 QuickBooks Online! Vendor, Expense, Purchases, Pay or AP Accounts Payable Cycle. Get ready to start moving on up with QuickBooks Online! 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. We're going to open up the free QuickBooks Online test drive searching in our search engine for QuickBooks Online test drive. We're going to be selecting the option that has the Intuit.com in it. Intuit being the owner of QuickBooks. We will be selecting the United States version of the QuickBooks Online test drive and verifying that we're not a robot. I'm going to zoom in a bit holding down control up on the scroll wheel currently at 125% zoom in. Remember that we're starting off on the accountant view so if you hit the drop down you could switch between a business view and accountant view we will be trying to toggle back and forth between them as we go. Going to go back on over and open up two more tabs so that we can put our major financial statement reports in them we're going to do this every time pretty much right click on the tab up top we're going to duplicate that tab and then as that is thinking I'm going to right click on it again and duplicate it again. As that is thinking I typically go to the middle tab and then open up our reports of the balance sheet reports are on the left hand side in the accountant view I'm going to go into the balance sheet report and then as that's thinking although it's done already I'm going to go to the tab to the right and then go to the reports again and this time the income statement or P&L profit and loss report then we will change the dates up top I'm going to do the manual date change from 010122 think that's the easiest way to type it January 1st 2022 then hit tab on the keyboard to 123122 and once again tab on the keyboard to December you have to run it in order to make sure it refreshes the data down below then I'm going to go to the middle tab same thing for this one I'm going to select the first date range from 010122 January 1st 2022 tab to 123122 December 31st 2022 tab and then run the report that's what we're going to do every time so now we've got our two major financial statement reports and our data where I would typically do the data input on the first tab so now we want to think about each of these cycles and go into them in a bit more detail if I hit the drop down up top we've got the major cycles in these categories which is the customer cycle or revenue or sale cycle the vendor cycle that is our focus here meaning money's going to be basically going out at the end of the cycle for goods and services we're purchasing from others for the use in the business and then of course the employee or payroll cycle now remember from the business perspective revenue generation is the point meaning we want to get paid is in terms of the business view terminology from the accounting perspective or bookkeeping perspective we're trying to facilitate the cash flow the financial transactions as easily as possible so those aren't the thing that's going to be the time consuming component but rather we can focus on producing and providing the best goods and services and as we enter the financial transactions the creation of the financial statements we saw that the foundational things need to be laid down which we'll talk more about in the second half of the course which are going to be those list type items the chart of accounts and the products and services we'll talk more about them around here as well but we'll actually put them together when we start a new company file in the second half of the course but once those things are going to be laid down then we can just do the data input forms which should be the easy things that we do in a day-to-day process and now we're focusing in on those forms for the vendor cycle another terminology thing we want to understand here is that when you hear the term vendor in normal language even accounting terminology you're talking about someone who sells stuff basically so we because we're in business might be a vendor because we might sell stuff but from the QuickBooks software from a software perspective we have to define which side of the table we are on for particular forms so this is going to happen a lot and it can really mess you up in your thinking process because I could apply that term again in normal even accounting terms to both sides of the table but for the software the vendors are the people that we are buying goods and services from not the people that we're not a vendor even though again in real life we are in essence we're selling stuff but we're not the vendor from our QuickBooks perspective from our vendors QuickBooks perspective or I'm sorry from our customers QuickBooks perspective we are the vendors to them right so it gets a little bit confusing the vendor from the QuickBooks perspective is the person that we buy goods and services from money's going to be going out at the end of the cycle so then we got to think about well what's going to be the process or the flow for the purchasing of items and for that I'm going to jump over to our flow chart again so I'm going to jump over to the to the desktop flow chart even though the online version and the dashboard or the get things done area has a flow chart I still think the desktop one's a little bit more static so I'm gonna I'm gonna go over to just a screenshot of the desktop flow chart just to get an idea of the forms this will be the same for basically any accounting process and the forms will be basically the same as the QuickBooks online you just have a flow chart here so on the vendor side of things that money is going to be going out let's start from the easiest kind of accounting system to the most difficult kind of accounting system the easiest accounting system would be one in which we're not only on a cashed based system but we're dependent on say the bank in order to record the transactions in that case we could use basically the bank feeds to record the transactions many small businesses can do this given the fact that they make all of their payments when the bill becomes due when the vendor bills them in essence and they pay it either with an electronic transfer or they pay it with a credit card which can also tie into the in essence the bank feeds so in that kind of system then you're basically just creating a check form without the check number but a check form from the standpoint of a data input form for QuickBooks is the form that decreases the checking account so it's still going to be like a check form even if there's not a check it's an electronic transfer because we think of the form as something that decreases the checking account so if you wait till something clears the bank you do an electronic trans electronic payment of something it clears the bank you record it through the bank feeds the bank feeds are going to create in essence a check type of form and that's the easiest kind of transaction that we can we can have now if we're actually physically writing checks then for paying for something then we're gonna have to basically and if it was a credit card by the way then the same thing would be the case you basically have a credit card transaction form which you can wait till the credit card feed clears the credit card statement and then pay and then and then record that transaction at that time and then of course that would increase a liability instead of decrease in the checking account and you would have an inter transaction between the bank feeds you'd have a payment at some point from the checking account to pay off the credit card and so we'll get more into that in a future point but you could still basically track the credit card transactions usually for small businesses after they clear you know the financial institution the credit card has been paid and then you can pay off the credit card with the from the bank to the credit card clearly okay so if you're actually writing checks it becomes a little bit more difficult because then you're gonna actually write the check on a physical check and then mail it out so you don't want to wait till the check clears the bank you can't really just use the bank feeds to record that you have to actually enter it into the system as you write the check and then when it clears the bank you want to check that it has cleared the bank with a bank reconciliation or the bank feeds the reason you want to do that is because if the vendor has a question about whether you paid them for something to facilitate the transactions and be able to relate to the vendor you want to be able to see that you wrote the check and that it just didn't clear or that it did clear or whatever that whatever the thing is so a lot of small businesses though are moving away from many businesses all businesses are moving away from writing physical checks to online transfers where you don't have that kind of lingering period or not as long as one so then the next step that would make things more complicated is when we enter bills this would be moving from a cash based system to an accrual based system now many small businesses maybe don't need to enter bills because they're in essence on a cash based system many times as businesses get larger and or deal with inventory they might include or have to have a bill that's going to be within the system and that's because like if you pay if you pay something as it becomes due your your your utility bill becomes due and you pay it right when it becomes due no problem even though you could have waited 15 days but if you have a lot of transactions where you could wait 15 days or pay it right away and the transactions or and or the transactions are quite large then it becomes much more the case that you want to have a management strategy of your cash flows so you can hold on your cash as long as possible in that case you're probably going to want to enter the bills the bills can also be a kind of an easy way to track your information you can enter the bills as you receive them and then you can sort the bills and determine when you want to pay them and then you can basically use a pay bill to to and to pay all the bills that you're going to be paying at a specific point in time so it's a way that you can basically enter the bills as you receive them and possibly then determine which ones you want to pay periodically you know every week or every two weeks or something and then that can that can be a nice systematic way to do it as well so note if that's the case then you can't just rely on the bank feeds to do that you're gonna have to get the bills now first note the term bill is another term that we have to know which side of the table we're talking about because even from accounting perspective accounting terminology we can use the term bill to refer to us billing our clients for work that we did or we can turn we can use the term bill as something as a as a vendor billing us something that we have to pay to the vendor so here we're talking about a bill for the software means that the that the vendor is paying us and not even that is completely specific because remember if the if you got a utility bill say in an email or something like that or whatever paper bill it's a bill but it might say invoice on it because to them you know they're invoicing you from their accounting perspective to us it's gonna be a bill even if it says invoice on it but if i i don't have to enter it into our system as a bill right i could take the invoice or bill that we got and i could just make an electronic transfer or write a check to them so i enter it in our system with a check decrease in the checking account and record in the other side to an expense right when i get their bill so the term bill within the quick book software means that we got possibly a physical bill but it actually means that we entered it into our system as a bill meaning it means that accounts payable went up it means we entered it as something that we have an i o u for that we're going to be paying at a later point in time so it's a quite specific term the form bill from our perspective from our quick book software and then we can sort those bills which are accounts payable and then pay those bills in the future this pay bill form is just in essence a check because we said the check form before decreases the checking account but this is a special check because it always decreases accounts payable it's always increasing the accounts payable with a bill and then we decrease it and so that's the normal process on an accrual process but then you might have inventory so if you have inventory then the question is are you going to track the inventory in the system or outside of the system are you going to deviate from a cash based system or possibly in some cases you could still be on a cash based system so for example if you do custom jobs for somebody and you buy stuff for them and you're going to turn around and sell them whatever you made shortly you have a just-in-time inventory system you're buying the inventory right when you sell it you might be able to kind of just pay the inventory or record it as cost a good sold when you buy it which would keep you on a cash based system which would be the easiest thing to do and then just charge the customer when you're done for for the sales but most of the time if you have a larger amount of inventory you got to put it on the books as an asset which is an accrual kind of thing and the inventory is going to span our two cycles the the purchasing cycle and the customer cycle because we're gonna have to buy the inventory and then money going out in essence and then we're going to sell the inventory which is going to be part of the generation or money coming in type of thing so if we have to track the inventory we could then have a purchase order which is which is actually just a request for the inventory which we'll talk more about later but it doesn't actually record a transaction because at that point we haven't received the inventory and we haven't paid for it unlike when we buy stuff from amazon or some online distributor we typically have to pay for it when we order it in the case of a larger company you might be able to order the inventory and they ship it to you before you have to pay them so in that case you got a purchase order that we would have to track and then the receive of the of the inventory usually with a bill and then we would pay the bill so you can see we have different levels of complexity within the vendor cycle so if i see that in the quickbooks online you can see that with the drop down in terms of the forms if you have just electronic transfers that you're paying for something with you might enter just the bank feeds and the bank feeds will record an expense form which is like a check form without the check number and then you've got a check form which is the same as an expense form but now it has a check number and if you're entering actual checks then you would want the check form and then if you're on an accrual system you would enter a bill entering the accounts payable and then you'd have to track the accounts payable and then pay it at a later point with the pay bills and then you've got your purchase order which would be at the beginning of the purchasing process for inventory and then of course on the vendor cycle when you're tracking the information that you're receiving from them you can go into the expenses area and you can go into say your vendor area which is going to be one of your major we'll talk more about this later this becomes more and more important generally when you're tracking accounts payable because the vendor is going to say hey did you pay us in order to facilitate the transaction to make the payment as easy as possible we can go into the particular vendors and determine whether or not we entered the bill and whether we paid them we could also track the outstanding bills here and then all the transactions with relation to the the the vendor cycle could be up here every time we enter one of these transactions except for the purchase order it's going to actually record a financial transaction in accordance with the double entry accounting system and that is what creates the financial statements the balance sheet and the income statement so what we'll do every time we enter a transaction we'll we'll go into here we'll go into each of these transactions and we'll say okay how does this fit into our particular accounting cycle how can i make the cash flow as easy as possible to make my payments flow as easy as possible and my relations with my vendors as easy as possible and then what's the impact of entering these financial transactions on the financial statements the balance sheet the income statement and related reports the major related report to the payable cycle will be related to the accounts payable account reports recording the accounts payable by aging so in future presentations that's what we'll do we'll go into each of these forms to talk about the data input of each of these forms how to make the data input as easy as possible how to get the cash flow to run as easy as possible how to deal with the vendors and relate to them as easily as possible within the accounting system and then what is the impact on the financial statements of each of these forms