 QuickBooks Online 2023 deposits, owner investment and loan. Get ready to start moving on up with QuickBooks Online. 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 QuickBooks Online Sampled Company. If you want to have these two things open at the same time, we suggest using the incognito window. 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. Or another browser, you can open the incognito window if using Google Chrome with the three dots up top in the browser than the new incognito window. Then search for QuickBooks Online Test Drive. We will be using the sample company to compare and contrast the accountant view the view Get Great Guitars is in versus the business view the view the sample company is in to toggle back and forth between the two views. You can go to the cog dropdown and switch the view on down below. Let's open up a couple of tabs to put our reports in. The balance sheet and income statement. That is right click in the tab up top to duplicate it. Right click in the tab up top again to duplicate it again. Tab to the middle as the one to the right is thinking it going to go to the reports on the left hand side and open up the balance sheet report. If you were in the business view by the way that would be in the business overview section and then the reports. And then I'm going to go to the tab to the right and open up the reports again. This time the income statement or profit and loss the P&L close up the hamburger as we do every time. Change the range from 010123, 123123. There's nothing yet in the income statement. Go into the balance sheet. I'm going to run it for 2023 the current period now. We're going to go from 010123 to 123123 and run it. So in the prior presentations we set up our beginning balances and we haven't entered any new data for the current period we are going to be working in that being January 1st, 2023. Now we're going to start to enter two months of data input. Now although we already have some data input in place from the prior accounting system, we're going to enter some transactions as if we're starting a new company file. The first few transactions will often be unique in that they're not going to be used basically all the time. So remember our kind of setup process when you're entering the system into QuickBooks if you were to start a new business. You would set up the QuickBooks file as we did in the prior presentation and then we looked at our settings up top and then we entered the general ledger looking at the general ledger. We also entered beginning balances which you may not have as many if it was a brand new company that you're going to be working on. We imagined we had a prior accounting system that we were using. We then set up the lists which include the products and services, the taxes and the payroll in order to make the day-to-day data input of the forms as easy as possible. So now we're going to try to get to these day-to-day input forms. However, oftentimes the first couple of things that happen in a new business is that we need to finance the business. We need to generate capital. In other words, we need cash. So to think about why that is or to think about the process, I'm going to open up the balance sheet again which I closed. Just a quick recap. If we look at the accounting equation, assets equal liabilities and equity on the balance sheet. The assets represent what the company has. Now notice that this is different than personal assets. We don't just have the assets in the company in order to just hold on to them. We have them in the company as an investment. So the assets are kind of like an investment. Why are they in the company and not in our personal investments? Because we want the assets to generate revenue in the future. We think they're going to get a greater return in the business than they would in some other place. That's why they're there. And then the liabilities and the equity is how we're financing the assets that we have in order to generate the revenue. Now different kinds of businesses will have different needs in terms of how much assets they're going to have to need on hand. So if you're in a type of business that requires a large capital investment possibly for the purchase of property planting equipment like farming or something like that or any kind of business where you need equipment, construction and what not in order to do, then what you're trying to do is get money of course through financing. Either you put the money into the business because the equity is not going to be there from business activity at this point because you haven't earned any revenue and you can't until you get the property planting equipment or you finance it with a loan or some combination of the two in order to buy the assets which might be fixed assets, property planted equipment whose value is there in order to help us to generate revenue in the future. That's the general idea. So the first thing we need to do oftentimes is get that money into a loan or from us putting money into the business taking it out of our personal account and putting it into the business. Now note if you're in other kinds of businesses some businesses do not have that big barrier to entry for the purchasing of the capital investment. So if you start a YouTube channel or something like that or you do gig work or something then you might not have a lot of upfront cost which is great and it's great stuff to get into but at the same time with a lower barrier to entry there's usually more competition in those kind of businesses. So that's how it generally works. So now we're going to say okay we're going to finance the business by putting money into the business we'll do one with us putting money in from the owner into the business to finance the purchase of say fixed assets and then we'll also enter a loan. Now to do that our question generally whenever we enter a transaction is a form up here designed specifically for the transactions that I'm talking about. Now if I'm putting money into the business there's not a form up here that's specifically designed for me putting money into the business because that's not a normal day-to-day operation it's only going to happen periodically. The next question is is cash affected? If cash is affected then we can use the cash related forms in this case cash is going up so I could use a deposit form to register. If cash isn't affected and there's no other form to use then I'll use the journal entry. So I could use a deposit form I could go into here and enter a deposit and use the cash deposit and then record the account down here which would be some kind of equity account. However usually when I enter something into the system that is a deposit I would only really use the deposit form if it's coming through the through the customer cycle. In other words if I had an invoice and then the receive payment there's often like a little pop-up in the bank deposit to take it out of undeposited funds within the deposit form and put it into the bank. We'll see that in the future but that's a great tool and that's what's in the deposit form. If you had a bunch of receive payments from a bunch of different areas different sales then you can use the deposit form and deposit them at one time. However if I'm just making a deposit from myself or something that's not linked to a receive payment or sales receipt then I might just use the register which is kind of a faster way to enter the deposit it's similar to like the bank feeds if you had a deposit through the bank feeds then that's like a similar kind of faster process to enter it sometimes and then it would usually make it'll still create a deposit form. So that's the method I'm going to use to do that I'm going to go to the hamburger well let's go to the tab to the left and then go to the hamburger and then I'm going to go to the accounting on the left and the chart of accounts. I'm going to practice using these chart of accounts if you were in the business view by the way the chart of accounts is located in the bookkeeping area here and then the chart of accounts on the left. Okay so we're going to then say that cash is going to be going up and the other side is going to go to an equity account now we might not have an equity account set up down here yet so let's take a look at our options on the equities and order assets liabilities and then equity. So our main equity account is what we changed from retained earnings to the owner's equity which you can see right here I can see that it doesn't have a balance that's the main one. Now I could put it directly into that equity account if I want to my owner investments or I might break it out into another equity account which is they have one here called investments so I'll call that my owner investments and I'm going to put it into this investment account it's important that it's an equity account and not an income account if you put money into the bank and it's recorded as income then it might be something that you're going to have to pay you might pay taxes on it accidentally and that's not something you typically will want to do so you've got to be careful if you're using bank feeds you also need to be quite careful if you have a system which we'll talk more about the bank feed course or section where you're just entering the deposits from the bank as revenue you got to make sure that if there is a deposit that's not revenue such as one from you or a loan that you don't accidentally include it in revenue or you're going to end up paying taxes on it most likely which is not good so we could go into either of those registers this register or the register for the equity account I'm going to use the checking account because that's probably the way most people would see it and then in the checking account I can use this register to enter the deposit form quickly so if I hit this little drop down they give me all the types of forms that might be used within the checking account I'm going to use just a deposit type of form and we're going to say that this is as of let's say it's the first thing we do so let's say it's going to be 010123 and then the payment I'm just going to put owner for us this isn't as important a field because owner because and I'm going to put owner now my only options here are customer or vendor and since it's a deposit I'll say a customer but obviously it's not a perfect system given the fact that I'm not a customer I'm the owner so anyways I'm going to put the memo this is going to be owner owner investment investment or something like that and then the deposit is going to be I'm going to say 65,000 that we're going to take out of our checking account putting it into the business checking account those two things are something that we generally want to keep separate and then I'm going to call this owner investment which you can see is an equity account here so make sure it's an equity account so if I save that then let's check out what happens so now we've got more money in the checking account that's good now I go every time I enter something I go to my financial statements and just check it out to see what's being built as we go running the report to refresh it I'm going to go into the cash account and we see now we've got the deposit that happened there's our beginning balance we entered at the end of the last time period and there's our 65,000 it's entered with a deposit form the other side's going to the owner investments if I go into it it's not going to take me to the register but to a deposit form so that was a quick kind of deposit form entry that's a little bit faster in my opinion oftentimes especially if you're entering multiple deposits at one time for whatever reason so let's go ahead and close that out and then go back to the report scroll down equity now has this investment account so it's in the investment account in equity and it's increasing equity because equity represents kind of what's owed to the owner and we put more money in so you would expect the owner to be receiving it back at some point in time assets went up and then the amount that is applied to the owner went up now note that in general accounting you would think that the investment account and draws account would close out to the equity periodically possibly yearly and you would think maybe QuickBooks does that automatically it doesn't it only does that automatic close out for the income statement so if you don't close this out it'll just keep on accumulating upwards forever which isn't a big deal sometimes you know it doesn't really matter but if you're trying to think about how much you invested into the company in a year and you want that to be represented here you're going to have to close it out make a journal entry at the end of the year to close it out to the owner's equity account in a similar way as net income is closed out automatically by the system okay so the other investment we might have is financing us getting money so that we can buy property and plant an equipment when we first start the business by taking out a loan so now we'll imagine that's what we're going to do we're going to finance the rest of it with a loan we need more capital we need to buy more stuff to make money so I'm going to go back to the first tab and this time we're going to have a loan same thought process I'm going to say okay a loan is there a form directly related to taking out a loan? no because loans don't happen that often so is cash affected? yes cash is going up so I could use the deposit form but I'm going to do the same thought process and put it directly into the register if cash wasn't affected if I took out a loan to buy equipment for example then I might have to go to the journal entry so once again I'm going to use the register and here's the register I'm going to put it in there as of let's say the second just to switch things up a bit and we'll say this is from I'm just going to say chase the bank it's going to be the bank we'll say it's a customer even though that's not exact as well because it's a bank but whatever because that's your choices we're going to say this is a loan the payment or the deposit I should say is 50,000 we're going to take a loan out for 50,000 and the other side we're going to put into loan payable so I think we already have one here a loan payable account is the other I'm going to put it into a current liability now this is kind of an issue with the loans there's a couple issues with loans one is that we usually think of loans and often times the loans are formatted in installment loans meaning we take out a lump sum and pay it back on a monthly basis if that's the case then it might be that we have the loan extending like five years out into the future or something like that and that means that we might have a short term portion which is current those do within a year and a long term portion those that are going to do the portion of the loan do beyond a year so what do I do about that what am I going to I mean I have to break this loan out to be properly reported between a short term and long term portion so I'm going to talk more about that in a second right now I'm going to put it into the current portion the other issue we have with a loan is that when we pay off the loan we're going to typically need an amortization schedule and there's a couple different methods we might use to pay off the loan so let's first put it into this loan payable account and one more issue is that if we have multiple loans should I put it into one loan payable account or have multiple loans okay we'll expand on some of those issues I'm going to put it into the same loan payable account for now and show what happens so we're going to say save it and let's go back to the balance sheet back to the big B balance sheet run it to refresh it and then the checking account now has a bunch of money in it if I go into it two deposits have been made there's the loan deposit there's the 50,000 other side going to the split account with a loan payable going into it it goes into a deposit form not the checked register as we would expect because that's what we saw last time and then we're going to go back and we know the other side did not go to equity this time but it went to loan payable so there it is in loan payable and there's the deposit so we had 72 in there 22 before plus 50 we're at 72 going back so when we first started the business closing the assets and liabilities our assets have gone up greatly because if we first start the business we financed the assets which a lot of it is in cash now by taking out by getting money either from us the owners or from a loan and now we're going to use that money of course to purchase property planting equipment so that we can use the property planting equipment to get a return on it generate revenue in the future okay let's take a little bit more time to look at this loan thing down here the issues with the loan so note that we and we should have a short term and long term portion of the loan because if I have a really large loan here that's really not due for five years then it's kind of messing up my calculation for liquidity meaning I have cash up here I need enough cash in order to pay off my current liabilities the liabilities that are coming due so that's why we have current assets which are those that are pretty gonna be turned into cash shortly or consumed shortly at least which we want to compare to current liabilities those liabilities that we're going to have to pay soon so it's possible what we want to avoid is getting all of our money here and investing all of it into fixed assets and then locking them into fixed assets which is we want them in fixed assets to generate revenue but we don't want to have all our money locked up to the point where I can't meet our short term obligations pay off the current liabilities so that's why it's important to break out the current and long term assets as well as the current long term liabilities but from a logistical standpoint it's a pain to have two accounts and a loan if it has a current and long term portion to it so the practical way to deal with that is to say I usually put it all into current liabilities and then break it because there's going to be some loans that are current they're only going to be due within a few months or something and some loans that have a current and long term portion therefore I would like all my loans from a bookkeeping standpoint to be under the category of current into one account or under one account heading and then periodically at the end of the month or year I can break out the short term and long term portion so that with an adjusting journal entry and I'll do that periodically at the end of the year or the month in order to help manage my liquidity as well as doing any kind of financial external reporting needed at that time problem number two we might have multiple loans if we have multiple loans then do I put them into one loan account we could and then support that loan account with amortization tables that we might get from the bank or we might create them or from our CPA firm but it's often easier and we will do I believe in future presentations break out multiple loans into their own account a parent account of loans payable and then multiple loan accounts under that one parent account so I can collapse it to one account for external reporting and for internal reporting I can see the detail tying out each loan balance to its individual amortization table as I make the loan names for each individual loan I'll add the loan number so that I can tie it out directly to the amortization table that's problem number two problem number three with the loans are that when we pay them we're going to have to pay both interest and principal when we make the payment so if we make a payment monthly it's not like I'm just going to pay cash and the other side decreases the loan payable because they're going to charge me for the loan that's interest so there's three accounts that are affected so first of all I'm going to need an amortization table and then I'm going to break out the principal and the interest which sometimes the loan provides you sometimes the bank does not you can make one yourself which we'll do later or we can give the loan terms to our accountant or CPA who can hopefully make one and then even if we have the amortization table it's kind of a hassle to be breaking out the short term and long term portion I mean it's kind of a hassle to break out the interest and principal because the interest and principal portions will change each period even though the amount of payment that you're making each time is the same that means you can't memorize the transaction as easily that means you can't automate the transaction using the bank feeds as easily so there's a couple workarounds for that you could just adjust it every time you make the payment or you could just try to make the payments directly to the loan payable just adjust the loan payable and the interest periodically at the end of the month in the year or have your accounting firm do that in accordance with the amortization schedule so we'll talk about those couple methods for dealing with the loan in a future presentation as well but those are the common transactions for financing so now let's open up our trial balance I think that's the best report to see where we stand so you can check your numbers if you're following along let's see if we tie out if I messed anything up or if you messed anything up reports on the left hand side closing the booger I'm going to then type in trial balance trial balance there's a trial balance and then let's make it from 010123 123123 tab run it to refresh it this is where we stand at this point in time there's our two legs we're standing on them so if your numbers tie out to these numbers then great we're on the same page if they don't then it might be a date issue often times when working practice problems it's a date issue so you can change the date range possibly extending the date range if you're working into the future then from what I'm working it's possible that your range is you know outside the range or something so change your date range extend it and if there's an issue if that solves the problem if you see that it's a date issue you can drill down on the information drill down on the on the form and then change the date it lets you do that in QuickBooks be careful doing that but you can do that in the practice problem and if there's any other problems than that we will be running a transaction detail report at the end of entering the first months of data and that often helps us solve any problems or reconcile any differences at that time