 QuickBooks Desktop 2023. Inter-transaction purchasing investments using bank feeds. Let's do it within two-ish, QuickBooks Desktop 2023. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course. Each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Here we are in QuickBooks Desktop Bank Feed Practice File. We started up in a prior presentation going through the set of process we do every time. View drop down. We've got the hide icon bar, open windows lists checked off, open windows open on the left. Reports drop down. We're going to open the major two financial statement reports starting with in company and financial, the profit and loss, income statement in other words, changing the range up top from 010122 to 123122. That's going to be the range or the year that includes the bank feed data that we are entering 123122. Then I'm going to customize it so I can go to the fonts and numbers tab, change the fonts up to 14. Okay. Yes and okay. Reports drop down again, company and financial, the other main financial statement report, balance sheet report. I'm going to first customize then change the range from 010122 to 123122 and then go to the fonts and numbers to change them up to 14. Okay. Yes and okay. Now I'm also going to be opening up the bank feeds because that's where we've been working. So banking drop down bank feeds. We want the bank feed center, which would only be there if you set up the bank feeds, which we had done in a prior presentation. So now we're thinking about the decreases. I'm going to go to the unrecognized items and sort them thusly. We're looking at the decreases still and looking now at some items which are more complex when you're looking at decreases and trying to record and create your financial statements from the bank feeds. This time we're dealing with investments. So if I go back to the balance sheet, let's just talk about some of the complexities with regards to how the financial statements will be built when thinking about investments in things like stocks and bonds. First thing to note that if you have a business, then typically you're not going to have a lot of investments in your business unless your business is financial investments. So in other words, if I have a business of selling guitars, for example, I'm not going to have a lot of my stock and bond savings for retirement in the business typically because the business is designed to kind of separate our books on the business side to the personal side. If I have excess cash in the system, then I'm not usually going to just park it into investments within the business, but rather I should distribute that cash to the owners. If it was a sole proprietorship, that would be a draw. If it was a corporation, that would be dividends so that the owners could then invest on their own, typically in things like the stocks and bonds. So that's one thing to just keep in mind. But note also that you might be using QuickBooks for your personal investments, in which case you might be tracking your personal investments in QuickBooks. You can also use QuickBooks if you have a small business to try to separate personal and business using class tracking, which can still give you an income statement, which could help you to fill out like a Schedule C, for example. And that way you can have one file possibly, which could make things easier in some cases, but also can cause some problems. We talk about some of that stuff in other courses. But the next thing we got to consider is like, well, if I have the investments on my books, that's going to be an asset if I'm investing in stocks and bonds. Now, you might invest in stocks and bonds that are under the umbrella of one mutual fund, which might be under the umbrella of an IRA or 401K plan, for example. But you might also have multiple mutual funds or multiple stock investments. So then the question is, well, how much detail do I want? Do I want to have another asset account for every type of investment that I am investing in? And generally, I would think not, no, not usually on QuickBooks, because QuickBooks is not there to design on the detail to break down the detail of all your day-to-day type of investments. It's there to usually give you kind of a summary of where you stand at any given point in time. There's other software that can help you track the detail, which would include the actual investment platforms you're investing in, like a Vanguard or an E-Trade or whatever, something like that. And you can also construct a balance sheet from your financial institutions using software connecting to the financial institution that's not accounting software but finance software. So the pros of that is that it'll also, it'll always give you like an end to balance, but it won't give you all the detail of the activity. With QuickBooks, it's designed for us to enter the financial transactions, so we not only end up with a balance sheet, but also an income statement. So you can experiment in addition to having your accounting books and like a QuickBooks, you might experiment with like a personal capital software or QuickIn has some stuff on it as well as a financial kind of software. So within QuickBooks, the idea would typically be, how can I group my accounts in such a way that it's a reasonable grouping so that I can see where I stand from an asset equal liability plus equity kind of standpoint. Typically you might want to group your assets then by institution. So you might invest in like your bank, you might have some investments there versus other investments with a 401k or something like that financial institution. Or if you're using personal investments, you might want to put your investments in say those that are under the umbrella of a retirement plan like a 401k or an IRA and those that are not because the ones that are under the umbrella should be long-term assets. You can't access them. The ones that are not would be short-term because you could access that cash to use it if you need to. Now when you invest in it, then the money is going to come out of the checking account and it's going to go into the investment. So that you can see when it clears the checking account. It's not something that's going to happen all the time, but that can be seen in the bank feeds. However, you're also going to have transactions that might be involving dividends and interest that you receive. And then you might have transactions with regards to the value of say the stocks or mutual funds going up or down. How do you account for that? Because oftentimes people want to keep their books on real-time numbers with regards to their financial investments, as opposed to what we do with the equipment where we put it on a depreciated cost. Because with the financial investments, we know what the current market value is because the stocks are all the same. There's a stock exchange, which is trading the stocks. So we can get a pretty good, accurate idea of what the stock value is at any given time. We can't do that with equipment, a building, for example, or something because they are unique in nature. Okay, so what I'm going to do is set up some investment accounts here and then we'll put some investments in it. So I'm going to go into the list drop-down chart of accounts. And let's first just imagine that we're going to set up some investment accounts. I'm going to put a parent account by going to the account rise up. I'm going to say new. And then I'm going to say that I want an other current asset account. And I'm going to say next. And I'm just going to call it investments, investments as just a generic parent. This is what I'm going to think is as the parent account. And then I'm going to have my sub accounts underneath it. Now note, if you're doing personal investments, you might want one that's going to be other current assets and another one that's going to be the current assets because these current assets are going to be the ones that you cannot access. So the ones that are in a 401k plan, you might want to separate. That's one way that you could separate them out. I'm going to say save it and close it. So there's our investment. And then I'm going to make sub accounts to that investment depending on or based on the financial institutions I'm investing in. So I'm going to say a new account and I'm going to call it an other current asset again and continue. And I'm going to say that this one, let's say one financial institution is B of a bank of America. And I'm going to say that it's a sub account of the investment account. So it's not an asset account. It's my investment account in stocks and bonds. And it's going to be a sub account of the not inventory investment. I'm going to get those mixed up going forward. Got to be careful. So we're going to say save it and close it. Boom. So now it's a sub account. So then I can do that again. I can go account rise up new. And let's make another one and just pretend I had another financial institution other current assets continue. And let's call this one primary America another financial institution. It's going to be a sub account of investments. And okay. So there we have our two investment accounts. Now oftentimes if you were starting up a new file for your personal file or your business file and you had investments in it, it's going to have a beginning balance in it already. So you're going to want to look at the financial statement and you're going to have to enter kind of the beginning balance and then you can track what is going on from that point going forward. So let's do one way you can do that is I could double click on the register and I can put this in there. I'm going to put it as of 010122. And maybe maybe we should actually put it in there as of the first day of the prior period. So it would be 123122. And what I'm trying to do is have it not impact the current income statement, which I'll do in two ways. One, I'm going to put it in there before like the cutoff date, meaning the new year started on January 1st, 2022. This should be 2021, let's say. And two, I'm going to put it to an equity account. The other side's going to an equity account, not the income statement. So for example, I'm going to say there's an increase. Let's pretend we had 10,000 as our beginning balance. And then from there, the bank feeds, if I add money to it, will increase this account if I invest more in it. So I'm going to put this in place. And the other side is going to go to an equity account. So I could put it into opening balance equity. You might put it into another account called owner investments, but I'm just going to put it directly into the owner's equity, which is the account that income is rolling into. So I'm going to say, and then this is going to be the beginning investment balance, something like that. I misspelled it, but I'm going to leave it. Now it says here, hey, look, you're posting something to a retained earnings account. I'm paraphrasing. Usually you don't do that unless you know what you're doing, because that's the account that rolls stuff into. But when you first set up the beginning balances, then sometimes it makes sense to do that. So I'm going to say, okay, and then close that out. And then if I go back then to my balance sheet, now I've got the $10,000 in Primarica. It's an asset account. It's a sub account here. I couldn't do it with the bank feeds because these were transactions happening before I started the bank feeds, which this amount I'm imagining then being dependent upon what was the beginning balance before I started the bank feeds on the finance from the financial institution. So if I look at the transaction then QuickBooks put it in with a deposit type form. So there it is into the investment account. I would have thought they would have used a journal entry there, which is that's a little weird, but they use a deposit form. The other side went into equity down here. So you could see it in equity if I change this to one. So there's the deposit on this side. Okay. Now one issue from there is, well, what if we put more money in? That's not going to happen all the time because we probably only do that periodically. We put more money in when we have the money to put in that would increase this amount. So I'm going to go, okay, bank feeds. Imagine I had a transaction. Let's just pick up a one that say, just see if I get one of these ones for 25. Let's do this one. Let's say this one imagining this one is an investment amount or payment amount. So it's coming out of the checking account and going into our investments. So I'm going to say the payee is going to be Primarka. I'm going to make this a little bit different life. Imagining it's an investment account though, setting up the vendor as we saw in the past because it's a cash outflow vendor. And then the other side of the account is not going to an expense, but this time it's going to go to our investment account. And we had, let's put it into the Primarka investment account and then 25. Now if I hit the drop down and add more details here, then you could see it in this format. Same kind of information. There's the date and it's going in here. Now we could also make a rule for that one. If we so choose to make the rule, I'm not going to do that here because I'm just using this as an example. So I'm going to save it and add it to the register. And then we could see it's been added on this side. We can go to the balance sheet and we can see now that added investment of the big $25 has been put in place. There it is. It's been in place with a check form. So whenever we put more money into an investment account, we can wait till that clears the bank feeds because it'll probably be an electronic transfer and we can easily kind of add that to the proper investment account. The things that often become more complicated with regards to automating the process with the bank feeds are one, you might have dividend and interest depending on what you're invested in. Now, if you're saying that the dividend and interest is set up, that it flows through to your checking account, then you're going to see them flow through and you can add them from the checking account. And you could say that there's going to be an increase to the checking account when you receive dividends and interest, and you can set them up then as the other side go into an income account, but rather than income up here, you might put the income as other income, which will show up on the bottom of the income statement because normally, even if you're thinking about your personal investments, if you're still working, you might think of your main income as like your W2 wages and whatnot. And then your investment income dividends and interest, you might think of that as other income down here. However, sometimes on your personal side, it might be your primary income, maybe if you're doing well, if you got substantial investments, so maybe you put it up top in that case, if it was on your personal side, if it was business kind of stuff, I would think that unless you're in the business of investing in financial services, you might want to put it down below so that you can get to a net income amount that doesn't include the gains from services or even interest and income, and then you can add those at the bottom. So then the other thing that we would want to do is to say what happens with the unrealized gains and losses. So if I check my financial statements periodically at the end of the month or the end of the quarter, you might say, hey, I would like to put this if my finances went up to buy $100 or $1,000 or something, I would like this to reflect the actual value given the fact that I could know the actual value with some degree of accuracy because there's an exchange trading the exact same thing, so I know what the amount is. So we can do that a couple of different ways. One, let's say this went up by $1,000. I can enter a transaction increasing this by $1,000, but the other side isn't going to cash because I haven't yet sold the investment. The other side is unrealized revenue. Now I'm not going to get into the generally accepted accounting principles on when you do one thing or the other thing, but just in general, there's two options. You could put the other side to equity so that you always have the other side in equity. It doesn't hit the income statement at all. Or the easier thing to do is that you'd put it to the income statement. So you'd have the other side of the unrealized gain as income. Again, I wouldn't put it into income up top. I would put it into other income that would show then down below at the bottom of the income statement. The reason putting it to the income statement is easier is because then you could see the gains and losses. The income statement would indicate that this is usually your realized stuff that happened on the income statement, but then it rolls into equity and you don't have to deal with it when you sell the stocks or anything like that as well. So if I go back to the balance sheet, the other thing that you could do is say instead of increasing the primary account itself, you might try to create another account which represents the unrealized gains and losses so that you have both kind of the cost, what you invested in Primerica, and that would include the original invested and then possibly the reinvestment of the dividends and interest. And then you could also try to track the unrealized gains and losses as a separate account so you can see both of those things. That might, may or may not be something useful to do. It does add another level of complexity. Let's see how that might be done. So if I go to the chart of accounts again, lists chart of accounts, and I'm going to make another account under Primerica sub account that's going to give me unrealized gains and losses. So I'm going to say new and let's say that it's going to be another current asset continue and I'm going to call it unrealized gain slash loss Primerica. And I'm going to make it a sub account of the Primerica account, which is a sub account of the investment account. It's getting complex. I know we got levels, layers upon layers upon layers. So there it is. If I go back to the balance sheet, now it's going to show up under here once I post something to it. So let's do that. Let's imagine that this went up by $500. So now it's at $10,525. So now I'm going to say, okay, I got to increase it. I could do that with a journal entry. It's easier to do oftentimes with the register. So I'm just going to go to the chart of accounts. There's, there's my item. I'm going to double click on it. And I'm going to say that as of, let's say 103122, let's say that it went up by $500. And then the other side is like, well, where's the other side going to go? I'm going to put it to a new account that I'm going to call an income statement accounts. I'm going to create a new account. I'm going to say it's not an expense account. It's an income account. And I'm going to call it unrealized gain slash loss. Now the reason I call it gain slash loss is because it could flip from like a debit or credit. If you think about it that way or an increase or a decrease. So if it's a gain, it'll be a positive income. If it's a loss, it'll show as a negative. And so that's a kind of unusual for an account, but it's, it's useful in this case to do that. Otherwise you got to deal with gain account and the loss account and try to get it gets messy. Okay. So in any case, so this is going to be the unrealized gain. So we'll say, okay, let's check it out. What happens then? If I go back to my balance sheet, now we've got the primary drop down. And then within the primary America account, you've got the 500 here for the unrealized gain. And then this is the cost. So the total that should tie out to your statement then is the 10,525 50. And that is broken now out into the 10,025 the amount that you invested in theory. And then the 500 is the gain, the increase in the value of the stock. Now note, like the way we set it up here is with the least number of like accounts, you could set it up like a primary America parent account, and then have, have the, the cost, and then the unrealized gain and loss under the primary parent account. That's another way that you could set it up so that it doesn't show up as like primary America other and then the 500 here. But I won't get into the deep, you could, you can kind of play with those, those differences. The other side is going to be on the profit and loss here. And so now you could see on the P and L, I've got it up top. I really don't want it up top. I wanted to put it on other income. So let's go to the chart of accounts. I'm going to say that profit and loss, what did I do? I put it in his income, right click and edit the account. I'm going to change it to other income, other income. Okay. And then back to the balance sheet or income statement. So now it's showing up down at the bottom, which is nice because then I get the subtotal of my net ordinary income from operations. And then this is unearned because I haven't really sold it. I haven't really realized it, but I'm still recognizing it on the income statement. So one, it's not my normal source of income. And two, it's not earned. I haven't actually sold anything to realize it. And therefore, it's kind of appropriate possibly to put it on the bottom. If you're going to put it on the income statement at all. And, but it still feeds into the net income after the other income and expenses. Now, if this was a loss, this would flip to a negative. So it would still say other income, but it would have a negative, you know, down here. So those are some of the complexities with regards to tracking the investments. So when I, so just to recap, you're probably going to want to be adjusting your investments periodically to the financial statements monthly or quarterly. So, so you're going to want to do that with, you're going to have to do that with a journal entry. You can't use the bank feeds typically to be doing that. And you want to be careful in terms of how many investment categories you're going to have in QuickBooks. You don't want to get too detailed because QuickBooks is not really designed for that. You're going to look at other software to drill down on the day-to-day activity. And one other software that you might use are called financial statement software, as opposed to accounting software, which is designed to kind of give you the balance sheet and possibly some of the trending activity for the stocks like a Primarica, for example, or possibly a Quicken. I'm not advertising either of those. Those are just a couple options. So what we have at this point, if I hit the drop down and I go to the trial balance here from 010122 to 123122 and we customize that fonts and numbers changing. Let's bring it to 16 here. Okay. Yes, and okay. Just to advertise the trial balance and how it can be a quite nice tool for us to go to one place and see the balance sheet on top of the income statement. It doesn't give us all the subtotals, but you can kind of see what's happening. If you imagine balance sheet, assets, liabilities, equity, and then income statement, revenue costs to goods sold as an expense and expenses.