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In our custom zero homepage going into the company file we started up in a prior presentation the bank feed file duplicating some tabs to put reports in like we do every time right click in the tab up top so we can duplicate it right click in the tab up top again and duplicating again let's go back to the tab to the middle accounting drop down open up our balance sheet report one of the major financial statement reports tab into the right accounting drop down open up the other major financial statement report the income statement changing the date range up top selecting the drop down we want 2022 starting in January ending in December of 2022 and there we have it running and updating that let's go back to the first tab now and go into where our bank feeds are located which we uploaded in a prior presentation accounting drop down located in the bank accounts and then within the bank accounts we got our bank feed up top that we connected to managing the accounts and we're going to go to the account transactions and then I'm going to go to the first tab which is the reconcile tab so we've been basically trying to as best we can construct our books from the bank feeds but now dip it into those areas where we might have a little complexity in doing that and have to come up with some other systems to work around let's go to our flow chart to see what I'm talking about this is from the QuickBooks desktop but we're just really looking at the flow of the forms which are the same for any kind of accounting system we're on the customer cycle here and we're trying to think about how we can fit the bank feeds into a customer cycle when we have an accrual concept we have to put in place meaning we do the work first and therefore has to invoice or bill the client and have to track the accounts receivable so that would be if we had the type of industry would drive whether or not we would have to do that right so if we're in an industry where we have to do that we're going to have to do that we can't just say well I'm not going to I'm just going to be on a cash based system it's like well no people aren't going to do business with you then right so we have to invoice them so that would be like an accounting firm or that could be like a law firm or landscaping we do the work we invoice the client so obviously the invoice doesn't have any cash impacted or affected from that transaction so we can't do that transaction from the bank feeds but then after the invoice has been input when we get paid we saw that it might be possible to connect the bank feeds to the invoice waiting until the payment clears the bank and then connecting it to the invoice however you can only do that if you're getting a payment that isn't the exact same amount as the amount on the invoice and you don't have kind of grouping of multiple invoices or other forms of payments together things that can muddy that up would be if there's credit card charges or a middle person in the transaction that kind of charges fees or groups the deposits like a credit card company or something like a PayPal or Stripe like that then we might not be able to connect the bank feeds to an actual invoice and if they group the payments together meaning we have multiple invoices for example or invoices and sales receipts possibly that are being grouped together by a credit card company or something like that then it's going to hit our bank account in a one lump sum of multiple uh multiple invoices right are combined together and so we're not going to be able to just match it with the bank feeds we're going to have to do the more of a full service system which means we're going to have to receive the payment now when we receive the payment uh that's when we can deposit it into the bank at that point in time however we might need another step there because we might want to set up like a clearing account because again we might have some system where the credit card company is grouping payments together in a way that we cannot easily uh grouped together on our side and therefore put it into a clearing account and then take it out of the clearing account and put it in as a deposit now if we have to do that then we're going to be reliant on the bank feeds just to match so what we want to do is make our deposit in our system the same format the same dollar amount the same grouping of money into the bank as we'll show up on the bank side which will come through the bank feeds we still need to use the bank feeds or can use the bank feeds but the bank feeds will not be recording anything here instead it will be simply helping us to reconcile which is still quite important all right so let's let's see if we can see what i'm talking about here let's pick a payment one of these deposits and kind of do our same thing where we're going to like work backwards to uh get to that deposit amount uh so let me find one first let me stop talking white look all right here we go i found one let's take this hundred and fifty here now now let's imagine that we have multiple invoices that were in play that are making up that hundred and fifty so i'll make multiple invoices and receive the payments on those invoices and you'll kind of see why hopefully we can't just tie the invoice out to here but rather we'll have to you know basically make the deposit on our end so let's imagine we're going to go backwards now i'm going to i'm going to make the invoice which normally would happen first in our time frame but now we're going to we're going to so you're imagining this happened first before that deposit right so let's say this is customer let's make another customer just to uh customer just to switch things up number three customer three i'm so creative with my names my customer names creativity is one of my uh blessings one of my strong points on making up names so then we're going to say this happened on october first let's say the the end date 17th okay that'll work whatever and then let's go down and say that we sold let's just let's just put a random description uh service service item usually we would want to have items that we're describing what we sell because that'll make things easier but that's not where our focus is right now our focus is on this grouping issue so let's say we sold something for a hundred dollars i'm not going to deal with the sales tax because again the sales tax would be we've talked about sales tax but that's not really our point of focus here no team here though what is our point of focus is that this will increase the accounts receivable by one hundred dollars and the other side will go into the sales account for a hundred dollars a uh revenue account however when it came when the deposit came through notice we didn't have a deposit for a hundred dollars we had the deposit for 150 dollars because there was a grouping of some kind of multiple deposits so let's show that let's say we're gonna approve it and add another approve it and add another and let's say this is uh uh customer number four we'll say customer number four to make a new customer and let's say this also happened in october oct one oct one and sounds like a like a username or something oct one act one oct one this is going to be sales of some kind one and this is for the 50 dollars let's say so now the two of these sales add up to the 150 this is going to increase the accounts receivable and the other side is going to go to revenue uh so let's go ahead and say approve it and let's check it out then let's check it out as soon as i get the green go ahead there it is the green has told me i can move forward so if i go into the accounts receivable into the a to the r the a accounts to the receivables the r as the pirate calls it are the our account there's the uh 50 and the 100 adding up to that 150 if i go back up and i go to my income statement now we recorded the revenue when we did the work so the revenue is already recorded even though we haven't yet got the money it went into the sales account here and if i check that out checking it out right now man checking it there it is and there it is so revenue went up movie b to the n now we're also tracking this a r because we have to collect on the accounts receivable that's the accrual component accounts receivable is an accrual account cash isn't involved with it if it was a cashed based system we wouldn't have a r but we have to have a r in certain industries because we have to track who owes us the money so if i go back to the first tab i can i can track internally in the a r with the business drop down invoices and we can then see we have these awaiting payment items these are the ones awaiting payment uh and so we can kind of track those out here we can also track it by going to our contacts and look at our customers and we can see the outstanding balances the outstanding balances these these balances are outstanding uh that's not a good thing that's not a good but what do you mean they're outstanding anyways uh so these are our outstanding deposits so then if i go back into my business drop down and then i go into my invoices i the point is that when i get a payment let's imagine that the payment processor or whatever is grouping these two together so we saw on the bank feeds it hit the bank feeds as 150 so if i tried to just match these invoices to the bank feeds i waited till i got paid on the bank fees let's go back into the bank feeds and i and i look at that 150 it's gonna be a little difficult to tie out uh these deposits to the bank feeds back to the reconcile and then let's find that 150 it's actually 150 but 150 is how you say it when you're cool that's how cool people say it so anyways here's the 150 and then so it's gonna be difficult to match it over here so if i go over here i could do it right i could go to the matching and say yeah that's gonna be this and this and then boom you're good to go you could do that but normally that's not the most efficient system because that means you're gonna have to do like a bunch of work over on on the reconcile and the reconcile should be the if you have a good accounting system reconciling should be easy and oftentimes these kind of problems are caused by intermediary systems in there like financial institutions like pay pals and stripes and there might be fees involved that kind of mess this up as well so this isn't so if you find yourself kind of having to tick off multiple things to tie out to a deposit you probably don't have the most efficient you know system you could probably do it better uh because again the bank the reconciliation process should be as easy as possible so what would probably be better than is you could say as you get paid when you when you receive the payments you can go into your business drop down invoices and zero has this nice system if i go into the awaiting payment once we receive payment to click these two off now i can click these two off and uh make a deposit of both of them now and i can deposit both of them at the same time uh for the one hundred and fifty dollars and that's great because then i can deposit it directly into the checking account and i'm showing one hundred the fifty and the one hundred detail when i check this out on the customer side but when it hits the bank it'll be there at one hundred and fifty deposit which will match easily zero will probably find it it'll it'll it'll be able to match automatically now i want to just throw one more wrinkle into this that could happen and that is that maybe there's fees that are involved maybe you have a a paypal or a stripe that's going to have fees that kind of messes up the invoice to to when you get the payment uh or uh you might have other kind of receipts that you're also receiving through the credit card company or something for for not invoiced items but sales receipt items or receive payment items if i hit the drop down receive money so in that case you're getting other deposits maybe that aren't simply from invoices that are also being grouped in or you have fees that you're dealing with then this system will still not allow you to just deposit it directly into the checking account that's when you might need a clearing account so that you can put it into the clearing account and then take it out of the clearing account and make sure you deposit into the checking account in the same format as will be seen on the bank statement so let me see let me just show you what that looks like uh if you had to you do that system and it really depends on how complex and what industry you're in usually and what payment methods you're using how are you getting paid so let's go to our bank accounts and what i'm going to do is i'm going to add another bank account but it's just going to be a clearing account i'm not going to connect it to the bank or anything so i'm just going to say add another bank account and it's going to try to connect it to the bank feeds and i'm like no uh so let's say it was bank i'm just going to choose the bank of america and i'm going to say bank of america and then it's going to be like do you want to connect to the bank and i'm just going to say no i just really wanted to set up like an account that's a clearing account but but they don't care about that so you don't have to tell them that but that's what we're doing so then we're going to say the account name is going to be cash clearing account account type i'll just call it uh other we'll say account number i'm making up a number and us dollars minor and us dollars because i'm in the us and we typically transact using the dollar as the form of transaction although inflation is destroying it and uh at the moment which is a little frustrating to savers like myself that have worked hard and put them okay that you're getting off track so so now what i'll do is i'll go back into the business and then we'll go into the invoices and go into the awaiting payment and we'll select these two and i'm going to deposit them into the clearing account so i'm going to say uh deposit actually let's do it one at a time so you can kind of see why the clearing account might be you will now keep it here so i'll deposit into the clearing account make up your mind my mind doesn't like making up it wants to change stuff all the time so we're going to say there's the 50 so this will go into our account let's choose an account and we're going to put it into the cash clearing account i should put an account number on it but the cash clearing account so it's going to go into the clearing account at 150 so if i deposit it uh it wants a reference i'll just put a d for deposit all right boom 150 so now if i go into my my balance sheet and update now we've got in the clearing account uh the cash clearing account the 150 nothing's yet in the checking account and the accounts receivable went back down so ar goes back down if i go into the a to the r r r matey we've got uh this goes back down and the 50 okay and then and so so now the ar went down and we put it into the clearing account and you could see it went into the clearing account not as 100 and 150 but just as $50 so again if if that was the only thing that you needed to do then you could have just we could have just deposited this uh directly into actually it went in here at uh one at 100 and 150 so it's in here as two separate transactions so this might still be useful here because now we're going to we're going to transfer it from the clearing account into the checking account and we're going to do that with uh with one deposit so then it'll go into the checking account as just one lump sum amount which is what we want to see because that's going to be easiest to connect to the bank feeds all right so let's go back and now i'm going to do a transfer i'm going to go back to the first tab and i'm going to imagine that i know that that 150 is now going to be grouped together when it hits the bank account right so that's what that's the system what i have to figure out now notice that if you have fees and stuff involved as well then you can also find different systems to use the clearing account to also help you to kind of figure out the fees and how you're going to deal with the fees with payment processors which is often an issue if you have like online shops like a Shopify or Amazon or something like that there are different systems you can put in place that uh that sometimes have to deal with the fees but anytime you deal with the pay pals and the and the stripes those intermediary the credit card companies fees can come into play as well and a clearing account can help you put a system to deal with the fees all right but in any case i'm going to go to the first tab and i'm just going to go to the transfer now i'm going to make a transfer now i could use a deposit form because i'm depositing into the checking account but when i use a deposit form it will actually show a deposit in the clearing account that is decreasing the clearing account which is like a cash account so that looks a little funny so but you could do that because everything is going into the the checking account but i'm going to use the transfer form because the transfer doesn't look funny on either side right because the transfer could mean a decrease to the to the cash account or an increase to the cash account so i'm going to say it's coming out of the clearing account and it's going into the checking account let's do this on uh october october two let's go uh 2022 uh october and okay and then we're going to say let's just say the seventh and it's going to be for 150 reference deposit all right let's transfer it and then if i go back to the balance sheet and update we've got the clearing account goes away because it's back down to zero checking account has the 150 in it but not two separate transactions for 150 instead having just one 150 150 right there so 150 i thought 150 meant a dollar and 50 cents fitty means 50 cents doesn't it whatever dude 150 you can say it for either 150 or a dollar and 50 cents it's 150 man okay so we're going to go into the checking account let's go back into the bank accounts and then uh drop down here let's go into the account transactions and see if the system matched it out now so i'm going to go into reconcile then look for that 150 and see if zero picked it up as a match and you can see it did now right so now zero was able to recognize zero was able to recognize the 150 you better recognize 150 that's right uh so there we have it so zero recognized it now so now so but now when i add it all it's doing is reconciling it's not going to add anything new to the uh it's not going to add anything new to the transactions so we'll just reconcile that helps us out with our bank reconciliation so nothing new happening to the financial statements here but still important to do because it helps us with that reconciliation process we still want to do bank reconciliations by the way just to make sure i would still you know process a bank wreck which they have a nice report zero does we'll look at it later uh but that's that let's let's see how our financial statements have been constructed thus far tabbing another tab open so i can open the trial balance you better recognize 150 man 150 inflation i used to be fitty i used to be just fitty but now i'm 150 because of inflate report reports okay okay focus trial balance and then we're gonna go uh there okay so so here's what we have it so we can see that this is just the balancing on top of the income statement and we're just constructing this thing as we go the income statement stopping or the balance sheet stopping at retained earnings income statement below that so that debits equal the credits is the same thing as saying that our assets equal our liabilities and our equity the income statement is part of equity because it's being squished together in this one number of uh uh the current year earnings which is the bottom line of the income statement 7609 54 7609 54 on the trial balance we're not grouping that in there into the equity which is going to eventually go into retained earnings this is the prior year equity and then the current activity is broken out in the income statement format accounts