FNSACC416 Set Up and Operate a Computerised ......FNSACC416 Set Up and Operate a Computerised Accounting System Xero 3rd Edition ISBN Number: 978-1-925782-65-3Part Number: 516Version:

FNSACC416 Set Up and Operate a Computerised Accounting System

Xero 3rd Edition

ISBN Number: 978-1-925782-65-3

Part Number: 516

Version: Xero 20.01

AUTHOR – Kerryn Maguire

Kerryn is an authorised Xero Learn Partner.

Kerryn has been working with accounting software products for over twenty years. Originally working from 1994 as an Accountant with small business when accounting software became mainstream. Kerryn then focused on providing consulting and training services to small business in particular. Expanding from this into to providing curriculum based resources to TAFE and private RTOs. Through Learner Link and as a Xero Learn Partner, Kerryn provides a wide range of resources for the Accounting and Business Services Certificate courses. Kerryn has a long association with many TAFEs and RTOs across Australia.

Kerryn’s fundamental aim is to provide resources that are easy to understand while providing a practical application of skills acquired.

Kerryn also co-authors two titles for Cambridge University Press which are in their 4th Edition – first published in 2000.

Kerryn has considerable experience and knowledge: Bachelor of Applied Science Mathematics Diploma of Education Graduate Diploma of Accounting CRI: Criterion Referenced Instruction Member of Institute of Certified Bookkeepers Member of VELG

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All Rights Reserved

© Copyright 2019 Learner Link v 20.01

No part of the contents of this book may be reproduced or transmitted in any form or by any

means without the written permission of Kerryn Maguire at Learner Link. All registered

trademarks or service marks are the property of their respective owners.

While care has been taken in the preparation of this Training Tool, Learner Link, the developers

do not accept any liability for any damage or loss (including indirect and consequential loss)

incurred by any person as a result of relying on the information contained in this material. This

tool should not be regarded as professional advice and it should not be relied upon in any

important matter without obtaining appropriate advice relevant to your situation.

If there is one, it is the Registered Training Organisation’s responsibility to validate the mapping

of this tool to the performance criteria.

Trademarks and Acknowledgements

All terms or products mentioned in this manual that are known to be trademarks have been

acknowledged. Learner Link cannot attest to the accuracy of this information. Use of a term in

this manual should not be regarded as affecting the validity of any trademark.

Software Description

This course has been designed for users of the Xero Learn platform software. All attempts have

been made to provide current information. Instructions are correct at the time of writing.

The case studies in this material use fictional information.

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Contents

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Contents Unit 1 Introduction .................................................................... 1 Purpose of this User Guide ...................................................................... 1

Accounting software used ....................................................................... 2

Prerequisites ....................................................................................... 2

Delivery ............................................................................................. 2

Relationship to Competency Standards ....................................................... 2

What you will need ............................................................................... 2

Relationship to Competency Standards ....................................................... 2

Conventions used in this User Guide ........................................................... 3

Download Student Files .......................................................................... 4

Access your Sugar Pie Xero Organisation ...................................................... 6

Set up 2 Step Authorisation ..................................................................... 8

The Demo Organisation ........................................................................ 14

The Help Menu and Panel ..................................................................... 16

The Tab menus .................................................................................. 17

Log out of Xero .................................................................................. 22

Unit 2 Introduction to Accounting Systems ................................... 23 The Accounting System ........................................................................ 24

Accrual versus Cash Accounting .............................................................. 25

Accrual Accounting and Balance day Adjustments ........................................ 26

Bookkeeping ..................................................................................... 27

Double Entry Bookkeeping ..................................................................... 28

Transaction Categories ........................................................................ 29

Account Groups: Assets, Liabilities and Equity ............................................ 30

The Accounting Equation ...................................................................... 31

Account Groups: Expenses and Revenue .................................................... 33

The Chart of Accounts ......................................................................... 36

Goods and Services Tax ........................................................................ 38

The Invoice and Tax Invoice .................................................................. 41

Source Documents .............................................................................. 43

Policies and Procedures for Business ........................................................ 45

Why Use Xero .................................................................................... 46

Security and the Accounting System ......................................................... 47

Case Study Overview ........................................................................... 48

Sugar Pie Policies and Procedures ........................................................... 48

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Contents

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Unit 3 Setting up a Business Organisation ..................................... 53 Requirements for setting up an Organisation File ......................................... 54

Basic Settings for your Organisation ......................................................... 55

Financial Settings ............................................................................... 59

Conversion Date ................................................................................ 60

Tax Rates ........................................................................................ 61

Display Advanced Tax Rates .................................................................. 63

Change User Role to Adviser .................................................................. 64

Unit 4 Working with the Chart of Accounts ................................... 67 The Chart of Accounts ......................................................................... 68

The Chart of Accounts in Xero ................................................................ 69

Change an Account Name ..................................................................... 71

Change an Account Code and Type .......................................................... 73

Change the Tax Rate for an Account ........................................................ 74

Create a New Account ......................................................................... 75

Create New Asset and Depreciation Accounts ............................................. 78

Deleting an Account ............................................................................ 80

Add a Bank Account ............................................................................ 81

Add a Credit Card Account .................................................................... 82

Set up a Petty Cash Account .................................................................. 83

Account Opening Balances .................................................................... 84

Enter Account Conversion Balances ......................................................... 87

Print a Trial Balance Report .................................................................. 90

Unit 5 Setting up Contact Records .............................................. 93 Overview ......................................................................................... 94

Add a New Contact ............................................................................. 96

Set up Default Terms for Contacts .......................................................... 100

Import Contacts ................................................................................ 104

Search and Find ................................................................................ 107

Sort Contacts ................................................................................... 108

Delete/Archive a Contact .................................................................... 109

Restore an Archived Contact ................................................................ 110

Privacy and Data Breaches ................................................................... 111

Unit 6 Creating Items ............................................................ 115 Overview ........................................................................................ 116

Create a Simple Inventory Item for Sale ................................................... 117

Create Simple Inventory Items to be Purchased .......................................... 119

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Create Non-Inventory Service Items ........................................................ 121

Inventory Items that are Purchased and Sold ............................................. 122

Tracked Inventory Items ...................................................................... 125

Check Items ..................................................................................... 127

Search and Find Items ......................................................................... 128

Unit 7 Sales Invoices ............................................................. 131 Create a New Invoice with Items ............................................................ 133

Send an Email with Invoice ................................................................... 139

Create an Invoice without Items ............................................................ 142

Create a Quote ................................................................................. 144

Create an Invoice from a Quote ............................................................. 146

Create New Invoice from Last Items Used ................................................. 150

Copy an Invoice ................................................................................ 151

Edit an Invoice to Correct it ................................................................. 156 Unit 8 Recording Customer Payments ........................................ 159 Analyse Receivables ........................................................................... 160

Receive a Payment ............................................................................ 162

Incorrect Payment from Customer .......................................................... 166

Send Receipt .................................................................................... 167

Enter Invoice and Payment in One Step .................................................... 169

Cash Sales Receipts using Receive Money .................................................. 170

Add a New Item while entering transaction ............................................... 172

Send a Statement .............................................................................. 175

Check Customer Activity via Contacts ...................................................... 178

Unit 9 Adjusting Invoices ........................................................ 179 Create a Credit Note and apply to Unpaid Invoice ....................................... 180

Paying a Cash Refund for a Credit on a Paid Invoice ..................................... 186

Run Aged Receivables Summary Report and Reconcile with Chart of Accounts ..... 189

Bad Debts ....................................................................................... 193 Unit 10 Purchasing from Suppliers ............................................. 199 Overview ........................................................................................ 200

Enter payments through Spend Money ..................................................... 200

Checking Documents for GST Components ................................................ 204

GST Free Purchase ............................................................................. 204

GST Free Purchase: Supplier not Registered for GST .................................... 207

Purchase Part GST and Part GST Free ...................................................... 209

Add a New Bill .................................................................................. 212

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New Bill with Previous Items ................................................................ 215

Enter a Purchase Order ....................................................................... 216

Purchases Overview ........................................................................... 219

Create a Purchase Order with Items ....................................................... 222

Convert a Purchase Order to a Bill and Edit ............................................... 223

Repeating Bills ................................................................................. 230

Unit 11 Recording Supplier Payments ......................................... 235 Analyse Payables .............................................................................. 236

Paying Bills ..................................................................................... 238

Part Payment of Bill ........................................................................... 239

Edit Transactions .............................................................................. 243

Refunds and Credits from Suppliers ........................................................ 245

Unit 12 Bank Reconciliation ...................................................... 249 Overview ........................................................................................ 249

Account Transactions tab .................................................................... 250

Physical Bank Statements .................................................................... 251

Things to do prior to a Bank Reconciliation ............................................... 252

Importing a Bank Statement ................................................................. 253

The Reconcile tab ............................................................................. 254

Match transactions ............................................................................ 256

Create Transactions ........................................................................... 260

Fixing Mistakes in a Bank Reconciliation ................................................... 262

Bank Rules ...................................................................................... 266

Cash Coding..................................................................................... 272

Entering Bank Fees ............................................................................ 273

Enter a Transaction with split lines and part private .................................... 274

Create a Transfer Between Accounts....................................................... 276

The Discuss tab ................................................................................ 277

Recording Payments of Invoices and Bills while Reconciling ........................... 278

Bank Reconciliation Report .................................................................. 281

Unit 13 Petty Cash .................................................................. 287 Manual Petty Cash Documents ............................................................... 289

The Petty Cash Account ...................................................................... 290

Enter Petty Cash Entries Using Spend Money ............................................. 291

Upload a Receipt Image ...................................................................... 293

Enter a Transfer to Petty Cash .............................................................. 297

Conduct a Manual Reconciliation ........................................................... 298

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Contents

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Unit 14 Journal Entries and Balance Day Adjustments ..................... 303 Overview of General Journals ............................................................... 304

Understanding Debits and Credits ........................................................... 305

Add a New Account to the Chart of Accounts ............................................. 311

Enter a General Journal ...................................................................... 312

View the Reallocated Accounts .............................................................. 315

Enter a General Journal for Depreciation .................................................. 316

Enter a Journal for a Period End Adjustment: Prepayments ............................ 318

Print a Posted Journal Report ............................................................... 321

Unit 15 Reports ..................................................................... 323 The Balance Sheet Report .................................................................... 324

The Trial Balance Report ..................................................................... 326

The Profit and Loss Report ................................................................... 328

Customise a Layout ............................................................................ 328

The Aged Receivables Reports ............................................................... 332

The Aged Payables Reports .................................................................. 334

Payroll Reports ................................................................................. 336

GST reporting ................................................................................... 338

Check Activity Statement Settings .......................................................... 339

Run the Simpler BAS on Cash basis .......................................................... 339

Run the Simpler BAS on Accrual Basis ...................................................... 343

Difference between Cash and Accrual GST Reports ...................................... 344

Use Spend Money to Record Payment of GST Tax to ATO ............................... 348

Unit 16: More on Opening Balances ............................................ 351 Accounts Receivable .......................................................................... 352

Accounts Payable .............................................................................. 356

Bank Account Opening Balance .............................................................. 360

Setting up Unpresented Cheques ............................................................ 362

Setting up Uncleared Deposits ............................................................... 363

Run a Bank Reconciliation that includes unpresented cheques and uncleared deposits ....................................................................... 366

Archive Accounts no longer required ....................................................... 368

Inventory Opening Balances .................................................................. 369

Add the Inventory Adjustment Account .................................................... 369

Enter the Inventory Opening Balance ...................................................... 370

Enter Inventory Stock Items Opening Balances ........................................... 371

Reconcile Inventory Items balance with Inventory account ............................ 378

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Unit 17: End of Financial year .................................................... 371 End of Financial Year Rollover .............................................................. 382

View the Balance Sheet ...................................................................... 384

Reconcile Account Receivable ............................................................... 385

Reconcile Account Payable .................................................................. 386

Reconcile Inventory ........................................................................... 387

Reconcile GST .................................................................................. 388

Lock Dates ...................................................................................... 392

Unit 18: More on Transactions ................................................... 395 Enter Asset Purchase .......................................................................... 396

Batch Deposit .................................................................................. 400

Appendix A: Elements of Competency and Performance Criteria ........ 403

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Unit 2: The Accounting System

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Unit 2

The Accounting System

This unit covers the components of successfully creating and maintaining a computerised accounting system and the accounting concepts that form the basis of the system. We also look at the organisational policies and procedures related to setting up and maintaining the system.

Learning Outcomes

In this unit you will read about

What an Accounting System is

The concepts of Cash and Accrual accounting

Account Groups

Debits and Credits

Relevant legislation and compliance requirements

Requirements for a tax invoice

Source documents

Organisational policies and procedures

Appropriate personnel

Physical and digital security

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24 © Copyright 2019 Learner Link

The Accounting System

The title of this unit is Set up and operate a computerised accounting system. What is an accounting system and why is it necessary?

Business transactions that occur in purchasing and providing goods and services are settled by the receipt or payment of money. These transactions are classified into groups of related receipts and expenses. The recording of these transactions in an accurate and timely manner result in relevant and reliable financial reports.

Each transaction is:

1. Identified – for example an invoice from a supplier arrives – it is

determined that it is a valid invoice for goods supplied

2. Assembled – for example the supplier’s invoice is forwarded to the

accounts payable department

3. Recorded – for example the Accounts payable department record

the supplier invoice

4 Reported – for example the supplier invoice amount is reported as

an expense and possibly as a gst credit

Source documents trigger the recording of transactions. Source documents will be looked at in more detail later.

The reports generated enable managers, business owners and other stakeholders to monitor the financial performance and to make decisions about the direction of the business.

How well an accounting system for a business works depends on the regular and accurate recording of business transactions.

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Accrual versus Cash Accounting

An accounting system can be on a cash or accrual basis.

A Cash accounting system - this means that only cash that is actually received and payments that are actually made are entered in the Accounting data file. (Bills from suppliers are only entered when the account is paid.)

The alternative is an Accrual Accounting system, where all sales (both cash and credit), and all expenses (both paid and unpaid) are entered in the data file. The accrual system results in more accurate reporting of business trends because there is a better match between revenue and expenditure.

As an example a business invoices $3000 for work completed in July but the customer does not pay until August. The business invoices another customer $5000 for work completed in August and that customer just happens to pay the invoice in August. The two tables below indicate how the income would be reported in each accounting system. Both systems are correct but the Accrual table is a better indicator of when work is completed.

Cash Accounting Accrual Accounting

July August July August

Income $0 $8000 Income $3000 $5000

If we add to our example materials purchased by the business to complete the work. The business pays for materials as they are used for performing the work.

Cash Accounting Accrual Accounting

July August July August

Income $0 $8000 Income $3000 $5000

Expense $1200 $2200 Expense $1200 $2200

Net -$1200 $5,800 Net $1800 $2800

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Accrual Accounting and Balance Day Adjustments

Balance Day Adjustments are another feature of accrual accounting which provide a better determination of matching revenue and expenditure.

For a very simple example a business purchases a truck to use in the provision of services to customers. The truck costs $50,000. However it will be used for 5 years in the business. Depreciation is used to apportion the cost of the truck over five years so that each year $10,000 is entered as a depreciation expense as opposed to having just one expense of $50,000 in the first year. The apportionment is a balance day adjustment.

A balance day is at the end of a reporting period which at the very least is at the end of a financial year, 30 June. Other balance days may be at the end of a quarter of a financial year, September 30, December 31, March 31 and June 30, or they may occur at the end of each month if that is the reporting requirement of the business stakeholders.

Balance day adjustments include but are not limited to:

• Depreciation

• Prepaid adjustments

• Work in progress adjustment

• Write off adjustments

• Re-allocation of fund adjustments

• Accrued expenses

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Bookkeeping

Bookkeeping is the process used to keep an accurate record of a business's transactions. We have already established that a business must keep records. The daily transactions of the business are written into books of record. These books may be either active or inactive. Before the advent of accounting software the books were in hard format, now of course they are more likely to be digital.

Bookkeeping is the process used to keep accurate records of a business’s transactions

The books are where the record of daily transactions of a business are kept.

Active books are those that relate to the transactions occurring in the current accounting period. An accounting period is the length of time — a week, month, or financial year — used by a business to assess its financial position.

Inactive books are those that relate to the transactions occurring in a previous accounting period.

Accounting period is the length of time reflected in financial statements and distinguishes between active and inactive books.

What is happening when we record business transactions. Generally, we use the double entry bookkeeping method. The Bookkeeping Entity principle states that the records of the business are always kept from the business point of view.

For a business we can say that transactions can be grouped into four types:

Sales (Tax Invoice issued)

Purchases (Tax Invoice and Invoice received)

Payments (Cheque, Cash, Credit Card, Electronic Funds Transfer)

Receipts (Cash, Cheque, Credit Card, Electronic Funds Transfer)

The ability to use software to make these entries is an enormous time saver. However, you still need to have understanding of what is happening. This will help you to be confident in the information extracted in reports from the transactions.

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Double Entry Bookkeeping

Double entry bookkeeping is the method used in Australia to record business transactions. The double entry refers to two sides of an entry – a debit side and a credit side. A balanced record is where at least one account is debited and at least one account is credited. The value of the debit entries must equal the value of the credit entries. For example suppose Clara is putting another $5000 of her savings (which is capital contributed) into her business. She puts the money into the business account so the Business account balance increases (debit) and the Capital contributed account increases (credit).

Balance is a key word. Debits always equal credits in one double entry.

The purpose of double entry accounting is to reflect where money comes from and where it goes. A transaction is any event that requires an entry in the books – for example, buying equipment or goods or services, selling goods or services, paying rent, paying wages etc. When you record $200 deposited in your business account you are completing only one half of the transaction. In accounting terms, you will need to indicate also where this money originated. It may have come from the sale of a product, the supply of a service, a loan, a deposit or from a variety of other sources.

Each transaction must be analysed to determine what type of accounts are affected, and whether each account is increased or decreased to determine whether the accounts are to be debited or credited. Each accounting transaction therefore should have two complimentary entries. Unit 14 General Journal Entries goes into more detail about Debits and Credits.

Debits Credits

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Transaction Categories

There are five major transaction categories that each transaction in a business may involve. Recognising the category involved in a transaction is important in an accurate recording of the transaction into the accounting system.

Type Function

Assets Record what the business owns or is due to be paid

Liabilities Records what the business owes to others

Owner’s Equity

Records the amounts contributed to the business by the owner or amounts withdrawn from the business.

Income Records sales and supply of services.

Expenses Records charges incurred in the running of the business and the production of goods and services.

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Account groups: Assets, Liabilities and Equity

Asset Accounts

Assets are items of value owned by the business.

An example of an asset account is the Bank account. Another example of an asset is the Debtors (Accounts Receivable) account. This is a less obvious example, but it is expected that the debt owed will be honoured, and is therefore an asset to the business.

Liability Accounts

Liabilities are items of value owed by the business.

An example of a liability account is a loan from the bank. Credit cards and overdrafts also represent a debt to a bank. Another example of a liability account is the Creditors (Accounts Payable) account.

Equity Accounts

As the name implies, this account group deals with the owner/s of the business. It shows the money or items of value invested into the business (called Capital), all withdrawals of cash or goods from the business called Drawings (sole trader and partnerships only), and any profits made or losses incurred in the accounting period.

Equity is similar to a liability but is regarded as a Special Liability as the business owes the owner for all money or items of value he/she has invested.

Activity

Classify the following as an asset, liability or equity account:

Computer: .............................................................................

$10,000 invested by the owner in the business: ................................

Business Credit Card debt: .........................................................

Toyota Landcruiser used for deliveries: ..........................................

$25,000 still owing on the Toyota Landcruiser: .................................

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The relationship between assets, liabilities and equity

Asset, liability and equity account groups are related to each other. They represent what the business owns or what the business owes.

In bookkeeping, a business report that lists what is owned (assets), and what is owed (liabilities + equity) is called a Balance Sheet (Statement of Financial Position).

The bookkeeping entity states that the business and the owner must always be regarded as separate. Even though equity is considered a special liability, the account group Equity is listed separately to the account group Liability. This supports the bookkeeping entity rule which states that the business and the owner are regarded as separate bodies.

BALANCE SHEET OF PETES PICKLES

AS AT 30 JUNE 2019

ASSETS LIABILITIES

Bank 1,500 Bank Loan 20,000

Production Equipment 10,000 Accounts Payable 2,000

Stock on Hand 5,500

Delivery Vehicle 30,000 EQUITY

Capital 25,000

$47,000 $47,000

This form of Balance Sheet is known as a T-form Balance Sheet. In a T-form Balance Sheet you will notice that the relationship Assets = Liabilities + Equity are presented in a way that clearly displays this relationship. This formula can be shortened to A = L + E and is known as the Accounting Equation.

Accounting Equation: A = L + E

Important: The Accounting Equation is an important accounting concept. The whole bookkeeping process is based on this equation. It will always show the relationship between Asset, Liability and Equity account groups.

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A Balance Sheet may also look like this, just another way of reporting the information. This is known as the Narrative form.

BALANCE SHEET OF PETES PICKLES

AS AT 30 JUNE 2019

EQUITY

Capital $25,000

Represented By:

ASSETS

Bank 1,500

Production Equipment 10,000

Stock on Hand 5,500

Delivery Vehicle 30,000 47,000

Less LIABILITIES

Bank Loan 20,000

Accounts Payable 2,000 22,000

$25,000

Note that the Accounting Equation is now:

Equity = Assets – Liabilities or E = A – L.

The Balance Sheet above tells the following story about the business owned by Brocks Tyreworld.

On the 30 June, the business owned by Petes Pickles had $1,500 in the bank, owned production equipment valued at $10,000, stock available for sale valued at $5,500 and a delivery vehicle valued at $30,000. The business had a bank loan of $20,000 (probably used to buy the delivery vehicle), and owes $2,000 to creditors. The owners have invested $25,000 in the business.

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Account groups – Expenses and Revenue (Income)

A Balance Sheet changes as a result of transactions affecting Assets, Liabilities and Equity values. A business also has other transactions. These transactions involve costs incurred by the business (called expenses) and money earned by the operation of the business (called revenue or income).

Expense Account Group

An expense refers to any cost the business incurs during the business’s operation.

Examples of expenses are:

• electricity

• telephone

• purchase of stock items to resell at a profit (purchases).

The business has to pay for these services and buy stock in order to continue operations.

Another example of an expense is wages. The business has to pay its employees wages for the services they provide on behalf of the business.

Revenue (also known as Income) Account Group

Revenue is any incoming money the business receives from the sale of the goods or services it provides.

An example of a revenue account is sales. The Sales account records the value of all the goods or services that the business makes.

Another example of a revenue account is delivery charges collected. When a business sells its products to a customer it may decide to deliver these products for a fee. This fee is considered income earned for providing a service, but it is not sales.

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Reports representing the five account groups

The report that shows all the expense and revenue items in a business is called a Profit & Loss Statement. This report is also known as an Income Statement or a Statement of Financial Performance.

Expense and Revenue items are recorded so that a business can ascertain whether they have made a profit or a loss.

A profit is made when the business’s revenue exceeds its expenses, and a loss is made when the business’s expenses exceeds its revenue.

A simple Profit & Loss Statement is displayed below.

PROFIT & LOSS STATEMENT OF JAM JARS

FOR THE MONTH OF FEBRUARY 2020

REVENUE

Sales 30,000

Delivery Charges 2,000 32,000

less EXPENSES

Purchases 7,000

Wages 1,300

Telephone 200

Electricity 500 9,000

NET PROFIT

$23,000

The Profit & Loss Statement is prepared to determine whether the business has made a profit or loss at the end of an accounting period, in this case one month.

Once this has been established, the profit or loss is transferred to the Balance Sheet because the profit belongs to the owner. A profit would have the effect of increasing the equity and a loss would consequently have the effect of decreasing the equity.

The Balance Sheet would now be presented using the Net Profit figure from the above Profit & Loss Statement.

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BALANCE SHEET OF JAM JARS

AS AT 28 FEBRUARY 2020

EQUITY

Capital 40,000

Add Net Profit (Retained Earnings)

23,000 63,000

Represented By:

ASSETS

Bank 27,000

Production Equipment 45,000

Stock on Hand 6,000

Delivery Vehicles 60,000 138,000

Less LIABILITIES

Bank Loan 70,000

Accounts Payable 5,000 75,000

$63,000

It would be impractical and time consuming to complete a new Profit & Loss Statement and Balance Sheet after each transaction that occurs on a daily basis.

Traditionally transactions are therefore summarised into some other books of record (journals) following the account group rules.

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Unit 3: Set Up a Xero Organisation


Unit 3

Set Up a Xero Organisation

Lesson Outcomes

In this unit you will learn how to:

check financial and organisation settings

view tax rates in Xero

access the ATO website.

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Accessing the Sugar Pie Organisation

Just to recap, you should have the following invitation email to gain access to the Sugar Pie organisation. Instruction to access it are provided in the Introduction. If you have not already done so work through the Introduction section starting at page 6.

1. You will need to log in to your Xero account.

Once logged in your Dashboard should look like this. This is a blank organisation. You will be required to make adjustments to it.

Requirements for creating an Organisation File

An organisation file is the term used in Xero software to name a company’s data file. Before you create an organization file you need to have the following information:

• Company details such as name, address, ABN and phone number

• Your current financial year and the last month of the financial year

• The conversion date – this is the month when you plan to start using Xero.This month is important for the opening balances that will be enteredduring the organisation setup. Examples include bank account balance,debtors and creditor aged balances.

• A list of all the accounts can be generated by Xero based on templates oryou can build your own, for example, Assets and Liabilities.

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Basic Settings for Your Organisation

Most of this is carried out via the General Settings area.

1. Click the tab Sugar Pie – the organisation name

2. Click on Settings

3. Click on Organisation details

The Organisation details window appears where you can enter more details about your business.

Settings

Organisation Name

Organisation details

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4. Check in the box Display Name that Sugar Pie is displayed

5. Enter a code after the name Sugar Pie such as your student code

6. Press the TAB key to move to the field What is your line of business?

7. Enter Retail Bakery in the box What is your line of business then TAB

8. Click on the droplist button and click on Sole Trader

9. TAB to the ABN box and type 84 111 122 223

10. TAB to Organisation Description and type Delicious cakes and tempting treats

Note: Only real ABNs can be entered in Xero. This ABN will be used for all your learning about Xero. The ABN above is recognised by the ATO as an education tool and will not be treated as real by the ATO.

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11. Scroll down to Contact Details

12. Leave the Quick find box empty

13. Click into each field and type the information shown

14. Click on Save

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15. Click on + Add contact field to display a list as shown here

16. Click on Mobile

This will add a new field for a Mobile number.

17. Click into the box for Mobile and type 412123123

18. Click into the County code for Mobile and type +61 and select Australia +61 that appears

19. Click on Save

20. Scroll back to the top of the window

Add contact field

Mobile

Mobile

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Financial Settings

This area is where you make settings relevant to GST and other TAX details.

1. Click on tab Accounting Advanced Financial settings

2. Enter the details shown below

3. Click on Save

Tax File Number

123456

GST Method

Cash Basis

For Sales

Tax Inclusive

For Purchases

Tax Inclusive

Accounting

Advanced

Financial settings

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Conversion Date

This date is important. It is the date from which recording transactions begins. You should choose a date at the start of a month and it is also preferable that it is at the start of some reporting period e.g. a BAS quarter or a financial year. The conversion date is also the date from which you determine the opening balances of various assets and liabilities and Bank Accounts. We will look at this in more detail shortly.

A conversion date can be in the past. Clara’s conversion date is 01/07/2019.

1. Click on Accounting Advanced Conversion balances

2. Click on the Conversion Date button

3. Click on the Month droplist button and click on July

4. Click on the Year droplist button, scroll down and click on 2019

Note the prompt that conversion balances need to be dated 30 June 2019.

5. Click on Save

We will return to enter the account opening balances in Unit 4.

Conversion Date

Month Year

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Tax Rates

Tax Rates are used when you process transactions such as entering sales invoices, purchase orders, spending or receiving money. Whenever you enter a transaction, you must assign an appropriate tax rate. This will happen automatically if you have Tax Rates set for Accounts, e.g. GST on Expense tax rate set for Postage.

Xero comes with a standard set of Tax rates. Every account has a tax rate applied to it – even if tax doesn’t apply then it has the BAS Excluded tax rate.

View Tax Rates

1. Click on Accounting Advanced Tax rates

The Tax rates window appears.

The rates used most often are GST on Expenses – 10% and GST on Income also 10%.

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Unit 4: Working with the Chart of Accounts


Unit 4

Working with the Chart of Accounts

Lesson outcomes

By the end of this unit you will be able to:

set up the Chart of Accounts

list account classes and types

change account names and codes

change account type

change account tax rate

delete accounts

enter account opening balances

print a Trial Balance report

add new accounts

add new bank accounts

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The Chart of Accounts

A Chart of Accounts contains a list of all the accounts required to record, track, organise and report on your company’s financial activity.

As already discussed in Unit 2, in Xero all accounts are in one of these five Classes: Assets, Liabilities, Equity, Expenses and Revenue.

In Xero these five classes are further divided into 17 specific account types. Numbers are associated with the accounts, but they do not determine grouping – the account type determines this.

Account Types

The Account Type determines the layout of reports.

Account Class Description Examples Account Type

Asset Items owned by the business.

Cash at bank, debtors, motor vehicles.

Bank

Current Asset

Inventory

Prepayment

Non-current Asset

Fixed Asset

Liability Items owed by the business.

Creditors, Visa, bank loans.

Current Liability

Liability

Non-current Liability

Equity The owner’s share in the business.

Capital, drawings. Equity

Revenue Money earned from sales.

Sales, service income.

Sales

Revenue

Other Income

Expense Costs to run your business. Costs associated with producing a product.

Wages, rent, advertising, stationery. Raw materials, labour costs.

Direct Costs

Expenses

Overhead

Depreciation

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The Chart of Accounts in Xero

1. Click on Accounting Advanced Chart of accounts

Note: The Chart of accounts option is also listed directly under Accounting as it has been highlighted by a star to create a shortcut.

The default Chart of accounts is listed. There are no bank accounts to begin with. You must create these yourself – we will cover this later in this unit.

Each account has a Code, Name, Type and Tax Rate.

You can modify this chart to suit your requirements by deleting, adding, changing the name, code, tax rate etc. Some accounts cannot be changed as they are crucial to proper working of the system – these accounts are indicated with a small padlock symbol.

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Liabilities

2. Click on the Liabilities tab to view just those Account types.

3. Notice the Padlock next to the Accounts Payable account and the GSTaccount.

4. Click on the line of Accounts Payable which will display the Edit AccountDetails window

5. Click on Show on Dashboard Watchlist so a tick appears (this is simply just toshow you how to add an account to the dashboard)

6. Click on Save

Show on …

Accounts Payable

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Changing Account Details

When Clara’s file was created it included a default set of accounts. This default Chart of Accounts needs to have some existing accounts changed or deleted to meet the specific needs of Clara’s business.

Information such as account name, account type, code, description and tax rate can be changed.

Change an Account Name

1. Click on the Assets tab in the Chart of accounts.

2. Click the line for Office Equipment to display details.

3. Click into the Name box at the start of the text, delete the text Office andthen type Production so the name is now Production Equipment.

4. Click into the Description box at the start of the text, delete the text Officeand then type Production to match the Name.

5. Click Save.

Name

Description

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Your window should now look like the following:

6. Click on the Name for the account Less Accumulated Depreciation onOffice Equipment

7. Edit the Name and Description to replace Office with Production

8. Click on Save

Account name and description have changed.

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Change an Account Code and Type

When you change an account code, all entries that have ever been entered will change as well for all new reports. Any reports that have already been published will not change. In this example we will change the 425 Freight and Courier Account Code to 315 and change the Account type to Direct Costs.

1. Click on the Expenses tab in the Chart of accounts

2. Click on the account 425 Freight & Courier

3. Click into the Code box and type 315 and TAB – check that it is available

4. Click on Account Type droplist button and click on Direct Costs. Notice thewarning.

Your window should look like this.

5. Click Save to save your changes.

Code is available

Warning

Code

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Change the Tax Rate for an Account

All Accounts have a Tax Rate so that the GST or whichever tax is appropriate is calculated and accounted for. Then, when you come to do reporting on GST and other taxes, most of the work is already done for you.

Clara wants to report Capital Purchase assets separate to other GST incurring expenses. So, she will use the GST on Capital tax rate. We changed to use the Advanced Tax Rates on page 63. However, the tax rates are not applied automatically to the accounts.

1. Click on the Assets tab – you will seethe Account Production Equipmentcurrently has a Tax rate of GST onExpenses

2. Click the Name link ProductionEquipment

3. Click the Tax droplist button andselect GST on Capital

4. Click Save to save your changes.

5. Repeat to apply the Tax rate GST onCapital to 720 Computer Equipment.

Note: If GST on Capital is not available as a Tax Rate you must display the Advanced Tax rates – the steps to do this are back on page 63

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Create a New Account

The default set of accounts provided for Clara just has the one main Sale Revenue account. We will add another account so the sales in the shop are separated from sales to wholesale customers. We will also create another income account for sales to catering events. While Xero does not have sub accounts this is one way we can group accounts in reports which you will learn how to do later.

1. Click on Accounting Advanced Charts of accounts if necessary, to display it

2. Click on the Add Account button

3. Click on the droplist button for AccountType

4. Scroll down and click on Sales

5. Click into the Code box and type 210

6. Click in the Name box and type SalesWholesale

7. Click in the Description box and typeSales to wholesale customers who sellthe products in their stores orbusinesses

8. Check that GST on Income Tax Rateappears in the Tax box

9. Click on Save

Add Account

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Now to add another account for Sales to catering events.

10. Click on the Add Account button

11. Enter the following details:

Account Type: Sales

Code: 220

Name: Sales Catering

Description: Sales for catering and supply to events

Tax: GST on Income

12. Save the account and click on the Revenue tab to view the results of your work

Practice Exercise 4.1: Edit Existing Accounts

1. Click on the original Sales account

2. Edit the account so the Name is now Sales Shop

3. Click on the Account Type droplist button scroll downand select Sales

4. Click into the Description box and edit the text to readSales from Shop only

5. Click on Save

6. Click on the All Accounts tab and repeat the steps above for the following accounts:

880 – change the account Code to 980, the Name to Drawings and the Account Type to Equity

900 – change the Name to Bank Loan

970 – change the Name to Capital

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Unit 7: Sales and Invoices


Unit 7

Sales and Invoices

Lesson outcomes


Create invoices

Email invoices

Create a quote

Create invoice from quote

Edit invoices

Copy invoices and quotes

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Overview

There are three methods of entering money that has been received:

• Payment of sales invoices

• Receive money

• Cash coding

Invoices are useful for sales to Customers that have an account with you. Entering invoices helps you keep track of whom owes you what and when.

Receive Money can be used to enter immediate receipts such as daily shop takings or online sales, or deposits received.

Cash Coding is useful for recording common receipts that happen multiple times in a month. We will look at cash coding in the Unit on Bank Reconciliation.

Invoices, Orders and Quotes

Invoices are sometimes preceeded by quotes and Orders.

A Quote is from the business to a customer to provide an estimate of the cost of items or services. It enables the customer to make an informed decision as to whether to proceed or not with a purchase. A quote does not impact on stock levels. A quote, if accepted, can be converted into an order or invoice.

An Order received from a customer is a request for items or services. At the point of an order no items or service have actually been completed or sold. If the order includes a deposit, then a transaction will appear in the Sales Journal. Once an Order is complete it can be converted into an Invoice to save time.

An Invoice can be created before or after the goods or services are delivered. Stock levels and Accounts will be updated, including Accounts Receivable.

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Create a New Invoice with Items

1. You can create a New Invoice with either:

+ New Invoice OR Business Invoices New Invoice OR + Add an invoice on the Dashboard

The New Invoice window appears:

2. We will be using the classic invoice type so check that your invoice looks like this:

3. If not, you can switch to classic invoicing by clicking on the link in

the centre at the bottom of the screen

Note: The reason we will use Classic is because it is in line with the layout of Purchases. Tax rates and Accounts are easier to check as well.

+ New

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4. Click into the To box and type the name of the Customer – in this case The Pier Events.

5. Type 7 Jul 2019 in the Date box

6. TAB to the Reference box and type PO# 5124 (notice that the Due date and Invoice # were entered automatically)

7. Check that the Amounts are box reads Tax inclusive

8. TAB to the Item column on the first row

9. Click on the droplist button and click on LAB001: Labour setup – 1 hour. We will leave the quantity as 1.00.

10. Click into Item column on the next row and type BB020 and TAB

11. Again, the row will be populated. TAB to the Qty column and type 50 then TAB – the Amount will be automatically calculated

Amounts are

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When you start a new invoice 5 lines are created automatically. If you need more, you can add them.

12. Click on Row 3 and type CM003 and TAB to the Qty and type 50

13. Click on Row 4 and type LM013 and TAB to the Qty and type 50

14. Click on Row 5 and type VM012 and TAB to the Qty and type 50

15. Click on Add a new line

16. Type BT001 and TAB to the Qty and type 50

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We now need to change two of the accounts as all the items are being sold as part of a catering event.

17. Click on the Account box for Chocolate Mud Stack – click on the droplist button and select 220 – Sales Catering

18. Click on the Account box for Blueberry Custard Tart – click on the droplist button and select 220 – Sales Catering

19. Check that you have all items, quantities and accounts correct – the TOTAL should be $925

Add a new line

Account

220-Sales Catering

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There are several ways to deal with this invoice now both in how it is saved and how it is approved.

20. Click on the drop down Approve menu.

Approve is the final stage in recording an invoice. You can go straight to this if you have completed all parts of the Invoice and you have the authority to Approve its recording.

Approve & add another will save the invoice and put it in the Awaiting Payment tab. The Invoice window will remain open for the next Invoice to be entered.

Approve & print will Approve the invoice and print a pdf file of the invoice. The Invoice will be listed in the Awaiting Payment tab.

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The following options are available on the Save drop down menu

Save is for users who may only have the authority to save and then submit to another user for final approval. Just clicking the Save button will save the invoice as a draft.

Save as draft will save the invoice and the user can return later and add more details or edit it then proceed.

Save (continue editing) will save the entries you have made so far but leave the invoice open for further work

Save & submit for approval will save any changes you have made and put the invoice into the Awaiting Approval tab.

Save & add another will save the current invoice in the Draft tab and leave the invoice window open to enter details for a new invoice.

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21. Just click on Approve to record the invoice

22. Now to provide a copy to the customer – Click on Email

23. Make the entries as shown below and then click on Send

Email

In practice of course, you would enter the customers email address here but, so you can see what happens put your own email address here

You can edit what appears here although

do not change the text for [Online

Invoice Link]

Include PDF attachment will add a pdf of the invoice for the customer to save

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The customer will receive an email. A PDF is attached if you ticked that box. There is a link to the Tax Invoice which will display as shown to the left on a separate Browser tab.

24. Close the tab for the link

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25. Click on the link Invoices

The invoice you just created is now listed on the Awaiting Payment tab. Notice the other tabs.

Note: The number of days in Overdue by will vary on your screen depending on when you do these exercises.

Invoices

Overdue by

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Create an Invoice without Items

You do not necessarily need to use items to create an invoice. Items are useful to assist you in quickly entering descriptions, prices etc. They can also help you keep track of what you sell. You can also simply enter a description and a price, or a combination of both.

1. Click on New Invoice to add another invoice

2. Click into To and type Hamilton Homes and then TAB to select the contact.

3. Type 8 Jul 2019 and TAB through to Reference and type Harry Hamilton

4. Click into the Description box and type Selection of custom cakes and slices

5. TAB to Qty and type 1

6. TAB to Unit Price and type 1100

7. TAB to account and type 220 for Sales - Catering

8. Check the total is $1,100 including GST

9. Click on Approve

NOTE: Remember when using Contacts in invoices you need to ensure you add at least their ABN or their address to their details, so the invoice is a valid Tax Invoice when over $1000.

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Practice Exercise 7.1: Create an Invoice

Another customer, Ebb & Flow, have emailed through purchase order #124 for the following cakes for their store:

• 40 blueberry tarts

• 40 chocolate raspberry tarts

• 30 chocolate mud stacks

They want to pick up the order on 10 July.

1. Enter the invoice as shown checking the tax rate used, the total amount, the quantities, date and purchase order number.

2. Click on Approve

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Create a Quote

The Pier Events have an event showcasing the wonderful things they can provide for weddings. They need a Quote for a large number of items.

1. Click on + Quote

2. Enter The Pier Events as the customer. The date is 1 July 2019 – make the Expiry date a week from your current date so you can see what happens in the email

3. Reference is Wedding Expo

4. Enter 200 each of BT001, CR002, CM003 and VM012.

5. Check that 220- Sales Catering appears in the Account column

6. Check that amounts are Tax Inclusive

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You can enter terms here or create standard terms in invoice settings.

7. Click on Send

8. For this exercise enter your own email address so you can accept the quote

9. Click on Send

Enter your own email address

Send

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Unit 10: Purchasing from Suppliers


Unit 10

Purchasing from Suppliers

Lesson outcomes


• Enter payments to suppliers through the Spend Money

• Enter GST Free purchases

• Enter GST Free purchase to Supplier not registered for GST

• Enter a Part GST part GST Free Purchase

• Enter a Bill for approval

• Approve a Bill received from a supplier

• Enter a Purchase Order

• Use the Purchases Overview

• Convert a Purchase Order to a Bill

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Overview

Xero is all about accurate records and saving time. You don’t want to go through the process of entering every little purchase as a purchase order or bill and then paying it.

There are three methods of entering money that has been spent:

• Paying bills

• Spend money

• Cash coding

Bills are useful for purchases from Suppliers that you have an account with. Entering Bills helps you keep track of what you owe when and to whom.

Spend Money can be used to enter immediate payments, writing a cheque or using eftpos to pay expenses such as your electricity bill, telephone account, insurance payments etc.

Cash Coding is useful for recording bank charges from a bank statement or paying for fuel, or other payments that happen multiple times in a month. We will look at Cash coding in the Unit on Bank Reconciliation.

Enter Payments through Spend Money

Clara has made several purchases during the month.

1. Click on the New + icon and Spend Money

2. Click on Business Account in the list of bank accounts then Next

New +

Business Account

Spend Money

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You can add new contacts as you go and edit their details later if needed.

3. Click on Spent as and select Direct Payment if necessary

4. In the To box type Super Supplies then TAB

5. In the Date field type 4 Jul 2019 and press TAB twice

6. In the Total field, enter 320

7. Check that Amounts are is Tax inclusive

8. Leave Item blank – this is only for Inventory items

9. Click into Description and type Various office stationery and TAB

10. Type 1 in the Qty field and TAB

11. Type 320 in the Unit Price field and TAB

12. Start to type 461 - Printing & Stationery and TAB

13. Check the GST on expenses appears in the Tax Rate column

14. Click on Save

The transaction appears in the transaction list.

Spent as

To

Date

Tax

Description

Save

Tax Rate

4 Jul 2019

4 Jul 2019 8,180.00

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We will enter another purchase via Spend Money.

15. Click on the + Icon and Spend Money

16. Click on the Business Account in the list of bank accounts then Next

17. Click on Spent as and select Direct Payment if necessary

18. In the To box type Bell Tel and TAB

19. In the Date field type 6 Jul 2019

20. TAB to the Total field, enter 220

21. Check that Amounts are is Tax inclusive

22. Click into Description and type Monthly internet telephone and TAB

23. Type 1 in the Qty field

24. Type 220 in the Unit Price field and TAB

25. Click on the droplist button and scroll down to 489 - Telephone & Internet and click

26. Check the GST on Expenses appears in the Tax Rate column

27. Check that the Total reads 220.00

28. Click on Save

6 Jul 2019

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You will now have two transactions in the Spent column of the Account Transactions tab for the Business Account.

You can continue to enter payments from the same bank account just by clicking on + New Transaction

1. Click on + New Transaction

2. A New Spend Money window appears – enter the following details

3. Click on Save

A blank New Spend Money window appears automatically. You can continue to enter transactions and just click on Save until you are finished and then just click on Cancel to close and return to the Account transactions list.

10 Jul 2019

+ New Transaction

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Checking Documents for GST Component

In business it is most likely that most of your bills and charges will include a 10% GST component. A business registered for GST essentially gets a refund from the ATO for this GST tax Input Credit.

However at the very least all of the situations below could occur:

• Not all products have a GST tax, unprocessed food for example.

• Not all businesses are registered for GST either.

• There is also the occasion when a bill may have a combination of GST and GST free products.

GST Free Purchase

In this transaction we will enter a GST Free purchase. In this instance it is because the products are classified as GST-free food.

Each time you check a Payment Receipt you must check the amount of GST.

1. Click into the To box and type Bakers Mill and TAB

2. In the Date box type 19 Jul 2019

3. TAB to the Total box and type 16.50

EFT: Business Account Date: 19/07/2019 Pay: Bakers Mill

Flour 5Kg x 2 $10.00 Sugar 5Kg x 1 $6.50

Total Amount inc GST: $16.50 Amount of GST included: $0.00

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4. Click into the Item box and click on the droplist button to display all the inventory items

5. Scroll down and click on FLWT5000 – all the details for this item will be entered into the Line

6. Tab to the Qty column and type 2

7. Tab to the Tax Rate column and check GST Free Expenses is selected

8. Click on Add a new line

9. Enter the details for 1 of the item SGWT5000. The Tax Rate here should again be GST Free Expenses

10. Click on Save

Add a new line

GST Free Expenses

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Practice Exercise 10.1: Spend Money

1. Enter this purchase from Dairy Queen on the 19 July 2019 for Milk and Cream which cost 5.00 – the Tax Rate should be GST Free Expense

2. Click on Save when you have checked all your entries

3. Click into the To box and type Bakers Mill

4. Tab to the Date box and type 24 Jul 2019

5. Click into the Item box and click on the droplist button to display all the inventory items

6. Scroll down and click on FLWT5000

7. Tab to the Qty column and type 3

8. Check that GST Free Expenses is in the Tax Rate box then click on Save

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GST Free Purchase: Supplier not Registered for GST

Some businesses while having an ABN may not be registered for GST because the turnover of the business is less than $75,000. This means that a business purchase that might normally incur a charge of GST, such as cleaning, does not.

Sally Sparkle runs a small cleaning business and does not turn over enough to warrant registering for GST. As a result, what she charges clients for cleaning does not have a GST component. Notice also that her invoice just reads Invoice – no Tax Invoice.

1. Click on + New Transaction if necessary

2. Click into the To box and type Sally Sparkle and TAB

3. In the Date box type 7 Jul 2019

4. TAB to the Reference box and type Inv 150

5. TAB to the Total box and type 90.00

Sally Sparkle ABN 10 425 425 425

Date: 7/07/2019 Invoice # 150

3 hours cleaning Sugar Pie Shop 3 x $30 per hour.

Total : $90

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6. TAB to Description and type Cleaning shop premises

7. TAB to the Qty column and type 3

8. TAB to the Unit Price and type 30.00

9. Tab to Account and type 408 for Cleaning

10. Tab to the Tax Rate column and click on the droplist button

11. Click on GST Free Expenses

12. Check that GST is now 0.00

13. Click on Save

Tax rate

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Unit 12: Bank Reconciliation


Unit 12

Bank Reconciliation

Lesson outcomes


Import a bank statement

Match, create and transfer based on bank statement lines

Enter a split transaction

Enter a transaction that involves a private expense

Create a rule

Use cash coding

Overview

Completing a bank reconciliation is a major part of ensuring that you have correctly recorded all business transactions. We have already entered many transactions however there are still more to be entered that can be achieved very efficiently using Cash Coding and Bank Rules.

1. Click on tab Dashboard Business Account

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Notice all the transactions you have entered so far appear in the Account Transactions tab. The Status for each is Unreconciled.

Notice that there are two different Business Account bank balances – the Statement balance – this is from the balance when you first opened the organisation. In practice it would be as a result of the last bank reconciliation. This will not change until you start to reconcile account transactions in Xero with Bank Statement lines. The other balance is the Balance in Xero – this amount is based on the opening balance less the transactions you have entered so far that appear on the Account Transactions tab.

Statement Balance Balance in Xero

Account transactions

Status

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Physical Bank Statements

This is Clara’s Bank Statement for July 2019. You need to reconcile it with the transactions entered into Xero.

Business Bank Paddington NSW

Bank Statement

Sugar Pie Business Cheque Account Account Number: 123123123

From 1 Jul 2019

To 31 Jul 2019

Date Transaction Details Debit (Withdrawals)

Credit (Deposits)

Balance

1-Jul-19 Brought forward 8500.00

4-Jul-19 Pad City Parking 2.80 4-Jul-19 Super Stationery Supplies 320.00 8177.20 6-Jul-19 Bell Tel Communications 242.00 7935.20 7-Jul-19 Hillview Realtor 440.00 7-Jul-19 S Sparkle Inv 150 90.00 7-Jul-19 Branch deposit 1650.00 9055.20 9-Jul-19 Officeworks 220.54 9-Jul-19 Pad City Parking 2.40 8832.26

10-Jul-19 Bell Tel Communications 98.00 8734.26 14-Jul-19 Hillview Realtor 440.00 14-Jul-19 Branch deposit 2100.00 10394.26 16-Jul-19 EFTPOS Dairy Queen 7.50 16-Jul-19 Pad City Parking 1.80 10384.96 18-Jul-19 Aus Post 355.00 10029.96 19-Jul-19 EFTPOS Bakers Mill 16.50 19-Jul-19 EFTPOS Dairy Queen 5.00 19-Jul-19 Pad City Parking 1.80 10006.66 21-Jul-19 Hillview Realtor 440.00 21-Jul-19 Branch deposit 1830.00 11396.66 22-Jul-19 Hamilton Homes Inv 00125 1100.00 22-Jul-19 Cheque 001013 1000.00 11496.66 24-Jul-19 EFTPOS Bakers Mill 15.00 24-Jul-19 EFTPOS Dairy Queen 5.00 24-Jul-19 Pad City Parking 2.80 11473.86 26-Jul-19 Events by Ingrid deposit 600.00 12073.86 27-Jul-19 The Pier Events Inv 127 1500.00 13573.86 28-Jul-19 Branch deposit 2200.00 28-Jul-19 Pad City Parking 1.20 28-Jul-19 Ebb and Flow Inv 00124 455.00 28-Jul-19 Hillview Realtor 440.00 15787.66 30-Jul-19 Hunter Insurance 465.45 30-Jul-19 Credit card 305.00 30-Jul 19 Hamilton Homes Refund per Inv125 100.000 14917.21 31-Jul-19 Cash Withdrawal 200.00 31-Jul-19 Bank Fees 12.00 31-Jul-19 Merchant Fees 160.00 14545.21

Closing Balance 14545.21

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Things to do prior to Bank Reconciliation

Enter these transactions prior to performing a bank reconciliation:

• Invoices

• Bills

• Credit note cash refunds

• Expense claim payments

These transactions can be entered prior or during a bank reconciliation:

• Invoice payments

• Bill payments

• Spend money transactions

• Receive money transactions

• Bank account transfers

When conducting the bank reconciliation Xero will use the following features for a very efficient result:

• Match

• Create with bank rules

• Create with suggestions based on previous entries

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Importing a Bank Statement

Before you import any bank statements the other tabs of Reconcile, Cash Coding and Bank Statements are all empty. Only the Account Transactions tab contain any entries. In practice you can get bank feeds directly to your account. To simulate this, we will import a file manually.

1. Check you have the Business Account displayed

2. Click on Manually import a statement

3. Click on Browse

You will need the file BS Sugar Pie Jul 31 19.csv.

Instructions on how to download files to use here are provided in the Introduction. If you haven’t done this refer back to page 4.

4. Click on the file then on Open

Manually import a statement

Browse

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You will be returned to Import Bank Transactions box.

5. Check you have the right file

6. Click on Import

The first time you import a bank statement file you will be prompted to assign the columns in the file to columns for the bank statement in Xero.

7. Check that the first field in the statement data is a date – this will be the Transaction Date

8. Check that the second field is a payee – this will be the Payee as shown on the right

9. Check the third line – it is an amount – check that Transaction Amount is the corresponding field

10. Click on Next a few times to view the various statement lines and how they appear

11. Click on Save and OK to the prompt

BS Sugar Pie Jul 31 19

Next

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The Reconcile tab is displayed. Notice that there are now 36 transactions to reconcile.

There are two columns. The column on the left lists all the transactions that were just imported. Note: These are not entered into the Xero system – they are here as list of what actually happened in the bank account. These are what are actually on the business bank statement. The column on the right lists either matching transactions or an entry form for entering the transaction into Xero in a very efficient manner.

We will deal with all the possible matches first then go back to the rest.

What has been entered into Xero What has actually happened in the bank account

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The first suggested “Match” is for the Spend Money transaction you entered earlier for $320 of stationery supplies.

Xero matches transactions that have the same date and amount and a similar payee or payor reference.

1. Click on OK as this looks correct

The next suggested “match” is for the Spend Money transaction to pay for a telephone bill.

2. Click on OK for the “match”

The next suggested “match” is for a payment to S Sparkle.


The next suggested “match” is for a Receive Money transaction you entered for cash takings from the shop earlier in the book.


Match

OK

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5. Click on the Accounts Transactions tab and scroll to view the transactions we have matched. They now have Reconciled in the Status column.

Status

Account transactions

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6. Click back on the Reconcile tab of the Bank Account window

7. Scroll down and click on OK to match the payment to Bell Tel for 98.00 and thedeposit of $2,100 for cash takings from the shop

8. Repeat to click on OK for the payment to Australia Post for $355

9. Then on 19 July the purchases from Bakers Mill and Dairy Queen for $16.50 and$5.00 respectively

10. Click on Next if necessary, to display the next page

Next

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Elements of Competency and Performance Criteria FNSACC416


Appendix A

Elements of Competency and

Performance Criteria FNSACC416

Element Performance Criteria Reference

1 Implement integrated accounting system

1.1 Implement general ledger, chart of accounts and subsidiary accounts according to organisational requirements, policies and procedures

Units 3, 4, 5, 6, 7, 8, 10, 11

1.2 Set up customers, suppliers and inventory items in system to meet organisational requirements and reporting requirements of goods and services tax (GST)

Units 4, 5, 6, 7, 8, 10, 17

1.3 Identify sources of technical help and use them to solve any operational problems

Unit 2

2 Process transactions in system

2.1 Collate, code and classify input data before processing

All Units

2.2 Process wide range of cash and credit transactions according to organisational policies and procedures

All units

2.3 Use general journal to make any balance day adjustments for prepayments and accruals

Units 14

2.4 Regularly review system output to verify accuracy of data input and make adjustments for detected processing errors

Units 7 -16

2.5 Perform end of financial year rollover Units 16

3 Maintain system

3.1 Add new general ledger accounts, customer, supplier, inventory and fixed asset records are added as required

Units 4, 6, 7, 8, 9, 10, 17

3.2 Maintain and update existing chart of accounts, and customer, supplier, inventory and fixed asset records and subsidiary accounts

Units 3-14, 16, 18

3.3 Customise chart of accounts to meet reporting requirements of organisation

Units 4-18

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Elements of Competency and Performance Criteria FNSACC416


Element Performance Criteria Reference

4 Produce reports

4.1 Generate reports to indicate financial performance and financial position of the organisation and for goods and services tax (GST) purposes

Units 4, 6 - 18

4.2 Generate reports that confirm that subsidiary ledgers and accounts reconcile with general ledger

Units 8 9, 11, 15, 16, 17

4.3 Generate reports that confirm that system’s bank account entries reconcile with bank statements

Units 15, 17

4.4 Establish systems and practices to ensure information is stored securely and according to legislative and organisational requirements

Units 2

4.5 Maintain secure record of all processed transactions for audit purposes

Units 1, 2, 3, 17

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