 Zero Accounting Software 2023 deposits related to owner investments and loan. Get ready because it's time to become an Accounting Hero with Zero 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, 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. Here we are in our custom zero homepage going into the new company file. We set up in a prior presentation that being get great guitars. Thus far we set up the new company file. We entered the beginning balances imagining we're pulling them in from the prior accounting system. As we did that we laid down the foundational items necessary to make data input going forward as easy as possible. Now we're going to start doing that data input going forward with the first month of operations after having set up those foundational items within zero. So let's start off by opening up some tabs duplicating tabs to put reports in right click in the tab up top to duplicate it. I'm going to right click the tab up top to duplicate it again. We want the balance sheet and income statement open. This is the general structure that I would have when I'm doing normal data input. So I can do the data input on the left and then refresh the tabs and check out the reports on the right. So tab into the middle go into the accounting drop down. Let's go to the the balance sheet report as it's thinking will tab to the right accounting drop down. This time the income statement sometimes called the profit and loss statement. So let's change the range. I'm going to go to 2023 this time. So this one is in 2023. We have no data on the income statement thus far. That's where we want to be on the balance sheet. Let's make it for the current year this last month. I'll go OK. And so that's going to be for the current year. The point is we're in the current year we're going to be doing data input for January. But this is as of a point in time in 2023. So we entered our data in for the beginning balances as of the end of 2022. Now we're starting our new data input for the period of January 1st 2023 and going forward. The balance sheet being permanent accounts already have data in it because this is where we stand as of a point in time. The income statement as of January 1st 2023 having nothing in it because we haven't yet started to do the data input. For the current period. Now although we had we put in some beginning balances here as though we pulled this information in from a prior accounting system. We want to imagine the process of a first month of data input in a similar fashion as if you had no prior accounting stuff going on before. You have a new business. You set up your file in zero. We put the minimal beginning balances in place. And now we're going to do the kind of things that often happen when you start up a new company. One is going to be the financing. So we have the financing transactions which are usually going to be a little bit different than the normal day to day transactions because these are the things that are going to record the initial kind of money into the company. That's not coming from sales that we're going to need to buy the equipment. The general idea of a new business oftentimes and this will depend on the kind of industry that you are in is that the first thing you're going to need is some capital some cash. That's probably not going to be coming from revenue because you need to set up the foundational items before you can start generating revenue. Now some businesses don't have as much of that need as others. So for example if you're in a service business if you're starting a YouTube channel or something then you buy you buy some equipment you're good. You might have maybe just your phone right. You don't have a whole lot of equipment. So there's not a lot of barriers to entry into that type of market for example unless you get obviously more advanced and technical and whatnot. If you're getting into other kinds of business like manufacturing or something like that then of course you're going to spend a lot of money on the fixed assets. The equipment the building and the equipment that you need in order to help you to generate revenue in the future in order to buy that since you don't have revenue yet. You're going to have to finance it yourself or you're going to have to get money from like a loan or something like that or you can have equity investments take on partners and whatnot. So the general first thing that happens is we need cash so that we can purchase the fixed assets. Where's the business cash going to come from either us the owner which means we're going to have an equity investment. If it's sole proprietorship we're going to we're going to increase cash the other side is going to go to equity like an owner investment or a partnership similar kind of thing. If it was a corporation you'd issue stock so for the owner investment. And then the other place would be liabilities. We're going to take out a loan and we're going to and we're going to use that money in order to purchase the fixed assets which are the things that we need in order to generate revenue in the future. So these transactions then will be increasing cash the other side go into equity or a loan and they're not normal day to day transactions. They're usually only going to be happening at the beginning of the business and or when we're increasing or scaling up the business. And therefore they're they're a little bit outside the normal accounting process or the day to day transactions. OK so to do that we're going to go to the tap to the left. These are both going to be deposits. So when we enter a deposit we could do it with a deposit form a receive money form and that's one way to do it. If you had the bank feeds on then you might get like a loan or something like that or you might just transfer money from your personal account to your business account and then wait till it clears the bank feeds and add it with the bank feeds. We'll talk more about bank feeds in another section or a course or if you're because usually oftentimes this receive money is is used if you make a sale or something. So you might just enter directly into the registers another way that we can do this. Let's go into the register. So if I go into the business or I'm sorry accounting and then I go into my bank accounts then we have our bank accounts here. We're looking at the checking account. Let's just go into the manage accounts and I want to go into account transactions and we'll go into that item and then we got kind of a register look here. So then we can enter this way. This might be easier than say using the receive payment form. So I'm going to say new transaction. It's going to be not a spend money transaction but receive money receive money transaction. I'm going to say it's coming from the owner. So I'll just type in owner for this one and we'll say OK. It's going to happen. Let's say the date is is 010123. So January let's say let's say we'll do it this way. We'll say January 1st 2023. And then I'm going to say this is an owner deposit. And so then the account that it needs to go to should be some kind of equity account. So let's see what zero gave us on equity accounts. It's not going to go it's not going to go to income because it's not income. And you want to make sure this is one of those transactions by the way that if you're running on like a cash based type of system and trying to use bank feeds in order to record revenue. Then you want to make sure that you can differentiate and break out deposits that aren't coming from customers. The major two being deposits coming from you the owner or a loan. In other words if I look at a flow chart over here and this is from the QuickBooks desktop but I'm just looking at a flow chart because it's just a normal flow of the receivable cycle. There's different ways that you can collect your money on a receivable cycle depending on the industry that we talked about before. If you have a simple kind of system where you're just saying I'm going to wait till things clear the bank have it come through on bank feeds and then record the deposit at that point in time. What you want to make sure is that you don't accidentally pick up a deposit recorded as revenue which wasn't actually revenue. And the deposits that aren't actually going to be revenue for your business account will typically be the money that you put in as the owner and or a loan that you took out. If you put them in there as revenue it's going to be increasing your income statement and that'll look good from a financial accounting standpoint although not correct. But if you pay taxes in the United States you'll be taxed on it and that's definitely not good. So let's see what they have here for an equity type of account. That's the key. We wanted to go into equity. So we're going to say all right we've got the beginning balance equity owner's capital owner's investment. That looks good. Let's pick that one up. So they gave us a nice account to go with and we'll say the amount I'm going to put this in there. It's tax exempts. I have to do it this way. Let's say the price is 65,000 and we'll just say one to populate it. All right. So there we have it. So this is going to be then increasing the checking account and the other side is going to go to this capital account income statement then not affected. All right. Let's save it and close it and check it out. Let's go to our balance sheet and make sure that that is indeed the case. Now we've got 90,000 in our checking account and let's go into that if I click on it and we go into that 90,000. We've got the opening balance and then there's our 65,000. Here it is on January 1st. So that looks good. And then if we click on that amount, we go into it. Receive money, even though we entered it into the register and there we go into our receive money form. If we needed to edit it, we can hit the dropdown and we can edit the transaction. All right. Movie B to the end. Let's go back on over back and back. And so we've got that in our checking account. So then the other side didn't go to the income statement, but rather we made this owner's investment account because we put the money in. Remember that as the business goes, we're hoping that we're not going to continually be putting money into the business. The business will be generating revenue from the equipment and stuff that we're purchasing. And then we're usually going to be taking money out in the form of draws if a sole proprietorship, which would be dividends if it was a corporation. So here we're putting money in. So we're going to, there's the 65. If I click on it, we go into the detail. There's the 65. On the income statement, nothing's on the income statement. Again, if you messed up and you put it in the income statement, you have 65,000 of revenue instead of on the equity side of things. It would still roll into equity. So it would be okay over time. But again, if you're in the United States, you don't want to be paying taxes on your own investments that are going into the, are going in there. All right. So now we've got, now we've got some cash that we can buy equipment with. Now let's say that we have, we want more equipment. We need more stuff. So now the other way we often finance is with a loan. So you can see what's happening now. We've got cash. We've got the assets now. And the other side of the transaction here is either financed by third party liabilities or us, the owner. So now we've put 65,000 in ourselves. We're going to finance some more of it through third party through a loan. So it's the same idea. I'm going to go to the first tab. This is a transaction that doesn't happen all the time because, because we don't always take loans out. We pay the loan regularly. If it's a month by month loan in a similar case as a mortgage, but you don't expect the taking out of a loan to be a transaction that happens all the time. So note, there's no, there's no actual form. Notice, like, like if I look at these forms, these forms are designed to make the normal day to day input as easy as possible. What we're doing now isn't the normal day to day input. Therefore, there's not a form that's designed exclusively for taking out a loan or an owner investment. So if there's not a form related to it, the next thing you ask is, is cash involved? And if cash is involved, then I would, I would say, let's go to either a receive money or spend money form, or you can go to the register. Or of course, you can think if you have the bank feeds on how you're going to be integrating the bank feeds. And again, we'll talk about the bank feeds in a future course or presentation. But remember, you want to understand the flow of what is happening before you turn the bank feeds on or else you'll end up with kind of a mess because you won't understand how the forms work, which are still integrated and necessary when you set up your bank feeds. So we're going to just have another receive payment form and say, let's say this one came from the bank. I'll just say generic bank. Let's make a new contact for the bank. And we'll say this happened on 01, 02, 23, January 2nd, 2023. And we'll just say this is a loan from the bank. And we'll say this is for 25,000. Now the account notice, we already have a loan over here on our balance sheet and we'll talk more about kind of organizing your loan accounts later. So we'll just put it into loan payable here and we're going to imagine that kind of we refinanced this loan or they gave us, we're going to ended up having one loan for the total amount of the 50 plus plus this 22. So we'll talk more about that later. But note that some companies have lots of loans, like if like I've dealt with construction companies that of course are financing a lot because they're dealing with a lot of equipment. So they tend to have a lot of loans that they're taking out as they're doing particular types of jobs. And so what you would want to do, I would recommend is that you would have one loan account per loan that you're taking out. And you might put it as a sub account, which you could do some formatting here so that we can kind of group it in our financial statements as being like a subsidiary account to say a parent account, for example. And we might talk more about that in future presentations. And then you and then you have a separate loan number so that you can track each individual loan to the amortization table. Also note that we're going to run into problems, you'll run into problems with loans also when you have short term versus long term breakout of the loan. So that's another area where I would personally recommend you don't break out between short term and long term, but rather just have one account per loan and then only break out between short term and long term periodically at the end of the month or year for reporting purposes because that makes it way easier to tie in to the amortization table on the bookkeeping side of things while still allowing you to make the adjustment necessary periodically for the reporting purposes side of things. Now one other thing with the loan, we're going to have payments on the loan which will include both interest and principal. And that's something that often messes up our cash based type of system if we're trying to automate it when we are trying to pay things off with the bank feeds because the breakout between principal and interest will be different per loan payment. So there's a couple different ways and strategies we can deal with that as well. So those are some things we'll talk about in the future, but right now we just want to get the money on the books so that we can then buy our equipment. So let's go back to the first tab and I'm just going to say this is going into our loan account. So loan account, where's my loan payable right there. And so 25,000, this is going to increase the checking account, other side going into that loan payable. So let's save it and close it and check it out. Go into the financials and updating it to get the up to date stuff, up the dates. And then we're going to go into the 115 on the checking account and check out the checking. So there's the 25,000 on a received payment form, other side going to the loan payable. Looks good. Let's go back on over, balance sheet. We balanced the sheet on the eraser of a pencil, balanced the sheet. Okay, so then we've got this one. So now we've got the money we need and we're going to use that to buy the fixed assets. And the other side of the transaction went to partially us putting the money in. So the business in essence owes us the owner the 65,000. That's the other side of the transaction, the other side of the coin. And then we also took out the loan payable, which was included in this loan payable account. So the other side of the coin there is that we owe the bank the loan payable amount. Now I'm going to make a slight adjustment here to it. And I'm going to show you how you can go back in and adjust this. So I did this totally on purpose. I'm going to adjust that loan payable up. Let's say it was actually for 50,000. So I'm going to go into it and say, I'm going to fix this. This is how you got to be careful making adjustments like this. But I'm going to go to my receive payment form because you can do it just to show you. And we can then go to edit up top and say, I got it wrong. I got it wrong. Edit the transaction. I want it in there for 50,000, 50,000. We need a lot of equipment. We need fancy new stuff. We don't want the used equipment over here. So we need a lot of money. So we're going to save it at 50,000. And there we go. And then let's go back into my balance sheet balance sheet and see that transaction has been changed and bring this on up to 2000. Let's do the drop down, drop down custom and 2023 end of December. Okay. So now if I scroll down, we've got the 72,000 in the loans payable. So there's the loan payable. If I go into that, we can see the detail, the detail, these tail. So we've got, it's a good story. She's a good storyteller. Any case, we've got the 50,000 adjustment on that one, bringing us up to the 72 and going back on over to our balance sheet. Looks good. All right. So now I'm just going to open up a trial balance because I think that's the easiest form oftentimes to see what is going on. So I'm going to go to the tab to the right, right click on it and duplicate it. And then reports, accounting drop down and reports. And let's just open up the trial balance to see where we stand. I'm just going to type in trial balance to do so. The trial balance, trial balance. All right. So let's do this as of the, let's do a custom date. I'll bring it up to 2023 end of December, update it. And so this is where we stand as of this point in time. So you could kind of check your numbers if you're following along with the practice problem. If your numbers tie out great. If not, then try checking the date range. It's often like a date range issue that's throwing people off, especially when we do a practice problem. So in other words, expand the range and see if one of these numbers change, which in this case would be like the equity number or the bank account number. Because that's what we put new activity into. And then if they do change and drill down on those numbers, go back to the source form and change the date so that it falls in place. So we're all on the same page. If you're if you're going following along with the practice problem.