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Important Note to UMUC Students:Xero is a New Zealand based company. This student manual has been edited to change the spelling of English words from British English to American English. For example, throughout the document, the British word “organisation” was changed to “organization.” If you detect misspelled words, please email Sharon.Levin@UMUC.edu so the document can be correctly for subsequent semesters.In addition, Xero, the software, will use the British spelling of English words. Don’t let this throw you. If you can’t figure out the American version of the British word, Google it or ask your professor for help.XeroAccountingSoftwareStudent Manual Using the Demo Company49036923925Contents TOC \o "1-2" Welcome to the Student Manual PAGEREF _Toc457736551 \h 6Let’s Get Started! PAGEREF _Toc457736552 \h 6The Cloud PAGEREF _Toc457736553 \h 6Create Your Xero Account PAGEREF _Toc457736554 \h 6The Demo Company PAGEREF _Toc457736555 \h 10Trial Organization name PAGEREF _Toc457736556 \h Error! Bookmark not defined.Xero is live software. Dates in your exercises and assessments are important! PAGEREF _Toc457736557 \h 11Manage Your Xero Access PAGEREF _Toc457736558 \h 12Xero Security PAGEREF _Toc457736559 \h 12Navigate Your Way Around PAGEREF _Toc457736560 \h 13Menus PAGEREF _Toc457736561 \h 13Icons PAGEREF _Toc457736562 \h 14Tabs PAGEREF _Toc457736563 \h 15Using excel .csv files PAGEREF _Toc457736564 \h 16Xero Hints and Tips PAGEREF _Toc457736565 \h 18Add New Accounts or Inventory items PAGEREF _Toc457736566 \h 18Reports PAGEREF _Toc457736567 \h 18Favorites PAGEREF _Toc457736568 \h 18Xero’s Dashboard and Accounts drop-down menu PAGEREF _Toc457736569 \h 19Select Accounts – Use Names or Numbers PAGEREF _Toc457736570 \h 19Chart of Accounts PAGEREF _Toc457736571 \h 20Set Up Your Chart of Accounts PAGEREF _Toc457736572 \h 20Introductory Exercise Your Name Kayaks PAGEREF _Toc457736573 \h 22Objective PAGEREF _Toc457736574 \h 22The Business Scenario PAGEREF _Toc457736575 \h 22Personalise your business name PAGEREF _Toc457736576 \h 22Customize the Chart of Accounts PAGEREF _Toc457736577 \h 22Conversion Date PAGEREF _Toc457736578 \h 27Conversion Balances PAGEREF _Toc457736579 \h 28Remove Current balances PAGEREF _Toc457736580 \h 28Enter Trial Balance Amounts PAGEREF _Toc457736581 \h 28Opening individual Accounts Receivable and Accounts Payable balances PAGEREF _Toc457736582 \h 31Inventory Set Up PAGEREF _Toc457736583 \h 33Transaction Time! PAGEREF _Toc457736584 \h 37Process Credit Transactions for Inventory Items PAGEREF _Toc457736585 \h 37Process Cash Transactions PAGEREF _Toc457736586 \h 43Process Invoice/Bill Payments PAGEREF _Toc457736587 \h 48Cash Receipts and Payments via Bank Reconciliation PAGEREF _Toc457736588 \h 50Bank Reconciliation Procedure PAGEREF _Toc457736589 \h 50Import Bank Statement File PAGEREF _Toc457736590 \h 51Bank Statement Terms PAGEREF _Toc457736591 \h 52Match Transactions PAGEREF _Toc457736592 \h 53Create Transactions for Direct Bank Entries PAGEREF _Toc457736593 \h 54Process Direct Credits for Part Payment of Sales Invoices PAGEREF _Toc457736594 \h 55Work with Multiple Matches PAGEREF _Toc457736595 \h 56Process Infrequent Transactions PAGEREF _Toc457736596 \h 58Inventory Returns PAGEREF _Toc457736597 \h 58Sundry Charges from Suppliers PAGEREF _Toc457736598 \h 63Sundry Charges to Credit Customers PAGEREF _Toc457736599 \h 65Drawings of Goods PAGEREF _Toc457736600 \h 67Inventory Shortages PAGEREF _Toc457736601 \h 70Purchase of Plant or Equipment on Credit PAGEREF _Toc457736602 \h 71Correct Errors PAGEREF _Toc457736603 \h 73Dispose of Plant or Equipment PAGEREF _Toc457736604 \h 77Deal with a Sale Other than a Trade-in of Plant or Equipment (Fixed Assets) PAGEREF _Toc457736605 \h 82View Your Reports PAGEREF _Toc457736606 \h 83Journal Report PAGEREF _Toc457736607 \h 83Profit and Loss PAGEREF _Toc457736608 \h 84Balance Sheet PAGEREF _Toc457736609 \h 84Wrap it Up PAGEREF _Toc457736610 \h 85Correcting Receive Money or Spend Money Transactions PAGEREF _Toc457736611 \h 86Invoices/Bills and Credit Notes PAGEREF _Toc457736612 \h 87Manual Journal Transactions PAGEREF _Toc457736613 \h 89Additional Resources PAGEREF _Toc457736614 \h 90Help Centre PAGEREF _Toc457736615 \h 90Xero TV PAGEREF _Toc457736616 \h 90Xero U PAGEREF _Toc457736617 \h 91Learn More About Using Xero PAGEREF _Toc457736618 \h 91Appendix A - Introduction Exercise - Kayaks PAGEREF _Toc457736622 \h 92Appendix B Your Name Home Care PAGEREF _Toc457736636 \h 104KeysImportantHelpful HintReferenceCompleteWelcome to the Student ManualYou will use this manual to learn about Xero’s features and benefits. Throughout this manual you will learn what you can do and how to do it. The examples to illustrate concepts in this manual are based on the introductory exercise-Kayaks Ltd included in full as Appendix A to this manual. Enjoy! The assessment activity will allow you to demonstrate your learning when you have completed the additional exercises.Let’s Get Started!Xero brings you online accounting that puts client financials at your fingertips. It’s easy for your clients, connected to banks and built in the cloud providing real-time access to what you need, when you need it. Let’s jump in and see how Xero can work for you.The CloudXero isn't software you need to install. Instead, it runs on the browser you normally use to access web pages on the internet. This means you have access to Xero anytime and anywhere you can get to the internet. Pretty convenient right? Xero works best on the Chrome or Safari web browsers.Create Your Xero Account All you need is a valid email address and Internet access. It is best to use your school email address if you have one. Follow these simple steps to log in and get started in Xero!Go to www.xero.com/teaching and follow the online instructions to set up Xero’s free education trial. This will give you access to Xero’s Demo Company, which you can use for all your exercises and your assessment activity. STEP 1Go to www.xero.com/teachingSign up using your own name and personal or school email address.STEP 2Follow the prompt to your email Inbox, click on the signup confirmation and activate your Xero trial account.STEP 3Sign into Xero using the email address and password you have created.We recommend that you add another layer of security to your Xero account by enabling Two-Step Authentication https://help.xero.com/nz/MyXero_Two-Step_About STEP 4Add Education Trial [& your own name] as your Organization Name and select Start Trial. You are now entered in the trial Organization called ‘Education Trial [your own name]’. Click OK on the “You’re all ready to go” pop-up screen. 1047752067560005676902603500 STEP 5 From the Education Trial you can now access the Demo Company. Select My Xero from the list menu beside your Education Trial business name STEP 6 Under Organizations click on“Try the Demo Company (NZ)”, to access the Demo Company. STEP 7Before starting an exercise in the Demo Company select the “Reset” button at the bottom of the screen. This ensures you have 28 days access to your demo company data.393982222796500 STEP 8You’re all ready to go! You are now in the Demo Company so have a look around and take Xero for a test drive!If you need more help with the signup process check out our video at Getting Started Teaching Video (http://vimeo.com/107005153)The Demo CompanyYou are going to use Xero’s Demo Company to learn how to process a variety of transactions using Xero accounting software. All of the illustrations in this manual are from the Xero introductory exercise called [Your Name] Kayaks. The complete exercise is attached to this manual as Appendix A.Reset the Demo Company273367544704000To make sure you have 28 days to complete your exercises you need to RESET the demo company before you start working in it.To reset the demo company:Go to the MY Xero navigation menu.Click ‘Reset’ at the bottom of the screen.You will return to the Demo Company dashboard where you can start your exercise.The Demo Company’s data is automatically reset every 28 days. Keep this in mind so you don't accidentally lose your work.Change the Demo Company NameBecause everyone in the class has the same Demo Company in front of them, the first thing you need to do is change the name of the company. This way when you print out your journal files you will know which print out is yours. It is very important to be able to distinguish your work for assessment purposes, so make sure you do this at the start of each exercise. For each exercise and the assessment the company name will include your name. In the example ‘Your Name Kayaks’ means if your name is Amy Lo your business will be called AMY LO KAYAKS.To change the Demo Company name:3710305115570Go to General Settings in the Settings drop down menu.Select Organization Settings.In the Basic Information change the Demo Company (NZ) name both as the Display name and the Legal / Trading name to ‘Your Name Kayaks’ as shown in this example for Amy Lo Kayaks. While you don’t need to add any more information or make any other changes to this screen you do need to save your changes. 44951656223000In order to keep your company name scroll down to the bottom of the screen and click the green Save button, otherwise your business name will not change.Xero is live software. Dates in your exercises and assessments are important!You are going to use Xero’s Demo Company to learn how to process a variety of transactions using Xero accounting software. Because Xero is live software and works with real businesses living in the real world in real time, you are going to create a business with transactions using dates in 2013. This is so they are before any of the Demo Company transaction dates. Demo CompanyThe bank statement files are setup for 2013 dates and the bank reconciliation process WILL NOT go smoothly if you have entered incorrect dates.If you leave the date as current when you are working on your exercises, your transactions are going to get muddled up with all of the Demo Company transactions and will be hard to find. You don’t want that, particularly in your assessment, so copy the dates listed in the exercises. Correct dates for balances and entries are very important.Manage Your Xero AccessWhen you have finished working with Xero you should logout. If you forget, Xero will log you out automatically after your account has been idle for a while. When you login again you may arrive at the My Xero screen. 325056522860In the My Xero screen click on the name you have given the Demo Company. You can do this to go back to where you were up to with your exercise. Everything you do is saved. Note: if you haven’t been away long Xero will take you straight to the companyXero SecurityMake sure you have made a strong secure password and use wise digital strategies when you are online.Here are some suggestions from Xero and some security concerns to look out for when you are online.https://www.xero.com/nz/about/security/ Never give anyone else your login & password (if you want to invite other users to your Xero account you can do this within Xero using user settings) Navigate Your Way AroundNow you've setup your Organization in Xero, let’s take a tour of the menus and dashboard to get comfortable.MenusXero has 2 menus to help you set up Xero the way you want and move between Organizations:Name menuMy Xero HYPERLINK "http://help.xero.com/us/" \l "GettingStartedTour$BK_MyXero" \h Name MenuClick your name at the top right of the screen to display the menu allowing you to access your profile and account settings and the logout button.My XeroFrom the header, click the list icon to see the My Xero menu. From here you can view and manage all Organizations and personal finances you have access to.IconsXero displays up to 4 icons on the top right of the screen which provide access to some special features. Your user role will determine which icons you can see.FilesNotificationsHelpGlobal SearchFilesFrom the header, click the file icon to open the file library where you can use and manage your files.NotificationsClick the envelope icon to view and manage notifications Xero sends to you. The number in the red dot shows how many unread messages are in your mailbox.HelpFrom the header, click the question mark icon to see all your options for getting help while you are using Xero. Global SearchFrom the header, click the search icon to search for any $ amount, name or account in Xero. Xero search will help you find any transactions you have entered or uploaded.TabsThe main menu bar has up to 6 tabs, as well as the Dashboard, to help you use Xero for the organization you are logged in to.AccountsManage the main business functions of your organization:Bank accountsSalesPurchasesInventoryExpense claimsFixed assetsReportsView your data using standard and Xero reports. You can customize many of these reports to suit your organization’s needs. You will need to view Journal Reports and Account Transaction reports from the All Reports link.ContactsAdd and manage the people and organizations you do business with.SettingsChange your organization settings, manage users and find add-on services.OrganizationOrganization SettingsTrackingConversion BalancesTax RatesChart of AccountsFinancial SettingsUsersCustom Contact LinksFeaturesInvoice Settings Currencies (for some Xero pricing plans)Fixed AssetsEmail SettingsConnectXero to XeroAdd-onsPayment ServicesAdviserThe Adviser menu tab is where you can create, edit and save reports and manual journals.Dashboard tabWhen you've set up your Xero account, the Dashboard screen is like a home page for your organization. The dashboard provides graphical snapshots of key indicators for your organization. The Dashboard is the main screen for each organization in Xero and displays a snapshot of your organization's financial position based on transactions entered into Xero. Use the Dashboard to directly drill down into a transaction, or do common tasks quickly like bank reconciliation or adding sales invoices or bills.If you have just started with Xero, your Dashboard is likely to be fairly empty. Don't worry. Once we start with the exercises in the workbook, the dashboard will fill up with all sorts of great info fast!Using excel .csv files Excel .csv files are provided for students to upload a number of the general ledger accounts needed to complete each exercise, and bank statement line items for the bank reconciliation process.The following files are available for this exercise:Chart of Accounts Kayaks-student.csvThis file has all the accounts the student needs to download into the Chart of Accounts for the business. Students are required to modify some accounts and add additional accounts to their Chart of Accounts. This is required for assessment.Bank Statement-Kayaks.csvThis file has the bank statement line items for each exercise so students are able to process transactions through Xero’s powerful bank reconciliation function. This will enable them to reconcile the bank as if they were using a live bank feed.Xero Hints and TipsXero is designed to save you time and make things easier. Here are some tips for getting the most out of Xero.Add New Accounts or Inventory itemsThe Settings drop down menu provides access to the Chart of Accounts where you can add new accounts. You can also add new accounts on the fly by clicking on the drop down arrow in the account cell of a transaction window where a blue +Add new account link will open up a new account window. The Accounts drop down menu provides access to Inventory items where you can add new inventory items. You can also add new inventory items on the fly by clicking on the drop down arrow in the Item cell of a transaction window where a blue +New item link will open up a new inventory item window. ReportsThe Reports drop down menu is where you can access the Journal Report you will need to export to PDF to save and/or print out. Because the Journal Report allows you to check your entries as you work through an exercise it’s a good idea to make it readily accessible. Click on the Reports menu and select All Reports. FavoritesThe Xero pre-set Favorites, which appear in the Reports menu, are displayed with a solid blue star. Under the heading Detail Reports, click on the star by Journal Report to include it in your favorites. Click on the star by Account Transactions, as you will find this useful when recording the sale of a fixed asset. You can click on the solid blue star beside any of the pre-set favorite reports to remove them from the Favorites list if you want to. This will reduce the Reports drop down menu and make it easier to locate the two reports you want access to. Keep Profit and Loss and Balance Sheet reports so you can easily view these at the end of each exercise.Click back on the Dashboard tab. Now you can access the Journal Report and the Account Transactions report from the Favorites list in the drop down menu under the Reports tab.Xero’s Dashboard and Accounts drop-down menuThe Dashboard is where you should go to process your frequent transactions.From the Dashboard you can manage your bank account and easily add new sales invoices for accounts receivable and new bills for accounts payable. You can also access transaction screens from the Accounts drop down menu but this manual recommends using the Dashboard for most frequent transactions.Select Accounts – Use Names or NumbersThere are two easy ways to select the accounts to enter in a transaction window other than using the drop down arrow. You can use account names or numbers.Use Account NamesXero’s alpha recognition of account names has been used in these explanations by suggesting you type the first few letters of an account name to locate and select it easily. However unless the name has unique letters other accounts will also appear in the list. Make sure you select the correct account. Use Account NumbersType an account number to give you access to that account alone. When you know the account number you can type this in to select the account. In some instances this may be quicker. Figure out what works best for different types of transactions. For example if you set up your inventory as 601, 602 and 603 using the account numbers to find the right inventory account may be quicker.For more helpful hints see the Xero Help Centre (https://help.xero.com/nz/XeroTips)Chart of AccountsYour Chart of Accounts is a list of accounts that every transaction you enter into Xero is 'coded' to. This is important for management and reporting. You can leave the default Chart of Accounts, or edit and delete items from it, or add your own to suit your business.Set Up Your Chart of AccountsIf you're using the Xero default Chart of Accounts you'll see it contains a broad range of typical accounts that will be suitable to most businesses. The account types used in Xero are arranged into the five financial elements. Some have slightly different names but they all belong in the same financial elements that we are used to: AssetsLiabilitiesEquityIncomesExpensesXero Chart of AccountsAccount typesXero Code RangeWhat we call this in schoolAssetsAssetsBank600sPart of Current AssetsInventory600sPart of Current AssetsPrepayment600sPart of Current AssetsCurrent Asset600sCurrent AssetsFixed Asset700sNon-current Assets - PPENon-current Asset700sNon-current AssetsLiabilitiesLiabilitiesCurrent Liability800sCurrent LiabilitiesNon-current Liability900-950Non-current LiabilityExpensesExpensesDepreciation400sPart of ExpensesDirect Costs300sCost of Goods SoldExpense400sExpensesOverhead400sPart of ExpensesEquityEquityEquity960-999EquityRevenueIncomeOther Income200sPart of IncomeRevenue200sIncomeSale200sSales (of goods)When you add new accounts in Xero you must use the correct Account Type. For assessment and moderation purposes, you should also ensure you allocate a code in the Xero code range for that type of account. Direct Costs have been assigned codes in the 300s to distinguish Cost of Goods Sold accounts from other Expense accounts. In the examples used in this manual Expense has been used for all expense accounts other than cost of goods sold.Tax Details You must also make sure the Tax details are correct. Entering incorrect tax details for an account means transactions processed to that account will not automatically be processed correctly in terms of GST. You will be told the tax details for each account you have to add, so ensure you enter these correctly.Introductory Exercise Your Name KayaksThe following instructions walk you through the introductory exercise step by step. You will need to have reset the Demo Company or started a new Trial Organization. The introductory exercise is included in full without instructions as Appendix A.ObjectiveAt the end of this exercise you should be familiar with the set-up of an exercise in Xero using the Demo Companyable to process frequent, infrequent and complex transactions in XeroThe Business ScenarioYou are a small business owner. On 1 January 2013 you, the owner of Your Name Kayaks, decided to start using Xero accounting software to process your transactions. You sell three main types of kayaks: Sea KayaksRiver KayaksKids KayaksPersonalise your business nameChange the Demo Company name to EDU “Your Name Kayaks” such as EDU Amy Lo Kayaks using the Organization Settings in the Settings, General Settings menu.Customize the Chart of AccountsEvery business needs a Chart of Accounts that is unique for the business. In order to create a Chart of Accounts that has the accounts related to a kayak sales business, the following four steps are needed. These are explained in detail.Archive the accounts in the current Chart of Accounts.Import the exercise Chart of Accounts related to Your Name Kayaks.Create a Xero bank account for the business.Modify the imported Chart of Accounts.4057650000Access the Chart of AccountsClick on the Settings drop down menu. Select Chart of Accounts 348234066675Archive AccountsCheck the box by Code. This will select all the accounts in the list. Then click Archive which will bring up an Archive Accounts window where you click OK. Import the Chart of Accounts related to your businessleft31750000To import a Chart of Accounts select the Import tab on the Chart of Accounts window3495675136525Leave the Xero and No buttons selected in the Import your Chart of Accounts screen. Click the blue Browse button to find and upload the relevant Chart of Accounts file. (Your teacher will provide these files. The file for the kayaks introduction exercise is called CoA-kayaks-student.csv.) Once you have selected the correct Chart of Accounts file click Import.In the next screen click Confirm to confirm your Chart of Accounts. Don't worry - you can ignore any warnings.Create a Xero Bank Account343344516510You need to add a bank account in order to spend or receive money in Xero. To add a bank account you will need:a bankan account namea chart of accounts code for the accounta bank account numberMake your Bank be “Your last name” FCU.Click on the down arrow on the right of + Add Bank Account.Select Bank Account.41243256667500Here’s an example using the introductory exercise:Name the bank ‘Your last name’ FCU. This will result in a message telling you this is not a recognized bank with an available feed. This is exactly what we want for exercise purposes. Having a recognized bank complicates matters as Xero is set up for the real world! So do not use a recognized bank here, just ignore the warning.For the Account Name: Use ‘Your name”.Use a code provided in the exercise for the bank account. eg. 601. Codes in the 600s are current assets.Provide your bank account number using any number – even 1 will do!Click Save when you have entered the required details.You can use the tab key to easily move around fields in the screen.Modify the Imported Chart of AccountsYou will need to modify the imported Chart of Accounts to meet the requirements of your exercise. Adding new accounts is required for your assessment, so you will do this for each exercise.First you need to modify the Tax Rates to save some frustration. Got to Settings: Tax Rates. Pick Tax Rates and the Edit. Here you will click on + New Tax Rate and add the following:15% GST on income, 15% GST on expenses and No GST. You can modify most existing accounts by clicking on the account name in the Chart of Accounts window. This brings up the edit screen where you can change the account details. For example you are expected to add your name to the Capital and Drawings accounts. System accounts like Accounts Receivable and Accounts Payable are locked and cannot be deleted or changed.Here is a list of the accounts you need to add (highlighted in blue) and modify for the introductory Kayaks exercise. In the exercises and assessment you will find these accounts highlighted in the trial balance or additional accounts list. Make sure you use the correct account type and tax details for each account you create.CodeAccount NameAccount TypeTax details201Sea Kayak SalesSale15% GST on income211Kayak Repair FeesOther Income15% GST on income301Sea Kayak COGSDirect costsNo GST434Shop InsuranceExpense15% GST on expenses471Interest on LoanExpenseNo GST605Sea Kayak InventoryInventory15% GST on expenses740Vehicles & TrailersFixed Asset15% GST on expenses741Accumulated Depreciation on Vehicles & TrailersFixed AssetNo GST811Kea Trailers*Current LiabilityNo GST905Loan - MNZBNon-current LiabilityNo GST971Capital – Your NameEquityNo GST981Drawings – Your NameEquityNo GST* The supplier, in this example, for the credit purchase of plant and equipment It is easier to manage adding and modifying accounts using the Assets, Liabilities, Equity, Expenses and Revenue tabs so you are not looking at too many accounts at once.196851280160Add New AccountsWhen adding new accounts the two most important things to get right are the Account Type and the Tax setting for GST:38671503238500The Account Type must be correct so the account will end up in the right place in the financial statements. An expense account must not end up in the balance sheet so the type for an expense account must be ‘Expense’ or if it is a cost of goods sold type account use ‘Direct Costs’ in Xero. Inventory accounts must be ‘Inventory’ or you won’t be able to set up your inventory items correctly.The Tax must be correct so GST will be correctly calculated when necessary or ignored when the transaction or account does not involve GST. For example internal cost transfer accounts like cost of goods sold, inventory shortage and depreciation do not have GST. On the other hand, Inventory and PPE asset accounts have 15% GST on expenses. It is up to you to make sure the GST is set correctly. The default settings are not always what you want.This example shows a cost of goods sold account being created for Sea Kayaks. Practice your new skillNow create all of the highlighted accounts in the account list above (page 24). And modify the Equity and Drawings account names to include your name. Use the Settings tab and Chart of Accounts settings screen to make these account code additions and changes.You will need to edit Account 820 to GST.Opening Balances You are almost ready to start processing transactions for your business, but first you need to enter the opening balances from the trial balance. Xero calls these Conversion Balances. Enter your Organization's conversion balances so your starting point in Xero is correct. You might like to think of conversion balances as one large journal that's used to bring in an Organization's opening balances.Conversion DateTo enter Conversion Balances you first need to set the Conversion Date. From the Settings drop down menu select General SettingsClick on Conversion BalancesClick on Conversion DateIn the Conversion Balances window update the Conversion Date, The conversion date (or start date) is the date you've chosen to start entering your day-to-day transactions into Xero. 351091520955Change the Conversion Date to the month and year you are starting XeroFor the introductory exercise change the month to January and the year to 2013 Ignore the warning and click Save.As a general rule, the conversion date is the date you start using Xero. You should only have transactions and invoices or bills in Xero that occur after this date. Conversion BalancesIf using the Demo Company you will now have the following screen.9715502730500Remove Current balancesUsing the Demo Company the Business Bank Account will have a balance that needs to be changed to zero. You are NOT going to use this account. You have set up your own bank account to use. Make sure Business Bank Account has a zero balance before you add your trial balance amounts.We are now ready to enter the trial balance amounts. Enter Trial Balance AmountsInitially the conversion balance screen only shows bank balance(s) and Accounts Receivable and Accounts Payable system accounts with zero balances. You will enter the balances from your trial balance for these two system accounts. Using the trial balance below enter the opening balances in the following way:Use the ADD a New Line button to add the other trial balance accounts and enter their balances as debit or credit. Xero has excellent alpha and numeric recognition so to find an account all you have to do is type the first few letters of the account name and options will appear or key in the account number. Do make sure you select the correct account, as you do not want to select Inventory Shortage when you need Inventory Adjustment. If you use the account number this will ensure you have the correct account. The Accounts Receivable and Accounts Payable balances in the trial balance must be entered in the System accounts which are already on the screen. Demo Company: Make sure you add your bank account (eg Bank-Your Name Kayaks) for the bank balance from the trial balance. Do not use the Demo Company’s Business Bank Account.When you have finished, total debits should equal total credits and the Adjustments number should be zero. Xero will add the cents to any whole dollars you enter. You do not need to enter .00 for whole dollar amounts. eg. enter 590 and Xero will correctly record the amount as 590.00. Your Name KayaksTrial Balance as at 31 December 2012Note: The calculation for Inventory Adjustment amount is:CodeAccount NameDebitCredit120Accounts Receivable*590 200Accounts Payable** 3,130601Bank – Kayaks (Your Name)3,400 699Inventory adjustment27,490 730Fittings & Equipment27,000 731Accumulated Depreciation on Fittings & Equipment 10,800740Vehicles & Trailers42,000 741Accumulated Depreciation on Vehicles & Trailers 12,600820GST 950905Loan - MNZB 9,000971Capital – Your Name 64,000100,480100,480 the total value of the inventory on hand – cost price x quantity added for each item.For more help with conversion balances see the help/xero.comhttps://help.xero.com/Settings_ConversionBalancesAlways click Save after you make any changes to your conversion balances.Here is what the example trial balance should look like before saving. Click Save when you are satisfied you have entered your opening trial balance or conversion balances correctly. Your adjustments figure should be zero as total debits equal total credits.Opening individual Accounts Receivable and Accounts Payable balancesSaving your opening balance trial balance automatically brings up the Sales Invoices screen where you enter the amounts owing by individual debtor(s) that make up the Accounts Receivable total in the trial balance. In this exercise you are going to enter $590 owed by Blue Water at 31 Dec 2012.Click Add InvoiceOn the Sales Invoice for Accounts Receivable and Bill for Accounts Payable use the Tab key to move around.To or From: Type the debtor’s or creditor’s name. This will automatically create an account for the debtor or creditor, so spell their name correctly!Date: Leave as set by Xero for opening balance invoicesDue date: 20th of the January. This is important.Invoice #: Leave as default, Reference: Leave blank Total: Accounts Payable invoice only – leave blank; it will set itself Currency: Leave as default which should be USDAmounts are: Change to Tax ExclusiveItem: Leave blank (tab through)Description: “Historical sale/purchase”.Qty: 1, Unit Price: The amount owing by the debtor or to the creditor. $590Account: Type hist and select Historical Adjustment or select from the drop down menu. It is important to use this account.The screen looks like this for the introductory exercise showing $590 owing by Blue Water. Click SaveThe next screen will tell you your total invoices match your total accounts receivable when you have entered all of them (in the example there was only one to enter).Click Next and repeat for opening creditor(s)In this exercise you are going to enter $3130 owed by Kayak World at 31 Dec 2012.The Kayak example opening creditor bill looks like this: Click add bill & enter the above bill details.Click save and you see the screen telling you your total bills match your accounts payable balance. Click Next and you have finished entering opening conversion balances. The green message tells you that your conversion balances have been saved:Congratulations! You are now ready to set up your inventory items.Inventory Set UpWhen you set up your inventory items as tracked Xero will track inventory balances, update them with each inventory transaction. Costs of goods sold balances are also automatically updated for inventory sales and sales return transactions.Xero automatically keeps a running balance of the number of inventory items on hand and uses weighted average cost to allocate the average cost to cost of goods sold when you sell tracked inventory items. Use inventory items for services or products you frequently charge or pay for to speed up creation of bills, invoices, credit notes, Spend and Receive Money transactions, and purchase orders. When you add or edit a transaction or purchase order, you can use the Item menu to search your list of inventory items by item codes and names. When you select an inventory item from the list, Xero will prefill the fields on the transaction or purchase order with the details from your inventory item, such as description and unit price.Here are the inventory items in the introductory kayaks exercise:Sea KayaksRiver KayaksKids KayaksCost price excluding GST$1,375$575$196Selling price excluding GST$2,085$1,285$515Quantity121415To set up your inventory items:From the Accounts drop down menu select Inventory which takes you to the Inventory window.If using the Demo Company delete all the current inventory items by selecting them all and clicking on Delete. You won’t be able to delete the tracked items but you won’t use them either.Click +New ItemIn Item Code write the short name of the item e.g. Sea Kayaks = “SK01”Item Name: Write the item name here e.g. Sea Kayaks Tick the I track this item button which brings up a drop down box to select the Inventory account associated with the item of inventoryKey in, or select from the drop down menu, the associated inventory account eg 605 - Sea Kayak Inventory – you should have created this – if not you can create it here.In the I purchase this item area:Unit Price: enter the GST exclusive cost of the inventory item Cost of goods sold account: key in or enter the associated cost of goods sold account e.g. Sea Kayak COGSTax rate will default to No GST if you have set up your COGS account correctlyPurchase description: Credit purchaseIn the I sell this item area:Unit Price: enter the GST exclusive selling price of the inventory item Account: enter the associated sales account for the item eg Sea Kayak SalesTax rate will default to 15% GST on Income if you have set up your sales account correctlySales description: Credit saleClick Save Add other inventory items in the same way.Here is what the Sea Kayaks inventory card looks like before clicking Save:714375-12382500right3810000Add the opening quantity on hand NEW!!In the inventory window click on the inventory name under Item code eg Sea KayaksYou are now in the Sea Kayaks windowFrom the Options drop down menu (on the right) select New adjustmentIn the Adjustment window:Adjustment type: Select Increase quantity from the drop down menu50636101079500Date: 1 Jan 2013 (you can type this date in)Adjustment: Enter the quantity on hand, eg 12Cost price: Enter the unit cost price excluding GST for the inventory on handNew qty on hand will be your adjustment numberAdjustment Account: Key 699 – Inventory Adjustment. Make sure you have the Inventory Adjustment account entered here, do not use Inventory ShortageNote: Key “On hand” Your window should look like this before clicking Review Adjustment6286501079500Click Review AdjustmentYou will see a debit to the inventory account and a credit (brackets) to the inventory adjustment account for the total of the adjustment (12x1,375=16,500)Click Post AdjustmentPractice your new skillRepeat the process for other items of inventory - River kayaks and Kids kayaks.Click on Inventory above the Sea Kayak name to return to the inventory window and select your next item of inventory to adjust.Note: when you are familiar with the entire process you can adjust each item of inventory immediately after setting it up.Remember to check your transaction entering as you go!All the transactions you enter can be checked in the journal report under the reports tab, journal report. All transactions are listed in the journal report in date order. Transaction Time!Now that we are all set up we can get to the good stuff. Let’s learn to process transactions using Xero accounting software. You’ll notice that the examples used to illustrate concepts here are all in the introductory exercise, Your Name Kayaks. Here in the manual you will have all the info you need to learn about Xero. Use the exercises in the workbook to put to practice what you have learned here.Process Credit Transactions for Inventory ItemsKeep track of inventory items you have bought or sold.Inventory Purchases on CreditAdd a bill that you have received and need to pay. Enter the details of the bill you received, using as many line items as required (there must be at least one). If needed, you can use different inventory items, accounts, tax rates, and prices (positive, negative or zero amounts) on different lines as necessary. If you set up inventory items in Xero, you can choose an item from this list. Doing this automatically populates your bill fields, using the information you have saved against the inventory item in the set up. For tracked items the selected inventory account cannot be changed on your bill screen so it must be entered correctly in the inventory setup. If there is an error correct it under inventory.Worked Example:7 Jan 2013 - Purchased 6 river kayaks and 5 kids kayaks on credit from Wild Water Ltd.Go to the dashboardSelect New Bill under Bills you need to pay on the Dashboard In the New Bill window type and tab between From: Wild Water LtdDate: 7 Jan 2013Due date: 20 Feb 2013Tab through to Item on the first detail line leaving Reference and Total blank, the Currency set to USD United States dollar Amounts are: Tax Exclusive. Item: Type River and select River Kayaks or select from the drop down menuDescription: Credit purchase (will default if entered in inventory setup)Quantity: 6Tax rate: Change to 15% GST on expenses – this is very important as regardless of your inventory account settings, Xero defaults to No GST and needs to be changed to include GST on your billTab to the second line under ItemItem: Type Kids to select Kids Kayaks or select from the drop down menuDescription: Credit purchase (default – tab through)Quantity: 5Tax rate: Change to 15% GST on expenses (to quickly access type 1 and tab)Key tab to complete the billCheck your bill has an amount for GST includedClick ApproveYour bill should look like this before clicking ApproveYou can Add Another Bill or return to the Dashboard for your next transaction.Once you have saved or approved the bill, you can create the bill as a PDF to print. Practice your new skill entering BillsProcess these additional bills for Kayaks Ltd using the steps outlined in the worked example above. Date2013TransactionAll bills are due on 20 February 2013Bill TotalJan 8Purchased 5 sea kayaks on credit from Kayak World.$7906.25 GST InclusiveJan 16Purchased 4 river kayaks and 7 kids kayaks on credit from Wild Water Ltd. $4222.80 GST InclusiveInventory Sales on CreditAdd a sales invoice for someone to pay you and send it to them Worked Example:7 Jan 2013 Sold 2 sea kayaks and 3 kids kayaks on credit to Blue Water.Go to the dashboardSelect New Sales Invoice under Invoices owed to you on the Dashboard In the New Invoice window type and tab between: To: Blue WaterDate: 7 Jan 2013 Due date: 20 Feb 2013Invoice #: leave default INV-0042Tab through to Amounts are Tax Exclusive Amounts are: For inventory items ensure Tax Exclusive is set. In the first instance this is the default setting. However the setting will change for a GST inclusive charge for repair fees or equivalent so you need to ensure it is Tax Exclusive when you are entering inventory sales. Item: Type Sea to select Sea Kayaks or select from the drop down menuDescription: Credit sale (will default if entered in inventory setup)Quantity: 2Unit price: will default to the selling price you entered at inventory setup ($2,085)Account: will default to the sales account you entered at inventory setup (Sea Kayak Sales)Tab to the second line under ItemItem: Type Kids to select Kids Kayaks or select from the drop down menuDescription: Credit sale (default tab through)Quantity: 3Unit price and Account will default to the entries made at inventory setup ($515)Key tab to accept the quantityClick ApproveYour invoice should look like this before clicking Approve:029464000Once you have saved or approved the invoice, send a PDF or online invoice to your customer. Cost of goods sold transferIn the background Xero has completed a cost of goods sold transfer for you. You can check this by viewing the Journal Report. The first time you view this report you need to locate it. From the Reports drop down menu, select All Reports if you have not already made Journal Reports a favoriteClick on the blue star beside Journal Report so it becomes a favorite in the drop down menu and easy to access to check other entries. You can uncheck the blue star beside reports you don’t need to see like aged receivables and aged payables so there are less items in the drop down menu.In the Journal Report window change the date range as follows: From: 1 Jan 2013 To: 31 Jan 2013, Click Update to view the journal entries you have completed.Here are two entries related to the credit sale on 7 Jan 2013. Note: If the journal entries appear in a different order on your journal report that is fine. It is just the way Xero processes the transaction in your software version. Practice your new skill entering invoicesProcess these additional credit sales invoices following the steps outlined in the worked example aboveDate2013TransactionAll invoices are due on 20 February 2013Invoice TotalJan 11Sold 6 river kayaks to Paddle Plus on credit.$8866.50 GST InclusiveJan 24Sold 1 sea kayak and 4 kids kayaks to Blue Water on credit.$4766.75 GST InclusiveProcess Cash TransactionsXero has a number of ways to record cash receipts and cash payments transactions. We will learn the following methods:Spend Money or Receive Money except for payments associated with bills or invoices.Adding a payment to a creditor for a bill received.Adding a payment received from a debtor for an invoice issued Bank reconciliation process after importing a bank statementEach of these methods is now explained in detail.Spend MoneyIf a payment has been made that is NOT a bill payment to a creditor (Accounts Payable/supplier), enter a Spend Money transaction at the time you pay the money. Worked Example:4 Jan 2013 382333535560Paid Key Media for marketing $368.90 by online bill payment #6372.From the Dashboard Bank Accounts access the Manage Account drop down menu for Bank-Kayaks and select Spend Money.In the New Spend Money window type in the cells Spent as: leave set to Direct PaymentTo: Key MediaDate: 4 Jan 2013Reference: BP 6372Amounts are: Tax Inclusive (you can leave this setting for all expenses as the codes set up with no GST, like wages and interest on loan ignore this GST inclusive setting)Item: leave this blank, you can tab throughDescription: Marketing Quantity: 1Unit Price: $368.90Account: Type Mar to select Marketing or select from the drop down menuClick Save or Save & add another if you are doing another Spend Money nextcenter28575000Here’s what it looks like before clicking Save:Practice your new skillProcess these additional payments Date 2013TransactionTransactions include GST where relevant unless otherwise statedTransaction DetailsJan 13Paid Joe Henry $826.54 for wages by online bill payment #2385Code to wagesEnter as spend money Ref #2385Jan 21Paid for personal groceries at Pak ‘n Save with the business EFTPOS card $197.65Code to drawingsEnter as Spend Money Jan 27Paid Kiwi Property for shop rent $935.00 by online bill payment #5192Code to rentEnter as spend money Ref #5192Personal expenses are not business expenses. All personal expenses are recorded and coded to the account code Drawings.Receive MoneyIf a cash sale or payment has been received that is NOT an invoice payment from a credit customer (Accounts Receivable), enter a Receive Money transaction at the time you receive the money. You need to be able to process cash received for other income or the sale of a fixed asset as well as cash sales of inventory. Cash sales of inventory is explained separately. Worked Example: 1) Cash Receipts (except cash sales of inventory items):9 Jan 2013 Received and banked a check for kayak repairs $143.72Select New Receive Money from the Bank Accounts Manage Account drop down menu. In the Receive Money window type and tab between From: Cash customerDate: 9 Jan 2013Reference: Check depositAmounts are: Tax Inclusive (for income and asset sales including GST)Item: leave blankDescription: Kayak repairsQuantity: 1Unit Price: $143.72Account: Type Repair and select Kayak Repair Fees or select from the drop down menuClick Save or Save & add another if you are doing another Receive Money next16509915303500Here’s what it looks like before clicking Save: Worked Example: 2) Cash Sales of Inventory items:4 Jan 2013 - Cash sales: 2 Sea Kayaks, 3 River Kayaks and 4 Kids KayaksIn the Receive Money window type and tab between: From: Cash customerDate: 4 Jan 2013Reference: EFTPOSAmounts are: Tax exclusive (important as selling price of inventory items is tax exclusive)Item: Sea KayaksDescription: Cash sale – change Credit to Cash in the default entryQuantity: 2Unit Price: Will default to $2085 if you set up Sea Kayak inventory correctlyAccount: Will default to Sea Kayak Sales if you set up Sea Kayak inventory correctlyTab to the second rowItem: River KayaksDescription: Cash sale – change Credit to Cash in the default entryQuantity: 3Unit Price: will default to $1,285Account: will default to River Kayak SalesTab to the third row Item: Kids KayaksDescription: Cash sale - Credit to Cash in the default entryQuantity: 4Unit Price: will default to $515Account: will default to Kids Kayak Sales Click Save or Save & add another if you are doing another Receive Money nextHere’s what it should look like before you click Save:Practice your new skillsProcess these additional cash receiptsDate2013TransactionTransactions include GST where relevant unless otherwise statedTransaction DetailsJan 16Received cash (EFTPOS) for repair fees $289.00 (make sure amounts are Tax Inclusive)Code to repair feesEnter as receive moneyRef #EFTPOSJan 16Cash sales (EFTPOS): 3 sea kayaks and 3 kids kayaks (make sure amounts are Tax Exclusive)Code to sea & kid kayak salesEnter as receive moneyTotal $8970.00 GST inclusiveJan 25Cash sales (EFTPOS): 4 river kayaks and 2 kids kayaks (make sure amounts are Tax Exclusive)Code to river & kid kayak salesEnter as receive moneyTotal $7095.50 GST inclusiveProcess Invoice/Bill PaymentsMoney Received from Credit Customers (Accounts receivable) For money received from credit customers (Accounts Receivable) you can access the invoices using the graph for Invoices owed to you on the Dashboard.If you have correctly entered the invoices for your accounts receivable they will appear in the “Older” section of the graph. Click on the bar for “Older” and the invoices you have entered will appear. You must select the correct invoice. For an opening balance payment select the opening balance invoice. If your invoices don’t appear in front of you, click on the Awaiting Payment tab to find them. If they are not there you will have, by mistake, entered a payment for them when you initially processed them. If this is the case they can only be found under the All tab.Money Paid to Credit Suppliers (Accounts Payable)For money paid to credit suppliers (Accounts Payable) you will follow the same procedure using the graph in the Bills you need to pay section of the dashboard. Clicking on the Older section of the graph should bring up your invoices. 4735195278130To more easily locate your invoices/bills click on Date to change the date order and bring your bills to the top of the list – provided of course you have entered them with the correct datesOnce you have selected the correct invoice or bill that is being paid such as the opening balance invoice/bill the procedure will be the same for Accounts Receivable and Accounts Payable.Clicking on the debtor/creditor name will bring up the View Invoice/View Bill screen where the invoice/bill will show as Awaiting Payment. Demo Company users will have additional invoices/bills in the awaiting payment screen that relate to the Demo Company. You need to ignore these. Click on the date arrow to change the date order and bring your bills to the top of the list.Worked Example:20 Jan 2013 — Used online bill payment # 1735 to pay $2,130 to Kayak World in part payment of the amount owing on 31 December 2012.In the blue section at the bottom you need to: Check the Amount Paid is correct – you will have to change the amount if it is for less than the total of the invoice/bill as the Amount Paid defaults to this total. Eg: In this example for Kayak World change $3,130 to $2,130.Add the Date Paid.In Paid To/From type Bank-Kayaks or select Bank-Kayaks from the drop down menu.Add a Reference eg BP 1735Click Add Payment.By following the instructions above the payment section of your bill should look like this before clicking Add Payment. 0561340Practice your new skillsProcess these additional invoice/bill paymentsDate2013TransactionTransaction DetailsJan 22Received and banked a check for $590 from Blue Water in full settlement of the amount owing on 31 December 2012.Enter through Invoices Owed to Me – Awaiting Payment Jan 28Used online bill payment #2914 to pay Wild Water Ltd in full settlement of the invoice dated 7 January 2013Enter through Bills to pay – Awaiting Payment $5094.50NOTEDon’t forget to check your journal report to see if the transactions have been entered correctly Remember to change the date range to go from Jan 2013Cash Receipts and Payments via Bank ReconciliationIn the real world, Xero has a brilliant bank reconciliation function that allows live feeds from your Bank showing the transactions coming through your bank account on a daily basis. This means each day you can update all your cash payment and cash receipt transactions straight from your bank reconciliation screen in Xero. You actually don’t have to record them first in almost all instances. Xero will find matches where it can and you can add rules to tell Xero what to look for. You can create Spend Money or Receive Money transactions in the bank reconciliation window when Xero hasn’t found a match. We are only going to ‘scratch the surface’ so to speak in regards to how powerful Xero’s bank reconciliation function is in this regard.As we cannot have real live bank feeds we will have to import a bank statement file but once we have done this Xero will work in exactly the same way as if the bank statement items had arrived overnight from the banking system. Your teacher will provide you with the bank statement file to import for each exercise. The exercise instructions will tell you at what point. Bank Reconciliation ProcedureBank reconciliation is when you match statement lines from your bank account with transactions you create in Xero. Xero automatically matches transactions in Xero with statement lines where it can. Alternatively, to reconcile your statement lines, you can create Spend or Receive Money transactions on the spot or find and match transactions you've already entered into Xero.On the Dashboard, your Bank account will show a Statement Balance of the opening balance you entered.If you have recorded any Spend Money or Receive Money or any invoice/bill payments the balance in Xero will show the effect of those transactions on the Statement Balance (your opening balance).Import Bank Statement File427990037909500You now need to import a csv file of your bank statement. This will be provided by your teacher. IMPORTANT: Make sure you select the correct bank account from the dashboard – Select the ‘Your Name Kayaks Bank Account’ before you import the bank statementTo import your bank statement - from the Manage Account drop down menu under Reconcile (on the ‘Your name kayaks bank account) select Import a Statement. 405447574930In the next screen click on the blue Browse button, find and upload the correct csv bank statement file then click Import. The following Statement Import Options screen will appear.IMPORTANT: You need to assign Payee to Column 3 and Reference to Column 4 by using the drop down menusthen click Save.Click OK.Close the Getting Started box on the next screen.You will then see ‘Review your bank statement lines… …then match with your transactions in Xero.Once the bank statement has been imported follow the instructions to match different types of transactions. Bank Statement Terms These terms will help you with the reconciliation process.Your Name Kayaks All Cards - This is the one total on the bank statement for all cash transactions on the same day received via EFTPOS. All Cards means all commonly used debit and credit cards from the major banks. The business name is the Payee. MNZ Bank 1554 Deposit - A deposit of physical cash and/or checks is recorded with the bank name and branch number where the deposit was made as the Payee. Direct debits and direct credits - Details of direct debit and direct credit payments will be provided.For Your Name Kayaks On the bank statement the details for the direct bank transactions are: Teleco Direct Debit is for Phone & Website ExpenseL Hohaia Direct Credit is for Kayak Repair Fees Max Energy Direct Debit is for ElectricityPaddle Plus Direct Credit is in part payment of their invoice dated 11 Jan 2013Bank charges, interest on loan and loan principal are all paid to MNZ BankDo not proceed with the next section until you have processed all the transactions in the Introductory Exercise above.Xero does not always automatically match the correct transaction. If you need to change the match click find & match on the right of the bank reconciliation box and select the correct invoice.Match TransactionsFor most of the transactions you have already entered as Spend Money or Receive Money, you will see Xero has found a match in the right hand column for your bank statement line item in the left hand column. When Xero finds a match you see it highlighted in green so matches are easy to spot. When you are happy the match is correct click the OK button between the two columns and the item is reconciled and removed from the list. Click OK for the second item Key Media $368.90 as this is the correct match.The screen looks like this: Click OK for the Cash Sales Your Name Kayaks as this is a correct match for total of $11597.75 EFTPOS sales of kayaks.Continue to review and remove all the matches you are happy are correct before dealing with the remaining transactions. If you are working on the introductory kayaks exercise you will be left with 8 bank statement line items to code and reconcile after agreeing to the matches Xero has found for you. See below for instructions on entering transactions from the bank reconciliation screen.Except for the Your Name Kayaks All Cards deposit on 16 January 2013 and the direct credit from Paddle Plus on 29 January 2013 proceed as follows:When using the Demo Company make sure Xero hasn’t found a match with one of its more recent transactions. If this happens you will need to find your transaction using find & match and remove the transaction Xero has found for you.Create Transactions for Direct Bank EntriesIn the blue shaded boxes on the right of the bank statement line item:Name: The payee – use MNZ Bank as the payee for bank charges, interest on loan and loan repayments.Acct: Select the correct account by typing the name or selecting from the drop down menu.Description: Write what the transaction is for. Do not leave this blank.Click OK.The OK button didn’t appear? Make sure you have a payee and an account otherwise Xero can’t create your transaction. You should also have a description before clicking on OK.Here’s how it looks for the 1 Jan 2013 bank charges: and for the direct debit to Telco:and for the bank loan principal repayment:there are 3 more transactions for you to code and enter. Interest on Loan payment, Max Energy-electricity payment, L Hohaia-kayak repair income.Process Direct Credits for Part Payment of Sales Invoices This example relates to the part payment of an invoice issued to Paddle Plus. Because the direct credit payment received is not for the full amount of the invoice, Xero won’t be able to find a match. You have to find the invoice the payment relates to and allocate the payment to the invoice. To find the invoice the payment relates to click on the Find & Match tab on the right. This will bring up a find and match screen with a number of transactions identified.You need to tick the relevant transaction, in this case Paddle Plus invoice on 11 Jan 2013. Because the invoice is for more than the $1,000 received, the word Split will appear. You need to click on Split as you are splitting the payments for this invoice (i.e. receiving more than one payment to pay it off). This will bring up the Split transaction screen where you will see the $1000 showing as a part payment. Click Split The Paddle Plus transaction will now be ready to be reconciled and will appear in green as follows:Click OK and the payment will be processed to the 11 Jan 2013 invoice.Work with Multiple MatchesWhen two (or more) Xero transactions make up a deposit its called a multiple match. The Your Name Kayaks All Cards deposit does not have a match in Xero even though the transactions making up this deposit have been processed. Xero didn’t find a match because it is a multiple match. This means two (or more) Xero transactions make up this deposit. EFTPOS overnight deposits will create this situation on a daily basis if you classify your income into different codes when you record it in Xero. Because we know we have actually recorded the two transactions (cash sales of kayak inventory and kayak repair fees in the introductory exercise) that make up this deposit we can get Xero to find them for us.Click Find & Match on the right of the Xero transaction column.Under 1. Find & select matching transactions: Tick the box beside each of the items dated 16 Jan 2013. This allows Xero to identify that these two transactions sum to the EFTPOS deposit on 16 Jan 2013 and Xero creates for you a green-highlighted Match stating 2 transactions selected.Now click OK.When you have completed the bank reconciliation process you should receive this message:Doesn’t match on your bank reconciliation screen? Don’t panic! If an amount or other details are wrong on your bank reconciliation screen you can edit any transaction directly from here. Click on the find and match tab and click the transaction name. Xero takes you directly into the transaction and under the bill options tab use edit to make any changes you need. Go back and reconcile the item in bank reconciliation.Process Infrequent TransactionsSo now that we've learned about the basics, let’s consider some less common transactions you will need to know how to process in Xero.Inventory ReturnsBefore processing a sales return from a credit customer (Accounts Receivable) or a purchases return to a credit supplier (Accounts Payable) you need to have processed the related credit sale or credit purchase.Xero has two different ways to process a return of inventory. Both involve the preparation of a credit note. You can assign the inventory return as a credit note attached to the invoice or bill directly by opening the unpaid invoice or bill and selecting Add Credit Note. As a beginner this method has a number of traps for the unwary and is not recommended unless you are fully conversant with what an inventory return entry should involve. As a beginner, you are much less likely to make a serious mistake with the inventory return, if you create a new credit note for the return first. This is the process that is explained here. Either method, completed correctly, results in exactly the same journal and related accounting entries in Xero.5080635215265003699450248980Creating a new credit noteFrom the Accounts drop down menu select Sales for a Sales Return or Purchases for a Purchases Return.Alternatively click on Invoices owed to you or Bills you need to pay on the Dashboard. In the Sales or Purchases window click on the +New drop down menu and select Credit NoteInventory Returns to Credit Suppliers (Purchases credit note)Worked Example:11 Jan 2013 — Returned one sea kayak purchased on 8 January 2013 to Kayak World.Note: Before processing this purchases return, you need to have processed the related credit purchase of 5 sea kayaks on 8 January 2013.Access a New Credit Note from the Purchases window In the New Credit Note window type and tab between From: Kayak WorldDate: 11 Jan 13 Reference and Total: Leave blank.Currency and Amounts are: Leave as USD and Tax ExclusiveItem: Type Sea to select Sea KayaksDescription: Credit purchase return – add return to the default Credit purchaseQty: Number returned (1 in this example)Tab to Tax rate and changeTax rate: 15% GST on expenses (like for processing bills for inventory, you must change this as default for the inventory account is No GST)Tab to complete the returnClick ApproveveThe credit note for the worked example looks like this before clicking Approve:Once you have clicked Approve the Allocate balance on Credit Note screen will appear:Select the bill the credit note relates to and enter the total outstanding credit balance in the Amount to Credit box. If there is more than one bill make sure you have allocated the credit to the correct bill and key tab. In this example you must not allocate the credit to the opening balance bill as the return is not related to this.Key Tab to accept the ‘Amount to Credit’Remaining Credit should then be zeroClick Allocate Credit.Practice your new skillsProcess this additional purchases returnDate2013TransactionTransaction DetailsJan 18Returned 2 kids kayaks purchased on 16 January 2013 to Wild Water LtdPurchases credit note2 x Kids kayaksTotal Credit note $450.80Inventory Returns by Credit Customers (Sales credit note)Worked Example:14 Jan 2013 — Paddle Plus returned 2 river kayaks purchased on 11 January 2013.Note: Before processing this sales return, you need to have processed the related credit sale of 6 river kayaks on 11 January 2013.Access a New Credit Note from the Sales windowIn the New Credit Note window type and tab between: To: Paddle PlusDate: 14 Jan 2013Tab through to Item (leave default settings, ensure Amounts are: Tax exclusive)Item: Type River to select River KayaksDescription: Sales returnQty: 2Tab to accept the number returned.The Unit price and Account will correctly default to the selling price and relevant sales accountTab through to accept - Tax rate: 15% GST on incomeClick Approve.The worked example credit note should look like this:Once you have clicked Approve the Allocate balance on credit note screen will appear:Select the invoice the credit note relates to and enter the total outstanding credit balance in the Amount to Credit box. If there is more than one invoice make sure you have allocated the credit to the correct invoice and key tab.Remaining Credit should then be zeroClick Allocate Credit.In the background, Xero will have reversed the cost of goods sold entry for this return. You can check the journal entries by viewing them in Journal Reports.Practice your new skillsProcess this additional sales returnDate2013TransactionTransaction DetailsJan 28Blue Water returned 1 kids kayak purchased on 24 January 2013Sales credit note1 x Kids kayaksTotal Credit note $592.25Sundry Charges from SuppliersAdd a Freight Charge to a Credit Purchase Bill for Inventory ItemsWhen the unit cost price of each inventory item is GST exclusive, the freight charge must also be recorded at the GST exclusive cost.Worked Example:15 Jan 2013 — Purchased 4 sea kayaks and 4 kids kayaks from Kayak World. Kayak World added a freight charge of $75.00 excluding GST.From the Dashboard from Bills you need to pay select New bill.Enter Kayak World, the date above, Due date 20 Feb 20134 sea kayaks and 4 kids kayaks add on the bill, Amounts are Tax Exclusive, ensuring you have adjusted the Tax Rate for the Inventory accounts to 15% GST on expenses, then proceed as follows on the next row:Item: leave blankDescription: Freight chargeQuantity: 1Unit cost: GST exclusive cost of the freight – in the example $75.00Account: Type Freight to select Freight Inwards or select from the drop down menuClick Approve.The worked example bill should look like this before clicking approve:Receive a Bill/Invoice for a Service ProvidedA new supplier will be created when the bill is recorded. If you are provided the GST inclusive amount of the charge, the new bill will also need to be set to Amounts are: Tax Inclusive.Worked Example:22 Jan 2013 — Canoe & Kayak sent an invoice for advertising in NZ Kayak magazine $247.50 including GST. Advertising is recorded in the Marketing account.From the Dashboard select New bill.In the New Bill window type and tab between: From: Canoe & Kayak, Date: 22 Jan 2013Due date: 20 Feb 2013, Reference and Total: Leave blank, Currency: leave defaultAmounts are: change to Tax Inclusive (as you have been given a GST inclusive amount)Item: leave blankDescription: NZ Kayak magazine advertisingQty: 1, Unit price: 247.50Account: type Mar to select Marketing or select from the drop down menuTab to accept accountClick Approve.The worked example invoice should look like this before clicking Approve:If you create this bill with ‘Amounts are’ Tax Inclusive and then process another bill for inventory items you will have to reset the ‘Amounts are’ back to Tax Exclusive.Sundry Charges to Credit CustomersAdd a Charge to a Credit Sales Invoice for Inventory ItemsWhen the unit selling price of each inventory item is GST exclusive, the charge must also be recorded at the GST exclusive price. A new debtor will be created when the invoice is recorded. Worked Example:17 Jan 2013 — Sold 2 kids kayaks to A Lo on credit. Added $34.00 excluding GST for painting names on the kayaks. Account to use: Kayak repair fees.From the Dashboard Invoices owed to you select New sales invoice Enter A Lo, the date, due date 20 Feb 2013and 2 kids kayaks on the invoice then proceed as follows:Tab to the second lineItem: leave blankDescription: Painting names on kayaksQuantity: 1Unit cost: GST exclusive cost of the repair fees – in the example $34.00Account: Type Repair and select Kayak Repair Fees or select from the drop down menuClick ApproveThe worked example invoice should look like this before clicking Approve:A Charge for Repair Fees or Other Income A new debtor will be created when the invoice is recorded. If you are provided the GST inclusive amount of the fee, the new sales invoice will be set to Amounts are: Tax Inclusive. Worked Example:22 Jan 2013 Charged L Huang $54.65 including GST for repairs to her old kayak.From the Dashboard select New Sales InvoiceIn the New Invoice window type and tab between To: L Huang , Date: 22 Jan 2013Due date: 20 Feb 2013Tab through to Amounts are: Amounts are: change to Tax Inclusive (as you have been given a GST inclusive amount)Item: leave blankDescription: Kayak repairsQty: 1, Unit price: 54.65Account: type Rep to select Kayak Repair Fees or select from the drop down menuTab to accept accountClick Approve.The worked example invoice should look like this before clicking Approve:If you Create this invoice with Amounts are Tax Inclusive and then process another invoice for inventory items you will have to reset the Amounts are back to Tax Exclusive.Drawings of GoodsPersonal expenses are not business expenses. Drawings is the accounting term for money or stock you use from the business for personal use. All personal expenses are recorded and coded to the account code Drawings.Two entries are required.The first entry records the reduction in inventory at GST exclusive cost using an Inventory Adjustment, which will debit drawings and credit the relevant inventory account.The second entry records the reversal of the GST claimed by a debit entry to drawings for the GST that can no longer be claimed for this inventory and a credit entry to GST. It may help to see what you would do in the class room (with good old fashioned paper and pen) to understand these two entries.For example: The general journal entry to record drawings of one kid’s kayak which cost $196 excluding GST would be: Debit: Drawings225.40Credit: Inventory196.00Credit: GST29.40This can be separated into a debit to drawings and credit to inventory for the GST exclusive cost $196 which in Xero is an inventory adjustment and a debit to drawings of $29.40 and a credit to GST of $29.40 which needs to be recorded in Xero in a Manual Journal (which is Xero’s General Journal). Worked Example:28 Jan 2013 — You gave one river kayak to your friend as a birthday present.Step One: Complete the inventory adjustmentFrom the Accounts drop down menu select Inventory.Click on the Inventory name you need to adjust – eg river kayaks Select New Adjustment from the Options drop down menu on the rightIn the New Adjustment window type and tab between (note explains the worked example):Adjustment type: Leave default as Decrease quantity Date: 28 Jan 2013Adjustment: Enter the number of items taken for personal use eg 1New qty on hand will updateAdjustment Account: Type Draw and select Drawings or select from the drop down menuNotes: River kayak for friend Click Review adjustmentNote the adjustment dollar amount as you need to use this in the next entry. In this example note $5750564311The worked example New Adjustment and Review Adjustment look like this before clicking Post AdjustmentStep Two: Complete the manual journal entry to reverse the GST claimed for the inventoryFrom the Adviser drop down menu select Manual Journals.Click New JournalNarration: Reverse GST on river kayak for friendDate: 28 Jan 2013Tab to Description Tab – the narration will enter as your descriptionAccount: type Draw or select Drawings from the drop down menuTab to the Debit column: enter the cost of inventory taken times 0.15 – you are entering a formula into this cell so use the * key for times. For example for one River Kayak type 1*575*0.15 (when it’s 1 you don’t need the 1* but this formula shows how to enter a formula in Xero) tab and you will see 86.25 entered in the debit columnNote Xero does the calculation for you if you type the calculation in its cellTab through to Account on the second rowAccount (second row): GSTTab to the credit columnEnter the same amount as your debit – 86.25Key enter to acceptClick Post Your Manual Journal should look like this before clicking post:Inventory ShortagesWhen a physical count of inventory (stock-take) establishes that there is actually less stock on hand than records indicate it is necessary to adjust for the shortage. An adjustment to inventory can also be required if an item of inventory is no longer in saleable condition and needs to be written off. In either case an inventory adjustment is required.Worked Example:28 Jan 2013 — One damaged kids kayak is required to be written off.From the Accounts drop down menu select InventoryClick on the Inventory name you need to adjust – eg kids kayaks Select New Adjustment from the Options drop down menu on the rightIn the New Adjustment window type and tab between (note explains the worked example):Adjustment type: default Decrease quantityDate: 28 Jan 2013Adjustment: number to write off – eg 1Adjustment Account: Inventory Shortage Notes: Damaged kids kayak written off Click Review AdjustmentClick Post Adjustmentleft427355The worked example looks like this before clicking Review Adjustment and Post AdjustmentPurchase of Plant or Equipment on CreditYou will use a manual journal and a separately created current liability account for the credit supplier.There are two ways to process this credit purchase. The first is to prepare a manual journal entry that looks like one you would prepare on paper in the classroom. This might make lots of sense to you and is explained first. The second uses a GST inclusive setting that lets Xero calculate the GST for you so it is simpler.Worked Example:30 Jan 2013 — Purchased a new trailer on credit from Kea Trailers $3,220 including GSTPrepare a Manual Journal that is like a Textbook Written ExampleFrom the Adviser drop down menu select Manual Journals.Click New Journal.In the New Manual Journal window type and tab between (note explains the worked example):Narration: Purchase new trailer Date: 30 Jan 2013Tab through to Account on the first row leaving the Amounts are No Tax as the default and allowing the Narration to automatically enter as the DescriptionAccount: Type Veh and select Vehicles & Trailers or select from the drop down menuTab to the Debit column and enter the GST exclusive cost of the asset (you can type the formula 3220/1.15 then tab and 2800 will be entered)Tab through to Account on the second rowAccount: Type GST and select GST Tab to the Debit column and enter the GST amount (you can type the formula 2800*.15 then tab and 420 will be entered)Tab through to Account on the third rowAccount: Type Kea and select Kea Trailers or select your creditor for fixed assets account.Tab to the Credit column and enter the GST inclusive amount owing to the creditor and key Enter to accept rather than tab.Click Post.The worked example manual journal looks like this before clicking post:— Alternatively and more simply (don’t do this entry as well!) —Only do one of these entries for recording the purchase of a new trailerPrepare a GST Inclusive Manual JournalIn the New Manual Journal window type and tab between (note explains the worked example):Narration: Purchase new trailer Date: 30 Jan 2013Amounts are Change to Tax Inclusive (this is important or the entry will not calculate GST correctly – you must set Tax Inclusive before you start entering the transaction)Description Tab through so the narration is enteredAccount: Type Veh and select Vehicles & Trailers or select from the drop down menuTab to the Debit column and enter the GST inclusive cost of the asset (3220)Tab through to Account on the second rowAccount: Type Kea and select Kea Trailers or select your creditor for fixed assets account.Tab to the Credit column and enter the GST inclusive amount owing to the creditor and key Enter to accept rather than tab.Click Post.The worked example manual journal looks like this before clicking post – you will see that Xero knows there is 420 of GST associated with the entry for the Vehicles & Trailers:You might find this approach easier as you don’t have to calculate the GST, you can simply process the transaction using the GST inclusive figure given. Just make sure you have set the journal to ‘Amounts are’ Tax Inclusive before entering the transaction.Correct ErrorsEvery now and then you may happen upon an error. To fix these errors you need to consider what did happen. Which accounts were debited and which accounts were credited. Then consider what should have happened. Which accounts should have been debited and which accounts should have been credited. It is a good idea to write out the entries so they are easily entered in the manual journal.Setting the manual journal to GST inclusive for ALL errors allows Xero to correct GST entries when required. If we let Xero correct any GST related to the error, we only need to worry about which account needs a debit entry and which account needs a credit entry to correct the error, along with the total amount we have been given.Worked Example one:30 Jan 2013 — Last month the phone & website expense of $174.65 including GST was posted to the marketing account in error. Correct this error.Thinking process:What did happen: A debit to Marketing $151.87 ($174.65/1.15 – ie: GST exclusive), a debit to GST $22.78 and a credit to Bank-Kayaks $174.65What should have happened: A debit to Phone & Website Expense $151.87 ($174.65/1.15 – ie: GST exclusive), a debit to GST $22.78 and a credit to Bank-Kayaks $174.65To fix the error we only need to debit Phone & Website Expense and credit Marketing. In Xero if we set the manual journal to GST inclusive we can enter the GST inclusive amount and allow Xero to sort out the GST for us. Alternatively you could determine the GST exclusive amount and record the entry with No GST. You can discuss this option with your teacher if you prefer to use it.This manual illustrates the use of the GST inclusive amount because this is the amount you will be given; set the journal to GST inclusive and let Xero do the work for you. From the Adviser drop down menu select Manual Journals.Click New Journal.In the New Manual Journal window type and tab between (note explains the worked example):Narration: Correct error processing phone & website expenseDate: 30 Jan 2013Tab through to Amounts are:Amounts are: Change to Tax Inclusive – this is important for correcting all errors as explained aboveTab to Account allowing the Narration to automatically enter as the Description.Account: Type Phone and select Phone & Website expense or select from the drop down menuTab to the Debit column and enter the GST inclusive amount of the transaction $174.65Tab through to Account on the second rowAccount: Type Mar and select Marketing or select from the drop down menuTab to the Credit column and enter the GST inclusive amount of the transaction.Click Post. The worked example manual journal looks like this before clicking post:The Journal Report of this manual journal entry confirms the error has been correctly processed excluding GST, which has already been accounted for. Access the Journal Report from the Reports drop down menu, set the date range to 2013 to include the transactions you want to view. Journal Report extract:Worked Example two:30 Jan 2013 — Last month the interest on loan $52.43 was posted to the shop insurance account in error. Correct this error.Thinking process:What did happen: Debit Shop Insurance $45.59 (GST exclusive); Debit GST $6.84; Credit Bank-Kayaks $52.43What should have happened: Debit Interest on Loan $52.43, Credit Bank-Kayaks $52.43To correct the error we need to credit both Shop Insurance and GST and debit Interest on Loan. Setting the manual journal to GST inclusive and using the full amount of the transaction allows Xero to sort out the GST. This is the approach illustrated here.From the Adviser drop down menu select Manual JournalsClick New JournalIn the New Manual Journal window type and tab between (note explains the worked example)Narration: Correct error processing interest on loanDate: 30 Jan 2013Tab through to Amounts are:Amounts are: Change to Tax Inclusive – this is important for correcting all errorsTab to Account allowing the Narration to automatically enter as the Description.Account: Type Interest and select Interest on Loan or select from the drop down menuTab to the Debit column and enter the amount that should have been recorded in Interest on Loan $52.43Tab through to Account on the second rowAccount: Type Shop and select Shop Insurance or select from the drop down menuTab to the Credit column and enter the amount that was recorded in Shop Insurance in error $52.43 (Xero will sort out the GST) and key enter to accept rather than tab.Click PostThe worked example manual journal looks like this before clicking post: Check the error has been correctly processed by viewing your journal report: Dispose of Plant or EquipmentA number of entries are required. It is recommended that you complete each entry separately, though you can combine them if you want to. Worked Example:30 Jan 2013 — Traded-in an old trailer to Kea Trailers for $989 including GST The trailer originally cost $2,000 excluding GST. Straight-line depreciation at 10% p.a. has been recorded for three full years. At the date of disposal an additional three months depreciation is required to be recorded.Each part of the process to complete this transaction is explained separately using the worked example. Access Manual Journals from the Adviser drop down menu. Three months depreciation at 10% p.a. straight line:The amount will be 3/12 or ¼ of 10% of $2,000 = 50 – you can enter the formula in Xero as 3/12*.1*2000In a New Manual Journal window type and tab between Narration: 3 months depreciation on trailer Date: 30 Jan 2013Tab through to Account on the first row leaving the Amounts are No Tax as the default and allowing the Narration to automatically enter as the Description.Account: Type dep and select Depreciation on Vehicles & Trailers Tab to the Debit column and enter the depreciation you have calculated or the formula to calculate it (3/12*.1*2000 or 50)Tab through to Account on the second rowAccount: Type Accum and select Accumulated depreciation on Vehicles & TrailersTab to the credit column and enter the depreciation you have calculated (50) Your manual journal should have the following debit and credit entries:Transfer of the trailer to the Trailer Disposal account:The amount will be $2,000 – the GST exclusive cost of the trailer.Proceed as in (a) above in a New Manual Journal with the following details:Narration: Transfer trailer to disposal Date: 30 Jan 2013Amounts are: No tax (default – it is important that the setting is No tax)Account: Trailer DisposalDebit column 2000Account: Vehicles & TrailersCredit column 2000Your manual journal should have the following debit and credit entries:Write off accumulated depreciation to the Trailer Disposal account:The amount will be 3 years of depreciation plus the additional 3 months of depreciation as above (3 x 10% x 2000) + 50 (from (a) above) = 600 + 50 = 650Proceed as in (a) above in a New Manual Journal with the following details:Narration: Write off accumulated depreciation on trailerDate: 30 Jan 2013Amounts are: No tax (default)Account: Accumulated depreciation on vehicles & trailersDebit column 650 or the above formula to calculate thisAccount: Trailer DisposalCredit column 650Your manual journal should have the following debit and credit entries:Record the Trade-in of the old trailer in a new Manual Journal with these entries:Narration: Trade-in of old trailerDate: 30 Jan 2013Amounts are: Tax Inclusive (this is important, make sure you change the default tax setting)Description Tab through so the narration is enteredAccount: Kea and select Kea Trailers or select from the drop down menuTab to the Debit column and enter the GST inclusive trade-in amount received - 989Tab through to Account on the second rowAccount: Type Disp and select Trailer DisposalTab to the Credit column and enter the GST inclusive amount of the trade-in and key Enter to accept rather than tab.Click Post.Here’s what the manual journal looks like for the trade-in to Kea Trailers for $989 including GST with ‘Amounts Are’ set to Tax Inclusive. You will see Xero has calculated and recorded the GST so only the GST exclusive amount will be recorded in the Trailer Disposal account. You could record this as No Tax but you would then have to determine the GST exclusive amount to record in the Trailer Disposal account as a credit and add the GST account on a new line for the amount of GST, also a credit.Record the loss or gain on disposalTo find out the loss or gain on disposal go to the Reports drop down menu: select Account Transactions. It should be a favorite if you set it at the beginning. If not find it in All Reports.Select Trailer Disposal in the Account window From and To: make sure the dates cover the month of your transactions eg from 1 Jan 2013. Click Update. Review the Trailer Disposal Account Transactions to determine whether you need to record a loss or gain on disposal. A debit balance means you have a loss to record, A credit balance means you have a gain to record.The account transactions for the trailer disposal look like this (note: your entries may be in a different order)The $490 closing balance is a debit balance. This means we have a loss on disposal of $490 to record in the general journal. Because we don’t know whether we will have a loss or gain on disposal of an asset, we create this account code on the fly in the manual journal. Instructions follow:Proceed as in above in a New Manual Journal with the following details:Narration: Record loss on disposal of trailerDate: 30 Jan 2013Amounts are: No Tax (default)Account: Click on the down arrow and select +Add new account. Create an account for Loss on disposal trailer* – Type: Expense, Code: 481, Name: Loss on disposal – trailer, Tax: No GST. Click Save and your new account will be entered.Debit column 490Account: Trailer DisposalCredit column 490If you have to create a Gain on Disposal account. The Type will be Other Income, the Code will be 281, Name will be Gain on Disposal - asset and Tax No GST. The entry will be a debit for the Asset Disposal account and a credit for the Gain on Disposal - asset account.Your manual journal should have the following debit and credit entries:When you have completed all of the above review the Trailer Disposal account transactions to ensure the balance is now zero.Deal with a Sale Other than a Trade-in of Plant or Equipment (Fixed Assets)If the fixed asset is sold for cash prepare a GST Inclusive Receive Money transaction, with the account as ‘Asset’ Disposal and the amount recorded as the GST inclusive amount of cash received.If the fixed asset is sold on credit to a person/business other than the one you purchased the asset from, you need to create a current asset account, code in 600s, tax default of No tax, for the debtor. Prepare a Manual Journal set to Tax Inclusive in the same way as you prepared the purchase of asset Manual Journal, except you will debit the debtor and credit the asset disposal account. Xero will sort out the GST if you have set the journal to Tax Inclusive.View Your ReportsAll that work can’t be for nothing. Once you have finished an exercise, or at any time during the exercise, you can view your Reports to see how you are going. It is a good idea to see how Xero reports your transactions in the financial statements. Journal ReportIt lists all items going into and out of your general ledger. When you have finished an exercise you need to save the Journal Report as a PDF file and print it if required. Once you have saved your final journal report and are sure you do not need to make any changes to the exercise you can reset your demo company ready for the next exercise. From the Reports drop down menu select Journal Report from favorites if you set it as a favorite at the beginning. Otherwise go to All Reports and select Journal Report.In the Journal Report window set the From: and To: dates to include the month of your transactions only. The From date should also include the conversion trial balance date so for example from 31 December 2012 to 31 January 2013. 1514475647700Change Order by to Journal Date.Click Update.You will see that Xero creates general journal style entries for all your transactions so you can easily see the debits and credits.Scroll to the bottom of your report. From here you can change the number of items displayed per page on your screen, select different pages of your report to view and Export your whole report.For assessment purposes you will export your report to a PDF file to guarantee authenticity.Your teacher will provide you with any other instructions regarding exporting, saving and/or printing your Journal Reports.Profit and LossThe Profit and Loss report (Income Statement) shows your Organization's net income, by deducting expenses from revenue for the report period.From the Reports menu select Profit and Loss. Click on the Show Date Range tab. Set From as the 1st of the month your transactions are in and To as the last of the month your transactions are in. Set the Compare With and Compare Periods to None. Click Update. 31432522415500This is illustrated here for January 2013.Balance SheetThe Balance Sheet report details the net worth of your Organization as of a particular date.From the Reports menu select Balance Sheet. Adjust the dates and other options to suit. Select the month and year your transactions are in for the Balance Date. Set Compare To and Compare Periods to None. Click Update. This is illustrated for a balance date of 31 January 2013.352425-11620500Wrap it UpHappy ? Once you are happy with your Journal report and you have saved it you are ready to start on a new exercise. Congratulations! You have completed the introductory exercise.You are now ready to reset the demo company and start your next exercise In order to do this you must first Reset the Demo Company that you have been working with. Then you can use the Demo Company again to do your next exercise or assessment task.Correct Your MistakesIf you discover you have made a mistake entering a transaction you can correct your mistake by editing the transaction or removing and redoing the transaction correctly. Xero keeps a record of your incorrect transaction and automatically creates a reversal. Xero does not delete any transactions. Your Journal Report will show your original entry, the automatically created reversing entry and your new entry.We all make mistakes so the following will assist you with correcting them. How you correct a mistake depends largely on the type of transaction it relates to. Correcting Receive Money or Spend Money Transactions370586025400To correct a Receive Money or Spend Money transaction from the Bank Account screen or Dashboard:Go to the Manage Account drop down menuSelect Find Account Transactions. A list of transactions will appear. You can select the transaction you need to edit. If you find the error when completing your bank reconciliation click the Status tab so un-reconciled entries will be first. Then tick on the left to highlight the entry you want to correct and select Remove & Redo. This example shows the payment to Key Media for marketing of $368.90 being incorrectly recorded as $386.90 meaning Xero will not find a match for it when doing the bank reconciliation. Notice that for reconciled transactions the Status is a tick in a green circle, while un-reconciled transactions have an orange icon in the Status column. Clicking Remove & Redo will bring up this screen. Notice that if you have to Remove & Redo a transaction you have reconciled the (bank) statement line will remain and once you have removed and redone the transaction it will appear as un-reconciled and you will have to reconcile it by going back to the bank reconciliation screen. In this example the transaction can’t be reconciled because the figure was entered incorrectly. Once it is corrected, it can be reconciled.Click Yes to Remove & Redo your transaction. This will take you back to the transaction screen. You need to go through the Manage Account, New Spend Money or Receive Money process to redo the transaction. Once you have done that, return to the Reconcile Account screen from the Manage Account menu and reconcile the now correct transaction with the bank statement.Invoices/Bills and Credit NotesFrom the Dashboard Go to Sales (for debtor invoices) or Purchases (for creditor bills) Select See all 4019550647700Because you now see all the Demo Company Invoices/Bills and yours are likely to have vanished to the bottom of a long list, click on the Date tab to change the Date order to earliest invoices first. Your invoices, if you have correct dates, will now be at the top of the list. Open the invoice/bill you want to change by clicking on the name in the To/From column. 4791075866775The options to change the invoice/bill depend on whether or not it has had a payment or credit note applied. Options for editing the invoice/bill are found in the drop down menu on the right of the invoice or bill. Void means to delete which may be tempting but you should not do this. You won’t be given the Void option if the invoice/bill has a payment applied to it. If the invoice has a credit note applied to it, the credit note will need to be voided before you can make many changes to the details on the invoice other than the account codes.If you have to change any invoice/bill use the edit option. This will force you to Remove & Redo any payment or void a credit note first so you know you have to deal with those again after you have edited the invoice. 336613578740To access the payment or credit note, click on the link on the invoice/bill under the total. This illustration shows a Payment of 2,130.00. The blue word means this is a link to the Payment transaction. -293370328930Clicking on Payment link will give you the Option to Remove & Redo the payment. Remove the payment and return to the invoice/bill, which you can now edit more fully. You can add the payment to the corrected invoice/bill in the payment section before you save it.Clicking on the credit note link in the invoice/bill will give you access to the credit note which you can void allowing you to edit the invoice fully and re-enter the credit note. Manual Journal TransactionsFrom the Adviser menu select Manual Journals. 4495800190500A list of posted manual journal entries will be on the screen. Select the journal entry you wish to edit by clicking on the blue narration link. On the right of the screen, just as with invoices, you have an options menu. You can simply select Reverse which means Xero will create the reversing entry for you. Then re-enter the journal entry correctly. Additional ResourcesThe Xero team has created many resources to help you out along the way. We have only just scratched the surface of all the amazing things Xero can do. Use the resources below to learn more or get assistance.Help CentreUse Xero's Help centre to access user guides, common scenarios and information about how Xero does its accounting. Just go to http://help.xero.com/nz/#home to browse all the great info available!Xero TVGet started with Xero 101, check out case studies, see what's new with the Xero team, see product updates and learn more about Xero accounting software from helpful how-to videos. https://www.xero.com/nz/tv/Xero UFind education, training and events tailored for small businesses. If you are an accountant, bookkeeper or other financial professional we have courses for you. https://www.xero.com/nz/training/Learn More About Using XeroXero U has great online training pathways for you to learn all you need to know about Xero. http://www.xero.com/trainingFollow our Business Essentials Program to be confident using Xeros’ key features. Use our Business Learning pathway to be competent and capable on XeroKeep up to date with Xero and our product releases with Xero NowMonthly broadcasts designed to keep you up to date with Xero. Register on line and always have the latest monthly updates from Xero. http://www.xero.com/xero-nowLearn More with our series of SMB & Accounting GuidesTips & tricks and accounting essentials for business success www.xero.com/small-business-guidesListen to great business podcastsInnovative insights from people who know business inside and out http://www.xero.com/podcasts HYPERLINK \l "_top" Appendix AIntroduction Exercise - KayaksObjectiveAt the end of this exercise you should be familiar with the set-up of an exercise in Xero using the Demo Company able to process frequent, infrequent and complex transactions in XeroThe Business ScenarioYou are a small business owner. On 1 January 2013 you, the owner of Your Name Kayaks, decided to start using Xero accounting software to process your transactions. You sell three main types of kayaks: Sea KayaksRiver KayaksKids KayaksYou have the following balances on 31 December 2012:Your Name KayaksTrial Balance as at 31 December 2012CodeAccount NameDebitCredit610Accounts Receivable*590 800Accounts Payable** 3,130621MNZB Bank - Kayaks3,400 699#Inventory adjustment27,490 730Fittings & Equipment27,000 731Accumulated Depreciation on Fittings & Equipment 10,800740Vehicles & Trailers42,000 741Accumulated Depreciation on Vehicles & Trailers 12,600820GST 950905Loan - MNZB 9,000971Capital – Your Name 64,000100,480100,480* The Accounts Receivable represents $590 owing by Blue Water.**The Accounts Payable represents $3,130 owing to Kayak World.#Inventory adjustment is the total value (price x cost) of three items of inventory on hand.Additional info:Bank-Kayaks must be set up as a Xero bank account. This is very important. You must set up a Xero bank account for each exercise. Bank account number is a mandatory field, so if you are not given a bank account number, you need to make one up even 1 will do!Tax details for Plant and Equipment (Fixed Asset) accounts are 15% GST on expensesTax details for Accumulated Depreciation (Fixed Asset) and Loan (Non-current liability) accounts are No GSTYour Name Kayaks has the following additional income, expense, asset, liability and equity accounts:CodeAccount NameAccount TypeTax details201Sea Kayak SalesSale15% GST on income202River Kayak SalesSale15% GST on income203Kids Kayak SalesSale15% GST on income211Kayak Repair FeesOther Income15% GST on income301Sea Kayak COGSDirect costsNo GST302River Kayak COGSDirect costsNo GST303Kids Kayak COGS Direct costsNo GST305Freight InwardsDirect costs15% GST on expenses306Inventory ShortageDirect costsNo GST405MarketingExpense15% GST on expenses411Vehicle ExpensesExpense15% GST on expenses413Depreciation on vehicles & trailersExpenseNo GST414Depreciation on fittings & equipmentExpenseNo GST421ElectricityExpense15% GST on expenses432Bank ChargesExpenseNo GST434Shop InsuranceExpense15% GST on expenses436Phone & Website ExpenseExpense15% GST on expenses441Shop RentExpense15% GST on expenses451WagesExpenseNo GST471Interest on LoanExpenseNo GST601Sea Kayak InventoryInventory15% GST on expenses602River Kayak InventoryInventory15% GST on expenses603Kids Kayak InventoryInventory15% GST on expenses750Trailer DisposalFixed Asset15% GST on expenses811Kea Trailers*Current LiabilityNo GST981Drawings – Your NameEquityNo GST* The supplier, in this example, for the credit purchase of plant and equipment Highlighted accounts in the trial balance and account list are added by you to your imported Chart of Accounts. All other accounts in the account list are in the imported Chart of Accounts.Part A – Get Your Company Set Up in XeroYou are excited to start using Xero. You want to be sure to set everything up correctly. Change the demo company name to reflect your company. And Add EDU as a prefix eg: EDU Amy Lo Kayaks LtdSet up your Chart of Accounts by importing the chart of accounts file: CoA-kayaks-student.csvAdd a Xero Bank account – Bank-KayaksCreate new accounts for the highlighted accounts in the trial balance and additional accounts list.Enter the amounts in the trial balance as Conversion Balances with the Conversion date set to 1 January 2013.Part B – Set Up Inventory ItemsNow that you're all set with stating company and bank info, you need to add tracked inventory items. Set up the following three inventory items as tracked inventory. It is recommended that you delete the Demo Company Inventory items first. Sea KayaksRiver KayaksKids KayaksCost price excluding GST$1,375$575$196Selling price excluding GST$2,085$1,285$515Quantity121415Part C – Process Credit Transactions for Inventory ItemsStep 1 – Process credit purchases of inventory itemsProcess the following credit purchases. We’ll walk through the first one together, then you will practice by doing the next two in the same way.Date2013TransactionAll invoices and bills are due on 20 February 2013Jan 7Purchased 6 river kayaks and 5 kids kayaks on credit from Wild Water Ltd.Jan 8Purchased 5 sea kayaks on credit from Kayak World. Jan 16Purchased 4 river kayaks and 7 kids kayaks on credit from Wild Water Ltd. Step 2 – Processing credit sales of inventory itemsComplete the following credit sales of inventory. We’ll do the first one together, then you should practice by doing the next two in the same way on your own.Date2013TransactionAll invoices and bills are due on 20 February 2013Jan 7Sold 2 sea kayaks and 3 kids kayaks to Blue Water on credit. Jan 11Sold 6 river kayaks to Paddle Plus on credit.Jan 24Sold 1 sea kayak and 4 kids kayaks to Blue Water on credit.Part D - Processing Cash Receipts and Cash Payments Sometimes you’ll pay cash and you’ll need to record this in Xero as well. Let’s take a look at cash receipts and cash payments except invoice/bill payments.Step 1 – Spend MoneySpend Money can be used for cash expenses, cash drawings, cash purchase of plant and equipment, repayment of long term debt eg loan repayments. Spend Money cannot be used to pay or partly pay a credit supplier bill.Complete the following “Spend Money” transactions. We’ll do the first one together, then you should practice by doing the next three in the same way.Date2013Transaction All amounts include GST where relevantJan 4Paid Key Media for marketing $368.90 by online bill payment #6372Jan 13Paid Joe Henry $826.54 for wages by online bill payment #2385Jan 21Paid for personal groceries at Pak ‘n Save with the business EFTPOS card $197.65Jan 27Paid Kiwi Property for shop rent $935.00 by online bill payment #5192Step 2 – Receive MoneyReceive Money can be used for cash sales, cash contribution by the owner, cash sale of plant and equipment, raising long term debt eg receiving a loan. Receive Money cannot be used to receive money from a credit customer for payment or part payment of an invoice.This section covers two types of “Receive Money” transactions:Cash from other income eg repair income, fees received or cash contribution by the owner or cash from the sale of plant and equipment. Cash sales of inventory items.Cash Receipts (Except Cash Sales of Inventory Items)Complete the following “Receive Money” transactions. Well do the first one together. You should then practice by doing the next one in the same way.Date 2013Transaction (note amounts include GST)Jan 9Received and banked a check for kayak repairs $143.72Jan 16Received cash (EFTPOS) for repair fees $289.00 Cash Sales of Inventory ItemsComplete the following “Receive Money” cash sales of inventory. You guessed it, we’ll do the first together then it’s all you.Date2013TransactionJan 4Cash sales (EFTPOS): 2 sea kayaks, 3 river kayaks and 4 kids kayaks Jan 16Cash sales (EFTPOS): 3 sea kayaks and 3 kids kayaksJan 25Cash sales (EFTPOS): 4 river kayaks and 2 kids kayaksPart E – Processing Invoice/Bill PaymentsWhen you receive money from a debtor for an invoice you have previously issued, or make a payment to a creditor for a bill you have recorded, the payment is recorded on the relevant invoice or bill. The payment could be a part payment of the invoice or bill. When you enter the payment you need to take care if it is a part payment to change the amount received/paid as it will default to the total of the invoice or bill. The first one is completed together then over to you!Complete the following invoice/bill payments. Date2013TransactionJan 20Used online bill payment #1735 to pay $2,130 to Kayak World in part payment of the amount owing on 1 January 2013. Jan 22Received and banked a check for $590 from Blue Water in full settlement of the amount owing on 1 January 2013.Jan 28Used online bill payment #2914 to pay Wild Water Ltd in full settlement of the invoice dated 7 January 2013Part F Process Cash Receipts and Payments through the Bank Reconciliation ProcessOn the bank statement the details for the direct transactions are: Teleco Direct Debit is for Phone & Website ExpenseL Hohaia Direct Credit is for Kayak Repair Fees Max Energy Direct Debit is for ElectricityPaddle Plus Direct Credit is in part payment of their invoice dated 11 Jan 2013Bank charges, interest on loan and loan principal are all paid to MNZ BankDownload the bank statement file for Your Name Kayaks BS-kayaks.csv and complete the bank reconciliation procedure.Part G – Process Inventory Returns and Sundry ChargesInventory returns from credit sales or credit purchases are processed by attaching a credit note to the related invoice or bill. Step 1 – Inventory returns to credit suppliersComplete the following inventory returns to suppliers. Walk through the first one together. You should then practice by doing the next one in the same way.Date2013TransactionJan 11Returned 1 sea kayak purchased on 8 January 2013 to Kayak WorldJan 18Returned 2 kids kayaks purchased on 16 January 2013 to Wild Water LtdStep 2 - Inventory returns by credit customersComplete the following inventory returns by customers. Walk through the first one together. You should then practice by doing the next one in the same wayDate2013TransactionJan 14Paddle Plus returned 2 river kayaks purchased on 11 January 2013Jan 28Blue Water returned 1 kids kayak purchased on 24 January 2013Step 3 – Sundry charges from suppliersSundry charges may include: A freight charge added to an invoice for the purchase of inventoryA service charge such as for repairs, advertising, etcComplete the following sundry charge bills. Each one is explained separately.Date2013TransactionAll amounts include GST where relevant unless otherwise statedJan 15Purchased 4 sea kayaks and 4 kids kayaks from Kayak World. Kayak World added a freight charge of $75.00 excluding GST.Jan 22Received an invoice from Canoe & Kayak Ltd $247.50 including GST for advertising in the NZ Kayak magazine. Advertising is recorded in the Marketing account.Step 4 – Sundry charges to credit customersSundry charges may include An additional charge added to a customer invoice for inventory items A charge for repair fees or income other than from the sale of inventory items.Complete the following sundry charge invoices. We’ll work through both below.Date2013TransactionAll amounts include GST where relevant unless otherwise statedJan 17Sold 2 kids kayaks to A Lo on credit. Added $34.00 excluding GST for painting her children’s names on the kayaks. Account to use: Kayak repair fees.Jan 22Charged Y Huang $54.65 including GST for repairs to his old kayak.Part H Infrequent Transactions in the General Journal – Manual Journal in Xero and Inventory AdjustmentsStep 1 – Drawings of goodsWhen the owner takes goods for him/herself the item(s) is removed from inventory at cost excluding GST using an Inventory Adjustment entry and the GST already claimed is added back to drawings using a Manual Journal entry. This example is walked through. Note you must complete TWO SEPARATE entries for this transaction.Date2013TransactionJan 28You gave one river kayak to your friend as a birthday present.Step 2 – Inventory losses/shortagesInventory shortages are removed from inventory at cost excluding GST. An inventory shortage account is used to record the shortage.Date2013TransactionJan 28The kids kayak returned by Blue Water had been seriously damaged in transit and is to be written off.Step 3 - Purchase of plant or equipment on creditCredit purchases of plant or equipment are recorded in the general journal with a separate current liability account created for the supplier.Date2013TransactionJan 30Purchased a new trailer on credit from Kea Trailers $3,220 including GST.Step 4 - Correction of errorsErrors will be corrected through the general journal. Two types of errors will be considered.Errors where the GST has already been accounted for or there is no GST to account for.Errors involving an adjustment to GST (complex errors)A. Errors where the GST has already been accounted for or there is no GST to account for.Date2013TransactionJan 30Last month the phone & website expense $174.65 including GST was posted to the marketing expense in error. Correct this error.B. Errors involving an adjustment to GST (complex errors)Date2013TransactionJan 30Last month the interest on loan expense $52.43 was posted to shop insurancein error. Correct this error.Step 5 - Disposal of an item of plant or equipment. Date2013TransactionJan 30Traded-in an old trailer to Kea Trailers for $989 including GST The trailer originally cost $2,000 excluding GST. Straight-line depreciation at 10% p.a. has been recorded for three full years. At the date of disposal an additional three months depreciation is required to be recorded.Record the following:Three months depreciation at 10% p.a. straight lineTransfer of the trailer to the Trailer Disposal account.Write off accumulated depreciation to the Trailer Disposal account.Record the trade-in of the old trailer to Kea TrailersRecord the loss or gain on disposal – review the Trailer Disposal Account Transactions to determine whether you need to record a loss or gain on disposal.When you have completed all of the above review the Trailer Disposal accountto ensure the balance is now zero.GWrap it UpYou have now completed all the different types of transactions in Xero. You should view your journal report and Export it to a PDF file before resetting your Demo Company.View Your Journal ReportGo to All Reports and select Journal Report.In the Journal Report window set the From: and To: dates to include the month of your transactions only. The From date should also include the conversion trial balance date so for example from 31 December 2012 to 31 January 2013. Change Order by to Journal Date.Click Update.Scroll to the bottom of your report. From here you can change the number of items displayed per page on your screen, select different pages of your report to view and Export your report.For assessment purposes you will export your report to a PDF file to guarantee authenticity.Happy? Once you are happy with your Journal report and you have saved it you are ready to start on a new exercise. In order to do this you must first Reset the Demo Company that you have been working with. Then you can use the Demo Company again to do your next exercise or assessment task. Appendix B Your Name Home CareYour Name Home Care is a house cleaning business in your local area. At the beginning of February 2013 you decided to add a gardening service to your business.Reset the Demo Company Name the company Your Name Home Care using your own name.Access the Chart of Accounts window from the Settings menuClick on 200 Sales and change the account name to Housecleaning Fees ReceivedClick on 260 Other Revenue and change the account name to Gardening Fees Received.Add a Xero bank account: Bank: MNZ Bank, Account code 621, Account Name: Bank-Homecare, Account Number 1Click on the Asset tab, click on 710 Office Equipment and change the account name to Gardening EquipmentClick on the Equity tab, click on 970 Owner A Funds Introduced and change the account name to CapitalIf using the Demo Company:Click on the Asset tab in the Chart of Accounts window and select the Business Bank account and Business Savings account.Archive these two accounts to remove them from the Dashboard, once selected, click Archive – you must not process transactions to these accounts for this exercise. Note:All the cash transactions must be through the bank account you created: Bank Home Care. Make sure you access Spend and Receive money transactions through the Manage drop down box associated with this bank account on the dash board:center45720Process the following transactions in Xero. Brief explanations are provided for the first of each type of transaction. For a full explanation read the similar transactions for Your Name Kayaks in the Student Manual.Process these transactions:Date2013TransactionAll invoices and bills are due on 20 March 2013All transactions include GST where relevant unless otherwise statedFeb 1Invested $12,000 cash in the business. Receive money entry, Account is 970 Capital.Feb 1Charged the business account at Bunnings for new gardening equipment $9,200. New Bill entry, Amounts are: Tax Inclusive, Account is 710 Gardening Equipment Feb 7Charged J Kay for fortnightly house clean $135.00. New sales invoice entry, Amounts are: Tax Inclusive. Account is 200 Housecleaning Fees Received Feb 8Paid cleaning assistant J Wills wages $384.25. Spend money entry, Account is 477 Salaries.Feb 11Cash customers paid for housecleaning using mobile EFTPOS $275.00Receive money entry, Amounts are: Tax Inclusive. Account is 200 Housecleaning Fees ReceivedFeb 11Cash customers paid for gardening using mobile EFTPOS $324.90Receive money entry, Amounts are: Tax Inclusive. Account is 260 Gardening Fees ReceivedFeb 12Paid AM Motors vehicle expenses $106.45 by EFTPOS. Spend Money, Amounts are: Tax Inclusive. Account is Motor Vehicle Expenses.Feb 14Charged J Kay for fortnightly house clean $135.00Feb 16Paid for a family dinner out at Bravo with the business EFTPOS card $172.30. Account is 980 Owner A DrawingsFeb 18Cash customers paid for housecleaning using mobile EFTPOS $325.50Feb 18Cash customers paid for gardening using mobile EFTPOS $287.40Feb 20Imported your first bank statement to start entering transactions directly from the bank statement. Import the file BS-homecare.csvOn the bank statement – in no particular order (other items should be self explanatory)ItemWhat to do:Green highlighted items where Xero has found a matchClick OKAll Cards 11 and 18 FebUse Find & Match and select the two entries for the day, click okXeroAccount 412 Consulting & AccountingAA Plus InsuranceAccount 433 InsuranceBank chargesAccount 404 Bank feesK Hill direct creditAccount 200 Housecleaning Fees ReceivedJ Kay direct creditUse Find & Match – Select invoice 7 Feb and invoice 14 Feb, split 14 Feb invoice, click OK BunningsUse Find & Match – Select bill, split bill, click ok
Solution: Xero Project