 QuickBooks Online 2022. Purchase of inventory using bank feeds, periodic method, and cash method. 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 1-2-5% we're currently in the home page, otherwise known as the Get Things Done page. The business view as compared to the accounting view, if you wanted to change to the accounting view, it's something you can do by going to the cog up top, switch to accounting view down below. We will be toggling back and forth between the two views, either here or by jumping to the sample company file, currently in the accounting view. Back on over to the bank feed practice file, opening up a few tabs to put reports in by right clicking on the tab up top, duplicating it. Back to the tab to the left, right clicking again and duplicating again. As those are thinking, let's see where the reports are located in the sample company, which is in the accounting view on the left hand side. There are on the reports, that's them back on over to the business view in the second tab. The reports are in the business overview section over here. And then in the reports, closing the hamburger, opening up the balance sheet, the big balance sheet as our first report and changing that range. 010121 to 123121 and then run in it. Tab to the right, going into the business overview again in the reports, closing the hamburger, going down to the profit and loss, the P&L, the income statement, range change up top from 010121 to 123121 and running it. So I'm going to go back to the first tab and we talked last time about the adding of the inventory and we had the three methods that we can take a look at. We can basically and when you think about inventory in QuickBooks, if you look up inventory, they're going to give you the information that's related to kind of the most complex or detailed process within the QuickBooks system. That's the perpetual inventory system in which you're tracking inventory units in terms of cost of the inventory and units of the inventory in the QuickBooks system. However, it's possible to have inventory and run it either outside the system. So that's the first thing you want to think about. In other words, one, is there some way I can stay on a cash basis system and still be doing the inventory, which from just an accounting standpoint would be the easiest thing to do, but not possible if you have significant amounts of inventory? Or two, do I want to have a periodic inventory system tracking the units of the inventory outside of the system and then making periodic adjustments like daily adjustments, weekly adjustments, monthly adjustments into the system to adjust the inventory to the physical count? Or three, do I want to use the full service inventory system that usually is the thing you'd be looking up, which is a perpetual inventory system within QuickBooks? QuickBooks allowing me to track the inventory in the system. Let's keep with our practice here of thinking about the easiest version or the most cash basis version or the version on which we can be completely dependent on the bank feeds as much as possible first and then deviate from that as we add levels of complexity and make a more cruel-based type of system. First, let's say, what if I want to try to just be dependent on the bank feeds and I have inventory, but I don't have a lot of inventory possibly? Possibly I just do a little bit of inventory and it's on like I have a just-in-time system, so I buy the inventory and then I sell it really quickly or possibly in a custom type of system. Someone actually orders something then I buy the inventory and then I sell it to them pretty quickly on the turnaround. It's possible maybe then I can be on a cash basis system and be reliant on the bank feeds in essence. So when I purchase the inventory, I can wait till it clears the bank and actually record the purchase of the inventory, increasing inventory as opposed to an expense account at that time. And then when I make the sale, maybe I can even wait till that clears the bank and when they have the deposit, I record the deposit and the other side goes to sales and I don't have to worry about tracking the inventory and that means I don't have to worry about items which allows me possibly not to need the inventory forms which track things by item, which is the sales receipt and the create invoice. So that's method number one. Let's take a look at it. So let's go back on over and say, okay, let's go into our bank feeds which are over here going to the first tab, hold control. I'm going to scroll down and we're going to find our bank feeds which under this system is going to be in our bookkeeping area and then in the transactions and then banking. But because I'm going to need to add an account, most likely I like to switch to the accounting view. So I'm going to do that by going to the cog dropdown, switching to the accounting view because I don't like the adding of the accounts as they're currently done in the business view that might change. QuickBooks might realize that I'm right and they should fix it and make it better and then the other view would work fine. But here it's in the banking area on the left-hand side and then the banking uptap. So we're in bank feed, what I call bank feed limbo now where the transactions are in the system but they have not been included to the, you know, processed over to the promised land of being used in the financial statement creation. They need a little help. They need a little guidance. So I'm going to pretend here that this is going to be an item for an inventory item. It's another, it's a Primarica item here. So we're going to assume that that's our purchasing of inventory. That's where we purchase our inventory from. So I'm going to select the dropdown and do we have one for that yet? I don't think so. Let's add this Primarica. So I'll add that here. And so there it is. And I'm going to say add it. So we will add it. I'm not going to add any details. I'm just going to save it as is. And then the account, which is the category or account that we want to sign to. Here's the key. Do we want to be putting it into inventory? That's what we would normally be doing because we purchased inventory. And then we wouldn't record it as an expense in the form of cost of goods sold till we sell it. But if it's possible, I'd like to just record it directly into cost of goods sold because that means I'll be basically on a cash basis system. So you, if it's a little confusing and someone might say, well, do you sell inventory? We're going to say, yeah, we sell inventory, but we don't ever actually have an inventory account. Why? Because we expensed it at the point in time that we purchased the inventory because our turnaround time is quite quick. And so we're just trying to expense it. We're trying to stay in a cash basis system. Again, talk to your accountant to see whether or not that would be a possible scenario for you. But we're going to try it here. Cost of goods sold. Cost of goods sold. I'm going to add that account and I'm adding this account because I deleted all the accounts that they gave us and I'm just building our books as we go. It's not going to be a bank type of account. It's going to be an expense, but a special expense type of account called cost of goods that are sold. And then a labor, they got equipment, other, let's just put it into other. The second category doesn't matter all that much. And then I'm going to put it into cost of goods sold, no sub-account or anything like that. There it is. Tabbing through this, that looks good. Now obviously, if this was a standard thing, we buy all of our inventory from Primerica. We can then make a rule for it, but I'm not going to do it here in our practice problem because we're just practicing. So then I'm going to go down and I'm going to say, okay, let's add that. Let's go ahead and add it and record it. So there it is. There's no rule that was applied. So it just added it outright. So if I go to the tab then to the right I run it. We're going to see in the checking account. So if I go into the checking account, we should have another expense type of form because of course there was a decrease to the cash. So I'm going to go down and say, there it is. There's the $30. If I go into it, I see that expense type of form just like we saw before. So there that is. I'm going to close that back out and then go back on up and back to my balance sheet. I'm going to control scrolling up a bit and then on the other side instead of recording the other side to inventory which is a similar kind of concept as we did with the equipment here because I didn't use it in the current timeframe. I'm going to use it in the future but assuming that the turnaround that when we use it is going to be quite quick we went directly to the expense account basically staying on a cash basis method. So if I go to the tab to the right then and I refresh this tab there we have our cost of goods sold. Now the cost of goods sold looks funny right now because there's no income line item related to it. How could you have a cost of goods sold before the income? Because we stuck to a cash basis system and when we purchased the inventory we just expensed it at that point in time assuming that we're going to turn around and sell it very quickly and therefore once that happens the two things are going to match up. The revenue is going to be matching up to the cost of goods sold. On the revenue side of things it should be quite easy for me to record. I don't have to track the inventory I don't have to turn on inventory within the system if I was able to do this method I could basically rely on simply the bank feeds because I could just say when the revenue goes through if I waited until it goes through and then I record basically all deposits that are from customers as revenue in the bank feeds then I would have an increase to the checking account and then the other side would be going here to the income at that point in time the income would match up to the cost of goods sold and we would be correct at that point in time so there's a timing difference that we see here from us expending the cost of goods sold before the actual sale had been made. Now on the sales side of things which we'll talk more about the deposits later we're talking about the decreases right now on the purchase side on the sales side of things for inventory on the first tab and hit the hamburger the two sales forms that are typically used are the invoice and the sales receipts the reason QuickBooks wants us to use those is because those are the things that we have items we put the items into the system and the items if we have inventory tell us the inventory help us with the inventory tracking we'll talk more about that on the revenue side of things but so on this side if you wanted a perpetual inventory system you would have to use these two items and it would be a little bit more complex because it would be tracking the inventory in the system. Here we're basically using the bank feeds you could in this case use the bank feeds just to wait till the deposits clear the bank in the bank feeds and then record the deposit and then just record it to sales in a bank in a deposit form you don't have the items so you can't really track things by what you sold and you can't track the inventory that's why you could still kind of be on a cash based system by using kind of this method if you're still basically on a cash based system now the other thing that you could do and I won't actually record this one but you can have the same kind of process and say I'm going to be on a periodic inventory system so the periodic inventory system would be a similar process where you're going to say I'm going to just take the decrease in the checking account when I make the purchase of inventory but instead of recording the other side to the cost of goods sold directly at that point in time I'm still going to record it to the inventory account an asset account of inventory at the point in time that I make the purchase but I'm not going to track it in the system in other words I'm not going to track the units within QuickBooks I'm just going to put the dollar amount I'm just going to record the bank transaction directly to the inventory account without using items in other words note that if I go to this first tab again and if I hit the plus button usually when we purchase the inventory we're going to enter like an expense form a check form or possibly a bill form if it was on an accrual method and if you go into an expense form you'll see you got your two items down below you can put things in just by category type in the inventory account here or you can add the item now when you say item the item is usually an inventory item or a service item but here we're buying inventory typically and the reason the items field is different than the field up top is because the item is going to allow you to actually track the inventory on a perpetual inventory system so if I was using a perpetual inventory system I would have to use this items field but if I'm not using a perpetual inventory system then I could just record it without the items which will be a little bit easier and just record it directly then into the inventory account so in other words I'll have inventory on my books here but I will not have a sub ledger within QuickBooks breaking out what inventory units we have and the cost of those inventory units using some kind of flow assumption QuickBooks Online typically using a first and first out flow assumption but rather I'm going to have my actual tracking of the inventory units and my flow assumptions outside of QuickBooks say in Excel possibly and then be tracking them on a perpetual inventory system so in other words I'm going to count how much inventory I have I'm going to record the purchases of the inventory as I make them in my Excel worksheet for example and then at the end of the period at the end of the day at the end of the week at the end of the month I'm going to count how much inventory I still have left I'm going to make an adjusting inventory subtract the inventory available minus the amount that I have left and the difference is the cost of goods sold so instead of me recording a decrease to the inventory every time I make a sale I will then come in here periodically and make an adjusting entry decreasing the inventory according to my worksheet periodically and the other side then going to the cost of goods sold so it's one more step in the process I still record inventory but I will not be tracking the inventory within QuickBooks on a perpetual inventory system I'm not going to record the sales line and record the items in it I'm just going to put the dollar amount in QuickBooks and then periodically adjust it down according to my external periodic worksheets using an adjusting entry a non-cash entry lowering the inventory account and recorded the other side to the cost of goods sold they have been used in order to make sales in accordance with my external periodic inventory system worksheet that's the second method those are the two methods you can do that are outside or not the full service inventory method within the QuickBooks system then you've got the full service method which we'll talk about next time which is attempting to track the inventory within the QuickBooks system which kind of makes the bank feed the bank feeds a little bit more difficult because you have that extra level of complexity if not only recording the items not expensing them but putting them on the books as an asset and you're going to need to track the sub ledger which means you're going to have to be using items so we'll talk more about that next time