 QuickBooks Online 2023. Write checks for expenses and prepaid assets. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our get great guitars practice fire. We started up in a prior presentation with the 30 day free trial. We also have open the free QuickBooks Online sample company. If you want the two things open at the same time, we suggest using the incognito mode or another browser. You can open the incognito mode if using Google Chrome by selecting the three dots in the browser and the incognito mode. Then searching in the search engine for QuickBooks Online Test Drive. We're gonna be using the sample company to compare and contrast the accounting view, the view that get great guitars is in and the business view, the view that the sample company is in. You can toggle back and forth between the two views by selecting the cog up top and switch the view down below. Opening up a couple of tabs to put reports in, right-clicking on the tab up top to duplicate it like we do every time, right-clicking to duplicate it again. I'm gonna do this one more time, opening up as well this time the trial balance. I'm gonna duplicate another time and then I'm gonna go way back to the middle tab now and open up the reports to open up the favorite balance sheet. If you're in the business view by the way, the reports are in the business overview on the left and then the reports. That's where they are there. So then I'm gonna go to the middle tab, go to the reports on the left-hand side, open the other favorite, the profit and loss. Then I'm gonna go to the tab to the right and do it one more time, reports this time the trial balance. I wanna practice using it. I'm gonna close up the hand boogie right now and close up the trial or open up the trial balance by typing in trial balance and picking it up. This is the report that has the balance sheet on top of the income statement. I wanna start practicing using it here when we're gonna enter transactions that will have an impact to both statements. Changing the range from 010123 to 123123, running it to refresh it, tab it to the middle. Do the same thing, close the boogie, scroll up to the top, change the range. The range ins they are changing from 010123 tab, 1231123 tab, run it to refresh it one more time, tab to the left, close the boogie, scroll up to the top, change the range, going to 010123, tab 1231123, tab run it to refresh it. That's the setup we do every time, except we kinda added the trial balance this time. 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. Now we're gonna be entering some transactions which are typically normal kind of month end type of transactions that you might expect on say the vendor cycle, the payment cycle, the expenses cycle that we're gonna be entering into the system. So if I was to go to the flow chart over here, we're considering the vendor cycle, which you can think about as the expenses cycle where at the end of the day, we would expect money to be going out. The easiest way that you can pay people depends on the system you're using, but the easiest way would be simply to write a check or expense form for expenses as they come due, like telephone bill, phone, you know, the utility bills and whatever bills and whatnot, the check form or an expense form for an elect, if you paid them with an electronic transfer. Now if you paid in this format, which many small businesses do, they just paid the bills as they come due, remembering that when I use the term bill, there's a difference between using it in terms of what you received in terms of a physical bill and entering a bill form into the system, which is an increase the accounts payable. If I received a physical bill, then I could just simply pay it with a check or expense form instead of entering a bill form into the system. So there's that difference. So if I was to do that, I could also just set up my bank feeds oftentimes to do that. So we'll talk about bank feeds in another course or section, but the easiest way would be basically if you have electronic transfers to wait for them to clear the bank and then record the transaction at that time, which would be basically an expense form when you record it with the use of the bank feeds. Now if you're gonna actually physically write a check for the payments that you're making, the monthly bills and whatnot, then you're gonna wanna enter the check first and not just wait till it clears the bank because the whole point of the check is that you're gonna have this big gap between when you write it and when it actually clears the bank and you would like to be able to track whether or not you wrote the check and whether or not that check cleared if you have any confusions about that with the vendor that you're dealing with. So the other way we can enter it is with a bill. So if we got the physical bill, we can enter a bill into the system. The bill into the system increases the accounts payable and then you pay off the accounts payable with the pay bill which is in essence a check type of form. Many small companies will basically be using electronic transfers on and therefore on a cash based system basically for the payments they're making and possibly on an accrual system in some cases for the revenue cycle because possibly they have to invoice people and that's just the way that their industry is. As companies get larger, they're more likely to use the bills, track in the accounts payable so that they can delay the payment as late as possible because of the time value of money. In other words, if you had to pay like a $100 phone bill today or 15 days from now, it really wouldn't matter for most people if they paid it today instead of 15 days later. But if the bill was really large, if you're talking about large dollar amounts and or if you're talking about many, many transactions, then that 15 days becomes significant and the management strategies to try to pay as late as possible take advantage of discounts and whatnot if there's cash discounts offered becomes more and more relevant. So for the first month, we're gonna enter the bills just by using a check or expense form. And then in the second month, we'll enter the bills using the bill payment method. So let's go back on over and just enter some of these bills. Now these are also gonna be things that are repetitive. So once we set up the vendor and the payment, hopefully the expense account will populate automatically making it easier and easier for us to enter the second month, then the first month, the third month, then the second month and so on and so forth. If you have bank feeds turned on, which we'll talk about in a future course or section, then you'll be able to have memorized transactions or rules to help to make this more automated process after you do the first month of data input. But you have to know how to set it up before you can do the automation and the accounting is what you need there. All right, so let's go back to the first tab. We're gonna start by entering one for an insurance company we're gonna imagine. So I'm gonna hit the plus button. This one's actually a little bit more tricky so we can use an expense form or check form. We're gonna imagine we're actually writing the check. So we're gonna use a check type of form. You can also enter this into the register format if you so choose, but I'm gonna use the form here. We're gonna call the company safe insurance. Now, remember that as you're entering these transactions into the system, if it was not the first time you're entering the transaction, if you're starting a new job or something, then you're gonna wanna make sure that you don't add new vendors with slightly different names. You wanna use what was done in the past and be consistent with it. And if this fits, so I'm gonna set up a new vendor because we're starting, we have a new company file, we're setting up the vendors as we go. Oftentimes the vendors will be just the name is all we need rather than all the contact information in order to just simply facilitate the payment. So I'm gonna say, okay, I've got that in the required field. It's gonna be coming out of the checking account. That would be the standard. It's gonna be for that's good. The due date, let's say is the 26. We're going towards the end of the month here. Imagining this is happening towards the end of the month. The check number populating automatically. So that looks good. If we were to actually physically be writing the checks or then we might hand write the checks and double check that the check number is accurate. If we're gonna be doing the checks within QuickBooks, then we might print them later here. We'd still have to buy the checks in order to print them, put the checks into the printer to print on them. We're not gonna have any tags. We've got the category down below. Note we're not entering an inventory item this time. We're just gonna be assigning an account for the insurance company. Now we started off with one that's a little bit confusing, that being the insurance. We might have different kinds of insurance, liability insurance, auto insurance or whatever types of insurance. The thing about insurance is it's different than like a phone bill. With a phone bill, we get the service first and then they charges for the service that we used. With insurance, we're gonna be paying for something that's gonna happen into the future. Now if you're close to the point in time where the actual benefit is being received, then it's not a big deal and you can expense it kind of as you go. For example, obviously with the phone bill, the phone usage happened the month before, but you're entering it pretty close to when you actually consumed it. On an accrual method, we would like to enter when we consumed it. For the insurance, we're not gonna consume it until the month after, but if we're paying on a month by month basis, then we might still be saying, well that's pretty close, so I'm just gonna enter it as an expense. However, if you paid for like five years of insurance upfront, then it starts to distort your income statement, right? And this is the same concept as it's most clearly seen in like fixed assets. If you bought a building for $100,000, you paid $100,000 cash for it and you expensed it in January, for example, on the income statement, then January versus February, when you try to compare your performance will be way skewed because January will look like you did really bad with this huge loss, but really you bought a building that you're gonna be using for 39 years or something like that. So what we need to do then in that case is put it on the books as an asset and then allocate the expense over the time it's gonna be consumed. Same concept for any other kind of prepayment. If I was to buy a year's worth of insurance, which we're gonna speculate here, then I might put it on, if I just expense it, then January and February will once again look skewed. So to be fair, I should put it on the books as an asset and then allocate it to the expense accounts as we consume the insurance as we get the coverage. But that takes another step. So with these prepayments and the insurances, the most clear example of a prepayment, you wanna talk to your accountant and say how are you gonna set up the prepayment? Do you wanna stay in a cash-based system or do you think that you need to do an accrual kind of component to it? Either way, you can kind of set up a system where every time you make a payment, it'll go to the same account, whether that account be a prepaid account or whether it be an expense account. If it's a prepaid account, then we have to do adjusting entries, which we'll talk about at a future presentation. So we're gonna set up a prepayment account here. So we're gonna look in our chart of accounts if we've never paid these people before and there's probably not a insurance prepayment in here. So there probably is some kind of insurance expense but not an insurance prepayment. So what I'm gonna do is type in and make a new account. I'm gonna call it prepaid. Notice they have prepaid expenses. I could use that one, but I'd rather use that as a parent account maybe if I had multiple types of prepaid expenses. So I'm gonna make another account prepaid in insurance. And then say tab, it's gonna ask me to set it up. So I'm gonna set it up. It's gonna be an expense account. So we're, no, it's not gonna be an expense. We're gonna do prepaid insurance as an other current asset, other current asset. That's the point. And then I'm just gonna say it's an other current asset here. We'll just say boom, prepaid insurance. I don't need a description. It's not a sub-account unless I wanna put it under that prepaid account, but I'm not gonna do that. And that's it. So let's save it. And then let's say the amount, we could put a description for the amount covered. So we might say it's for a year and you might then put the dates to start and the stop which might help you later on to do adjusting entries or whoever's doing the adjusting entries. I'm gonna say it's $12,000 for a year's worth of coverage. It's not gonna be billable because I'm not gonna be allocating it to a customer and making an invoice related to it. I'm not gonna add any lines. I don't need any memo, any attachment. We can cancel, clear. We could print the check. We can order checks. We can make it reoccurring. You have the more options of avoiding them. Then we can save and close it or save a new. We're gonna go with the save and close and check it out as we go. Let's go to the balance sheet, see what happens. Run the report to refresh it. Checking account, if we go into that, we should have a check in the checking. And there's the check, check it out. There's a check, $12,000 looks good. Opening that up and there's our check. Looks good. Closing this out, scrolling up back to the balance sheet. The other side did not go to the income statement for our first item here, but rather went into prepaid insurance. Is that how you spell insurance? It looks right there. 12,000, there it is. And now we're gonna imagine that's for a year, which breaks out to 1,000 a month. So when we do adjusting entries at the end of the period, we're gonna take 1,000 each month and take the prepaid insurance down and record it to prepaid expense. So it's an added step than a cash-based system, but we'll end up with $1,000 a month being allocated to each month in accordance with when that expense was incurred on a cruel concept as opposed to when it was paid for. So we'll talk more about that in the adjusting entries in a future course or section. Let's do another one. We're gonna go back to the first tab. We're gonna hit the plus button again and we'll go to another check. Checking out another check. Now we're gonna pay the electric bill. So we're gonna say it's Edison. Edison, notice I'm gonna have to set up all my vendors because this is kind of like the first month of data input as we go. If we were doing bank feeds, then oftentimes if they were electronic transfers, this will be in the memo somewhere, but you're still gonna have to set them up as a vendor. Once they're set up, then it should be a lot easier going forward because it'll memorize the account category down below most likely. So we're gonna say tab and then that looks good. We're gonna copy over Edison to the required field. It's gonna be coming out of the checking account. The date, we'll keep it up to 26, 2008. That's the check number automatically populating. I'm not gonna print the checks for the example problem. And then down here, now we've got our questions on which account do we want to put this to. I'm gonna open up another tab. I'm gonna right click on this tab, duplicate it. I'm gonna pull it to the left so that we can open up our chart of accounts, which are in, let's close this thing up because I have it open in another tab. And I'm gonna go to the chart of accounts, accounting on the left hand side, chart of accounts, and then closed up the boogie. If you're in the business view, by the way, the chart of accounts is in the bookkeeping and then you've got your chart of accounts right here. Okay. So then in the chart of accounts, note that the expense categories down here, that's where you have the most variance between your capacity to have different account names and how you're gonna organize the chart of accounts. Do you wanna have a lot of subledgers? Do you wanna have more accounts, which adds more detail but also makes things more complex? Or do you wanna have less accounts and make things simpler but not have as much detail? You can kind of have the best of both worlds in the reports by having more accounts that are kind of sub-accounts, these accounts that will expand. So the idea here would be most people, I would recommend, use the format that QuickBooks has given you for the most part if there's an account that they have given that matches what you want to do, use that account if it's closed, but it's not formatted the way you want it, go in here and change the formatting of that account to the name that you want and whether it be a sub-account or not. And if there's no account at all, only then do you add a new account. At that point in time is the general rule. Then after two months of data inputs, you can go in here and try to delete or make inactive all the accounts that basically you're not using. And in that way you can kind of clean this whole thing up. And the utilities is a good area because the utilities used to be like phone, electric and water and the gas, but many people break the phone out into its own thing now. So a lot of times I wouldn't put the phones under the utilities at all anymore. I would just have its own account for phone oftentimes. And then I usually use utility personally as just that's where I put the electric, not in its own account, but just in the utilities account. I consider like gas and electric usually utilities. That's how I typically do it. It might change depending on the cost of things. Obviously the phone has going up in cost. That's why most people think it's relevant to have its own line item on the income statement. Okay, so if I go back on over here, I'm just gonna put this into the utilities account directly and I'm just gonna put it into that account. And I'm not gonna use all these sub-accounts under the utilities is gonna be my idea. And then the telephone, I'm probably gonna change the name and take it out of being a sub-account when I get there. Okay, so then you might wanna put something on the description like the period that you paid for, but I'm not gonna do it here. 620, it's not gonna be a billable item. We're not gonna have any tax on it or so on. This is gonna decrease the checking account. The other side is gonna go to the income statement this time. Let's do it and save it. Let's, I'm gonna close this. Well, I'll keep that open. Let's go to this tab and run it and then check out the checking. Another, there it is. There's the other side. It's going to Edison this time to the utility. Move B to the end. And then we're gonna go to the tab to the right and run it to refresh it. And then now this side is now in the utilities under the expenses. We've got our first expense account. Isn't that wonderful? Now you can check this out more easily just on the trial balance over here. We've got a balance sheet side, the cash, and then the income statement side, the expense on the same form. See how much shorter and easier it is to have this open than an income statement and balance sheet if all you're trying to do is kind of verify which accounts were impacted by them. So that might be a tool worth checking out. Speaking of checks, let's make another one. Eh, eh. Let's go to the middle tab here and then we're gonna hit the plus button and we'll do another check this time. We're gonna pay Verizon the phone company, let's say. So this is gonna be, I'm gonna make a new vendor, Verizon just on the fly as we go. I'm flying and we're making vendors in the air passing clouds and making vendors. So that's gonna be our required field, Verizon, cash account, boom, boom, looks good. Check number populating automatically. And then down here, I'm gonna see what they have. Do they have a telephone expense? Telephone, no, they just call it phone. They got phone and they call it phone services. So I would rather change that. So now I'm going, no, I'm gonna go back to the tab to the left. I don't wanna make another one called telephone because then I might record something to both of those. I'm just gonna take this account and call it telephone and I'm gonna take it out of the utilities and all this other stuff. If I'm not using it, I'm just gonna, I'm gonna make those inactive at some point or I would imagine to do that at some point in the future. So I'm gonna say, I'm gonna use this account but I'm gonna change it. We're gonna edit it and I'm gonna say, I just wanna call it, I just wanna call it not a sub account, not a sub account. I just wanna make it a normal expense account in the expense category. So they kind of changed the way to do that in here. So I just click the expense category which is not a sub account now. And then I'm not gonna have anything. I'm just gonna call it telephone. Telephone, that's what I wanna call it. So we'll save it. So now it should be updated. They're requiring me to have a field here. So let's say we do, we'll go with utilities on that one. Okay, so then that looks good. So let's save it and close it. So we should be good to roll. It should be down there in telephone and not as a sub account. And we'll see it when we get over to, there it is. Right there, it's right there. Can't you see? Are you blind? No, I just didn't see it, okay? There was a lot of accounts at the same time. Okay, then again, you might wanna put like a description here but we're not gonna now and I'm gonna say this was for 410. We're gonna say 410. Save it and close it. Same stuff's gonna happen. Balance sheet, run it to refresh it. Checking accounts, got a new check in it. A new check, we're gonna check out in the checking. There it is, the 410, scrolling back up, back on over. The other side's on the income statement. The P to the L, the profit to the loss, boom. There it is. And on the trial balance, we could have just looked at this one report where it has these two expense accounts on down below. Okay, let's do another one here. This one I'm gonna say supplies. So I'm gonna go back to the middle tab and we're gonna say new again, another check. Check out another one. Let's check out another one and this one I'm gonna say is gonna be supplies. I'm gonna say supplies or we're gonna get the supplies from staples, we'll say. This is gonna be from staples tab and so that looks good. I'm gonna copy that on over here, boom. And then I'm gonna save it. So we have our new vendor, check numbers being populated. Now supplies down here is we could have the same kind of issue that we had with the insurance, meaning if I'm buying supplies and I'm buying a bunch of supplies, kind of like it would be kind of similar to inventory. If I bought a whole lot of supplies and I'm gonna be using them for like years into the future and their significant in dollar amount, then I might put them into a supplies account similar to inventory and as I use them, I might have to track them, at least most likely in a periodic inventory system, counting the inventory and that would be something like medical supplies, for example. But if the supplies are small in nature and not material and cost, then the easiest thing to do would be just to expense them. So that's what we're gonna do here. We're just gonna expense the supplies. So there's probably an account for supplies. So I'm gonna type in supplies and see what we have here. They got an expense account for supplies. They also have an office supplies sub account. So it's funny that it's quite redundant on it. So I should probably pick one of these and like delete the other one. I'm just gonna keep it in supplies and not have it as sub account. I think that would be the preferable option for me. And then we're gonna put the amount on for 500, 500. And then, so there we go. So there, that's it. So that's gonna do the same. I'm gonna save it and close it. And then I'm going to go to my balance sheet and run it, run nine, and then check out the checking. And we should have then another check down here for the 500 on the supplies. Scrolling back up to the top, back to the reports. I'm gonna go then to the profit and loss and run it. And then we've got our supplies here. That looks good. Tab it to the right. If I look at the trustee trial balance, I can run that again. And then there's our expense accounts at the bottom of it. This is the balance sheet on top of the income statement. Now I do think I need to make a little bit of a change here because I think I got my check numbers mixed up a little bit out of order. So I'm gonna go in here and just show us how we can make a change to the accounts because I enter these in a different order. And I want the check numbers to match up to our bank account when we do the bank feed category. So hopefully this doesn't throw us too far off here. I'm gonna go into Edison, and I'm gonna try to change the number here, just the number to 1009, because that's gonna match what's on our bank statement. And then I'm gonna say, okay. And then wait a sec, do you want to leave without saving? No, I wanna save it. Let's save it and close it. And then it says I already have this check number. That's okay because I'm gonna change the next one as well. So now I've got two that are the 1009. And then the Verizon down here needs to be 1010. So I'm gonna save and close that one. Yes. And so there's that one. Now I've got two of those. And the staples needs to be 1008, 1008. So sorry about that confusion. If you don't do that, it'll still be okay, but we won't have the check numbers won't line up when we do the bank rec. So I think we're good now. So let's go back up top. I'm gonna go back. And so there is that. Now we usually don't need to track like a lot of the expense accounts by vendor because we're not going through the accounts payable. But if we needed to get more information about who we paid, we can obviously drill down on the accounts here. We could go into the checking account and drill down on the checking account there to look at the payments. We could sort by payment. And we can go to the first tab, open up the hand boogie and then scroll down to the expenses area. And we could go into the vendors here and into the vendors here are the people that we paid. Now, even if you use the bank feeds, you wanna make sure cause it might be possible to enter transactions into the bank feed adding the necessary information to the account without adding the vendor. But if you don't add a vendor, then you can't go in here and like search for this information by vendor and see who you paid by vendor. So there's the actual check. And you don't really necessarily need that information cause you can create the financial statements without it but you might as well have that added data field so that you have another field to search in if you have any kind of issues that you wanna go into you always wanna add the vendors and the customers if you can. And usually they're in the bank feed memo. So we'll talk about that more when we get to that. Now, obviously the more difficult thing to do with vendors is to deal with the bills if you're entering the bills and having an account payable but we're on a cash based system. If we're just entering checks we'll talk more about bills in the second month of data input. You can also look for the checks in the expenses area by filtering by transaction type by a check form for example, and then apply that out. And so there are the checks that we have put in place. If you wanna look at the other view here where those things are located in the business view you've got the get pay and pay area where you've got the pay area, the vendors. So there's your vendors and then you've got your bookkeeping area and the transactions and the expenses that's where you can kinda sort and find those checks by the checks alone. Okay, so that's it. Let's go back to the trial balance. Let's refresh it, run it to make sure it's fresh. Check our numbers. If your numbers tie up to our numbers, great if not try expanding the date range. It's often a date issue. If there's a change when you expand the range, drill down on it, possibly change the date to match the date range here which is something to do great in practice but be careful in practice. It's great for a practice problem but be careful in practice. We'll also take a look at a transaction detailed report at the end of a month of data input which is helpful to further drill down on any differences.