Setup of Company in Peachtree

Setup of Company

After the start of the Peachtree Program you have to set up a new company before entering data. For this click on File menu and select New Company

After you have selected a new company following introductory screen will appear to guide you the rest of the process and tell you what informations are required for setting up of the company.

You have to click the Next button. After that you will find the following screen. Hereyou will decide about the Peachtree Product.

Again by clicking Next button you will find the following screen. Here you will type the Company name, Address, Telephone, fax number, business type, website and email address. These information will be printed on every report. This information  may be edited after the creation of the company.

After typing all the above information you will be clicking the Next button and following window will appear. 

You need to establish how your new company will be set up:

Use a sample business type that closely matches your type of company: Select this option to copy basic setup information, particularly a chart of accounts, from a sample company. You can select either a simplified chart of accounts that contains only the basic accounts you need to get started; or you can choose a detailed chart. Depending on which version of Peachtree you are using your selections will vary.  You can modify the accounts later, according to your needs.

Copy settings from an existing Peachtree company: Select this option if you want to copy setup information from another Peachtree company or you are rebuilding a Peachtree company.

Convert a company from another accounting program: Select this option if you want to import company data from some other program.

Build your own company: Select this option if you want to create a company from scratch. This option is only recommended for experienced users who are comfortable setting up accounting information. For users coming from a paper ledger, it is recommend that they select a business type (see above) that most closely matches their existing chart of accounts and then modify it as they have need.

If you select this option, make sure you set up your chart of accounts prior to setting up any other part of the company.

After you have decided about the method to create a company click Next. In the next window you will have to decide about the accounting method. The available accounting methods are Accrual and Cash.

Accrual Accounting: Income is recorded as you invoice customers, and expenses are recorded when you receive bills from vendors, regardless of when cash is actually exchanged. This presents a truer picture of income and expenses. Most companies use this method.

Cash-Basis Accounting: Income is recorded when cash (checks, money orders, or currency) is received, and expenses are recorded when paid. However, unpaid credit sales and purchases do not show on ledgers, which can present a misleading picture of income and expenses.

After deciding about the accounting method click next button. Following window will appear. Here you will be deciding about the Posting method. The software provides you two posting methods i.e. Real Time and Batch.

Real-Time Posting: Transactions are posted to the journals and the general ledger as they are entered and saved. This method can save you time and is best for most business and network environments. Most companies use this method.

Batch Posting: Transactions are saved by the program and then posted in a group. When you use batch posting, you can print registers and check the batch of transactions before posting them to the journals.

You can switch posting methods at any time.

To continue setting up the company click Next following window will appear. Here chose an accounting period structure. Normally it is 12 month accounting periods per year.

Again click Next button and choose the first period (Month) of the fiscal year.

After clicking Next button you will find following finish window and buy clicking finish button the software will create you company.

General Ledger

Now you have setup your company in Peachtree, it is recommended to establish Chart of accounts, General Ledger Defaults and Beginning Balance if any.

To establish the charts of accounts click the Maintains menu and select “Chart of Accounts...” 

The following window will displayed

Here you have to type Account ID, Description and the most Important Account Type.

Enter an account ID and description for the account. The account ID determines how the account is identified and sorted in the chart of accounts list and the General ledger account is displayed as typed in description. Most charts of accounts are set up with specific account types grouped together.

Account types define how the account will be grouped in reports and financial statements. They also control what happens during fiscal year-end.

General Ledger accounts are assigned types on the General tab of the Maintain Chart of Accounts window. Select an account type from the drop-down list and select Save to save the account. The account type should be selected carefully. If you are entering a Revenue account then its type will be Income so on. A simplified chart of account with Account ID, Description and Account Type is given at the end of the chapter.

You can enter the Beginning Balances on the General tab. Select the Beginning Balances button. Peachtree displays the Select Period window.

Select the period in which you want to enter beginning balances. You can select from previous, current, or future periods.

Select OK. Peachtree displays the Chart of Accounts Beginning Balances window.

Click or tab to any of the white cells in the grid to add an amount. (The gray cells are for viewing purposes only.)

Enter all the beginning balances for the accounts. Scroll the list box to make sure the account amounts are correct.

If you are out of balance in the Beginning Balances for General Ledger Accounts window, Peachtree displays a warning message indicating that an equity account will be created (or updated) to contain the difference or out-of-balance amount.

This account will be named Beginning Balance Equity, and its type is Equity-Doesn't Close. This account does not appear in the Beginning Balances window, but it will appear in the list of accounts and on financial statements and general ledger reports.

Try to find the reason for the out-of-balance situation, and correct it if possible. (Select Cancel when Peachtree displays the warning message.) If you are entering beginning balances from financial statements supplied by your previous accounting system or by your accountant, you most likely made an error in data entry. Make sure you didn't leave out an account or balance and that you entered all amounts correctly.

When done close the window.

Add a New Account in G/L Beginning Balances

In the Beginning Balances window accessed from the Maintain Chart of Accounts window, select the New button. Peachtree displays the Enter New Account window.

Enter an account ID and description for the account and also chose the appropriate account type and select OK.

Delete an Account from the Chart of Accounts

In order to delete an account from the chart of accounts, there must be no transactions posted to the general ledger that reference the account ID. If an account has a nonzero balance, you must delete or remove transactions associated with it. These can include beginning-balance entries.

If an account has a nonzero balance, you can enter an adjusting G/L transaction in the General Journal to bring the account's balance to zero. Then, after two year-end closings, you can purge or delete the account.

To make the account inactive

You can make the account inactive to ensure that no further transactions are associated with it. Then after two year-end closings, you can purge the account.

From the Maintain menu, select Chart of Accounts. Peachtree displays the Maintain Chart of Accounts window.

Select the account you want to make inactive. To display a list of existing accounts, type ? in the G/L Account ID field, or select the Lookup button.

Select the Inactive check box to the right of the account ID. (There is an mark in the check box when it is selected.)

Sample Charts of Accounts

100	Current Assets	Account Type
105	Cash in bank	Cash
109	Petty cash	Cash
110	Accounts receivable	Accounts Receivable
118	Allowance for doubtful accts	Accounts Receivable
120	Inventory	Inventory
130	Prepaid expenses	Other Current Assets
140	Property and Equipment
141	Land	Fixed Assets
142	Building	Fixed Assets
143	Leasehold improvements	Fixed Assets
144	Furniture and fixtures	Fixed Assets
145	Equipment	Fixed Assets
146	Automotive equipment	Fixed Assets
150	Accumulated Depreciation	Accumulated Depreciation
152	Depr-building	Accumulated Depreciation
153	Depr-leasehold improvements	Accumulated Depreciation
154	Depr-furniture and fixtures	Accumulated Depreciation
155	Depr-equipment	Accumulated Depreciation
156	Depr-automotive equipment	Accumulated Depreciation
160	Other Assets
162	Long-term investments	Other Assets
168	Due from officer	Other Assets
200	Current Liabilities	Account Type
202	Notes payable	Other Current Liability
210	Accounts payable	Accounts Payable
212	Accrued expenses payable	Other Current liability
220	Wages payable	Other Current liability
221	Income Tax Payable	Other Current liability
222	Sales Tax Payable	Other Current liability
250	Long-Term Liabilities
252	Mortgage payable	Long Term Liability
261	Long-term note payable	Long Term Liability
271	Due to officer	Long Term Liability
300	Stockholders’ Equity
381	Common stock	Equity does not close
390	Retained earnings	Equity retained earning
392	Dividends	Equity gets close
400	Revenue
410	Sales	Income
500	Cost of Sales
510	Cost of goods sold	Cost of Sale
600	Operating Expenses
610	Salaries and wages	Expense
621	Advertising	Expense
622	Amortiz leasehold improv.	Expense
623	Automobile expense	Expense
626	Bad debts expense	Expense
627	Bank service charge	Expense
632	Commissions	Expense
638	Depreciation expense	Expense
640	Dues and subscriptions	Expense
643	Entertainment	Expense
650	Insurance	Expense
655	Interest expense	Expense
657	Licenses and permits	Expense
659	Miscellaneous expense	Expense
660	Office expense	Expense
666	Postage	Expense
667	Professional fees	Expense
668	Rent expense	Expense
669	Rental of equipment	Expense
672	Repair and maintenance	Expense
690	Telephone	Expense
691	Travel	Expense
695	Utilities	Expense
700	Other Income (Expense)
710	Interest income	Income
790	Miscellaneous income	Income
895	Income tax expense	Expense

Financial Institution

CHAPTER 5

Central Bank

AND THE CREATION OF MONEY

CENTRAL BANKS AND THEIR PURPOSE

The primary role of a central bank is to maintain the stability of the currency and money supply for a country or a group of countries. The role of central banks can be categorized as: (1) risk assessment, (2) risk reduction, (3) oversight of payment systems, (4) crisis management.

One of the major ways a central bank accomplishes its goals is through monetary policy. For this reason, central banks are sometimes called monetary authority. In implementing monetary policy, central banks, acting as a reserve bank, require private banks to maintain and deposit the required reserves with the central bank. In times of financial crisis, central banks perform the role of lender of last resort for the banking system. Countries throughout the world may have central banks. Additionally, the European Central Bank is responsible for implementing monetary policy for the member countries of the European Union. 

There is widespread agreement that central banks should be independent of the government so that decisions of the central bank will not be influenced for short-term political purposes such as pursuing a monetary policy to expand the economy but at the expense of inflation.

In implementing monetary and economic policies, the United States is a member of an informal network of nations. This group started in 1976 as the Group of 6, or G6: US, France, Germany, UK, Italy, and Japan. Thereafter, Canada joined to for the G7. In 1998, Russia joined to form the G8.

THE CENTRAL BANK OF THE UNITED STATES: THE FEDERAL RESERVE SYSTEM

The Federal Reserve System consists of 12 banking districts covering the entire country. Created in 1913, the Federal Reserve is the government agency responsible for the management of the US monetary and banking systems. It is independent of the political branches of government. The Fed is managed by a seven-member Board of Governors, who are appointed by the President and approved by Congress.

The Fed’s tools for monetary management have been made more difficult by financial innovations. The public’s increasing acceptance of money market mutual funds has funneled a large amount of money into what are essentially interest-bearing checking accounts. Securitization permits commercial banks to change what once were illiquid consumer loans of several varieties into securities. Selling these securities gives the banks a source of funding that is outside the Fed’s influence.

INSTRUMENT OF MONETARY POLICY: HOW THE FED INFLUENCES THE SUPPLY OF MONEY

The Fed has three instruments at its disposal to affect the level of reserves.

Reserve Requirements

Under our fractional reserve banking system have to maintain specified fractional amounts of reserves against their deposits. The Fed can raise or lower these required reserve ratios, thereby permitting banks to decrease or increase their lending and investment portfolios. A bank’s total reserves equal its required reserves plus any excess reserves.

Open Market Operations

The Fed’s most powerful instrument is its authority to conduct open market operation. It buys and sells in open debt markets government securities for its own accounts. The Fed prefers to use Treasury bills because it can make its substantial transactions without seriously disrupting the prices or yields of bills.

The Federal Open Market Committee, or FOMC, is the unit that decides on the general issues of changing the rate of growth in the money supply, by open market sales or purchases of securities. The implementation of policy through open market operations is the responsibility of the trading desk of the Federal Reserve Bank of New York.

Open Market Repurchase Agreements

The Fed often employs variants of simple open market purchases and sales, these are called the repurchase agreement (or repo) and the reverse repo. In a repo, the Fed buys a particular amount of securities from a seller that agrees to repurchase the same number of securities for a higher price at some future time. In a reverse repo, the Fed sells securities and makes a commitment to buy them back at a higher price later.

Discount Rate

A bank borrowing from the Fed is said to use the discount window. The discount rate is the rate charged to banks borrowing directly from the Fed. Raising the rate is designed to discourage such borrowing, while lowering should have the opposite effect.

DIFFERENT KINDS OF MONEY

Money is that item which serves as a numeraire. In a basic sense money can be defined as anything that serves as a unit of account and medium of exchange. We measure prices in dollars and exchange dollars for goods. Hence coins, currency, and any items readily exchanged into dollars (checking deposits or NOW accounts) constitute our money supply.

MONEY AND MONETARY AGGREGATES

Monetary aggregates measure the amount of money available to the economy at any time. The monetary base is defined as currency in circulation (coins and federal reserve notes) and reserves in the banking system. The instruments that serve as a medium of exchange can be narrowly defined as M₁, which is currency and demand deposits. M₂ is M₁ plus time and savings accounts, and money market mutual funds. Finally, M₃ is M₂ plus short-term Treasury liabilities. While all three aggregates are watched and monitored, M₁ is the most common form of the money supply, with its trait as being the most liquid. The ratio of the money supply to the economy’s income is known as the velocity of money.

THE MONEY MULTIPIER: THE EXPANSION OF THE MONEY SUPPLY

The money multiplier effect arises from the fact that a small change in reserves can produce a large change in the money supply. Through our fractional reserve system, a small increase will allow an individual bank, to lend out the greater part of these additional funds. These loans subsequently become deposits in other banks allowing them to expand proportionately. So, while one bank can expand its loans (or deposits) by an amount 1% of reserves required, all banks in the system can do likewise. Thus, in a simple format total change in deposits can be stated as change in reserves divided by the reserve requirement, which is also the formula for perpetuity. For example, if the change in the level of reserves is $100 and the reserve requirement is 20%, the change in total deposits will be $500 for a multiplier of 5. Of course, major assumptions are that banks will fully loan out their excess reserves and that depositors will not withdraw any of these extra reserves.

THE IMPACT OF INTEREST RATES ON THE MONEY SUPPLY

High rates of interest may make keeping excess reserves costly, since unused funds represent loans not made and interest not earned. High rates of interest will also affect the public’s demand for holding cash. If deposits pay competitive interest rates, customers will be more willing to hold such bank liabilities and less cash. Therefore, a higher rate of interest can actually spur growth of the money supply. More likely, however, it will deter borrowing and slow monetary growth.

THE MONEY SUPPLY PROCESS IN AN OPEN ECONOMY

In the modern era, almost every country has an open economy. Foreign commercial and central banks hold dollar accounts in the United States. Their purchases and sales of these deposits can affect exchange rates of the dollar against their own currency. The Fed has responsibility for maintaining stability in exchange rates. A purchase of foreign exchange with dollars depreciates the dollar’s value, but it also adds dollars to the accounts of foreign banks in this country, thus adding to the U.S. monetary base. Most central banks of large economies own or stand ready to own a large amount of each of the world’s major currencies, which are considered international reserves. Sales of foreign exchange transactions have monetary base implication and hence consequences for the domestic money supply, emphasis is given to coordinating monetary policies among developed nations.

ANSWERS TO QUESTIONS FOR CHAPTER 4

(Questions are in bold print followed by answers.)

1. What is the role of a central bank?

The role of a central bank has several functions: risk assessment, risk reduction, oversight of payment systems, and crisis management. It can do this through monetary policies, and through the implementation of regulations.

2. Why is it argued that a central bank should be independent of the government?

Central banks should be independent of the short-term political interests and political influences generally in setting economic policies.

3. Identify each participant and its role in the process by which the money supply changes and monetary policy is implemented.

The Fed determines monetary policy and seeks to implement it through changes in reserves. It is up to the nation’s banking system to act on changes in reserves thereby affecting deposits, which constitute the greater part of the M₁ definition of the money supply.

4. Describe the structure of the board of governors of the Federal Reserve System.

The Board of Governors of the Federal Reserve System consists of 7 members who are appointed to staggered 14-year terms. The Board reviews discount operations and sets legal reserve requirements. In addition, all 7 members of the Board serve on the Federal Open Market Committee (FOMC), which determines the direction and magnitude of open-market operations. Such operations constitute the key instrument for implementing monetary policy.

5.

1. Explain what is meant by the statement “the United States has a fractional reserve banking system.”
2. How are these items related: total reserves, required reserves, and excess reserves?

a.       A fractional reserve system requires that a fraction or percent of a bank’s reserve be placed either in currency in vault or with the Federal Reserve System.

b.      Total reserves are the amounts that banks hold in cash or at the Fed. Required reserves are amounts required by the Fed to meet some specific or legal reserve ratio to deposits. Excess reserves are bank reserves in currency and at the Fed which are in excess of legal requirements. Since these amounts are non-interest bearing, banks are often willing to lend these surplus funds to deficit banks at the Fed funds rate.

6. What is the required reserve ratio, and how has the 1980 Depository Institutions Deregulation and Monetary Control Act constrained the Fed’s control over the ratio?

The required reserve ratio is the fraction of deposits a bank must hold as reserves. The DIDMCA constrained the Fed’s control over the ratio by letting Congress set ranges of reserves for demand and time deposits.

7. In what two forms can a bank hold its required reserves?

A bank can hold its reserves in the form of currency in vault or in deposit at the Fed.

8.

1. What is an open market purchase by the Fed?
2. Which unit of the Fed decides on open market policy, and what unit implements that policy?
3. What is the immediate consequence of an open market purchase?

a.       An open market purchase by the Fed consists of the purchase of U.S. Treasury securities.

b.      The FOMC decides on open market policy and directs the Federal Reserve Bank of New York to implement it through sales and purchases of these securities.

c.       The immediate consequence of an open market purchase is to supply the seller of the security with a check on the Federal Reserve System that he can deposit in his bank, thereby immediately increasing the excess reserves and thus nation’s money supply.

9. Distinguish between an open market sale and a matched sale (which is the same as a matched sale-purchase transaction or a reverse repurchase agreement).

A matched sale or reverse repo involves the sale of a Treasury security with an agreement to buy it back at a later date and at a higher price as the cost for borrowing the funds. This contrasts with an outright sale at some discounted or premium price.

10. What is the discount rate, and to what type of action by a bank does it apply?

The discount rate is the rate a bank pays to borrow at the “discount window” of the Fed. Such borrowings are often undertaken to meet temporary liquidity needs. Bank needs are monitored and the Fed likes to state that borrowing from it is a “privilege and not a right.”

11. Define the monetary base and M₂

The monetary base includes total bank reserves plus currency in the hands of the public. M₂ = M₁ (currency and demand deposits) + savings and time deposits.

12. Describe the basic features of the money multiplier.

The money multiplier is crucial to the concept of money creation and is analogous to the idea of the autonomous spending multiplier and formula for a perpetuity. It is the inverse of the required reserve ratio (1/rr). If the reserve ratio is .2 then the money supply will expand five times any increase in new deposits. The multiplier will be less if banks hold excess reserves or experience cash drains.

13. Suppose the Fed were to inject $100 million of reserves into the banking system by an open market purchase of Treasury bills. If the required reserve ratio were 10%, what is the maximum increase in M₁ that the new reserves would generate? Assume that banks make all the loans their reserves allow, that firms and individuals keep all their liquid assets in depository accounts, and no money is in the form of currency.

The maximum increase in M₁ will be $1 billion assuming no cash drains in the system, and banks are fully loaned up.     

14. Assume the situation from question 13, except now assume that banks hold a ratio of 0.5% of excess reserves to deposits and the public keeps 20% of its liquid assets in the form of cash. Under these conditions, what is the money multiplier? Explain why this value of the multiplier is so much lower than the multiplier from question 13.

Substitute the given values of currency ratio, required reserves ratio, and excess reserves ratio of 20%, 10% and 0.5% respectively into the formula given on page 94 of the textbook. Now we have a lower multiplier value of 3.9=1.20/. 305. This is because public and banks do not deposit or lend, all they can.

Financial Institutions

Final Project Computerized Accounting

Following post should be ioon your Blog:

• Set up of Company
• Maintain Charts of Accounts
• Maintain Customers and Vendors
• Default information Customers and Vendors
• Maintain Inventory Items
• Default Information Inventory Items
• Sales Quotation and Sales Order
• Sales Invoice
• Reciepts
• Purchase Order
• Purchase Recieve Inventory
• Payments
• Vendor Credit Memo
• Credit Memo
• General Journal Entry
• Reports

Final Project for Advanced Financial Accounting

Final Project:
Details discussion on following arears on your own blog, followed by a comment on my blog here. Adjusting entries, Inventory, Propertyplant and equipment and cash flow statements. If the post has already been made on your blog, you may edit them to be a final project.
you may consult the site for PPT slides
http://www.studyforall.com/

Reciepts in Peachtree Accounting

Reciepts in Peachtree is used to record teh reciepts from Customers and even from Vendors.......

IAS 16 - Property, Plant and Equipment

According to IAS 16 - Property, Plant and Equipment the objective of IAS 16 is "to prescribe the accounting treatment for property, plant, and equipment. The principal issues are the recognition of assets, the determination of their carrying amounts, and the depreciation charges and impairment losses to be recognised in relation to them. "

you may have a very good article on Propert, Plant and Equipment at

www.studyforall.com/articles.htm