 QuickBooks Online Journal Entry. Get ready to start moving on up with QuickBooks Online. We're gonna be using the free QuickBooks Online Test Drive, searching for QuickBooks Online Test Drive in our search engine, picking the option that has Intuit.com and the URL into it being the owner of QuickBooks using the United States version of the software and verifying that we're not a robot. Support Accounting Instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course, each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources, such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Zooming in a bit by holding down control up on the scroll wheel, currently at 125% on the zoom and noting that in the car dropdown, we could switch between the business view and the accountant view. We're currently in the accountant view. We might be switching back and forth between the two as we go. We're gonna be duplicating some tabs as we do every time. Right click on the tab up top to duplicate it. Right click on the duplicated tab to duplicate it. Going back to the tab to the middle as the tab to the right is thinking, selecting the reports. We want the big balance sheet report and then I'm gonna go to the right as that one's working and then go to the reports. Again, this time we want the P to the L, the profit to the loss to income statement. I'm gonna close the hamburger, otherwise known as the hamburger and then we're gonna change the range up top. Selecting the beginning here and go from 01, 01, 22, tab 12, 31, 22, that's January to December. We're gonna run it because we wanna refresh it and that's how you do that. You refresh it by running it. Go to the tab to the middle and then close the hamburger, scroll up. We're gonna range change. The range needs to change from 01, 01, 22, to 12, 31, 22. It's pretty close, but we're gonna change it anyway. Run it if you wanna freshen it up and we want fresh stuff. We're gonna go to the first tab. That's the setup we do every time. Selecting the plus button. We've been looking at these forms. The forms are what we use to generate the transactions typically as well as facilitate the linkages of transactions within the system. We've been looking at them by cycle. Now we're over here in the other area which isn't actually a cycle but is where QuickBooks put some other data input forms and now we're looking at the journal entry. Now the journal entry is a bit complex because you might think if you learned accounting just in terms of double entry accounting system before you worked with software, you probably learned everything in terms of journal entries and you probably have this urge to record everything with simply a journal entry and not use as much as you should the forms but you wanna resist that urge. You wanna use your knowledge about the journal entries to then determine which forms over here are best to create those journal entries and how to set up the forms so that the data input is as easy as possible so that someone could just make the forms in the day-to-day process that will then create the journal entries. The journal entries being the recording of the financial transaction which will impact at least two accounts on the financial statements which is gonna keep everything in balance and so on and so forth. And so the way you wanna think about how the system is set up is that we're gonna put the fundamental things down first which is gonna be the chart of accounts and the products and service lists and then we're gonna set up our forms in such a format that the day-to-day normal transactions which we break out by cycle, customer, vendors, employee cycles can be populated as easily as possible with simply the data input forms and these day-to-day transactions as they are entered through the forms will then create the journal entries automatically creating the financial statements, balance sheet income statement or profit and loss and related reports and they will also facilitate the ease to interact with people such as vendors, customers and employees by giving us kind of links between the invoices, the received payments, the estimates, the bills and the pay bills so we can track that information in our system under what I would call the centers, the customer center, the vendor center and communicate with these people. That's a step above a step different that process than just thinking about the creation of the financial statements, the balance sheet and the income statement because the linkages between these things like a bill and a pay bill for example is not something that has a direct impact on the financial statements and therefore isn't something that you often learn when you're just learning debits and credits from an accounting perspective outside of software but in practice that is added value and it's quite important. So the way you wanna think about the data input then is gonna be if I'm entering a financial transaction, the question is is there a form that I can use to enter that transaction? If it's a normal day to day transaction typically there will be, if there is I wanna set up that form and use that form to create the transaction. Now note, you might still be using one of these forms to create a transaction even if you have like a quick data input field for example, you can enter a deposit form by entering something directly into the register as a deposit and you can also use the bank feeds to enter the deposits. It's still gonna be a deposit form even though it doesn't look like the full deposit form. QuickBooks is gonna still use a deposit form to record it. You can record an expense type of form by entering something directly into the check register or having a decrease in the bank feeds transactions. Those don't look exactly like the form if I was to click on it here but they're still gonna be creating an expense type form that's important to note. If there's not a form related to the transaction you're doing because it's not a day to day transaction such as purchasing a large piece of equipment or something then you wanna ask is cash affected? If cash is affected then you wanna use typically a cash related form like an expense form or a deposit form usually. If cash is not affected then you might default to a journal entry. So it's the last thing that you would go to because you wanna use the default forms first. So that would be something like if you purchased equipment for example on account or purchased equipment and financed the equipment, no cash involved. Therefore you're gonna have to enter it with something else like a journal entry because you don't do that normally. It's not part of the normal day to day transactions. Also the period and adjusting entries which we'll talk about in its own section when we get to the adjusting entries are typically where you would enter those purposely as a journal entry because they are there for adjustments as opposed to day to day kind of transactions to get your financial statements more in alignment with whatever accounting system you're using such as an accrual basis or tax basis or whatever you are doing. We'll talk more about that later. But let's just get an idea of what I'm talking about here. So for example, we've seen if you enter an invoice let's enter an invoice and just enter a normal invoice and then compare if you tried to do that with like a journal entry how that might mess things up and you wanna be careful of it. So let's say I make this for AAA customer. I'm just gonna say customer and then I'm gonna go down here and say this is going to be, I'm just gonna make a new item so we know what we're doing here. I'll make it just a service item. I'm gonna say it's service one for a generic item and then we're gonna put that as the description and I'll make it for $1,000 whatever. It's gonna go to the service income account. I'm gonna say it's not taxable. So it's not taxable. So straightforward, easy transaction. This is gonna increase accounts receivable by 1,000 and the other side is gonna go to sales by 1,000. Let's save it, save it and close it. And you can say, okay, and then if I go to the tab to the right, I'm gonna refresh this, run it and then I'm gonna go into my accounts receivable and boom. We've got the invoice right there. Looks good, scrolling back up so you can see the financial transaction is being recorded. This is the debit and credit. This is in essence a journal entry that's being recorded. On the income statement, we put that into services right here and there it is. But that's not all that happened. That's the journal entry. That's the creation of the financial statements. But if I go to the first tab, also if I go into my sales area, then we know that I can track this by customer for example and I've got my invoices in here. I can track them by my invoices this way or let's go to all sales and I can look at my invoices this way and look at my open invoices and sort it that way. If I was to try to say, if I went to my plus button and said, hey, I know what the journal entry does, I'm just gonna record it with a journal entry. So I'm just gonna say, it's a sale. I'm gonna record it with the journal entry instead and say that the transaction is gonna be an increase to accounts receivable of 1,000 and then the other side is gonna go to the six, what did I call it, service revenue, services income, 4,000. Boom. Now, if I was to just record this, which I don't think QuickBooks will even let me do, then you can see a couple problems with this even from just an accounting kind of reports perspective because I'm gonna increase the accounts receivable and increase the services. That'll have the same impact on the financial statements, but the accounts receivable typically has a sub ledger breaking it out by customer and I don't even have a customer field here. That's a problem. So I'm gonna probably have to add, I could add a customer field over here so I can kind of fix that but I also have kind of an issue in that I can't really sort my services items by item because there's no item. I didn't create like the item in here. You might not need that but sometimes that could be important because you could have a sub ledger for your sales sorting by what you did. So if you can add that detail, it would be great. But the biggest problem here is that even if I add the customer over here, the sub ledger internally is now gonna have this journal entry instead of an invoice. So it kind of messes up the second step which is gonna be to receive payment and I'm supposed to connect the receive payment to the invoice, but I don't have an invoice now. I have this journal entry. You see that connection doesn't really have an impact on the financial statements, but it's gonna be important. So let's try to record this without even a name. I don't think it's gonna let us do it if I save and close it. It's gonna say when you use accounts receivable you must choose a customer name. So QuickBooks kind of forces you to do that. There's some issues that kind of causes problems sometimes but that's actually a good thing because it's gonna make sure that the sub ledger doesn't get off from the balance sheet. So let's say this is gonna go to AAA again. So I'm gonna say AAA and then save it and close it. And so now if I go to my financial statements and I go to my balance sheet and run it and I look at that accounts receivable I go into the A to the R receivable and scroll down. So now I've got that same thousand but it's in there with a journal entry as opposed to an invoice. If I go into the journal entry then I can go into the source document which is now a form. This QuickBooks thinks of it as the default form when there is no other form which is a journal entry, the debits and credits. And then I'm gonna scroll back up even though the invoice also makes debits and credits but it does it through the use of the form. And then I'm gonna go to the tab to the right and then run this one and then scroll down and the other side went into the services. And so I still have the transaction being correct. My financial statements are the same under either method but there's still kind of some issues with the sub ledger. Now, if I go back on over here I look at the accounts receivable I also have to track that by who owes us the money so I can go to the tab to the right, click on it and duplicate it. And then I'm gonna scroll down to the reports on the left and then close up the hand boogie. And then we're gonna go to the who owes you money and look at the accounts receivable detail, customer, let's say customer balance detail. And so now I've got my AR, people owe us 2000 but one of those is an invoice and one is a journal entry. The journal entry is gonna be a little bit more difficult to link to the receipt payment. But notice at least we're still in balance down here because it forced us to use a customer. That's why I've got the 728152 which ties out to the 728152 here. However, if I go to the first tab and then look at it this way and I search my data thusly and I go to all my transactions I can't really sort by invoice, people owe us money. I can't really see why they do have the journal entry here but it doesn't have the same receive payment kind of linkage over here process. So that's kind of an issue because that's the next step typically we're gonna connect the receipt payment to the invoice. If I go to the customers field we've got that same kind of issue here. If I go into this transaction the next step is to receive the payment which I don't really have that option right here. So it causes kind of an issue in that regard. So the bottom line is you gotta be careful with the journal entries. I'm gonna open this back up. I'm gonna hit the plus button and just recap that from an accounting standpoint everything we do that has an impact on the financial statements is a journal entry in the sense that a journal entry is defined as a financial transaction that has at least two accounts affected has debits and credits increases decreases to those accounts making the accounting equation in balance. But the more formal definition within QuickBooks of a journal entry is this journal entry form. It's kind of similar to the terminology that we've seen before when we say something like is a bill form for example which is a very complex term even though it should be a simple term because we say bill in normal language even accounting language for us being billed and us billing our customers depends which side of the table we're on and further from that the bill that we've received physically I might not enter into our system as a bill but rather just pay it with a check or expense form. The bill specifically means bill form which increases accounts payable in the system. The same with the journal entry like in normal accounting language a journal entry means a financial transaction properly recorded with debits and credits in such a way that the financial equation is still in balance. But a journal entry with regards to QuickBooks means it's a form. And in terms of the form it's the last default form that you want to use when there's no other form involved because all these other forms are designed to make journal entries through the data input form but do so in such a way that the flow of the transactions within each cycle customer vendor employee works smoothly not just the creation of the financial statements therefore you want to use these forms first and then if cash is affected you'll typically default to cash forms deposits and checks or transfers and then if none of those apply journal entries that would be unusual transactions like purchases of equipment and other kinds of investments the owner puts machinery into the equipment instead of money or something like that into the system and adjusting journal entries at the end of the period which we'll talk about in their own section which you don't have cash involved typically and they are designed specifically that are perfect for like a journal entry transaction we'll talk more about that in future presentations. Now just to look at this for the business view we've been going into the business view we've spent most of our time just talking about going to the get things done area and then just same plus button up top to open the invoice and the journal entry and then we looked at the get paid and paid area where we looked at the customers so this is the customer AAA we looked at the invoices here there and we looked at the transaction which is actually under the banking I'm sorry not the banking the bookkeeping and then transactions up top and then we were looking at the sales transactions so there's where that's located under this view and then of course we were looking at the reports which is under the business overview and you've got the reports on the left hand side so same stuff basically just different ways to get there