 Zero accounting software 2023. Enter transaction purchasing equipment using bank feeds. Get ready to become an accountant hero with zero 2023. First a word from our sponsor. Well actually these are just items that we picked from the YouTube shopping affiliate program but that's actually good for you because these aren't things that we're just given to us from some large corporation which we don't even use in exchange for us selling them to you. These are things that we actually researched purchase and use ourselves. Ugg slippers. I usually walk around my home in just my socks but I wanted a high quality pair of slippers that didn't have a heel on them so I can slip them on easily give me a little bit more warmth than just my socks provide and which has a sole on them so I can deal with messes in the home such as spilled liquid or broken glass without getting my socks wet or my feet cut up and the ugg slippers do a great job with that. I like the quality of the slippers. They feel like they're going to last a long time. They will probably outlast me so I recommend the ugg slippers. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com where we have many different courses you can purchase one at a time or have a subscription model giving you access to all the courses courses which are well organized have other resources like Excel files and PDF files to download and no commercials. Here we are in our custom zero home page going into the company file we set up in a prior presentation the bank feed file duplicating some tabs to put reports in like we do every time we're going to right click on the tab up top so we can duplicate it we're going to right click on that duplicated tab and duplicate it again. Let's go back to the tab to the middle and the accounting drop down we want to go into the balance sheet report one of the major financial statement reports then we'll tab to the right accounting drop down and this time the income statement or profit and loss the other major financial statement report. I'm going to bring the range of the dates back to 2022 because that's the data input range I'm adding to the system so I'm going to hit the drop down 2022 January to December of 2022 and update our report so we have just what we've entered from the bank feeds and the prior presentations tapping to the left we have 2022 for the point in time on the balance sheet that looks good let's tab to the left again this time we want to be looking at our bank feeds so we've uploaded the bank feeds in a prior presentation in the accounting drop down if we go into our bank accounts we have our bank feed information here we'll hit the drop down up top I'm going to go into the account transactions and now we're basically in our bank feed type center we're going to go into the reconcile area as we have done in prior presentations and this time we want to imagine a situation will be a little bit different in that we still have money going out but instead of a normal kind of purchase that we're making for expenses that happen periodically for fairly regularly and therefore lend themselves to bank rule creation quite readily we are now going to be looking at the purchase of equipment which is not something that happens on as regular a basis and therefore when we think about the rules and the account we set up we got to be a little bit more mindful of it all right so I'm just going to pick a transaction and imagine that the transaction is coming from the bank feeds I'm going to go next year I'm sorry it's going to imagine that it's coming for the purchase of it's coming through the bank feeds for the purchase of equipment it's hard to talk and look for the transaction here but you know I'll just be quiet and find my transaction there's the one this is the one I want so I'm going to pick this one here so we haven't been entering any transactions on our end we've waited till things clear the bank and now we're going to be recording them on our side so we're going to basically do the same kind of thing we did last time record the transaction and think about whether or not we want to make a rule for it now let's just take a look a quick look at the difference in a flowchart this is a quick books desktop home page flowchart but we are just using it to look at the flow of transactions which is basically the same for any kind of accounting system we're looking at the outflow here now remember when the money is going out of the business we're purchasing usually services oftentimes and goods that are short term things that are expenses when we actually pay for them therefore with the bank feeds we can basically use a check form or a reduction of the bank type of form and that works perfect that's what we looked at last time with the utility bills and the telephone bills however if we're purchasing equipment then you're basically going to have to deviate from the standard accrual or cash kind of basis and do an accrual thing putting the equipment on the books as an asset now you might say why do I have to do that I'll just expense the equipment when I purchase it but if you're in the United States for example just for taxes the tax code is going to force you to deviate even if you're on a cash basis from that cash basis to an accrual basis and so you so you're going to have to do that on certain types of things so that's why equipment becomes more complicated you can see the rationale for that most clearly was something like a building if you paid a hundred thousand dollars for a building what would happen if you just expensed it when you compare january's performance on the income statement to february january would look like a very bad month if you purchased a whole building and expensed it during that month which isn't actually proper from an accrual standpoint because you're going to be using the building in the future and therefore you should allocate the cost over the useful life and so that's the same concept with other pieces of equipment that we're purchasing like a forklift or large large equipment so that means that when we're looking at this from our bank feed standpoint the the problem is we don't buy equipment all the time it's not like a regular thing that we do such as we do do with inventory or something like that if i buy inventory or i pay for my normal utility bill that happens on a fairly routine basis and the vendors are probably just providing that particular thing such as inventory or the utility the electric or something like that so it's easy to make a bank feed with but with large pieces of equipment we're usually deciding something that we need at this point in time that we haven't purchased for a long time because and once we make the purchase we're going to be using it for a long time and we might be purchasing it from the same place that we purchase say supplies from so if we just set up our bank fees to say whenever i purchase something from like a home depot and or in our case this series or whatever then then i want you to record it as an expense of supplies expense we're going to run into problems with that when we purchase large pieces of equipment we might accidentally record it as an expense when we're going to need to in reality record it as an asset in order to comply with the tax code and whatnot for that particular purchase so you might be able to think about kind of how can you set up your bank rules so there maybe there's dollar limitations to help you to determine to at least think over whether or not something should be expensed or put on the books as an asset now the other thing just to mention when you're purchasing large equipment for example you might have a loan or part of it is financed so you might be paying a down payment and finance the rest of it if that happens then clearly the only thing that you're going to see pulling through from the bank feeds uh if you're waiting till it goes through the bank feeds is going to be the dollar amount here so uh that came out of the checking account not the financing portion so you would have to then think about how you're going to be dealing with the financing portion now you can enter a transaction so that you can include uh the loan that you're putting on the books or you could try to stay on a cashed based system for example and work with an accountant to help you to shore these things up at the end of the year so if you paid any money for the equipment as long as you make sure to put it down on the books as the equipment for example and then tell your accountant at the end of the year and say hey look i'm trying to stay in a cashed based system there was a loan kind of transaction that took place here i've just record the payments to the loan to the loan account but you need to shore up the transaction with regards to the purchase of the equipment and put the loan on the books for the proper amount and make the adjustment for short-term and long-term loan if you need to as well as break out the interest so so again if if you're working with an accountant and you're trying to automate everything you might be able to come up with a system where you basically can kind of automate everything when even when you hit some of these more complicated complicated areas if you're able to yourself or work with an accountant that knows the system that you're doing and can make the proper adjusting entries to shore up those things that make it difficult to automate the bank feeds all right so i'm going to copy this and just say this is going to be the name and choose what it's for i'm going to expand this down here let's add the details so i can add a new account when i choose what it's for so here it is the date's going to be good reference we're not buying inventory so no item so this is good now on the account we're going to need to add an account and this time it's not going to be an expense account we're going to put it on the books as an asset type of account so i'm going to add so where the the assets should be up top i'll just say like one two maybe so i'll say add number i'm trying to think of the code one two one zero let's see i think that will be open and then the account type is going to be a fixed asset so it's a fixed asset type of account i'm going to call it equipment equipment and that looks good that's all we need so i'll save that and that looks good now before i save now i'm going to look at the rule related to it so now that we have an account added hit the drop down and i'm going to create a rule for it we need some rules around here so any conditions match and notice that if you're going to try to set up a condition where you want the dollar amount to be over a certain dollar amount in in order to to make it a a fixed asset which is kind of an arbitrary thing because really something that should be a fixed asset if you're going to be using it for multiple periods into the future however there is kind of a materialities threshold where you're like well i'm if i bought a year's worth of paper clips even though i'm going to use or five years worth of paper clips i might just expense them because the dollar amount is small so really i you might have a dollar amount kind of involved and say hey look if i'm looking at a rule if it's over a certain dollar amount that's when you might put it in the books as a fixed asset as opposed to say supplies for example if that was the case we might go to all conditions here and say we're going to look at not the payee i'm going to look at the any text field just like we normally do any text field if it contains and i'm going to put part of the name and that's all i need all that other junk uh if it just has that i should be good and i have another condition where maybe i put an amount uh and if i say the amount is over if it's greater than let's say uh one thousand then possibly we put it in the books as a fixed asset if it's less than one thousand maybe you put it in the books as supplies and that can at least help you to to see the dollar amount or for example if you bought multiple things from this place like if it was an amazon or an office depot or a home depot and most of the time what you purchase you categorize as supplies but sometimes you might be purchasing fixed assets from that same location you might set a dollar amount for your normal transactions that are below everything that's below one thousand dollars you put into supplies and then you might leave that as your only rule and that rule then would not be applying if the amount was over a thousand dollars so that you can kind of give a more of a double check to make sure that you are categorizing uh uh the proper amounts for fixed assets or you can make two rules right you can make one rule saying it's the same vendor if it's under a thousand dollars i just want you to put it to supplies and if it's over a thousand dollars like we have it here we want you to put it to equipment right that's the general idea all right uh set the the contact uh existing contact i'm going to say it's going to be that series series we set it up last time i'll create it here hopefully i didn't put in there twice and then down below we're going to say the account is going to be the equipment account that we just set up equipment so there it is and then i'll set this to reference checking account so there we have it so i'm going to save that and the rule should be applying now so there's the rule applying my voice is going this is not good this is not good don't go voice don't go so i'm going to add this this will record the transaction and it will reconcile the transaction so we'll go ahead and say let's say okay and check it out so if i go to the balance sheet then we update the balance sheet and if i go into the the i got a little thrown off there because zero actually does the proper thing here which some software doesn't do like this like a for example uh a quick books doesn't normally do this it pulled the checking account down here into the liability why because the checking account is overdrawn so it's actually properly recorded now as a liability because it's overdrawn because we haven't yet put the beginning balance into the checking account so so that's actually again another thing that that zero does uh more properly actually than than some other softwares uh like the major competitors like uh like quickbooks online for example so if i go into this there's the money out the spend money form if we go back on up the other side did not go to the income statement but rather uh hold on i went too far back i just want to go back to the balance sheet the balance sheet all right the other side went into the equipment here so it went into the equipment with the money out form a fixed asset type of account and if i go to the tab to the right nothing happened to the income statement so that's going to be you know the point of the fixed assets now when we get into the fixed assets just realize that when the next question is well when do i get an expense from it and when i say get an expense i'm often thinking from a tax standpoint because if you're in the united states you can have to do your income taxes and when you do that you're going to say well i want to i would like to just expense the entire thing to lower my net income and pay less taxes but we have to do it in the form of depreciation there might be accelerated depreciation for the tax software and whatnot but that's the that's the general idea we have to depreciate it so because of that uh in the united states we often don't really have the sub ledgers within the accounting software to record the depreciation because we're going to have to give it to the accountant to do depreciation on a tax basis anyways using other software such as tax software now then the question is do you want to keep your books on a tax depreciation schedule or do you want to have it on the book depreciation you have to do tax depreciation for taxes but you it's not the best depreciation schedules to use for accounting purposes typically so you could use the tax software then to run depreciation schedules on both a tax basis for taxes and a book basis for your books so you want to kind of keep that system in mind because the sub ledger being in another software means that you want to set up your accounts here if that's how you're doing it you want to set up your accounts to line up to the account categories that will be on the sub ledger schedules created from the tax software so that's what you want to keep in mind when you're adding your equipment account your fixed assets what what are the asset classes and you might want to talk to your accountant about this on the tax software so that I can match them and mirror them over here so that when I do my adjusting entries for depreciation it will be as easy as possible also note that when you deal with your taxes what do you have to do with regards to the depreciation you're going to have to give your tax preparer at least yearly in order to facilitate the depreciation schedules the additions and subtractions to the the fixed asset type of accounts so you could give that to them with this like general ledger right here you can give the tax preparer this at the end of the year there shouldn't be too much going on because you don't purchase a lot of stuff and remove a lot of stuff during the year because equipment is stuff you don't purchase on all the time you only purchase it periodically however you want to make sure that you give as much detail to your tax preparer as possible so that when they put it on their books they they do a good job of being able to identify the exact pieces of equipment they're putting on their books in other words if this 2082 represented three forklifts or something like that then you don't want your tax preparer putting it on the depreciation schedule as just equipment that would be way too generic you don't even want them to put it on the books as three forklifts because that's too that's still too generic and you want them to put it on the books as three separate forklifts and be able to identify those three forklifts with basically an identification number if possible or some description so that you can actually locate them from the schedule to physical reality why is that the case well it won't be a problem if they shortcut when you first put the thing on the books for taxes I can put 2082 and just call it generic equipment not a problem for this year however if I sell the forklift five years from now it's going to cause a problem if the tax preparer put it on the book as one lump sum and just called it equipment because now I don't know where the forklift is that I sold and I can't figure out my depreciation schedule so so make sure you're working with a tax preparer that is is doing a good job identifying the the actual pieces of equipment on the sub ledgers because it will make things easier in the future all right so that's the general idea let's open up a trial balance I'm going to right click on the tab to the right just to open up a trial balance so we'll open up the trustee trial balance over here going to the accounting drop down reports reports and then I'll type in trial balance to open up the trial balance just to see it being built kind of as we go so we'll open that up and this is for December 2000 so now you just got the balance sheet on top of the income statement there's our checking account they still put the checking account up top for for this one because I think it's ordered by the check numbers even though it's a liability because it's overdrawn at this time there's our equipment and then the income statement accounts of utilities and the telephone account the debits and credits mean the double entry accounting system it is in balance when I convert that to an accounting equation we can see on the balance sheet the assets of 2082 uh equal the liabilities and equity that's really the same thing uh that the the debits and credits is this in balance is the same thing is saying the assets equal liabilities in the equity how does the income statement fit into this the income statement is part of equity it's the breakout of equity of the 101 51 that you can see here these two items in the trial balance which is the income statement income minus expenses which we just have expenses of the 101.51