Set Up and Operate Xero
for Small Business
ISBN Number: 978-1-925782-64-6
Part Number: 781
Version: Xero 19.6
AUTHOR – Kerryn Maguire
Kerryn is an authorised Xero Learn Partner.
Kerryn has been working with accounting software products for over twenty years. Originally working from 1994 as an accountant with small business when accounting software became mainstream. Kerryn then focused on providing consulting and training services to small business in particular. Expanding from this into to providing curriculum based resources to TAFE and private RTOs. Through Learner Link and as a Xero Learn Partner, Kerryn provides a wide range of resources for the Accounting and Business Services Certificate courses. Kerryn has a long association with many TAFEs and RTOs across Australia. Kerryn’s fundamental aim is to provide resources that are easy to understand while providing a practical application of skills acquired. Kerryn also co-authors two titles for Cambridge University Press which are in their 4th Edition – first published in 2000. Kerryn has considerable experience and knowledge:
Bachelor of Applied Science Mathematics
Diploma of Education
Graduate Diploma of Accounting
CRI: Criterion Referenced Instruction
Member of Institute of Certified Bookkeepers
Member of VELG
Reproduction and Communication for educational purposes
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Copyright Agency Limited Level 15 233 Castlereagh Street Sydney NSW 2000
Telephone: (02) 9394 7600 Facsimile: (02) 9394 7601 Email: [email protected]
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All Rights Reserved
© Copyright 2019 Kerryn Maguire v19.6
No part of the contents of this book may be reproduced or transmitted in any form or by any
means without the written permission of Learner Link. All registered trademarks or service marks
are the property of their respective owners.
While care has been taken in the preparation of this Training Tool, Learner Link, the developers
do not accept any liability for any damage or loss (including indirect and consequential loss)
incurred by any person as a result of relying on the information contained in this material. This
tool should not be regarded as professional advice and it should not be relied upon in any
important matter without obtaining appropriate advice relevant to your situation.
If there is one, it is the Registered Training Organisation’s responsibility to validate the mapping
of this tool to the performance criteria.
Trademarks and Acknowledgements
All terms or products mentioned in this manual that are known to be trademarks have been
acknowledged. Learner Link cannot attest to the accuracy of this information. Use of a term in
this manual should not be regarded as affecting the validity of any trademark.
Software Description
This course has been designed for users of the Xero software. All attempts have been made to
provide current information. Instructions are correct at the time of writing.
The case study in this material uses fictional information.
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Contents
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Contents
Unit 1 Introduction .................................................................. 1
Purpose of this User Guide ....................................................................... 1
Accounting software used ........................................................................ 2
Prerequisites ........................................................................................ 2
Delivery .............................................................................................. 2
Duration ............................................................................................. 2
What you will need ................................................................................ 2
Conventions used in this User Guide ........................................................... 3
Student Files ........................................................................................ 4
Create an Account in Xero ....................................................................... 6
The Xero Business Site ............................................................................ 9
The Getting Started Panel and Help Centre .................................................10
Navigation Tools.................................................................................. 11
The Tab Menus ................................................................................... 12
The Contacts Tab ................................................................................ 14
The Reports Dashboard ......................................................................... 16
Unit 2 Business and GST .......................................................... 19
Why Use Xero ..................................................................................... 20
Reference Websites ............................................................................. 22
Goods & Services Tax ........................................................................... 23
The Invoice and the Tax Invoice .............................................................. 26
Cash versus Accrual Accounting ............................................................... 28
Methods of reporting GST ...................................................................... 28
Source Documents ............................................................................... 29
Unit 3 Creating a Business Organisation ...................................... 31
Requirements for setting up an Organisation File ......................................... 32
Case Study Overview ............................................................................ 32
Login to Xero...................................................................................... 33
Basic Settings for your Organisation .......................................................... 35
Upload a Logo .................................................................................... 37
Financial Settings ................................................................................ 40
Conversion Date .................................................................................. 41
Tax Rates .......................................................................................... 42
Display Advanced Tax Rates ................................................................... 44
Change User Role to Adviser ................................................................... 45
Invite a New User ................................................................................ 47
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Unit 4 Working with the Chart of Accounts .................................. 49
The Chart of Accounts ........................................................................... 50
The Chart of Accounts in Xero .................................................................. 51
Change an Account Name ....................................................................... 53
Change an Account Code and Type ............................................................ 55
Change the Tax Rate for an Account .......................................................... 56
Create a New Account ........................................................................... 57
Create New Asset and Depreciation Accounts ............................................... 60
Deleting an Account .............................................................................. 62
Add a Bank Account .............................................................................. 63
Add a Credit Card Account ...................................................................... 65
Set up a Petty Cash Account .................................................................... 66
Account Opening Balances ...................................................................... 67
Enter Account Conversion Balances ........................................................... 70
Print a Trial Balance Report .................................................................... 73
Unit 5 Setting up Contact Records ............................................. 75
Overview ........................................................................................... 76
Add a New Contact ............................................................................... 78
Set up Default Terms for Contacts ............................................................ 82
Search and Find ................................................................................... 87
Sort Contacts ...................................................................................... 88
Delete/Archive a Contact ....................................................................... 89
Restore an Archived Contact ................................................................... 90
Unit 6 Creating Items ............................................................. 91
Overview ........................................................................................... 92
Create a Simple Inventory Item for Sale ...................................................... 93
Create Simple Inventory Items to be Purchased ............................................ 95
Create Non-Inventory Service Items ........................................................... 97
Inventory Items that are Purchased and Sold ................................................ 98
Tracked Inventory Items ....................................................................... 101
Check Items ...................................................................................... 103
Search and Find Items ......................................................................... 104
Unit 7 Sales Invoices ............................................................ 105
Create a New Invoice with Items ............................................................ 106
Send an Email with Invoice ................................................................... 109
Create an Invoice without Items ............................................................. 112
Create a Quote .................................................................................. 114
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Create Invoice from an Accepted Quote .................................................... 116
Create New Invoice from Last Items Used .................................................. 118
Copy an Invoice ................................................................................. 119
Edit an Invoice ................................................................................... 123
Unit 8 Recording Customer Payments ....................................... 125
Analyse Receivables ............................................................................ 126
Receive a Payment ............................................................................. 128
Batch Payment .................................................................................. 130
Incorrect Payment from Customer ........................................................... 132
Send Receipt ..................................................................................... 133
Enter Invoice and Payment in One Step .................................................... 135
Cash Sales Receipts using Receive Money .................................................. 136
Add an Item while entering transaction .................................................... 138
Send a Statement ............................................................................... 141
Unit 9 Adjusting Invoices ...................................................... 143
Create a Credit Note ........................................................................... 144
Create a Credit Note for an Unpaid Invoice ................................................ 147
Bad Debts ......................................................................................... 149
Unit 10 Purchasing from Suppliers ............................................ 153
Overview ......................................................................................... 154
Enter payments through Spend Money ...................................................... 154
GST Free Purchase .............................................................................. 158
Edit an Inventory Item ......................................................................... 159
GST Free Purchase: Supplier not Registered for GST ..................................... 161
Purchase Part GST and Part GST Free ....................................................... 162
Enter Asset Purchase by Credit Card in Spend Money .................................... 165
Prepayments ..................................................................................... 167
Add a New Bill ................................................................................... 169
New Bill with Previous Items .................................................................. 172
Enter a Purchase Order ........................................................................ 173
Purchases Overview ............................................................................ 176
Create a Purchase Order with Items......................................................... 179
Convert a Purchase Order to a Bill and Edit ............................................... 180
Repeating Bills ................................................................................... 184
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Unit 11 Recording Supplier Payments ........................................ 189
Analyse Payables ................................................................................ 190
Pay Bills ........................................................................................... 192
Part Payment of Bill ............................................................................ 193
Pay Several Bills Together For One Supplier................................................ 194
Email a Remittance Advice.................................................................... 195
Edit Transactions ............................................................................... 197
Refunds and Credits from Suppliers ......................................................... 199
Unit 12 Bank Reconciliation ..................................................... 203
Overview ......................................................................................... 203
Account Transactions tab ..................................................................... 204
Physical Bank Statements ..................................................................... 205
Things to do prior to a Bank Reconciliation ................................................ 206
Importing a Bank Statement .................................................................. 207
The Reconcile tab .............................................................................. 209
Match transactions ............................................................................. 210
Create Transactions ............................................................................ 214
Fixing Mistakes in a Bank Reconciliation ................................................... 216
Bank Rules........................................................................................ 220
Cash Coding ...................................................................................... 226
Entering Bank Fees ............................................................................. 227
Enter a Transaction with split lines and part private .................................... 228
Create a Transfer Between Accounts ....................................................... 230
The Discuss tab .................................................................................. 231
Recording Payments of Invoices and Bills while Reconciling ............................ 232
Bank Reconciliation Report ................................................................... 235
Practice: Import a Bank Statement and conduct a Bank Reconciliation .............. 236
Unit 13 Reports .................................................................... 239
The Balance Sheet Report ..................................................................... 240
The Trial Balance Report ...................................................................... 242
The Profit and Loss Report .................................................................... 244
Customise a Layout ............................................................................. 245
The Aged Receivables Report ................................................................. 248
The Aged Payables Report .................................................................... 250
GST reporting .................................................................................... 252
Check Activity Statement Settings ........................................................... 253
Run the Simpler BAS on Cash basis .......................................................... 254
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Run the Simpler BAS on Accrual Basis ....................................................... 256
Difference between Cash and Accrual GST Reports ...................................... 257
Unit 14 Petty Cash ................................................................ 259
Manual Petty Cash Documents ................................................................ 261
The Petty Cash account ........................................................................ 262
Enter Petty Cash Entries Using Spend Money .............................................. 263
Upload a Receipt Image ....................................................................... 265
Enter a Transfer to Petty Cash ............................................................... 269
Conduct a Manual Reconciliation ............................................................ 270
Unit 15 Journal Entries .......................................................... 275
Add a New Account to the Chart of Accounts .............................................. 276
Entering a General Journal .................................................................... 277
View the Reallocated Accounts .............................................................. 279
Enter a General Journal for Depreciation .................................................. 279
Print a Posted Journal Report ................................................................ 281
Unit 16 End of Financial year ................................................... 283
End of Financial Year Rollover ................................................................ 284
View the Balance Sheet ........................................................................ 286
Reconcile Account Receivable ................................................................ 287
Reconcile Account Payable .................................................................... 287
Reconcile GST ................................................................................... 288
Lock Dates ........................................................................................ 291
Appendix A: More on Opening Balances ...................................... 295
Accounts Receivable............................................................................ 296
Accounts Payable ............................................................................... 300
Bank Account Opening Balance ............................................................... 304
Setting up Unpresented Cheques ............................................................ 306
Setting up Uncleared Deposits ................................................................ 307
Run a Bank Reconciliation that includes unpresented cheques and uncleared deposits ........................................................................ 311
Inventory Opening Balances ................................................................... 314
Add the Inventory Adjustment Account ..................................................... 314
Enter the Inventory Opening Balance ....................................................... 315
Enter Inventory Stock Items Opening Balances ............................................ 316
Reconcile Inventory Items balance with Inventory account ............................. 323
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Appendix B: Customising Templates ........................................... 325
Edit a Standard Branding Theme .................................................. 326
Create a New Standard Branding Theme ........................................ 329
Setting Up Payment Services ...................................................... 331
Add a Bank Account for a Payment Service ............................. 332
Add the Payment Service to the Xero Organisation ................... 333
Add Payment Service to Branding Theme ............................... 336
Test Payment Service ...................................................... 337
Add Payment Service to New Branding Themes ........................ 338
Customise a Document Template ................................................. 339
Add Payment Services to a Custom Branding .......................... 340
Download Custom Document Templates ................................ 341
Edit a Template in Microsoft Word ....................................... 343
Delete Table ................................................................ 344
Enlarge Logo Space ......................................................... 345
Move a Field and Text ..................................................... 346
Change Font Size and Colour ............................................. 347
Save the Template ......................................................... 348
Upload a Template Document ............................................ 349
Check New Layout .......................................................... 350
Open Template to Continue Editing ..................................... 352
Find List of Available Template Fields .................................. 354
Insert a Field ................................................................ 356
Display Table Cells ......................................................... 358
Change a Field to be Tax Inclusive ....................................... 359
Split Cells to Create New Columns ....................................... 361
Change Column Widths .................................................... 362
Delete Text and a Field .................................................... 363
Display Field Codes ......................................................... 365
Format Numerical Values .................................................. 366
Check Text Format of Field ............................................... 367
Remove Borders............................................................. 368
Summary: The Cycle of Customising a Template ...................... 369
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Unit 3: Creating a Business Organisation
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Unit 3
Creating a Business Organisation
Lesson outcomes
In this unit you will learn how to:
list requirements for creating an organisation
create an organisation file
make financial and organisation settings
view tax rates in Xero
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Requirements for setting up an Organisation File
An organisation file is the term used in Xero software to name a company’s
data file. Before you create an organization or company file you need to have
the following information:
Company details such as name, address, ABN and phone number
Your current financial year and the last month of the financial year
The conversion date – this is the month when you plan to start using
Xero. This month is important for the opening balances that will be
entered during the data file setup. Examples include bank account
balance, debtors and creditor aged balances.
A list of all the accounts can be generated by Xero based on templates
or you can build your own, for example, Assets and Liabilities.
Case Study Overview
Sugar Pie is a small baking business owned by Clara Cooper. Clara’s business is
divided into 3 main areas. She has a small shop where she sells cakes and other
baked goods directly to customers. She also sells wholesale cakes to other
cafes and supplies cakes to catering events.
Up until now Clara has used a manual method of recording transactions. Her
Accountant has indicated the opening balances of Assets, Liabilities and Equity
We will commence entering business transactions in Xero from 1st July 2018.
We are therefore working in financial year 2019 which ends on 30th June 2019.
Company details
Sugar Pie has an ABN and is registered for GST reporting quarterly on a cash
basis. The business reports income tax on an accrual basis and does not take
advantage of the small business income tax concessions.
GST Legislation
Clara is making use of Xero accounting software to meet her GST legislation
requirements.
Source Documents
All source documents are to be filed in folders in alphabetical order for future
reference. When hardcopy source documents are processed into Xero a stamp
‘entered’ should be used to identify it has been processed and where possible
save a copy of the document.
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Login to Xero
1. If necessary, type www.xero.com and click on the Login link
2. Type your email which is your username
3. Type your password then click on Login and work through your 2 step
authorisation
The Demo company will load automatically as this is the last one you were using.
4. Click on Demo Company name then select My Xero from the menu.
Email address
Password
Login
Demo Company
My Xero
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The following page will appear. We are creating a file for Sugar Pie. On this first
page some basic information needs to be entered.
5. Click on the first box and type the name Sugar Pie
6. Check that Australia appears in the country for tax purposes
7. Click into the box What does your organisation do? and type Retail Bakery
8. Check that a tick appears in Are you registered for GST?
9. Click on Start Trial
Remember as soon as you start the trial you only have 30 days to complete user
guide. If you don’t get through it in 30 days you can always create another trial and
start again – good practice.
Start Trial
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Basic Settings for your Organisation
Most of this is carried out via the General Settings area.
1. Click the tab Sugar Pie – the organisation name
2. Click on Settings
3. Click on Organisation details
The Organisation details window appears where you can enter more details about
your business.
Settings
Organisation Name
Organisation details
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4. Check in the box Display
Name that Sugar Pie is
displayed
5. Press the TAB key to move to
the field What is your line of
business?
6. Check that Retail Bakery
appears then TAB
7. Click on the droplist button
and click on Sole Trader
8. TAB to the ABN box and type
84 111 122 223
9. TAB to Organisation
Description and type
Delicious cakes and tempting
treats
Before moving on we will upload a business logo.
Note: Only real ABNs can be entered in Xero. This ABN will be used for all your
learning about Xero. The ABN above is recognised by the ATO as an
education tool and will not be treated as real by the ATO.
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Upload a Logo
1. Click on the Upload logo placeholder – the following box appears
2. Click on the Browse button
3. Locate the student files you downloaded – instructions on how to do this
are on page 4
4. Click on the file Sugar Pie Logo and Open
Browse
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5. Scroll down to Contact Details
6. Leave the Quick find box empty
7. Click into each field and type the information shown
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8. Click on + Add contact field to display a list as shown here
9. Click on Mobile
This will add a new field for a Mobile number.
10. Click into the box for Mobile and type 412123123
11. Click into the County code for Mobile and type +61 and select Australia
+61 that appears
12. Click on Save
13. Scroll back to the top of the window
Add contact field
Mobile
Mobile
Save
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Financial Settings
This area is where you make settings relevant to GST and other Tax details.
1. Click on tab Accounting Advanced Financial settings
2. Enter the details shown
3. Click on Save
Tax File Number
123456
GST Method
Cash Basis
For Sales
Tax Inclusive
For Purchases
Tax Inclusive
Accounting
Advanced Financial settings
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Unit 4: Working with the Chart of Accounts
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Unit 4
Working with the Chart of Accounts
Lesson outcomes
By the end of this unit you will be able to:
set up the Chart of Accounts
list account classes and types
change account information
move accounts
delete accounts
enter account opening balances
print a Trial Balance report
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Working with the Chart of Accounts
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The Chart of Accounts
A Chart of Accounts contains a list of all the accounts required to record, track,
organise and report on your company’s financial activity.
In Xero all accounts are in one of these five Classes: Assets, Liabilities, Equity,
Expenses and Revenue.
In Xero these five classes are further divided into 17 specific account types.
Numbers are associated with the accounts, but they do not determine grouping –
the account type determines this.
Account Types
The Account Type determines the layout of reports
Account Class Description Examples Account Type
Asset Items owned by
the business.
Cash at bank,
debtors, motor
vehicles.
Bank
Current Asset
Inventory
Prepayment
Non-current Asset
Fixed Asset
Liability Items owed by
the business.
Creditors, Visa,
bank loans.
Current Liability
Liability
Non-current Liability
Equity The owner’s
share in the
business.
Capital, drawings. Equity
Revenue Money earned
from sales.
Sales, service
income.
Sales
Revenue
Other Income
Expense Costs to run your
business. Costs
associated with
producing a
product.
Wages, rent,
advertising,
stationery. Raw
materials, labour
costs.
Direct Costs
Expenses
Overhead
Depreciation
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The Chart of Accounts in Xero
1. Click on Accounting Advanced Chart of accounts
Note: The Chart of accounts option is also listed directly under Accounting as
it has been highlighted by a star to create a shortcut.
The default Chart of accounts is listed. There are no bank accounts to begin
with. You must create these yourself – we will cover this later in this unit.
Each account has a Code, Name, Type and Tax Rate.
You can modify this chart to suit your requirements by deleting, adding,
changing the name, code, tax rate etc. Some accounts cannot be changed as
they are crucial to proper working of the system – these accounts are indicated
with a small padlock symbol.
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Liabilities
2. Click on the Liabilities tab to view just those Account types.
3. Notice the Padlock next to the Accounts Payable account and the GST
account.
4. Click on the line of Accounts Payable which will display the Edit
Account Details window
5. Click on Show on Dashboard Watchlist so a tick appears
6. Click on Save
Show on …
Accounts Payable
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Changing Account Details
When Clara’s file was created it included a default set of accounts. This default
Chart of Accounts needs to have some existing accounts changed or deleted to
meet the specific needs of Clara’s business.
Information such as account name, account type, code, description and tax
rate can be changed.
Change an Account Name
1. Click on the Assets tab in the Chart of accounts.
2. Click the line for Office Equipment to display details.
3. Click into the Name box at the start of the text, delete the text
Office and then type Production so the name is now Production
Equipment.
4. Click into the Description box at the start of the text, delete the text
Office and then type Production to match the Name.
5. Click Save.
Name
Description
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Your window should now look like the following:
6. Click on the Name for account Less Accumulated Depreciation on
Office Equipment
7. Edit the Name and Description to replace Office with Production
8. Click on Save
Account name and description
have changed.
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Change an Account Code and Type
When you change an account code, all entries that have ever been entered will
change as well for all new reports. Any reports that have already been
published will not change. In this example we will change the 425 Freight and
Courier Account Code to 315 and change the Account type to Direct Costs.
1. Click on the Expenses tab in the Chart of accounts
2. Click on the account 425 Freight & Courier
3. Click into the Code box and type 315 and TAB – check that it is
available
4. Click on Account Type droplist button and click on Direct Costs. Notice
the warning.
Your window should look like this.
5. Click Save to save your changes.
Code is available
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Unit 5: Setting Up Contacts Records
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Unit 5
Setting Up Contacts Records
Lesson outcomes
By the end of this unit you will be able to:
create a contact
create profile information
set selling information
set default credit and tax terms
set payment details
delete a contact
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Setting Up Contacts Records
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Overview
The Contacts feature is a database that stores information about your customers,
suppliers and employees.
When you create a card, you can enter information such as contact details, credit
terms and tax terms. When you choose a Contact in a transaction, the information
stored within it is automatically retrieved, helping speed up your data entry.
Types of contacts
Use Customer contacts to complete sales quotes, orders and invoices.
Use Supplier contacts to complete supplier quotes, purchase orders and bills.
You can put as much or as little detail as you need in a Contacts record. As an
example, we will look at a Card already set up in the Demo Company.
1. Click on the Sugar Pie menu at the top left
2. Click on Change organisation
3. Click on the tab Contacts All contacts
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4. Click into the Search box and start to type Bayside
5. Click on the contact Bayside Club
6. Click on the Edit button to view the contact with some details filled out
as shown below
7. Click on Save to close
the Edit window
8. Click on Demo and
Change organisation
9. Click on Sugar Pie to
return to your
organisation
Edit
Search
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Add a New Contact
Let’s add a couple of contacts to the Sugar Pie organisation.
1. Click on the + symbol for Add New in the menu
2. Click on Contact to add a New contact
3. Start typing Stevenson – you can see suggestions appearing
4. Continue to type Stevenson & Co
5. Click on + Add “Stevenson & Co’ as a new contact
Add New
Contact
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6. Enter the following details in the Contact Information section
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Unit 6: Creating Items
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Unit 6
Creating Items
Lesson outcomes
By the end of this unit you will be able to:
create an item
link accounts to items
enter buying and selling details of an Item
create inventory reports
create a service item
create a tracked item
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Creating Items
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Overview
Inventory Items are good or services that you buy and sell. An item can be a
physical unit, such as a cake, or it can be a service, such as labour for an event
setup.
When you create an item, you can enter information such as:
the item’s selling price
unit of measure.
Items must be linked to accounts.
If you mark the ‘I purchase this item’ then it must be linked to a cost of sales
(or expense) account. When you use the item, the amount is automatically
allocated to the correct account, for example, 310 – Cost of Goods Sold.
If you mark the ‘I sell this item’ then it must be linked to an income account.
Again, when you use the item the amount is automatically allocated to the
correct account, for example, 210 Sales Wholesale.
Inventory can be tracked or untracked.
If you mark the ‘I track this item’ then it must be linked to an inventory asset
account, for example 630 - Inventory. The Products and services list is then
automatically updated when you buy or sell the item.
There are four basic steps involved in creating an inventoried item:
1 Enter the item with an Item Code and Item name.
2 Linking the item to the appropriate accounts.
3 Setting up the buying details.
4 Setting up the selling details. Sample
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Create a Simple Inventory Item for Sale
Each item has both a code and a name. If you begin similar types of items with
the same number, it helps you to keep your items list organised.
1. Click on tab Business Products and services
2. Click + New Item
The New Item window appears.
3. In the Item Code field, enter BT001 then press TAB. This code will
identify the item
4. In the Item Name field, type in Blueberry Custard Tart
5. Clear the tick from I purchase this item
6. Check that a tick appears in I sell this item
7. Type 4.00 in Unit Price
8. Click on the droplist button for Sales Account and click on 200 - Sales Shop
9. Check that the Tax Rate is GST on Income
10. Click on the Save droplist button and click on Save & add another
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Practice Exercise 6.1: Create Simple Inventory Items for Sale
1. Now add two more items in the same way
Item Code CR002 CM003
Item Name Chocolate Raspberry Tart
Chocolate Mud Stack
Unit Price $4.00 $4.50
Sales Account 200 200
Tax Rate GST on Income GST on Income
Your list of products and services will now look like this:
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Create Simple Inventory Items to be Purchased
You can add items that you purchase just to make it easier to fill out order forms.
1. Click + New Item
2. The Item Information window appears
3. In the Item Code field, enter FLWT5000 then press TAB. This code will
identify the item
4. In the Item Name field, type in White Flour 5 Kg Bag
5. Check that a tick appears for I purchase this item
6. Clear the tick from I sell this item
7. Type 5.00 in Unit Price
8. Click on the droplist button for Purchases Account and click on 310-Cost of
Goods Sold
Your window should now look like the following:
9. Click Save droplist button and click on Save &
add another
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Unit 8: Recording Customer Payments
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Unit 8
Recording Customer Payments
Lesson outcomes
By the end of this unit you will be able to:
Analyse receivables
Receive a payment
Review customer payments
Enter invoice and payment in one step
Cash sales receipts using receive money
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Analyse Receivables
A quick picture of how much the business is owed is obtained via the Sales
Overview.
1. Click on tab Business Sales Overview
2. Click on tab Accounting Reports
3. Click on Aged Receivables Summary in the Sales list
Aged Receivables Summary
Accounting
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4. Click in the Date box and type 31/8/18 and Update
A better picture is provided of how old outstanding invoices are and who
owes you what and when.
At the end of the unit we will work through Statements.
Date Update
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Receive a Payment
In the next few sections we will work through entering payments in Xero.
You can also do this very quickly when conducting a Bank Reconciliation.
1. Click on tab Business Sales overview if necessary
2. Click on the Awaiting Payment tab on the Sales Dashboard
3. Click on the invoice INV-00126 for Ebb and Flow
The total amount is entered automatically in the Amount Paid box.
4. Click onto Date Paid and type 28 Jul 2018
5. TAB to Paid To and click on the droplist button and click on
100 – Business Account
6. TAB to the Reference box and type Direct Deposit
7. Click on Add Payment
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You will be returned to the Awaiting Payment tab – the invoice will no longer be in the list as it was paid in full. If you want to view it, you can just click on the Paid tab.
8. Click on the Paid tab
9. Click on the line for the payment to display the original Invoice
10. Click on Invoice Options just to view what is available if you need to edit or repeat it.
Paid
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Batch Payment
A customer may pay more than one invoice in one payment.
1. Click on tab Business Sales overview if necessary
2. Click on the Awaiting Payment tab on the Sales Dashboard
3. Click on the Select box for the oldest two invoices for The Pier Events
4. Click on Deposit
The New Batch Deposit window appears as shown on the following page.
Deposit
Select
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5. Click into Payment date and type 31 July 2018
6. TAB to Reference and type Inv 124 and 127
7. TAB to Bank Account and type 100 then TAB to set the Bank account
8. Click on Deposit
9. Click on Send Receipt
10. Enter your email address
into the Email box for
the customer ( of course
in practice you would
enter the customer
email address)
11. Click on Send
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Incorrect Payment from Customer
Sending a receipt can be very useful if a customer has accidentally paid you
the incorrect amounts for an invoice or invoices.
Ebb and Flow have made a direct deposit on 18 August 2018 for two invoices
128 and 130. All the details re invoice numbers and dates appear to be
correct on the remittance advice however the amount is $909.08. On your
system the amounts for each invoice are $500 but they have paid $454.54 for
each. How annoying.
1. Click on tab Business Sales overview if necessary
2. Click on the Awaiting Payment tab on the Sales Dashboard
3. Click on the Select box for the oldest two invoices for Ebb & Flow
4. Click on Deposit
5. Click into Payment date and enter 18 Aug 2018 and in Reference Inv 128 and 130.
6. In Bank Account enter 100 – Business Account
7. Click into the Payment AUD field for each invoice and enter 454.54
8. Click on Deposit
9. Click on Send Receipt
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10. In the Send Receipt window enter a message explain what you think
may have happened.
11. Enter your email address so you can what happens (of course
ordinarily you would send this to the customer’s email address)
12. Click on Send
Your email address here
Add to the message here to
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13. Check your inbox for the email
14. Open the Receipt pdf attached
You have noted receiving the payment and asked the customer to check
their records while entering the payment in your system and maintaining the
current outstanding amount on these two invoices.
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Unit 9: Adjusting Invoices
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Unit 9
Adjusting Invoices
Lesson outcomes
By the end of this unit you will be able to:
Credit note adjustments and refunds
Create and pay a refund
Create a credit note and apply to relevant invoice
Create a credit note and apply to another invoice
Adjustment notes for bad debts
Collecting debts and disputes
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Create a Credit Note
Credit notes are created when a customer returns an item or disputes the
amount of an invoice and you agree to either refund them cash or create a
credit for them to use later.
In this example you are going to create a credit note for The Pier Events.
Management is disputing the Labour fee – they were under the impression they
would not be charged for that on this occasion as they were purchasing so many
items. The Invoice has already been paid so you will create a credit note that
can be applied to future sales to that customer.
1. Click on Business Sales overview
2. Click on the droplist button for + New and click on Credit Note
3. Enter the details as shown here
+ New
Credit note
Who To
note
Date
Automatic
Specific Inv if appropriate
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When entering a credit, the amount is entered as a positive number. You
should also use the same Item and Account that was originally used if
possible. You could alternatively use an Expense account such as Refunds
and Returns.
4. Use the Item LAB001 with Qty of 1 and leave the Unit Price as 50.00
5. Click on Approve
You can click cash refund and pay a refund here OR you can apply it as
credit to another invoice.
We are going to apply it to an Invoice that is still outstanding.
6. Type 50 in the Amount to Credit box
7. Click on Allocate Credit
Approve
Allocate Credit
Cash refund
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The credit note is paid out. The invoice it was applied against is indicated.
8. Click on the link to the Invoice.
A new Amount Due has been calculated.
Link to Invoice
Link to Credit Note
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Create a Credit Note for an Unpaid Invoice
You can use this process when a customer still has an unpaid invoice. A credit
can be created and immediately applied to the Invoice.
1. Click on the Invoices link (or the tab Business Invoices)
2. Click on the outstanding invoice INV-00132 for Hamilton Homes to
display it
3. Click on Invoice Options and click on Add Credit Note
Invoice Options
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4. Click into the Date box and type 25 Aug 2018
5. Click into Description and type Reduction in price then TAB to Unit Price
and edit the automatic entry of 660 to read 100
6. Click on Approve
The invoice amount due now will be reduced to only $560. The amount you
entered into the Unit Price on the credit note appears as the Credit amount.
Unit Price Description
Credit Note
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Bad Debts
From time to time it happens that a customer will not be able to pay their
debts. This is dealt with in the same way as a credit note but a bad debt account
is used instead of a reversal of a sale item.
You have received formal notification that Ebb & Flow will not be able settle any
existing debts they have with Sugar Pie.
First let’s check if there is a Bad Debts account.
1. Click on tab Accounting > Chart of Accounts and check for an Expense
account called Bad Debts. You will find the account 406 – this account
was created in Unit
Now let’s check how much is still outstanding for Ebb & Flow.
2. Click on Contacts Customers
3. Click on Ebb & Flow in the list
A neat little list is displayed of what is owed along with a total of $340.92.
4. Click on New Sales credit note
Sales credit note
New
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Unit 10: Purchasing from Suppliers
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Unit 10
Purchasing from Suppliers
Lesson outcomes
By the end of this unit you will be able to:
Enter payments to suppliers through the Spend Money
Edit an inventory item
Create a bill received from a supplier
Pay bills
Create a batch payment
Send a remittance advice
Enter and use repeating bills
Edit a payment
View transactions in the bank account
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Overview
Xero is all about accurate records and saving time. You don’t want to go through
the process of entering every little purchase as a purchase order or bill and then
paying it.
There are three methods of entering money that has been spent:
Paying bills
Spend money
Cash coding
Bills are useful for purchases from Suppliers that you have an account with.
Entering Bills helps you keep track of what you owe when and to whom.
Spend Money can be used to enter immediate payments, writing a cheque or
using eftpos to pay expenses such as your electricity bill, telephone account,
insurance payments etc.
Cash Coding is useful for recording bank charges from a bank statement or
paying for fuel, or other payments that happen multiple times in a month.
We will look at Cash coding in the Unit on Bank Reconciliation.
Enter Payments through Spend Money
Clara has made several purchases during the month.
1. Click on the New + icon and Spend Money.
2. Click on Business Account in the list of bank accounts then Next
New +
Business Account
Spend Money
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You can add new contacts as you go and edit their details later if needed.
3. Click on Spent as and select Direct Payment if necessary
4. In the To box type Super Stationery Suppliers then TAB
5. In the Date field type 4 July 2018 and press TAB twice
6. In the Total field, enter 320.
7. Check that Amounts are is Tax inclusive
8. Leave Item blank – this is only for Inventory items
9. Click into Description and type Various office stationery and TAB
10. Type 1 in the Qty field and TAB
11. Type 320 in the Unit Price field and TAB
12. Start to type 461 Printing & Stationery and TAB
13. Check the GST on expenses appears in the Tax Rate column
14. Click on Save
The transaction appears in the transaction list.
Spent as
To
Date
Tax
Description
Save
Tax Rate
4 Jul 2018
4 Jul 2018 8,180.00
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We will enter another purchase via Spend Money.
15. Click on the + Icon and Spend Money
16. Click on the Business Account in the list of bank accounts then Next
17. Click on Spent as and select Direct Payment if necessary
18. In the To box type Bell Tel and TAB
19. In the Date field type 6 Jul 2018
20. TAB to the Total field, enter 220
21. Check that Amounts are is Tax inclusive
22. Click into Description and type Monthly internet telephone and TAB
23. Type 1 in the Qty field
24. Type 220 in the Unit Price field and TAB
25. Click on the droplist button and scroll down to 489 - Telephone &
Internet and click
26. Check the GST on Expenses appears in the Tax Rate column
27. Check that the Total reads 220.00
28. Click on Save
6 Jul 2018
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You will now have two transactions in the Spent column of the Account
Transactions tab for the Business Account.
You can continue to enter payments from the same bank account just by
clicking on + New Transaction
1. Click on + New Transaction
2. A New Spend Money window appears – enter the following details
3. Click on Save
A blank New Spend Money window appears automatically. You can continue
to enter transactions and just click on Save until you are finished and then
just click on Cancel to close and return to the Account transactions list.
10 Jul 2018
+ New Transaction
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GST Free Purchase
In this transaction we will enter a GST Free purchase. In this instance it is
because the products are classified as GST-free food.
1. Click into the To box and type Bakers Mill and TAB
2. In the Date box type 19 Jul 2018
3. TAB to the Total box and type 16.50
4. Click into the Item box and click on the droplist button to display all
the inventory items
5. Scroll down and click on FLWT5000 – all the details for this item will
be entered into the Line
6. Tab to the Qty column and type 2
7. Tab to the Tax Rate column and click on the droplist button
8. Click on GST Free Expenses
9. Click on Add a new line
10. Enter the details for 1 of the item SGWT5000 changing the Tax Rate here
to GST Free Expenses as well
11. Click on Save
Add a new line
19 Jul 2018
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12. Enter this purchase from Dairy Queen on the 19 July 2018 for Milk and
Cream which cost 5.00 – the Tax Rate should be GST Free Expense
Edit an Inventory Item
We will edit the Tax Rate for this item, so it doesn’t need to be changed
each time it is used in Spend Money or a Bill.
1. Click on the tab Business Products and services
2. Click on the line of the item FLWT5000 White Flour 5 Kg Bag to display
3. Click on Edit Item
This will change the Tax Rate just for this item not for the Account.
Edit Item
4. Click on the droplist
button for Tax rate and
click on GST Free
Expenses
5. Click on Save
19 Jul 2018
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Practice Exercise 10.1: Editing an Inventory Item
1. Click on the tab Business Products and services
2. Click on the line of the item SGWT5000 White Sugar 5 Kg Bag to display
3. Click on Edit Item
4. Click on the droplist button for Tax Rate and click on GST Free Expenses
5. Click on Save
6. Click on Inventory again to view the Products and services list
Practice Exercise 10.2: Spend Money
1. Click on the + Icon and Spend Money
2. Click on the Business Account in the list of bank accounts then Next
3. Click into the To box and type Bakers Mill
4. Tab to the Date box and type 24 Jul 2018
5. Click into the Item box and click on the droplist button to display all the
inventory items
6. Scroll down and click on FLWT5000
7. Tab to the Qty column and type 3
8. Check that GST Free Expenses is in the Tax Rate box then click on Save
24 Jul 2018
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