ed

Peachtree ® FOR DUMmIES ‰ 2ND EDITION By Elaine Marmel and Diane Koers Peachtree ® FOR DUMmIES ‰ 2ND EDITION By Elaine Marmel and Diane Koers Peachtree® For Dummies®, 2nd Edition Published by Wiley Publishing, Inc 111 River Street Hoboken, NJ 07030-5774 Copyright © 2004 by Wiley Publishing, Inc., Indianapolis, Indiana Published by Wiley Publishing, Inc., Indianapolis, Indiana Published simultaneously in Canada No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600 Requests to the Publisher for permission should be addressed to the Legal Department, Wiley Publishing, Inc., 10475 Crosspoint Blvd., Indianapolis, IN 46256, (317) 572-3447, fax (317) 572-4355, e-mail: brandreview@ wiley.com Trademarks: Wiley, the Wiley Publishing logo, For Dummies, the Dummies Man logo, A Reference for the Rest of Us!, The Dummies Way, Dummies Daily, The Fun and Easy Way, Dummies.com, and related trade dress are trademarks or registered trademarks of John Wiley & Sons, Inc and/or its affiliates in the United States and other countries, and may not be used without written permission All other trademarks are the property of their respective owners Wiley Publishing, Inc., is not associated with any product or vendor mentioned in this book LIMIT OF LIABILITY/DISCLAIMER OF WARRANTY: THE PUBLISHER AND THE AUTHOR MAKE NO REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE ACCURACY OR COMPLETENESS OF THE CONTENTS OF THIS WORK AND SPECIFICALLY DISCLAIM ALL WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF FITNESS FOR A PARTICULAR PURPOSE NO WARRANTY MAY BE CREATED OR EXTENDED BY SALES OR PROMOTIONAL MATERIALS THE ADVICE AND STRATEGIES CONTAINED HEREIN MAY NOT BE SUITABLE FOR EVERY SITUATION THIS WORK IS SOLD WITH THE UNDERSTANDING THAT THE PUBLISHER IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL SERVICES IF PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL PERSON SHOULD BE SOUGHT NEITHER THE PUBLISHER NOR THE AUTHOR SHALL BE LIABLE FOR DAMAGES ARISING HEREFROM THE FACT THAT AN ORGANIZATION OR WEBSITE IS REFERRED TO IN THIS WORK AS A CITATION AND/OR A POTENTIAL SOURCE OF FURTHER INFORMATION DOES NOT MEAN THAT THE AUTHOR OR THE PUBLISHER ENDORSES THE INFORMATION THE ORGANIZATION OR WEBSITE MAY PROVIDE OR RECOMMENDATIONS IT MAY MAKE FURTHER, READERS SHOULD BE AWARE THAT INTERNET WEBSITES LISTED IN THIS WORK MAY HAVE CHANGED OR DISAPPEARED BETWEEN WHEN THIS WORK WAS WRITTEN AND WHEN IT IS READ For general information on our other products and services or to obtain technical support, please contact our Customer Care Department within the U.S at 800-762-2974, outside the U.S at 317-572-3993, or fax 317-572-4002 Wiley also publishes its books in a variety of electronic formats Some content that appears in print may not be available in electronic books Library of Congress Control Number: 2004104567 ISBN: 0-7645-5967-2 Manufactured in the United States of America 10 2B/RZ/QX/QU/IN About the Authors Elaine Marmel: Elaine is President of Marmel Enterprises, LLC, an organization that specializes in technical writing and software training Elaine has an MBA from Cornell University and worked on projects to build financial management systems for New York City and Washington, D.C This prior experience provided the foundation for Marmel Enterprises, Inc., which helps small businesses implement computerized accounting systems Elaine spends most of her time writing; she is a contributing editor to Peachtree Extra and QuickBooks Extra, monthly magazines She also has authored and coauthored over 25 books about software products, including Quicken for Windows, Quicken for DOS, Excel, Microsoft Project, Word for Windows, Word for the Mac, 1-2-3 for Windows, and Lotus Notes Elaine left her native Chicago for the warmer climes of Florida (by way of Cincinnati, Ohio; Jerusalem, Israel; Ithaca, New York; and Washington, D.C.) where she basks in the sun with her PC and her dog Josh and her cats, Cato, Watson, and Buddy, and sings barbershop harmony Diane Koers: Owns and operates All Business Service, a software training and consulting business formed in 1988 that services the central Indiana area Her area of expertise has long been in the word-processing, spreadsheet, and graphics area of computing as well as providing training and support for Peachtree Accounting Software Diane’s authoring experience includes over 30 books on topics such as PC Security, Microsoft Windows, Microsoft Office, Microsoft Works, WordPerfect, Paint Shop Pro, Lotus SmartSuite, Quicken, Microsoft Money, and Peachtree Accounting, many of which have been translated into other languages such as Dutch, Bulgarian, Spanish, and Greek She has also developed and written numerous training manuals for her clients Diane and her husband enjoy spending their free time traveling and playing with her grandsons and her Yorkshire Terriers Dedications Elaine’s dedication: To my brother he knows why Diane’s dedication: To Jan and Chris: Thanks for letting me think of myself as the “third” sister Authors’ Acknowledgments We are deeply indebted to the many people who worked on this book Thank you for all the time, effort, and support you gave and for your assistance Oh, where to start? First, thank you Tiffany Franklin for your confidence in us, your support in pushing to get this book published, and for listening to us whine throughout the process Thank you to all of our many editors and production staff, especially Beth Taylor for your patience and guidance, Virginia Sanders, Jean Rogers, and Susan Pink for your assistance in making this book grammatically correct, and Delicia Reynolds for your assistance in making sure that we weren’t fibbing about the product We’d also like to express our gratitude to Kellie Jones and Cathy Strange at Peachtree Software for keeping us informed of the latest and greatest happenings at Peachtree Software We know how frustrating we can be when we nag Thanks for listening Lastly, thanks to our families, for always being supportive of our stress tantrums and our late-night hours and keeping us supplied with chocolate Publisher’s Acknowledgments We’re proud of this book; please send us your comments through our online registration form located at www.dummies.com/register/ Some of the people who helped bring this book to market include the following: Acquisitions, Editorial, and Media Development Composition Project Editor: Beth Taylor Acquisitions Editor: Tiffany Franklin Copy Editors: Susan Pink, Virginia Sanders, Jean Rogers Project Coordinator: Courtney MacIntyre Layout and Graphics: Jonelle Burns, Andrea Dahl, Lauren Goddard, Denny Hager, Stephanie Jumper, Heather Ryan, Julie Trippetti Editorial Manager: Leah Cameron Proofreaders: Laura Albert, Carl William Pierce, TECHBOOKS Production Services Media Development Specialist: Kit Malone Indexer: TECHBOOKS Production Services Technical Editor: Delicia Reynolds Media Development Supervisor: Richard Graves Editorial Assistant: Amanda Foxworth Cartoons: Rich Tennant (www.the5thwave.com) Publishing and Editorial for Technology Dummies Richard Swadley, Vice President and Executive Group Publisher Andy Cummings, Vice President and Publisher Mary Bednarek, Executive Acquisitions Director Mary C Corder, Editorial Director Publishing for Consumer Dummies Diane Graves Steele, Vice President and Publisher Joyce Pepple, Acquisitions Director Composition Services Gerry Fahey, Vice President of Production Services Debbie Stailey, Director of Composition Services Contents at a Glance Introduction Part I: Getting Started Chapter 1: Mastering Peachtree Basics Chapter 2: Setting Up Your Company 21 Chapter 3: Designing the Chart of Accounts .29 Chapter 4: Setting Up the Background Information 47 Part II: The Daily Drudge 71 Chapter 5: Buying Goods .73 Chapter 6: Paying Bills 97 Chapter 7: Selling Products and Services 113 Chapter 8: Collecting the Money 145 Chapter 9: Paid Employees Are Happy Employees 163 Chapter 10: Billing for Your Time 187 Chapter 11: Counting Your Stuff 199 Chapter 12: Tracking Project Costs .223 Part III: The Fancy Stuff 237 Chapter 13: Working with Forms 239 Chapter 14: Making Reports Work for You 257 Chapter 15: Reviewing the Financial Picture 275 Chapter 16: When the Bank Statement Arrives 287 Chapter 17: When Accounting Cycles End and Other Miscellaneous Stuff 299 Chapter 18: Keeping Your House Safe 323 Chapter 19: Real-Life Ways to Use Peachtree .335 Part IV: The Part of Tens 359 Chapter 20: Ten Common Error Messages (And What You Can Do about Them) 361 Chapter 21: Ten Things You Can Get from the Web 367 Index .371 Bonus Chapter 3: Peachtree and Networking get it?) The data location you select must be a shared folder Because peer-topeer networks allow you to share the entire hard drive or only a particular folder, before you load Peachtree you should know whether you’re sharing the entire drive or just the Peachtree folder If you’re planning to share only to a particular folder, here are a few strategies to keep in mind: ߜ If you’re planning to map Peachtree workstations to a specific folder, such as making P: point directly to the \Program Files\Peachtree\ folder, your data path would read: P:\Company\ ߜ If you are mapping the entire Program Files folder as P: your data path would read P:\Peachtree\Company\ ߜ If you map the entire hard drive as P:, the data path would read P:\Program Files\Peachtree\Company\ ߜ If you’re performing the Peachtree installation on the server, the program path and data path should be the same However, when installing on the workstation, the program path should be on a local hard drive (C:\Program Files\Peachtree\) while the data path should point to the Company folder on the server computer, for example, P:\Program Files\Peachtree\Company Because Peachtree writes to the Windows registry, you should restart your system after installation but before you use the application If you’re installing to the server, be sure to warn any users who may be using other applications on the server that you’re going to restart the system Just a Few Final Notes We told you this was really geeky stuff! Here are a few little ditties you might want to know if you need to make changes to your Peachtree settings Data folders For each company you create in Peachtree, Peachtree creates a folder in which to store the company information The folder name comes from the company name Generally, Peachtree takes the first three letters of the first word of the company name, the first three letters of the second word of the company name, and the first two letters of the third word of the company name If your company name contains two or fewer words, Peachtree uses Peachtree For Dummies, 2nd Edition only those words but a total of eight letters if possible Confused? Here are some examples: ߜ If your company name is All Business Service, Peachtree creates a folder called ALLBUSSE ߜ If your company name is Marmel Enterprises, LLC, Peachtree creates a folder MARENTLL ߜ If your company name is Bo the Handyman, Peachtree creates a folder BOTHEHAN ߜ If your company name is Magic Fingers, Peachtree creates a folder MAGFINGE ߜ If your company name is Wanderbusters, Peachtree creates a folder WANDERBU Changing from single- to multi-user If you first installed Peachtree as a stand-alone program, but now you need to network it, we suggest that you uninstall Peachtree and then reinstall the program Different settings are used when installing as a single user versus as a multi-user Changing data path If you simply want to change the data path location, you can edit the Peachtree INI file You’ll find the INI file in the Windows (or WINNT) folder The file name depends on your version of Peachtree, as follows: ߜ For Peachtree Complete Accounting R2004, look for a file named PCW110.INI ߜ For Peachtree Complete Accounting R2005, look for a file named PCW120.INI ߜ For Peachtree Premium Accounting R2004, look for a file named PPA110.INI ߜ For Peachtree Premium Accounting R2005, look for a file named PPA120.INI Open the ini file by double-clicking the file Then edit the DATAPATH= line The DATAPATH line should always be pointing to the drive and Company folder that contains your company data folder Your company data folder itself should not be included in the path Bonus Chapter 3: Peachtree and Networking Even though the data path is, for example, C:\Program Files\Peachtree\ Company, the ini files that Peachtree still uses can’t handle long file names Therefore, the ini file actually references the eight-character DOS filenaming convention In the preceding example, the ini file would read DATAPATH=C:\PROGRA~1\PEACHT~1\Company Special hardware and software issues This section contains suggestions, not requirements, for networking However, we have found that Peachtree responds much better if you follow these guidelines: ߜ Make sure all workstations are using the same version of Windows If you’re using Windows XP, for example, make sure everyone is using Windows XP ߜ Make sure all workstations are using the latest update of their Windows version ߜ Make sure all workstations have the same brand of network card We’ve seen a number of instances where replacing the network cards so that all workstations use the same brand substantially improved Peachtree performance We don’t really know why it works better, but it does ߜ Make sure the workstations have enough memory If you’re on a network, chances are your Peachtree data files will be larger than a single user, simply because you have more people entering data Peachtree requires a minimum of 64Mb of memory but we highly recommend at least 256Mb — and more if you can More memory means much better performance Peachtree recommends a maximum of five simultaneous users It won’t stop you if you have more users, but you will notice a slowdown in performance and an increase in collision times, especially when multiple users write to the data files at the same time Peachtree For Dummies, 2nd Edition Bonus Chapter Add-On Products for Peachtree In This Chapter ᮣ AttitudePositive ᮣ Best Software ᮣ DataSoft ᮣ Invertech ᮣ Multiware, Inc ᮣ Wizard Business Solutions P eachtree alone may meet your needs However, several vendors provide solutions that enhance Peachtree’s functionality In this chapter, we give you a brief overview of some of these products — and information on contacting the vendors for more information AttitudePositive AttitudePositive sells AccuPOS, a point-of-sale system that links to Peachtree Complete Accounting You can visit their Web site at www.attitudepositive com or call the company toll free at 877-888-0880 Best Software (The Owners of Peachtree) In the box in which your Peachtree software arrives, you’ll find one add-on product: ACT!Link for Peachtree If you purchase Peachtree Premium, you’ll find one additional add-on product: Crystal Reports Best Software, which owns Peachtree, also makes available a variety of other add-on products In Peachtree For Dummies, 2nd Edition the following paragraphs, we give you a brief description of each of these add-on products You can find more detailed information at the Peachtree Web site: www.peachtree.com ACT!Link for Peachtree ACT! is a contact management system that handles all the tasks and information related to developing and maintaining business relationships ACT! links to Peachtree so that you synchronize customer and vendor information between ACT! and Peachtree Both Peachtree and ACT! are products of Best Software Timeslips Accounting Link Timeslips is a time and billing software package that provides great flexibility to consultants, lawyers, accountants, architects, and others who bill for their time by allowing them to track time spent, prepare a client bill, record payments from clients, and track outstanding receivables The Timeslips Corporation sells two add-on products that link Timeslips to Peachtree Timeslips Accounting Link (TAL) translates your Timeslips activity into debits and credits that update Peachtree’s general ledger, enabling you to use Peachtree to track the expense and payroll side of your business and still view a complete picture of your financial situation TAL Pro enables a two-way transfer between Peachtree and Timeslips; in addition to sending revenue information from Timeslips to Peachtree, you can send expense information (checks you write that need to be billed to clients as reimbursable expenses) from Peachtree to Timeslips Both Peachtree and Timeslips are products of Best Software Crystal Reports Crystal Reports is a custom report writer that you can use to create reports that don’t come with Peachtree The Crystal Reports program only works with Peachtree Premium and Peachtree Complete Bonus Chapter 4: Add-On Products for Peachtree Peachtree Internet Postage Service In partnership with Stamps.com, you can print postage directly from Peachtree When you produce invoices and checks, you can print postage onto envelopes or labels for letters, postcards, and a variety of packages Peachtree Credit Card Service With the Peachtree Credit Card service, you can accept and authorize credit card transactions from inside Peachtree using your existing business bank account so that you can expand payment options for your customers without any hardware additions Peachtree Online Backup In partnership with Connected, Peachtree Online Backup enables you to protect your company data by storing a backup of your data securely offsite on a remote server You use Peachtree to schedule the backup to occur anytime that’s convenient for you WebsiteCreator Pro Using the WebsiteCreator Pro add-on, you can build a Web site for your business with customizable pages and an online catalog, including inventory items that you can upload from your Peachtree Accounting software WebsiteTrader Using the WebsiteTrader add-on, you can sell your products and services online and transfer Web orders into Peachtree This service is available with all versions of Peachtree except Peachtree First Accounting Peachtree Payroll Service If you’re looking for an outside payroll service, check out the Peachtree Payroll Service, which handles all payroll functions for you and, of course, Peachtree For Dummies, 2nd Edition integrates with Peachtree After each payroll processed by the Peachtree Payroll Service, you synchronize your data to update your general ledger and job information with payroll information This service is available with all versions of Peachtree except Peachtree First Accounting Peachtree Direct Deposit Using the Peachtree Direct Deposit service, you can automatically deposit your employee’s paychecks into up to four different bank accounts And it’s okay if only some employees participate; you can still prepare paychecks for those who don’t This service is available with all versions of Peachtree except Peachtree First Accounting Peachtree Web Accounting With the Peachtree We Accounting service, you or anyone you authorize (like your accountant) can use the Internet to securely access your Peachtree data from home or while traveling and perform daily tasks such as entering transactions and running reports This service is available with all versions of Peachtree except Peachtree First Accounting Peachtree Fixed Assets If your company owns assets with a useful life of more than one year, you own fixed assets From an accounting perspective, you treat a fixed asset differently from another type of asset because you depreciate it over its estimated useful life to spread out the cost of the asset instead of recognizing its entire cost in the year that you buy the asset If you have lots of fixed assets, tracking their value and associated depreciation can be problematic Consider trying Peachtree Fixed Assets, which is available for Peachtree Complete and Peachtree Premium DataSoft DataSoft carries an impressive line of reporting tools linked to Peachtree data These specialized reports help you better manage your inventory, pay sales commissions, and analyze job profitability Their product line also includes a series of utilities that can clean up old Peachtree data files Contact DataSoft at www.dscorp.com or call them toll free at 800-662-0188 Bonus Chapter 4: Add-On Products for Peachtree Invertech Invertech designed their Peach Pro Suite with a direct link between Peachtree and their main products Their add-on products include Real Time Inventory Analysis; Sales Analysis and Forecasting; Contact Management with a link to Microsoft Outlook, and an Advanced Bills of Material Processor You can contact the folks at Invertech at 513-942-6333 extension 202 or visit their Web site at www.invertech-corp.com Multiware, Inc Multiware, Inc provides PawCom, an Access end application, and other add-on tools that extend the functionality of Peachtree and provide a programming environment for developing custom forms and reports and for integrating Peachtree with your own application For more information on their tools, visit www.multiwareinc.com or contact Multiware, Inc at 530-756-3291 Wizard Business Solutions Wizard Business Solutions specializes in producing add-on products that expand the capabilities of Peachtree You can contact Wizard Business Solutions at 800-322-4650 or visit their Web site at www.wizard-net.com for complete information Consolidation Wizard The Consolidation Wizard program retrieves period-to-date general ledger data from related Peachtree companies and consolidates the data It then pokes the consolidated data into a master Peachtree company created for the purpose of producing consolidated reports The amounts for each general ledger account number of each consolidated company appear in consolidated form in the master company If you’re using Peachtree Premium, you won’t need this add-on, but users of other versions of Peachtree may find it useful Peachtree For Dummies, 2nd Edition Bar Code Wizard The Barcode Wizard software prints barcode labels and works with many barcode scanners and printers to help you ensure accurate inventory counts Wizard Business Solutions also makes available a combination package comprised of the Barcode Wizard software, a scanner, and a label printer Payroll Wizard Using the Payroll Wizard, you can reduce the size of your general ledger, which helps speed up processing in your Peachtree company When you use the Payroll Wizard, you dedicate a separate company to nothing but payroll functions, and the Payroll Wizard summarizes the data in the payroll company by pay period and transfers it to your regular company In this way, payroll details exist in the payroll company, and your regular company’s general ledger is kept up to date with summarized payroll information Direct Deposit Wizard By purchasing the Direct Deposit Wizard, you pay a one-time fee — exclusive of optional program upgrades — to be able to prepare your payroll data for electronic transfer from Peachtree to the your bank every payday The bank deducts total payroll from the account of the user and then deposits the payroll amounts to the accounts of employees who are customers of that bank, or wire transfers funds to the accounts of employees who are customers of other banks With this program, you can transfer payroll instructions by magnetic media or by modem Time Clock Wizard This software program retrieves your time clock data, reformats it to Peachtree’s requirements to create time tickets, and transfers it to Peachtree, eliminating the manual acquisition of time clock data and the manual entry of that data into Peachtree You prepare and print payroll checks in Peachtree in the same way you always have Bonus Chapter 4: Add-On Products for Peachtree WizMag W-2 The WizMag W-2 program permits employers to file their annual W-2 report with the Social Security Administration on magnetic media It copies year-end summary payroll information from Peachtree and reformats the data to meet the current formatting requirements of the Social Security Administration In addition to WizMag W2, you can purchase Wizard Business Solutions’ Magnetic Media W-2 Preparation Service, and Wizard Business Solutions will all the work for you WizMag CA DE California requires that employers file a quarterly report, which serves as a state W-2 report and also incorporates the features found in a typical quarterly state unemployment tax report WizMag CA DE 6, approved by the California Employment Development Department (EDD), copies end-ofquarter payroll data from Peachtree and reformats the data to meet the current magnetic media formatting requirements of the EDD WizMag FL UCT-6 WizMag FL UCT-6 automates the filing of the Employers Quarterly Report (UCT-6) by extracting the needed payroll data from Peachtree, generating and formatting a file according to prevailing Florida DOR UCT-6 requirements, and submitting the Employers Quarterly Report (UCT-6) electronically using the Florida DOR Web site WizMag 1099-MISC The WizMag 1099-MISC program copies end-of-year 1099 independent contractor data from Peachtree and reformats the data to meet current formatting requirements of the Internal Revenue Service CertPay Wizard The Davis-Bacon Act requires that contractors of construction projects utilizing federal funds for payment of part or all of project cost must file a detailed Peachtree For Dummies, 2nd Edition payroll report each week The report must certify that pay rates for each payment for labor equal or exceed local prevailing rates as set by the U.S Department of Labor (DOL) CertPay Wizard automates the preparation and printing of this report and its accompanying compliance certificate SUTA Wizard TX Magnetic Media (MM) Some states require that certain employers file their quarterly unemployment report on magnetic media SUTA Wizard MM copies quarterly payroll information from Peachtree, reformats the data to meet the formatting requirements of the respective states, and transfers the reformatted data to magnetic media for filing This program is not yet available for all states Check Wizard’s Web site at www.wizard-net.com for the list of states for which the program is available EDI Wizard EDI (Electronic Data Interchange) Wizard enables your business to conduct transactions electronically with both internal and external customers EDI Wizard provides a seamless and consistent flow of data between Peachtree and the accounting applications of your trading partners The benefits to you include fast, automated, and economical data transactions operated according to EDI industry standards, ensuring accurate and precise accounting operations Bonus Chapter The Accounting Equation — and How It Works W e’re going to start with a little history — after all, debits and credits didn’t just magically appear And, with the history lesson, at least you’ll know who to hate for inventing debits and credits (We’ve always found that directing anger correctly is more productive than being angry in general.) You can trace double-entry bookkeeping back to Luca Pacioli’s book, Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything about Arithmetic, Geometry, and Proportion) Pacioli was a Franciscan friar in Venice, Italy, and wrote the Summa in 1494 One part of his book described a method of keeping accounts so that the trader could get, without delay, information about his assets and liabilities Pacioli’s interrelating system of accounts was based on two fundamental principles that are still the foundation of accounting today: ߜ The accounting equation (also called an accounting model): ASSETS = LIABILITIES + OWNER’S EQUITY ߜ Debits = credits Assets are things of value, such as cash, receivables, inventory, equipment, deposits, and investments that your company owns These “things of value” help you operate your business Liabilities are the debts owed by the company, such as accounts payable, loans, taxes, and interest Owner’s Equity (also called Equity, Capital, and Paid-In Capital) is the owner’s interest in the company To understand how the accounting equation works, we’ll start a fictitious cash-based business with $1,000 of our own money, giving the company one asset of cash To represent our investment into the business, we record the $1,000 as equity, as you can see from Line in the following table of fictitious accounting transactions Peachtree For Dummies, 2nd Edition Line Assets = Liabilities + Owner’s Equity $1,000 = $3,000 = $3,000 $4,000 = $3,000 $2,000 = $2,000 ($1,200) = ($1,200) $4,800 = $1,000 $3,000 + + $1,000 $1,800 To run our business, we purchase a delivery truck by borrowing $3,000 from the bank (it’s a cheap truck), which we record as Line in the table Combining this entry with the original investment, we have $4,000 of assets (the initial cash and the truck), $3,000 of liabilities (the bank loan for the truck), and $1,000 of equity Note that the accounting equation balances That is, assets equal liabilities plus owner’s equity The table is looking suspiciously like a Balance Sheet (now you understand why they call it a “Balance” sheet; see Chapter 16 for a sample of the Balance Sheet) Okay, every business has income from sales (or it won’t stay in business very long) and expenses Pacioli realized this, too We’re sure you would agree that what you earn belongs to you At least, you should get to keep most of it We handle income and expenses in the accounting equation by expanding the equation to include them in owner’s equity: Equity = Original investment + Income – Expenses In our example, the original investment was $1,000 Suppose that we made $2,000 of cash sales and pay for $1,200 of expenses What would happen to our accounting model? Line in the table shows how $2,000 of cash sales increases our assets (cash) and the income portion of owner’s equity Line shows that $1,200 of cash expenses decreases our assets (cash) and the expense portion of owner’s equity Income minus expenses is net income, as you may remember on your Income Statement in Chapter 16 — and the business pays taxes on this amount And, when you close the year, Peachtree posts net income after taxes to the equity section of the Balance Sheet You can gain numerous insights about your business by studying your Balance Sheet and Income Statement Wish we had space to show you, but think Peachtree Bible Now consider Pacioli’s second principle of accounting: Debits = Credits Pacioli needed some mechanical device to make sure that the accounting equation was always in balance He developed the following four rules — and we find them most helpful when preparing journal entries: Bonus Chapter 5: The Accounting Equation — and How It Works ߜ Debits increase Asset accounts and decrease Liability and Equity accounts ߜ Credits the opposite; they decrease Asset accounts and increase Liability and Equity accounts Expense and Income accounts behave like equity accounts, so ߜ Debits increase Expense accounts and decrease Income accounts ߜ Credits (surprise!) the opposite; they decrease Expense accounts and increase Income accounts Return to our example to see how these work In Line of the table, we started our business by investing $1,000 We increased our assets and increased our equities According to Rules and 2, we debited assets and credited equity Line shows how we handled the purchase of our truck Because both an asset (purchase of truck) and a liability (borrowed money) increased, we debited assets and credited liabilities (again, Rules and 2) In our last transactions (Lines and of the table) we earned $2,000 of income and paid $1,200 of expenses Note the following: ߜ The income increased our cash asset by $2,000 and also increased our income by the same amount Therefore, Rules and say we should debit (increase) the cash asset and credit (increase) income ߜ Expense transactions have the opposite effect; therefore, Rules and say we should credit (decrease) the cash asset and debit (increase) expenses These debit/credit rules are necessary to make sure we always keep the accounting model in balance ... 242 E-Mailing Forms 244 Customizing Forms .245 Exploring the Form Designer 246 Moving objects 248 xiii xiv Peachtree For Dummies, 2nd Edition Deleting... daily stuff for yourself — and paying your accountant for advice on making your business more profitable Peachtree For Dummies, 2nd Edition, shows you how to set up your company in Peachtree and... bought Peachtree and installed it on your computer The Flavors of Peachtree Peachtree comes in four versions: Peachtree First Accounting, Peachtree Accounting, Peachtree Complete Accounting, and Peachtree