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Here we are in QuickBooks Desktop get great guitars practice by how we started up in a prior presentation going through the set of process we do every time maximize in the home page to the gray area going to the view drop down notina we've got the hide icon bar open windows lists checked off open windows open on the left hand side reports drop down company and financial let's open up that P and L profit and loss with the range change 010123 12 3123 January to December no activity yet still no none yet we're going to say reports drop down company and financial this time the balance sheet let's open it up for five or customize the reports up top with the change in the range in 010123 to 12 3123 and then we'll go to the fonts and the numbers to change those to 12 okay yes okay so in prior presentations we imagined we started up the company file bringing in the beginning balances from our prior accounting system now we are imagining we're going through the setup process often needing to be done before you start generating revenue first financing putting the capital into the business we did so with the owner putting money into the business as well as taking out a loan then we took some of that money we put it into the investment we put it into an investment here then we're started to purchase stuff with that money that we're going to then used to generate revenue in the future that will typically be the property planting equipment that the pre-shipple assets the things we need in order to do the job to generate revenue in the future and in our case we also need inventory we're going to use that money to buy the inventory that we're then going to use to generate revenue so we still don't have any revenue in this period because we're kind of going through that setup process last time if I go to the home page we went to the purchase order which doesn't actually record a transashing but instead is just a request for inventory only a form which would only be used if you had a kind of relationship with the vendor where you can we have a little bit more control on the purchasing side of things you can ask or request the inventory in this case guitars and not have to pay for them until you receive them otherwise you wouldn't have that situation you would have to just basically make a payment at the point in time you purchase in a similar way that you would if you're buying personally from amazon or some other online distributor and you would just basically be recording the transaction at that point in time because that's when basically you paid for it but we're imagining the purchase order then we're imagining that stuff the guitars in our case the inventory that we're going to sell arrives to our warehouse to our shop and we open it up it's got a bill with it so we're going to be tying out what we've received to what we ordered so we'll tie out the purchase order to the bill that we got in the physical count of the inventory in the box to make sure we got everything tied out and then we'll enter the bill which will then record the inventory that's when inventory will go up on the balance sheet account of inventory the other side will then go to accounts payable because we have to then pay the bill and then we're going to also have these sub ledger that will be impacted now that's the normal process because normally we would think we would enter a bill next here but in this case because we're trying to focus more on the cashed based transactions even though inventory in and of itself is in a cruel transaction we're going to do the same process but instead of a bill we're going to use a check so we're going to get the bill in the in the box of guitars but instead of entering a bill and then paying it off with a pay bill we're just going to basically write a check right when we get it and we'll kind of skip that accounts payable step and the following month next month we will add the bill step and we'll try to do more accrual kind of transactions in the following month so if we've got the purchase order then we could then go into the we would most likely go into the vendor center which you could do here or the drop down vendor center here and whoever gave us i'm on the vendor side we can then look up who gave us you know what boxes stuff we got we can go into their vendor item and we could see the purchase orders that are related to it here making sure you've got all dates checked off if you're working in the future as i am and you'll see the purchase order you can also go into the transactions and we can try to search for the purchase orders and we might want to look for all purchase orders or possibly just the ones that are open the ones for which we have not yet received anything for and so for our case we're going to say that we've got epiphone these two that uh we're we're receiving the boxes of guitars for so now we're going to enter those transactions so i'm going to do that with going back to the homepage just a check transaction instead of a bill transaction notice this is something that you can't really enter directly into the check register because the check is kind of tied to the purchase order so when you get into more complex transactions then you've got to take that into account it also makes another complication if you were trying to use bank feeds meaning uh if you're you can't really wait till something clears the bank as easily if you're trying to connect your check or your bills to the purchase order so inventory kind of throws off the easiest method of trying to use bank feeds to just depend on bank transactions to record all of your data so we'll get into bank feeds in a whole another course or section but just to mention that from time to time as it comes up so i'm going to enter a check and i'm going to type in that we got this on well 1005 okay let's say this is on the 14th and then we're i think it should be 1004 for some reason i'm going to keep it at that and then i'm going to say this is for epiphone epiphone tab and there's oh and it says there's open purchase orders exist for this vendor do you want to receive against one or more i'm going to say yes there's the two purchase orders i'm going to select both of them and say okay so now we're getting that and then it populates down here notice it jumped from expenses because i'm not just going to go to an inventory account because we're buying inventory because if i did that it wouldn't be able to track the sub ledger by item the unit item on a perpetual inventory system so that's why we have to use the items which are populated we set up the items in a prior presentation here and then we used those items to to populate the purchase order the purchase order then just pulled them over into the actual bill if i scroll through this we can see that this ties out to the same data we entered into the two purchase orders these two down here are billable these are billable because when we populated them in the purchase order we said they were for a specific customer we imagined in this case eric music our customer came in said we want this stuff we said we don't have that right now we will order it from our vendor epiphone in this case and the vendor didn't need to know about eric music but it's useful for us to see that now i have this stuff i can turn around and bill or invoice eric music our customer now that we have the inventory on hand that'll be the next step these ones up top are not billable because we we are just buying those guitars for the shop hoping people will come in and purchase those that would be the general idea all right let's save that one well before i save it let's just imagine the transaction that's going to happen here this is a check the check's going to decrease the checking account the other side's going to go to inventory it's not going to be an expense even though we're paying cash for it because inventory is a component where we have to do an accrual kind of component with it typically putting it on the books as an asset and we're gonna have a sub ledger that's going to be impacted for the inventory tracking it by item the sub ledger having to tie out then to what's on the balance sheet you can also kind of look at the reports here and take a look at the the won't give me the transaction journal so it's not going to give me the journal sometimes that journal will give you the debits and credits but so it's a useful turn tool for internal use but whatever we'll record it and we'll check it out we'll say save it and close it let's go to our reports now on the balance sheet we can scroll down and we see that we have in inventory an increase here so if i double click on the inventory account zooming down to the source document we have these items they put them in there uh individually so notice that these are all the same check one oh four but they have that they have broken them out because of the different inventory item transactions here so that's interesting to note when you're sorting your data and so there it is and i can drill back to the source document closing that back out closing this back out the other side is in the checking account double clicking zooming in drilling down on the checking account and then we have the check one oh four notice here it's in as one item it has a split in the other account which is kind of annoying because the other side really only went to inventory but it broke it out into those multiple line items so it can't show you the the multiple items here that's why it's a split if i go into it then it gets us back to the checking account closing this out closing this out we can also see if i go to the reports drop down up top the inventory sub ledger giving us a detail about the inventory account changing the date to 1231 23 then we had the adjustments or the items that were sold here's our count that we have after that point in time let's customize it fonts and numbers see if i can bring it to like 11 maybe so we can drill down on it a little bit and so it gives us our unit count and we should still tie out 39976 ties out to the balance sheet 39976 we can also go to the vendor center over here and we can see that the purchase orders that are now open or i have decreased if i hit the drop down and i look at all purchase orders here's all the purchase orders and then if i go to the vendor balance over here we went to epiphone now we've got this check that has been input if i open one of these purchase orders then you can see it's been received in full it gives you that indication that it's been received so these little links between the purchase order and either the bill if we use the bill or in this case the check are nice from a bookkeeping perspective so that we can we can communicate to epiphone whether we got the the merchandise and so on and see those links within the system okay let's do another one this one's going to be for Gibson so we're going to receive we're going to imagine that for Gibson we're going to receive these items so let's go to our check forum which we can go to on the home page we can see it here or we can go into the drop down in the banking if we want to write a check that way we can't really go into the register remember as easily because we want to link this check to the purchase order so i like to use a form typically in that case so it's going to be 1005 let's say this is on the 15th i'm just going to type in Gibson starts to auto populate which is nice there's the vendor i want tab it says i'm paraphrasing hey there's some open purchase orders here do you want to use those i'm going to say yes please thanks quickbooks here's the two purchase orders we made i'm going to say okay so once again we're imagining that Gibson then shipped us these guitars the Gibson usas and the Gibson sg's hopefully those are the right guitars i don't know those are the guitars we're imagining we received and uh and uh there was a bill in the box now we're not entering a bill into our system because a bill in our system means we're going to increase the accounts payable but instead we're just writing a check for the bill skipping the accounts payable so you gotta kind of understand the terminology right they billed us meaning they sent us a bill when i opened it up the bill that they gave us might say invoice because to them it's an invoice because it kind of matters which side of the table you are on but to us it's it would be a bill to us and we don't have to enter their bill into the quickbook system as a bill because within the quickbooks system a bill means that you want to increase the accounts payable and pay it later in this case we're just going to pay it at the same point in time therefore we're going to pay off their physical bill with a check form the check form being the form that decreases the the checking account okay so then we've got these guitars down below and this second one is in a similar situation as we saw before is billable because we bought this particular set of Gibson's for a particular customer now that we've got the guitar that's going to remind us and help us to then populate the invoice for us to finally start selling some guitars so what's the transaction when we record this it's going to decrease the checking account for the six eight nine two and then the other side's going to go to inventory and it's also going to have an impact on the sub ledger for the inventory so let's save it and close it let's check it out let's go to the balance sheet we can see in the checking account double clicking zooming back to the source document there's the check one oh five the other side went to a split account it really all went to inventory but because we had two inventory items it has that split component double clicking on it takes us back to the check which is on the items side indicating that we bought inventory as opposed to assigning it to a particular account which wouldn't have the same ability to connect to a sub ledger tracking inventory and a perpetual inventory method closing this out closing this out the other side is in the inventory asset account and then we can see we had two line items because we had two different kinds of inventory items either one of these will go to the same check which is the total of the six eight nine two but the two line items are broken out separately in the inventory sub ledger in essence the general ledger the transaction by account closing these two out we can also go to the inventory valuation report which is now populating what's on hand at this point in time the total value is at the 46 868 which should tie out to what's on the balance sheet 46 868 if we go to the vendor center and we go to the Gibson there's the check if I open up one of these purchase orders it's now saying that it's received in full you can see some more detail on this item open balance zero and so on closing this out closing this out if I go to the transaction detail here's all the purchase orders if I just want to see the open purchase orders here's the open purchase order at this time in other words the purchase order that we have not yet received let's do that one so this time I'm not even going to go to the home page I'm just going to go to the banking and write a check and we're going to say okay this is for the diamond with a diamond which I think should have a deal do you want to purchase what I'm going to say yes there's the purchase order check it off okay boom the 15th we'll keep that as the date 75 and so once again it's on the item side three of those so that looks good it's populating those we would tie them out to the physical box of ukulele leaves we got and say okay that's good what's this going to do decrease the checking account by 72 dollars the other side going to inventory for 72 dollars and it's going to have an impact on the sub ledger for three ukuleles so we'll say save it and close it and then let's go to our balance sheet double clicking drilling down on the checking account and there's the diamond head uh check five 1006 there it is looks correct closing this back out closing this back out the other side is on the inventory and so there we have just one line item because we just bought one item worth three of the same item and then the sub ledger in the inventory sub ledger now tying out to 46 940 notice this is the retail price what we expect to sell them for but we have them on the books for what we bought them for 46 940 that's their value to us until we actually sell them 46 940 uh so there is that if i go into the vendor center then nothing's open in the open purchase orders at this point here's all the purchase orders nothing that are still open vendor if i go to diamond head diamond head then we've got we've got the check here and the purchase order has now been received in full so is there any impact on the income statement yet have we made any money in the profit loss no not yet right because now we've we've actually bought the inventory and some of those inventory we bought specifically for a customer so in the future now that we've gone through the through the vine of the inventory side and we've got our shop we've got them we're able to pick up the stuff we could tell the customer where to pick them up and whatnot now we can turn around at least invoice for those those couple purchases that we purchased for the specific customers and that will finally get us some action on the in on the income statement for revenue it will also give us some cost of good sold recording the expense at the point in time that we consumed it of the inventory that we purchase right right now the inventory is not an expense because it's on the books as inventory it'll move to cost of good sold in a perpetual inventory system when we sell the inventory with a invoice or a sales receipt so let's go and make one more report reports drop down this is going to be accounting and taxes let's look at the trial balance just to check our numbers oh one let's go from 010123 to 123123 customize that report fonts and numbers let's bring it up let's bring it to like 14 even let's go crazy with this that's like two whole things higher than normal so then you can check your numbers here and if anything is off then you can you can drill down on on them to look at the detail and change the date because we're not working in real time it's often a date issue if you find something that the date is wrong in or so you've got a wrong dollar amount you can drill down on it drill down to the source document and make the changes you need which is something you might not always want to do in practice unless you're you're sure of what you're doing but in a practice problem you have that capacity which is quite nice to keep us all in alignment we will go over all of the transaction detail reports at the end of of the whole section of the first month of transactions which is another great way if we can't figure out where something is off to kind of drill down and hone down on where the problem is