About accounting in QuickFill

QuickFill's accounting facility is designed to support—not replace—your existing accounting system. To this end, QuickFill keeps track of all the accounting for your subscription income. QuickFill generates reports and files that let you post this data to whatever accounting system you use. (Because QuickFill provides accounting data for your subscription income only—not for the rest of your business—it cannot replace your existing accounting system.)

Here's how QuickFill's accounting facility works: whenever you enter certain transactions or run certain updates, QuickFill posts entries to its internal general ledger. It keeps this ledger on a double-entry bookkeeping method. You can see the contents of the ledger either by selecting 'Account codes' under 'Accounting' on the main menu or by running the 'General ledger' report under 'Reports' on the main menu.

When you begin using QuickFill, this internal ledger contains no accounts or entries. QuickFill creates an account when you first enter a transaction that will post an entry to that account. For example, when you enter your first unpaid order, QuickFill creates an accounts receivable account. Click here for a complete description of account codes.

Cash System vs. Accrual System

QuickFill maintains its internal ledger for two different accounting systems. We've labeled these systems "cash" and "accrual," although, technically, both are accrual systems. Here's the difference between the two: The "cash" system records income only when you receive a payment. The "accrual" system records income whenever you enter an order; it does not matter if the customer has paid for the order. However, both systems defer recognizing income until you actually serve issues. (That's why they're both, technically, accrual systems. A true cash system would recognize all income as soon as you received it.)

As you know, deferred subscription income represents a publisher's obligation to serve future issues for a subscription. This obligation is reduced as you send each issue to the subscriber. Usually, this obligation to fulfill is identified on a balance sheet as "unearned subscription income" or "deferred subscription income." In QuickFill we refer to it as deferred subscription income.

Now, here's an example of how QuickFill's accounting systems work:

Suppose you enter an unpaid new order with a term of 12 issues and a price of $120. QuickFill would record the following accounting entries in its internal ledger:

Cash System:

No entry

Because you've received no payment, QuickFill records no income.

Accrual System:

Db

Accounts receivable

$120

 

Cr

Deferred subscription income

 

$120

QuickFill debited your accounts receivable for $120, because the customer owes you that amount. But it has also credited you with $120 in deferred subscription income, because that is the price of this new subscription.

 

Now you run the 'Issue labels' update and serve the first issue for the order. Running the update causes QuickFill to record the following entries:

Cash System:

No entry

You still haven't received any payment.

Accrual System:

Db

Deferred subscription income

$10

 

Cr

Subscription income

 

$10

Because you've now served one issue, or 1/12 of the issues in the term, the accrual system debits your deferred subscription account 1/12 of the price, or $10, and it credits your subscription income account $10.

 

Now the customer sends in a check for $120, and you enter the payment. The 'Payments' transaction generates the following entries:

Cash System:

Db

Cash (PAYNC)

$120

 

Cr

Deferred subscription income

 

$110

Cr

Subscription income

 

$10

Accrual System:

Db

Cash (PAYNC)

$120

 

Cr

Accounts receivable

 

$120

QuickFill debits your cash account in both cases by the payment of $120. For the cash system, it credits to deferred subscription income $110, the amount that's still unearned. And it credits $10 to subscription income, because you've already earned this amount.

For the accrual system, the credit goes entirely to accounts receivable. That's because you've already recorded the deferred subscription income and the subscription income.

(PAYNC means "payment of a new order by cash/check." Click here for more information on account codes.)

Again, here's the fundamental difference between the two methods: with the cash method, QuickFill records income only when you've actually received payment. The cash method assumes that your orders are actually "on approval"; the customer still has the right to cancel without paying you. That's why QuickFill records no accounts receivable when you enter an order. The accrual method, by contrast, assumes that you have a firm order, for which the customer is genuinely obliged to pay.

Using the cash method usually results in your recording slightly less income during the tax year. Why? Because QuickFill doesn't record income for orders for which you haven't yet received payment—even if you've served some issues for those orders.

You choose whether to use the accrual or the cash method on the company definition screen (click here for details on setting your accounting policy ). The method you choose depends on many complex financial factors. You should discuss this decision with your accountant or financial adviser.

Internally, QuickFill keeps track of both sets of accounts at all times. So you can switch back and forth between them if you like. However, we don't recommend it. Doing so is likely to affect your accounting; the posting file created from the journal extract as well as the account codes displayed on the 'Account Codes' screen will be different. In any case, it always makes sense to discuss potential changes with your accountant or financial adviser. Also, you should switch only after you've extracted the accounting journal (click here for details on the journal extract ).

Using QuickFill's accounting facility with your outside accounting system

QuickFill records all accounting entries in "batches." It posts these accounting entries to QuickFill's internal ledger whenever you

The batch reports show you the details of the internal journal entries that QuickFill has posted (click here for details on batch reports). These batch reports are part of your audit trail—that is, they help you trace the total amount posted to each account back through the individual batches to the original transactions. The 'Accounting closing detail' report is the other part of your audit trail. QuickFill generates this report—which summarizes all the accounting entries for the period you're closing—when you select 'Close period' or 'Close year' under 'Accounting' on the main menu).

Now, here's how you link QuickFill's internal accounting facility to your outside accounting system. First, select 'Account codes' under 'Accounting' on the main menu and tell QuickFill which of its internal account codes correspond to the account numbers in your existing accounting system. That way, QuickFill will produce reports and output files with the correct account numbers for your system.

Then, to actually post QuickFill's accounting data to your outside accounting system, select 'Journal extract' under 'Accounting' on the main menu. 'Journal extract' creates a report—the 'Accounting journal extraction' report—that shows the consolidated amounts you should post. (Typically, you'll have to post only 15 to 20 entries per publication.) It also creates an output file.

You can then enter the data manually into your existing accounting system from the printed report. Or, if your accounting system is able to "import" journal entries—you might be able to use the output file QuickFill creates. Your accounting software manual should have the information you need. (Click here for details on the format of the journal extract output file.)

Note that if you only plan to post your accounting system when you close a period in QuickFill, you do not need to run the 'Journal extract' as a separate step—QuickFill does it for you as part of the 'Close period' and 'Close year' options on the 'Accounting' menu.

Whenever you plan to close a period or year, we strongly recommend that you back up your database immediately before running 'Close period' or 'Close year'; this backup should be archived. After you close the period or year, you should archive the reports created by 'Close period' or 'Close year'. It is especially important to archive the 'Accounting detail' report as it contains all the detail for the period. Backing up your database and archiving these report files will help to ensure the ability to go back and research them as necessary.

 

See Also