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Here we are in our custom zero home page going into the new company file we set up in a prior presentation that being get great guitars we're going to duplicate some tabs to put some reports in like we do every time right click in the tab up top to duplicate it right click in the tab up top again to duplicate it again let's go back to the tab to the middle I counting drop down up top we want to be opening up our balance sheet report as it is thinking I'm going to tab to the right I counting drop down again this time open up the income statement or profit and loss back to the middle tab hitting the drop down on the range we're going to have a custom range we're going to go to the drop down we want to have our own custom home on the range over here we're going to have it on December 31st 2023 and have it up to date up to date home on the range tab and to the right this one looks good for the income statement let's go to the first tab now and now we're going to imagine we're receiving payments for invoices that were issued in a prior presentation so remember the flow here I'm going to jump over to a flow chart this is a QuickBooks desktop flow chart but we're just looking at the normal flow of an accounting cycle and in essence the sales cycle which is this middle area remember that it depends on the industry that you are in so if you had a very basic industry like you just collect money from YouTube or something then you'd probably just have a deposit coming through the bank feeds that you would record as revenue once you receive it using the deposit form to record the revenue however if you have a cash register or something it gets more complex because although still on a cash-based system you now have to collect the cash most likely group it or the credit card receipts and whatnot in such a way that you can deposit into the bank so that you have the internal controls of checking your cash register to your sales receipts and whatnot and that the deposits going into the bank in the same format that it will be on the bank statements so you can reconcile if you're in an industry like a bookkeeping firm a law firm where you do the work first and then invoice the client then of course we're gonna enter the invoice and a lot of e-business is is gonna need an invoice these days because that often is the form to facilitate the sales transaction when we email out the invoice so we sent out the invoice now we're gonna be receiving the payment so you can think of that as a deposit type of form that is going to be happening when we receive the payment now usually if you're in a system where you're getting one payment per invoice then it's usually fairly easy for us to then receive the payment and deposit it directly into the checking account so for example if you send out an invoice and you would expect some kind of electronic transfer or something like that and you receive the payment for that dollar amount of the invoice that goes into your bank account then we can record the receive payment as basically a deposit at that point in time however we could imagine more complex situations where we're gonna get paid on the invoice or multiple invoices get paid for example or maybe they pay us through some other kind of payment platform like a payment port or a credit card or something like that and then the credit card company is going to be the intermediary receiving the payments and when they group the payments that actually hit our bank account they might have multiple invoices that they've received payment on and put one lump sum into the bank account so that's one of the common issues that come into play with our receivables in our sale cycle is the grouping of the money that's going to go into our bank account on our books in the same grouping in format on the bank statement so that we can do bank reconciliations so in order to deal with that issue sometimes you might create an intermediary clearing account which you might set up another checking account for example to have a hold-in account that you can put your money in and then when it gets grouped either cash grouped together or credit card payments grouped together to actually go into your checking account you can then take it out of the clearing account and put it into the checking account in the format that matches what's on the bank statement so we're gonna practice that middle step which can be a little bit confusing of a step and something you have to think through to see whether or not you need to have that middle step or not when you're at it when you're at a cash register you can clearly see why that might be the case if you're collecting cash payments and or credit card payments right because if you're selling five dollar items all day long you're gonna be collecting the cash when you go to the bank you're gonna deposit not a hundred five dollar transactions but one lump sum transaction for the sum of the day's sales so that means that the bank statements gonna show that one lump sum and you would like your books to reflect the same thing so you're gonna have this clearing account that can help you to facilitate that that process so let me show you let's see this in zero let's go on over what I'm gonna do first is go to the accounting drop down and let's look at our chart of accounts and I'd like to add a clearing account which I'm gonna set up as basically a bank type of account and it's the money that's just gonna go in and out of the clearing account so that we can then group it if we need to into the checking account when it hits the checking account one other thing I just want to mention before we dive into that is the bank feeds you might think about how the bank feeds are gonna fit into this you could try to wait till something clears the bank you invoice someone if they're gonna pay you electronically you could try to wait till it clears the bank to then to then match the bank feed deposit to the invoice you could you could kind of test that out but again that will be difficult to do if for example you receive multiple invoices and whatever whatever platform is facilitating the sale like a credit card or something groups the payments together you won't be able to do that as easily so you gonna want to think how the bank feeds are gonna fit into your system if your invoicing clients because the invoice is a non-cash kind of transaction so we'll talk more about that when we get to the bank feeds course or section but just want to point that out all right so we're gonna add a bank account here I'm gonna add a bank account now it's gonna make me try to connect it I don't really want to connect it I just want to add it so I'm gonna say this is gonna be let's just say chase I'm just gonna type in an account but it's really just gonna be a clearing account chase chase us all right that's just a bank so I'm just gonna put something there and then I'm gonna skip the check-in because I don't want to put up an account there account name it's gonna be the cash clearing clearing account you could come up with a more creative name like undeposited funds or funds to be deposited or whatever you want to call it and we're gonna call it every day okay and then account number they're gonna make me put something here so I'll put something there I don't know the code I want to use yet so maybe I'll just see if they let me post it without it and then I'll put it in in a second US dollars good save it and continue it pour five or so there we have it now I can look at the code which is the account number here so the checking account is 1 1 0 0 so it should probably be under that so let's say 1 1 1 0 let's say I'm gonna edit this and put a code 1 1 1 0 for the account number code and I will say let's save it and this it's I put the day-to-day I think it's good there okay let's save it so there we have it all right so now we're ready to go we can now collect on the invoices so we entered invoices last time we could track the invoices by hitting the drop-down up top and I go to invoices we can also track the invoices under the contacts but this is kind of our list of invoices if I go to this tab these are the invoices that are awaiting payment so we expect to be paid in whatever format we're expecting payment now this is the format we expect payment gets a little confusing these days because you might be expecting electronic payment they might send you a check you might give them multiple options to pay you you might be using other platforms to help to facilitate the payment so whatever the process is you're gonna need to make sure that you're able to track the receipt of the payment obviously and then when it's gonna be hitting you know the checking account and then we're gonna record the received payment here which will decrease the accounts receivable and the other side is gonna go into the in our case the clearing account and then we'll put it into the checking account from the clearing account so we're gonna choose the payment here now we're gonna be picking Mr. Anderson so we want to make sure that we're in the awaiting payment you could actually go into it here if you just have a payment on one of them and then down below where it says receive payment you got the amount paid the date the paid to and we're gonna put it into our clearing account where you can put it into the checking account and reference number so that's one way that we can do it the other way is possibly a little bit faster and if you had multiple amounts you were receiving for example if I had multiple invoices that I'm receiving then I can check them off this way and create a deposit for it however I just have one that I'm gonna receive here so I'm gonna be checking this one off and I'm gonna say there's Anderson and let's go ahead and deposit that so this gives us our new batch deposit now we only have one item in the batch but you could have multiple items that that you were depositing this way and if you had multiple invoices that you were grouping together for example to deposit into the checking account at one time as we talked about with this issue with the undeposited funds you could batch them this way as well but you might have other things that you're grouping with it to like you might be grouping other sales with it as well that weren't just invoices like sales receipts so I'll put it through the clearing account in any case so we're gonna say the date is gonna be January 18th 2023 for the practice problem it's a deposit and we're putting it into not the checking account but rather the clearing account that we set up in this practice problem so that's going to be increasing the clearing account here because that's going to be a deposit the other side's going to decrease the accounts receivable not only that but it's also going to be decreasing the sub ledger for accounts receivable for the customer Anderson guitars so let's make the deposit and check it out so we'll make the deposit and then go on over to the balance sheet update the balance sheet so it's up to date and then we're going to go down and say let's check out there's the clearing account clearing account looks good and then the accounts receivable let's go into the accounts receivable here and check it out we're going to say all right we had the decrease so there's the receipt payment form decreased the accounts receivable that's good going back I'm going to open up another form notice there's no impact on the income statement right now because there was an impact when we made the sale but the sub ledger for accounts receivable will be impacted so if I right click and duplicate a tab just to look at another report for the sub ledger of accounts receivable I'm going to go to the reports on the left hand side you can also hit the drop down for the reports let's tight let's just search it down here we want the receivable it's like at the aged receivable summary aged receivable summary like a fine wine it has been aged well so now we've got the all we really want to look at is the total here so we've got it broken out by total and we have it broken out by customer 23 721 50 that ties out to what's on the balance sheet or it should 23 721 50 but we would probably be tracking it internally in the first tab now we could go to the accounting drop down if we go back into well let's go into the business drop down let's go into our invoices and now that invoice up top is no longer a waiting payment right so the invoice is no longer waiting payment if I go into the paid area there's our paid invoice so that's one way we can track it we can also go to the contact drop down and go to our customers perhaps and we would like to see Anderson guitars going into Anderson guitars and we can see our detail in here so invoice approved and invoice paid all right let's do another one so I'm going to go back up top and hit the business drop down and we're going to go into the invoices and so oh by the way the others oh no I'm let's go do another one so Jones guitars let's go into a waiting payment over here don't get ahead of yourself we're going to go into the Jones guitar so we'll add this one so I'm going to select that one and again if I had those two at the same time that I think the payments going to be grouped together when it goes into my uh my bank account then maybe I well I could I could so I could have selected both of those items together and had a grouped deposit that goes into my checking account and that's one method that we could use to solve kind of that grouping problem which is probably all you would really need as to a method and therefore wouldn't need basically the clearing account that were that we're setting up because it's likely that you would get a lot of you would be processing all of your receive payments through an invoice if that's your normal cycle however you can imagine situations where you got paid say cash from the invoices and then paced possibly you got paid cash from a cash register receive payment type of stuff and in that situation you would still need like a clearing account so we're still going to kind of imagine a clearing account situation just to get the concept of the clearing account all right so we're going to be putting this in here we're going to make the deposit and do this again so we're going to say this happened on uh on jan you wary I can hit the drop down this way january 18th again let's do that and 2023 I'm just going to say deposit and we're going to say this is going to go into the clearing account again for jones guitars looks good I'm not going to have a reference number what's this going to do increase the clearing account and the other side is because it's a batch deposit and we made the clearing account a cash type of account the other side uh decreasing the accounts receivable because we're paying off an invoice and we can connect to the invoice by the way if we clicked on it here just to check if we wanted to do that and it's going to decrease the sub ledger breaking accounts receivable out by customer in this case jones guitar being the customer let's do it let's deposit it and then hit that big blue button the green pops up because it's good to go balance sheet update the report we want up-to-date stats here stat so we've got our clearing account has the two items within the clearing account now so if i'm going to deposit them together again if they were both invoices i could have deposited them into the checking account as one lump sum by selecting both of those invoices and making the one deposit i might have wanted to do that if for whatever reason due to credit cards or whatever the payment processing form i'm using is that it was going to hit the bank account in one lump sum uh at that nine five nine nine so i can do the bank rec if they're going to be hitting the bank account with two separate transactions and like this then i would like to see it in my system that way so once again i can tie out to the bank accounts and so so again the the check the clearing accounts a little bit redundant in this system but again you can imagine that i'm also you could have a situation where you're going to get when you're going to also get received payment forms money in forms like that were cash that you're going to deposit together along with these items that are in the clearing account and therefore again you might have a grouping problem when you deposit it into the checking account so we'll just check that out conceptually the other side accounts receivable 19 122 50 if i go to my aging account and update it then uh we're we're now at the 19 22 50 so that should now tie out to what's on the balance sheet if i go to the first tab then and look at this internally business drop down look at my invoices then we can see that uh we have the awaiting payment invoices have now decreased or there's one less of them the paid invoices are now here we've got the two in the paid invoices if i hit my contacts drop down and look at my contacts i can go to jones guitars and go into to that they still owe us some money but uh they paid off this invoice so invoice paid if i go into that invoice by the way you could see the detail uh of uh of the invoice so there we have it amount due uh no amount due so less payment i can click on the payment and link on over to the payment so here's the transaction batch transaction very very nice all right let's do one more i'm going to hit the drop down on the business again invoices and let's do uh smith here uh so let's go to a waiting payment a waiting payment and we're going to pick up this one this time that's the one and then deposit it boom we got a payment for that one and the date i'm going to say is again january uh 18th let's say reference deposit bank account is going to go into the clearing account and we're going to say that this will be there's the invoice for the 8 000 this will increase the checking account the clearing account this will decrease the accounts receivable and it'll also decrease smith guitars the customer sub ledger for accounts receivables let's deposit it and do it again we've seen this before let's update it so now we have in the clearing account 17 5 99 again if i would expect that all 17 5 99 was to hit the checking account in one lump sum due to the credit card processing or whatever i could have checked all three of those invoices off and deposit them them directly into the checking account as one lump sum which hopefully would tie out to the the the bank statement for the bank reconciliation or if they were going to hit the bank statement in three separate deposits i could have chosen them one at a time and simply put them right into the checking account so the clearing account is redundant in this example but again you you could imagine a situation where you might get paid and something other than invoices where you'd still might have a need for the clearing account if you also are receiving receive payments from clients probably for many companies that wouldn't be the case because you would probably be receiving your payments and whatever the normal cycle is if you invoice that's usually the way you're going to be receiving the payments through the invoice although you could have different payment processors credit cards different intermediate pay pals and whatnot and cash and checks and whatnot that that could be grouped together in strange ways sometimes so the clearing accounts good good to get a get a grasp of the check the accounts receivables now at 11 122 50 if i go to the aged account we now have smith guitars off the book so there's the 11 122 50 if i go to the first tab we can hit the drop down and invoices that drop is down that's a down drop we're going to hit this let's go to the awaiting payment so dropping down just like dropping into a half pipe with a skateboard or something so drop down so paid and then the paid items look good i don't know what i'm talking about apologize i apologize for the rambling and uh smith guitars if we go down to smith guitars smith guitars uh there we have it so that looks good now i actually have a correction that i need to make here so if i go to the first tab and i go to the business drop down and we look at our invoices then the ones awaiting payments what i wanted to do was pick up this one for jones guitars and i picked up the other one so if i go into the paid area i went into jones guitars and picked this one so what i'd like to do is uh undo this transaction and then pick the other one and obviously i did that totally on purpose so we can test this process out so one way to do that i'm going to go into the transaction actually drilling down on it from the financial statement and then delete it from there so i'm going to go to the balance sheet and then in i know it posted to the clearing account here so i'm going to go into the clearing account and then i'm going to find that transaction and drill back down into the source so i'm going to say there's the one for jones guitars i'm going to go into that and then we have the options up top so this is the batch receipt i'm going to hit the option up top and we want to say remove and redo so i'm going to remove it and so cash uh clearing account so there we have it so then i'm going to go back to the first tab over here and then refresh this one that is awaiting the payments so now we have jones guitars back on the books so there's the jones guitars and the one i want to pick up is this uh 7500 so let's pick that one up instead and make the deposit for it and this happened once again on january 18th and i'm just going to say deposit and so it's going to go into the clearing account jones guitars let's try it again let's deposit it and then i have to recreate the balance sheet because i messed it up in this tab here accounting drop down reports actually i don't need to go to reports i just go right down to the balance sheet because it's in my favorite reports here i put a little star next to it and everything so we're just going to that one and let's change the range and bring it up to 2023 and okay update okay so now we're at the clearing account at 20 500 here and the accounts receivable at 8 2 to 150 if i look at my aged account and update that one we're then have uh anderson and jones guitars there's the 8 2 to 150 all right let's also see it in the form of a trial balance and just check our numbers as of this point in time so i'm going to hit the drop down up top and let's go into our reports and type in trial balance up top i'm going to go in the trial i should put it into my favorites but i'll just type it in here trial balance type it and it shall come type it and it shall come and so then we're going to hit the drop down and we're going to say custom date range 2023 and update so this is what we have thus far if your numbers tied out last time then you would think the only things that changed that could be off if you made an error or whatnot would be the 20 500 and the 8 2 to 150 because that's those are the accounts that we worked on of this time and i showed you quite intentionally what you can do if there's an error that happens you can drill back down onto those source documents and make the adjustments that you need to make usually it's a date issue oftentimes especially with the practice problem so you can expand the date range and see if it is a date issue if these two numbers change or if any of the numbers change when you expand the range then you can drill back down onto the source documents and make the adjustments necessary