 QuickBooks Online 2022. Purchase of inventory using bank feeds, periodic versus perpetual system. Get ready because it's go time with QuickBooks Online 2022. Here we are in our bank feed practice file we set up with a 30 day free trial. Holding down control, scrolling up a bit to get to the 125% currently in the homepage, otherwise known as the get things done page. In the business view as compared to the accounting view, if you wanted to change to the accounting view with something you can do by going to the cog up top, switch to accounting view on down below. We will be toggling back and forth between the two views either here or by jumping over to the sample company file currently in the accounting view. Back on over to the bank feed practice file. Let's open up a few tabs to put reports in by right clicking on the tab up top and duplicating it back to the tab to the left right clicking on it again, duplicating it again back to the tab to the left right clicking on it again and duplicating it again. As that is thinking, let's jump on over to the sample company file to see whether reports are located in the accounting view which is right on the left hand side under the reports. Back on over to the bank feed practice file. We're going to open the balance sheet, the income statement and this time a trial balance report as well which is a really good report to kind of see what is happening as you enter transactions. So let's see those items. Let's go to the business overview. That's where the reports are located reports and then closing up the hamburger, opening up the good old balance sheet, the BS balance sheet and scrolling up with the range change from 0101212 123121 and run it. And then we'll go to the tab to the right go down to the business overview again into the reports closing the hamburger going into the profit and loss the P and L the income statement doing the range change up top from 0101212 123121 and run that one. And then go to the tab to the right. This time we're going to go back into the business overview into the reports close up the hamburger. I'm going to type in the trial balance which is a really good report for tracking transactions because it's a little bit easier to see everything in one location. So let's look at it going into the trial balance range change from 0101212 123121 and run it. Now this is in essence the balance sheet on top of the income statement in one place without the subtotals. So we've got checking accounts, balance sheet account, equipment balance sheet account cost of goods sold income statement account, telephone and utilities income statement accounts. That means you can kind of see everything in one place here as you enter transactions in a much smaller and more compact fashion. Although it does have the debits and credits if you're not used to the debits and credits that could be a little bit intimidating but even if you're not used to the debits and credits you could see what is happening to the accounts quite quickly and be able to drill down on those accounts by only having one report open as opposed to the other two reports. So in other words in practice you might have either the balance sheet and income statement open as you do data inputs so you could see what is actually happening to the financial statements or possibly simply having only the trial balance open which has the balance sheet on top of the income statement still allowing you to drill down on those transactions and seeing the detail of them. Let's go back to the first tab. This time we're gonna be opening up our bank feed information which under the business view is in the bookkeeping section then in the transactions tab up top and then in the banking. However we might be adding new accounts and when I do so I like to be in the accounting view so I'm gonna go to the cog up top and switch on over to the accounting view to get into our bank feeds area which is located a little bit different. That's in the banking on the left hand side and then the banking up top. So I'm gonna close up the hamburger. These are the transactions currently in what I would call bank feed limbo that we're gonna be adding into our system. Now we're thinking about inventory and adding inventory to the system in prior presentations. We thought about possibly different methods we could use and we want to have the system or the idea of we're gonna go from the easiest method relying as much as possible on the bank feeds and then deviate from it. So the easiest method would try to stick on a cash basis method and when we make the purchases of inventory recording them to cost a good sold instead of recording them to the asset of inventory so that then when we record the sale or the deposit and the sale at that point we could just record it to sales and we're not tracking the inventory at all other than just having an expensing it. Now if we had more inventory than that we would have to use either a periodic inventory system tracking the inventory outside of QuickBooks and only recording the dollar amount in the account in QuickBooks or a perpetual inventory system which is gonna track the inventory increase and decrease not only in dollar but also in unit and types of units in the QuickBooks system. So as a quick comparison let's go back on over and record a transaction first on a periodic system. So let's pretend that this is an inventory item here for Primerica and last time we recorded it to cost a good sold because we were saying we're gonna be on a cash based system in essence. This time I'm gonna move it to a periodic based system in which case I'm gonna change this to inventory increasing the inventory account. Now this cannot be done on a perpetual system this way because I'm not using inventory items and that's what we will compare and contrast in in this presentation. If I change this to an inventory account in other words I'm just gonna be recording something directly into inventory in a dollar amount but not having the sub reports that will report the units of inventory and related dollar amounts and have the flow assumption in this case in QuickBooks case generally first in first out. Okay so this will be the starting point. I'm gonna add a new account because I deleted all the accounts and I wanna add them as I go and this is gonna be an inventory account so it's gonna be an other current asset type of account and then here will be inventory. So I'll just choose one of these other long term assets that I say other asset. I want other current asset. It's gonna be a current asset and then inventory there's the inventory. So there we have it other current asset and then inventory I'm just gonna call it inventory and there it is. So let's save it and close it. So now it's going to inventory. I'm not gonna make a rule of it which we could do in practice but in this case I'm just practicing the different methods. So we'll just put it directly to inventory here. I'm gonna add it and it's gonna, what's it gonna do? It's gonna increase the inventory account as opposed to instead of what we did last time increasing the expense account of cost of goods sold. So let's go ahead and record it and check it out. So if I go up to the first tab here on the balance sheet and run it again, holding control down, scrolling in on it and then we're gonna go into the checking account here going into the checking account. We've got then the $50. Now the other side in the split going to inventory if I was to drill down further on it it will of course not go to the bank feeds but rather be going to the expense type of form as we can see here. Going back up, closing this back out, scrolling up back then to our report. So there is our report. The other side did not go to cost of goods sold but rather this income or asset account of inventory. If I go into that inventory account then we can see here we have our inventory transaction once again scrolling up and I'm gonna go back then to our account. Now if we kept on doing that transaction every time we purchased inventory and when we purchased inventory this account would be going up and up and up. Notice what I don't have in this system. I don't know what kind of inventory we bought. I don't know how many units we bought and I don't know the cost per unit. I'm assuming I'm imagining on a periodic system we're tracking that outside on say an Excel worksheet. What's gonna happen here is I'm just gonna increase inventory, inventory, inventory goes up, up and then I'm gonna adjust it periodically possibly with on a daily method, possibly a weekly method, possibly on a monthly method by doing my classic inventory or cost of goods sold calculation which is beginning inventory plus the purchases that we made minus ending inventory which is the physical count we can have at the end of day, week or month. And the difference then we're gonna assume is the sales, the cost of goods sold. So then I'll adjust this down periodically at that point in time and record the cost of goods sold and that would be a non-cash transaction. It would be a deviation from a cash basis system. And so to do that, you could go off, I'm gonna right click on the tab to the left and duplicate it. So when I do the actual adjustment to inventory you could use a journal entry meaning I could hit the plus button up top and then go into the journal entry on the left, on the right or I could enter a transaction into a register account which is in the accounting view here in the accounting down below and then in the chart of accounts you could choose the inventory account here and go into the register so that it looks like a check register but we're in the inventory register and you might then record a decrease with a journal entry type of transaction, a journal entry like this and then decrease the inventory recording the other side then to cost of goods sold periodically so that you can tie out your inventory account to what you have on your worksheet on a periodic type of system. So the other system we can use is a perpetual system which you would have to have inventory turned on which is typically turned on by default but you could go into the cog just to double check it and then go into your account and settings and we'd be looking at the sales side of things so we're gonna be over here in the sales area. So not in the usage in the sales and then we've got the sales content and the products and services track inventory quantity on hand so you can see it's on here I believe it's on by default so if you're gonna add inventory items it will basically by default track those closing this back out then I'm gonna go back to the first tab now and I'm gonna go down I'm gonna look at another Primarica one and consider entering this one into the system but I have a bit of a problem here because again if I want to track it using a perpetual system I can't just record it to inventory because it won't give me the sub ledger I've gotta use items I've gotta have items to be set up in order to do this. Couple ways you could set up items you could set them up as you enter transactions not in the bank feeds but normal transactions so if I go to the tab to the right if we were to enter say a normal kind of expense or a bill or a check form we can add the item there or you can go on the left hand side and go into the sales area which would be the get paid area if you were in the business view and we can go to the products and services tab to the right which would be in the drop down video or area here on the business view and then we've got our item so we can then add an item if we so choose so let's do that we're gonna add an item here so that we can track the actual inventory item now if it's an inventory item and we wanna track it perpetually we can use this if it's an inventory item and we do not want to track it perpetually then we can use this and that would mean that it's not gonna be increasing inventory on the purchases and decreasing but we're just noting it's still an inventory item if it's a service item then we don't have to worry about inventory we can use the service item which still allows us to track what we're actually doing but it's not gonna have the inventory tracking so we're gonna try to track the inventory using that first one up top and I'm just gonna call this inventory item one let's call it I'm not gonna put any number on it just gonna have a generic kind of problem we're not gonna add a category quantity on hand I'm gonna say started at zero there was none on hand as of let's say the beginning so we didn't have any on hand before this point reorder point I'm not gonna be adding at this time and then the inventory asset is the account now notice that that account is different than the inventory account so I'm actually gonna keep that as inventory asset so I can see the inventory it's gonna be on two separate accounts the first one was on a periodic system and this will be on a perpetual system and then I'm gonna say it's gonna be called inventory item one this is what's gonna show up on the description the sales price this isn't what we're purchasing for this is what we're selling for which I'm gonna say is $60 it's gonna go into an income account which is the sale of product account that's gonna when we sell it not when we purchase it when we sell it it's gonna go into that account and then the cost purchasing information I'll put the same description cost is gonna be $30 we're gonna say we're purchasing it for $30 and then it's gonna go into this cost of goods sold now once again it made another cost of goods sold account because we created one cost of goods sold account but this one will track it on this perpetual system so we'll be able to see the two there and then on the preferred vendor we could set up a preferred vendor which in this case is Primarica if we wanted to that's who we purchase our inventory from so I'm gonna save and close that so now we've got an inventory item here so now we've got our inventory item which will be tracking inventory when we use the item in order to track the inventory on the purchasing side of things I have to use a expense, a check or a bill on the sales side of things I have to use an invoice or sales receipt I can't just record the sale with a bank deposit because it doesn't have the items related to it now you'll recall that when I enter the item here it would still be recording a it would be recording in essence an expense form but I don't have the capacity to add the item in here so one way that you can do this then is instead of entering it this way you can go to the tab to the right and I'm gonna enter a transaction this on the tab to the right I'm gonna enter the transaction first and then match the bank feed out to the transaction I have made couple different forms you could use you could use an expense form or a check form that would mean that we already entered the decrease to the checking account and then when we matched it up to the deposit that's gonna I mean to the check or expense that happens through the bank feeds we wouldn't be recording anything new we would just be verifying that that had been cleared and it would be a matching situation or we can use a bill type of form which means it would be an accrual kind of component and that would increase accounts payable the other side then go into the inventory and then when we match it up it will be taking it out of the accounts payable and recording it recording the decrease to the cash I like using the bill form because that you know that'll allow us to kind of track it in the accounts payable so I'm gonna use the bill form and see how this matching system works and this is gonna then be going to Primerica and notice you might even do this after hold on a second like you might already see this clearing on the bank feeds and then you're like okay I'm gonna enter a bill because the end and use it to match out or you might do this beforehand depending on what your accounting process is here is so Primerica we're gonna say the terms you know I'll just keep say the terms are net 60 and then I'll put this in place as of 010221 let's say which is before this transaction this transaction's on 1018 so 1018 I might make it closer to the 1018 but I'll keep it there it's in so there it is and then we gotta add the category now it's not gonna be a category because I'm not gonna record it just to inventory here because that will not let me track it by the item so I'm gonna put it into the item detail and then I'm gonna choose my item we set up and there it is so what's this gonna do it's going to increase the accounts payable because it's a bill the other side is gonna be going to the inventory driven by the item and there'll be a sub ledger tracking the units and cost by item using a first and first out method so let's go ahead and save it let's save it and close it and check that out save it and close it and then I'll go to the tab to the right run it, holding control down and scrolling up we're gonna have now not a decrease to the checking account but rather we had an increase in the liability of hold on a second, where did it go? Okay, I got it to record here but just note that you gotta be careful when you're doing a practice problem basically in the past like this and I'm gonna go back to the first tab where our products are just to note if you have an issue where it's saying you didn't enter the beginning date I'm gonna go back to the edit and I wanna make sure my starting point is before the point at which I'm gonna enter the data so I went back in and adjusted this to the starting point of 11, 2021 so that I can basically go back in time and record this without it causing any timing issue problems for tracking the inventory and then I recorded the bill okay, so then if I'm gonna close this back out I'm gonna go to the tab to the right and now let's take a look at it running it and if I go down then I have my two inventory accounts at this point in time and so the second one, I believe the second one is the one where I'm using the perpetual inventory system so if I go into the checking account here I'm gonna go into the checking account I don't have anything in the checking account because it wasn't an expense type of form going back up, gonna go back to my balance sheet instead we have an accounts payable the liability account now I'm gonna match up this liability account to what clears the bank feed which will take it out of the accounts payable and then record the check that's gonna be the in-between step we're gonna have with the use of the bank feeds we've got our inventory that is recorded here nothing's currently on the income statement at this point from that transaction I'm gonna open up another tab right-clack clicking on the tab to the right and duplicating it look at the sub ledger that has been created tracking the inventory within the system by unit and cost to do that I'm gonna go down to where the reports are located on the left hand side I'm currently in the accounting view now I like to just type in inventory up top so I'm gonna look at the inventory valuation summary report and then as of 12 that's fine so you can see here now I've got the quantity one and I've got the value at 30 this is what we're not tracking or what we're missing if we use one of the other methods like a cash method or if we use a periodic method in other words if we use a periodic method this type of reporting is something we would be doing outside of QuickBooks in an Excel worksheet and adjusting QuickBooks periodically at the end of the week, month or day for example so let's go back to the first tab now so let's go to the first tab and now I'm going to say instead of recording this transaction which is that $30 transaction decrease in the checking account with the use of the bank feeds I'm gonna make the go to the matching find the match for this transaction and see if we have a match now note that you might have to refresh the screen over here in order to do it you could refresh the screen here just to make sure it shows up and you also need to check your dates if your dates are pretty close then QuickBooks will often automatically pull this stuff in and if you actually did it in a system where you entered the bill first and then did the bank feeds it will typically pick it up and pull it in and might automatically match it automatically for you however, if you're gonna go do the bank feeds and then enter the bill and in that system then you might have to go into the here and do a little bit more searching just to make sure it matches out properly so then I've got the bill down here I'm gonna go ahead and match it out so this in essence is gonna be like recording the bill payment type of form in essence now it's cleared the bank so it's gonna decrease the accounts payable and the other side's gonna go to the checking account so let's go ahead and save that and we're gonna say okay we matched that out so if I go to the balance sheet now again now I could go into the checking account and see that $30 decrease so if I go to the checking account there's the check notice it's a special check it's a bill pay check because it's a check that was used to pay off the accounts payable and so I'm gonna go into it and say let's check it out that takes me into the source document which is not an expense form this time but a bill payment form that is linking to the bill that we entered and if you wanna see the detail of what we purchased we can then link to the bill to see the detail closing this back out going back up top going back then to our balance sheet the other side is gonna go to the accounts payable which is now back down to zero so if I go into the accounts payable then we're gonna see nothing's gonna be in there at this point in time if I change the date range 010121 and run it then we're gonna see the bill and then the pay bill activity down below okay scrolling back up top going back then to our report now we won't get into too much on the sales side of things but just note if you were to sell it at that point then you can't really wait till it clears the bank and go into the banking section and record the sales item as just a deposit that has cleared because you're gonna need to record the items again so you can't really just go into here you'd have to record some kind of sales transaction go into the second tab to see that go into the hamburger hit the plus button that would be either an invoice typically or a sales receipt if you wait till the sale clears the bank from the customer something you've received as a deposit it would be a bank deposit and the bank deposit doesn't have the items attached to it so when you make a sale you want to typically use an invoice or sales receipt if you're trying to track the inventory on a perpetual system in QuickBooks so let's enter one just so we can see it so either the sales receipt or the invoice let's enter an invoice to see the other side of how we would track this in the system an invoice would be a non would be an accrual type of transaction we'd be looking at here let's just make up a customer I'm just gonna call it customer one okay hold on a second customer one and then tab we're just gonna add a very generic customer I'm not gonna add any details just calling it customer one if we wanted to email the bill or the invoice we would need to email but I'm not gonna do that at this time I'm just gonna tab through to see the inventory information on the date let's make this as of let's make it oh one fifteen two one so we'll keep it there and then we're gonna choose our item down below which is going to be the inventory item one now note it pulls in here with the $60 because that's the sales price not what we purchased it for what's and then you might have sales tax that would be involved I'm not gonna turn on sales tax for the purposes of our practice problem but so what's this going to do it's a little bit more complex than you would think just looking at it it's an invoice that means it's gonna increase the accounts receivable that means we have not yet got paid if it was a sales receipt it would increase cash or some kind of clearing account and then the other side is gonna go to sales for the amount we charged $60 not the amount we purchased it for and this is what's not on the invoice this is what you don't see when you normally purchase things like at the grocery store or something like that the other side happening automatically decreasing the inventory account by $30 because that's the amount it knows given by the item the other side going to cost of goods sold for the $30 and expense account decreasing the net income and we'll be tracking this in terms of the sub ledger for the customer but that's not really where our focus is and we'll be tracking this the sub ledger for inventory on the perpetual inventory method so let's save and save and close this save and close it and we'll take a look at that real quick so if I go to the tab to the right and then scroll up and run it again now we've got a non cash transaction that took place at this point in time accounts receivable went up by the $60 because people owe us money for that sale that we have not yet paid or received at this point and the other side went into inventory for the perpetual inventory decreasing inventory back down to zero so if I go into that we purchased the inventory we had an increase when we did so of the $30 and then we sold it and when we made the invoice the invoice is the thing that drove us to decrease the inventory there so if I go back up top then the other side of this transaction is going to be on the income statement so the income statement if I scroll down we've got then the cost of goods sold there's the $30 on the cost of the goods that are sold hold on a sec I refreshed it so now we've got two cost of goods sold this is the one that we use for the perpetual inventory system going into the cost of goods sold there is the cost of goods sold recorded by the invoice now going back up top the other side is in the income account product sales it's in that $60 amount and if we track the sub ledger going to the report to the right then in updating this one I'm gonna say let's run it again so now we've got zero items in the inventory because we sold it so this number should be always tying out to what's on the balance sheet for the second inventory account that we're using the perpetual inventory system to track now let's do this one more time I'm gonna go back to the first tab I'm gonna look at this transaction now and do a similar kind of process to it but this time instead of entering a bill I'm gonna enter a check so I purchased inventory again I can't just record it to inventory I've got to use either a bill or a check so I'm gonna say I can't do that here because I wanna track the inventory and I don't have the items in the data input here so I'm gonna go back to the second tab and I'm gonna say this time hit the drop down instead of entering a bill I'm gonna enter an expense form which is kind of like a check with no check number that you might use for electronic transfers and this one's gonna go to Primerica again and we're gonna say there it is and let's say that this happened or the check happened on we'll just say 0117 for example the payment I'll keep that as is and then I'm gonna go down and we've got then the inventory that we're going to be purchasing now this was memorized from the last transaction I'm gonna delete it there I'm not gonna record it to the category detail but instead go down to the items purchasing our inventory unit item now this one was the $30 unit so I'm gonna actually add another one I'm gonna add another item notice I'm adding as we go this time and I'm just gonna add another inventory item this is gonna be inventory item two for $50 let's say the $50 item and then I'm gonna say it's not a category I'm gonna say the quantity on hand is zero at the starting point I gotta bring this back to the prior period so I wanna make sure I'm in 2000 let's do a 2000 beginning of 2021 so it'll let me track it on a perpetual system and then I'm gonna go it's gonna go into the inventory account there's the description the sales price I'll say will be let's just say $70 that's what we're gonna sell it for not purchase it for and purchase description and then the cost is gonna be that $50 the $50 that we're gonna purchase it for cost of goods sold that's what we're gonna be tracking it in the vendor again might be Primerica is gonna be our vendor let's save it and close it and so it says I needed a quantity on hand which is gonna be zero so I'll save it and close it again and so there we have it now we got that $150 item this is an expense form but we're not entering it from the bank feeds we have to enter it here so I can use the items which is going to be increasing then or decreasing the checking account the other side is gonna be an increase to inventory and the sub ledger will be impacted so I'm gonna go ahead and say save it and close it let's go to our bank accounts now or in our in our the bank account that's in our balance sheet and so if I go into my checking account going into that checking account holding control, scrolling down a bit now I've got this expense form that I put into place but I didn't enter it with the bank feeds it's actually this one I didn't I did not enter it with the bank feeds but I physically entered it outside of the bank feeds so that we can add that inventory item going back on over the other side would be going into the inventory so now inventory has gone up by the $50 again so if I go into that inventory item we've got these items in here so there's the $50 there going back up top we also know that the sub ledger which is all the way to the right tracking the inventory by unit if I run that report again also has that $50 item in it as well and this is the perpetual inventory system so now if I go back to the first tab I can once again say okay when I record this I'm not going to record another expense I can now match it out to the expense that I already put into the system this is not going to record anything new this time because I already entered the expense it's going to help me with basically the bank reconciliation tying out to what has cleared the bank to what I put into the system so I'm going to say let's do let's say this is going to be all bills and I'll say this is going to be on one let's say oh one and see if we can pull in so there it is so that's the one I'm going to match this out so this isn't going to do anything new all this is going to do is say now I've matched out you've tied out, you've reconciled you see that this thing that actually cleared the bank is correct because it matches what you put on your system this is actually more of a full service kind of accounting system where we're not reliant on the bank but we're double checking with the bank so I'm going to close that back out that will then pull it over but again it's not going to record anything new it's just going to help us verify that that transaction that cleared the bank is valid and that we have recorded it