 QuickBooks Online 2023. Creating sub-accounts, categories for fixed assets or property plant and equipment type accounts. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Get Great Guitars practice file. We started up in a prior presentation using the 30-day free trial. We also have opened the free QuickBooks Online sample company. If you want the two open at the same time, we suggest Incognito window or another browser. You can open Incognito if using Google Chrome by selecting the three dots in the browser, Incognito window, typing into the search engine, QuickBooks Online, Test Drive. We're going to be using the sample company to compare the accounting view, the one that Get Great Guitars is in, and the business view, the one the sample company is in. You can change between the two by selecting the cog up top and switch the view down below. We're going to now open up a couple tabs duplicating as we do every time to put reports in, tab up top, right-clicking, 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, each 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 to duplicate. And then we're going to right click on the duplicated tab to duplicate it. We're going to go back to the tab to the middle, the reports on the left hand side, opening up the balance sheet report, one of the favorites. By the way, if in the business view, that's going to be in the business overview on the left in the reports. That's where the reports are located in the business view. Then we're going to go to the tab to the right, reports on the left, open up the P to the L, the profit to the loss, the income statement, close up the boogie, the hand boogie that is and go from 010123 to 022823. Let's take a look at it in a month by month comparison so we can see running it, Jan Feb and Toad, Jan Feb Toad, Jan Feb Toad. Tab to the middle and we're going to then open up or close up the boogie and then change the range, 010123 to 022823 and run it. I was running. All right, so that's the setup process that we do every time. We're looking at the fixed assets now and we entered our beginning balances and looked at the fixed assets using the categorization of our beginning balance categorizations. Or if you start a QuickBooks file, you might just use the fixed assets categories that are given to you by the default system of QuickBooks. This is one area where the general rule I would think doesn't apply that I would normally go to. In other words, if I go to the tab to the left and we go to our chart of accounts, which is in the accounting on the left chart of accounts, if you're in the business view, where's the chart of accounts. If you're in the business view, that's what I need to know. If you're in the business view, it's under bookkeeping and then the chart of accounts. And then if you're in this test file, you've got to turn it on that thing. Okay, so then our chart of accounts. Now normally, most of the like chart of accounts that are going to have the most section with the most accounts will be the expenses. In other words, you'll have more type of expense accounts typically than any other accounts. And if you just look at the chart of accounts that's given to us, you can see that they've given us more default expense accounts. Now, the general strategy I would have when starting a new QuickBooks file would be that I'm going to keep the chart of accounts that they have if I can. And then as I do data input, many of the data inputs having an impact on the expenses, because that's the most common type of transactions, the payments that we're making for particular things. If there's an expense account related to it, I will use that expense account with the rationale that QuickBooks is giving us basically the default expense accounts, the most common expense accounts. If there's an expense account that's close, but not exact, then I'm going to use that expense account, but I'll edit it to change the name to what I want it to be. If it's close, but I don't want it to be a sub account or something like that, then I'll change it from a sub account. What I won't do is make two accounts that are similar in name because then I'm likely to post to both of them and that's going to mess things up. And then I would go through these accounts like after two or three months of data input and make inactive any accounts that we're not using. That's the general strategy I would take. But with the fixed assets, it's a little bit different up here. So if I go to the fixed assets, we have all this stuff that they gave us for the fixed assets building. You got furniture and equipment, which is a little bit different than what you would think. Land is kind of normal, long-term office equipment. And then they put all this stuff, copier, furniture, phones, in this subcategories. Vehicles is kind of normal, but you might not call it vehicles depending on the circumstances. So these to me aren't exactly, they're not even the most common names other than building and land. Furniture and equipment to me isn't the most common name. All these subcategories might not be the most common strategy for tracking this stuff on a subledger. Now the problem with the machinery and equipment, just like let's look at the problem here, is that we have to put this stuff on the books as an asset because they're large items. I can't be on a cashed base system even if using a cashed base system with these large items because if you're in the United States, you're going to at least have to break out the accrual component, putting on the books as an asset for taxes. So the tax software then often is the thing that we're going to use to track the accumulated depreciation. So what we got to do, we got to put it on the books as an asset and then we've got to depreciate it, lowering the asset, allocating the cost over the useful life. Similar to what we do with inventory or any other prepaid asset like prepaid insurance. But with the fixed assets, it's an estimate. We don't know exactly how much of the cost we used over any certain time period. We're just going to estimate using some method like straight line, like straight line or double declining or makers tax methods or whatever to make that estimate. That's why we break it out into another account here to recognize that I'm not actually using up the equipment. It's not disappearing. I don't have like less inventory of equipment. I have the same number of equipment, but I think the value is being allocated or the cost is being allocated to the timeframe that we're using it. So this second account shows that it's an estimate. Now that comes with some complications because now you would think I would need a sub ledger tracking each unit of equipment that I purchase, applying the schedule of depreciation to it to know how much of it has been consumed or allocated and then giving us the total that hasn't been consumed. Now that's a complicated schedule, more complicated than most other schedules and there's different methods that we can use to depreciate. And therefore oftentimes we don't do that in QuickBooks or ourselves. It's useful to do it with the tax software oftentimes because even if the tax software we're going to have to do it for tax purposes, if nothing else. And so even if we did the calculations in our bookkeeping side of things, then we would probably do it on a book basis using straight line or double declining bases, but then I'd still have to do it again in the tax software using tax depreciation schedules, which are slightly different than any kind of book depreciation schedule and could have accelerated depreciation and that kind of stuff. Therefore it's often easiest for a lot of companies to use the tax software as kind of like the sub ledger. That means you got to talk to your accountant or CPA or look at your tax software to see what their categorizations are for property, plant and equipment. And then usually the tax software can do both tax depreciation schedules and book depreciation schedules if you want to have a difference between the two. Or you can just try to do your books using tax depreciation, which isn't ideal for bookkeeping because it's not using a good, accrual kind of components using the tax code, which is all wacky depending on whatever they're trying to do on taxes and what not stimulate the economy, not stimulate the economy or whatever they're trying to do. But that could be the easiest way to do it. So you have to talk to your CPA about that. How do we want to be tracking the accumulated depreciation? How do we record depreciation? Can we do that periodically, which would typically be the case at the end of the year or possibly give me the adjusting entry or you do the adjusting entry at the end of each month or something like that. Then if you look at their tax software, how am I going to categorize the stuff that I purchase? I would use their categories. For example, this is coming from tax software. They've got furniture and fixtures, which is sounds cool because it's got the two F's in it. And it's the most common format to me of hearing that instead of furniture and machinery. That seems unusual to me. And then you've got the machinery and equipment to me. That's the most normal term. So what QuickBooks gave us over here is they gave us the scroll back up to why am I way down here? They gave us furniture and equipment. So I don't think that's the term that would be most common to me. So I'm going to try to expand this a little bit. And let's go back to expand this out. Okay. So now I'm going to go in and I'm going to try to change these to line up to what I have here. Now, if you've already entered data into it, then that becomes a little bit of an issue. You might have to do a journal entry, which we'll have to do here. So I'm going to try to say, I want to make this account match what I have on my schedule over here in terms of furniture and equipment and machinery, furniture and fixture and then machinery and equipment. So most of my stuff is furniture. So I'm going to change this account right here to furniture instead of furniture and equipment. And then if there's equipment in here, I'll do a journal entry to adjust it to the schedule. All right. So I'm going to go back to the tab to the left and I'm going to say, okay, furniture and equipment. I'm going to go into it and edit it. And I'm just going to change the name and call it furniture and equipment. Boom. Or yeah, furniture and fixtures is what I want to change it to. So I'm going to do that. I'm going to say save it. There's that one. And then the other one, accumulated depreciation building. And then the other main category I have here is machinery and equipment. So I would like another one called machinery and equipment. Do I have one similar to that? I'd say we've got building, furniture, land. Then they've got long-term office equipment. And then all this stuff underneath it. I don't really want these sub categories. I think they're trying to force you to kind of categorize your equipment a little bit more detailed. But we should do that, in my opinion, with the documentation making sure that whenever we buy something that we put in a fixed asset, we keep the documentation so we can provide that to our CPA. So they have it on their sub schedules. So to me, I don't feel like this is really necessary. This is more detailed than I think most people really need. So I'm just going to delete all this stuff and then make this one here, machinery and equipment. So I can't delete it. I have to make it inactive. So I'm going to make all this subcategory inactive. Just to clean this whole thing up, copier. I'm going to make it inactive. Make it inactive. And then we've got the custom, whatever that is, make it inactive. And then we've got the furniture. I'm going to make it inactive. And then, so the phones make it inactive. And then we've got the photo equipment. I'm going to make it inactive, make it inactive. And then I'm going to say, okay, so now I've got my office, then I'm going to rename this one. I'm going to edit it. And I'm going to name it. I'm going to name it. What am I going to name it? A machinery and equipment to match what I have on my sub ledger. So then I've got, these names make sense to me. We've got buildings that make sense, even though we don't have anything on the sub ledger, but that makes sense. Furniture and fixture, that's the name on the sub ledger from the tax software. So that means we can group everything. I would like my total here to tie out to what I have there. And then we've got the land, which makes sense as a normal kind of thing, machinery and equipment. That's the normal language vehicle. You might have automobile or something like that on your sub ledger, but that's pretty straightforward and obvious there as well. Now all that other detail in terms of what you actually purchased, you would like listed out in the sub categories on the tax software. So whatever I purchase, there's not going to be a lot of stuff that we purchase because it's large pieces of equipment that we don't purchase all the time. Therefore, I could just basically print out the sub ledgers, the transaction details for these accounts and hopefully give them the documentation for exactly what we purchased. So within each category, they can break out what it is we purchased, like sofas, chairs, recliners, and the more detailed we can make the sub ledger accounts to tie out to be able to tie out to what I physically have in the shop, the better. Because if I start making really generic categories within here, then in the future, when I dispose of things and sell things, I won't be able to tie out which thing I actually sold. So it becomes a problem in the future. If I group things together and put them all on the books, let's say they just put everything for the whole year on the books as just generic furniture and fixture for $98,000. Well, then when I sell this $15,000 sofa or dispose of it, I'll have to break out the fact that my sub ledger has grouped everything together in one lump sum. It will not cause a problem when you first put it on the books. It will cause a problem down the line. So check to make sure that whoever you're working with is properly recording the depreciation schedule so that doesn't happen. Okay, so now I'm going to say that this stuff, the 98, is going to be in the furniture and equipment. And then I have 5,000 that is actually machinery and equipment. So now if I go back on over here, I can say in my ledger, I've got a total of 103,000. So if I open up my trusty calculator, trusty calculator and do some calculations, we've got the 98,000 plus the 5,000. That's the 103,000 that is here. So now I've got this problem that it's all grouped in one category. Now I could go into the stuff that I purchased later and try to recategorize it to the proper fixed asset account, or I can just make a journal entry to recalculate it. So I'm going to say, okay, now I'm just going to make a journal entry, reducing the 103,000 and putting the money into the machinery and equipment in accordance to it tying up to my sub ledger schedule, so everything ties out to the sub ledger. So that's what I'm going to do. I'm just going to make a $5,000 adjusting entry. So note, if I hit the dropdown, there's no form related to me doing this because this isn't something that happens all the time. I can't use a cash related account because cash isn't going up, it's not going down, so I can't use an expense or bank deposit. Therefore, I have to use a journal entry. Sometimes because there's only two things affected, the easiest way to enter a journal entry is by going to the register. So I'm going to go to the register and either side will work. I have a register for balance sheet accounts, pretty much all balance sheet accounts, except for retained earnings has a register. So if I can go into either one, I can go into machinery and equipment, or I can go into the other side, which is the furniture and fixture. So let's go into the furniture and fixture and I'll go to the register. I'm registered and then I'm going to hit the dropdown and make a journal entry. And I'm just going to say this is going to happen as of I'll do it on the end of the month. Let's just say the end of felt 022823. And then I'm not going to have any payee. The memo is going to be to adjust a fixed asset categories categories to match sub ledger or something like that categories isn't spelled right. You idiot. Okay, there's no need to be to be cruel about my spelling capabilities. This is going to decrease and then the other side's going to go to machinery and equipment machinery and equipment. So there it is. So notice all I need to know is this side is decreasing and the other side should go to the other side. And I'm not thinking about debits and credits. I'm just knowing I'm just going to the other side goes to the other side. It will record debits and credits. But sometimes when there's only two accounts affected, this is an easy way to enter it. And so I'm going to say, all right, let's save it. It will make a journal entry with debits and credits. So there's the balance that looks right. Let's go to the to the balance sheet. Run it. I was running just like Jenny told me to there's the 98,000 and that ties out here. And then the 5000 is right there. So that's right. Looks good. Now we want to make now the question is what about this accumulated depreciation? Do I want to have one accumulated depreciation account for all categories, which I could do. But I think it's more common to have an accumulated depreciation account per category. Okay, so then the easiest way to do that is to make this a sub ledger of the category it relates to. So I'm going to make this a sub category of furniture and equipment. So let me show you how that looks. I'm going to go to the tab to the left, go back to the chart of accounts. Oh, by the way, if I look at this journal entry that I did over here, then if I go in, it's a journal entry form. If I go into the journal entry, then it's going to show the debits and credits of it, right? So there it is. So I'm going to close this back out. It goes to the journal entry form, not to the ledger. It's my point. It's one of my points. I make many points and they're all very informative and useful. So anyways, I'm going to go down. We're going to go down here. And now we're looking at the accumulated depreciation. I'm going to make it a sub account of the furniture and fixtures. So I'm going to edit it, edit it, edit it, edit it. And then sometimes I like saying, I like to kind of list what it's accumulated depreciation of. So a lot of times I'll abbreviate it to, which is kind of, you know, you might not want to abbreviate it, but it's awful long. And I like to put the name. So you could keep that there and just make it like a sub account of the furniture and fixture. And then that generic name, it's fine because it's a sub account of furniture and fixture. But I tend, even like when I post it, I usually say something like ACC D pre as the account and then D D pre or something like that. And then furniture and fixture. So I know which, which asset account it's tying out to. So that's what I typically do. So I'm going to say save it and yes. And so then if I go down, so now you got furniture and equipment and accumulated depreciation under it. Now notice that you could make like a furniture and equipment parent account and then have the cost for furniture and equipment and then the accumulated depreciation have two sub accounts under the parent. But this is a little bit, a little bit of a shortcut to do that where we have the parent being the furniture and equipment and the accumulated depreciation under it. Let's see what that looks like on the balance sheet. If I run the balance sheet, this is what it looks like. So you got the furniture and fixture and then the accumulated depreciation under it. That also kind of works nicely because then you've got this drop down thing that will collapse nicely there and and it gives you one less line item than having another line that says furniture and equipment and then cost and then accumulated depreciation. Now with the machinery and equipment, we're also going to need an accumulated depreciation account related to it. We don't have anything in it yet. So it won't change here. But just to show you on the ledger, I'm going to make another account. Let's make another new. I'm going to make it a fixed asset type of account and it's going to be for fixed asset under the machinery and the equipment and fixed asset and a name. I'm going to say ACC D pre do the same thing. This is for machinery. I'll just say and equipment equipment. There we go. There we go and save it. And so if I scroll down now, I've got the this sub account, this sub account. So that looks nice. Now periodically when the accountant runs the sub ledger and calculates depreciation, they can give me the depreciation on a yearly basis or monthly basis, whichever I want on either a tax basis or book basis, whichever we're planning to do. And I can enter it in periodically with an adjusting entry or they could do it periodically as an adjusting entry at the end of the month or the year. We'll talk about how to do that adjusting entry at the end of when we get to adjusting entries in another section or a course. But note that you want to line it up so the adjusting entry is as easy as possible. And the way to do that is typically to use the same accounts on the sub ledger as you're going to have on the on the financial statements. All right, I think that's it. Let's go let's make a trial balance to see where we stand go to the tab to the right. Nothing new on the P to the L the profit to the loss duplicate the tab scroll down to the left. And we're going to open up the reports, the reports and type in trial balance trial balance. The balance is on trial again. 010123 to 022823. Let's look at the side by side the month to month trial bounce T to the B. Here's where we stand. If your numbers to these numbers, that's good. If they don't, then that's bad. But you can extend the range and see if it's a date thing. And if it is try to change it. And if not, then we'll do a transaction detail report at the end of the second month. The data input to further drill down on any differences.