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Create and Use a Temporary Distribution Account in QuickBooks

Posted by Dave Dunn on February 2, 2008 | 0 Comments

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When quickly entering a pile of bills or reconciling a bank account, it can be very frustrating to come across an unknown bill or transaction. How do you enter it into QuickBooks if you don't know what it is? Instead of stopping what you are doing and hunting down someone who knows, assign it to a "temporary distribution" account.

A "temporary distribution" account is an account created specifically for transactions that, for one reason or another, can't immediately be assigned to another account. At year end the temporary distribution account should have a $0 balance. During the year, my temporary distribution account almost never has a $0 balance. In addition to the scenarios above, I use it when paying my credit card bill and sometimes payroll. Then, when I have the necessary information to breakdown these payments to all the correct accounts, I edit these transactions in QuickBooks to assign the expenses to the proper accounts.

The best thing about a temporary distribution account, however, is not that it simplifies entering transactions. The best thing is that it reduces errors. Knowing you can assign something to this account gets rid of the temptation to guess which account something belongs in, or to put it in an account with the intention of changing it later, which you might forget to do.

I recommend numbering the temporary distribution account as 9999 and categorizing it as an Other Expense. This way it will show up at the bottom of your P&L and will be hard to miss when looking at your numbers, thereby reminding you to assign any unassigned transactions before closing out the year. Also, create a todo for yourself to go into QuickBooks at least quarterly to assign any unassigned transactions. If you wait until the end of the year, it might be hard to remember what your question was.

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