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Here we are in our QuickBooks Online Bank Feed Practice file we set up in a prior presentation after setting up the QuickBooks Online Practice file we went into the transactions tab on the left hand side the chart of accounts up top and then reduced or made inactive many of the accounts provided by QuickBooks Online including many of the expense accounts so that as we add transactions from what I call Bank Feed Limbo including the crucial piece of information so that we can add those transactions that being the account we can actually create the account at that point in time customizing our chart of accounts we also included a checking account and then we imported data that would be mirroring the similar type of transaction if we connected to the bank in other words resulting in transactions over here in the bank transactions tab in what I would call Bank Feed Limbo so now we have these transactions in what I call Bank Feed Limbo that need that information that need the added account and also as we're doing that we should also be adding the customer or vendor to this information so we're going to start doing that now we're going to start with the most basic type of transactions the easiest type of transactions to automate those being transactions where your their monthly transactions things like the utility bill things like the phone bill they're reoccurring they will be made as easy as possible to create a rule for if we set up like electronic payments and basically automate those payments that would be the easiest type of thing to do because then we'll see the information populate in the bank feed memo over here and we'll see the amount and the date and we can just use the bank feeds in order to pull them into our accounting system let's first take a quick look at the QuickBooks desktop homepage analyzing it for the QuickBooks online system just trying to see where the bank feeds would fit into the normal flow of forms we're thinking here about the vendor cycle or expenses cycle where at the end of the cycle we would expect money to be going out which of course we would see through the bank feeds for goods and services that we're purchasing for the business now the easiest system usually to automate the entire thing with bank feeds would usually be a cash based type of system remembering that we can kind of think about the cashed based system by cycle so even if we're not on the cashed based system for the revenue cycle we might be on the cashed based system and oftentimes many small businesses will be on the cashed based system for the vendor cycle or expenses cycle and that system it would be easiest to try to set up the electronic transfers and as the electronic transfers clear the bank that's when we actually record the transaction note that that's not exactly a full service to counting system because normally for example if you were to write actual checks physical checks we would enter the transaction when we write the physical check and then when it clears the bank which we would see with the bank feeds we would match that transaction to the physical check we wrote that gives us an added layer of internal control because now we have two separate institutions recording the same transaction and if we can match those two up then we have more assurance of the transaction however we're becoming more and more comfortable relying on the electronic transfers and the time between the transfers are much shorter so in other words it would still be a full service accounting system if I was to pay the telephone bill with an electronic transfer to record it in QuickBooks when I do the electronic transfer with an expense form which would be like a check form with no check number and then when it clears the bank to match out what I recorded to the bank feeds however it's easier to say because there's such a short distance and I can basically check that electronic transfer within a day at least to make sure that it clears that I'm just going to wait till it clears the bank and then be completely reliant on the bank to record the transaction that's the transactions we'll look at right now those are the easiest ones to automate those are the easiest ones to basically build our books from the bank feeds if we were going to enter a bill into the system note that that is introducing an accrual component the bill for QuickBooks increasing accounts payable when you increase accounts payable with the bill no cash is taking place and therefore the bank feeds would not be able to facilitate that transaction we'll talk about that wrinkle in the future first the easy the easy ones now on the filters up top notice that I have all dates here even though I have two months of information and then oftentimes you might filter it by date but then it might be easier to filter by the bank detail if I filter by bank detail then I can see the transactions that have the same detailed information also remember that I have in the settings the thing that shows all the detail copy the detail it shows the bank details so that I can see everything and not have QuickBooks try to truncate and guess what the most important thing for me to see is I also might want to filter by decreases so I'm going to say I'm going to say this is a money out I want to see all the money out rules and then I can focus just on the money that's going out and I have for example the the the SoCal Edison so that looks like it's going to be a utility bill so that one would be an easy one typically so let's copy that notice it's putting it into owner's draws in part because we deleted the expense accounts and draws maybe they think that we're doing it for our personal utilities or something rather than the business but obviously that is wrong so I don't want to just confirm that or it's it's not going to record it properly right we have to assign the account so the vendor we don't have a vendor yet so notice that down here I can copy this information to create the vendor so I'm going to copy that I'm going to put it here note that the entire memo is not what I'm going to copy the vendor from but just the part that's going to be the vendor name which oftentimes will be in the bank detail which QuickBooks is now including in the memo which is nice what you don't want to have happen over time however is to copy multiple vendors right so you want to make sure that if you already have a vendor in place then you choose that vendor that that you're going to be using so that so that your vendor information isn't duplicated also note that if I do not include a vendor and I just include a category note that the asterix is indicating that's the only field I absolutely need to record the transaction in other words I can make the balance sheet and the income statement reports just by assigning a category meaning an account however the only way I can assign an account typically is to see in the memo the a part of the memo that tells me who the vendor is right because that's what's going to tell me what I spent the money on so I know it's Edison therefore I spent the money on utilities like the electric bill I might as well also add the vendor however because I might want to search in my vendor center by who I paid right so that's still an added you want to add the vendors if you can so I'm going to say there's the vendor I don't need all the detail for the vendor right now because all I need is basically who I paid so I can search for who I paid in the detail so I'm going to say save that now it's not going to go to owner draws this is where I have to add a category I'm going to add my expenses as we go if I hadn't deleted all the expenses in QuickBooks my method would be to search in the expenses to see if one is relevant and if so use that if not or if there's one relevant but I don't like that it's a subcategory or I don't like that the name then I would go into the chart of accounts and simply adjust the name instead of making a new account which is similar but different because then you're going to confuse yourself when you're entering transactions because you might post two two transactions to the two accounts that are have a similar name and then and only when there are not any expense accounts would I add one but in our case the best way to really customize this is to add the expense accounts as you go and so we're going to do that as we go now notice that this is Edison so traditionally I would have said that it used to be that utilities used to include all the kind of utilities right you could put under utilities the gas bill the electric bill the telephone bill was often under there oftentimes these days it seems that the telephone bill is no longer really considered a utility because it's it's its own thing it's expensive now oftentimes for many businesses and so I might break that one out and so you can also just break out the Edison to an electric bill that's another method that you might use you might make a utility account and then put subordinate accounts under the utilities account to me I like just having a utility account for like the electric and the gas for example so I'm just going to say those are my utilities I'll put them into one account I'm going to say boom this is going to be an expense type of account so we're going to say expense and this subcategory not typically the most important category so it's a detail type so I'm just going to put other other expenses or probably is a utility down here utilities let's do that utilities I don't need another description I'm not going to make it a sub account now if I did make a parent account of utilities and then one of the electric as a subordinate account to it then I can create the utilities account I'd have to do that separately from the chart of accounts and then make the other one subordinate to it by choosing a subsidiary account here but I'm just going to put it directly into the utilities I think that's the cleanest way to do that I don't like to get over overboard or go overboard or have too many sub accounts because I think you know if I don't need a sub account then I'd rather not have the more detail on it unless it's appropriate right I don't know so this is where a lot of the judgment comes in there's no set rule as as to how your account should be lined up for example if I was in a business where the electric bill was really important because I was growing plants or something with neon lights that would that are going to take up a lot of energy then I would make the this this one wouldn't be utilities this would be a very important expense that I would say this is my electric bill it's really important it's not just under this miscellaneous or grouped together with the gas bill right because these two being grouped together is basically saying they're they're not as large and expense and therefore I can group them in one category so let's go ahead and save that and then if there were tags I can add tags these are kind of like our classes class tracking if you needed to do that we have a whole another section or course on class on tags and class tracking location tracking if you want to look at that in more detail if we need to add an attachment we can add an attachment and we can create a rule which we will do we can exclude it we can categorize this is the history now note that the default here is a category is a categorize and that means it's going to make an expense form which is like a check form check forms decrease in the checking account without a check number the other is match we'll talk more about that later transfer and if it was a credit card so you're usually going to be using this one for electronic transfers for normal kind of decreases to the checking account now once I have this populated I can create a rule now you want to create the rules because this is the thing that's going to automate your transaction so I need a rule name but and we'll talk more about rules specifically later but we'll go into the basics of the rules here so we're going to say a rule name I'm going to copy the the vendor name so so Cal Edison and then I'm going to say apply this rule to transactions that are it's all money out not money in so these are decreases to the checking account I can apply to all bank accounts or just the one that I'm in now I only have one bank account but if I had multiple bank accounts I could apply the rule across them all or I could apply the rule just to the account that I am on and then uh and include the following so these rules down below I could say if I have multiple rules so I can add another one so if I have multiple rules down here I could say hey look if it meets any of these rules then these conditions then I want you to apply the rule or I can say that it has to meet all the rules so all the rules would be more constraint a bigger constraint you'd have to meet all rules in order to apply it or you have to meet any of the rules which would be a less constraint in order to apply the rules we'll get into more detail about how you might construct those for more complex rules later oftentimes the default of all rules will will be fine because you're only going to have one of them right so if it's the Edison I only want one rule if you see if you see that in the description if you see and I like using the bank text so if you see the bank text because the bank text includes all the detail not just what QuickBooks thinks is relevant right in terms of what might be the vendor name or customer name if within the bank text it contains meaning it has within it but it doesn't mean that that's all that's in there or doesn't contain which is you know that might be useful if you had multiple rules or is exactly I don't need it to be exact I just need it to contain the name because remember it's going to have all this other jargon at the end of it so I just want the name so Cal Edison if you have that apply the rule I'm not going to add any other condition most rules just need one condition we'll talk about more complex rules later I can test the rule so if I test it it says this rule will apply to two currently unreviewed transactions perfect and then down here we have the transaction type it was an expense account the category that we set up has been pulled in here when we when we started entering the transaction the split we'll talk more about the split possibility later which could give you more capacity for complex transactions possibly the utility bill being split between say a couple accounts because because you have two different departments or something like that or between two different class trackings because you have you're using class tracking for departments or something so you paid when you paid who you paid I'm going to say so Cal Edison as the vendor if I have tags I can add tags to the rule replace bank memo so this pulled in from the bank memo I could put something other than that in the in the memo but I'm going to keep that as the memo also keep existing bank memo I'm going to keep it unchecked as the as the default so hopefully it'll pull in the current bank memo for the following transactions and then then I can clear it down here this is important automatically confirm transactions that match these conditions once they're downloaded from the bank so in other words do I want quickbooks to just apply this rule and then take it out of bank feed limbo and and and add it to our system automatically or no I would start off with no right I'd start off saying I don't want you to do that because if I do that all these transactions are going to be assigned and if there's an error like if you did this for a whole year's worth of transactions then it's going to assign all the whole year's worth of it so I'd like to say first no I'm going to check it and then possibly when I become confident with the rule then maybe I'll go back into the rule and add that in place all right so I'm going to say let's save it and now you can see that let's see let's see we have these two here for so cal and it says here rule applied rule applied I also have my sorting options now so if it was a money out I can say rule applied I can sort by rule applied and there's the two that have the rule applied to it let's try to add just like one of them and see what it does to my financial statements so when I add this it's actually going to enter a transaction adjusting my financial statements it should also move it from the review to categorized and so let's go ahead and say so we reviewed it and then we're going to say confirm confirm Roger that and then so let's see it went it now we're down to 19 here and under categorized we see that one that has now been moved to the categorized now remember if I log out and log back in this one that has been categorized might be removed because it's not going to keep it here basically forever but there it is when we're currently working on it let's go back to the first tab and then I'm going to go up top right click on the tab up top to duplicate it so I can open up the reports and look at the impact on them so we'll open up the reports on the left the major two reports being the balance sheet and the income statement so I'm going to close up the hamburger here's the balance sheet I'm going to write let's right click on the income statement first I'll right click on the income statement and then I can open a link in a new tab it's going to open up top I'm also going to open the balance sheet now this is the format I usually use whenever I'm working I'm going to open two tabs so that I have the balance sheet and the income statement to the tabs to the right and then the tab on the left is my data input tab so now every time I add something I can go to the financial statements look at the impact on the financial statements so if I do that I go over here every time I go over here I'd have to refresh it I can change the date range going from 010124 to 022924 and then I can uh I might want to see it by months month by month might be interesting to look at and so when we start adding two months of data and then in the checking account if I drill down on it this is what's great about QuickBooks I can now see I can deconstruct here's the end result here's what we're making drill down on it and then here is the transaction so the transactions from the checking account gives us the date the transaction type expense form that's the typical form for a decrease to the checking account that will be used the name the description uh the full name the other side what's the other account going to there's always two accounts affected with every transaction it's going to the utilities account which is an expense account if I drill down on it it doesn't take me to the bank feeds it takes me to an expense form so uh one online banking matches and then so Cal Edison payee if we tab through this this is the same date right we had the payee we had it going out of the checking account because that's the bank feed that we were in when we recorded it the date it doesn't have a payment type because that wasn't part of the information in uh in the bank feed form so you could choose a payment type here but reference because it was an electronic transfer right and then there's no tags but if we added a tag it would be here and here's the categories down below it was in the utilities and the description and if there were multiple categories that's what the split in the rule would do if there were multiple categories that it needed to go to allowing us to assign to multiple accounts and possibly multiple classes uh if we had class tracking on note that we don't have items items would be inventory items and items complicate the bank feeds so if we had items then we would probably have to do something a little bit more complicated because we would have to track the units of inventory if we're purchasing items instead of assigning directly to the account we might talk about that more later in the memo we have our memo no attachments have been attached we can cancel revert make recurring more and so on so there it is let's go ahead and close that out do you want to leave without saving i don't think i changed it let's go back notice when i'm navigating back i'm not going to this back button here but everything within quickbooks is typically within quickbooks so i'm going to go to this back button that takes me back to the balance sheet the other side of the balance sheet you can see is down here on the equity side so you can see within equity it put it into this net income on the equity so this makes sense because if we look at the accounting equation assets equal liabilities plus equity so assets is what the company has liability and equity is the flip side of the coin who has claimed to the value that the company has well right now we have a negative value because we have negative cash because we haven't put any of the deposits in and we don't have any liabilities yet because we haven't put anything in there for liabilities such as a bank loan or a credit card and therefore the whole value is part of equity which means that the owner in essence owes the company money right because it's overdrawn it's a negative amount inequity at this point in time so that's the general that's the that's the accounting equation now this net income is being pulled from the detail of the income statement so if i go to the income statement and we run that for let's say going from 010124 to 022924 let's look at it by a month by month basis as well run it so now we have an expense in january it's under utilities that's the account that we added if i go into that expense then we have our utilities here if i drill down on that it takes me to that same expense form every transaction has at least two accounts affected that will impact the accounting equation going back in this format now this is the net income how is the income statement tied to the balance sheet how is it connected to the accounting equation assets equal liabilities plus equity it's given us the detail about the equity side the equity side of the balance sheet now the equity side of the balance sheet often confuses people because it could have a different name over here depending on what type of entity we have so if it's equity for a sole proprietor this probably shouldn't be called retained earnings it should be called like owners equity and then and then if it was a corporation it would be it would be called retained earnings if it was a partnership you might have multiple people that have claimed to the equity so why is that confusing because if you think about equity as a total it's what owners have claimed to the to the to the assets of the business but then you have to think about how do you break that out between owners well if there's only one owner then it's a sole proprietor and that's fairly straightforward if you have a partnership you could have like multiple owners you might have five partners then you have to track different capital accounts for each of the partners according to the revenue sharing and draws and investments that they have made if it's a corporation it's actually easier than i mean a part if it's a if the corporation it's actually easier than a partnership oftentimes because then although there's multiple people that own the business you're breaking up the equity the net value in the business into equal unit shares like dollars and then you say who has what depending on who has more of the shares right that's kind of easier to do than a partnership typically oftentimes also note that this net income will roll into retained earnings on a yearly basis that's quick books closing the books out automatically so if i take this from 010125 to 0101 010125 run it it moves from the net income into retained retained earnings it's just closing out the books that net income really shouldn't even be on the balance sheet but it's quick books trying to tie out the income statement to the equity so we can see what is happening let's go back from 0101 uh 24 to uh 0229 24 run it okay so you can see that i don't need the actual vendor to run these reports however the vendor could help us because if i go to the tab to the left and i go in and you'll recall that we added the vendor so if i go into my expenses which i would call the vendor center then i can go into my vendors up top and i can actually i didn't where's my vendor well let's go into my expenses over here i could see my expense here and the payee is uh the solcow addison so i can i can sort my information in the expenses area uh over on this side okay i refreshed my screen i think the vendor's going to show up now so i don't have any bills because that would be an accrual thing i didn't enter a bill i just entered an expense form from the bank feeds if i go into my vendors i get my vendor layout and then i can go into solcow addison here and if i wanted to look at the transactions that were paid to that particular vendor that could be useful information that's why that's why you want to add the vendors even though they're not a required field just to add the information into the bank into the system so let's open this up again let's go back to the transactions and i can close this and let's do at least one more here let's do uh we have the Verizon is the other you know really common one right so if i go into Verizon and we do the same thing it's going to be a category making an expense form who's going to be the vendor i have one vendor now that's not the one i'm going to copy the part of the memo that i think is going to be the vendor paste that into the vendor create a vendor for that that's who we paid all i need is this name that's all i really need i need that's the telephone company i'm going to save it like that and then what i really need to record this is the category the vendor although not required but something you want to add in order to record the transaction is going to be something you need in order to determine the category Verizon is a telephone provider therefore i'm going to assume it goes into telephone expense if i already had the accounts from quickbooks i would then look at quickbooks accounts to see if they have a telephone in our case we're going to create our own accounts noting that the telephone used to be under utilities but now because it's expensive it usually has its own place so i would just give it its own account you could still make it a subordinate account to utilities but i feel like telephone should be its own account so i'm going to add my account as i go it's going to be a uh a expense type of account and then they probably have a telephone here uh i'll put it under utilities again i'll call it telephone and i'm not going to make it subordinate to any other account but if i wanted to make it subordinate in it to the utilities account i could if i wanted to make the utilities apparent and then make the so-called Edison or the electric subordinate and then make this subordinate that's another method i could use i'm going to save that and then i don't have any tags the memo is pulling in i'm not going to do any attachments i will add a rule going to add the rule and then what's the rule going to call i'm just going to call it usually what the vendor name is so i'll copy the vendor name tab it's a money out rule there's only going to be one rule or it's going to apply to all accounts that's fine and then i'm just going to say all instead of any because i'm only going to have one rule i'm going to say the rule is going to be pulling from the bank text so that i can pull all the information including the numbers and i want it to contain which is the default rather than be exact or doesn't contain and then i'm just going to put usually the name of the vendor deleting all the other gobbly goop because that other stuff may not be the same as we go to multiple transactions so i just needed to contain Verizon if you find that apply the rule we're not going to add any other conditions we'll talk about other conditions later test the rule two of them are applied that looks appropriate assign expense account category telephone i don't need a split because i don't need it to be split between two expense accounts or anything like that or two classes who did you pay i'm going to put put Verizon here tags no tags i'll keep the memo and once again i don't want to confirm it automatically i want to check it and possibly then adjust that later so i'm going to save that and then i can see these two on the Verizon now has the rule applied let's do the one for january review and then i'm going to say confirm and so that should pull that transaction from the review to the categorized so now i've got the two in the categorized also note the rules are located over here so here's the rules so now i can i can go to the rules there's my two rules if i want to edit these rules i can edit them here and then adjust them so later on if i want to make it auto confirm from this point forward i can do that so i'm going to close that out go into my balance sheet run it same kind of thing if i drill down on the checking account going from the end result i can see how it was constructed and i'm going from january first what happened to my dates i'm going from 010124 to 022924 let's run it and then okay now i'm going to check it out and so now i've got these two transactions so here's the Verizon here's the checking account it's an expense type form transaction type that transaction type is useful because you can filter we'll talk about that maybe later Verizon and then if i drill down on this the other side's going to the telephone it'll take me to an expense form not to the bank feed data input where we have the Verizon the date and then the category down here should be categorized telephone there it is for some reason i think it's some zoomed in or something i'm going to close that out and then i'm going to go back and then the other side's on the profit and loss profit and loss i need to refresh it so it populates now we have my two expenses on the income statement here's my telephone drilling down on it and then there's my telephone drill down on that takes me once again to the expense form or it should here we go go into the expense form there it is every transaction will typically be using some form these are the forms usually an expense form for money out and then a deposit form for money in and so then i'm going to go back this is what i have on my net income a loss of 146 how is the income statement tied to the balance sheet because on the balance sheet the income statement is the equity side it's the detail of the equity side which is just one number over here net income broken out to the activity assigning income and expense categories on the income statement so now the checking account is showing as overdrawn because i've only entered two expenses there's no liabilities therefore that in total responsibility of the overdrawn account is applicable to equity which should be in retained earnings but is currently in net income because quickbooks breaks out the net incomes to try to show you the relationship between the profit and loss and the income statement which will roll into retained earnings on a yearly basis because quickbooks closes out the income statement to retained earnings automatically on a yearly basis all right so if i go back to the tab to the left open the handbooky and i go into my expenses which is going to be my my vendor center i can now look over here if i needed to search for an expense form or something like that to see the transactions i have the capacity to search by form and i have the payee which is useful then i can go to the bills i don't need bills because we haven't entered any bills because we're not doing an accrual thing if i go into the vendors we now have our two vendors if i needed to go into Verizon because i have a question about the payments to Verizon it is useful that i added the payee because then i can go in here and check it out even though the payee isn't required to add the transaction and to create the financial statements balance sheet income statement from those transactions all right let's go back to the to the button up top the hamburger and let's go to the transactions again so i'm going to go back to the bank feeds and so so we'll continue on this next time and i should probably note that on the chart of accounts if i go to my chart of accounts we have now added you can see the balance here down below you can see that we have added these accounts as we go so there's the telephone there's the utilities if i wanted to add a parent account and make another account subordinate to it i would first have to go in here and make a new account something like an expense account i won't actually record this and then if i wanted to make a parent of the utilities account or let's just and let's call it utilities too just to see a difference if i wanted to make this subordinate so if i wanted to make the parent i can make it a parent if i wanted to make this the subordinate account of a utilities account i can do that right and so so then so that's how you can create that tiered system it'll create a sub account but i don't need that right now so i will not do that and that's where we stand at this point in time those are the most basic type of transactions that we can enter those those cyclical transactions that you pay electronically such as utility bills you want to make the rules as you go and then once i become comfortable with those transactions i can even automate those rules so that i don't even have to review it if i don't want to i kind of like to sometimes still but i can automate the rules so they they then become automated automatic going forward but you have to set them up properly otherwise the automation is going to work against you and not for you will continue on with more these in future presentations