 QuickBooks Online 2022, inter-transaction for owner withdrawal or personal payment using bank feeds. Get ready because it's go time with QuickBooks Online 2022. Here we are in our bank feed practice file we set up with a 30-day free trial holding down control, scrolling up a bit to get to the 125% we're currently in the home page. Otherwise, no one is the get things done page in the business view as compared to the accounting view. If you wanted to change to the accounting view it's something you can do by going to the cog up top, switch to accounting view down below. We will be toggling back and forth between the two views either by going here or jumping over to the sample company file currently in the accounting view. Back on over to the bank feed practice file. Let's open a few tabs to put reports in right clicking on the tab up top, duplicating it back to the tab to the left, right clicking again, duplicating again, back to the tab to the left one more time, right clicking again, duplicating again. As that is thinking let's see where the reports are located over in the accounting view. They're on the left hand side under the reports. If we go back on over to the business view we're in the second tab. We're going to be in the business overview on the left hand side. Then we're going to go into the reports. I'm going to close up the hamburger up top, closing up the hamburger. We're going to open up one of the favorite reports that being the financial statement report of the balance sheet. Range change 010121 to 123121 and run it tab to the right. Going back on over to the business overview again for another report. Closing up the hamburger, going to the profit and loss, the P and L, the income statement. Range change from 010121 to 123121 and run. Then one more time, tab to the right, going to the business overview again into the reports. This time we're looking for the trial balance, less well known but a good report to get to know. You should get to know it because it's a good one. Doing the range change up top from 010121 to 123121 and run. It basically balance sheet on top of the income statement without the subtotals here. Do have debits and credits but don't let those bother you. If you're not used to debits and credits you can still drill down on these transactions quite easily and use one report to get an idea of your data input. Now let's go back to the first tab and open up our bank feed information which in the business view is under the bookkeeping on the left hand side. Transactions up top in the banking tab up top. If you were in the accounting view it would be under the banking up top in the accounting view. Back on over these are going to be the transactions that we pulled in from our financial institution. In this case we're thinking checking account but for which has not been added from what I would call here bank feed limbo into the promised land of helping us to generate or verify the financial statements balance sheet and income statement or otherwise the trial balance type of accounts. So the scenario here we're going to be taking a look at if something comes out we see it clearing on the bank feeds but it's going to be a type of transfer or withdrawal that is going to be a draw for personal use something that's going to be used for personal use. Now there's a couple different scenarios this one can be a little confusing people often mix this kind of thing up so we want to get an idea of how we're going to be treating the draws because if we don't we're going to record it improperly on the income statement and that can have tax impacts and so on with it. So let's get an idea of it if we go to the balance sheet here what's happening of course is there's going to be a decrease to the checking account the decrease to the checking account if it was set up properly then what we typically want to have is anything that's going to go to our or for our personal use is going to be taken out by a cash withdrawal possibly or a transfer from the business account to the personal account. That would be the general rule so that we can clearly identify the draw and when doing so we can record it down below as an equity section activity in other words cash would go down the other side would go to equity possibly an account that will set up that will be called draws that will be the most clear kind of thing or way that we can see this now also just realize in terms of bookkeeping in general usually you got your business account and then of course your personal account which is going to be separate with regards to your your actual QuickBooks files and the general idea would be that you would want to do the same for your financial transactions in terms of your checking account being different from your business versus your personal and your credit cards accounts being different from business versus the personal that makes it as clear cut as possible so that you can know exactly once you do something with a business account that it is a business transaction and you can clearly see the transfers if you say the transfers are going to a personal account that we can see that that's going to be the way that it will happen each time so the idea would be that we're going to have a generation of revenue in the business account we're going to take some of that most likely and reinvest it back into the company but the amounts that we're not going to do that for the amount that we want to then take out for our personal use then in the form of a sole proprietorship or partnership that's called a draw if it was a corporation that would be a dividend we're going to take that money out you can also think about payroll and whatnot if it was a S corporation and stuff we're not going to get into that but we're going to take the money out with a draw and then we're going to use that on the personal side of things so you want to make that as clear distinction as clear cut as possible for your own bookkeeping ease to do and if you're having someone else do the bookkeeping you want to keep it as clear cut as possible so that they know exactly what is happening even though they don't have an idea of you know what your typical what you typically do generally they might not know exactly what your business is but they don't have to distinguish between what is a personal transaction versus a business transaction because they're only handling the business books and old transactions in it are going to be business related except those that you're pulling out for personal use that would be the easiest thing to do however sometimes a small business and this could work for a small business larger businesses are going to of course want a really clear separation of duty and are going to have requirements the larger you have to have external reporting needs of your financial statements and the taxes often need more full reporting in terms of your balance sheet and income statement but if you're a small company like if you have a small sole proprietorship and you're doing like gig work or something like that and possibly it's not a large part of your income even or you know you have business and personal but it's a small business then you could try to use class tracking we have some business we have some some presentations on that as well what that will do is every time you record a transaction you could try to distinguish whether it is a personal transaction or a business transaction something that's way harder to do for an external bookkeeper because they don't know your business so they don't know if it should be personal or business it gets a little bit more difficult but if you're doing your books you might say I'm going to try to break out my transactions to business and personal and then on the income statement you'll have two line items one will be for the business one will be for the personal and then the total and if you're a sole proprietorship for taxes your primary need often is the income statement to fill out the schedule C in the United States at least for your income taxes and that could be something that you can do and basically be able to use the same company file and you're going to be using co-mingled accounts you might have one check-in account and one credit card accounts where you have business and personal transactions again best practice would be to separate those but if you have a small business many people don't and so the class tracking is one way that you could do that and you can basically then use one QuickBooks file to sort your business and personal at least on the income statement side with the class tracking and that could work fairly well as well we have some courses on that we won't get into that any more detail at this time but that's one option and then and then the the other thing that could happen is you could say okay what if I have my business account but I spend some money on personal stuff I take some money out of the checking account and I spend it on personal stuff like I went to Disneyland or something like that and it wasn't meals and entertainment on the business side it was a personal thing I can't really say it was meals and entertainment or anything then you'd have to say well it came out of the checking account the other side shouldn't be going to the income statement on a business perspective of meals and entertainment for example but rather should be going into the equity section so you can record that transaction into the equity account as a draw and that would be similar to imagining that it was money that was drawn out in terms of a cash withdrawal to the personal and then the personal went out and spent it on the Disneyland or whatever in that case so on the business side it's still just basically a draw even though you spent it you didn't take it out as cash you spent it directly on the trip to Disneyland so we'll still record it as a draw one of the problems with that is on the personal side of things you're not getting the recording you're not really tracking this on the personal side of things maybe you a lot of people don't track in the same detail on the personal side anyways because they don't need it for taxes or whatnot but in any case on the business side of things we can record it as a draw so those are going to be some of the transactions we'll take a look at let's go to the first tab and look at the simplest way that we can set this thing up and just say we have a transfer that's going to be happening so let's take a look at this for a transaction we're going to imagine this is a reoccurring transaction that's coming out of our checking account and it's going into our personal account so anytime we see something going into our personal account then we could say okay that that's going to be a reoccurring or a transfer that I can basically say it's going to be a draw that's going to be happening now note that QuickBooks basically recorded it as a transfer you could record it as a category item which would be an expense type of form typically right it would be the same kind of expense type of form that would be decreasing however if you record it as a transfer then it's kind of saying hey the transfer gives you an indication that this is going to basically yourself and often times the transfer would be used if it was two accounts within the same company file you think that then you really want a transfer because if you didn't use a transfer and it was going from one checking account to a savings account then you're going to have one side will be if you used an expense form the expense form would look right on the on the account that it's going out of like the checking account but then the expense form would be used for an increase into the savings account which would look kind of funny so the transfer kind of indicates that hey this money is going to yourself in this case it's still going outside of this entity which is the business entity but in essence it's going to the owner so you might think of it as a transfer there so I'm going to say then the other side needs to go somewhere else and we're going to have to add an account I want to add an account because I want it to go to an equity account we don't want it going to an expense account that's the main point because if it went to an expense account then it would be decreasing our net income and that would be incorrect because it doesn't have to do with our net income it's going to be a draw now I am in the the business view and I don't like the way they add the accounts here on the business view so I'm going to right click on the tab up top duplicate the tab switch on over to the accounting view and then add the account to the general ledger so I'm going to hit the drop down up top in the cog the cog drop down and let's switch us over to the accounting view so we can do stuff in the in the chart of accounts so I'm going to scroll down and say I'm going to go down to my accounting accounting and then go into the chart of accounts closing up the hamburger and I'm going to make a new account here and notice you don't have to go into to the chart of accounts to make a new account you can do it as you do the bank feeds however I would be if you were in the accounting view would be easier to do and at least at this point in time in my opinion so I'm going to hit the drop down here and we're going to say that this is going to be an equity type of account that's the key point and it's going to be a draw so it's going to be some kind of draws account so we've got owners equity I'll call it personal expenditure this one doesn't really matter too much you want to make sure that the name ties out and the equity type or the main thing I'm going to call this the owner draw if it was a partnership it could be called partnership draw if it was a corporation it would be dividends dividends are a little bit trickier but that would be the general idea so there we're going to have it let's save it so now we've got that if we look at it in order of type we're going to go down there's our equity on the draws let's go back to the bank feeds I'm going to refresh this thing let's refresh the screen by hitting this little refresh button and going back into it okay so there we have it so now I'm in the transfer I'm going to go into this item and say now it's going to be an owner draw an owner draw that's the one we want memo is here we could then create a rule for it but I'm not going to at this point because it's just going to be our practice here but obviously if it's going if it was a transfer like this we do have the information that would be required to make a rule which would make this a lot easier in future timeframes let's go ahead and add it what's going to happen well let's see we're going to go over to the balance sheet and scrolling up top and let's run it again run it again and then I'm going to go into the checking account let's go drilling down to the source docs on the checking and let's scroll it back down and then we're going to have this was a transfer a transfer of scroll down a little bit more the 75 right there if I go into it we use a transfer form as opposed to an expense form there it is notice if I close this out it's acting like the expense form it's it's like a check or an expense form it's a decrease to the checking account but the transfer gives me an indication that it's going to myself in some way or going to the same entity or in this case outside of the business entity into the personal account so then we're going to go down and the other side is still on the balance sheet we added an account in the equity section called draws so within the draws you're going to see the same transfer transaction that's the point so there it is scrolling back up and going back on over the point being it's not going to the income statement so if I went to the income statement I don't see anything here that's going to be an increase to an expense so I didn't record it to an expense because it went to me the owner and it was it's not part of the income statement accounts that's going to be the thing that we want to make clear and distinguish distinguish a bowl it becomes more difficult to do that if you actually spend money out of the checking account on personal stuff because then when you go into the bank feeds you have to determine whether this is a personal thing or a business thing which might not be too difficult but it's a bit more tedious especially for an outside bookkeeper and then again if you are doing that system where you are spending money out of the same checking account for personal and business think about using class tracking possibly because then you could you could break that out that way or you could do the draws or you could basically record those personal expenditures as a draw so let's take a look at that option so let's pick up this one this one is is life insurance that we so but let's say let's say this was for personal personal and it came out of the business account so we're going to say okay so the dates here it's we're going to say primary care here we put it into investments before so now we're going to imagine it was for something that we spent on personal use and and for the business side it doesn't really matter what it was on the personal use unless we were trying to track business and personal making an income statement on the personal side as well possibly with the use of class tracking but if all we needed to do if we're not doing class tracking on the business side is determine that it was for personal use and then say that it's not going to go to any expense account but rather it's going to be going to a draws account for us here kind of mimicking the idea that what should have happened is the money came out of the checking account on the business side to the personal side and then they spent it on whatever they spend it on which doesn't matter for the business side of things so we're just going to determine it was personal and put this transaction then to draws that means that it's going to be on the equity section not on the income statement if I didn't do that correctly which is a lot more difficult for an external bookkeeper to do because they're not going to be able to know as easily whether it is business or personal if they put it on the business side of things possibly putting like meals and entertainment for example can be quite expansive if people put things like restaurants Disneyland or what not these kind of things trips onto meals and entertainment because the bookkeeper didn't know if they were personal or not and you have this huge amount in meals and entertainment or miscellaneous these are catch all type of accounts that often get bloated with stuff that's actually personal if you then record your taxes that way that then the iris could say hey that's kind of a red flag if you have this huge amount in meals and entertainment or if this huge amount in miscellaneous expenses because they didn't know where to put it or then so you want to be careful it should be going to the draws instead of to the income statement and notice if it goes to the income statement as some kind of expense it's going to lower your net income which if you're trying to get a loan would be bad because it would make you look worse if you're for taxes it would be good because if that means it would be something that could be a deduction possibly but it wouldn't be an actual deduction and that means you know so if you report a bunch of deductions that aren't correct on your taxes then you could get you know you could get audited at some point in time and that would be bad so in any case it should go to draws and that's going to be the idea so let's go ahead and add that one and see what it looks like going back then to the balance sheet let's run this one again holding control scrolling up a bit and then I'm going to go I'm going to go to the checking account drill down to the source docs in the checking account so this was for the 70 something was it it was for now that was for this 2550 so there it is right there now this one's an expense form we've recorded it as an expense form here and the other side is going to draws and so notice if you could actually use even on an ex something like this that you actually bought something with it you might use the transfer form in that case to try to indicate that it was a that it was a draw that might make it a little bit easier to see when you look at the detail here that it was business versus personal but in the case that is that I'm going to go back on over the other side the other side is going to be down here in the equity section in the draw so if I go into the draws the they're both recorded as draws even though one of them was actually a cash withdrawal or transfer from a business account to the other account the other was actually spent out of the business account on something personal but we still record it as draws on the business side of things because it's not a business transaction kind of mirroring the idea that the money was taking out and then spent on something on the personal side and the point being on the income statement if I jump on over to the profit and loss we've got no expense over here if you recorded it incorrectly you would have an expense here like meals and entertainment or miscellaneous or some catch-all account that would then bring down that income and again if you record deductions with this stuff that has personal stuff in it on the tax return then you could get if there's an audit that they could cause a problem.