 QuickBooks Online 2024. Cash payment for inventory linked to purchase order form otherwise known as the PO form. Get ready and some coffee because we're gonna save time with QuickBooks Online 2024. First a word from our sponsor. Yeah actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but but that's okay whatever because our merchandise is is better than their stupid stuff anyways like our trust me I'm an accountant product line yeah it's paramount that you let people know that you're an accountant because apparently we're among the only ones equipped with the number crunching skills to answer society's current deep complex and nuanced questions. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Here we are in our get great guitars 2024 QuickBooks Online sample company file we set up in a prior presentation opening up the major financial statement reports like we do every time reports on the left in the favorites we're going to be right clicking on that balance sheet open link in new tab right click it on the P and L otherwise known as the income statement or profit and loss right click it on the trial balance to once again open in a new tab if you don't have the trial balance in the favorites you can open it up top searching it here tab to the right closing up the hamburger we're going to change the range up top just for the first month of 2024 010124 tap 013124 and then we're going to go for a run because it's refreshing tabbing to the right closing up the hamburger and doing the range change again 010124 tab 013124 tab running again another run and then we'll tab to the right close up the hamburger and we'll change the range one more time 010124 013124 and another run I'm not sure these runs are refreshing anymore I'm getting tired but that's okay they're short runs they're still referring all right let's go back to the balance sheet quick recap on what we have done thus far we set up the company file laid down the foundational items necessary in order to do the normal accounting cycle process those usually found in the cog where we looked at the company settings the managing the users the lists like the chart of accounts the products and services the customers the vendors and the employees then we took what we imagined to be the beginning balances as of our prior accounting system or the ending balances as of the prior accounting system entered them as our beginning balances for our current system which we're going to start doing in january of 2024 then we entered some transactions typical to a new business including trying to get some cash so that we can then buy the things we need to generate revenue the investments in fixed assets property plants and equipment and inventory once we had the cash on hand we bought the fixed assets or some fixed assets even though some of them were stolen and then we went and we bought some inventory so but well we we just sent a purchase order out for the inventory we're trying to buy the inventory that's where we're at now so we sent out the purchase order for the inventory and now we're going to imagine that the inventory has arrived no one has stolen it thus far and we actually are going to be able to continue with the business we open up the box and there's a bill in it so let's recap the process real quick using a flowchart over here and this is the desktop flowchart but we're just looking at the flow of the forms which is the same for just about any accounting system so remember that inventory is going to be both on the purchasing side of things as well as the sales side of things we're using a perpetual inventory system the full service inventory system in our practice problem note that if you're buying inventory if you buy inventory similar to you buying something from like an online store like an amazon or something like that you would pay for the stuff that you buy when you purchase it but if you're a larger company and you're ordering like manufactured products like from china or something that's going to manufacture them over there or something because it's cheaper then uh they might you might have a situation where you can order the inventory they send it to you before you pay for them and then you would expect when you've received the inventory it will have a bill with it that's what we did last time we entered the purchase order which is simply a request form which we track which looks like it's a form that would record something looks like a bill or a check form but it doesn't actually record anything once we get the stuff and check it out then we are going to have the bill with it we can enter the bill into the system either as a bill or we can simply pay off the bill and this isn't a useful time here to remember the differences between normal terminology and quickbooks terminology even accounting terminology note is a lot broader than quickbooks or most accounting software terminology so in other words if someone says i was billed for something that that generally means that you've received a bill in this case we got a bill from our vendors for the purchase of the inventory but a bill form for quickbooks means specifically that we're increasing the accounts payable so so if i put it into the system as a bill we're increasing accounts payable if i take that bill and just pay it with an electronic transfer we're paying it with similar to a check form or expense form so we even though we can say we got a bill we didn't enter it as a bill in the system we entered it as an expense or check form we simply paid off the bill so it's not a bill for quickbooks terminology right we can also say that we got invoiced from a client those words are interchangeable from a normal even accounting kind of terminology but on our side of things within quickbooks we don't call the the invoice form is the thing that we give to our clients right but if it says an invoice on the other side of the table it's a bill to them that's why invoice and bill are basically interchangeable with normal language but when you get into software language a bill means that you that not only you got something from your vendor someone that you need to pay money ultimately going out but you're entering in the system in such a way that it's going to increase accounts payable rather than just paying it off now that in this system or the first month we're going to not use accounts payable as much and do more of a cash based system so we're going to take that bill and just simply pay it off with a check form or expense form so that's going to be the process now so if i go to the first tab we'll recall what we did last time if i hit the drop down we know that the purchase orders are under the vendor section and they're under the pios the purchase orders here we can track the purchase orders and the expenses area which i would call the the vendor center and we can then go into here and we could track them by going to our expenses and we could say okay there's our purchase orders we might be looking for the the purchase orders for example drop down i just want to see the purchase orders and maybe i want to see those that are open open purchase orders and then when i get the box that has the guitars in them i can match them out to the particular purchase order that we have sent out we can also see the purchase orders by vendor and break them out by the vendors so when i get the box of stuff so i've gone into the blue here i could see these vendors are the ones that have the open purchase order so if i get something from diamondhead i can go into here epiphone Gibson and so on so let's say we got a box of guitars from epiphone that we ordered so let's go into that one we've got our multiple purchase orders that we could be taking a look at if i select the drop down then it says copy to a bill that would typically be the next step we're going to enter a bill and that's usually what we do we enter a bill but i'm going to pay it off with with simply a check form this time so so instead of doing that let's do it this way let's hit the plus button up top and i'm in the vendors expense here's the check form i'm going to enter a check form i want to match this check form out to the purchase order which it should give me an option to do if i select the vendor epiphone we're going to say epiphone and then boom it on the side it gives me these items here's the two purchase orders and we have this bill that's outstanding but here's the two purchase orders that we could be pulling in if we so choose and that is indeed what we do choose to do so let's go ahead and just add the purchase order detail and then i'm going to do the same for this one we're going to add the purchase order all right let's tap through this we're going to say it's epiphone it's going to be coming from the checking account and let's bring it to the 14th i'm going to say this happened on january 14th and we'll put the check number in so let's put a check number in i'll put starting with the 1004 now the check numbers are a little bit different notice that most forms will have a numbering system like the invoices will have an automatic numbering system with the checks if you're actually physically writing checks within quickbooks with a lot of people aren't doing anymore because they're going to electronic kind of transactions but we just want to point out the checks here in case you still want to be processing checks in some way shape or form how could you do that if you want to well you can purchase the physical checks which already have check numbers on them you can't print a check from quickbooks on just a blank piece of paper you need the physical checks the checks will already have check numbers on them and then you can add that first check number into the system then after you do that all the check numbers will populate automatically just one number at a time and that number should tie into what your physical checks say which gives you that kind of internal control over the over over your checks then you have the print later if you want to be printing them later remember that if you have multiple checks that could be a useful thing to do because you might want to enter multiple checks into the system and then print them all at one time then putting the checks into your printer the proper way and then print all of them at one time but we're not going to print them later here all right so as we go through here's we're not going to have any tags notice it's not going to a category the check form is like an expense form except now we have a check number related to it this is the form that decreases the checking account we're not going to apply them to a category that would be like applying it to the telephone expense or something like that but instead we're going to use items the items will still record things to a category but it will record things to the category driven by the items which of course in this case we're purchasing inventory means that we're going to be increasing the inventory accounts in dollar amount as well as we're going to be increasing the units of inventory so let me copy this over i'm going to right click and duplicate this just to get an idea of a recap of that i'm going to pull this to the left and then i'm going to close out this form and just recall that we entered in the sales tab we entered the products and services over here and so here we have our products of services and these are the inventory items and when we look at the inventory items they have a price and a cost we are purchasing the how come the what this one is the same i think this one there's something wrong with that one but we'll deal with that in a second actually i think that's just something weird to happen because if i edit this you can see in here that the sales price is in this case 500 and the cost is 400 the point is the price and the cost are going to be different what's going to populate now should be the 400 because we're purchasing them at this time and when we sell them that's when it should populate with the 500 on the invoice and the sales forms now i also want to point out that we could use the billing items for this process but it's not a perfect system so i just want to remember where they were those are located in the cog drop down account and settings and then under the expenses on the left hand side we turned on the bills and expense so right here it says make expenses and items billable so that is on so we can track billable expenses and and items as income in a single account so that's what we have done we've turned that on why is that important with a purchase order if i go back to the purchase order you'll remember that these two up top we assigned a customer to why did we do that well we've got our box of guitars that we received from our vendor and these two purchases of the guitars we bought specifically for a particular customer which our vendor didn't care about epiphone doesn't care about the customers that's not why we put it there we put that there so now when i get the guitars i can remind myself that i need to turn around and sell this with an invoice or sales receipt form to this customer eric music now you might think well look at that i got this billable thing these two tabs are there because or these two columns are there because we turned on that preference so you could say well why don't i just make it billable and taxable because we're going to say they're taxable and then when i pull it into the invoice they will populate on the invoice now this is not a perfect system because when it pulls into the invoice it's going to pull in the the cost i believe if you're used to the desktop version the desktop version for some reason this is one thing it did better it like it pulled it into the invoice properly with the sales tab this one is going to link it out to and it's going to pull in the cost so just for example if i looked up here and if we had like an expense that we purchased like gasoline or something and then we wanted to pull the gasoline cost with the billable item into an invoice it makes sense that it would pull in the cost that would come into the invoice and if i did that and i only assigned an account to it then quickbooks doesn't know what account to use on the invoice it's just going to assign it to one income account because we don't want it to decrease like auto expense in that case we wanted to put the on the invoice the increase to an income account not a negative expense account so you can see why that would work that how that would work up here down here though these are items so the items you would like to be the item is the thing that's driving which account it should go to so when this goes over to the invoice we would like it just to be driven by the fact that this is an item and hit the proper income account according to the item not according to just the billable just the billable account here for billable income and we would like it not to pull in the cost but we would like it to pull in the sales price and and in that format so i just want to show you that you could do this but it's not a perfect system i'll show you kind of why and it's a good explanation of what kind of happens with these billable things and how you might want to put together work arounds if you're using them all right so let's record it when we record it what's it going to do decrease the checking account because it's a check form and the other side is going to go to inventory and it's going to go to inventory by the total dollar amount and it's going to have an impact on the inventory sub ledger tracking both units and dollars and so down below we can cancel it we can clear it we can print it out we can order checks make it reoccurring or under the more we could void it we can save and close we can save and new let's go to save and close on it and then let's tab to the right and see the journal entry i'm going to run it again to refresh it go to a nice refreshing run and then we'll go into the checking account and check out the checking and we could see there's our check there's the check number and if i go into it it's going to take us back to that check form we go into it goes back to the check form close now now the other side it didn't tell us where it went even though it went only to one other account because there's multiple line items so if i so that's why it kind of dashes that out even though it's only in one other account over here on the inventory asset so there it is here so notice we have multiple check forms in here but all the check are it's all the same form it put them in by line item possibly in part because QuickBooks is trying to track the inventory on like a first in first out method the flow assumption it's using let's go back on over there's nothing in the profit and loss yet the trial balance updates of course let's open up another report the inventory sub ledger right clicking on this tab to duplicate it and then i'm going to go into the reports on the left hand side and i just like typing in up top inventory inventory valuation summary so if i go into the inventory valuation summary and this date's fine that'll be fine and so we're going to say well let's change it because you might be working in a separate date 013124 run it and so here's the quantity of inventory that we have now and the total is the 39976 this is the cost not the sales price so that should tie into what's over here 39 on 39976 okay internally let's go to the internal area let's go here and if i go into my expenses so now i'm just to recap we're on the expenses tab and then we're in the expenses drop down and you can see i'm filtered by purchase orders and then i'm only looking however at the open purchase orders so i only have these three in here if i switch this to the closed purchase orders there's the purchase orders that are closed if i go to all purchase orders then of course we can see all of them if i go to my vendors this blue thing only shows the open purchase orders so there's the ones that we have not yet done anything with if i clear the filters here and i go into epiphone here's the detail for epiphone uh hold on a sec let's go into the detail so now we see the purchase orders and we see the check form if i go into a particular purchase order so now we see the status here changed to closed and it's linked to a check so look at this beautiful linking process this is why we can't just do this with journal entries because all these forms kind of link together and it pulls me right over to the check and here's the two transactions linked to the check closing that out if i go into the check this way we can also see it this way here's the two transactions that are linked to the check if i go into those transactions here's our two purchase orders so everything's tied together we have an audit trail that we can see multiple different ways it's great okay so just note that the next thing we might do for that for like eric music the one the people on this purchase order uh that that uh not that one oh yeah that one but let's go into the check we entered this check and we made it billable so i'm not going to record the invoice right now but just show you what i mean 400 is the is the cost not the sales price we sell it for 500 so if i if i go into now a plus button up top i'm like all right now we're going to sell these guitars because we bought them specifically for eric music uh what did you do quick books uh we're going to go in here and if i put in uh eric music boom so it tries to pull in these two billable items which is great because now you've got the seven everything's linked together but when it pulls it in you can see that it pulls it in as you get the little link here but it's at 400 dollars they should be 500 dollars that's the problem and i don't believe it's going to go to if i record of this i don't think it would go to the proper income account because it would just go to the billable income account instead of the sale of product income account because it's driven by that connection to the billable item instead of using the item which should put it on there at this at the correct price so you could so again i just want to point that out to be careful with that because i again the desktop version actually does that well it does that properly i think in that system works good so you could still link them together like this i'll show you kind of a workaround later but you have to be very careful if you're dealing with inventory that way so i'm going to leave without saving right now okay so let's do the next one i'm going to go back i'm so i'm in the vendors i'm going to open this back up so i can go back to my vendors here notice how i'm navigating not with the back button up top quickbooks has a system where everything's basically internal you shouldn't need to use this back button basically ever out within quickbooks but it can be a little tricky to get used to so but i think it's actually a better navigation system so then i'm going to if you use everything in here not this back button up top but if i go into here now we have another one we can do gipson so if i go into uh gipson we had some uh purchase orders that we have in here if we were to enter a bill for them we can hit the drop down and copy to a bill but i'm just going to do the same thing we're going to go directly to a check we're not going to enter a bill we got a bill from them with the box of guitars that we've received but we're just going to pay it off so we're not going to enter a bill into quickbooks we're going to enter it and just pay it with either an expense form or a check form these two forms are the same except that the check form has a check number on it but they both decrease the checking account we're going to use the check form because we we've got that in our worksheet and we want to kind of see show you what the check numbers do when we get to the bank reconciliation area in a future course or section so let's just type in gipson here we're going to say gips we're going to type in gipson usa and then quickbooks going to say hey we have two uh purchase orders so we can add those two purchase orders at the same time into the same one we could do it one at a time or we can just add all of them and save ourselves a click that's what we'll do right here that'll help me to run more reports i can run more reports because i've got more energy because i saved myself a click right there so then we've got 1005 the check number populating automatically now and so that is good and then down here it's not in the categories because we're not going to be charging it to telephone expense or even inventory account directly but instead use the items down here the items are going to be the thing that tells it what category to go to which of course will be inventory but it will also be tracking the sub ledger related to it so once again we have one of these two that we purchase directly for a customer the customer doesn't matter on the purchasing side of things but the fact that i see that when i get the box of of guitars reminds me hey i need to turn around and create a invoice for this now again you probably don't want to do the billable and the tax thing here or possibly not you might just want to make the invoice from this information because of what we talked about last time but i just want to show you a few times how that pulls in and how you might use that as a workaround if you do want to use that to then populate your invoice so this is another check form check form means what's it going to do decrease the checking account it's a check form the other side where is it going to go it's going to go to inventory driven by the items in dollar amount of 6896 the cost of the inventory not the sales price and it's also going to track the units of inventory on the sub ledger inventory valuation summary so let's save it and close it and check that out so we'll save it go on over to the balance sheet repeat the process to check it out run into refresh it i could i see that run was so easy because i saved myself some energy with this click last time so i was ready to run and then i'm going to go in here and we're going to say that we have the checks so here's uh Gibson so there it is if i go into that one notice the new reports here uh there it is that looks good they have this red the red with the decrease i kind of like their new reports although it's a it's a little bit tighter because they don't use the full screen they got these margins on the rights i'd like to have as much space as possible so i can expand my columns you know but still i kind of like it we'll see if they keep it i think they will exit without saving and then the other side's going into the inventory we still haven't hit the income statement with it noting by the way and so down here we have two check numbers 1005 because quickbooks is trying to break out each line item possibly to help track the units of inventory on a first in first out flow assumption method let's go back again so notice if notice we're putting this inventory account just want to point out is an accrual account right because uh if it was a cash based system we would have just expensed the inventory when we purchased it because we just paid cash for it and it would have been on the income statement as let's say cost of goods sold what's the problem with that if you did that you'd have cost of goods sold the expense on the books that's not tied to the related revenue that might not be a problem again in some cases where if i bought the inventory in that situation for example if i bought the inventory directly for a particular person then i and i don't hold on to the inventory then that might be fine because it's only going to be a two day distance between when i buy the inventory pay for it and when i sell the inventory so i might just say i'm just going to expense it cost of goods sold will be on there for two days before i then turn around and sell it and therefore i might not i might just use a cash based system where i don't track the physical inventory right i you know i that's one way that you could do it but if we're going to be holding the inventory in the shop and i have a bunch of guitars in the shop then you could see why that's a problem from an accrual standpoint because now i'm i'm expensing the expenses but i but i would like to tie that into the time that we actually sold the inventory from an income statement standpoint and if i have guitars that are actually in the shop i want to track the guitars that are in the shop and make sure that i have a physical count of them and i'm managing them so when people steal them and whatnot that i actually am aware of it and i can at least complain and shake my fist in the air in a useless effort of making myself feel better but then if i go if i go to the inventory here 46 868 and we take a look at the the the the inventory valuation summary we can update that report and then we have the units of inventory and then the 46 868 so so that's see this account is similar to like the accounts receivable right where we want to track the accounts receivable on the balance sheet because we want to manage collecting of the receivables we want to track the inventory on the balance sheet as well so that we can manage the collectible or the sale and the and holding on to the inventory so that 46 868 ties into what we have over here okay let's do it one more time back to the first tab and we're going to say the next person was on the second tab so now let's go in the second tab so once again i'm going to go back to the vendors but i'll well let me just check out and the expenses over here and note the purchase orders if i look at the purchase orders filters by open purchase orders now we only have the one left right so so this last one the diamond head ukuleles and then if i go into the vendors section so now i'm in the vendors and if i look at my one purchase order leftover we can go into that there's my last purchase order uh if i go back to the vendors here or i clear the filters let's say just to check the Gibson USA if Gibson was to contact us now we can say okay we sent out these purchase orders if i go into the purchase order i can see that it's closed and i can see the link to the check and go to the check if there's the check i can actually find the check so everything's linked up very nice close this back out if i go into the check and they have a question about it i could say well i sent the check out it's outstanding or did it clear i can check the bank to see if that happened and then within the check form it's linked to the purchase orders and i can go to the purchase orders very good movie b to the n bn all right hippies are just being man but why would you just be in when you can movie being when you can movie being and i'm going to go back here let's do this one more time last one diamond head let's go to the plus button again and then we're going to go check and we're going to say this is diamond head that's a hard head this guy's got a hard head we're going to say that it's going to be add oh okay so same process boom boom and we'll keep the date the same check number populating automatically nothing's in the category because we're buying inventory we're buying a diamond head ukulele three of them pulling in we're not buying them for any customer in particular we just like happen some ukulele's in the store because people like the ukes the ukulele's so what's this going to do decrease the checking account because it's a check form the other side's going to go into inventory for the dollar amount of seventy two dollars and the sub ledger will be impacted tracking the units of inventory let's go ahead and save it and close it check it out go into the balance sheet to do so run in the report once again checking out the checking and it's always fun to check out the checking there it is 1006 there's our seventy two dollar ukulele's that's what we pull people in with there are only seven there's only you could buy the ukulele just for a few bucks and then when they and then we sell them that seven hundred and seventy seven thousand dollar no we don't do that that's not nice i'm going to go into the inventory and then we're going to say this is going to be there's the the side of it going back nothing's on the income statement nothing's on the income statement because we haven't sold the stuff yet so still nothing's happening over here we're just financing our business we're going to make money soon it takes time okay i'm getting worried this seems like a lot of outflow of money without any inflow that's how it works that's why you make the that's why business owners make the big bucks because they take on the risk right that's what the anyways so here's the four dollars forty six nine forty that should be tying into the balance sheet here uh 46 940 so that looks good and just a quick check internally if i go back on over here we can see that in the expenses area no more open uh open purchase orders they're all closed now moe b to the n bn and the vendors we've got no more purchase orders here if i clear the filter and we go into diamond head that he's such a hard head we have we call them a diamond head such a hard head okay we're going to go into there we have a purchase order and we can see that the purchase order is closed and it's linked to the check great and there it is so then let's i think that's it so this is where we stand now on the balance sheet at this point this is where we're at we've now got the inventory we we got the money we got the loan we put in our own money we bought the the fixed assets the furniture so we have a beautiful shop that people want to come into and now we've got all the guitars that are like hanging all over the shop and that's going to make people want to come buy the guitars and we're ready to make some sales but we haven't done it yet because thus far there's nothing on our income statement which is worrying our partners here uh because we because it seems like a lot of outflow but we're not worried because we have a beautiful shop and it's going to happen people are going to want to buy our stuff so then we're going to go into the trial balance this is where we stand now this i think is the best report to compare your numbers to so uh so you can you can check out these here so the first bit are the assets liabilities equity income and expenses so checking account asset accounts receivable asset inventory asset investment asset accumulated depreciation contra asset because it's intimately linked to part of in essence the property plants and equipment furniture and fixture the accounts payable there's our first liability the visa payable liability that's a credit card loan payable liability and then the equity the 65 000 in the investment that we put in and the owner's equity representing the income generated over the life of the company that has not yet been distributed in the form of draws in the case of a sole proprietorship or a partnership it would be in the case of dividends if it were a corporation