 QuickBooks Online 2023. Short-term investment sales and recording gains on sale. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Get Great Guitars practice file. We started 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 two open at the same time, we suggest using the Incognito window or another browser. You can open Incognito by selecting the three dots. If you're using Google Chrome in the browser, select Incognito window type into the search engine QuickBooks Online Test Drive. We're going to use the sample company to compare the accounting view, the view Get Great Guitars file is in, and the business view, the view the sample company is in. If you want to change between the two views, select the cog up top and switch the view down below. Opening a couple tabs to put reports in like we do every time, right click to duplicate the tab, duplicate it, and then duplicate the process. Again, duplicate. And then we'll go back to the tab in the middle, reports on the left hand side. We're going to open up one of the faves, the balance sheet report. As that's thinking, I'm going to just see what 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. Where do we go on the business view? By the way, the reports are in the business overview tab and then the reports tab. That's where they are. And then we'll tab to the right, open up the reports again. This time we want the P and the L, the profit and the loss. We're going to close up the hand boogie, scroll up and change the range. Let's go from 010123 to 022823. And then I'm going to do the month by month comparison, compare the months and then run it. So now we got January, we got Feb and Feb only has some activity thus far with the interest and then the total year to date, January and Feb. So let's go to the tab to the left, close up the boogie. This time I'm just going to go from 010123 to 022823 and keep it at that and run it. And that's the setup process that we do every time. Now we're going to be focusing in on this short-term investment account. So first I want to just give a recap of how we put that on the books and when you might have a short-term investment account on your business books versus your personal books. So I'm going to close up the assets here and then the liabilities. When we first started the company file, if it was a new business, oftentimes we're going to need assets to help us to generate revenue in the future. Those assets will generally be things like property plants and equipment. In our case, it might be the building where we're going to do our shop and it might be the inventory that we're going to have to purchase because we're going to need to sell the inventory in order to generate the revenue. So if you haven't had any revenue in the past because you're starting the business or you're expanding it, then you're going to need the capital to start the business. Where's that going to come from? Either it's coming from you, the owner, so you could put money from yourself into the business, the owners into the business and investment or we can get a loan. So that's what we did. We took out a loan and we put some money from us into the business and then we bought property, plant and equipment and investment hoping that that will help us generate revenue in the future as well as inventory. Now we also had some revenue or cash left over and this is where the key comes in with the business here because I think a lot of people get a little bit confused separating the business from the personal books. Meaning on the business side of things, this business isn't here in order to generate revenue from returns on stocks and bonds. It's here to generate revenue from our business of get great guitars. So any assets we have in the business, even cash, we have that in there in order to cover current costs as well as possibly invest into the future in property, plants and equipment and inventory to help us generate revenue that we're going to get a return on. If we have assets in here that we think we don't need because we generated revenue and we have cash and we have no plans of putting it back into the business, buying more property, plants and equipment for example or inventory in the future, then we don't usually want to keep it in the business. We would then take it out of the business, give it to the individual. The individual will then generally use it to invest in stocks and bonds or wherever else they would want to go. That's the general idea. Now it gets a little bit complicated when you have retirement plans in the business and so on and so forth, but that's the general concept. So from the business perspective, if we had cash that we think we're going to use in the future, but we're holding on to it now, we're going to buy property, plants and equipment shortly, but we're holding on to it. That's when we might then put some of it into like a short-term investment typically and we have a short-term investment here. Now there's different rules for generally accepted accounting principles on how you account for an investment, if it's going to be short-term or mid or long-term. I'm not going to get into details with that, I'm just going to give kind of the overview concepts here. So that's when we would have our short-term investment on the books because now I'm still going to use that cash in the future fairly soon you would think and then buy property, plant and equipment with it. Now if this was your personal books or you had a business that if obviously if you had a business that was in business for financial investments, investments in stocks and bonds, then you would be tracking investments in stocks and bonds in order to generate revenue from the stocks and bonds, but our business is not that it's a guitar shop like most businesses aren't investment businesses. Now on your personal side of things you can also use QuickBooks for your personal investments and in that case you would be tracking of course your stocks and your bond accounts in QuickBooks and it works quite well to do that. The goal is just different for your personal than from the business. On the business you're trying to use your assets to generate revenue in the future that's you're trying to get a return on your assets from the business. On the personal side of things your overarching goal is to live well or something like that, right? So because you're going to have expenses for vacations and stuff that have nothing to do with generating revenue so it's a but the double entry accounting system works in a similar fashion. So that means then the question is well if I have the short-term investments on the books how am I going to break them out? Let's first just do a quick look if it was a personal thing if it was on the personal side of things you might want to group your short-term investment accounts into say your financial institutions like Vanguard versus an e-trade versus your bank or whatever if you have multiple places versus your 401k in your business or that you're employed at or something like that and then you can adjust these periodically when you get the statements which might be at the end of the month or year instead of trying to put every individual stock that you hold or even every individual mutual fund in here because you're going to get too much detail in QuickBooks. Remember that QuickBooks is not here to track the day-to-day transactions of your investments. There's other software that can do that oftentimes the websites themselves are the place to kind of track that day-to-day activity if you're trying to make quick changes in terms of your stock positions on a day-to-day trading basis but you want to be careful with that too as well and you have other software like a personal capital I think is one and quicken I think is another that can give you the ending balances your balance sheets information from the financial institutions you know as as the market changes but QuickBooks is not designed to do that you could link to the banks and link to financial institutions but QuickBooks doesn't want to give us the ending balance on the balance sheet they want to give us the activity so that we can create not only the balance sheet but also the income statement so the point is it's kind of cheating to just take the ending balance and it's not just cheating it's not going to help you out from a bookkeeping standpoint although it'll give you a nice snapshot of where you stand so you might use these different softwares in alignment you might have a QuickBooks you might have a personal capital that can help you to to see where you stand in a snapshot kind of format so and also then you might want to break out your your investments that are in that are in not under the umbrella of an IRA or a retirement account in short term and then you might put long-term assets as those that are under the umbrella of a 401k or an IRA or a 403b those that you can't get into very easily so that you can see your liquid cash versus the cash that you can't really reach so those are some concepts on the personal side on the business side we have similar kind of things if i put if i put the short term investments on the books again i'm probably going to try to put it in here at one lump some investment in whatever the financial institution i have it in might have actually multiple investments meaning i might be in a mutual fund with multiple investments or i might have multiple mutual funds so i could break it out stocks versus bonds or just have one lump sum here that i changed periodically then i'm going to get interest or dividends on the investments if that interest and dividends goes directly into my checking account then i'm going to see them coming through the bank feeds and i might record them just simply with the bank feeds as they hit the checking account to income so that means i would have income and i could go over here and i could i could then just have them increase income now normally if i was to increase income from an investments then i would put it down at the bottom not in income up top because it's not part of my normal operations this business isn't there to generate interest and dividend income but if we get dividend and interest income that would be great i'm going to reflect it at the bottom just to show my net income before this other investment income would be the general idea now it's also possible for you to roll over your dividend income and invest it back in which you would like to then make a journal entry once in a while to put it back into back into your investment in that case so you have to record the the dividend and interest and then increase your investment account meaning it would be a journal entry in essence increasing the investment the amount that you're investing the other side going to dividend and interest income now the other issue we have is that the investment account could go up or down in value due to the market not due to dividends and interest so it's just going to go up and down in value the stock price for example now now if we took the cost like usually when that when we think about like a building down here for fixed assets when a building goes up and down generally accepted accounting principles in the united states usually says well we're not going to go with the fluctuations of the increases and decreases in the market value of the building in part because we don't know what the market value is right there's other arguments than that but a building is unique until you sell it you don't really know what the cost is and people can manipulate the value of their books by having higher or lower appraisals on a building but if you're talking about stocks and bonds that are publicly traded on a public exchange then you can still have an argument that the fluctuations are not you know valid or whatever because you haven't realized them however you pretty well know what the value of your stock is because other stocks are trading for that same amount therefore there's a good argument to to record your stocks and bonds if they're trading on a market at market value so then but then the question is logistically how do i do that if i get a if i get a report saying that my stocks went up let's say by by five hundred dollars or something like that then how am i going to record that i can increase this account by five hundred dollars or possibly i make another sub account which shows the unrealized gain of five hundred dollars so i try to track it separately under the parent sub account another method you can use and the other side the two methods you could use is you could put the other side to equity the argument being that you haven't yet realized it so i'm just gonna have the other side go to equity and not hit the income statement but that's confusing to most people so most people i would suggest then are going to report it on the income statement not as income again but down here at as other income down at the bottom and just call it unrealized gains or losses so those are the those are the kind of the issues just want to touch on them we're gonna imagine that we're gonna sell our investment so let's imagine that we just sell it we could just wait till it sells so i put it on the books at at uh 12 000 that's the cost i'm gonna wait till we just sell it so later on we're just gonna say okay i'm gonna sell it for whatever i can now and imagine that we got when we sold it uh 12 250 so if i got 12 250 and i bought it for 12 000 it went up by 250 so what am i going to do the cash account has to go up with a deposit form let's say by the by the 12 250 this needs to go down to zero by 12 000 and the other side needs to go on the income statement now this is another transaction that we don't expect to happen all the time so if i go to the first tab and i hit like the plus button there's not really a form that's directly related to recording the changes and the value of an investment right because it's not a day-to-day transaction it's like an adjusting entry so then the question i would usually go through is is cash affected in this case it is cash is going up so i would use a deposit form if cash wasn't affected and you were just recording say a gain to the value of the stock you can then and you were just saying increase to the stock value the other sides go into unrealized gain then you would have to use a journal entry which you could enter a journal entry by using the registers meaning you could go into the chart of accounts on the left hand side and the accounting and you could then go into the chart of accounts close up the boogie and by the way if you're in the business view by the way the chart of accounts under the bookkeeping under the bookkeeping and then the chart of accounts right there and then you have to hit that thing in the sample thing to see it okay and then you could go into the chart of accounts and you could go into the investment account and use the register and then and then enter a journal entry you know basically this way and the register so we're going to go into a deposit so i'm going to hit the plus deposit form my throat's a little messed up here that's okay i have coffee coffee fixes fixes stuff so i'm going to say this is from 0202 22 not 22 23 23 we're working in now get up to date man you're living in the past this is going to be short term i'm going to say deposit form this is going to be short-term investment has to go down so we might want to put a description but i'm not going to put one here probably would be good and i'm just going to put the amount of 12 000 and then the other side i'm going to have to make an account for it's going to be gains on sale of investment so i probably don't have an account in here for that most likely in in the myriad of accounts that they gave me so i'm just going to make a new one i'm going to add it i'm going to make it not an income account but rather an other income other income so it'll be at the bottom of the income statement and then you got dividends other interest i'll just call it other investment income and then i'm going to call it other income no i'm going to call it gains on sale of investment something like maybe an s investments no description i'll keep it there save it and close it what's this going to do increase the checking account because it's a deposit by the full amount or hold on a sec i need a dollar amount here don't get ahead of you're getting ahead of yourself so it's going to increase the checking account by the 12 250 the other side's going to decrease short-term investment down to zero and the gains then will be on the income statement of 250 at the bottom of the income statement that's what should happen let's see if that's what does happen so let's record it go back to the tab to the right run it go into the checking we're going to check out the checking once again we're always checking out the checking there's the deposit right there the checking is so interesting that's why we check it out all the time and then the other side is on uh the the loan went down or the investments down to zero because we no longer have it we cashed it in to buy more stuff because we're going to make more money uh selling guitars than we ever would from the dividends and interest we're going to be billionaires with our business and then on the tab to the right i'm going to run it again and then down below we've got then the interest and the gains are down here so notice now we why would we do that because i could have put the gain up here but we don't typically do that because that's not part of our normal operations and we haven't realized the gain so we're going to say hey look this is the gains from actual operations that we can count on in the future and then these are gains from investments stuff that we don't isn't really part of our business but we just put some money in the investments and we got a gain so we put it down here don't expect that to happen again in the future that's not part of our business model or anything but hey we'll take it if it comes and so that's that's how it works so we might show you how to move this one down there too at a later point because sometimes some businesses might want to do that so i'm going to right click on the tab up top and let's see where we stand on the trustee trial balance so let's go to the reports down below and i'll just open close the boogie type in trial balance the balance is once again on trial and then i'm going to make from 010123 to 022823 and i'm going to run it month by month so you can see the beginning balances for jan and feb jan and feb so we are of course at the end of feb and so you can check out those numbers if they tie out great if not change the range try to expand it and if they still don't match we'll do a transaction detail report at the end of the second month the data input which will help us drill down on any differences