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Here we are in our custom zero homepage going into the new company file we set up in a prior presentation that being get great guitars duplicating some tabs to put our reports in like we do every time right click in the tab up top to duplicate it right click in the tab up top to duplicate it back to the middle tab. Accounting drop down we want to open up the balance sheet then I'm going to tab to the right go to the accounting drop down this time the income statement or profit and loss back to the tab to the left range change the date range that is hitting the drop down custom date we want 2023 and to the 31st update it that looks good tab and to the right the income statement is already up to date so we're good to go there let's go back to the first tab now last time we entered some invoices for sales now we're going to enter the receive payment so we're going to up top these are normally the forms that are used when we do the normal data input last time we used the invoice this time we're going to have the receive money form. Now note the difference between the two or when you might use the two we're going to check out on the flow chart over here this is our desktop QuickBooks desktop flow chart but I'm just looking at the flow of the accounting cycle in terms of forms. Remember your accounting cycle will be dependent not just on your choice of what you want to do but the industry you are in. If you're in an industry that has an easy receivable cycle such as you're getting money from YouTube or some other platform or something like that you might just use the deposit form receive money form for example possibly with the help of the bank feeds and record the sale at that point in time. However if you're at a cash register or something like that then you're probably going to have to record the money that you are receiving possibly by credit card possibly by cash and then you're going to need to group that money so that when it hits your checking account it will be grouped in the same format as hits the bank statement that's what we're going to be looking at here so it's an added level of complexity typically. Once again if you if you're going to have to group you have multiple sales happening that are going to be grouped together when they hit your actual physical bank statement and therefore we need to match that same grouping in our system. As opposed to an invoice which is a situation where we do the work first like a law firm or accounting firm send out the invoice possibly with an email and then we're going to receive the payment. We could we might have that same grouping problem here in terms of how it's going to be deposited into the checking account but it's a little less likely with the invoice so we might have that interim clearing account and then put it into the bank. So we're going to imagine a cash register situation we're selling guitars here so we imagine they come up with the guitar in like a shop situation and they're going to pay us with like cash or something like that right and then we're going to take that cash. At the end of the day for all the sales that we made tied out to our sales reports that we put together during the day to make sure that everything ties out right and then we're going to deposit it into the bank physically. All in one lump sum not in a bunch of separate sales and then we're going to need to put it in our checking account in the same format. Therefore we're going to use a clearing account for that intermediary transaction from when we make the sales and have the cash that's going to be deposited to when we actually deposited into the bank. All right. Let's see what it looks like over here. So we're going to hit the drop down up top and then we're going to say that we have a receive money form receive money form. I'm not going to put it directly into the checking account but rather the clearing account because of that concept of us possibly having multiple receive money forms during the day that are ultimately going to go into the checking account. But we'll be done so in a group payment possibly because of batching from the credit card or because of batching from us taking physical cash deposits and depositing them at the end of the day. All right. So I'm going to put the new string music is going to be our new contact note that if you're at a cash register situation for example you might not even be needing the name of each customer. Right. You might just be saying I'm just going to have a generic customer and basically just be receiving payments. And if I don't have repeat business custom business with a particular customer that might be a fine way to go. If you have repeat business with a customer then of course you would typically want to have their name in the system so that you can get repeat business. And if you can collect things such as their email address and whatnot so that you can put them on your newsletter and everything that would be great as well. So we're going to put the name here we're going to say that this is going to be in 2000 let's say January so bring it on back to January. Let's say the 19th of 2023 for our practice problem. We have the same kind of item drop down as we saw with the invoice. So if we have all of our items set up then we can imagine that we have some punk teenage kid that's just recording this stuff and it should be really easy even though they don't even know what's going on. Because we have the items set up properly to run everything if they could just get those items in there. So we're going to say the first we have a GSB a Gibson SG and we're going to say that we imagine they come up to the cash register or whatever with one of those which is a good sale because those are expense most of expensive ones apparently. And then they've got the ELP or default that's the one we use to get them into the shop. And then we sell and then we upsell to the to the to the to the Gibson SG which is more not just kidding. We're going to say then but we're going to imagine they bought three of those for whatever reason. Sales tax is applied because that we put in our items and subject it to sales tax which is similar to the usage tax another type of usage tax. And so there it is. Now this looks a lot like a invoice except of course instead of increasing accounts receivable as an invoice does. We are now going to be increasing directly to our our account our cash account. But instead of putting it into the checking account we put it into the clearing account because we're going to have multiple sales that are going to be taking place. So increase to the to the clearing account. The other side is going to go to revenue not for the full amount but for the 2002 77 the difference of the sales tax is going to go to a payable account just like we saw with the invoice. We also have a decrease of the inventory not by any amount on the actual receive payment. But the system knows it because we put the cost in the system and we're tracking it on a perpetual inventory system cost of goods sold the expense related to us selling the guitars will go up. Which means that the impact on net income will be this 2002 77 sales minus the cost of goods sold and the sub ledger for the guitars will be going down tracking the units as well as the dollar amount the dollar amount matching what will be on the balance sheet. Let's save it and check it out so I'll save it and see if that is indeed what happens the green means we're good to go so we're going to go back on over to the balance sheet update it. And so and then we're going to say that we had in our clearing account by go down to the clearing and check out the clearing. We've got then scrolling on down the receive money so there it is for the full amount to 2390 if I drill back down on it takes us to the forum breaks out the sales tax between the two this time. But because we had the two locations the state and the local but the total here the other side back and back I'm going to go to the income statement update it is going to go into the sales. So if I go into the sales line item on the income statement we're going to scroll on down and we've got the receive money forms. So there they have here and they put it in there for the full dollar amount for those not including the sales tax. All right so then going back back to the balance sheet if I go to the balance sheet the sales tax is a payable account which is in sales tax payable. That's where it is that puts us back in balance but we're not done yet because also the inventory went down so the asset went down because we're using a perpetual inventory system using zero to track the units of inventory as well as the cost of the inventory as we actually make the sales. So if we scroll on down we have this one here these two sales I think this is the one right. Notice the dollar amount here isn't actually on the the receive money form but the receive money form knows it because we set it up in the items. So it's the cost not the sales price which isn't actually on the sales receipt. So if I go to the income statement then update it cost of goods sold also will be impacted. This is in essence the expense related to a selling of the inventory in the same time period as we used it to generate the revenue. So the impact on net income will then be the difference between the sales price which doesn't include the sales doesn't include sales tax. And then the cost of goods sold that'll be the impact on net income also back on over to the balance sheet. This inventory should be tracked on a perpetual inventory system so we can have a sub ledger for it tab to the right right clicking on it duplicating it so we can then generate and check out the sub ledge accounting drop down reports sub ledge for the inventory that is let's type in inventory and let's say inventory inventory item list and take a look at it if we may and we could change the date if we want customization on the date 2023 let's just go to the end of it and run it although it shouldn't matter because we're we're past the date in any case inventory breaking out by items that we have 38878 should be it pulling that on over to the balance sheet and 38878 ties out looks good. Let's do another one. I'm going to go back to the first tab and we will repeat. So we're imagining another sale happening at the same time we're collecting the money as we go. So we're going to say receive money for another sale. They're coming up to the cash register with another guitar. We're putting it into the clearing account instead of the checking account and continuing on we're just going to make up another customer as we go. We're going to say this is going to be Sam the guitar man. So we're just making up another customer Sam the guitar man. We're going to say that the date hitting the date drop down on over to January January and we're going to say the 19th again same day and we'll say that what did Sam want. So we're going to contrast this and imagine that Sam bought non inventory items. So service items and we got service items that sound more like car service items. So we have a diagnostic on the guitar a diagnostic a guitar diagnostic that we put we performed. And so notice that we're going to go into guitar lessons later and that'll kind of mirror a service industry that would be similar to like a law firm or CPA firm. But right now we just want to kind of show general service items to look at the difference in the United States where we might have items that aren't subject to basically the sales tax and some items that are inventory more likely to be subject to the sales tax. So we're going to say that we had 10 of these diagnostics that we're putting in here and notice the sales tax is the point is the sales tax is not populating here. And so I'm going to say now note I might have to go in there and actually say that it's exempt from the sales tax so that would probably be better. So let me check it out first and then I'm going to say hourly hourly service and that was 15 so again kind of a generic name just to practice with the service items and then tuning. Remember with the service items it would be nice anytime you can kind of deviate or move away from just hours just reporting hours to actually what you did. I think that's often times a more concrete way to be tracking things. So instead of saying I'm just going to put how many hours I worked. If you can kind of break out some kind of functionality to what you did so that you can have so that you can show the work that you did and then be able to populate the invoices. That's usually easier on the billing just as a general rule. But any case we'll put 12 here and that comes out to five thousand one hundred and eighty. So then what I'm going to do then this what is this going to do well it's going to go into the clearing account and the other side is going to be going to the sales account and we don't have any inventory involved. That's the other thing that's great about or easier about service companies you don't have to deal with the inventory. We're not tracking inventory much easier transaction or more simplistic transaction. Although the data input for both this one and the one that dealt with the inventory is just as easy because we set up the foundational things which are the items properly. So let's save it and check it out. So we'll say save it and notice what it's saying to saying there must be a tax rate. So I'm going to put in that these are exempt from the tax and what I should do is go into my items and and and include that they're exempt from tax. So this field will populate instead of leaving it blank. So we'll check that out possibly in a second. Let's record it and then we're going to go to the balance sheet and update it. And so now we should have in our clearing account the cash clearing account. We've got more stuff in there. We got we're holding on to a lot of cash here. If this is all cash we've got we need to go to the bank man. But in any case Sam the guitar man there it is looks good. And then the other side we put to the income statement running it. And so now we put it into a separate account for the service item. And we don't have any cost of goods sold related to it because we didn't sell inventory. So straightforward transaction. Now if I go to the first tab let's actually look at my products again. I'd go to the business drop down products and services. And what I should do is go into my services and update them to be exempt from the tax. So all of these if I was to hit the drop down or I'm just going to click on it and then edit it edit the item. I should say that this is exempt from tax tax exempt. Boom. All right. And then I'm going to do it again products and services. And then this one is it edit. It's going to be exempt from tax. Wait that's not it down here. Exempt from tax. Boom. Next one. We're going to go to hourly service. Edit it. And this should be once again exempt tax exempt. Save it. Uno vase moss one more time tuning tuning is also exempt from tax tax exempt. Save it. Close it. Now if I was to do this again. If I was to say we're going to have a receive money form and put it into the cash clearing account just to check out our new program in here. We're going to say that we had a service diagnostic and now that field populates automatically. So that's way better. OK. So but we're not actually going to record it here. So I'm just going to don't record it. And so then we're going to hit the drop down. Also just note if I go to the accounting here we can look at our contacts. And if we wanted to go into say Sam the guitar man although they're not going to owe us money from that transaction we could see we could still track the information. Note that if you sell stuff like like at a register or you sell a lot of stuff you know in a particular location you might not even collect their name. Right. You might not need their name. You might not need to track all the individual customers. You might just set up one customer called say you know point of sales sales or something like that. And that would that might be working quite well. Obviously when you have repeat business with customers that's when you want to make sure you have the customer name because then that gives you added fields to search data on because then you can track how much revenue you had by customer. Right. Which isn't really that important or as important if you don't have a lot of repeat customers if you're at it if you're at a gift shop or something like that that people come and visit when they're in another country or something like that. You're probably not going to see them again after that point in time. So you might not have as much of the repeat business but if you're in the type of business where you're in a restaurant or something you have customers that come in all the time. And if it's possible to track which customers are which you know that information could be useful and obviously if you can get their email for the newsletter and whatnot that could be useful. All right. Let's open up the good old trial balance. I'm going to go to the tab to the right and then check out where we stand in terms of our numbers at this point accounting drop down reports and we want to this trial balance to be appeared. So we type it and then it will come trial balance. All you need to do is type it these days and it will come. So we're going to say all right there it is. Boom typed it in and it appeared. It's all magic world we live in. So we're going to say this is December. Let's update it. This is what we have. Is this the trial. Yeah. So this is where we stand at this point in time. So the main things we changed this time were so if your numbers tied out last time you would think if they don't tie out this time it would probably be because something's different. Different in either the clearing account or we the other side. We also had inventory involved. We had a sales tax involved because we had we were dealing with inventory. We had cost of goods sold. We had the service item and the sales item. So kind of a lot of action that we took on this time. Remember when you look at this trial balance it's the balance sheet on top of the income statement. So assets liabilities liabilities and then equity equity stops right here. Income statement sales representing inventory sales service representing service sales cost of goods sold representing the expense of the inventory that we consumed to generate the sales item which is the revenue for inventory sales. So if your numbers tie out to these numbers great if they do not then possibly try a date range change and see if there's a date issue. If the date range changing changes the number drill down on that number see where the date range is an issue drill down to the form and change the date on the form.