 QuickBooks Online 2023. Enter purchase cycle in QuickBooks Online for comparison to e-commerce. Get ready to earn the skills needed to boost your bank books on up with QuickBooks Online 2023. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category. Further broken out by course then organized in a logical reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as excel practice problems PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Here we are in our QuickBooks Online test company file using the accountant view as opposed to the business view you can toggle between the two views by going to the cog up top and switch the view on down below. We're going to duplicate some tabs to put reports in which is a custom we'll do basically every time we're going to go to the tab up top right click on it to duplicate it right clicking on the duplicated tab because we want two main reports balance sheet income statement duplicate it as the tab to the right is thinking I'm going to go to the tab to the middle down to the reports on the left hand side and we want the balance sheet one of the one of the favorite reports here of course back to the tab to the right let's go down to the reports again this time the profit and loss which can also be called the income statement the P&L I'm going to close the hamburger up top and I'm going to change the range to the end of 2025 so let's go to 120125 to 12 3125 and this is where we will place our data running it shouldn't be anything in there we have a nice clean report to start out with let's go to the tab to the left close the hamburger do the same thing on the balance sheet we're going to go from 120125 to 12 3125 and I'm going to run that report nothing is there so far obviously the financial statements are basically our end result what we are trying to build from an accounting standpoint for our business let's go to the tab to the left now we want to think about the purchasing cycle we're going to think about it as though we're on an on-ground kind of store and run the perpetual inventory system that QuickBooks has designed and then think about where the deviations are going to have to happen when we try to integrate data that's coming from like a Shopify or an Amazon type of situation so if we had an on-ground kind of system let's follow the inventory if I was to purchase the inventory we may or may not use a purchase order we might just be paying for the inventory with an electronic transfer a bill but let's go through the whole or an electronic transfer which would be a check or an expense form but let's go through the whole process here so first when we request the inventory we want to be able to track not only the dollar amount but also the items the way QuickBooks does that is we use the items so these would be like the inventory items similar to what you would put in like a Shopify store right when your products into a Shopify store so again note that I'm not saying that we're necessarily going to put these items in our final system into QuickBooks online because that might be redundant we might not need to do that but we want to see how QuickBooks would normally do a perpetual inventory system so that we can see kind of the deviations we might make for a Shopify integration type of thing or any other kind of platform so here's where the items are located it's under the sales tabs we're going to go to the products and the services on the right now some of these you might have like hours in labor in here don't worry about any of these other ones right now we're just going to add generic product one two and three so if I go up top and I say I want a new and we're going to make inventory items if there were inventory items that means we're going to actually track the physical units in you know QuickBooks online if it's non-inventory we're not going to be tracking the units now if we were doing a full service perpetual inventory system we would want to be taking an inventory item allowing us to have inventory reports I'm going to give it a generic name product product number one and we could have the SQ number if we have one we can add that we can add a picture of the inventory and so for if we wanted to track it which is actually kind of cool if you're doing on-ground kind of stuff we can add it to a category so we can have groups of inventory and so on I won't get into that in detail class tracking if we need quantity on hand now I'm going to start with zero on hand because we're going to purchase them and I'm going to say this happens at the beginning of of let's just say the beginning of 2023 just so I make sure it's at the beginning point reorder point this will be the point that we want to remind us to order more inventory so then we've got the inventory assets this is going to be the account that it's going to go to when we purchase the inventory the description it's going to be product number one and then the sales price so this is going to be the amount that goes on our sales form the the invoice type of form let's say that we sell it for $100 the income account it's going to be a sale of product so when we make an invoice or sales receipt that's the account it's going to go to and when we purchase the inventory let's say we purchase them for $75 it's going to go to inventory when we purchase it and then cost of goods sold when we sell it in a perpetual method kind of similar to what would happen if you're checking something out of the grocery store so we'll take a look at that in future presentation and then we might have a preferred vendor who we buy the inventory from all right let's go ahead and save that let's and let's make a a a couple other ones kind of to match our little thing over here so we might have another one product number two inventory product number two product two and i'm just going to say that this is going to be quantity on hand is zero beginning of the year that we've got this other product number two and description sales price let's say this is a $200 product and we we purchased it at a cost of 150 let's say cost to goods sold the expense account same thing looks good let's say save and new this time save and new and this this is going to be product product number three product number three and we're going to say quantity on hand is zero we're going to purchase these january okay reorder point description let's say this is for $300 and we're going to purchase it for 210 so we try to sell those ones you pull them into the store with a hundred dollar item and then you upsell them okay no we won't get into sales strategies here but we'll say save and close that one boom so now you've got your items here now when i purchase when i purchase the item it will be tracking not only the dollar amount we spent on it but also the units that's what we would be trying to do within quick book something that we might not be doing if using an e-commerce kind of stores we're using we're looking here at a full service accounting system within quick books that we will deviate from with Shopify so let's say that i would then go up and i say that we're going to buy the inventory we would buy it possibly starting out with a purchase order a request for the inventory and or we might just buy it basically with an expense form an electronic transfer or something like that but let's do the full thing let's say we're going to say it's a purchase order requesting the inventory let's say it's going to be requested from vendor number one which i just made up a vent let's just make up a vendor vendor vendor for p1 for product one so we're buying it from vendor p1 okay generic can't you come up with names no i'm not that creative it's going to ship to it's going to come to our store if we were doing it internally that would be the idea here so we're going to say the purchase order let's say this happens on 010 low oh no we're on 12 12 31 25 we're ordering it and let's say that we're ordering product number one i put produce produce look at that oh my goodness oh my goodness that's okay let's say that we're buying uh 10 of those so at a rate of 75 which populates automatically and i'm not going to put a class we're not buying it for a particular customer here so we'll keep that as is and then maybe i'm also buying product number two produce number two sorry about that i did that just to get a laugh out of people that i put it in there product number two produce two we sell some produce okay okay so then we've got 150 of those and what's this going to do uh nothing in terms of the financial statements it's just a request that we would then send to the vendor and then they would send us these items once we get the items with the bill in it that's when we would record uh something to our financial transactions at that point so in terms of our flowchart we would be here requesting the inventory no financial transaction at that point let's do one more let's save it let's do a save a new and let's see let's say this was vendor vendor uh p2 tab and same kind of thing but this happened on 1205 25 and the item that we're going to be purchasing is going to be the date is actually 12 525 i think i got that right okay so then the items let's say we're going to purchase product number three and let's say we're going to get another 30 of these let's just say and then we'll also purchase product number one and i know this was two vendors for the same product but just to get something on the table here so there we have it so let's say save and close this will just be a request that we would send out possibly by email to the vendor so let's save it and close it and then we can track those requests in the sales tab and we can look at all sales this is one place we could go and i could say i want to look at the the transactions and possibly be searching for the transactions of actually hold on not the sales tab we're in the expenses tab now because we're buying the stuff and then i could go to the expenses here and then filter by the purchase orders so i could say filter by the purchase orders and there's our request forms that that have sent out on 12 31 and 12 5 12 31 is that what i wanted let's change this date to the beginning of the month here i wanted to do it on 12 1 not 12 31 save and close it how about that doesn't really matter but there we have it we can also track it by going to the vendors and we can look for the vendors that have the open purchase orders up top and so then we can track them next step we're going to receive the inventory in our actually warehouse now again this might be different if we had if we had an e-commerce kind of situation because you might use some other system to to help you to manage the inventory so so you might not be dealing with the physical inventory so again that means that you're going to have to adjust adjust your system a little bit which might be easier because you might be doing this uh managing of the inventory the count somewhere else and we'll talk about how to pull it in so that's where one of the differences will be but when we receive the inventory that's when i'm going to put it on the books with a bill so i'm going to create a bill with this and we're gonna say all right now we've got the inventory i want to create a bill quick books it's not doing it let me do it again create a bill all right so there we go so now it's made uh the bill from it and i'm going to go ahead and pull in the data that's on the right on the right attached to it so now i've pulled in the data for the bill now a bill means that it's going to increase the accounts payable so i've got the vendor the bill date 12 five that's fine it's not going to go into a category i'm going to minimize this it's instead going to go into the uh item down below so it pulled the items in this is actually going to record a transaction increasing the accounts receivable because it's a i mean accounts payable because it's a bill the other side's going to go into the inventory account because that's where we told the items to go to when we set up the items and it's going to track the sub ledger for the units of inventory in quick books let's say save and close and if i check that out i can go over here and say run it run the the balance sheet and you could see the accounts payable went up because now we owe the bill hasn't yet hit the checking account if i go into that by drilling down there it is i can go back into that bill boom bill baby there it is i don't know i had a lot of bees in there i wanted anyway so i'm gonna close this back out and then back and exit and then we want to go into the inventory has gone up because that's normally what happens when we purchase inventory it put it in by each line item of inventory even though they're on the same bill so we can track the two line items okay let's go close that up back and is there anything on the income statement nothing yet on the income statement however we do have another report because the income statement will be impacted not when we buy the inventory but when we sell the inventory on a perpetual inventory system so let's duplicate this tab over here and then go down to reports and just check the inventory summary inventory summary report i'm just going to type in inventory summary and i'm going to make it as of 1231 to five and run it okay so now we've got our inventory tracking by the products here and then the the asset value and the average amount so this is giving us the quantity that should tie out to the quantities that we have on hand that we can count and verify and it's also going to give us the amount the dollar amount of the cost not the sales price that we can then tie into our balance sheet over here it should match basically our balance sheet now this is the part that gets somewhat redundant to some degree because again if you were using a Shopify kind of system you might have some other system that's tracking at least the units of inventory and so you might not so do you really need to pull in all that data and have to add the items and have to add basically bills and whatnot in order to record in order to get this information into QuickBooks again so that's one of the issues that we'll be dealing with all right so and go back to the first tab and let's go back on over here and let's do it for the second one we're going to create a bill for it and do the same thing i'm going to pull that in adding it and 12 five that's fine this is going to increase accounts payable and it's going to and it's going to increase inventory and it's going to also affect our sub ledger tracking by dollar amount that should tie out to the balance sheet as well as by units that we set up from our items so let's save and close this there we have it and then let's go ahead and just pay those bills so we can pay the bills by going or at least pay one of them maybe if i go to my if i go to my vendors and i can say the bills i have open bills so if i pay the bill let's go into this one and say we want to make a payment of that bill so then we're going to say this is going to pay the bill on 12 five this will decrease the checking account and because it's coming out of the checking account that's what a pay bill form does it's basically a check or an expense form the other side is going to decrease the accounts payable so let's save and close that and i'll just check that out if i go back to the to the balance sheet and run the balance sheet now the checking account is being decreased by the by the pay bill form back on over exit and the other side is going to the accounts payable the accounts payable account went up and then went back down we we entered the bill and then we paid the bill so those two things should line up in a in a general fashion mode as time passes it goes up and then it goes back down inventory is now at 11175 nothing's on the profit and loss because we didn't sell anything even though we did pay cash because inventory is an accrual thing normally and then we can see our units of inventory over here and the value of the inventory that is tied out to our our balance sheet so you can see in order to set that full system up within quickbooks what we would what we what we need to have then what we would like to have is the tracking of the inventory this is on a perpetual kind of full service type of system the inventory account is going up when we purchase the inventory and you could you know imagine that to be more simplified system where you just pay like you just have an expense where you bought the inventory when it actually hits the checking account that you then add the items here instead of entering a purchase order a bill and then basically hitting the checking account you can imagine it just when it hits the checking account you're gonna you're gonna do the same thing increase the items if you're using a full service perpetual inventory type of system which would be ideal the best thing that we can do but obviously there's a lot of working parts it would increase the inventory and then it would also be tracking our inventory over here in dollar amount as well as in units and then when I sell the inventory which we'll take a look at in future presentations with either an invoice or a a sales receipt it will reduce the inventory and when I sell the inventory that's that's when there's going to be an impact on the profit and loss because like when you do a point of sale transaction at a grocery store it's actually recording the transaction that records the revenue that you're paying them the sale the revenue and the cost of goods sold meaning it's reducing inventory and recording the related expense at that point in time so that's kind of an accrual type of thing because at the point of sale uh means we have that's the triggering factor that sales point is a triggering factor so you can see kind of the issues here when we go to an e-commerce situation in e-commerce the question is do I really I mean I already if I go to my store over here have to enter the products into e-commerce and I'm probably tracking at least the inventory in some way shape or form to make sure that I'm managing the number of units that I need to sell do I really need to make that same information input into QuickBooks so I can run another inventory report within QuickBooks right and and and that might be that might be a redundant kind of thing you might not need to you may be able to find apps that can basically do that meaning you might find in you might be able to find integration apps that when you purchase when you make the purchase it's going to pull into all that data into QuickBooks but even if you did that be very careful because to make that work properly you would still have to go into QuickBooks generally into products and and enter your items so that it can so that it can match up the transactions that it's going to pull in which are could be cash transactions to the items and many people would recommend and I would generally agree most of the time for most you know small to mid-sized businesses that that that's going to be too tedious oftentimes and if you have a high volume of sales it's going to be it's going to be confusing and QuickBooks isn't as robust an inventory management system as some other inventory management system so it has limited capabilities for more advanced kind of inventory needs in the first place so when we go to the e-commerce side of things that's why we might have to decouple this what are we going to end up doing we're going to basically say maybe we should move from a perpetual inventory system to more of a periodic inventory system so that I can track the dollar amounts of inventory on a periodic basis and get my financial statements correct on this side and then I can track my units of inventory logistically quite well in in like a Shopify or an Amazon or something in order to meet the the needs from just a logistical basis to make sure my sales meet needs are being are being met so then we'll take a look at some of those those things those concerns in the future and the following and future presentations now will follow the inventory the next step of the inventory in a perpetual inventory system would be to sell the inventory which again is similar to what you would do when you're at when you're just checking something out at a grocery store at like a at like a self-checkout or something it's quite easy and automatic if everything is set up but there's actually a lot going on behind the scenes and there's a lot of data that's basically happening and and so it takes a lot a lot more you know know how to set it up and then make sure everything is linking together to do the perpetual system so again the question is what's the difference between a perpetual system and a periodic system which systems would be best if we're trying to integrate with an e-commerce store possibly we'll break it out into a periodic system but i just want to point out you know the differences here because some integrations with QuickBooks from from from other platforms might say hey we can pull everything in and track inventory in QuickBooks and maybe you could to some cases but the question will be is that something that you should be doing is that going to be the easiest thing to do the manageable thing to do um for your particular business so we'll get into that in future presentations