QuickBooks Online (QBO) is a great software. Business owners, internal AR/AP staff, virtual assistants without an accounting degree can easily create and send invoices, process customer payments, enter vendor bills, and categorize transactions through the Bank Feed.
Having also worked with Xero in the past, I appreciate the philosophy behind modern accounting software: enabling business owners to manage daily operational tasks without having to be a bookkeeper.
If every transaction in a business flowed perfectly without exceptions over the years, yes, the software could generate accurate financial statements.
But does money in business ever move that smoothly? Also…
- Do you always know which QBO form to use when handling a credit memo, issuing a customer refund, or recording a loan payment?
- What happens when a customer payment doesn’t match an open invoice?
- Does your Chart of Accounts (COA) remain the same when business grows?
QBO is user-friendly, hiding accounting mechanics behind clean visual buttons. But on the backend, it is still powered by double-entry accounting mechanics (which is why I am always fascinated by and love learning accounting software!).
As an accountant and bookkeeper, I don’t just see forms. I think about the underlying debits and credits and how each entry impacts the Balance Sheet and P&L.
Knowing how money actually flows through the general ledger makes it easy to select the correct form and to review and clean up inaccurate accounts later.
Here is a real-world example of how understanding debits and credits behind QBO forms helps, and how you can start reviewing accounting impacts in your own file.
Troubleshooting Example: Accounting Impact Behind Transactions
When an Accounts Receivable balance looks incorrect for a customer account, you don’t have to guess or delete entries randomly if you understand debits and credits. You can trace the accounting flow to understand what went wrong, and where.
- Was a customer overpayment recorded to a credit to the customer account? (Dr. Cash / Cr. Accounts Receivable)
- Was a Refund Receipt then used to record the refund of that overpayment back to the customer? (Dr. Revenue / Cr. Cash)
What happened? Refund Receipt was used incorrectly when a normal Check or Expense form coded to Accounts Receivable should have been used instead. Because the wrong form was selected, Revenue was decreased unnecessarily while the customer’s open credit remained uncleared.
Without understanding the underlying accounting impact, it is easy to select the wrong form and leads to misstated financial statements. By understanding which account was debited and credited at each step, the troubleshooting process becomes a lot more straightforward.
3 Habits to Start Learning Accounting Impacts
You don’t need to master debits and credits or hold an accounting degree. Just a few simple habits will transform how you look at your QBO account.
Each and every form in QBO – whether it is an Expense, Credit Memo, or Payroll entry – impacts specific line items on your financial statements.
At the bottom of almost every form in QBO (Invoices, Receive Payment screens, Expenses, Bills, and Bank Deposits), there is a Transaction Journal option (sometimes found under the More button).
Opening the Transaction Journal shows you the exact accounting impact (i.e. journal entry) created behind that form.
Before recording a complex adjustment or resolving an issue, write out the debits and credits – what increases and what decreases – on a paper to walk through your logic.
After saving an unusual transaction or journal entry, run a Balance Sheet and P&L to confirm the number moved into the account you intended.