 QuickBooks Online 2024. Bank feed deposit entered as income for cash based business. Get ready and some coffee because bookkeeping is sublime with QuickBooks Online 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 that's okay whatever because our merchandise is better than their stupid stuff anyways. Like our crunching numbers is my cardio product line. Now, I'm not saying that subscribing to this channel crunching numbers with us will make you thin, fit and healthy or anything. However, it does seem like it worked for her. Just saying. So, 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. Here we are in our QuickBooks Online bank feed practice file we set up in a prior presentation. Opening the major financial statement reports as we do every time the reports on the left hand side. In the favorites we're going to be right clicking on that balance sheet to open a link in a new tab. Right clicking the profit and loss to open a link in a new tab. Once again for the trustee TB that being the trial balance open the link in a new. If you don't have that trial balance in the favorites you can find and search for it. Tapping to the right closing the hamburger and let's change the range to the first two months of two thousand twenty four oh one oh one two four tab. Oh two twenty nine two four tab drop down let's see it side by side for the months run it and then we'll tab to the right repeating the process those ranges. They are changing oh one oh one two four tab oh two twenty nine two four tab drop down. And months and run it to refresh it again tapping to the right one more time and those times times they are changing man the times they are changing. It's pretty scary to tell you the truth oh two twenty nine two four what is going on with the times they're changing crazily anyways we'll run it to refresh it. Let's tab back to the balance sheet. Now we're going to imagine the deposit side of things much of what we've done thus far. We've been thinking about the decreases to the checking account first thinking about the most easy type of decreases which are the circular items that happen on a periodic basis such as paying the utility bills. For example the decreases for many businesses is often where businesses can really take advantage of using the bank fees and possibly automate the system. Given the fact that they're usually going to be more in a cash based system not using for example accounts payable to pay their bills which is going to be the accrual component. On the deposit side however you have less. A lot of small businesses might not have the ability to be fully on a cash based system and fully automate their system with the help and use of the bank feeds but rather try to integrate the bank feeds into their accounting process. Let's take a look at a flow chart just to get an idea what I mean this is a desktop flow chart but we're using it for online purposes because we just want to see the flow of the forms and how the bank feeds would fit into it. So you'll recall we've been looking at like the vendor cycle or the expenses cycle where money is going out at the end of the cycle. Many businesses can automate that process by recording these transactions when they clear the bank by utilizing electronic transfers and then just recording expense forms as they clear the bank. That's what we've been doing thus far on the revenue side of things. Then the cycle at the end of the cycle or at some point within the cycle we expect money to be going into the business deposits are going to be happening at some point for goods and services that we provide to customers. So let's think about the easiest method that that could happen and then to the more complex methods and how bank feeds will fit into there. The easiest kind of system would be one where you have like gig work. You're getting paid by YouTube. You're getting paid by some platform. You do some kind of service work and they just pay you. In that case you could possibly wait till it clears the bank with the help and the use of the bank feeds and then record a deposit form that will have the other side going to income. Cash goes up. Revenue is going to be the other side. Now there are some complications sometimes when you have online businesses and you're getting paid by platforms because sometimes they want to pay you through other kind of intermediary financial institutions rather than going directly to your bank such as you might have to use PayPal or like a stripe or many other kinds of intermediary financial kind of tools in order to get the deposit to ultimately be going into your checking account. And so we might talk a little bit about that here and possibly more in future presentations. But this is where our focus will be this time the easiest process. Then however you could still have a cash based system but one where you're at a cash register or something like that. In which case you typically you could still wait until something clears the bank. You could make all your sales for the day and then go to the bank and deposit that money into the bank account and then when it clears the bank you can record it as revenue. However, if you do that you're going to lose possibly some internal controls which many businesses that are at like a food truck or a restaurant or something like that or store would like to have which is generally tying out the receipts that you have have generated from the cash register possibly to the money that's in the cash drawer before you make the deposit into the checking account. And you also might have to track other forms of payments such as credit card payments for example and the credit card will will throw a wrench into the system as well because they're going to group the payments in a certain fashion. So again you'd kind of like to be able to check the credit card payments to the money that's going to be deposited on the credit card side of things. So usually you can have a clearing account in that system where you're going to put it into the clearing account and then make the deposit on your side which then will be matched by the bank deposit using the bank feeds as a double check in that kind of system. And then you might have a system where you have to invoice the client. If you have to invoice the client then you've introduced an accrual concept altogether of accounts receivable needing to track accounts receivable. And because there's no cash involved at that point you're going to have to do something outside of the bank feeds recording revenue with the invoice and then receiving the payment and then making the deposit. We'll talk about these transactions later. Right now let's focus on the easy one where you're just saying I worked at YouTube or some other platform I'm going to get paid and just record it as income when I see the deposit. Now first thing to just realize with this the deposit form is not designed for recording income generally meaning that QuickBooks designed the sales receipt form and the invoices to be the forms used to record income. And so if you use the deposit form which is typically the form you will use if you wait till something clears the bank you might lose a little bit of detail in terms of sub ledger accounts that could give you more detail about the income statement income line items. In other words if I go back on over here if I go into my profit and loss notice our income line items up top are typically going to be broken out by you know what we do. So usually we have basic income line items here which are just sales of product and services and then all of the detail of the types of products and services that we provide. I'm not typically put on the income statement. I'm not going to list every type of thing we sell or type of service we provide. We're going to have very general categories on the income statement. Part of the reason for that is that you can have subsidiary accounts or subsidiary reports which could then give you the more detail breaking out income by customer who you sold the income to or income by item what you actually sold. But you can only do that typically in QuickBooks if you're using the sales forms which are invoices and sales receipts. Otherwise you're not going to have that breakout of the detail because the deposit form is not generally designed to create those sub ledger reports. So there's kind of a trade off. However with regards to like if you have YouTube income then you don't really need those sub ledger reports what's going to happen there is you'll probably deviate from the general rule. And instead of creating an income account that just says like this is my my my ad revenue income or my content creation income and then put all the different platforms you put your content on or whatever. That gives you revenue. You're probably just going to call it YouTube income or Google income or whatever. And you will include the name of in essence the customer in that case in part because that just makes sense because all your money is going from this one vendor in that case. Instead of a bunch of different customers. Number one and number two because you can't get the sub ledgers in this case because you're waiting till something clears the bank and therefore you're not going to have capacity to get to the sub ledgers. Okay. So let's go to the first tab and take a look at it. We'll go into the transactions and I'm going to close up the handbookie and I'll scroll down and say let's look at the increases now. I'm going to hit the drop down and say money in. So money in. Wait that's money out. Money in. We're going to say boom. So so for example if you if you sell stuff on Amazon or if you have Amazon income possibly by like Amazon Prime income or something like that selling stuff on Amazon could of course add another level of complexity because then you have inventory involved. We have another whole another course or section on that if you want to take a look at that in more detail. But if you're just getting like like revenue from from you're selling other people stuff and you're getting revenue from that or you put in your your your your media on the Amazon media platform then there's multiple places you can get paid by Amazon. And so it would possibly look similar to like a YouTube. If you add YouTube then of course you might get paid by a YouTube other platforms similar to YouTube you might be trying to generate revenue to again hopefully it would come to your bank if it goes directly into the bank then you would see who it came from. Now in some cases however if you do this kind of work this like gig work then you're going to have an intermediary that you need to facilitate the transaction traditionally like that was was PayPal PayPal was a was a primary tool often used by businesses to try to get the revenue. That for some reason they couldn't just deposit directly into the bank. So I had to go through PayPal. Another one is Stripe that you might be using if you have an online store or something like that then you might need a stripe as well in those instances in order to facilitate the payments. Now so so let's look at the easy one first if I got money that just goes into my account from YouTube directly into my checking account. I'm going to see it as a deposit. I can go into it and just say that I'm going to say this is going to be YouTube I'll copy the the name from the memo and say boom and then it's going to be revenue. I have the two I'll say save. Now instead of putting it into service revenue I'm going to create a very specific category of revenue just called YouTube revenue at this time because because of the type of industry I'm in. It's going to be an income account and I'm going to say other primary income. I'm just going to say YouTube income right and then I'm going to not put it a subcategory. We could put a subcategory if we wanted to have like content creation for example and then maybe you put YouTube and other platforms as a subcategory of it. But I'm just going to put it directly into YouTube income and then if we wanted class tracking we now have the class tracking field and then we could create a rule for that and automate this process. So I'm just going to call it YouTube. It's a money in rule will say for all bank accounts and then the condition. I only need one condition typically because it shouldn't be confusing although it's possible you have different kind of things coming in from YouTube YouTube where you might try to try to apply to different sources if they break out different types of revenue that are coming from YouTube. But I'm just going to put it all into YouTube income. I like to use the bank description because it's a little bit more detailed contains not exact as long as it has YouTube. I'm not going to put Google after it. I'm just going to say YouTube and then test it. And those two are being applied. That looks good. What's it going to do if it sees that rule to be applied. It's going to be a deposit form. So so deposit versus transfer. We have YouTube income as the category pay is YouTube. No tags. We're not going to be adding any classes and we I'm not going to turn on the auto confirm although we could do that after we have checked them out a few times. I'm going to say OK. Boom. And then so there's the YouTube income. It now has the rule being applied to it. And let's do the January one first. I'm going to add it and that will move it from for review to categorized and within the categorized we have the YouTube income. So did it in here somewhere. Don't. Hold on. I didn't add it correctly. Let's go back back to the first tab and I'm going into January and then I'm going to say down here confirm they move that button around a few times. So there it is. Now it should be in here. So we're going to say YouTube income should now be included. I still don't see it. Oh there it is. OK it's there has a rule applied to it. That's good. All right. Let's go to the balance sheet. Run it and now we should have our checking account going up. It's still in a negative balance but it should be going up now. So that's good. And so now we have the YouTube income. So there it is right there. If I go into it it's now created a deposit form. That's the form typically used for increases. That's the default form you want to use. So normally you don't want to use like a transfer form unless you have a transfer between two bank accounts. That's usually when you would use it. So there is that. And then if I go to the other side on the profit and loss. Now we have a category that we have included as YouTube income. So that would be the most straightforward type of in of transaction that you can have nice and easy. And we can apply a rule to it nice and easy. I can go to the first tab now and I could go into my plus button. And if I wanted to track it in terms of the customer center I can go to the sales and in all sales we could search here by the transaction. And actually we can't because it was a deposit. So remember the deposit isn't exactly isn't actually a transaction for sale. So here's one of the downsides with it. If I go to the customers for example and I look at YouTube then I don't actually even see the deposit in here which is kind of annoying. It would be nice if the activity would be in here. But that's because in the customer center the sales documents that are typically going to be used are going to be the sales receipt which is here the invoice and the sales receipt. That's what's supposed to happen. We enter these two in for an accrual invoice for cash basis a sales receipt and then and that's what should show up in the customer center. So that's kind of it. So you just have to deal with that. Not not a big deal. It's probably still worth it to do it that way in a very simple system because that'll be the easy thing to do. But if I go to the reports the other thing that we don't have as much detail on. If I close up the hand boogie and I go down to the sales sales and customers. And if we look over here we have sales by class sales by customer. So if I open up the sales by customer. You would think that we would get a report that supports the income line 0 1 0 1 2 4 2 0 2 29 2 4. And in this case it only shows the invoices right. It doesn't show the deposit. So it doesn't give me the the income for the YouTube income because we don't have we don't even though we added a customer to it. It's not the form that will typically be used to create those sub ledgers. Again probably not a problem for us but it's just something to note that you're kind of sacrificing a little bit of added detail by using this really simplified method. Let's go back to the first tab and go open the hand boogie back in the transactions closing the hand boogie. And so so then Amazon would be the same type of thing that we could add. If Amazon is going directly into your checking account then you can add that directly. Let's go ahead and just do it. We'll say if we had Amazon income I could just say this is Amazon media. Let's say boom adding it's going to be that's all we need. And this one I'm going to say add an account. It's going to be an income account. And then we will call it other primary income Amazon media income. And that's it. Save it. We can create a rule for it. And we would simply call it Amazon media most likely money in rule all conditions. I like to use the bank text and then contains Amazon media testing the rule two of them have been found. It's going to be a deposit. This is the category or account Amazon media the payee or customer no tags no class not going to be auto applied. So we're going to say OK. And then Amazon media we have the rules I can add one and say confirm Roger that. And then if I go up to the balance sheet that's going to be increasing the checking account of course the other side go into the profit and loss that we can see here for Amazon media 430 if I drill down on it. It's going to be a deposit form that was created if I go to the deposit form. It doesn't take me back to the to the to the bank fees but rather to a deposit form. So I'm going to close this out. I go back and then there's our profit losses go back to the first tab again. So I could add the other ones I probably should but notice if you have a cash like if you waited till something cleared the bank. And you're at a cash register situation then you could you know do that like you could wait till everything clears the bank and record it as cash. If you use that that method then for example I could go into here and say I'm just going to be at a cash register or whatever sell my goods. And then at the end of the day I'll collect cash I will deposit it into the bank and then I'll wait till it clears the bank and just record it as revenue once I receive it. Well if that's the case who's going to be the customer I'm just going to make a generic customer. So this will be my sales customer and we'll just say for our cash sales I'm just going to make a generic customer because I'm not going to record all the customers because I'm just selling at you know whatever my hot dog stand right so I don't I don't have a customer sales. I don't get the name of every customer right and then I'm going to say this is going to be income. Let's make this other primary income and this let's say this is going to be our cash register sales if that was the type of business. And then I'd say OK and then all all deposits that are are like that we could then record and make a rule for it. Although if that was your business type you need to be careful because if you put more money into the business then it's going to be difficult to distinguish from from customer deposits because all your deposits are just going to be cash right going into the business. So so you just need to be careful doing that. So I might not even make a rule in that case just to double check all my deposits. I'll just add them individually each night since I don't have really a customer to tie it out to. So maybe I'll just confirm that and then go to my balance sheet and then of course the the checking account would go up and then on the profit and loss then we can record our cash register sales just waiting until they clear the bank. Now the issue with that cash register sale thing just note that if you're selling actual inventory and the United States you might be subject to sales tax which is a state and local tax rather than a federal tax which could make it a little bit more difficult to do that because the general process for sales tax if you're using the full QuickBooks system would be to go into the taxes tab down here and then go into the sales tax you'd have to turn on your sales tax and then you'd have to go into your items in the sales tab and the products and services and determine which items are subject to taxes and then you'd have to make sales with the sales forms invoices and sales receipts not deposits so that these forms can help you to record the sales tax into an accounts payable account which you can then pay according to the sales tax widget thing down here. However you could do a workaround and not use the widget right you might just say okay I'm just going to make all of my sales including sales tax when I sell it so I'm just going to tell people hey look the sales tax is included in the sales price record everything to sales when I record it and then when I have to pay the sales tax I can do a calculation to figure out what's the sales tax that's going to be owed based on my taxable income and then I can make an adjustment. We might talk about that more later but I just want to mention that now because that'll be a wrinkle if you have to deal with sales tax taxes are always wrinkly they always make wrinkles they always mess things up. So let's go back to the first tab and then we're going to go into the transactions again close up the hand boogie. Now then you have this thing with like if you got money through a PayPal for example or Stripe. Now let's imagine that you had your YouTube or whatever and then that's the only income you had for your small business and you had to for some reason pay it through Stripe which means Stripe is now an intermediary or a PayPal. PayPal would be an intermediary that would then receive it and then you would get it from Stripe or PayPal transferring it from Stripe or PayPal to your account. Stripe would do it automatically PayPal you'd have to actually physically do it more like a checking account. Well then the question is do I want to go to this intermediary and get the detail because by the time it hits my account you can see all I have here are the Stripe income. I can only see the financial intermediary I can't see the actual customer that gave it to Stripe is that important. That's the question right because because then the question is well if it was all coming from YouTube then it doesn't really matter. I know that everything that's coming in from Stripe is from YouTube or if this was my website if all my money that's coming from Stripe is from the website then maybe I don't need all the detail of all the customers that paid me on the website for whatever reason because that information is on the website so all I need to do is just add it as income because I know the income is my website income or something like that or you might be getting multiple places paying you meaning multiple different platforms that you want to break out in that case you might have to come up with a system to pull the information from the financial intermediary to make sure that you're categorizing it to the right account and you could find apps to do that and so on if your financial intermediary is PayPal we might talk about PayPal more later but PayPal has an app and or you can connect the PayPal like a bank feed because PayPal is acting more and more like a checking account so you can treat PayPal as a checking account if you wanted to the easiest thing to do is if you're just using PayPal to collect money and then deposit into your checking account you might not need to do that you might say I'm not going to do that why would I do that I'll just transfer from PayPal into my checking account because I'm just using PayPal to collect revenue and I know where the revenue is coming from so I don't need another bank feed which will make the process actually more complex but if you're using PayPal to pay things out and you have multiple things paying you through PayPal then you might want to add it with the app or with the bank feeds okay so just to get an idea like if we went to the strike payment here I might I might say that it's a strike payment so I might just call it that as my a strike transfer as my name even though I know it's not actually from Stripe because that's a financial institution and then I'm going to say the category here I'm going to add a new income and imagine it's going into an income account it's going to be a primary income sale of other primary income let's say and let's say it comes from my website so website sales income for whatever I sell on my website I just know that the Stripe account is tied to my website and that's the only thing it's tied to then I could say okay save that I can make a rule for it create a rule it's going to be the Stripe money in rule and then all I would need is I like the bank text which contains Stripe transfer I don't need anything beyond that and note that sometimes you might have a situation where you could have a difference right between income of of multiple places so let's just kind of play with that right now see this this one right here has a slightly different memo so like a lot of times like Amazon for example you might have Amazon media versus Amazon it has some other characters to it for other things that you're doing with Amazon and you could use those to make more complex rules so I might be able to distinguish these two things if they were for different things so I might say this was this was my website income income and this is going to be transfer and I'm going to be ST dash F 90 and then that's all I need on the rule if I test it test it it doesn't pick up any of them okay I copied the full name down here Stripe transfer I copied this and I put the full thing in here so now if I test the rule it's only given me two of those stripe transfers rather than all three of them because the information that was in that text area I want to distinguish to tell me it's going to go to two different accounts so if I was to save that now I can now I can create a rule that applied to just these two versus these two and maybe I want these two to go to a different account because it's income from another platform which I can somehow identify because of the bank text which sometimes is the case and to do that note that you have to see the bank text so you want to make sure in your cog up top that you have the bank detail to the memo so that it shows not just what QuickBooks thinks is relevant to create the vendor or customer but also gives you all that added information okay so I'm going to say let's go ahead and just add one of those you know it's going to here and say confirm and you can see it moves it of course to the categorized and we have rules that we have been creating so within the rules now we've got our stripe transfer rule for example if I wanted to edit it I could edit it this is why you really want to make your own rules because then you know what the rules are and you could go in and adjust them and refine them if you need to if you're kind of just using the memorized transactions that QuickBooks will make suggestions from then it's a much more loose system which might be easy at the beginning but it could start to be more difficult later on so you want to make it nice and good at the beginning to make it as easy as possible later on right so I'm going to say okay let's in the balance sheet we have another deposit and then let's just go to the profit and loss and we can see in the profit and loss we have another income and so this was the website income and if I go into that then we have our transfer that went through Stripe but I'm just going to assume that Stripe all came from my website that's the intermediary I needed for that alright so next time we'll talk about more complex systems here's our flow chart where possibly we're at a cash register and how it's going to work there and then possibly if we have to deal with invoicing clients how do the bank feeds fit in that kind of system because it's not going to be as automated based on simply the bank feeds let's go to the trial balance that's not the trial balance you're not the trial balance let's run it this is where we stand if your numbers tie out to these numbers great if not it might be a date range issue you could change the date range and see if they then tie out and if not you can drill down or if you need to change the date you can drill down to the source documents and change the date if you need to