 QuickBooks Online 2024. Deposit forms for owner investment and loan. Get ready and some coffee because we're diving into it. We're into it. QuickBooks Online 2024. First a word from our sponsor. 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 accounting rocks product line if you're not crunching cords using excel you're doing it wrong. A must-have product because the fact as everyone knows of accounting being one of the highest forms of artistic expression means accountants have a requirement the obligation a duty to share the tools necessary to properly channel the creative news and the muse she rarely speaks more clearly than through the beautiful symmetry of spreadsheets so get the shirt because the creative muse she could use a new pair of shoes 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 we're going to open up our major financial statement reports balance sheet income statement as well as the trial balance a process that we will do basically every time we open up our quickbooks file from here going forward we will do so by going to the reports on the left hand side within the favorites we have our balance sheet i'm going to right click on it open link in a new tab and then the profit and loss which i will right click on open link in a new tab i have my trial balance here if you do not you can type it in up top but i like to have it as a favorite right clicking it open link in a new tab let's look at those new tabs this second tab from the top closing up the hamburger is our balance sheet i'm going to change the range for 2024 i'm just going to choose the entire year going from 010124 tab 123124 tab run it to refresh it and then i'm going to go to the income statement next tab to the right close up the hand boogie same change of the range going from 010124 tab 123124 tab nothing in it thus far in the current year that we're working on tapping to the right the trial balance balance sheet on top of the income statement closed on the hamburger scrolling up changing the range 010124 tab 12 what happened k-pasta 010124 tab 123124 tab run it to refresh it there we have it okay quick recap what we have done in the past is we set up our beginning balances in a new company file that we created that had nothing in it and the beginning balances we pulled in from this statement which we are imagining came from our prior software and we wanted to just put in the beginning balances as of the cutoff date of 1231 2023 so that in 12 or January 1st 2024 we will have a fresh income statement and we can move forward from there so that's everything that we've done thus far if we go to our balance sheet items then we can see that we still have the balances in the balance sheet because the balance sheet represents permanent accounts however on the income statement in the current year there's nothing in it thus far for 2024 because the income statement rolls into the balance sheet and resets every period so now we're going to start the new period the first month of data input in our in our new accounting software system and then the trial balance here will be the balance sheet on top of the income statement but it's only showing balance sheet accounts no income statement accounts no income and expenses because again we don't have any yet as of the current period of 2024 okay let's go back to the first tab here now note that even though we're kind of imagining a system where we already started the company before and we're pulling in the data and that's where these beginning balances come from we want to first start off with the financing of the company this is typically what happens when you start a new company or when you're growing so we're going to imagine we're starting a new company or we're in a point of growth and we need to get money capital into the business this is often more of a kind of a one-time transaction because once the business is running hopefully you're not going to need to keep putting more money into it you are rather going to be taking money out of it in the form of draws if a sole proprietorship or partnership or dividends if you are a corporation so let's just get an idea of this if I collapse the assets liabilities and equity we get to our trusty accounting equation which is assets equal liabilities plus equity that's our accounting equation remembering that the assets represent what the company has liabilities and equity represent who has claim to those assets meaning liabilities third party people such as the bank for example and vendors and equity the owner which might be a sole proprietor one person partnership multiple people or a corporation multiple people owning shares of stock to have the relative amount of ownership represented by relative shares of equal stock so when we're starting a new company then usually what happens is there's going to be some kind of upfront costs that we need to start up the new company some businesses will have less costs than other types of businesses so for example if you're starting a youtube channel or something like that as a business or side business or something like that then there's not much upfront cost although you still have some you need you're going to possibly need a computer you depending on what you're doing you might need a camera and whatnot and some editing software and a microphone and that kind of stuff so you can limit those types of costs for certain things but you're still typically going to have those upfront costs before you can really get started and that is going to need an initial investment so how are you going to fund the initial investment either it's coming from you personally taking your personal money putting it into the business or it's going to come from a loan or something like that now if you're doing other types of businesses then the upfront cost might be a lot larger so if you're doing some kind of manufacturing business if you've come up with a new thing that you want to patent a new thing that that you think everybody's going to need it's the new deal well you need to patent it possibly and then possibly you need to manufacture it which you might be able to do maybe you can get like some like china to manufacture it or something but the manufacturing of the things is going to is going to take an initial investment to get the inventory so again how would you do that how are you going to finance it well you can either there's there's basically three ways that you could do it you could do it yourself you can put money in money coming in from the equity you can take on a partner in some way shape or form in other words give an equity interest to somebody so that they have claim to future revenues which is risky in that if you do that then you have to deal with them as basically having input in terms of the decision making of the company which you might not have the same idea of what direction the company should go in or of course you can take a loan right which would be a liability those would be the main ways that you might you know fund the business another classic type of funding business where you need a lot of machinery would be say construction or forming right forming the classic type that has a lot invested in the equipment if you're in a farm then you might have a lot of assets the asset value could be quite high but you still could run into situations where it's difficult to pay your bills because all of the assets are not cash they're not liquid they're in the farm they're in the tractors they're in the land and all that kind of stuff because that's the point you're trying to take the money in the business reinvest it in the equipment and inventory because the equipment and inventory are what you're going to use to actually generate future revenue so when you think about it that way just realize that the assets in the business are not simply going to be cash typically you're not you don't start the business just to hold on to cash unless you're in investment business you you start the business in order to generate revenue the assets you have on the business are typically going to be fixed assets property plant and equipment and inventory which are in essence investments rather than just normal assets they're not stocks and bonds they're investments that you're going to consume you're going to use those things in order to help you to generate revenue in the future the business is a revenue generation tool that's kind of the idea if you're just sitting on cash then you probably don't want it in the business that might happen because you're making money that's great then what do you do you either invest it back in the business so you can make more revenue in the future or you take it out of the business distributing it to the owners in the form of draws if it's a sole proprietorship or dividends if it's a corporation so that you can then take the money as an owner and invest it somewhere else if you don't want to invest it in the business such as stocks and bonds or something like that that's the general so that's the general idea so we'll do these initial transactions then uh one being well we'll have a loan transaction imagining that we're taking money out so that we can then you know buy the property plant and equipment for our business which once again isn't a normal cyclical transaction in other words most of the cyclical transactions are under the plus button broken out by a customer vendor employee those being the cycles we don't typically have a form just for taking out a loan because because the loan is something that doesn't happen all the time it doesn't happen cyclically it only happens for an initial investment or if you're trying to update something for whatever reason within the business now as you do this also just note that the the other way that the business is going to be basically getting cash or deposits that are going into the business meaning that's what we're going to put into the business cash uh usually the cash goes into the business how hopefully in normal times it's because we sell stuff meaning the cash is ultimately coming from the customers so if whatever system you're using you've got to be careful to make sure that you're not counting your deposits that are not coming from the customer coming from the bank or from you that you don't record them as revenue in other words if you have a fairly simplistic kind of system to generate to record revenue such as deposits come through the bank feeds and you just record those deposits as revenue with a bank deposit form as it goes through the bank feeds then you have to be careful to make sure that you distinguish if there's a deposit that is not from a customer otherwise you're going to record it as revenue instead of as an owner investment and for united states taxes you'll end up paying taxes on it which isn't good right so so you want to you want to make sure you have a distinction in your accounting system noting that most increases in cash are ultimately going to come from the customer but you might have cash from other sources which is kind of why the deposit form i assume isn't under the customer cycle which is what would normally kind of be in most of the transactions but rather over here because you might be getting deposits from say you the owner or a loan for example all right so let's so how would we enter the deposit well one way we can do it is we can go into the deposit form and enter a deposit this way it would go into the checking account and then we would enter the deposit date here and then down here we can assign an account that would work fine however i don't usually use this form to enter the deposit because unless unless i'm entering a deposit that's going through the clearing account of funds to be deposited and that's because the clearing account has a special tool to group the deposits together as we'll see in a future presentation if i'm recording a deposit that that is is just going to an account like a loan or it's going to an account for like the owner investment i think it's easier to use the register so that's what i'll do here the other way you might see a deposit that will be entered is with the bank feeds we'll set up the bank feeds and look at them in another course or section but if you think about bank feeds note that they're going to increase with deposits decrease with the decreases to the checking account expense forms and check forms so the bank feeds are kind of like a register and that they have a quick data input format but the increases will still typically use a deposit form when you drill down on the data for it so let's give an example of that let's go to the first tab and we can find our registers by going down to the transactions and then i'll close up the hand boogie and the chart of accounts on the right hand side and then here is our checking account so i like to open the register so if we go into the register then i can select the drop down and we have a whole lot of different form types even though we're just entering it into a quicker data input field the register and that's because the checking account is like the lifeblood of the company therefore there's a lot more data input forms than any other account if i look at any other register you'll have far fewer types of forms that might impact the register but we're having an increase so we're going to call it a deposit and we'll say the deposit happened let's just say the beginning of the month 010124 and the payee now we're going to imagine this is coming from the owner from you so i'm just going to put owner and tab and we'll set the owner up as this is a deposit so it'd be a customer even though again you're not a customer but the only choices are customer and vendor so you could leave it basically blank there if you wanted to as well this is going to be owner investment and then we're going to be putting in we'll say i think we said uh 65 thousand 65 thousand we'll put in and then the other side where's the other side going to go this is the important bit it's not going to go into revenue you didn't earn revenue here it's coming from the owner so it needs to go into an equity section directly instead of through the income statement to the equity section so we can look in here and see if they have one already set up it would be like withdrawals i'm looking over here for the equity accounts they kind of have a funny order to them because they're trying to they're trying to put it in an order i think that's going to be more helpful but here's all my equity accounts opening balance here's an owner draws that's the one i want now if they didn't have owner draws then we can we can set up a new account and just make sure it is an account type of an equity account but they gave us one here so i will use uh actually that's the draws one of my talking about these are the investments draws are when we take it out they also have an investments one so the point is again it's an equity account this is us putting money into the business if it were a partnership you might have a separate capital account investment account and draws account per per partner if it's a corporation you would call the draws dividends and the investments would be the sale or initial offering of or the initial you know the selling of the stock from the corporation which would be common stock so i'm going to say owner's investments what's this going to do it's going to create a deposit form increase in the checking account 65 000 other side going to equity owners investments and it's not going to impact the income statement all right let's do it and let's go to our balance sheet run it if i go into the checking account i can drill down on the checking account and i can see k posso what happened and there's a deposit form now if i go into the deposit form it's not going to go to the register but rather to a deposit form and it just assigned it to the account the owner investment account so this will still be the form the formal form even if you use a quick data input such as the register or if you were using the bank feeds same concept closing this back out the other side went to the owner investment let's go back that's a balance sheet account so we can see that down here in the equity so there's the owner investment now note sometimes some people like to put the increases just directly into the owner's equity or capital account for sole proprietorship or similar for a partnership and then just break out the draws other people like to break out the investments why might it be appropriate to put the investments directly to the owner's equity or capital accounts if a partnership because you don't expect them to be there all the time so maybe it'll make the equity section smaller also this investment account typically from a textbook standpoint would close out to the related capital account in this case the one owner's equity in a partnership it would close out to the related partnership capital account yearly however quick books will not do that automatically as it does close out the income statement to the equity or retained earnings account so if you don't close this out that's okay because then you'll just have the investments that have happened over the life of the business but just realize if you're coming from a textbook standpoint this would generally only be representing the investments for a particular year that would then close out at the end of it to the related capital or owner's equity account so if I go into that we can see that we have the same form here if I go back on over if I go to the income statement nothing happened to the income statement which is good because normally deposits might if you're using some systems you might have it automatically set up that it records revenue instead of going to the equity section and then it will flow through to the equity section so you'd still be in balance in the form of net income that would then go into the retained earnings or owner's equity but the income statement then we have an income tax so you might end up paying income taxes again on your deposit which wouldn't be good because you'd be paying more taxes right and then we have the trial balance over here if I run that we can see the two accounts in one place checking account was impacted and the other side is on the owner investment here as well in a nice tight format of the trial balance okay let's go back to the balance sheet and so now now we have more money in here so we've got money that we can use to buy property plants and equipment I'm going to minimize this so we can see the assets liabilities and equity that we have thus far let's do the other method that we might get funding now that with a liability we're getting money from the bank what's going to happen then cash is going to go up for the asset the other side once again not hitting the income statement because we didn't earn revenue we have to pay it back but instead of increasing the lia the equity because it would be basically cash if it were us investing that is owed back to us notice we're thinking of ourselves kind of as a third person here compared to the business the business is like its own entity even if it's a sole proprietorship from a bookkeeping standpoint and it owes us the money back if we gave the money in the form of equity if the bank gave it the money then it's going to increase the liability because we're going to owe the money back to the bank all right so let's do it let's go back to the first tab and do a similar thing I'm still going to do this with the register for the same reasons we talked about before we're going to say this happened let's just say the second to make it different I'm going to say it comes from Chase bank which is a bank I'm just going to make up a bank and I'm going to say it is a deposit a customer again even though they're not really a customer but just so we can track track them because we only have customers or vendors as our options and I'm going to call it a loan which you might want to get more detailed here and say the last four digits of the loan number so that you can tie out which loan you're dealing with note that some businesses they actually have a lot of loans if you deal with construction businesses I've worked with they quite often to finance equipment might have a whole lot of loans that becomes a lot more tedious and you want to make sure that you're tracking your loans appropriately let's say this is going to be for 50 000 now the next question is well what am I going to record the other side to but we set up a loan account over here called called the loan payable current portion now the loans just to note we'll get into this in a future section or course when we talk about the adjusting entries but some issues with loans are that you might have when you record the loan you can break you might have a current and a long-term portion of it the current portion current assets by definition are those that are due within one year so but a lot of loans are paid back similar to a mortgage where you pay them off on a monthly basis the principal and the interest of the loan that means that the amount of the loan that's due within a year is actually short term and the amount of the loan that's going to be due after the year is long term so that means that we can have one loan that's broken out between short and long term now we don't actually want to do that all the time from a bookkeeping standpoint because then we would have to actually adjust two accounts every time we do a transaction we don't want to do that because we would probably just want to automate the payment of the loan as best we can so that it'll be easy and then just make periodic adjustments so the concept would be typically that i that's what i would want to do i want to make my payments as easy as possible so i'm not doing a lot of journal entries and whatnot as i make my payments most likely with the help and use of the bank feeds being able to automate the payments as best i can and then at the end of the period end of month or year when i do external reporting at least for taxes and possibly for other things such as loans or audits and whatnot make period end adjustments that will then break out the short term and long term portion according to the amortization tables so we'll talk about that more later what is an amortization table how can we make an amortization table if we don't have one how can we then see what the current portion is versus the long term portion now another problem is breaking out the interest portion of the payments we'll talk more about that when we pay off the loan because the interest of the payment is basically like rent on the usage of the loan so we'll get into that in future presentations the other issue is that you might have multiple loans if you have multiple loans you could just dump them all into one loan payable account and that's because you want to represent the loan payable to external users typically on one account short term and long term portion of loans that might have multiple loans within them however it's a little bit more difficult to track that way from a bookkeeping standpoint so from a bookkeeping standpoint it would be useful if i have a lot of loans to make a separate account per loan possibly adding the the issuer bank name in the name of the account but that might not be enough because you might have multiple loans from one bank or institution so you might instead or plus or add to that name the last four digits of the loan number so you can make sure that you can tie out each of the loans to the current balance on say the amortization table so to do that you might also want to make a parent account called loan payable and then make sub accounts that will have each of the loans within it so you get this kind of triangle drop down and you can see that format so we'll get into some of those details later i just want to basically point them out now for now we're just going to put it into the same current portion also note i tend to like to set up all the loans in the current portion because some loans might only be current some might be long term therefore i have all of my loans in one account and then i break out the long term portion periodically at the end of the month or year you could do it the other way you could put all of it into the long term portion and then break out the short term portion uh if you wanted to do it if you wanted to do it that way but this is the way i'd prefer to do it typically okay that said we're just going to dump this into the same loan payable loan that's not it loan uh payable current portion liability account what's this going to do increase the it's going to increase the deposit the deposit to the checking account and the other side's going to go to the liability account loan payable no impact on the income statement all right let's do it so back to the balance sheet so now we've got rerun it to refresh it we got a lot of money and cash we're going to buy a lot of equipment and some furniture and and we're going to people are going to love coming into our guitar shop so now after we spend all this money that we and we're going to make a lot of money from it because we put the investment so there's the loan now if i go into it of course it goes into a full deposit form not to the check to the check register closing this back out go into the back the other side went into not an equity account this time but into the loan payable so if i go into the loan payable there it is here going back if i go into the income statement nothing happened here if if it went in here as income that would be bad because we might in in united states we didn't pay taxes on it possibly it would still end up in equity we would still be in balance if that happened because it would roll into equity instead of into the loan payable but it would would mess us up because we would we wouldn't see the the the loan that we have to pay back and so on and so forth all right and then on the trial balance if i run the the i'm sorry nothing on the income statement trial balance running it then we see the loan payable current portion now at the seventy two thousand okay so a quick recap here if we go back to the balance sheet and we look at this just from our accounting equation assets equal liabilities plus equity we now have assets not only do we have assets though if i go into the assets most of our assets are now liquid if we're if we were imagining we were starting the company from scratch what we would we would have basically everything in liquid assets the checking account why would we want it in that short term not because we just want to hold on to cash but because we're going to use that cash to be purchasing the things that we're going to invest in to help generate revenue that being property planting equipment the fixed assets as well as the inventory we'll do that in future presentations then we financed that cash to get that cash we did so by third party liabilities and by us the owners the equity that's the way to finance the company so on the liability side of things you could see that we did that with the loan here so we took out a loan in order to get the cash that we need and then we also put the other side into uh we also got other cash from us us putting money into the business you can see how the double entry accounting system is working when when the assets went up the other side has to go somewhere we think of ourselves similar to the liabilities similar to the bank when we're looking at the business bookkeeping whether it be a corporation or not even if it's a sole proprietor like it is in this case because we're treating ourselves similar to the to the third party people we're saying we have this claim this is the claim of us as the equity owners and this is the claim of the assets by third party liabilities from the company therefore if we were to liquidate the company sell the company close the company at this point what would happen well you'd have to sell off you'd have to collect as much as you can on the accounts receivable and uh the the current assets so you have all cash and if you were able to convert everything to cash then you would pay off the bank eighty eight thousand and then you would have left over the amount of the value of the business which is currently at 142896 which you can see by adjusting the accounting equation from assets equal liabilities plus equity to assets minus liabilities equals equity 23896 minus the 88 thousand liabilities equals the equity 142896 now in practice that wouldn't actually happen because usually the company isn't holding on to a bunch of liquid cash they have buildings they have property plants and equipment and inventory which they might sell for some value that is different than what is recorded on the books because the books are recording them at cost or adjusted costs in some way as best they can so therefore it's not going to work out perfect if a business liquidates they're not you're not going to get exactly what the equity is but in theory that's of course the idea okay so there is that if i go to the to the income statement nothing's on it now we'll look at the trial balance this is where we stand at this point in time here are our two legs the debit and credit leg and we're standing on them this is the easiest report i think to verify your numbers from step to step as we go so i would recommend opening up your trial balance running the date here and it probably would be safer to run the date for 013124 because we're entering it as of the first month of operations the end of january and that will help us to keep our dates in alignment so then out you can check each number your checking account accounts receivable inventory these are our assets that's a contra assets accumulated depreciation the asset of the furniture and equipment here's a liability accounts payable the liability of the visa credit card the liability of the loan and then in the equity section we've got the owner investment and the owner's equity totals debits and credits tying out of course because quick books forces that to be the case in in our double entry accounting system now if something is off what what do you do it's probably a date issue what do you do then increase the date because you're probably working on this after the date that we are and therefore you might have entered the current date which is later so just increase the date and see if any of your numbers change if it fixes it if your number changes then drill down on that section where the date was an issue find the one that's outside the date range which is usually going to be higher in the date range a later date and then go to the source document for it and simply change the date right that's going to be the easiest fix that you can do let's close that back out let's go back to our trial balance now just to analyze this from a debit and credit standpoint as we build the financial statements because it's the easiest time to kind of see how all these statements fit together just realized that from a debit and credit standpoint you can do the similar kind of calculations that we did on the balance sheet these are just two ways to be representing the same thing the total debits and credits here is the same concept of the balancing concept of the double entry accounting system as the accounting equation assets equal liabilities plus equity so if i go over here the assets if we add up the assets we can obviously see 140 000 plus the 25 plus the 2896 and then minus this is where it gets thrown off accumulated depreciation why is that a credit it's because it's a contra asset account that's the thing that kind of messes things up sometimes is these contra asset accounts or contra accounts in general so i have to subtract that out 7500 and then plus the 75 000 that gives us our total our total assets which we can see on the balance sheet here 238 96 so if i go back on over you can't just say then that the debits are there's going to be like the total assets and the liabilities and equity are going to be uh all the credits right like you kind of like to see it like that but you're going to say the assets generally go up with debits and they go down with credits is the general idea and then on the liabilities and equity side on the liability side we got 15 000 plus the 1000 for the visa plus the loan 7200 that's going to give us the liability 88 000 if i go back to the balance sheet that of course is our liability the 88 000 and then the equity is going to be the 65 000 plus the 77 896 that gives us the 142 896 and if we were to add up the liabilities and equity that's going to be all the credits except this credit because it's a contra asset 15 000 plus 1000 plus 72 000 plus 65 000 plus 77 896 238 96 uh 238 96 assets equal liabilities plus equity so these are just two ways to represent the same balancing concept equation format and debit and credit format the debit and credit format being the initial if you were to think about how this happens if you were to do it by hand you would do the debit and credit format first because it's actually easier cleaner and then you would convert it to the financial statements balance sheet income statement