 QuickBooks Online 2023. Enter transactions for owner deposit and loan deposit using bank feeds. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our bank feeds practice file. We started up in a prior presentation using the 30 day free trial. We also have open the free QuickBooks Online sample company. If you want the two open at the same time we suggest using the incognito window or another browser. 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. You can open incognito if using Google Chrome by selecting the three dots in the browser. Choosing incognito window typing into the search engine QuickBooks Online Test Drive. We're using the sample company to compare the accounting view the one that the bank feeds practice file is in and the business view the one the sample company is in. If you want to toggle between the two views you can go to the cog up top and switch the view on down below. We're going to open some tabs to put reports in like we do every time right click on the tab to do so and then we're going to duplicate it. Right clicking on the duplicated tab so we can duplicate it again back to the tab to the middle that we duplicated just a second ago and then we're going to go to the reports on the left hand side and open up the balance sheet. By the way if in the business view the reports are located business overview reports. Then we're going to go back on over to the tab to the right open up the other favorite financial report that being under the reports. This time the profit and loss report close in the hamburger and change the range from 010122 tab 123122 tab running it to refresh it. This is what we've constructed thus far back to the tab to the middle close in the hamburger. And change the range 010122 tab 123122 tab run it to refresh it. That's the system that we've set up. Let's go to the first tab now open up the bank feeds that we've connected in a prior presentation located in the left hand side under the banking. So here we have our bank feeds close in the handbookie and if you're in the other view the business view they're located under the bookkeeping tab on the left transactions up top and then the bank transactions. Okay that's the setup process we do every time. And last time we've been entering our deposit side of things we've got our information sorted first by the detail and then by amount. So we can see our our deposits up top and see them kind of grouped together. And so last time we've been thinking on the deposits those are usually tied to of course deposits what we received from customers for work that we provided to them. So in other words in our customer cycle or revenue cycle at the end of the cycle we would expect to be having a deposit typically into our checking accounts for goods and services provided. And in the easiest scenario if we're getting paid from gig work what we did and concentrated on last time we might be able to just record income with the record deposit item as it comes through the bank feeds constructing our books from the bank feeds. However we might have some more difficult components in that we might have a cash register situation in which case we would probably need to use the sales receipt form and then make the deposit. We'll talk about that in the future or we might have an invoice type of situation where we have to do an accrual component entering the invoice receive payment then make the deposit. The other thing we need to be careful of is what if a deposit comes in that's not from the customer that doesn't happen all the time but there's a couple primary scenarios where it would happen. One would be that deposit came from us the owner so we needed to put money in in order to finance the business often happening at the beginning of the business in order to finance the purchase of property plants and equipment and inventory to get the business going. Or it could happen when we're basically building up the business trying to step up the volume buying more property plants and equipment or fixed assets. Another way that the deposits might come in is if we took out a loan if we take out a loan then in order to finance for the same reasons in order to finance the business we might have a deposit that's not coming from customers. What we want to do in that scenario is be careful that we don't actually record the deposit as income. So in other words if you have some kind of system set up where you're just saying all deposits that go into my checking account are income. Then if you get a deposit that's from you or the bank which is not income and you don't differentiate it you're going to record it incorrectly. Now the system that we've been looking at we've been getting deposits from like platforms like YouTube or something like that which is clearly delineated in the bank feed data where the deposit is coming from. And we can set up a rule that's going to be specific to who we got the money from. But if you have a system set up for example that you're just getting cash and you're just depositing all the deposits that are cash just recording it as income for example. And so you're just saying if anything is a deposit I'm just recording it as income that's the assumption. Then you got to make sure that if you put some other kind of deposit in there that you have some differentiating factor to pick up the other deposits from you or the bank and not record them as income. So let's just see what those two kind of scenarios would look like. And so let's just pretend like that these skill share items were from from us the owner we put money in. Now if we put money in then we probably wouldn't have a skill share thing here would just say that there was a bank deposit of some kind we might not have much more detail than that other than it's a deposit. So then we would say OK the only thing we would know is like the dollar amount which might be conspicuously even oftentimes because when you make a deposit. If you don't put one thousand two seventy seven fifty five you probably put one thousand three hundred or something into it. Right. So that's one way you can kind of differentiate the deposits. But also of course if you have the bank feed detail when the deposits are coming in from customers that's another way that you can kind of differentiate it. So if I go into it and I say OK let's assume that this one was a deposit from let's say we came from a loan that we took out. So I'm going to say this is going to be a skill share. Let's just call it skill share bank skill share bank assuming it's a loan of some kind. And so I'm going to add that now it's not exactly a customer but I'm going to add it as a customer because it's a deposit. It's not a customer or vendor really. The point is it's not going to go to an income account. It's got to go to a loan account. So set up a new account for it adding account and I'm just going to call it a other current liability account. And I'm going to call it a loan payable account loan payable account. So that's good. Now note that if you have multiple loan payable accounts there's other issues with regards to the loans that you put on the books. And let's talk about that in a second here but you might have like a loan parent account. You might put the other loans underneath the parent account. But right now I just want to concentrate on the fact that we're not recording it as income. So I'm going to save it and close it. And so there we have it. We could we probably wouldn't set up a rule necessarily because the because this isn't a transaction that's going to happen all the time. What you want to do with all the other rules that you set up is make them specific enough so that they would not pick up as income this this deposit from the bank. Right. Because the other rules are going to pick up only the items that are that are somewhat specific. If you have a very broad rule that says old deposits I want you to record as income then you're going to you're going to miss these deposits that might come from you or the bank and mistakenly record them as income. Instead of as a loan. So let's see what this would look like if we record it. Let's add it. And so boom I'm going to go to the balance sheet and then scroll up top and run it. So if I scroll up top and run it I can go down to the checking account. So if I go to the checking account again I can sort it and customize it up top filtering it possibly by transaction type looking at just the deposits. And then I might look at the name and I might want to look at the bank. What did I call it. I called it skillshare bank skillshare isn't really a bank obviously but there it is. There's the deposit. Then if I go into it it's coming from a deposit form. So it's a deposit form but now it's not going to an income line like we did last time but instead to a loan going back to the balance sheet. The other side instead of going to the income statement is now down here in a liability account for the loan payable. So going into that there's our loan payable account. So going back on over now just a general rule with the loans. Let's just look at our accounting equation assets equal liabilities plus equity. Assets are what we have in the business that they're in the business instead of us having them personally because we're using them in order to help generate revenue in the future. And we're doing so because we think the business is capable of getting a higher return than us taking the money out and then putting it into like stocks and bonds for example. We finance the assets property plants and equipment inventory primarily by either taking out a loan. Right. We take out the loan to buy the property plants and equipment finance it so that we can then generate revenue in the future or through ourselves. Our own investment the equity from the owners either us investing it putting it in from our personal side or us retaining the money that has been earned in the business. Reinvesting it in the assets that we're purchasing in the business to further grow the business. That's going to be the general idea why we would have the the the liabilities and the loans. So notice it's a little bit complex when you have to deal with the financing because kind of you're not on it on you know specifically at like a cash system per se now because now you've got to track this loan payable. And there's going to be an added component with the loan payable which is the financing of the loan which is interest. So just a couple things with loans in general when you put the loan on the books you might have multiple loans. So in that case you might make up a parent loan account and then make multiple subsidiary accounts to it listing out each of the financial institutions you got the loan from and possibly the last four digits of the loan number. So for internal reporting you can track each loan by its loan balance and for external reporting you can collapse it to one loan account so that you can give it for external reporting purposes or tax preparation if necessary. Also you might have short term and long term portions of the loan if a loan that you took out is going to extend beyond a year. And you're paying it in installments like our natural format that we're often most used to like a mortgage type of loan you're paying off in same installments you could have a short term and long term portion of the loan. Now it's not useful it's not helpful to break out short term and long term every time you record a payment to the loan because that's tedious and we can't tie out the balance to the loan. So in that case I would recommend having one account for the loan payable breaking out short term and long term portion periodically at the end of the year or the end of the month. So that you can have that for external reporting purposes tax preparation purposes and managerial purposes to kind of make sure you got the cash flow to pay off the upcoming loan balances. And then you reverse it so you have only one account so that when you make the actual payments they're going to that loan account. Another issue with the loan is that maybe you don't get the amortization schedule because you just get the terms of the loan they might not include an amortization table breaking out interest and principle of each payment. You can make one if they give you the loan terms in Excel or you can possibly have your accountant or CPA or tax preparer help you out with an amortization table. And then when you make the payments to the loan there's going to be a principal portion and an interest portion of the payments to the loan. What you would like to do what we've been doing over here on the bank feeds is trying to make the payments on the loan in such a way that they will be automatic automating them to the extent we can. Because there's a difference between the interest and principal payment even though the decrease to cash is the same it makes it difficult to automate the payments. So that's another issue that we have with regards to the loan payments couple ways you can deal with that. You could every time you make a loan payment you can go in there see it going through the bank feeds and adjust it to match the amortization schedule properly recording interest expense and loan reduction. Or you could you possibly could just make your payments decreasing all of it to the loan payable account ignoring interest for the time being recognizing that at the end of the year or the end of the month you or your accountant is going to take the amortization schedule and then adjust the interest versus the principal portion of the loan and break out the short term and long term portion periodically. If you use that system you can automate the payments right then I can automate the payments and I can just do periodic adjustments at the end of the period. And that might be a way to go if you're trying to be a bookkeeper that is trying to automate everything as much as possible but you have to be working with a good CPA or accountant that can make the adjusting interest at the end of the period. Okay let's do the other one that's often not income I'm going to go back on over here and say okay let's do the other one what happened here I'm going to go down and say let's just pick another one of these skillshare ones and I'm going to go into it. And let's assume this time this was me putting the money in so it says skillshare down here but let's just pretend that this is money coming from me the owner that put into the business. So once again I would need to differentiate that from other deposits so that I don't record it as income and it's not going to happen all the time because hopefully I'm not putting money into the business all the time. Hopefully as the business gets going I'm taking money out of the business a lot of the time. So I'm just going to say this is going to be this is going to be owner or something owner. I have an owner vendor owner customer let's say and I'm going to say save it and then this one's not going to go into the loan payable it's trying to guess what I did last time with the skillshare payment. I'm going to put this instead into an equity account and I'm going to put it into you could put it into the owner's equity directly or you might create another equity account called owner investments for example. And the so so basically the owner's equity is kind of like retained earnings the income of the business is going to roll into equity. Opening balance is the balance used by QuickBooks to plug in any kind of miss any kind of thing that needs to happen to stay in balance. So that's kind of a clearing account that's not really something you want on the books you want to see what QuickBooks did and kind of fix it clearing that account out draws as the account that's used when we take money out of the business. And then because that's more natural we do that most of the time you might not have an investment kind of account you might just put that into the equity or you can create another account called you know owner investments. If it was a corporation that would be the the the stocks the issuance of the stocks. So I'm going to say all right this is going to be a equity type of account. And I'm going to say common stock I'll just say owner's equity and I'm going to say this is going to be owner investment. So I'll say that and let's just save it. The point is it's not going to an income account. I'm not going to be able to set a rule for it oftentimes because I don't plan on putting money into the business all the time. It's going to be a thing that happens every so often when I'm growing or starting the business. Let's add it and check it out by go to the balance sheet and run it to refresh it. Then I can see checking account is now going up. Let's let's customize it. Let's look at the filters. Let's check it out by type and say we want the deposits and let's check it out by customer. And say that we want then the owner customer owner customer. There it is. So there's the deposit that we put in here. It obviously was put in with a deposit form. The other side not going to income this time as we've been doing in the past but rather go into the equity account. So if I go down to the equity side of things then we've got the owner's equity and there's our investment account. That's what we just added to it. So it's here instead of on the income statement. Now note if you if you mess that up and you just record all deposits as income you're going to have recorded those two items in income on the profit and loss somewhere. And that's not good for income tax reasons. I mean it makes your income statement look better than it actually is because that income was from you not from customers and your income and net income will be higher. But for income stack tax purposes if you're in the United States that's bad because that means you're going to be paying taxes on the money that you put into the business. Not the money you earned or the money you got from a loan not the money you earned. So that's going to be not good if that if that were the case for tax purposes at least. If I go to the tab to the left note that net income will roll into the equity section. So we're building the net income down here. There's the income on the year. There it is here on the balance sheet. It's going to roll into equity. So if I change the dates up top to 23 and 23 that income rolls into the owner's equity. Right. Note that the the draws and investments traditionally should also roll into equity but QuickBooks doesn't do that automatically. So if you want these draws and investments to represent only the draws for the current year you've got to fit. You've got to manually do yourself the closing journal entries closing out draws and investment to equity. If you don't do that not a big deal because then these you just got to recognize that these are going to represent investments and draws over the life or however long you've been recording the draws and investments into them. And you know that's fine too because you can look at the detail by just going into it and just looking at what happened in the current year for for the draws or investment accounts if you want to do that but just just noting that. So that's going to be mainly it here for those two. Let's open up a trial balance and see what we've done thus far. Opening up a new tab to do so reports on the left. I like to see the trial balance because I think it's underrated and it needs to be rated higher. I want to increase the rating of the trial balance 010122 to 123122 run it. So we're this is our balance sheet on top of the income statement we're constructing mainly from the bank feeds. Now these are our asset accounts. This is our liability account that we set up now and our equity accounts. Here's the new equity account we set up and then our income statement income expense accounts and then other income and expenses down below.