 QuickBooks Online 2024. Purchase and finance equipment. Get ready and some coffee because we're going on air with QuickBooks Online 2024. First a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us but but that's okay whatever because our merchandise is is better than their stupid stuff anyways like our crunching numbers is my cardio product line now i'm not saying that subscribing to this channel crunching numbers with us will make you thin fit and healthy or anything however it does seem like it worked for her just saying so yeah subscribe hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine if you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com Here we are in our jikray guitars 2024 quickbooks online sample company file we set up in a prior presentation opening up the major financial statement reports like we do every time the reports they're on the left we're in the favorites we're going to be right clicking on that balance sheet to open a link in a new tab right clicking the profit and loss to open a link in a new tab doing the same with the trustee tb trial balance let's go to the tab to the right close up the hamburger change that range for the first couple months of 2024 oh one oh one two four tab oh two 2824 i want to see a month by month side by side so we'll drop it down months and run it then let's tab to the right repeat the process hand boogie needs to be closed oh one oh one two four tab oh two 2824 tab let's select the months so we can then run to refresh and one more time tabbing to the right hand boogie closed changing the range in oh one oh one two four tab oh two 2824 tab months on the drop down and then we will refresh the report let's go to the balance sheet to discuss the new process happening this time we have decided to purchase more equipment at this point in time so you will recall that equipment is something that we purchased at the beginning of the process when we started up the new business so when we start a new business typically what we will need is cash we have to have cash in order to purchase the furniture equipment building property planting equipment and the inventory now before we start the business of course how are we going to get that cash well we're going to get that cash from either a third party the bank we took out a loan in order to get the cash right here or we can finance it ourselves putting our own money into the business so we can pay for those startup costs and then to start our shop of selling guitars we took that money and we purchased the fixed assets of the the furniture and whatnot in the store and whatever and then we also had to purchase the actual inventory so that we can sell the inventory but again the neighborhood has gone down downhill and people put gum on the bottom of our couches and like and then you know they put like they I guess tagged on it whatever that is like they put these I can't even read it I don't even know what it's supposed to say but apparently it's important information that had to be put on our couch so so we're going to buy so what we've decided to buy new equipment now to refresh this to refresh our stuff so but you will recall that that usually only happens when we buy property planting equipment at the startup of the business or possibly when we're when we're upgrading the business we're not typically needing to buy a lot of fixed assets large purchases all the time so unlike with supplies unlike with our normal expenses we don't expect this to be a cyclical kind of thing that happens all the time but rather something that happens periodically and so and also note that the second time around we might then have the money already because now we can accumulate money from sales because we already had the furniture and equipment from the startup costs in order to generate sales and hopefully we can build up some money to expand to grow the shop that would be the idea now when we first purchased the equipment we first took out the loan got the money and then used the money to pay for the equipment meaning we paid for the equipment basically with cash however we can imagine a situation where we're going to say hey look i'm not going to take out the money first but rather finance the equipment possibly from the same people that i'm i'm getting the equipment from so in other words i'm going to finance the equipment that i'm purchasing at the point in time that i'm purchasing it so there's no actual cash involved in this transaction we're getting equipment and we're taking out a loan what's going to happen then the equipment account is going to go up and the other side is going to go to a loan payable type of account okay so a couple things just with the furniture and equipment themselves uh if we go into the furniture and equipment we can see there's not a whole lot of transactions happening nothing happened for the current month of furniture and equipment and in the prior month we would have that couple transactions when we started the business in the furniture and equipment so that's important to note because we're going to need a sub ledger for the furniture and equipment noting that we don't actually just expense the equipment when we purchase it we're going to put it on the books as an asset and you're kind of required to do that this is an accrual thing to do it's not a cash-based thing to do but if you're in the united states you can't get around it you can't just basically say i'm just going to be in a cash-based system for the most part because at least for taxes even if you're a small business you're going to have to follow the tax code which will force you to put it on the books as an asset although it might allow you to use 179 or special depreciation to deduct it anyways but the general idea is you have to put it on the books as an asset you can see the reason for that most clearly with very large purchases such as those for buildings if you purchase a building and you simply expense it in the month that you purchased it you're going to have a huge loss because you didn't really purchase the building to use it in that month but rather you purchased it to use it for years into the future so you can see how it will distort the comparison of the income statement that's the point of the accrual process it's better for a comparison period to period based on performance not cash flow and then we have another statement statement of cash flows to help us to see the cash flow information as well as the accrual information although the accrual information the accrual process as you can see is more cumbersome it's more difficult because now i have to put it on the books as an asset and then depreciate it so if i put it on the books as an asset then i also need to notice if you put it on it's kind of like inventory in that if we're going to actually invest in the equipment we also want to keep track of it now it's less likely that someone's going to walk out the door with our couch as they will with a guitar or something like that like the inventory although they might defile the couch in some way shape or form you know apparently but but it's unlikely that they're just going to steal the couch less likely however we want to be able to track the couch for the for the same reason we want to have a sub ledger for the assets that are on the books but that sub ledger which will list out our equipment is not often done in quick books in the united states because we already have to do us a sub ledger in the tax software so oftentimes you'll have the tax software that's going to help you out with the sub ledger which might look something like this listing out for furniture and equipment the actual things that have been that you have under furniture and equipment and then the tax software can help us also to do the depreciation adjustment meaning the expensing of the cost of equipment over the useful life of the business which we'll talk more about in a future course or section when we get to the adjusting entry process when we're purchasing the equipment however what we really want to understand is I need to get the detail of the information of what we're purchasing if there's a if there's a product number for it if I bought multiple things I want to list out those multiple things separately on the on the depreciation schedule which means I have to provide my accountant with a list of exactly what we purchased so that when I sell it I will be able to identify the thing that we sold if I say hey look this this couch uh is is desecrated and I I've got two two but I don't know who who above a homo has is that oh I can't read this thing but apparently that's a person that needed to put their some kind of name on my couch and so I need to throw it away now so I'm going to throw my count but if I have multiple couches and I can't identify which one it is that's going to be difficult because I have to reduce not only the couch but also the depreciation related to it when I dispose of or sell a piece of property so that's going to be important to put it on the books but right now we want to be thinking about another issue which is that if there's no cash affected what form am I going to use in order to put this on the books remembering that if I hit the drop down usually the journal entry is the last thing that we use because QuickBooks has broken out the forms by cycle so that the forms give us a nice audit trail and make it easy for the bookkeeper as well as an auditor to track what has actually happened so any normal transaction any cyclical transaction those that happen repeatedly will typically have a form related to it but purchasing equipment is not something that happens all the time so you might think it would be in the vendor section however if cash is not affected where it is not in this case we're not it's not going to come through the bank feeds or anything then we're not going to have any cash affected so what form are we going to use due to the fact that there isn't one remember that the list of process we go through one is there a form related to it if not then is cash affected if cash is affected I'll use an expense or check form possibly and if not then I default to a journal entry so this is where we basically have to do a journal entry however we can still use the register so we can use a journal entry in the register so that that might make it a little bit easier so we're going to say that we finance this thing let's go to the first tab and go down to the the transactions and I'm going to close up the handbooky go into the chart of accounts and we're going to say that we're going to finance this thing and I'm just going to imagine the loans coming from Bank of America so I want to make up another loan account now the loans are another kind of issue you you'll recall here that we had the loans payable that was the current portion of the loans payable but now we have multiple loans so if I go into the balance sheet over here do I I could just keep this one loan payable account where is it where did it go there it is I could just keep this one account and put multiple loans within it but that's going to be a little bit more difficult from for internal bookkeeping purposes what I would like to do is break out the loans into into a parent account possibly and then multiple subsidiary accounts so I can track the loan balance each one at a time this being quite common if you deal with types of businesses that have a lot of fixed assets such as construction companies farms and things like that because they're often financing different pieces of equipment the equipment then acting as collateral support of the loan balance for the bank to allow them to process the loan for them so let's go over here and say that we're going to we're going to say we have a new one and it's going to be a loan so I'm going to say it's a liability I'm going to put it into current liability so I'm going to say it's a current liability let's scroll on down to do I'll say other current yeah other current liability and line of credit loan payable let's say and then I'm just going to call it be of a loan and then I'm going to imagine that I put the last four digits of the loan number because that will help me internally to know which loan it is because I might have multiple loans that are coming from the same institution if we trust the institution we will probably do repeat business with that institution and therefore the institution in and of itself might not be enough of an indication of identifying each of the loans so that's going to be our loan payable so let's save that okay now let's see if we can figure a way to make it a subsidiary type of account so I've got my loan I've got my bank of of America account here and then I also have this is the other current liability and then I've got my general loan payable account which is down here and that's that's the loan payable current portion so what I'd like to do is basically make a parent account which is just going to be generally loan payable current portion and then put these two within it so what I'm going to do is change this name to make it less generic I'm going to select the drop down I'm going to edit this one and I'm going to imagine this one came from chase so instead of just calling it loan payable I'm going to call it chase let's say chase chase loan and then we'll put the loan number we're imagining again of whatever the last four digits of the loan number so now I've identified the two individual loans by institution and by the last digits of the loan number now I'm going to make a parent account to house those two under as subsidiary accounts so now I'm going to make a new account and this is going to be a liability this is going to be another current liability it's going to be once again a loan payable I'll call it loan payable current portion which might be redundant you might not need current portion because it's in the current portion of the loan payable but you might make another loan payable long-term portion which means you'll have two names that are the same and that'll cause you kind of a problem quick books won't let you possibly record it maybe so in any case we'll keep it at that and we'll save it so now we have that in there and now I need to go back in the two that we made and make them supported it or some subsidiary to my new parent account so this loan payable for the b of a selected the drop down editing it and I'm going to say did it in the loan payable that's correct but then down here I want to make it I want to make it what's actually here I'm looking for I'm looking for the loan payable current portion there it is so now I can see down here it gives you a little display of it now it's going to be subordinate subsidiary to the loan payable current portion I'm going to do the same for my other chase loan let's do that and then I'm going to say all right there's the loan payable boom and then the chase loan don't day for crying out loud a star the chase loan there it is and then we're going to hit the drop down edit that one and I'm going to say that this one is going to be subordinate also that's not the right one here to this one so loan payable current portion boom okay so now we have a parent that will not have anything in it and then the two accounts below it will have a drop down let's see what that looks like now on the balance sheet it's only going to have one of the two because we don't have the two balances in there but if I scroll down there it is nothing's in the parent loan payable current portion and then we have the one loan that's currently on the books now we're going to record the second loan on the books we can use a register format to do that instead of a journal entry so we're used to the registers most likely in the checking account but we have a register format for every balance sheet account except for the retained earnings or the owner's equity in our case so we could use either one because both of them are balance sheet accounts either the equipment account or the loan payable account let's go to our loan payable account because we just set that one up let's go into it if I say okay there I said okay okay I said it okay I said I'd say okay if I say okay we're going to go into the view register here now this is the loan payable the loan payable should be going up with a credit so it's a little tricky because it's going up with a credit but we're going to say that we purchased this on on 022824 and let's say we purchased it from we'll just imagine it was Bank of America even though they're the ones that financed it bank what did I call it B of a I think bank let's just say and we're going to say okay that's going to be a vendor and I'm going to say save in this case even though it's really the financial institution but I'm going to and then in the memo you might want to put exactly what you purchased so equipment equipment and you might want to put a lot more detail of the you know equipment that was purchased because this is where you're going to you're going to want the transaction to show so that when you go to your tax return prepare or they don't put it on there as just generic equipment was purchased because that will make it difficult when you sell the equipment so 5000 increase on the loan and then the other side is going to go into the equipment account so I'm looking over here for fixed asset types so to do we have expenses they kind of put it in a funny order they're trying to help you out but it's actually a little confusing to me I kind of wish they would just put it in normal order but whatever it's in the furniture and equipment so there it goes what's that what's this going to do it's going to increase the loan hopefully in a credit direction and then the other side is going to go to equipment which should increase equipment so it should in other words debit equipment and credit the loan let's see if that's what it does if it goes the right way I can then go back into it edit it and we can see the loan got credited and the furniture and equipment got debited and it did use a journal entry even though I entered it into a register format I'm going to copy the description to both sides save and close it so that looks good let's go into our balance sheet and check it out so I can run the report again and then I can go into my furniture and equipment boom is now at 103 can't you see oh my goodness okay we're going to go into there it is it's a journal entry form and so there we have our journal entry form now notice you can't as easily tag something to this form like if you needed to show a receipt or something like that so so again you want to be make sure that you have the added detail the receipts that you can provide possibly you know storing it or saving it as a pdf or something so that when you provide this information to the client or to your tax preparer you give them this transaction entry so they know the amount that was purchased but they also have all the detail that they need to break that out into whatever format is necessary to properly put it on the depreciation schedule properly calculating depreciation in this period but also allowing you to be able to handle the accounting when you sell or dispose of the equipment because you can identify which equipment is being sold both the physical equipment as well as on the the ledger the sub ledger okay so let's go back on over then the other side is going to go into this new loan payable account so now we got the loan payable dropping it down and so see how nice that is now because now I can I can show this externally to one account that just has both of them in it because that's all most external users users need but internally I can drop it down and I can see the loan balances for each of these so when I make the payments I can still tie it out and make sure that this ties out to the amortization tables note however that we also might have to break out a short term and long term portion of the loan however I wouldn't do that every transaction because that'll be too tedious because that will change every time instead having a long term portion of the loan in a similar fashion loan payable long term portion and then the two loans within it breaking out the current and long term portion with adjusting entries at the end of the month or year as is required and possibly having the help of the of the CPA firm or accountant to do that noting that if you're small business and you're just doing a schedule C you might not need to break out the short term and long term portion for external purposes although it might be useful for internal purposes for your own decision making because it's not affecting the income statement which is the main statement used for tax preparation for a schedule C sole proprietor type of business so in any case we'll talk more about that when we get to the adjusting entries in a future course or section all right so let's see this is where we stand we're going to keep it there for now this is the balance sheet and looks movie B to the end I got two letters for B and movie B and okay and then we go to the income statement nothing happened to the income statement because we put it on the books as an asset and remember just note we it's not because you might think it'd be logical to think well it didn't affect the income statement because we didn't pay for it yet we took out a loan but that's not right that's not the reason it's not on the income statement it's not on the income statement because we had to put it on the books as an asset even if we paid cash as we did in the first month of operation when we bought the original equipment our original sofa right we still didn't expense it at the point of purchase but rather put it on the books as an asset even though we paid cash because we have to do that for for long term assets we will expense it however in the future in the form of depreciation which we will see in a future course or section as we get into the adjusting entries okay let's go to the trial balance let's run that again this is where we stand at this point in time if your numbers match out to these numbers and you're following along that's great if not try changing the date see if it's a date range issue the first section is of course the asset section what the company has reported in dollar amounts not in units not in number of count couches that we have but in dollars so we've got the assets the checking account accounts receivable inventory investment payments to deposit prepaid insurance accumulated depreciation contra asset account which is tied to or linked with the furniture and equipment which will have to adjust at the end of the period in this case and then we have that's what the company has the flip side of the coin who has claimed to it the liability and equity that's who has claimed to it liabilities first accounts payable visa the bank the government the state with the sales tax the loan payable the bank the bank we have two loans that are out at this point in time we've got the government again with payroll liabilities that we owe to them unearned revenue if we had sales or that we earned we got cash but we haven't yet done the work yet and then we have our claim to the assets in the equity section including owners investments similar to common stock if it was a corporation and owner's equity similar to retained earnings if it was a corporation and then the income statement income being credits expenses being debits credits minus debits should result in a credit balance if we have income rather than a loss the whole income statement will roll into close out on or into the owner's equity otherwise known as retained earnings if it were a corporation QuickBooks does that on a yearly basis so we can then see how that is done by going one year up oh 101 to 5 to 0101 to 5 and run it to refresh it and you can see that it squished the income statement into one number the income statement kind of like an odometer but one that you reset every year so that on the new trip all the accounts in it count upwards starting from zero the owner's equity representing the odometer over the life of the company all the income that has been generated through the life of the company which has not yet been distributed out to the owners in the form of draws if it was a corporation i'm sorry if it's an individual sole proprietor and dividends if it was a corporation the equity remembering being the bottom line of the financial statements if you think of the financial statements in the form of the accounting equation of assets minus liabilities equals equity