 QuickBooks Online 2023, invoice created from check created from purchase order. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Get Great Guitars practice file. We started up in a prior presentation using the 30-day free trial. We also have the free QuickBooks Online sample company open if you want the two open at the same time. We suggest using 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. The incognito window or another browser, you can open the incognito window if using Google Chrome by selecting three dots on the browser incognito window and then in the search engine typing QuickBooks Online Test Drive. We're going to be using the sample company to be comparing and contrasting the accounting view, the view that Get Great Guitars is in, and the business view, the view that the sample company is in. If you want to switch between the two views, it's something you can do by going to the cog drop down up top and the switch views down below. We're opening up a couple tabs to put reports in. We're going to right click on the tab up top like we do every time to duplicate it. Right click in the duplicated tab to duplicate it again and then go to the tab to the middle as the one to the right thinking reports on the left tab. And then we want the balance sheet report, which is one of the faves, one of the favorites. If you're in the business view, by the way, the reports are in the business overview reports on the left hand side. We're then going to go to the tab to the right, open up the reports again. This time, the P to the L, the profit to the loss, the income statement, close up the hamburger. Otherwise, no one is the boogie. And then we're going to change the range from 01, 01, 2, 3, 12, 3, 1. No one else calls it the boogie, but I call it the boogie. And we're going to run it just so you just, you know, if you call it the boogie, someone might not know what you're talking about. But I'm going to go to the tab in the middle. We're going to close the boogie and then we're going to scroll up and do the range change. Just going from 01, 01, 2, 3, tab, 12, 31, 2, 3, tab, run it to refresh it. That's what we do every time with the setup process. Okay. Now we're going to create another invoice, but this time we're going to do the whole connection process between an invoice that we created a purchase order and then a check for. So to understand that, let's go back to our flow chart over here and recap what we did in a prior presentation. Now note that if you have inventory, we've got the caveats on the inventory. There's multiple ways you can track inventory. You don't have to track it within the QuickBooks system. You might try to stay on a cash based system if you have just in time inventory and just expense the inventory as you purchase it because you're going to turn around and sell it quickly. Or you might do a periodic system tracking the inventory in an Excel worksheet, tracking the units and then recording just the dollar amounts for the financial reporting purposes. In QuickBooks doing periodic adjustments to adjust to the physical count in your Excel worksheet, for example, that you might do on a nightly, weekly or monthly basis. But here we're using a perpetual inventory system using the full services within QuickBooks to track not only the dollar amounts, but the unit amount of inventory. Inventory will span the vendor cycle where money is going to go out for purchases typically and the customer cycle where we expect money to be coming in for sales. On the purchases side of things, clearly we're buying the inventory and that might start with a purchase order. We would only use the purchase order if we're in a type of situation where we can request the inventory without actually paying for it at that point in time. So you'd have to have a special relationship in that case. If you're buying the inventory or paying for it at the point in time that you've requested, then you would go straight to a check form or a bill. We entered a purchase order in the past and then we would expect, let's imagine we bought our guitars from like China or something like that or we're buying them from Epiphone. And then we expect them to come to us with a box of guitars, the inventory that we're purchasing, being guitars and a bill in it. The bill might say invoice on it because the invoice is what they would create if they were using QuickBooks because we would be their customer from that side of the table. But to us, it would be a physical bill which we could enter into the system with a bill form but aren't required to because we could also just enter it in with a check or expense form, which is what we did in the past. So in other words, once we get the inventory with a bill, physical bill in it, we then have to pay the bill in some way. Either we enter it as a bill, which we'll do in the following month. We'll talk about entering that transaction more of an accrual thing in the following month. Or we can just basically pay the bill right away using a check form or an expense form, which is what we did last time. So that's what we did. Then of course we're going to turn around and sell the inventory at some point in the future. Now we might buy the inventory with no intention to sell it to a particular client. But if we do have a particular client, then we might track the client in this whole stream of transactions. So in other words, if a client came in, they said, I want this particular guitar and we said, okay, we'll buy you that guitar. We don't have it on hand. I'll ask my vendor to buy it for you. We then make a purchase order requesting it on the purchase order. We're going to put who we're buying it for, not because the vendor needs it. Epiphone doesn't need it. But so we can track it so that when we get the guitar, it'll remind us to then turn around and make an invoice. Then when we receive the inventory with a bill on it from Epiphone, we can enter the bill with a bill form or we did last time with a check or expense form. The check form will have the billable item allowing us to check off that it's going to be billable if we so choose. Although we have to be careful of that as we will see so that we can then know that we need to turn around and then create the sales side of things, which would be the invoice for the client that we or customer that we purchased the guitar for. So that's going to be the process. I'm going to go back on over. I'm going to go to the first tab now and then let's go into our expenses side of things to kind of recap what we saw in a prior presentation. We can go into the vendors, for example, and I'm going to close up the hamburger and we had purchase orders for our major vendor that we buy from. That's going to be Epiphone. That's who we buy the guitars from. And then we made these two purchase orders here. So if I go into this purchase order, for example, we go into that purchase order. It's linked to a check form. So that would indicate that we got a receive on it. And we've got these two customers or the customer in these two fields, that customer being Eric Music. So the purchase order is requesting from the vendor, but we put the customer in there. So when I turn around and pay it, it'll remind me to create the invoice. This is the first step, the purchase order. If I close that back out, if I look at this purchase order, then we can see this one didn't have any actual customer fields. Because we just purchased them for the shop closing that back out. And then we made a check form. I believe encompassing or or being populated from both of those purchase orders. So if I go into that, this is us. Now we imagined we got the guitars and with the bill in it and we populated the information that we're just going to pay the bill that we got with a check. But we have these two customers that populated from the purchase order. Then we have this billable option. We then made them a billable here. This is where we got to be very careful because these billable items are neat because they allow us to then create an invoice for this particular customer. But it's not exactly using the items tab the way we might imagine it to do. It's kind of using this billable tab. So it would be like pulling over like a telephone expense that we paid trying to pull that over into the invoice. Let's just take a quick look at where the options are to turn that on in the settings. I'm going to go to the tab to the right right click on it. And let's go up to the the cog up top. And I'm going to go into the accounting and settings. And then we're in the expenses tab on the left hand side. And then in this billing area, it says right here make expenses and items billable. So mark with a default rate or so mark you could mark it up. But usually that's not what we would like to have it be doing is driven by the items not just to mark it up. But then we've got the track billable expense items as income. So it would create another kind of income line item if we use that kind of billable item. But it's not really using the items to drive where it's going. So let me show you what I mean on that. Let's complete this out. And so let's go to I'm going to close this out. I'm going to go back to the first tab. So now we're going to turn around and create an invoice for Eric music. And then it'll ask us to populate with this billable item because that's what the that's what the purpose of it. The billable item is let's close that out. And I'm going to go to the plus button up top and let's make an invoice. And so I'm just going to type in Eric music Eric Eric music and tab. And then so now we have these items pulling over for for the billable items. So let's let's pull them both in. Let's add all of them at all. And so then I'm going to close this out. And so let's go through tapping through it. I'm not going to add an email address. We've got the send the terms that let's go to the date. Let's make the date the 23rd plus button plus button 123 number location. And then everything else is populating like we've seen in a prior invoice is just populating now pulling over from that billable item. Now the tricky thing is that you can see it's kind of linked over here that link indicates that it pulled in from a billable item. It looks like it's pulling in the item perfectly. But if I go down here, notice if I type in an ELP again, then you can see the ELP is actually $500 not the $400. Now if you've worked with the desktop version, the desktop version actually somehow does it the way you would hope. It actually changes the rate to the sales price using the sales item typically, I believe, where it's not doing it here. So you could use this kind of billable item, but then you might want to then then you'd have to check down here and say, OK, the ELP should be $500. And then I would change it to $500. And I believe everything else will still populate properly if you do that. But it's kind of annoying that it puts in the four. And then here I'm going to do the same thing with the EPSH. So an EPSH is $400. So this one, I'm going to change the rate to $400. So and then I'm just going to delete this bottom item so you can see what I did there. I pulled them in, but then I'm going to double check that they're actually doing the right rate because that billable item pulls in the cost, which is typically how that billable function works because you usually use it when you pay for like gas or materials or something like that. So that the materials will then populate over into the invoice as just the amount that you paid for it. Plus you might add a markup if you were doing like a construction process project, for example, everything you paid for. You can then say, when I paid for it, I'm going to pull it into the invoice and at cost. But we don't want to pull it into the invoice at cost here. We want it to use the items to make it the sales price. So it gets a little wonky on that. You got to be really careful with that tool. So there is that. So everything else is an invoice. So I'm going to go down here and change this to the 5% for our generic problem, which you could do here where you can change the math if you want to follow along with our generic problem for the sales tax. And so there it is. So what's this going to do? It's an invoice now. So it's going to increase the accounts receivable for the full amount. $30,450. The other side is going to go to the sales driven, you would think, you know, by the items, but it would be the $29,000 that we charged and then sales tax payables going up a liability $1,450. And then the inventory is going to go down by the amounts driven by the items, hopefully. And then the other side is going to go to cost of goods sold. The net impact on net income is the sales price minus the cost of goods sold. We also have the sub ledger for accounts receivable will be impacted tracking the fact that Eric music is the one that owes us the money. And we're going to try to collect on that. And then the inventory sub ledgers also going to go down by units, hopefully as well driven by these items. Let's check it out and double check that that is indeed the case. Let's save it and close it. Save it and close it. And then we're going to go to the tab to the right. We're going to run it to refresh it because we only work with fresh stuff here. No, no old moldy reports. And then in the accounts receivable going into the aid to the R going into the aid to the R. We've got the invoice here. That looks good. 30,000 450 30,000 450. That's the total down below. So that's the total. Okay. Go back up top. Ex out of that. Scroll up back to our report. Then I'm going to go to the profit and loss, run it to refresh it and then drill it into the cost of goods sold. I'm sorry. Let's go to the sales side first. I'm kind of curious to go to the cost of goods. So I want to get there first, but no sales. Sales first. So there's our invoice with the two line items, the 25,000, the 4,000 doesn't include the sales tax. Just as we would expect closing that back out, scrolling up back to the report back to the middle. Back to the report and then back to the middle tab. And then we want the liabilities. There it is in our sales tax payable for that department because we're going to pay California department and so on. There's the sales tax, which looks correct. Okay. That's a lot of sales tax and scrolling up and we're going to go back. And then we also have the inventory. If I go into the inventories gone down, inventory is the asset. It's going down with an invoice because we sold the inventory. So there's the amount for the invoice 1006. So you've got these dollar amounts separate line items because of the, but it's being driven hopefully by the units of inventory that's being, that are being decreased here by. So if I go into that, those amounts aren't on the actual form, but it's using the items hopefully to be decreasing the inventory because we use that billable thing to do it. Notice there's this invoice is 1006 with two lines. And I have, I have four lines here. Now that I believe that's because QuickBooks is using a flow assumption of first in first out. So that means when they, when they remove the inventory, they have to do it in alignment with what the layers of the flow assumption, even though we haven't changed the price of anything, I think they're tying it out kind of like to when we purchased it. So that why, so that can be a little confusing at first, but I believe that's the rationale for it going back and then tab to the right and the profit or the cost of goods sold here. So there's the cost of goods sold for this side. The net impact on the AR on the income statement is the revenue minus the cost of goods sold and it did put the revenue into the sale of product revenue. Right, which is what we would expect driven by the item. That's what the item would typically tell it to go to. So that looks good. It didn't put it into like a random revenue account for, for the billable item. It's just that dollar amount thing. That's a little weird. So if I go back to the first tab and the AR, the sub, we should have a sub ledger breaking out by cuss by customer. So if I go to the tab to the right, right click on it and duplicate it. So we can see that sub ledger. And we're going to go to the reports and let's close up the bogey and scroll down who owes you. Let's look at the AR aging summary report and check that out as of the end of the year. 12 to 1, 2, 3, 2, 3, run it to refresh it. And so we've got the agents, but I'm just looking at the three customers that add up to the 38 671 50. That should tie out to what's here 38 671 50. We could also track that internally to try to collect on it as we saw with the invoices before in the sales tab, like the customer tab. And then in the customers, which if you were in the business view, by the way, would be in the, the get paid and paid area. And in the get page, you got your customer tab here. So there we have it. And then you can find, you can find the customer or I can sort up top by the open invoices and then it'll give us a list of customers with the open invoices. And I think we're looking at Eric music, I believe. And then you could also go to the sales tab or the invoices and track your invoices that way as well. And the sales tab, you can change this to invoices and possibly you want the open ones to try to collect on the payments. If you were on the business view, by the way, that's in a little bit different area in the bookkeeping tab on the left. Transactions up top. And then you're all sales transactions to find those invoices. All right. So now that we got the idea of it, let's do it again. Ultra base one more time here. So let's check out if I go to the expenses tab on the left hand side and I'm going to close this out and I go down to Gibson. This is another person that we buy guitars from our inventory. So we can see we got the two purchase orders down here for them. So if I go into the purchase order, this being the beginning request form, this purchase order has this customer related to it. The customers, they're not for the benefit of Gibson USA, the person we're purchasing from. But for us, so that when we get the guitars, we can turn around and sell it. Then we entered instead of a bill, which we'll do in the following month. We entered a check this time when we just to pay off the bill as we got the guitars or when we got the guitars. And then in that check form down here, we put it's a billable item and we could link to it here. If we so choose, we added the customer. So now we can turn around and sell it to music stuff store. We have the same caveat to be aware of that it might pull over at cost instead of for the sales price, but it still has that linkage. So let's go close this out plus button. Let's make an invoice for music, music stuff store. Great name. Who came up with that name? That's genius. We're going to say add that. Close this thing up. And then we're going to say this is going to be the 24th on the date due date is going to be 30 days from that because we have the net 30. And then down below once again, it pulled in everything. You got the link, which is nice. But if I type in again down here, G G B G S B. It comes out to 777 so it pulled it in at the cost instead of instead of the sales price. I got to change it to 777 if I want to use that method. I got to close it. I got to close this back out. I want to use the one with a link in it though, because then otherwise it'll if I if I don't use that or delete the link, then it'll try to pull in again when I make another invoice. So you still you can you want to use that one to if you're going to use this method and change the rate typically any case. So there's the link. And so so now we should be good. I'm going to change the sales tax to that 5% as has been our custom for the practice problem. And there it is. What's this going to do invoice counts receivable goes up full amount. The other side goes to revenue driven by the item for the amount we charge the difference sales tax going to a sales tax payable account inventory going down by an amount. Not on the invoice, but the amount that we just saw and changed driven by the item cost of goods sold going up by that same amount net impact on net income revenue minus the cost of goods sold. Also, the sub ledger for receivables is going to be impacted from music stuff store so we can try to collect from music stuff store and the sub ledger for inventory will be impacted for the number and units of inventory for the Gibson SG guitars. We're selling. Let's save it close it and see if that is indeed what happens. You could say it, but let's see if that is what really happens. All right. Let's go to the balance sheet run it to refresh it. So we're working on fresh stuff just like a fresh piece of fruit or something. And then we're going to go into the AR accounts receivable. There it is. If I go into it 818550 looks movie B to the end two letters to explain that one be in that one looks right for the full amount and then going back to our report. The other side's on the profit loss. The income statement run it to refresh it. It should have gone into the sales of product income. So there it is right there music stuff store looks good. That one's on the books for not the including the sales tax, but what we charge the difference of the sales tax at the 38850 should be a payable accounts. Let's go back to our report here. Go back to the balance sheet and then go into the payable account, which is a liability. Mine's for California because we had a California Beverly Hills, but we just did a generic 5%. There is that one that looks correct going back. We know that the AR or that's the inventory is also affected inventory. That's what you're on. Keep your head in the game dang it inventory. So there it is inventories impacted down here. Notice there's two line items of inventory even though we only had one line item on the invoice because I believe of the flow assumption first in first out. So I think that looks good. Those amounts aren't on the actual form because they're driven but driven by the form. If I go to the sales cost of goods sold has those same amounts here. The net impact on net income on the income statement revenue minus the cost of goods sold. Also, if I go to the balance sheet, the accounts receivable should tie out to the sub ledger 46830, which should tie out over here to our sub ledger 46830 breaking it out by customer. I should also be able to find the open invoices on the tab to the left. If I wanted to look in my sales tab and see for example by customer my open invoices so I can try to collect on the invoices and or send statements saying hey you owe us money people. You owe us money. There's four open invoices. This has been a long time. We gave you a guitar. Okay. And then we also have the inventory. I didn't check the inventory last time. We should have a sub ledger for the inventory. So I'm going to right click on the tab to the right. Well, let's just let's just do it on this tab since I don't need this report anymore. Let's go down to the reports on the left. Close up the buggy and type in inventory valuations summary. Let's do that one. And then change the data just to the end of the year 123123 you could do the year to date on the thing. And that gives us our units of inventory. We have a negative GSB that shouldn't happen because we've but so we have we have a phantom guitar because our practice problem sold something that we don't physically have which shouldn't generally be the case but in any case. 9698 is here if I go back to the first tab. 9698. 698. 9698. Read it right. Okay, so I think that's it. Let's take a look at our trustee trial balance going to the tab to the right. And just check our numbers down here as we do every time. Type it in into the reports the trial balance best report for checking the numbers balance sheet on top of the income statement in essence with no subtotals therefore it's nice clean and easy. We're going to go from 010123 to 123123 run it to refresh it. And that's what we have so far if everything ties out that's great if it doesn't try doing a range change expanding the range if there is a change in the numbers when you change the range. Drill down on that number change and then try to change the date possibly which is something that's worth doing in the practice problem but something to be careful of in practice. And at the end of the entering the first month of data we will run transaction detail reports which help us to drill down on any differences.