 QuickBooks Desktop 2023. Inter-transaction for owner withdrawal or personal payment using bank feeds. Let's do it! Within two weeks, 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 setup process we do every time. View drop down we've got the hide icon bar open windows list checked off open windows open on the left reports drop down company and financial let's open up the profit and loss P and L income statement changing the range in 010122 to 123122 then I'm going to customize it so I can go to the fonts the numbers and change them on up to 14 okay yes and okay same thing for the balance sheet reports drop down company financial this time the balance sheet reports and I'm going to customize it first then change the range 010122 to 123122 and then fonts and numbers changing those on up to the same 14 we did with the P and L profit loss income statement okay so then let's open up the bank feeds banking drop down bank feed center will only be there if you had set up the bank fees which we did in a prior presentation so now we're going to be thinking about a decrease I'm going to go back to the unrecognized items I'm going to sort them this way we're going to look at money going out but this time we're imagining money's going out for the personal use or for a draw so let's think about that by going to the balance sheet and see how this is going to work logistically what's the end result that we expect to happen on the financial statements if we have the business account here typically the thought is that you want to keep the business account completely separate from the personal account that makes it easier to track your information through the checking account because if everything in one checking account is business related then it's a little bit easier to determine what you spent the money on and categorize for example the expenses that's even more the case when you have somebody else doing the books which has to determine whether I mean if they have to determine what's personal and what's business in terms of the expenses that gets quite complex if you're doing your own books maybe you can you can kind of determine what's personal and what's business but best practices are usually we're going to keep the two quick books files separate noting that with quick books desktop you have the capacity to have one quick books account and have two two separate quick books account but just realize that it is possible if you have a small business to use class tracking to have say one checking account and try to break out your income statement between business and uh and personal the income statement being what is usually required for tax preparation at the end of the year because the schedule c is in essence an income statement so if money is going out then what's going to happen it's going to come out of the checking account and the other side we're going to want to be putting down here into typically draws the main thing that we do not want to do when money is going out to us as the owner is to be putting it to an expense account by accident because if we put it to an expense account it's going to lower net income which looks bad from the perspective of your financial statements actually it looks good from the perspective of taxes but it's wrong because if the IRS audited you and you had a bunch of draws that were in here as like miscellaneous expense or something then you can get here now you're going to get in trouble for something like that that's not what you want to have happening back to the balance sheet it's also useful to note that depending on the structure of your business you might name the equity accounts something different so if you had a sole proprietorship then there's no real restriction from you taking money out for personal use you would just call it a draw and you can call it a draw down here at the equity section if you have a partnership then you're going to have to break out multiple partners down here in the equity section tracking their capital accounts separately the capital accounts representing each partner's share of assets minus liabilities right and so then you're going to have a draws account for each partner and if it's a corporation then you might have multiple owners but they're going to own like stocks and the stocks are supposed to be all the same part of the problem with that is that you can't have one owner pulling out different amounts than other owners you usually have to give the distributions in the form of dividends and so that's where you have the concept of dividends which is kind of like a draw but it's somewhat more restrictive because the company has to determine the dividend to give it out basically to everyone so clearly we have the the the names here that would be assigned to an owner a sole proprietorship or possibly a partnership so let's imagine that we had a draw that was taken out here so i'm going to go to the bank feeds and the easiest one would be let's start with an easy draw we're just going to say that there was let's sort it here of that 75 right there let's say this was a draw that's coming out from the business to us as the owner so we're imagining it's going from the business account and it's going to go out into the personal checking account so and you might also imagine this could be something like as well if you pulled money out of the business from like a a ATM machine or something like that then if you had a bookkeeper that was doing your books that you're going to want them to be able to assume anytime you pull money out that it's going to be a draw that you're now using that for personal use if you pull money out and you spend it on business stuff spending cash you don't have the same kind of audit trail so when you're spending money on business stuff you usually want to have the audit trail for tax purposes so meaning i don't want to pay cash for stuff that i can get a deduction for because i want to make sure i have a solid audit trail for the deductions on the personal side if i don't get a deduction for it then yeah i want to pay cash for it because i don't want i don't need people tracking what i do otherwise right but if the IRS is gonna if i'm gonna claim it as a deduction i want to be able to track it so that's the general rule so i'm gonna say this is gonna go out and i could put then the the owner here i'll just say owner name i'm gonna quick add it could be a vendor not really not really customer you could put it as other because this is coming to us the owner when i say us i'm usually referring to us as the owner of the business but sometimes i refer to us as the bookkeeper just doing the bookkeeping or the accounting department but in any case we're going to say then the account now if you had an account that was set up when when you created the business and you let quick books set up an account it might give you a draws account and even here it still gave us a draws account so the bottom line is that you want to put it into an equity type of account you don't want to put it to an income or an expense type of account because it should be on the balance sheet not affecting net income because this isn't an expense even though money's coming out of the business so i'm going to put it into the draws here and then we could check it out this way hitting the drop down more details and this is the same stuff and the more detail screen so here's the owner here's the account here's the memo and then note that you could make a rule for it if it's a standardized kind of transaction like this one that would be easier to kind of make a a rule for but i'm not going to make a rule here because we're just testing stuff out so i'm going to say save it and close it and in the added area we've got it added here if i go to the balance sheet then double clicking on the checking account we've got the draw so the draw was right there so there it is double clicking on it it's still in the format of a check form because the check form is the form representing a decrease to the checking account the other side is going to this expense tab which is deceiving because we don't actually have an expense here we have an account which is an equity account so note that expenses really means that really this really should be called an account you know it's going to go to just an account as opposed to the items which is usually going to go to an inventory item tracking not just the gl account the account on the financial statements but also the items of inventory closing this back out which would be in a sub ledger closing this back out and then the other side is going down here to equity so it's in it's in draws double clicking on the draws there it is so the draws is going to be what we might call as a contra equity account noting that the equity represent if i squish up the assets assets minus liabilities is equity in total we don't have any liabilities right now which is nice so we just got assets minus liabilities is equity so that's the owner's claim to the assets minus the liabilities and then when we break this out if this was a partnership you would have multiple equity accounts that would have the owners or you might call them capital accounts and their draws that you could net these two out against each other this one down here is the net income which will roll over if i if i take this up one date it will roll into the equity so that net income is kind of a way of quick books trying to tell us how the equity section ties into the profit and loss but it's actually kind of messy at the same time if you have a partnership because it really shouldn't be there but in any case here's so here's these two now notice that the draws also is something from a traditional bookkeeping standpoint that usually rolls into the equity account periodically quick books doesn't do that automatically so the equity account is just always going to keep going up even after the year closes out so if you want to to close out the draws yearly to see how much draws you have per year you could close these out you know at the end of each year to the the equity account which if it was a partnership you'd close it out to the related equity account or you could just let it ride and you can have lifetime draws that will be shown here and that's fine too if it was a corporation then this account would more typically be called retained earnings and then you'd have the draws account would be dividends account and you would act in a similar fashion although again the dividends would have to go out to all shareholders in the same way and and so that's where you have some complication on the logistics of it okay so there is that notice there's nothing's happening to the profit and loss here that's the point if you put it over here to an expense and it was actually a draw then again you've lowered your net income which could be good for taxes but incorrect for taxes subjecting you to problems if audited now the other scenario we have is well what if i don't draw the money out but instead i just spend money out of my checking account on personal stuff right i spend money for my groceries i spend money to go to disneyland or something like that well then you can still see it go through the bank feeds and we might be able to identify whether it be personal or business related by who you spent the money on with the the trend with the memo and whatnot and then again we can assign the the amount to two draws in that case that's one way you could do it another way you could do it is that you could try to set up your class tracking which we might talk about later we've got a whole like course other courses and stuff on class tracking because it's a whole different thing but it's in the edit preferences just so you know where it's located to get a general idea and then it's under accounting and you've got the class tracking here now the class tracking could allow you to assign different classes to your income statement accounts generally just the income statement accounts so it would work if you're for like a small business that has a schedule c and then you could try to say hey look i'm gonna assign everything that's personal to the class on the personal side of things everything that's business to a business class and then you can break out your income statement to have two columns if i go to my profit and loss i'd have two columns business and personal and so you'd still end up with an income statement that could be used hopefully for your taxes with a schedule c while also having your personal income statement which might be useful for internal budgeting and that kind of stuff but usually that's not recommended if you can be disciplined enough to have two sets of books your personal quickbooks file and your business quickbooks file right and then on your business quickbooks file anything that's going to be personal we're going to we're going to call it a draw so if you so then if you paid for something out of the business account it's not the end of the world you don't want to do that if you have that separation because you'd like the business account to just be business related expenses because that makes your bookkeeping easier especially if you have someone other than you the business owner doing the bookkeeping because if you are the bookkeeper for example how do i know you know what when you went to Costco whether you bought something that's business related or personal you know it's becomes difficult but if you're doing your own books then maybe maybe that's not so difficult but in any case let's imagine we spent something on personal i'm going to go to the un recognized let's go i'm going to sort them this way and let's do another let's look for those primarica ones i'll do another life insurance let's let's pretend that this item right here was for personal still let's do this one this one right here was for personal stuff so i'm going to say okay this went to primarica i'll just say primarica again as the as the vendor but it went for some personal use whatever personal life insurance or whatever it's not business related well then instead of recording it to an expense account i can record it just simply directly to the draws account just as if it was a draw of money you can see we get to the end result what should have happened is they should have taken the draw out in cash and then spent the money on the personal primarica whatever it is life insurance on the personal side but they didn't that we spent it directly out of the checking account well as long as we pick that up it would be the same thing we're just going to say okay well there the money's coming out of the checking account and i'm just going to put that directly to the draws account right so so that will work now note again if you had the class tracking on then what you would do is you could still put it to life insurance which would be a personal expense type of account and then assign it a personal class as opposed to a business class so that you would have an income statement with two columns one with this personal expense and one with the business expense but we're not going to do that we're just going to put it to draws which means you don't have that added detail for the personal financial statements and if you wanted that personal financial statements you can run your own quickbooks file for the another quickbooks file for your personal bookkeeping separate from the business files another option okay so if i was to hit the drop down details here's the same stuff with the details you could of course create a rule related to it if this is a habit that you're going to be having of doing your personal expenses in here i'm going to save and add it to the register i'm not going to do the rule by the way and then that means we've got two items over here if i go to the balance sheet double click on the checking account so uh and now i've changed the dates on the checking account let's go back up to customize go from 010122 to 123122 okay and then double click here and i got my right range i've got the right range so there's the primarica one here i think that's yeah that's the latest one we did and no that's not the latest one we did so i've got too many going to this primarica thing here's a draw there's the 75 draw and the other one is here there it is so there it is going to draws so i'm going to close this back out close this back out and then in draws down below so now we've got the contra account in the in the draws the other side is decreasing the equity representing the net assets assets minus liabilities and what didn't happen is it didn't go to the profit and loss now note that if you've done some bookkeeping you can you'll you'll know that if you're doing bookkeeping for someone else that it gets difficult when they're doing personal expenses out of the business checking account and if you don't if you don't communicate well and you don't know what's business or personal you might end up with accounts in here called something like miscellaneous or you know like trips or travel or something that have really large amounts in them which for tax purposes can look like a red flag because those look those are going to be deducted on the taxes which will be good for taxes but not correct for taxes which could be subject to audits and causing problems so you again you want to kind of really define the draws out properly so let's just take a look at the at the trial balance for the fun of it for the giggles and laughs and let's go to the reports drop down accounting and taxes trial balance from 010122 to 123122 customizing it fonts to the numbers changed to let's go 16 okay yes and okay so just to note the trial balance being a nice tool with the banal sheet on top of the income statement we could see the accounts being affected here and here we can see the accounts assets liabilities we don't have any oh we do we got pounds payable we don't have anything in it but there and then equity and then the revenue and expense accounts down below on the income statement side of things