 QuickBooks Desktop 2023 Enter transaction purchase of inventory using bank feeds overview. 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 maximizing the homepage to the gray area view drop down hide icon bar open windows list checked off open windows open on the left reports drop down company and financial. Let's open up that profit and loss P&L changing the range from 010122 to 123122. Then I'm going to customize it and go to the fonts and numbers because I like it to be changed a little bit larger to 14. Okay. Yes and okay. Once again reports drop down company and financial but this time the balance sheet standard. I'm going to change the range by going to the customizing of the reports from 010122 to 123122 and then go to the fonts and numbers changing the font to match the P to the L to the 14. Oh yes. Okay. There we go. That's the setup process there. Now I'm going to be opening up the bank feeds by going to the banking drop down bank feeds and we got the bank feed center which is only there if you got the bank feed setup which we did in a prior presentation. It un-maximizes stuff which is annoying so I'll just maximize it. Remax, re-maximize and there we have it. So now we want to talk about inventory. Inventory being one of those things that often adds to a level of complexity making it more difficult to just enter the transactions directly from the bank feeds. So let's first give an overview of why that is and then we'll go through the most easy kind of transaction first and then build on some more complexity related to inventory. So let's go back to the homepage here and just imagine the flow with regards to inventory. So if we're purchasing inventory and selling inventory we could track the inventory either on a periodic basis or a perpetual basis. So if we're tracking the inventory on a periodic basis then possibly we don't even need to turn inventory on within QuickBooks because we're not going to have a sub ledger tying out to the inventory account in that case. But instead, possibly do our own sub ledger outside of QuickBooks in other software or possibly just on a spreadsheet program Google Sheets or Excel for example. And what we would do in that kind of scenario is we would simply when we purchase the inventory record it within our bank feeds and we can use the bank feeds then to do that to an inventory account increasing inventory every time we do a transaction allowing us to automate the system. And then we'd have to do a periodic transaction at the end of the day, at the end of the week, at the end of the month. And we would determine what that transaction would be by counting the inventory that we still have on hand and doing our cost of goods sold calculation beginning inventory plus purchases minus the ending inventory to determine how much inventory we sold in theory. And that would be the cost of goods sold. So then we would have to periodically that's why it's the periodic system lower the inventory and record the cost of goods sold. And we would do we would use like a just a journal entry to do that kind of transaction. So that would be an added step that we would have to put in place and track the inventory outside the system and do a periodic entry. Now, we could do something even easier than that. We could say and this would only work in certain cases and you want to really run this by when you have inventory, your tax preparer. If you have someone giving you some advice on how to set this up in terms of what's best for bookkeeping what will be needed at the end of the year for things like reporting purposes and tax preparation. But in some cases you might say, hey, look, why don't I just not even deviate from a cash based system. And when I buy the inventory, I'm just going to expense it at the point when I buy it. So I'll just expense it at that point in time to possibly cost of goods sold. And then when I sell the inventory, I'll just record the income when I when I sell it. And the reason that's a little bit wonky or a little weird is because you're still on a cash based system that time. But when you buy the inventory, you're expensing it when you purchased it in the form of possibly cost of goods sold. But that will result in an expense that's usually on an accrual basis tied to when you sold the inventory. So you would think you would have inventory related to it. But no, you got you put you put the expense on there first and then later when you get the income, then you're going to record the income when you receive the income. So it's just a timing difference. If you were to do that because you still have the income and the cost of goods sold, you're just recording them not exactly in the same same period, which which is a timing difference. The timing difference is being why we need an accrual basis. So if you were in a system, for example, where you do work for someone and you and you do something that is going to be customized for your customers and you buy inventory that you're then going to use specifically for that customer, then maybe the easiest thing to do is just expense the inventory as you purchase it because you're not holding on to a lot of inventory and then just basically record the income when you make the sale. But if you're in a situation where you're buying a lot of inventory and then you're holding on to inventory, that becomes something that's not as effective because now you have a situation where you're not really using the inventory to generate revenue until later. So that matching concept between recording the expense and the and the income gets kind of messed up. Also note that if you are doing taxes inventory in some cases are an area where you're forced to kind of go on to an accrual basis. So you want to keep that in mind as well. And then the third method you can use is of course the full accrual accounting system, which would be indicated to be turned on by the vendor item up here. This would be a perpetual accrual accounting system. And then I can go to the edit dropdown preferences and you can see here that in the items and inventory we turned on the inventory right here. So that if turned on will result typically in the homepage having this top track and that will indicate that you have a perpetual inventory at least turned on. And in that case it really complex makes it more complex to use the bank feeds to just generate your financial statements because you can't just rely on the bank feed forms. Remember that the bank feeds are increases or decreases to the checking account. So usually a decrease to the checking account the bank feed decrease when you buy inventory would be a check type of form. And usually the when you have an increase it's going to be a deposit type of form inventory is going to have an impact on both the vendor cycle the payments as well as the customer cycle the receipts the sales to the customers the inflows of cash. So when you pay for inventory you might still be able to pay it with basically simply a check type of form. But the check it's going to be more complex because you're going to have to check assign the check form rather than to an expense account an item type of account here. Because the items are going to be the things that are going to allow QuickBooks then to track the sub ledger not just by account that it's going to inventory and dollar amount but also by units that you will have on the sub ledger. So these items become quite important and how you can get those items recorded becomes important. You can set the items up as we might discuss a little bit in more detail later by going to the list drop down and items list. And then these are going to be your items you hit the drop down or rise up new item you got service items and inventory items that we can set up here as we have the items then we got to use the proper forms in order to input the items. Closing this and closing this you also might have a purchase order situation in some cases which also adds a level of complexity because that's a non cash transaction that we have to track that's not going to go through the bank feeds. You might enter a bill form connecting to the purchase form which again is an accrual form increasing accounts payable and therefore you're going to have to think about how the bank feeds would fit into that kind of transaction. Before you finally pay it which would be a bank feed transaction with a check type of form or a pay bill form. So we'll talk more about that in the future but then just to touch on the other side of the inventory when we sell the inventory. We were not going to be able to record just a deposit if we're tracking the inventory within the quick book system because the deposit form is not designed to account for the sub ledger the forms that are designed for a sales transaction even on a cash basis would be the invoice and the sales receipts. These two forms have the the item list the item thing is what you need in order to track the sub ledger. So if you have perpetual inventory system you got to think about how are the bank feeds going to fit into my perpetual inventory system that's going to add a level of complexity. So also just realize that you're going to have sale you might have sales tax which in the United States is applied to the inventory often on the state and local level and the sales tax items when they're set up can be set up and usually are driven by the sales forms again not by the deposit form the deposit forms not going to allow you to automatically calculate the sales tax. There are workarounds to that and we might we might talk about it meaning for example you might just if you want to keep on a cash basis and you're selling stuff or use a periodic system. You might just say hey look my sales price includes sales tax and so that you can manually calculate the sales tax that way without using the automated sales tax calculation. That QuickBooks is doing and then still record your revenue with a deposit so we might talk more about that in the future but first let's first think about the purchasing side of things and let's imagine the easiest method. Let's imagine we're not going to deviate from a cash based system because I'm just buying inventory and then turning around and selling it immediately. If I'm not holding on to it too long maybe I can just expense it as I purchase it that would be the easiest thing to do again talk to your accountant in terms of what would be best for you. But and then we'll get into more complex transactions just to touch on a few of them. So let's go back to the bank feeds right here and let's choose a transaction. So I'm going to go back to the uncategorized. Let's pick one of these like Primerica one. I'm going to hit this one. So let's pick this one. Well let's do this one. Let's just say that we're doing this one here and I'm going to say OK we're going to we're going to purchase this for so I'm going to say let's say it's purchased from just like we have done in the past. Primerica which I'm just pulling from this data. We're just imagining that this is someone more purchasing inventory from that we're going to turn around and sell immediately to a customer. I'm going to say tab quick setup. So we'll do a quick setup on it. It's a vendor so we'll keep that OK. And then the account that it's going to go to. I'm not going to put it to inventory which would be what we would normally do to track inventory but instead try to stay in a cash based system. And record it to cost of goods sold which is a special expense type of account. So I'm going to go to cost of goods sold. I don't have a cost of goods sold yet. If you chose an industry that deals with inventory then the system would probably have given you a cost of goods sold. I'm going to set hours up as we go by adding a new account. It's not really an expense account although it's in it's a type of expense account a special one cost of goods sold will be the type. I'm just going to give it the same name here cost of goods sold boom. That's all we need. And some you just know you could get more complex with cost of goods sold like you might have categories. So you might make a parent account of cost of goods sold and then other subcategories of types of cost of goods sold in certain cases possibly. But I'm just going to keep just cost of goods sold and say OK. And then I'm going to go to the drop down here add more details just so we can see it in this format. So we've got this information up top. We've got the date. We've got the memo. We've got the number there's we added that we added the cost of goods sold account the memo billable item. And you could we won't get into the billable items but just note that you've got that option to have it billable so that you could then pull this over. Generate the invoice from it. So you got to be careful with that billable item. However because you want to make sure that it's pulling over to the proper income account. So we've got some prior court in the prior courses or prior sections. We've we talked more about the pros and cons of that billable item and how you might use it depending on your system. But that's that. Now we could create a rule for it but I'm not going to do that right now because I'm just using this as a practice. If this was the system that we were going to use every time then I can create a rule just always making my inventory go to cost of goods sold when I purchase it which would be the fastest thing to do. So I'm going to close this out and then I'm just going to add it to the register and let's just see what happens. We can see in the register now we've got this $30 item here if I then go to the it's not recognized because I didn't add it there. Let's go to the balance sheet double clicking the checking account. We still have a check type of form recording this item which went to cost of goods sold double clicking on it still a check type form. Notice this tab says expenses which is a little deceiving. What we didn't do is put it to the items tab items typically refers to inventory items so it would be a purchase of inventory items. But we're not going to put it there because I don't want to track the sub ledger of inventory items because that adds a level of complexity. We'll talk more about them later. Instead we put them over here and notice that cost of goods sold is a kind of expense so it still kind of fits in the term. But if I was to put it to inventory I would still use I could still use this item for inventory or fixed assets. So that that categorization names a little bit complex really this is an account you're going to that's not impacting like a like a sub ledger like inventory. So in any case I'm going to close this back out close this out instead of the other side going to inventory an asset which would add more complexity because then I would have to decrease the inventory when I used it. But with the with the use of a perpetual inventory system which would be when I make a sales receipt or a invoice or I would have to do it periodically lowering it on a periodic basis based on my schedules outside of QuickBooks which I might do nightly weekly monthly. But in this case I just said I'm just going to expense it as I go profit and loss there's the cost of goods sold. Now notice this looks quite funny quite strange because now I've got the cost of goods sold here without any related income to it because usually those things on an accrual system I try to match them in the same time period. However if I bought this thing and I know I'm going to use it for a particular job which I'm going to turn around and and bill for very soon. Then this system that's when this system could work right you might say OK it's a small timing difference if you're holding on to a lot of inventory then it becomes something that's not going to work out too well. So just on the other the next thing that would happen on the revenue side of things now that I've got the inventory is that I might try to stay in a cash based system right and charge the client revenue. If the client gives me money and I wait till it clears the bank and I could record revenue with just a deposit form and record the other side to income. Then I can stay all on a bank feed even on the revenue side. However I might have to use an invoice to charge the customer for example which kind of messes me up on the revenue side from using just the bank feed. So we'll talk more about that in the future. So that's the general overview. Just note again that the inventory you really have to kind of think through how you're going to be doing your inventory. If you have sales tax involved you want to make sure that you're thinking about how you're going to calculate the sales tax to on it which and and you want to take into consideration. You know what's the best method for you. Not just you know what QuickBooks does like you could track inventory in QuickBooks but you don't have to. It might you know it depends on what you know how big your company is and how you're going to be running things. So in the case we'll talk more about inventory in the future for now. Let's go to the reports dropdown and let's go to the accounting and taxes and just look at the trial balance. I'll change the date from 01012 due to 123122 and then let's customize it fonts to the numbers changing it up to 14. Let's go to 16. Get crazy. And then this is where we stand so far remembering that this is just the balance sheet on top of the income statement for a current for the year that you have up place. Which is nice to be able to see you can see the balance sheet accounts and the income statement accounts in one place drill down on them. Check your numbers. See what's happening as you enter the data into the system into the financial statements without the long financial statements and subtotals. Hopefully I've sold you on the trial balance and now that's it. Talk to you next time.