 QuickBooks Desktop 2024, customer prepayment, purchase order, bill, invoice, and receive payment forms. Get ready and some coffee because we're locking into some non-stop QuickBooks Desktop 2024. First, a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers, they don't want to be seen with us. But, but that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our crunchy numbers is my cardio product line. Now, I'm not saying that subscribing to this channel, crunchy numbers with us, will make you thin, fit, and healthy or anything. However, it does seem like it worked for her. Just saying. So, you know, subscribe, hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. We are in QuickBooks Desktop sample company file. We set up in a prior presentation using the enterprise version of the QuickBooks Desktop software so we can practice using the unearned revenue new feature within it. Under the view tab, we've got the hide icon bar selected, the open windows selected, open windows open on the left hand side. Under the company dropdown, we have the home page open going into the reports so we can open the major financial statement reports. Like we do every time, company and financial looking at that balance sheet standard report. Let's customize the report, change that range from 010127 tab, 123127 tab, fonts and numbers changing the font to bring it up to 14. Is that okay? Yes, okay then. Then we're going to go to the reports dropdown again, company and financial. This time the P, the L, the profit loss, the income statement, change the range. This time from 010127 to let's go to 06327. And then I want to see this one on a month by month breakout, month by month. And then customize the reports, fonts and numbers changing the font up to 14. And okay, yes and okay. So that's the setup process we do every time. We've been running the multiple scenarios here, the standard scenario in January. Then we did a couple scenarios with a negative AR February and March or March through May. And now we're running our new scenario here in June. Let's recap what we did thus far. Home tab, we're looking at a situation where we're selling a large product. In our case a surfboard, a psychedelic surfboard because it's got a crazy airbrush on it. And we want to then, we made an estimate for it. So we're imagining the customer came in, wanted the surfboard, we made the estimate. And then we made a sales order which basically locks in the estimate that has been made. And then we asked for a deposit because we're going to go up here and order the custom surfboard. And we want to make sure this guy's locked into the sale. And then we jumped over and received a payment skipping as the arrows are saying here the invoice. So usually when we do that under the old method that would make a negative AR, which would be okay from an internal reporting standpoint or bookkeeping standpoint, but for external reporting purposes causes a problem because it should be a positive liability. And so the new method QuickBooks allows us to make a positive liability. Check that out. Balance sheet, instead of making a negative accounts receivable over here, it made another account down below and we called it customer deposit. There is our $50. When I look at the sub ledger reports under the reports dropdown, if I go to the receivables, we now have two of them we need to track. We're going to go to the customer balance detail. This tracks the accounts receivable. Let's customize it. Let's make the fonts and numbers. Let's just bring it up to 12. Let's not get crazy with the 14. Yes. And okay, it's not here yet because it's under the, it's a liability. So we have another report now a sub ledger for the customers and receivables. And this is going to be the open, what did we call it? Open pre-payments. There that is. Let's customize this report. Fonts and numbers change the font up to 12 as well. And okay, okay, okay. Then if I go into my customers dropdown, the customer center. This is where our customers are hanging. They're hanging out over here. So there is our customer. We could see that we made an estimate. We had the sales order and then we got that payment. We should now be able to apply that payment to the invoice, which is what's going to happen next on the customer side. But before we do that, we have to actually buy the product. So we're going to go over here and say, we don't have it yet because it was a custom order. We made a sales order. Now we want to make a purchase order from the sales order so that we can then go to our vendor and purchase the product. All right. So let's do that. Let's go back into the customer detail. I think the easiest way to do that would be from the customer center. We go into the sales order. And then I'm just going to say make a bill, a purchase order from it. So create a purchase order. So we're going to the purchasing side and it says create the purchase order for all allowed items. That's what we want. Pull the whole thing in there. There's just one thing. And then this is going to be, what did we call it? Customer prepayment vendor, which is a funny name for a vendor. But I'm just trying to say everything has that name so that we can tie it to this scenario that we're running out. This is going to be 06, let's say 0427, tab, tab, tab, tab. This is another internal document. Not going to record anything. It's only for $100 because that's the cost of the surfboard, not the sales price, which was $175 and no sales tax is being applied here because we're going to apply the tax on the sales side internal documents that we could track in Excel. This is just going to be the PO or purchase order, no financial transaction happening. We track that internally. So I'm just going to save it and close it. Where do we track it internally? Closing this out. We track it not in the customer center, but in the vendor center. So we go to the vendor dropdown, vendor center. We can see it somewhere because I should have named the vendor's name with a 4 so I could have seen it easier. What did I call it? Customer prepayment. So I should have put a 4. That's what I was doing before. But that's okay. Here's the open purchase order. And then the next thing would be we would have a bill that when we receive the surfboard. So let's do that. I'm going to double click on this and we would then we could say create a sales receipt. I'm just going to go directly to a bill. I'm going to close this out home page and let's say now we're going to receive the inventory with a bill. So we got a box with a surfboard and it's got a psychedelic air breath that was ordered for and we want the and it's got a bill with it. So this is going to be the customer, the vendor. What did I call it? I call the vendor customer prepayment vendor. And then it says there's an open purchase order. Do we want to add that? I'm paraphrasing. I'm going to say yes we do. I would like to do that. Quick books. Thank you for working asking. This is going to be 06. Let's make it 0727 tab, tab, tab. There's the $100 and there's the item down below. Now what's going to what's this going to do? It's a bill and therefore it's going to increase the accounts payable. That's what bills do. It's going to increase the sub ledger for this vendor and the other side is going to go to inventory for the surfboard putting it on the books for 100 and tracking the sub ledger for inventory. I don't need to make it billable because I don't want to pull this into the invoice. We will create an invoice because I'm going to turn around and sell this to the customer. But we're going to create the invoice from the sales order in our case. So if I record that in a journal entry format over here, I could say let's do it with a journal entry. What's going to happen? We're going to say the inventory is going to say equals the inventory is going up and the other side is going to be equal to the accounts payable. That's it. And it should be over here. I'm going to copy that and put that over here. I have to cut it and put it over here. And then I got a format paint this down here. Sorry about that. And this is going to be a bill type form for $100. One hundo, negative one hundo inventory up top. Let's record it. Inventory is going to go up by the one hundo. And then the liability accounts payable is going to go up. Both of those accounts have a sub ledger to them. Inventory, we need to track it by units of items typically and accounts payable. We need to track who we owe by the vendor. Notice nothing is happening down here for the cost of goods sold at this time because we're using a perpetual inventory system. So I'm going to go back on over. Let's check that on this side. I have to make it smaller so I can see the button to complete the transaction. So I'm going to save it and close it, save it and close it. And then back up to full super sized. And then we're going to go on over to the balance sheet to see what happened. What happened? We're going to say that the inventory went up. The inventory went up. There I said it because I said I was going to say it. We're going to say the inventory went up. The inventory went up. There. I do what I say I'm going to do. So there it is. $100 bill inventory goes up. The other side went to the AP accounts payable. So there's the accounts payable double clicking on it. It's going up. It's going up. We can see if we had the sub ledger for the vendor vendor. We could see the AP vendor balance detail. We can see the bill here if I find that customer because I should have numbered it. There it is. That's the same as normal. So nothing really new with because we're really the new thing has happened on the customer side, not the vendor side. We can also see that of course in the vendor center. So now we've got the bill and we would have to pay the bill later. But we're not going to do that right now because that's not our point of focus. We're on the customer side. So now if I go back to the homepage, we now have made the estimate sales order. We've got a down payment and then we use that possibly to help us purchase the custom surfboard, which we now have because it shipped to us. Now we're going to create an invoice and we're going to apply that $50 to it. And then the remaining balance will still be due. So we're going to say, all right, this is the critical moment here because we have to apply that credit out. So if I go into the customer center, now I can see over here, it looks nice from the bookkeeping side because I can see that $50. And I can see that I would apply that to the invoice just like we did with the negative accounts receivable method. So let's go ahead. I could go into the sales order and say, let's make an invoice from it. Now I'm going to create the invoice from the sales order. And I'm going to say, make a, oh, no way. Yeah, that's right. Make the invoice and then create the invoice for all. Yes. And that's what I want to do. So then I'll tab it through. This is going to be 0609. Let's say 27 tab, tab, tab, tab, tab, tab, tab. And so now the invoice pulls in and we're charging 175. We bought it for 100. Sales tax is going to be charged for 1356. What's this going to do when we actually record it? It's actually kind of complicated. The invoice is going to cause accounts receivable to go up by the 188.56. The other side is going to be revenue 175. The amount that we charge the different sales tax 1356 is going to be going to a liability account and inventory is going to be going down by $100, which is not on the reports. But is driven by the item and cost of goods sold is going to go up by $100. The effect on net income will be the sales price 175 minus the cost of goods sold $100. And the sub ledger for accounts receivable will be impacted for customers as well as the sub ledger for inventory tracking the items. So actually a lot going on here. And so we're going to say, let's check that out in a journal entry format. And let's check that out from a journal entry format. That's what I'm going to say. That's what I said. So we're going to say that this is going to be accounts receivable is going to go up. Wait, let's do it this way. This is going to be an invoice. And then a to the R is going up accounts receivable for the sales for the sale. And then the sales is going to go up or income. And that's going to be for 175. And then we're also going to say that there's going to be sales tax payable sales tax payable, which they're charging us apparently 0.0775. So this should be a negative because it's a credit that should be equal to this times 0.0075. No, too many zeros. So 1313 and negative sum for the plug here is going to be then that means we're going to charge 188 13188. 188 hold on 0.0775 sales tax 0.0775 188 56. Is that right? Okay. Good thing I checked. All right. And then we're also going to have then the cost of goods sold for the $100. That's the cost of the inventory. And we're going to have the inventories going down by the unit of inventory that we sold. So let's record all that starting with this one. I'll make it green so we can see what in the world is happening around here. Let's actually make it full screen so it's so I can put more stuff here. So I'm going to go then to the AR up top R and this is going to be equal to the 188 56. So accounts receivable first time it's impacted as opposed to the other method, which would already have that negative 50 in it. And then the income is happening here. 175 is going up in the credit direction. And then the sales are going to be, I'm sorry, the sales tax is going to be here. That's a liability. So there we have that. And then our cost of goods sold is going to go up. So that's an expense. It's going up in the debit direction. So the effect on net income is 175 minus 75. And then the inventory, which was at 100, because this is the only thing we recorded in it, is now going back down by the hundo. And so there we have it. All right, let's go back on over and see if that is what happens over here. Let's save it and close it and then we'll check it out. Save it and close it. This customer has available credits. I should have applied the credits first, but if I don't do that, notice what it does here. It says, do you want to apply the credit out? Would you like to apply the credit? I'm going to say yes. Now it's pulling in this credit in a similar fashion as we saw when we had the negative receivable. So the process looks much the same from an internal bookkeeping standpoint. Once you apply any available prepayment credits to this invoice, you won't be able to make any changes. Now that, well, so that's okay. We could delete the invoice possibly if we had to and then do it again that way possibly. But we're going to say, okay. And so then it recorded it. If I go back into that invoice, you can see now it applied that $50 payment. Now the other way we could have done that is we could have said apply the credit up top before we said save and close. And I believe we could have applied the credit in the same fashion as we did before. So similar process as the negative receivable, but now it's properly tying out to that under and revenue account. So this is the 138.56 that is still owed at this point. Notice up top, I'm at 188.56 because I need to do another step here. What's the next step I need to do? I also need to say as I recorded this invoice, I'm going to reduce the customer deposit needs to go down. Customer deposit needs to go down, man. You need to go down. You're going down customer deposit. And then the other side is going to go into the accounts receivable for the $50. And so now I'm going to say, all right, customer deposit goes down. I'm going to double click on it. It's going to go down with a debit. Boom. So it's back down to zero. And so we're back at the normal. And then this one AR is going to go down. And so now it's at 138.56. So there's our 138.56 on the invoice. This $50 is just a reporting thing. It doesn't change the actual transaction we saw with the invoice that would be recorded for the invoice. So I'm going to save it and close it. So in other words, if I look at the transaction that was recorded, balance sheet, we're going to say that what happened, the accounts receivable goes up by that 188.56. The full amount of the invoice. Notice it's not going up by only the 138.56. It's going up by the full amount. This is just an informational thing down here because that 50 has already been recorded. So I'm going to close that out. The other side is going to the P and L profit and loss. And so there's the 175 that got recorded there. That looks good. The sales tax payable back on the balance sheet. Back to balance sheet is going to the sales tax payable right there. And so there we have that invoice here. And then we have the inventory side of things. Inventory is going down, dude. Dishes are done, dude. Inventory. What are you talking about with dishes? I don't know. It's got a lot of Ds. So it sounds cool. Dishes are done, dude. Whatever. So then we've got the inventory went down. Closing that out. And then on the profit and loss, we've got the 100 costs of goods sold down here. You can see the impact on net income 175 minus 100. It's the same as the other scenarios. This one, we didn't complete that scenario because it was a subscription model and we're back to the same point that we were at with the equivalent model, which was like the second one that we did here. And then on the balance sheet, if we look at our accounts receivable sub ledger on the customer center, no, not in the customer balance detail. Notice in here, all I have is an invoice and then we have this journal entry. Now that's a new thing, right? Because we had to have this journal entry to pull in the fact that we had the owner and revenue. So that's just like basically this journal entry that I made down here. Now notice, so that's another thing that's kind of weird because usually, and it's something that again, it's not as nice as the negative receivable from a bookkeeping standpoint, although not a customer center. Now I've got these two journal entries down here. That's kind of weird. It's kind of ugly. It's kind of messy because in the last one, when I did it this way with a negative receivable, I don't have that, right? So from an internal bookkeeping standpoint, it's kind of ugly to see these journal entries, but it's not the biggest deal. Also, if I go to my list dropdown and I go to my chart of accounts and I look at my inactive accounts here, they have an account for prepayment transfer. So this is, they made it inactive so you don't post stuff to it accidentally, but we still have this added account and these journal entries which give potential for people to mess things up, right? Now you could also say, well, why do they even use this account? Because you would think that you could just do this journal entry, right? It should just be a debit to the liability, customer deposit, lowering it and then a credit to the accounts payable. What did they do instead? They made this clearing account and then took it in and out of this clearing account. So right here's the customer deposit on this side and then the receivables, but it's going in and out of this new account which is a clearing account. So they kind of added another step. I'm not exactly why they did that because you would think they could have done it with one journal entry that looks like this without that added clearing account, but these are tricky accounts here because the accounts receivable has that sub ledger which QuickBooks usually kind of nicely actually restricts you from posting to a lot of times and of course the other account that they added that we added should only be used, this customer deposit account should only be used for this process. So maybe for whatever reason then to restrict the transactions to those two accounts they had to make this clearing account. So that's the added level of complication. It's pretty easy from a bookkeeping standpoint but we've seen that the added level of complication is that of course we need another account. You're going to have to have the liability account down here. That adds a level of complication and potential for people to mess things up and then when we take it out of unearned revenue and apply it to the accounts receivable that's another journal entry which is another step and then within that journal entry they actually add a clearing account which shouldn't cause a problem but it's another potential area where problems could be caused and when you look at the internal bookkeeping system then you have these two extra transactions because there were two journal entries instead of just one if they could have just done it with one journal entry now there's two journal entries which is kind of ugly but you know not a big deal because you're like okay I see what's happening those two are just netting out against each other that's a quick books thing and from my side on the bookkeeping side I would just basically say okay I'm going to ignore those as just part of the process basically but it's not quite as clean as this process over here now then of course the final step would be that if we go back into the home page that we would receive the payment receive the balance that is still due so I can go back on to the customer's center here and say now we have the invoice let's open the invoice and let's say that we're going to receive payment from it let's go into the is that the right invoice hold on a second am I in the right place I should be in this one so I'm into this invoice and then I'm going to say receive payments and it opens up the receive payment notice it's not a prepayment this time so it looks like the prepayment form we used before but it's not because we didn't make it from the purchase order and so there's no prepayment thing here so it's just a normal payment it populates the amount that's still due not on the prepayment but on the invoice now we have it normally what it looks like normally it has an invoice down here and it normally populates the whole amount of the invoice that is still due the whole amount of the invoice was for 188.56 but we already collected as a prepayment $50 of it so this is going to let's say this is as of 06 let's say 15.27 what's this going to do well it's a customer prepayment or a customer payment which normally decreases the accounts receivable then it will this time the other side is going to go into a cash account in our case under revenue let's check it let's make a journal entry for that I'm going to I can't see my format painter let's just try to copy this down because I don't want to show my ribbon up top let's go boom and then I'll delete this and then I'll say this is going to be received payment what's going to happen in essence cash is going up and the other side is going to bring down the A to the R for the amount is still left which is the full amount was 188.56 minus the $50 deposit in essence the 138.56 still there negative of that cash double clicking the cash plus cash is going up to 188.56 and the AR would go back down at this point A to the R going back down and there we have it so now our cash has been collected let's check that out on this side to see it I have to make the screen a little smaller so I'll bring it down bring it down to 125 so I can just see the button save it and close it and then I'll bring it back up to supersized supersized I have to I like to have it supersized but then I have to unsupercise it in order to tie my shoes otherwise I can't see my feet when I'm supersized I can't see my feet and I can't tie my shoes but otherwise supersized okay what was I doing so then if I go to my balance sheet then I'm going to say that the unearned revenue here has now going up with the prepayment looks good the other side is going into the accounts receivable accounts receivable so that looks good and then if I go to my customer balance detail you can see what is in here so now we've got the invoice that was then tied out to the prepayment which looks like a journal entry because that's what was pulled in from from the unearned revenue type of account and then the other side so it looks pretty good in here but it's probably not quite as clear as the other method where you can see kind of the payment you can see it as a payment here but not bad the journal entry is a little messy but and then if you go into the customer center then again you can see the whole process pretty clearly and it looks almost the same as the negative AR process almost the exact same process here from an internal bookkeeping standpoint but you just got that added messier thing of these two accounts that are journal entries and you have some added potential for causing havoc with another clearing account and another account for the liability account and another kind of phantom transaction here that is happening so those are some of the pros and cons