The three purchase windows in QuickBooks

When I’m writing about QuickBooks, I often have to talk about payments the business makes and expenses the business incurs. These types of transactions are recorded according to their type. There are three windows that most people use in QuickBooks for them. Since they perform similar functions, I often refer to them as “the three purchase windows.” Here they are.

1) The Write Checks window. If the checking account was used, then the Write Checks window can be used to record the transaction. This window can be used even if a paper check was not created, e.g., it can be used to record debit card transactions. It can be used any time money was removed from the checking account, including transfers to other accounts. It records a credit to the bank account and a debit to the account chosen in the lower half of the window.

2) The Enter Credit Card Charges window. If a credit card was used, then the Enter Credit Card Charges window can be used to record the transaction. This records a credit to the credit card liability account on the Balance Sheet, and a debit to an expense account (or whichever account was chosen in the lower half of the window).

These are both one-step processes. They record the payment and the expense in a single step. For very small firms, these two methods should be used exclusively if the business only uses cash-basis for all accounting and tax reporting. For larger firms, or if the firm needs accrual-based accounting, then the next method should be seriously considered.

3) The Enter Bills window. Unlike the first two, recording expenses and their payments is a two-step process under this method. Step one: when a vendor bill is received, it is entered in the Enter Bills window. This records the expense and the fact that the firm owes money to a vendor. Step two: when it is time to pay the bill, the Pay Bills window must be used. This records the payment, lowers the amount owed to the vendor, and zeroes the vendor bill from Accounts Payable aging reports. This method is the better method for accrual-based accounting. Accrual-based accounting is more accurate and forward-looking than cash-based accounting.

This window records a credit to the Accounts Payable account on the Balance Sheet, and a debit to an expense account (or whichever account was chosen in the lower half of the window).

If the Enter Bills window was used to enter a vendor bill, and the Write Checks window was used to pay the bill, the expense from the bill will be double-counted on accrual-based reports, and the bill will remain on A/P aging reports indefinitely. Never use the Write Checks window to pay a vendor bill that was entered into QuickBooks on the Enter Bills window. Use the Pay Bills window instead.

Here is a table I made for easy reference.

For purchase transactions: which windows do what?

Report basis for expense
Transaction side
Location in window
Write Checks
Enter Credit Card Charges
Enter Bills
Pay Bills
Credit
Upper half of window
The bank account
The credit card account
Accounts Payable
Payment account (lower part of window)
Debit (typically an expense)
Lower half of window
Whichever acct chosen there
Whichever acct chosen there
Whichever acct chosen there
Accounts Payable (upper part of window)
Expense shows on which basis report?
Cash and accrual
Cash and accrual
Accrual only
Cash only

The General Journal can also be used for any or all of these of transactions, but this should only be done by an experienced accounting professional. I do not recommend for average QuickBooks users to use the General Journal without explicit instructions from an accounting professional. When I say “the three purchase windows,” I am not talking about the General Journal.

The Transfer Funds window cannot be used for entering expenses. This is because it only posts to Balance Sheet accounts.