 QuickBooks Online 2024 Vendor Expense Purchases Pay or AP Accounts Payable cycle. Get ready and clear your mind because we don't overanalyze, we intuit within to its QuickBooks Online. Here we are online in our browser searching for the QuickBooks Online test drive. The primary tool we'll be using for the first part of the course looking for the result that has Intuit.com in the URL because Intuit is the owner of QuickBooks. We'll be choosing the United States version of the software and verify that we're not a robot. Let's open up our financial statement reports like we do every time. I'm going to right click on the tab up top so that we can duplicate that tab. Right click it on the tab as it is thinking so that we can duplicate it again as that's thinking I'll go back to the middle tab down to the reports on the left hand side like we do every time going into the balance sheet report which should be one of the favorites back to the tab to the right down to the reports on the left hand side this time opening up first a word from our sponsor. 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because the scientific survey participants could really use some extra cash if you would like a commercial free experience consider subscribing to our website at accounting instruction dot com or accounting instruction dot think of it dot com the profit and loss or income statement type report and so that's our normal setup we have in the first tab where the data input will be happening then we have the financial statements balance sheet and income statement which will be populated and formatted adjusted as we do data input the data input forms typically being found in and under this plus button remembering the primary goal of us at the bookkeeper or as the bookkeeper two primary goals one being to create those financial statements we're doing the data input to create the financial statements at least in part for united states uh businesses to do income taxes and also for our own reporting needs and possibly for other uh external users of the financial statements that we might have to provide this information to and as the bookkeeper we want to facilitate our communications as smoothly as possible with the people we do business with those including the customers the vendors the employees and others so what we want to do now is look at this by cycle we're going to start off with the vendor cycle when we think of the vendor cycle we're thinking of the money is going out at the end of the cycle so we might be on a cash based method we might be on an accrual based method but at the end of the cycle we would expect that we're purchasing goods or services why because we're going to use those goods and services in order to help us generate revenue in the business and eventually we're usually going to pay for those with an outflow of money so first thing to note here is that the term vendor whenever we look at these terms in in QuickBooks software we have to understand which side of the table we are on because when we use these kind of terms they have a different uh structure or different use possibly in normal language possibly a different use when you're talking about accounting which usually means we're something that someone who sells stuff right a vendor would be someone who sells stuff and then from accounting software it could be even different possibly even more restrictive such as in this case vendors aren't just people or companies that sell things they are the people that we buy stuff from so notice that we might say that we ourselves are vendors in a sense because we sell stuff to people so we are a vendor but we have to think about the side of the table that the terminology is pointing to when we're using software so when we're using most software and definitely with QuickBooks the term vendor means that that's the people that we're usually paying money is going out in order for us to be purchasing something customers on the other hand of course are going to be the people that are paying us we we are also customers as a business because we're the customers of the vendors it's just we're on the other side of the table so we can also define ourselves as customers but uh clearly when we're looking at this from the software perspective the customers are the people that are going to be purchasing goods and services for us and therefore at the end of that cycle we would expect money coming in in that case so we're looking at the vendor cycle here so the first thing we need to understand is the flow of the forms that are going to be involved in each of these cycles you want to start to visualize the accounting process as a cycle and have cycles within the full accounting cycle meaning you might the whole process is going to repeat possibly you could think of it as monthly because then you you create the financial statements possibly on a monthly basis and do the the bank reconciliation possibly adjusting entries and then within those cycles you have you have the cycles of the vendors customers and employees which might have their own timeframes as they turn over as we purchase stuff as we try to collect our our revenue for the accounts receivable and revenue and as we pay our employees for example so each of these cycles we want to think of differently because they could be a little bit different depending on the industry that we are in and the type of company that we're running so the easiest way to see this to me is to look at a flow chart so we're going to jump over to just a flow chart over here this is once again a desktop version of the homepage but all we're looking at are the forms the forms are in essence the same for any kind of accounting system so so we're just going to follow the forms and then of course we're going to use the forms that are in the quickbooks online to when we actually enter the forms so just one more quick look over here you'll note that when I see the drop down you see the forms here but they're not in a flow chart format so we're going to jump over here and just see them in more of a flow chart type of format so we're going to start from the easiest kind of cycle for the vendor cycle the purchasing cycle and then we'll get to the more complex cycles so what would be the easiest system you could possibly set up for the vendor cycle it would basically be you're paying people and you're paying people as the as the bills come in and you're paying them with electronic transfers is typically the easiest things these days because then you might be able to connect the bank feeds and use the bank feeds as they come in to just record the related expenses as you purchase things that would mean that you're on a cash based system but not only on a cash based system you're actually even a step easier you're paying for everything as with electronic transfers as they happen as the bill comes in you just pay it you're not going to enter the bill as a bill in the system you're just going to pay it with an expense type form and this it looks like a check form here but you might not actually do a check but rather an electronic transfer now one of the reasons that's the easiest thing to do is because you could you could set up a system where you're reliant on the bank feeds meaning because it's an electronic transfer you don't have a big separation of time between when you actually write or make the payment and when the payment clears the bank and and therefore because we feel pretty secure about these transfers normally now we could take a step away from the full service accounting system oftentimes and wait till it clears the bank and then record it in our books as it clears the bank that's the easiest thing to do it's not exactly the full service accounting system because normally what you would want to do is when you make the payment you record it in our books with a check form or expense form and then we would use the bank feeds or the bank reconciliation to verify that we that we have paid it as a part of a reconciliation a double check but because we're pretty comfortable with the electronic transfers these days and because they're pretty close in a time frame we don't have outstanding items to for the most part then you can that would be the easiest thing that that can be done now obviously a lot of small businesses are able to do that but some businesses might not be able to do that possibly because they're tracking their accounts payable or possibly because they're using checks if you actually use physical checks you might still be on a cash based system but you might like the idea of actually you know writing the checks and be able to track the check numbers and whatnot and you might not be as comfortable yet with the electronic transfers even though everything's based check clears the bank before you enter the check into the system because if I write a check today it might not clear for like a month because it has to actually go in the mail to somebody else they have to deposit it it has to clear the bank and then it's going to come through if you have the bank feeds connected and you can record it now the reason that's an issue is because when we're dealing with checks what we want to see is did we write the check and did the check clear there's two different questions so it's really important when we actually enter physical checks that we enter the check when we write the check so that if there's a question from the vendor about us paying then we can at least say hey look I wrote the check here it is in my system it didn't clear maybe it got lost in the mail or whatever happened at that point in time and so we have to actually enter the check before it clears the bank to do that so again if you have the electronic transfers because the transfer happens within you know one to three days we don't have that big gap between when we enter the the check and when it clears so that so those are the cash based systems now some sometimes the company is going to well the other thing you could do is you could still be on somewhat of a cash based system you might think of it as a cash based system but you're paying with a credit card which means you're you still have a liability you don't actually pay it with out of your checking account but you're paying it with a credit card and the reason that's a similar process is because the credit card can also be connected with the bank feeds so you're still in a situation where if a bill comes in and you pay it with a credit card because it's an electronic transfer and because you can connect the bank to the to quick books we can wait till it comes through on the bank feeds and just record that transaction as it clears the bank feeds once again so that is a fairly easy process to do now sometimes people will have to deviate from a cash based system altogether and then they're going to be entering a bill form now usually this happens when you get to a larger type of companies most small companies they're going to be they're going to be paying their expenses as they come do either with checks or credit cards right but even small companies might end up where they want to enter the bill when it comes in and then track it and then pay it as late as possible the reason this becomes very important in large companies is because of the volume of transactions and the size of transactions means that cash management becomes more and more important in other words if you got your utility bill today and it was like $70 or something and you paid it today instead of 15 days from today when the due date was not a big deal although from a cash management standpoint you would say hey look I would like to pay it as late as possible because I want to hold on to my money as long as possible because theoretically the longer I hold on to my money the more cash flow benefit I have the more I'm able to make interest on it and so on that's just the general best practices however if it's only $70 and it's only one transaction you only have a few transactions it's not that big of a deal to pay it today versus 15 days from today whatever but if you're talking about thousands of transactions a day that are $70 or whatever or if you're talking about less transactions that are much bigger dollar amounts there's $7,000 transactions instead of $70 transactions that 15 days becomes important for cash flow so that's why accounts payable becomes a really important thing so that you can try to hold on to your money as long as possible by entering the bill into the system and then trying to pay it as late as possible without incurring any fees and and being able to take advantage of discounts if you can and without angering the people you're doing business with your vendors right so so that would be when you enter a bill now when you enter a bill if you're on an accrual type of system then the bill form is another term that is different than the term you might hear normally you might say I got a bill from the utility company or something like that if you got a bill from the utility company then you might just pay the bill with a credit card or with a cash payment in that case it's a bill in normal terms but it's not a bill that you entered into QuickBooks as a bill because for QuickBooks the bill form means that your increase in accounts payable so if you got a bill and you paid it with a check or you paid it with an expense form or you paid it with a credit card you paid the bill but you didn't enter a bill form into QuickBooks because you didn't go through accounts payable on the other hand you might also call that bill from the utility company and invoice I got invoiced by the utility company the notice the invoice and the bill are the same type of document it just depends which side of the table that you're on so you can actually use them interchangeably in normal context but when you're entering stuff into the software the bill means that you're that ultimately you're going to be paying someone else and the bill form more specifically means that you're entering the bill into the system increasing accounts payable so that you'll then have to track the stuff that you owe and then pay the accounts payable at a later time so that's going to be a little bit more complex of of a process and then if you have inventory then that throws another kind of wrench into the system so if you have inventory that now you're purchasing let's say we're going to be purchasing guitars later and we sell guitars so if we purchase the guitars we might have a purchase order that we're going to enter into the system the purchase order is a form that's different in that it doesn't actually have a financial transaction behind it it's just a request and it's different than what you might think of or we might think of when we order something from amazon like i order something if i buy a guitar online i haven't got it yet but i have to pay it when i buy it from the online store unlike if you have more power for as the purchaser in a business situation if you're if you're if you're purchasing a thousand guitars from china or something then you might be able to because they're manufacturing it or whatever i don't know then then you might be able to request the guitars before you actually pay for them which would be great right so then you could request the guitars they ship them you see if they're good and then you know they if they meet the qualifications and then you pay for them so in that situation the purchase order is the request form and then when you receive the the stuff then you would enter the bill at that point in time the bill would come in the box of guitars or whatever and then you would enter the bill so those are the the different kind of format so we'll practice in the first month of data input or we'll go through all of these forms one by one and then we'll do a practice problem and look at it more in a cash based system for the first month and an accrual based system for the second month but when you're setting up your your system that's what you want to ask you want to say am i on a cash or an accrual basis oftentimes you don't have a choice as to be on the cash or an accrual basis because it will be somewhat dependent on the industry that you're in so you have to say am i on a cash or an accrual based system in the industry that i'm in and then how can i set up my system to be as easy as possible if i could just pay my bills as they come do by just taking it out of the checking account then i might just be able to depend on the bank feeds that would be great or depend on the credit card feeds that would be great if i'm using checks then i want to make sure that i do a full service accounting system enter the checks before uh before they clear the bank so i can track the outstanding amounts that's the point of you know the checks you have to do that for the checks or do i need to do the accounts payable process now if i see that over here in in our system here notice here's all the forms right so if you're on a normal cash based system and you're doing electronic transfers you'd be entering expense forms what do expense forms do from a journal entry standpoint they increase the expense account typically although you could be purchasing like equipment or something like that an asset account and the other side's going to decrease uh the checking account typically a check form quickbooks online differentiates from the expense form they're going to be similar except that the check form has a check number on it that will be dealing with it but the journal entry will in essence be the same the bill is going to be the form that specifically means that you're increasing accounts payable it's not coming out of the checking account it will be coming out of the checking account later when you pay off the accounts payable but the bill for the purpose of quickbooks means we're going to pay something but we're going to pay for it in the future the pay bills is a specific form that's basically just another type of check or expense form meaning it's going to decrease the checking account but it's going to be specific to paying off the bill form and that'll give you a like an added piece of information that that's that's a kind of a check that was used to pay off the bill form and we'll get we'll talk about each of these forms in more detail in future presentation the purchase order is that a request type of form and then we have these forms that will also talk about a little bit more detail later a vendor credit a credit card credit and then when we print the checks if you enter checks then you'd have to print the checks and then we have an ad you can add a vendor down below so we'll take a look at each of these forms in more detail we'll analyze the journal entries and we'll look at the impact of those journal entries on the financial statements