 0. Accounting Software 2023. Rental Income Envoys Created from Estimate or Quote and Customer Credit Applied to the Envoys. Get ready to become a Counting Hero with 0. 2023. Here we are in first, a word from our sponsor. Well, actually these are just items that we picked from the YouTube Shopping Affiliate Program, but that's actually good for you because these aren't things that were just given to us from some large corporation, which we don't even use in exchange for us selling them to you. These are things that we actually researched, purchased and used ourselves. Focusrite Scarlett Solo 3rd Gen USB Interface with Software Suite. I've been using a Focusrite for years for my audio needs, before which time I had a USB microphone which plugged directly into the computer. But I think you'll find as I have found, if you want to increase the quality of your microphone, you will need an interface and the Focusrite is the go-to interface as far as I'm concerned. I've been using this for years now. It works well. It's easy to use. It seems quite durably built because I only do the screen recordings. I only need the one Solo interface. However, if you have multiple microphones you need to plug in or if you have other instruments you need to plug in, you can look at a similar model that has more input ports. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com where we have many different courses. You can purchase one at a time or have a subscription model given you access to all the courses. Courses which are well-organized have other resources like Excel files and PDF files to download and no commercials. In our Custom Zero homepage, going into the company file, we set up in a prior presentation Get Great Guitars. We're going to duplicate some tabs to put reports in by right-clicking the tab up top so we can duplicate it right-clicking the duplicated tab and once again duplicating it. Back to the tab to the middle, Accounting drop-down. We want that balance sheet report. And then we're going to tab to the right, Accounting drop-down, the income statement. But we're picking the comparative income statement. If you don't have that, you can pick the normal income statement. The comparative income statement is one we created in the past comparing the current month of February and the prior month of January. Back to the balance sheet, Date drop-down, Customizing the date range, bringing it up to 2023, the end of 2023 and then updating it. Alright, back to the first tab. We've been formulating our new form of income, that being rental income. So let's take a look at the flowchart, just for a quick recap. So if I go to our flowchart, this is a desktop screenshot of QuickBooks desktop but we're just looking at the flow of the forms here, noting that we're on the revenue cycle of things and normally we generate revenue from selling guitars and from our guitar lesson business but now we're renting some of our equipment for people that want to have like a band set or something like that on the weekends. That's the idea. So the general process we put in place, they're going to call in. When they call in, as we did in the past, we create an estimate. So we create the estimate and then we're going to collect a deposit to lock down the equipment. So that's basically we're receiving the payment before we actually do the work providing the equipment for rental. Therefore it's going to be recorded as a liability and then they're going to come in. This is where we're at and the story now they're going to come in and actually we'll rent the equipment at this point in time, creating the invoice and as we create the invoice the sale will be recorded and we're going to have to apply the credit to the invoice and after that then of course we can receive the payment from there that's remaining and record the deposit. Alright, so let's just a quick recap and zero what has happened. So the first thing we needed to do is we set up our products and services. So we went into our products and services under the business dropdown and we grouped our rental stuff in a band set and then added guitar and whatnot if they wanted to put some more stuff in it so that we can make the estimate as easily as possible. And then when we made the estimate in the prior presentation we can find that by going to the business dropdown and go into the quotes, quotes or estimate, same thing. And we're going to go into that and say the accepted ones. We had customer number 10 here made this quote. So they have the quote that they made. If I go into the quote this is what it was. So there it is. And so this didn't actually record anything. It's just a quote that's not that we're going to track but we haven't completed in essence the job which in this case is the renting. So we would expect possibly to make an invoice from this quote when they come in. But before we did that we collected a down payment so to lock them in which we might in practice make based on the quote amount. So we can find that by going to the business dropdown and we can go to the invoices and we can go into the ones awaiting payments and there's the prepayment that's ready to be applied out to the invoice which we will do now because the customer is coming in to actually rent the stuff. The day has come and they're so they're here. So then we can go we can also find this by going to the contacts dropdown of course. And we can see customer number 10, customer 10. It's a weird name for a customer but whatever that's what their that's what their parents named them. So it is what it is. So there it is. We got the quote that's accepted and we've got the 200 prepayment. That's where we are in the story. Now we're going to make the invoice. So we're going to complete this thing. They're going to come into the shop. They want the stuff. They're picking up the guitars or whatever and we'll invoice them. All right. So let's actually let's do this from from the estimate. So I'm going to go into the business dropdown. I'm going to go into my quotes over here and then I'm going to go into the accepted quote. And I think this is possibly the easiest way to do it so that I'm going to check off this quote right here. And I would like to create an invoice from it. So I'll say make an invoice from it. I want to market as invoiced. If I don't actually generate the invoice with the quote, then I could mark the the the invoice as invoice manually this way. Just so I can pull it out of this area of the accepted area and put it over into the invoice area. But I'm going to make the invoice from the quote, which is nice because that makes the data input a little bit easier. So now we got customer number 10. We're going to make this. Let's make it February 28. So February 28. And so there we have it. And it just pulls this information in from the estimate we put on the estimate, the one band set. You'll recall that are the punk kid that we had working in the shop was able to populate the estimate very well and take the order down. Even though I mean, I don't mean to be rude, but he's not the smartest, you know, the brightest, you know, firefly in the gaggle of fire, fireflies. But we have the one, the band set, but he did a good job here. So right, we got the band set, we've got the added guitar and the added amp, and it pulls into our invoice. Now note that we don't have the down payment yet being applied out here. But if I approve it, then I should get a pop up saying, hey, there's a down payment that needs to be applied. So we're going to be like, yeah, that's the total right there. Let me see if I can approve it and apply out the credit, which I know is there so we can populate it. There it is. Customer 10 has 200 in outstanding credit. Would you like to allocate credit to this invoice? We're going to say yes, we would like to do that. How much would you like to allocate the whole $200 por favor, please? So that brings the 2002 60 down by 200 to 2000 and 60. So we'll allocate the credit and move on forward. So there we have it. So now we've got the invoice with the credit allocated to it. What's this going to actually do when we record it? Note that if I give this to the client, we can just say now you owe us. Obviously the difference here of 2016, we can collect possibly at that point in time. So notice how easy the flow basically is, but this is a fairly complex transaction that's actually going to happen to the financial statements based on this invoice. So what's it going to do? Well, it's going to increase the accounts receivable by 2260, but it's also going to decrease the accounts receivable by the 200. And it's going to decrease the unearned revenue, the liability account by the 200. So the net impact on the accounts receivable will be the 2060 but created from those two transactions. And then the other side is going to go to the income statement for the amount that we charged the 2002 60. We don't have any sales tax to deal with at this point. So that makes it a little bit easier. And so that's the other side of it. And we also don't have any inventory that we have to deal with. So this is a little bit confusing in terms of the unearned revenue kind of being applied out, but not too bad. All right, so let's go ahead and then check that out. So let's go to the balance sheet and update it and check it out. We'll go into the accounts receivable. I can't do a good pirate sound. It doesn't sound pirate. It just sounds stupid. That just sounds stupid. Supposed to sound like a pirate. There's the 2260 and there's the 200. So those two transactions netting out. This one, the other side going to unearned revenue. This one, the other side going to the rental income. So if I go back to the balance sheet, we should have the unearned revenue decreased because we have now earned it. So unearned revenue down to 450. So if I go into that, we can see the 200 has been credited in there right there. Is that it? Is that the one? That's the one. That's the one. Back on over. And then if I go into the income statement, update it. We've got the rental income now finally being recorded because we actually did the work. So now the whole 2260, including the credit, even though we populated it all at this point in time, because this is the point in time that we actually did the work renting out the equipment. And then of course we can track the sub ledger for the accounts receivable by customer number 10. But let's just look at that internally. If I go internally here, we could see if I go to the business dropdown. If I look at the quotes, for example, the quote has now been moved from the approved to, so it went out of accepted to invoiced. All right. That is there. So it's been moved over. If I go to the business dropdown and I look at my invoices, then I can go to my ones awaiting payment. And so now I've got the 10 awaiting payment still, but it only has the balance of the 2060. And that little yellow thing indicates that there's basically a partial payment to it at this point in time. I can also look at this by contacts and look at all the contacts and look at the customer contact that we want. Customer number 10. Customer number 10. And so now we've got the invoice, which has been partially paid at this point in time. And if I go into that invoice, then we can see the full amount of the invoice, the partial payment, and what is still due the 2060, which we can also see as a summary here up top, what's due by the customer 10 at this time. All right. So let's just finish this thing off. And let's say that we're going to collect the rest of the payment at this point in time as well. So we're just going to say, all right, they're going to pay us the rest of it. Let's do it this way. I'm going to go to the business dropdown into my invoices and go into the ones awaiting payment. And so there's the one awaiting payment. I'm going to select that item and we're going to say it's going to be deposited. Now note, I'm going to deposit it into the clearing account again. And just to practice the idea that you might need a clearing account if you have like the intermediary payment processors or if you're collecting cash so that you can then deposit it into the checking account in the same format as will be physically put in the checking account to match out with the bank statements. If you were had multiple invoices that you're going to combine together, then you might not need the clearing account because you can combine multiple invoices together here, which is quite neat and a good tool by zero. But you can still kind of also imagine that you have other things going on such as fees by the payment processor or other types of batches with other kind of transactions, which might be, you know, just money in transactions that are being grouped together. So let's just practice the idea of that clearing account. So I'm going to put it in here. We're going to go to the deposit and I'm going to choose instead of the checking account. I'm going to choose the clearing account and then we're going to put this in as a Feb 28. If you could get the date correct, it would be helpful. That would be help that help everyone out so that you don't have to make corrections like in the middle of the presentation, which is really annoying. So notice we're depositing the what's left now the two thousand sixty because we already got the two hundred deposit for the prepayment before that. So let's make the deposit and then we'll go on over to the balance sheet and update it. And so now we've got the clearing account cash clearing has gone up and the AR should be going down. So if I go into the A to the R, the accounts to the receivable, then we're going to see that we have a payment receive payment for the two thousand and sixty. So these two, of course, match up to that one. So it went in went out and so on. So then I'm going to go back. If I track that on the AR side of things, we can see if I go into my business dropdown and my invoices, the invoices were awaiting payment, but now it's been paid so it moved over to the paid area. Boom. Done. Contacts drop down all contacts. We can take a look at it in this format as well. Customer number 10. And we can say that invoice has been paid. It's been paid in full. Indicated by the little paid thing. Okay. So that's the Mui B to the N. Now on the balance sheet, we've got this amount in the clearing account. I'm going to move it from the clearing to the checking account. In this case, I don't have to group it with anything else. So we could have just put it directly into the checking account. But if you had to group it with other things, other deposits that happened so that you can group it in the same format as will be on the bank statement, that's an important step. Things that messed that up are payment processors, depositing cash, credit card companies, fees and whatnot. Those are reasons where you might need to set up some kind of clearing account system. And so keep that in mind. Going to go to the tab to the left and we'll just say plus button transfer the money. And we're going to say it's coming out of the clearing account going into the checking account as a Feb 28. Feb 28 is the date. 2060. 2060 deposit. So we'll just transfer that on over and then we'll call it a day. It's a day. I'm calling it a day. What else would you call it? Of course it's a day. Oh man, the clearing account didn't get cleared out. K-PASO. Let's go back into it and scroll down. Dude, dude, you typed in the wrong number. Okay, no big deal. So I'm going to go into it here. And options, mark as reconciled, remove and redo it. I'll just remove and redo it. No big deal. No big deal. Hit the drop down again. And then we're going to say transfer. And this is going to go out of the clearing account. And we're going to put it into the checking account as a Feb 28. And okay, what was the dollar amount? 2040? No, it was 2060. That's my prompt. 2060 deposit. All right, let's do it. I think I got it this time. Now I got to go back into the balance sheet because I drilled down and messed up the balance sheet report. So I'm going to open up the balance sheet again and then drop down on the date range, customizing it 2023. End of it, update it. And then the clearing account has disappeared because it's cleared out. It's cleared out. And I just, I did that on purpose to show that if the clearing account doesn't clear out, then that's a kind of internal control that's really useful and worthwhile to demonstrate how that could help you to fix any mistakes if people make mistakes. I don't make mistakes, but some people do. And that's why we have these internal controls so that if that were to happen, you could fix it. That's why the checks are there. So let's go to the tab to the right. Let's open up the trial balance. And see where we stand. We're going to duplicate the tab and we're going to go into the accounting dropdown and let's go into the reports. And we'll type in trial balance up top, trustee trial balance. That's not how you spell it. Trial balance. And then we're going to bring it on up to 2023. The end of it and update. All right, so this is where we stand. If your numbers tie out great. If not, if you were on last time, your numbers checked off at the last time, but you're off this time, the things we changed, we changed the checking account. And if that clearing account's not cleared out, as we demonstrated, then that's an indication that something's an issue. Accounts receivable, we had some activity that happened in the AR as well. I think that's basically it because we, I think that's basically it. So you can check those numbers out, change the date range, drill down onto the source document if you need to and see if you need to make any adjustments from there.