Question

If you associate a service item with two accounts, how does QuickBooks know which account to use on a transaction?

1) When the item is on a sales form, QuickBooks uses the account under "Sales Information" in the item setup. When it's on a purchase form, it uses the account under "Purchase Information."
2) When you enter the item on a transaction, QuickBooks asks which account to use.
3) You cannot associate two accounts to an item.
4) Items do not affect accounts.

Answer 1

In QuickBooks, a service item associated with two different accounts will have the appropriate account used based on the transaction type: 'Sales Information' for sales forms and 'Purchase Information' for purchase forms.

Step-by-step explanation:

The correct answer is option 1: When you associate a service item with two different accounts in QuickBooks, the software determines which account to use based on the type of transaction. On a sales form, QuickBooks will use the account specified under "Sales Information" in the item setup. Conversely, when the item appears on a purchase form, QuickBooks will reference the account listed under "Purchase Information." This allows QuickBooks to accurately track income and expenses separately and streamlines data entry by pre-filling the appropriate account based on the transaction type.

Options 2 and 3 are not applicable because QuickBooks does not prompt you to choose an account each time, nor does it restrict you from associating two different accounts with a single service item for the different uses. Option 4 is also incorrect as items do affect accounts; they are fundamental in categorizing financial transactions within QuickBooks.