 QuickBooks Online 2023. Purchase of inventory using bank feeds, periodic method and perpetual method. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our bank feeds practice file we set up in a prior presentation using the 30-day free trial. We also have open the free QuickBooks Online sample company. If you want the to open at the same time we suggest using incognito window or another browser. 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. You can open incognito window if using Google Chrome by selecting the three dots in the browser and select new incognito window then type into the search engine QuickBooks Online Test Drive. We're going to be using the sample company to compare the accounting view the one the bank feeds practice file is in and the business view the one the sample company is in. You can toggle between the two views by going to the cog up top and switch the view on down below. We're going to duplicate some tabs to put our major two financial reports in like we do every time right click in the tab up top to duplicate it. Right click in the duplicated tab as it is thinking so we can duplicate that duplicated tab back to the tab to the middle as the tab to the right that we just duplicated is thinking reports on the left hand side. Let's open up the balance sheet report one of the favorites one of the financial statement reports by the way if you're in the business view the reports are located in the business overview and then the reports on the left back to the bank feeds practice file tab to the right. Let's open up the reports on the left this time the profit and the loss the other major financial statement report close the hand boogie and change that range. I'm going to go from 010122 tab 123122 tab. I'm going to run it to refresh it. This is where we stand as of this point in time back to the tab in the middle. That's the performance the balance sheet is where we stand as of a point in time. Let's do the range change 010122 to 123122 run it to refresh it. That's the setup process. Let's go to the tab to the left now and just open up the bank feeds which is where we've been working banking transaction on the left hand side we've uploaded the bank feeds and this is what we have in there if you're in the business view by the way the bank feeds will of course be in the bookkeeping and then transactions up top and then you've got your bank transactions there. Okay, we talked about inventory last time we're going to be continuing on with inventory of this time we talked about three methods using the flow chart just a quick recap if we go to the flow chart you might if you have inventory try to stay in a cash based system that's the easiest thing to do but it would only work if your inventory is quite low possibly you're buying inventory for a particular job and you're going to be billing the client fairly soon after doing the work in which case we can use the bank feeds possibly to record the expense as a cost of goods sold as it happens now we're going to move on to the other two methods where we're going to have to deal with the inventory on the books as an asset one method per pet or periodic inventory method in which case we're going to track the units of inventory outside the system but track the dollar amounts in an asset account in the system and then make a periodic adjustment for the inventory the second method a perpetual inventory system the full service kind of system within quick books which means we're going to track not only dollar amount but unit in the quick book system as we go so let's get some examples of that we'll start off with the periodic system what would we do if we're trying to do a periodic inventory system when we purchase the inventory then let me give me an example of a purchased item here so we'll just use this one and imagine that we're purchasing the inventory with this item so if I go into this one when I purchase the inventory I've got the date notice I have the vendor already set up so I'll keep the same vendor we can use the same vendor that we pulled from the memo as we normally do it's now categorizing to uncategorize because I didn't save the transaction last time or make a rule for it last time we recorded it simply to cost a good sold which is an expense account right off the bat that's the easiest thing to do but now we're going to put it on the books as an asset account of inventory so I'm just going to choose the inventory account there it is that's was given to us when we first set up the quick books file we didn't delete that account so we don't have to make another one note that I'm going to inventory but I'm not actually tracking the units of inventory because I didn't set up an item so it's not going to give me the it's not going to count the inventory or anything like that it's just going to record the dollar amount of inventory with inventory we have a like a difference in terms of measurement that is similar to try to measure things in different units Celsius Fahrenheit for example we have measuring it in dollars and measuring it in units the number of units that we have here we're only measuring it in dollars and so we're going to have to deal with that and we'll talk more about that shortly so if I go down here we could create a rule for it but I'm not going to create a rule this time because this is just a practice for the inventory but if this was something or the system we're going to use constantly then of course we can create a rule even if I go to the splits down here note that I don't have an item the item is the thing that's missing for us to be able to track the units of inventory and we will see the item when I record it on the expense form but it's not on the data input form on these bank feeds so that gives us a bit of a limitation for the tracking of the inventory using you know the bank feeds at the purchase point so let's go ahead and add it so I'm going to say let's add it and then we'll check it out so if I go to the balance sheet then am I run it running and I can go into my checking account of course the checking account is going to go down by that amount I believe it was this one the other side's going to inventory in the split account if I go into the expense form you'll see that the inventory has been recorded but it was recorded with a category it was not recorded with an item which would generally drive the inventory as well as the sub ledger for the item so if I go back closing this out back and then the other side went to the inventory asset there's our $50 in the inventory asset and it's in there from the expense form there's no inventory sub ledger related to it so as I do this in practice I might have a separate Excel sheet for example that's counting the units of inventory that I'm purchasing not just the dollar amount and I might be using a flow assumption like first and first out LIFO or FIFO or weighted average usually weighted average or first and first out and then periodically at the end of the day at the end of the week or at the end of the month I'll do my cost a good sold calculation which is going to be beginning inventory plus purchases which is basically reflected here in the inventory account minus ending inventory gives us the difference that which is going to be called cost a good sold we assume we sold the difference it wasn't there could have been spoilage or shrinkage and that kind of stuff but we assume we sold the difference and then what I would do is I'd have to do an adjusting entry at the end of the day at the end of the week or at the end of the month reducing inventory and recording the cost of good sold which we can do with a plus button we'd have to do an actual journal entry to do that because cash would not be impacted this would be an internal kind of thing or we can go to the register to do that I can right click on the tab over here let's duplicate it so I can get to the register and you can enter a journal entry with a register entry which sometimes is an easier way to go if there's only two accounts affected going down to the accounting on the left hand side and the chart of accounts if you're in the bookkeeping view by the way it's in bookkeeping and then the chart of accounts and then within here you could go into like the inventory has a register kind of like the check register and you can go in here and enter a journal entry decreasing decreasing this account and the other side going to the cost of good sold so that's a periodic type of method that that you could use the next method of course would be the perpetual inventory system in a perpetual inventory system on the vendor side I'd like to use the form which would be an expense form or a bill form to actually record not only the dollar amount but also count the items which means I can't wait till it clears the bank feeds I have to actually enter a check or expense or bill form which has the capacity to add the item and then when I sell the item I can't use a deposit form but have to use an invoice or sales receipt in order for QuickBooks to track the decrease of inventory and cost of good sold at the point of sale as opposed to us having to do that adjusting entry periodically at the end of the week day or month alright so to see this let's set up an item so I'm going to go I'm going to go to that we could set up the item like as we do a data input for like an like when we make the purchase with an expense form or possibly a purchase order but I'm going to sit I'm going to go to where the items are located at and that's under the sales area because it's kind of part of the sales cycle or you can think of it as kind of part of the sales cycle it kind of fits in both but that's where they house it over here and then the products and services are on the right if you're in the other view the business view they're in the get paid and pay area and then they get paid and paid area and then they're in the get paid products and services and then I don't have any items yet set up so I'm going to close this out and I can add an item that I'm going to be selling I'm going to say it's an inventory item because that's going to be the one that we're going to have the tracking of inventory if it was inventory that I'm not tracking in the system I might call it a non you know a non inventory item if it's a service item no inventory related and it's a service service item and then you can create bundles of them we're going to go to the inventory the most complex kind of item and I'm just going to call it inventory item one I'm going to copy it SKU is like a shorthand kind of number for the inventory you can add a picture of the inventory which can be useful if you have multiple people recording the transactions as they happen a category so if you were to categories like guitars versus drums that we sell or you know if we had banned equipment that we're selling so I'm not going to add a category quantity on hand usually it will start at zero because you're going to be purchasing the inventory starting at this point but it's a required field so I have to add the zero I'm just going to start it like at the beginning of the period the beginning of last year and my practice problem to make sure it's before the date another required field which is kind of annoying reorder point I'm just going to say zero meaning it's going to give us a little warning when we get low on the inventory to buy more of them inventory asset account that's going to be the asset account that will go up when we make a purchase which we do with a bill form expense form or check form the description is what's going to be showing on that form and then the sales price this is what we sell them for not what we purchase them for so therefore that amount will be populated when we create an invoice or sales receipt the sales documents the sale of product that's the income account that will be impacted when we make the sale in turn that'll be a sales receipt or invoice that purchase information that's going to be the description showing in a bill check or expense form the cost what we buy it for as opposed to what we sell them for 30 and we're going to sell them for 60 cost of goods sold is the expense account that will be impacted when we make the sale decreasing inventory other side going to cost of goods sold that'll happen with the sales forms invoices sales receipts and then preferred vendor we could add a preferred vendor if we so choose down below I'm not going to do that here save it and close it notice if you have sales tax set up then you can also use your items to kind of set up the sales tax per item as well so those so if you have sales tax involved and you're doing a full service accounting system you can turn on sales tax and then QuickBooks will help you to calculate the sales tax per item so now when we when we make a purchase for example if I was to use the actual forms up top I can I can make a purchase with it as an expense a check or bill form all of them will look similar let's just take a look at expense form and now I can have the item down here and if I choose that item it will populate the 30 dollars the purchase price recorded to the inventory account and the other side will be going to the the the cash here and we'll also have the sub ledger for inventory I'm not going to record it yet I'm going to close this back out and then on the income side of things I would have to use not a deposit form because it doesn't have the capacity of the items an invoice or sales receipt invoice for an accrual system sales receipt for a cash based system if you're at like a register and then if I said if I said that down here we had the item one now it's on there for 60 dollars and this would drive the decrease of the inventory account for the 30 dollars the cost of goods sold and record the revenue at the 60 dollars and record the cash that you received as well so we'll talk about that a bit more in a second let's let's compare that however I'm going to leave without saving to what's on the bank let's go back into our bank feeds go into my banking I'm going to close this up and scroll back down to that area in my banking area let's just open one for now I'll just pick one I'll just open one up notice I don't have the I don't have the area to add the item that we just set up even with the splits I don't have the area to add the item so that's that's the issue I'm going to if I'm using a perpetual inventory system I'm going to have to enter the item in some other way so let's do that now now if I go on the vendor side of things in terms of the flow of the forms you've got a purchase order which you might or might not use depending on if you can request the inventory before purchasing it and then if you do have the purchase order you might connect that to a bill the bill that you received with the inventory when you actually get the inventory and you can and you can connect that out or you might just pay the bill with a check form or an expense form as you receive it if you don't have a capacity for a purchase order and you're just paying for things when they when you pay for the inventory you just buy an inventory then you can just enter it with an expense form if it's an electronic transfer or a check form so let's just show that if I go to the first tab and I enter a purchase order let's go to a purchase order request for inventory and we're going to say this is going to go to Primerica so Primerica because that's going to tie into the to the vendor I hope and then I'm going to go down and say alright there it is and let's say this happened on I need to make it before let's say 01022 I'm just trying to make a date before the actual transaction in the system which I think is a lot later so I can match it to what's going to happen in the bank fees later I'm not going to enter a category we're now entering the purchase of inventory units so I'm going to say that we're buying this one inventory item so inventory item so this is a $30 item now notice that this doesn't have any financial transaction it's not going to have an impact on the financial statements it would just help us to short the request for the inventory because we don't have the inventory yet and we haven't paid for the inventory yet we're just requesting the inventory and it would only be that way you have the capacity to be able to do that you'd have to be in a pretty good situation to be able to request the inventory before you actually pay for it so let's save it and close it so if you were to do that then if I was to track my purchase orders I can do that by going to my expenses on the left hand side so I'm in the vendors now normally you'd be able to sort by the purchase order but this is for the last 65 days and we're working in the past here so I don't have that sorting option because this wasn't as recent you know the transaction however I know that it was in here so I went to Primarica and then there's the there's the purchase order you can also go to the expenses by the way if you're in the other view that would be under the get paid and pay area and we would be under the vendors and there's the vendors and you can also search your purchase orders by going to the expenses tab and then expenses up top and then filter by purchase order once again I deleted the first date so it doesn't have that 365 rule and then there's your purchase order right there as well so if I was to go into the other view that's in a little bit different location and the other view it's under the bookkeeping and yeah bookkeeping and then transactions and then the expenses no sales tab for the purchase order side so there it is now I was right the first time it was under the expenses there it is and then you could sort by the purchase orders over here if you so choose okay so there it is now the next step would be that we imagine the inventory comes to our warehouse with a bill inside of the box so now we can enter it into the system as a bill or we might just enter it into the system and pay for the bill of the inventory that we have received with an expense form or a check form so for example if I hit the drop down we've got copy to a bill that would be the easiest thing to do we can create the bill from the purchase order now and the bill will actually record the transaction now a bill not impact cash that's an accrual component it's going to be increasing the accounts payable so I'm going to go through here and just say the terms I'll keep that as is and we'll say the date let's say it's on the 12th let's say it's still way too early in the year to tie it to the bank feeds but the point is that down here the bill is pulling in the item not the category so the item is what's going to drive it increasing the inventory account by the $30 and the other side is going to go to accounts payable in this case because it's a bill you can see it's linked to the purchase order and so that's going to be and then it's going to be for the $30 and it's going to track the inventory now you could also turn on like a tracking of a customer tracking the bills on the customer just show you how that looks real quick I'm going to close this out but without recording it and I'm going to go to my cog drop down let's go to the account settings up top and I'm down here and expenses on the left hand side and you have this option to make expenses and items billable so if I turn that on you're going to see another kind of form in your bills track billable expense and items as income is the default typically a good one and single account so I'm going to go ahead and just show you what that looks like so I'm going to save that and turn on make expenses and items billable we'll also okay so I'm going to go okay close that out let's go back into the bill so now I'm going to make this into a bill again copy it to a bill and so there we have it and so now we've got this added item that says it's billable what that means is that I could pull this item over to customer if I add a customer let's add a customer customer one now you've got to be careful of doing this billable item but I just want to kind of show it I'm just going to put the minimum data for the customer so when you're pulling it over with an inventory item it's going to pull over the cost I believe so it's a little bit tricky but the idea is that you can put information into a bill or expense form that you're going to that you want to pull over as a line item into the invoice or sales receipt that you're going to later create from it again be very careful of doing that with inventory as we'll see here there's a little bit of a glitchy kind of situation with it but I want to just show you the concept of it alright so let's save that I'm going to say save and close if we see what happens on our financial statements go into the balance sheet run it now we've got the inventory went up so if I go into it the inventory went up when we entered the bill not the purchase order if I go into the bill there's the bill that increased it closing that up scrolling back to the top on the income statement running it again nothing happened to the income statement because we purchased inventory back to the balance sheet the accounts payable is the other side the $30 alright so now there's also going to be a sub ledger for inventory right click on the tab to the right duplicate it to see to run another report tracking the inventory by inventory item reports on the left hand side I like just typing in inventory summary inventory valuation summary let's do and that's fine we'll keep it there and you've got one item at $30 now this does not match what's on our balance sheet because that first piece of inventory we put on the books we did so without so here we've got $30 here we've got 80 because that other item we put on the books with a journal entry without using the items so now we're tracking the one we're tracking is the $30 unit at this point in time now you can also track the bill and stuff on the left hand side that's now outstanding the bill is in the accounts payable so if I go to the expenses and then the vendors then you've got a bill for and again it's kind of limited because this is limiting to $365 up top but I believe it was in here and then now you've got your your bill and you can have a payment a schedule a payment for the bill so that's the next step that would happen you know typically with a bill let's assume now you could make the payment here using a payment form and then use the bank feeds to double check the payment form that you would make or I can try to wait till something clears the bank and attach it to the bill with the bank feeds which will record this next step so let's let's try to do it that way I'm going to go to the bank fees and say okay now this transaction has been recorded I'm going to say this was one on the 1017 one for $30 that's the one I think and so let's take this one I know the dates are way far off but let's just imagine that this one now is a payment that I'm not going to use to record the inventory but instead I already recorded the inventory I'm going to try to match it up to the transaction that I have already put in place so I'm going to try to find a match to it and then I'm going to change the date from 0101 to 2 and so there's our bill that it's matching up now if these things were close in time frame QuickBooks might try to try to match it beforehand it might have picked it up because I put them so distance in time QuickBooks had trouble picking it up and if I and notice I'm matching to a bill now so if I had entered the bill as with an expense form or paid the bill with an expense or check form or pay bill form then then it would match to the pay bill form and that might be easier for QuickBooks to match up but I'm going to select the bill so what's that going to do it's in essence going to enter the pay bill form so now I have if I look at the flow chart I had a bill that was put in place I'm using the bank feeds in between here so instead of me paying the bill and then matching it to QuickBooks I'm going to use the bank feeds to basically record the pay bill matching it to the bill after it's actually cleared the bank alright so let's do it so we're going to say that looks good and I think that's good so then I'm going to save it and so now we've recorded that transaction so if I go to the balance sheet run it again now we've got the checking account impacted the checking account notice it created a pay bill form instead of the normal expense form because the pay bill form is basically like an expense form but it's its own special designation noting that it's used to decrease the accounts payable as opposed to a normal expense form or check form which is decreasing the checking account the other side going to somewhere like utilities or something so if I go into this one drilling down on it then we've got the pay bill form this is what the pay bill form typically looks like we did it through the matching format of the bank feeds so it doesn't take us to the bank feeds takes us to the form closing this back out and then the other side if I go back on up top went to the accounts payable which is now back to zero accounts payable has now been paid so if I go into that this is what we expect to see an accounts payable bill goes up it goes down with the pay bill so the inventory adds a little bit of complexity there now see that's just on the inventory for the purchase side of things the next step would be for us to sell the inventory and so when we sell the inventory I can't wait till it clears the bank I'd have to sell the inventory with a sales receipt or an invoice in order for QuickBooks to track the inventory which would reduce the inventory and record the cost of goods sold on a perpetual inventory system so let's just take a look at that so if I went back on over and said let's make an invoice I'm going to go to the first tab new button I'm going to make an invoice and let's say this is going to be for customer one now customer one has this thing that's linked to it because I made the item billable so it's trying to pull it in but there's a bit of a problem if I hit add I'm going to say okay let's just tap through this so I don't forget anything and so I'm just going to make the date closer to real time let's make it like 10.01.22 or something like that that I'm going to sell it on and then down here it pulled in the item but notice it pulled it in at the wrong rate it pulled in the cost not the sales price so what I'll do is I'll just double check the inventory item down here it should be sold for $60 so I'm going to change this to to reflect the proper price the link works good the cost of good sold I think will be recorded correctly but that's something I want to point out is a little tricky thing with regards to if you're trying to use that billable item with inventory items so I'm going to trash the one below now this actually does a lot this transaction is recording a lot at the same time now it's an invoice it's going to increase accounts payable by the full amount the $60 the other side is going to go to sales or revenue driven by the item which I believe we told it to go to sale of product revenue if there was sales tax it would also record the sales tax on it but we're not going to deal with the sales tax at this point and then also the inventory is going to go down by $30 I believe we set it up for which is the cost not showing on the invoice because we don't want to show the cost to the client and cost of good sold the expense related to the purchase will also be recorded at $30 and the impact on net income will be the sales price $60 minus $30 or 30 and the sub ledger for the customer will be impacted tracking the receivables by customer and the sub ledger for inventory will be impacted showing the units of inventory impacted as well as the dollar amount so actually a lot going on here in a perpetual inventory system when you check something out at a grocery store check register or something there's a lot going on even though the transaction is quite simple to facilitate once it's all set up so if I save it and close it just to double check that go into the balance sheet we can then run it we got accounts receivable going up by the $60 that there's that the other side is going to the income statement if I run the income statement we've got income going up at the $60 if I go back to the balance sheet we also have the inventory which should be going down so if I have the inventory going down by the $30 so it went up and then it went back down again and then if I go back to the balance sheet cost of good sold by going to the cost of good sold it was recorded at the $30 the impact on the income statement would be the increase to the income statement which was $60 minus the impact on cost of good sold which was $30 and back to the balance sheet the inventory sub ledger should track the information in the sub ledger it's back down to zero nothing's in it even though that doesn't match what's on the balance sheet because we've recorded that $160 amount not using items in a prior presentation and then of course we can track the accounts receivable if we use an accounts receivable and the next step there would be we're going to receive a payment on it but we'll talk more about that in future presentations now let's do just one more this time I'm just I'm not going to do the purchase order situation I'm just going to hit the I'm just going to hit the plus button instead of doing the the whole purchase order I'm just going to go straight to an expense form say we're just going to buy the inventory with an expense form so I'll just say expense I'm going to say once again this is going to primarica and so I'll say that is that and then let's say ten one that's fine and then the payment method I'm just going to say cash for the payment method and then down here it's trying to memorize the transaction down below so I don't want it to memorize that I'm going to trash that and I'm just going to open the item so I'm going to imagine I'm purchasing an item I'm going to make a new item now I'm just going to call it inventory item number two tab and we're just going to make the item as we go this time inventory item item two and then I'm going to say quantity on hand zero I'm going to make sure it's prior to the date that I start this thing so we'll say January of last year 22 reorder point zero inventory account I'm going to keep that description let's say the sales price is going to be 100 sales is the account that's going to be impacted when I sell it with a sales receipt or invoice cost let's say is just $50 that's what we're going to buy it for cost a good sold is the expense account when we sell it alright so if I save that then we've got our population $50 item okay so I'm going to record this expense account this is going to be decreasing the checking account the other side is going to be going to inventory and the sub ledger will be impacted by this inventory item accounting up for it by unit save and close go to my balance sheet run it and so now the checking account if I drill down on the checking account we see now we have that decrease to the checking account for the inventory asset I believe it was this one or this one and then I'm going to go back on up top the other side went into inventory so if I go into the inventory we're now up to 100 on the inventory for the item 2 and then if I go back on up top my sub ledger if I go to my sub ledger of inventory is now up by that $50 the one unit of inventory 2 that we purchased and then I need to match that to what happens on the bank feeds so if something cleared the bank feeds now I'm just going to use the bank feeds to match out this time as opposed to recording a new transaction so we're just using it as basically a bank reconciliation tool so I'm going to use this one here and I think I got the dates backwards so that's going to cause me a problem possibly but I'm going to try to find a match now once again I'm not going to record a transaction with this I'm just going to match it to the transaction I already have in place and it is allowed me to put this in even though the dates are kind of backwards but now I'm just matching it out so what is this going to do nothing really new it's helping me to reconcile it's just helping me to reconcile because I already recorded the expense account it's already recorded the inventory it's already recorded the sub ledger but this is just going to help me reconcile this is more of a full service accounting system we would need to do in that case because now we're entering the data and we're kind of checking it to what the bank is doing with the bank feeds in a similar way to what we would do in just a normal bank reconciliation so I'm going to save it and there we have applied that out but no new transaction has been entered into the system we still have the same amount you know in the inventory no new transaction has happened to the sub ledger over here or to you know the income statement okay let's just see what's happening with the trial balance now I know I kind of went out of a we went a little bit out of the system there reports on the left hand side in that we recorded some stuff building our financials not simply just from the bank statement so we kind of deviated a little bit from the from the easiest thing to do so 01, 02, 02 to run it so there's what we've constructed thus far some of these transactions like the accounts receivable has a non cash component to it such as the inventory has some transactions that can't be constructed just from the bank feeds and you would only need to do that if you're in certain kind of industries we just want to kind of point out when those might show up so we'll continue on with it in future presentations