 QuickBooks Online 2024, account and setting, expenses, payments, time and advanced tab. Get ready and relax because it's so easy using QuickBooks Online, you'd think it'd be a crime. But it's not, so let's get into it. 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 works 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 Here we are in our Get Great Guitars 2024 QuickBooks Online sample company file. We set up in a prior presentation remembering the major goals of the bookkeeper or accountant is number one, the creation of the financial statements, balance sheet income statement and related reports. Number two, facilitating the transactions as smoothly and quickly as possible as we communicate with those we do business with, including customers, vendors and employees. The locations that we go to in order to meet those goals include once the system is already set up, entering forms. Forms are in the new button broken out by cycle, customer cycle or revenue cycle, vendor cycle or payable cycle, employee cycle or payroll cycle. And as we then track that information, we go into what I would call the centers, the sales center or revenue center, customer center, the expense center or vendor center and the payroll center or employee center as we communicate with the customers, vendors and employees. In order to first set up the foundational items, however, we go into the items up in the cog. Generally, these being the basically foundations that we have to set up. This is what we are doing now, including the company settings and then we'll go into the lists. So we're going to continue on with the account and settings. Obviously, once these are set up, they should be good to go and you don't have to keep adjusting them. So now we're going to go down to the expenses. So last time we did the company, we did the usage, we did the QuickBooks checking, the sales area. We're going to go through the expenses, payments, time and advance. So we got a lot to cover here. Let's go into the expenses, switch sections. I'm going to say okay. And we have the bill and expenses. If I go into that, show items taxable on expense and purchase forms. We can see ads, a product service table on the expense and purchase forms. So you can itemize products and services. So that is going to be what we would typically want to do because when we purchase items, we could either be just assigning them to an expense account or we might be purchasing inventory items. So let me show you what that means. When we buy things, we're on the vendor side. We can buy things with expense check or bill form typically. Most of these will look similar to each other. If I go into the expense form, if I was to purchase something like a service from the telephone company or something like that, I would normally simply assign it to an account down below. However, if I'm buying inventory, then I might want to assign it to an item. Even if I don't have inventory, there could be some even like service items. Sometimes you might have an item down here. The items if tracking inventory will give you the added benefit of being able to track the inventory if you're tracking it on a perpetual inventory system. Now, if you're never doing that, maybe you take this out so you don't you're not tracking the you don't have that items area, but it's not really in the way. Do you want to leave without saying I'm going to say yes, and that's on by default. So I typically would keep that on by default all the time, even if I'm dealing with a service type of business, but you could possibly think about turning that off. It's on by default. Show tags field on the expense and purchase forms. That tags is going to be that special thing, kind of like class tracking and location tracking. We have another course or section on tags. If you want to get into that in more detail, I'll leave it on by default, but we're not going to be working with it too much in this section. They leave it on by default, I think because QuickBooks is proud of their tags and they want to try to promote people to use the tags. So track expenses and items by customer. So adds a customer column on the expense and purchase forms so you can track expenses and items by customer. Note that normally when you're thinking about expenses, you don't track them by customer, you track them by vendor because you're paying the vendor. If you're paying the telephone company, you don't really have a customer to track for it. But possibly if you have a job cost system of some kind or something like that, you might want a customer field because you're tying out some of your expenses possibly to the purchases that are made for a particular customer. So that might be more in a job cost system. We have make expenses and items billable. So adds a billable column on expenses and purchase forms so you can add billable expenses and items on sales forms. So billable will mean that you're going to be pulling over the expenses to an invoice. We'll talk more about this in the future. Let's take a look at an example. If I went into the expense form before I changed the setting, you can see down here you don't have anything for a customer because it's an expense form. We're dealing with the vendors up top and we don't have any check mark by default to make it billable. If you turn on the billable item, let's go up top to the cog and account and settings and then I'm going to make it billable switching it and we'll go into here and say boom billable. So we'll get into these settings in a second but let's say I just turned that on save it. So turn on expense and items billable. So then it also automatically turned on the customers because you're going to need a customer to assign the billable item to. So I'm going to say all right save it done plus and we'll go into the expenses. And so now down here you can see that we have let's close this out a billable item down here and the customer field. I'm going to leave that on by default. So we turned that on. We're not going to spend a lot of time on this billable thing but we'll touch on it and when we do I'll look at that setting again. If you don't use it at all you might just want to turn this off because it could kind of it's just going to add more detail into your data input screen that you do not need. That's why it's off by default but we're going to turn it on and we'll touch in on it. What will happen is if you assign a specific expense such as supplies make it billable to a customer then you can turn around and create an invoice and it will pull in the expense to the invoice or we'll be able to tie those two things in. So it's a way for you to kind of track in a job cost system. So I'm going to hit the drop down account and settings. Let's go back to our expenses. I'm going to say okay. And then now we have this billable item on this one. Mark up with a default rate. So in other words let's say that we bought supplies and then we want to pull those supplies into the invoice. Well what if I don't want to pull it in at cost I want to mark it up then you can have a percent markup here. So the other way you might do that is you might make your invoice and then show your client what the cost was to you and then mark it up yourself on the invoice with another line item. But this is one way that you can mark it up. Track billable expenses is the items as income. So this is kind of an issue. I won't read it here but this is kind of an issue when they first used this setting because if you make something billable and you pull it into the invoice there's not actually an item that has tied out to it. And the items the inventory items and service items are the things that usually assign it to the proper account. So the issue is when you use the billable thing it's going to pull in but it doesn't know what account to go to. Before it used to go to the same expense account when you invoiced them meaning it decreased the expense account which isn't what you want. You want it to go into an income account. So this is good because it still goes into an income account. This way if you have this ticked off we'll talk more about this later. I won't get into it in too much detail now but that's the idea of it. It's still a bit of an issue however because you might want it to go to a particular income account and you can't really adjust the income account it goes to because you're not using the items. It's pulling in through this billable thing. So we'll talk more about that later. So in a single account or you could have multiple accounts. So add a use for billable expense checkbox to an account's edit screen in the chart of accounts. So I'll keep this as the default. We'll talk more about that later. Charge sales tax. So that means if it's going to be billable and then you pull it into the invoice is it going to have tax applied to it or not. So you could check that out. So default bill payment terms notice on the invoice we have the terms of 30 you know 15 30 10 I think it was the terms on the bill are not as useful because when you enter a bill the terms have been defined by the person who gave you the bill. Right. So if I enter a bill into the system I'm probably going to have to manually put in the due date because because I'm not the one that gets to determine what the terms are. The person who gave me the bill are the ones that are going to tell me when it's due typically. So that means so this field is not as useful. That's why it's blank here. So purchase orders purchase orders you could turn off the purchase orders because the purchase orders are a request for inventory. Small businesses do not have the power oftentimes even if dealing with inventory to request inventory. For example if you purchased something as an individual from an online store you have to pay for it when you purchase it. So that means you've already kind of claimed the inventory you are you've already paid for it. But with a purchase order you're requesting they ship you the inventory before you pay for it. So you would only use that then if you have the ability to order inventory. So you would only have purchase orders if you have inventory number one and number two if you have the ability to request the inventory before you pay for it. If not you could turn off the purchase orders altogether. And then you have the custom fields here custom transaction numbers so you could have your own transaction numbers if you want otherwise the purchase numbers are automatically assigned kind of like a check number. And then if you want a message on the purchase order you can add a message to the purchase order. This is an external report that will be going to vendors so you could do some customization possibly on purchase orders. And then we have the messages. So default email sent with purchase orders. So usually if you're requesting inventory oftentimes it's done by email these days. If you attach the purchase order to the email you might also want the message on the email. Here's the default message. Dear name the name is going to be pulled in from the information that's in your vendor section. Purchase order from our company name please find our purchase order attached to this email. So that's just going to be the email link and then you'll have the purchase order attached if you want it to look different then you can change it. Email me a copy. Do you want a copy every time you sent out a purchase order? If you do a lot of purchase orders it will clog up your inbox but possibly if you don't have a lot then that might be useful. You could CC it which means you send it to some other email in the CC screen. You could be CC it meaning you still send it to someone else but the vendor will not be able to see that you sent it to somebody else. Then let's go to the payments. So we have the QuickBooks payments get paid more ways fast. So take credit cards or bank transact transfers account payments through QuickBooks email invoices and mobile QuickBooks automatically updates when you're paid. So we have all these different payment options. This would once again be something that you might need to basically set up and account with QuickBooks basically as kind of like a checking account allowing you to have these payment options through that system. So I think we have a whole another course or section that dives into that in more detail if you wanted to look into that. You don't have to do that because you could still use whatever checking account that you have and use the bank feeds to pull that information in and that works pretty good. So existing account if you already have a payments account within to it you may know you may know it as go payment or merchant services. So then you can connect to that. So in my opinion you know the best thing about that payments account might be your communication with the people that pay you because the people that pay you it would be nice to send an email that they can easily link to an automatic transfer payment of whatever system that would be easiest for them to pay with. Right. And so if they could pay if you could tell them you can pay me whatever way you want pay me with PayPal pay me with an email pay me with an electronic I mean pay me with an electronic transfer pay me with a credit card you would like to give them all the options that you can to facilitate the payment from them because if they can pay you in their preferred way they might be more likely to pay you. However, you also want to make the transaction as cheap as possible too because that's going to because the payment format could could add up if there's a cost to it. All right. Let's go to the time general so so first day first day of the work week is Sunday. So so notice you could change the first day of the work week to something other than Sunday but it will keep it on the default as Sunday. The timesheet show service field. So when entering timesheets let's you specify services performed. Now note that you're only going to be entering time in a timesheet if you're using that feature either for payroll or because you have a job cost type of system that you're entering time into the timesheet within QuickBooks so that you can then turn around and bill based on that time. If you're billing based on time that you're entering into QuickBooks then you might want to to show the services that were performed which possibly could then pull over to the invoice allow time to be billable. So this is similar to what we saw with the with the expenses we might enter time not for payroll purposes per se but possibly so that we can bill the client for it. So if it's billable that means I've entered the time I'm going to assign a charge to it and then pull that over into an invoice. We'll touch on that in a future presentation. We'll leave it on by default. Show billing rate to users entering the time. So if you bill customers a different hourly rate then you pay your employees and subcontractors you may want to leave this blank. In other words if you have a job cost system as is the case in a CPA firm often types or law firm you might gather people's time sheets that work for you and then you pay them based on one rate or possibly you pay them salary but you bill based on a different rate which will typically be higher because you're trying to make a profit from them. So you might not want to show that rate to the people that are entering the time if your employees are entering the time you might not want to show them what your billable rate is that you're pulling into the invoice. Let's go to the advanced area in the accounting section. We've got the first month of the fiscal year. So this gets a little bit confusing because oftentimes when you think about the fiscal year a fiscal year end you think about it where it ends in December but they're telling us where it starts in January. So note that a calendar year is from January to December. A fiscal year is some 12 month period that is going to be your business year. Oftentimes it's the same as the calendar year which would be January to December which means that it's going to default to the calendar year being the fiscal year starting in January. If you have something other than the calendar year as your fiscal year then you will change it. Just make sure that you're picking up the starting date not the ending date. So first month of income tax year is the same as the fiscal year or it might be January. In other words you want to make sure when you're setting up your company file that you have your fiscal year that might be different than the tax year. So sometimes you have to look at the tax law to see what that would be. So it might be the case that you have something other than January as your fiscal year but possibly you still need to have January as your taxable year for tax preparation. So then we have the accounting method. So accounting method we have accrual versus a cash method system. Now typically you're going to keep this on the accrual and I want to stress that unless you talk to an accountant or something and they're telling you that you should switch this to a cash method you don't switch it to a cash method you keep it accrual. Now that doesn't mean that your bookkeeping might not basically be on a cash based system. I'm jumping over to a flow chart to kind of explain why that might be the case because some people have problems with this and they think that they want to have an easy cash based system so they want to toggle that to the cash based system. Even though that's on accrual you might still have an easy cash based system. It's just that both the cash based system and the accrual system will be recording at the same time given the fact of the type of industry you're in. In other words let's say you have a gig work type of system and you just get paid by YouTube and you're going to wait till it goes through the bank account and you're just going to record revenue with the bank feeds. That would be a really easy system. That would be a cash based system in essence because you're going to wait till you have the deposit form which means you got the money in order to record the revenue. However, if you keep it on an accrual based system there will be no difference in the recording because whether you're on an accrual based system or cash based system your simple process of just recording with a deposit form will record revenue at the same point in time. If on the other hand you have a more complex system such as you're entering invoices if you're entering an invoice you are doing an accrual thing because you're going to have to track the accounts receivable. If you toggle the system over to a cash based system then you have a timing difference and it's going to basically not record revenue when you made the invoice but rather when you deposit when you get paid on the received payment. Now you don't normally want to do that because if you're entering an invoice that means that you want to track the accounts receivable. You have to track the accounts receivable to collect on it. So note that what you want to do is use the best system according to your entity which might be a simple system which is a cash based system but the accrual based system would just be the same. Both systems would recognize revenue at the same time because you have a simple process and then let yourself be on an accrual based system if the forms you are using dictate that you should be on an accrual based system because if you do something that is accrual based like enter an invoice or process payroll and you turned off the accrual to cash then it's going to mess you up because you're not going to be able to track possibly the accounts receivable. So that's my general argument on that one. Keep it on the accrual unless you have some specific reason why you'd want to change it. Also note that when you go to the reports you could toggle them back and forth from cash to accrual basis on the reports area as well. So then we have the closing of the books. So if you toggle off the closing of the books you have the closing date and then the ability to do something after that. So notice that once an accounting period is over particularly the end of the year but possibly monthly as well you want to not record things in the prior period unless you have really thought about it. So for example after the end of 2023 once you make the tax return and issue the financial statements you have finalized 2023 because now you've reported that to the external users like the IRS. So what you don't want to do then is have someone go back and delete transactions or void checks or something like that in 2023 because it's already been closed. What will happen if you do that is that it'll mess up the retained earnings because 2023 has closed out to the balance sheet account of retained earnings. Your beginning balance and retained earnings will not be correct. So for example if you had a check that you wrote in 2023 that was on the tax return it was a deduction in 2023. If the check doesn't clear then the thought is well it didn't clear I didn't really pay that money so I need to void the check. So I void it but if it voids it in 2023 then you've already got the deduction. So what are you going to do? Are you going to amend the tax return in 2023? No, what you want to do is recognize it reverse it in 2024. So that's how you need to take that's how you have to adjust it. So you have to be very careful about adjusting something in the prior period. And so you might close out the prior period and then only allow changes after viewing a warning meaning it'll give you a warning before you do something or you're going to have to enter a password before you before you do something. So you might want to close this close things out every year at least and give yourself a password or at least a warning or possibly if someone else is using the software then force that they need a password so that they can't mess up the prior year. Okay, so company type so we entered the company type when we started the company file which is the sole proprietorship for us company the type of entity would be a sole proprietorship a partnership or a corporation noting that these don't have a big impact on the setup of your accounts because they don't really change the general ledger now QuickBooks does have this tax account kind of setting however I've not seen it work smoothly in that we have a system that you can just pull in the financial statements convert them to a tax basis and then pull them into the tax software because TurboTax owns some tax software out there like if you could just pull it into TurboTax or something like that that would be great but I haven't seen that work well yet right what's going to have to happen is you actually generate a financial statement balance sheet and income statement and then do the data input of at least the income statement into the tax software. So therefore you want to get the right entity but it might not have as big an impact on your data input as you as you might think but a sole proprietorship reports a schedule C on their tax return in the United States a partnership has a separate 1065 you would think that your difficult problem with the partnership is tracking the equity accounts to properly allocate the net income of the partnership so you would think the equity accounts wouldn't be called retained earnings but some kind of capital accounts and then you've got the corporations could be a corporation or a limited liability corporation this either of these two would then mean that you would expect retained earnings on the equity section and you would you would expect possibly common stock in there and not for profit is those companies obviously that try to pretend like they're not after money but there seem to be really after money unless you're in a good one that's actually run efficiently and not just giving all the money to the executives that are running the not for profit in the form of salary instead of instead of equity but then you've got the limited liability company which is kind of like a partnership usually although it could be set up as a corporation and so on okay so then we've got the chart of accounts the chart of accounts enable account numbers account numbers can be very useful by default they are off as you can see one reason is because when you turn on the account numbers oftentimes people don't understand how to add the account numbers and if your numbers if your numbering system doesn't make sense then the account numbers get ugly they don't help they actually hinder it also takes a little bit more time to add accounts with the account numbers we're going to turn them off for now we have a whole nother course or section on the chart of accounts if you want to look at that in more detail if I toggle them on then it says show account numbers display account numbers on reports and transactions such as sales and expenses in other words if you have the account numbers on then do you want them to show on the reports oftentimes you might not because if you have the account numbers on the reports it looks a little bit more ugly but you would kind of like to have the account numbers guide the reports and if you're giving external reports like a like a trial balance then the account numbers could be very useful because they could have the same space you know they they're in the same order instead of the alphabetical order switching from year to year I'm going to toggle it off though and then we've got the time tips account so the account that goes with the settings sales form content and tips in other words when we have the sales forms invoices and sales receipts we saw that we had a toggle for tips if you turn tips on then you can have this account related to the tips and it's going to be the tips income type of account and then we've got the billable expense income account so the account that goes with the setting expenses bills expenses track billable expenses and items as income in other words when we went to the expense area here I'll just take a look at it we turned on the make expense items billable and then we said that we wanted we want you to track it in income then the question is well which income account do you want us to post it to that's that's what this is going to in the advanced settings well the income account is currently going to the billable expense income account now note that if the problem with that is you can only assign it to one account you could change this account but I can't I can't when I make something billable say say that I pulled in something for supplies income or something you know income verses another income account they are all going to one income account because I'm not using items to pull it in to an income account which I could change if I was using items will talk more about that later so we have the categories so this is class tracking and location tracking this is similar to the tags in that if I add classes and locations it'll it'll allow us to break out the financial statements primarily thinking the income statement by class tracking and so that could be very useful sometimes in a job cost system sometimes it could be useful in not-for-profit businesses and also it could be useful for tracking many other you can you can think of many other cases if you have the same company file for your business and personal class tracking can be used to try to make an income statement that has business expenses and income and personal expenses and income which is not recommended oftentimes by bookkeepers because they don't want to have those things commingled together in one account but if you just want to pay for one quick books file then that could be one way that you could do it if you have a small business that actually works fairly well and then and so and you also might do it by to try to do some kind of allocation between departments where you can use the combination of class tracking and location tracking we're not going to get into that in detail in this major section here but we have another course or section that dives into class tracking location tracking tags and the differences between them part of the problem with these things is like you can do different things with these down the question is which of the tools should I use in a particular situation because you can imagine using multiple tools to do the same thing so what would be the old the the optimal tool to use we talked more about that in a special area or course or section so we have the automation pre-fill forms with previously entered content automatically fills other fields of the form based on the last save transaction for that customer vendor or employee in other words when you enter customer forms such as invoices or sales receipts and you put the same customer in there it will populate the form based on the last time you entered that form for that customer which is useful because that'll at least save the account the numbers might change but you want it to give you the account so that you can be consistent when you enter a bill or an expense or check form when you're paying for something the system will populate the form based on what you paid for last time for that vendor again that the amount probably isn't what you're looking for but the account that you posted to is important same with the employees when processing the payroll and then we've got automatically apply credits so automatically applies credits to the next invoice you create for the same customer so if a customer has credits like prepaid amounts that they've deposited to you then it's going to automatically apply them now this is off by default it used to be on by default but it could cause problems because sometimes you might not want it to automatically apply the credit so I think having it off by default is actually better so that you can do it yourself and you can see what the connection is so when there's a credit it might still give you the option showing you on the side panel that there's a credit and then you have the option of pulling it in I think that's best because it gives you a warning but it doesn't do it automatically so most companies turn on the setting turn it off if you're a property manager that requires security deposits so I'm going to keep it off by default automatically create invoices for customers with unbilled activities notifications appear in the activity feed on the home page so again this is off by default automatically create invoices for customers for unbilled activities where would those come from well they could come from the expense forms or bill forms that we made billable which we then need to turn around and make an invoice for so I'm going to keep it off so that we manually enter the invoice when those things are populated so we can kind of organize our invoices before we send them out also when we enter time if the time was billable like in a job cost system accounting firm, CPA firm, law firm or for example then that's where that falls in automatically apply bill payments when you add bill payments in the register this setting automatically applies the payment to the oldest existing bill most companies turn on the setting I'm going to keep it off by the default so that we can apply that out as well so let's go into the projects organize all job related activities in one place now when you think about jobs this is a specialty area which basically used to use what we called job jobs and that would be like a sub and then in QuickBooks they called it a sub-customer and now they have this whole other thing in QuickBooks Online and in QuickBooks Online they called it a sub-customer instead of a job and now they have this whole other thing called projects so projects often a tool that would be used if you have a job cost system like possibly a law firm or a legal firm or CPA but more you probably first thinking of like a construction company or something like that so that we can track the information by a project kind of a specialty area you could also imagine using projects for other things as well we have a whole other course on or section on projects and using the projects and in job cost systems and then we have the currency so the home currency we're going to be using the US dollar now if you're somewhere else then obviously you can use whatever currency is local to you most of the accounting will be the same because it's just simply the double-entry accounting system where will people in other countries differ from what we're doing here in the practice problem where we are using US dollars well the things that typically differ are laws that are different than the double-entry accounting system that means taxes generally so when taxes come into play like payroll taxes sales taxes or usage taxes then you've got to take what we're doing here and think about how it relates to the laws and regulations in your own area everything else for I mean most things for the double-entry accounting system however are just the double-entry accounting system so it should be the same except that we're going to be using a different currency now multiple currencies means basically that you have transactions for people that are that that are in another currency so if you're going to be paid in another currency then you have the whole exchange issue that's going to be an issue and we have another course or section that goes into that if you want to dive into that in more detail remember that if you want to practice with multiple currencies I think once you turn it on you can't turn it back off it's not a big deal because it doesn't really get in the way of your normal transactions to turn it on but we're not going to be dealing with that now just remember that you would deal with that when you have these timing differences when you're going to be collecting money in another currency or paying money in another currency so if I was in US dollars and then I have an accounts receivable or something that they're going to then pay me in something other than US dollars like a Mexican pesos or something like that well now I have the issue of of there could be a timing difference between the point in time that I record the the transaction the invoice and the time that they pay me in terms of the exchange value which causes a problem that's where the problem comes in right if I deal with something that's that some a company that's in Mexico but they pay us in US dollars then that's that's not a problem right but if I if if also if I'm paying someone else a bill and I'm going to pay them in pesos instead of US dollars that's when it becomes an issue because of when I enter the bill then the exchange rate might be different then when I pay the bill and I'm recording my books in US dollars right because my financial statements are in US dollars so I have to convert that that transaction to US dollars so again we have another course or section on that if you want to look at that more detail so business networks allow members to find me when members search the network a limited info from your private profile so do you want people to be able to find you on the network next one other preferences date format so I'm going to keep the default month month day day year year year some depending where where you are you might prefer whatever date format that you prefer mm stands for the month day and wise stand for the year so number format again this is this is what I'm used to here dollar sign up front commas and the the point for the decimals it what where you wherever you're located you might have different preferences for the dollar format a custom customer label so the customer label could be customers I'm going to keep that as the default if you're a law firm might be clients if you're a not-for-profit you can call them donors again most of the not-for-profit kind of idea is that you're going to use you still want money if you're not for profit don't give me that don't give me that you don't want one but you're going to act like they're not customers they're donors so then it makes them feel good and so then they're giving you money but then but then you just give it to the executives instead of no there's some good not-for-profit but anyway it could be guests it could be members patients tenants those are the those are the ones so worn if duplicate check number is used that's usually on by default because that's an internal control worn me if I enter a build number that's already been used for that vendor not as important so it's off by default but you might want to turn that on worn if duplicate journal number is used that's off by default because it's not quite as important because those are automatically generated typically but you might want to turn that on signed me out if in active for so meaning if you're not if your computer is on and you've been in active and you're in quick books it's going to sign you out after one two or three hours whatever you choose as a security measure so people don't you know your your co-worker doesn't go in there and mess with your file or something like that someone breaks into your house and then and then sees and then messes with your quick books file just to be a jerk or something I don't know so those are the settings