 QuickBooks Online 2023. Enter transaction purchasing equipment using bank feeds. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our bank feed practice file. We started up in a prior presentation using the 30-day free trial. We also have open the free QuickBooks Online sample company. If you want the to open at the same time, we suggest using incognito window or another browser. If using Google Chrome, you can open incognito by selecting three dots in the browser. Incognito window typing into the search engine. QuickBooks Online Test Drive. We're using the sample company to compare the accounting view, the view that the bank feeds practice file is in, and the business view, the one the sample company is in. You can toggle between the two views by going to the cog up top, switch the view down below. Let's duplicate some tabs. The practice we're going to be doing every time in order to put our major financial statement reports in so we can watch them grow as we enter data from the bank feeds. Right click in the tab up top to do so. We're going to duplicate it. That's where our balance sheet is going to go while it's thinking. I'm going to right click again and duplicate it again. And then I'm going to go back to the tab in the middle as the tab to the right is thinking. Go to the reports on the left hand side and open up one of the favorites. It's always one of the favorites is everybody's favorite. If it's not your favorite, you have a problem and you need to fix yourself. Go get some help because it's the balance sheet. It's everyone's favorite. By the way, if you're in the business view, then the reports are located in the business overview and then the reports on the left hand side. And so then we 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. We also have the tab to the right. Let's open the income statement by going to the reports on the left hand side. This time the profit and loss, otherwise known as the income statement, the PNL. And then we will change the range. I'm going from 0 to 0 to 22 to oh, let's go to 12, 31, 22. This is the year in which the data input is coming in from the bank feeds that I am particularly using. We had some common type of expense forms last time, telephone utility back to the tab to the left, closing the hand boogie and change the range up top from 010122 to 123122. Run it to refresh it. This is what we have at this point and that is the setup process that we do every time. So now we're going to go into one that's a little bit more unusual of a transaction than the items that we'll have for the telephone utility, for example. So the month-in kind of expenses are perfect types of things for us to set up with the use of the bank feeds waiting till something clears the bank if we automate them instead of actually writing a check. So this will also be an outflow, but instead of for an expense, it's a larger purchase, something like equipment that we're going to be purchasing. Now the problem with the equipment is that you can't really stay in a cash-based system with it. So ideally the easiest thing to do would be, I'm just going to record an equipment expense over here or something for whatever I purchased. If it's a small purchase, you might call it small tools, you might call it supplies. But if it's over a certain dollar amount, then typically from an accrual standpoint, we have to put it on the books as an asset. Even if you want to be on a cash basis, most small businesses still have to do that because from a tax basis standpoint, the tax code is going to force you to do that if nothing else. And so that means that we have to kind of think about, well, how am I going to recognize a transaction going through the bank feeds that will be applied to a purchase of equipment versus something that's just going to be an expense for small tools or supplies? One way you might do it is apply a rule for a dollar amount type of rule. So we might say, hey, I bought this from Home Depot, a supply shop. If they're under a certain dollar amount, maybe that's just going to be supplies. If they go over a certain dollar amount, maybe then I have a rule to at least let me know and notify me that I might need to put this into the categorization of an asset on the books, as opposed to expensing it. Now, the purchase of assets don't happen all the time, like the fixed assets, equipment, for example. You don't buy a forklift every day. You do pay the phone bill every month. So that means we don't expect the same kind of regularity with the big purchases that we have. So that means that when we set up the rules in the bank feeds, we've got to make sure that we can catch those kind of unusual type of things. Also, if you finance the equipment, meaning you take out a loan for part of the purchase of the equipment, then that's going to mess up the whole concept of just constructing your books from the bank feeds. As well, there's a couple ways you could deal with that. You might say, okay, I'm just going to adjust it when they come into the bank feeds, and I'm going to record the loan, the part of the finance that I put on the books. Or if you're working with a good accountant that does your taxes at the end of the year, then you might say, I'm just going to stick to a cash-based system as much as I can, relying on the data input from the bank feeds. I put it on the books as an asset because it was over a certain dollar amount. I've got my loan documentation, but I'm not going to actually record the loan documentation into the system. I'm just going to record the purchase of the equipment for whatever cash I did pay for it. And then I'm going to give all that documentation and the purchase information to my accountant at the end of the year so that they can make the adjustments necessary, which would be to put the loan on the books. And we might have to put the loan on the books just to pay the loan, but we'll just make the payments to a loan account. And then we can have the accountant set up the transaction properly, record the actual transaction for the purchase of the equipment. And sometimes the purchase of equipment can be a little bit tricky because if there's a trade-in or something like that, the tax depreciation might be different than the book depreciation. So the tax preparer might have to do it anyways, even if you try to attempt to do it on your side. So in any case, and they can set up the loan and they can set up the interest portion, breaking out the interest and principal of the loan payments that you've been making on the loan. So that's one way you can kind of try to automate on the bookkeeping side of things, and then you can make periodic adjustments at the end of the period. So those are a couple of concepts. I'm going to go to the first tab over here. Let's take a look at our bank feeds. Our bank feeds are under the banking on the left-hand side. If you're in the accounting view and then the banking up top, if you're in the business view, then the bank feeds are going to be, let me jump over here, the business view is on the bookkeeping. It's in the bookkeeping and then the transactions tab up top. So let's duplicate one more tab and I'm going to look at the general ledger now. So I'm going to right-click and duplicate the tab. I'm going to pull it to the left. I'm going to grab it and pull it to the left. I'm going to go down to the GL, the general ledger. I'm sorry, the chart of accounts. The chart of accounts, I should say, which is going to be under the accounting and then the chart of accounts up top. If you're under the business view, the chart of accounts are located in the bookkeeping and then the chart of accounts. And then I click that to see the chart of accounts. Okay. So we basically removed all of our chart of accounts and the fixed and notice the general rule I have with the chart of accounts is that if you're starting from scratch and you don't know much about the accounting system, you might want to add your accounts or keep the accounts that QuickBooks gives you, which is this huge list of accounts. As you're doing data input, use the account that they have, assuming that that's going to be close to some kind of standard. And if they have a name that you don't like, change the name of the account instead of adding another one with a similar name. And if there's no account at all, then you can add the account and then go in here after a couple months of data input and delete or make inactive all the accounts that you are not using, which there should be a lot of them most likely because they put a whole lot of accounts in here. That's the general concept. Now I've removed all the accounts up front because I want to build the whole thing as we go to show you how we can add the accounts as we do the data input. But even if you were using that first method with the fixed assets, they give you this whole list of fixed assets, which I don't think, I think it's too detailed for most small businesses. They're trying to do a lot of things to help you, but I think they're making it too convoluted. What I would suggest doing is talking to your tax preparer and asking them for their depreciation schedules and what categories they're going to put in place with regards to the depreciation schedules because it's likely that you're going to have to record depreciation in accordance with the tax software external to QuickBooks, which is going to be prepared by the tax preparer, most likely. And they can do book and tax depreciation oftentimes, depending on the software they're using. So what you want to do is get the categorization from them. How does their software categorize the fixed assets? Most small businesses would do it that way. I think that would be the best way. And then set up your accounts to mirror that so that it will be easy to reflect the sub ledger and the tax software in terms of your listing of your assets and the depreciation that's related to it, making the adjusting entries easy to do as well. So we're going to come come back here and create an account kind of as we do the data input. All right, let's actually do it. We're going to go to the banking and I'm going to close up the hand boogie and I'm going to find the transaction I want to work with. I'm sorting by bank detail. And I'm going to pretend that this one is for the purchase of equipment. So we're purchasing equipment with this item. Remember that the person you purchase equipment from may also be the same place like a Home Depot or something that you purchase supplies from. So you have to be careful with the vendor because it might already be going to an account. And when you set the rules, you want to be careful to set up the automatic rules or be careful with setting up automatic rules if there's no dollar limitation because then you'll put a bunch of stuff into the supplies that might better be put under the fixed asset of equipment. So now I'm going to copy the tag here and notice that if this was like a Home Depot type of area, I might try to make the vendor a little bit different for those types of transactions that are going to be under a certain dollar amount and those that are over a certain dollar amount. In other words, I might have some stuff that I purchase from this particular vendor that are supplies, some that are equipment. I could have the same vendor and then have two separate accounts and I could still apply a rule and that would work. Sometimes however, you might want to actually have a different vendor even though they're the actual same vendor that you're buying from differentiating the vendors a little bit so that you can actually sort your transactions by vendor which will show you the transactions that you made for the purchase of cash versus the, I mean, for the purchase of equipment versus supplies. So I'm going to set this up and so this is going to be a vendor type because it's a payable. Notice the category. It doesn't know where to put it. This is the account because we need to set up an account. So I'm going to hit the drop down and go up top and say I want to add a new account so this will be like what like, as if we did it in the tab to the left in the general ledger. It's going to be a fixed asset type of account. You might call that depreciable assets type of account property, plants and equipment, P, P and E. I'm going to call it building equipment. I'm not too concerned with the subcategories because it doesn't add a whole lot. So I'll just pick one here. And this is what I'm concerned with on this side. I'm just going to call it equipment equipment. So I'll call it that. And then a sub ledger. I'm not going to make a sub ledger of it. There's a couple of different variations we might use in terms of how we're going to deal with the accumulated depreciation related to it. So we might talk about that a little bit more later, but you could make a parent account for equipment and then have the cost and the accumulated depreciation as sub accounts. Or I think it's a little bit shorthand to do it this way. Have the equipment, the parent account, and then make an accumulated depreciation account, the sub ledger account of that parent account. So that's one that's another way you can do it. I'm going to save it and close it. There's that. Okay. So let's make a rule down here. So I'm going to say, all right, let's add, create a rule with it. Create the rule. There are rules here. And so I'm going to say it's going to be a money out type of rule, not a money in, of course, all accounts or just this one. I'll keep it on all accounts. It's fine. And here we have all conditions or any conditions. Now this is one where we'll talk about where you might possibly do multiple conditions. So if I only buy it, like if this was some like forklift shop and I bought a forklift from it or something, I'm never going to do business with them again. I don't need any other other rule, or if I'm just going to buy forklifts from them, then that's all I need. But if it was an office supply store where I buy supplies and possibly equipment from time to time, I might want two rules and I would like them to have not just any of the two to be applied, but all of them in order for the rule to apply, the first one being the description. I'll take the bank text typically contains just like normal. I just want this. I don't need this other junk on the right. And then you might add another rule and it might be a rule like a bank amount, a amount rule. Sorry about that. I got a little, a little tie, a little tongue tie there. And it would have to be greater than, and you might say whatever line item that you would like it to be greater than, maybe like over $1,000. You might say something that you could possibly put on the book says equipment. I'm not, I don't know exactly what the dollar amount like the dollar amount could vary a little bit as time goes on in terms of when you might record it as supplies versus when you might record it as equipment. But the general idea is obviously if this dollar amount goes up, it's more likely that it's going to be recorded as a fixed asset as opposed to just expensing it. And then you can have another rule, which if it was under the certain dollar amounts, you would record it as supplies or something. But we'll get into that more later. So I'm just going to apply. I'm not going to do the second bit here. I'm just going to do the first bit. And then we've got the expense account transaction type. Now this is a little confusing because it says expense up here. You might think that that's going to be the account, like the type of account on the income statement. But that just means it's an expense form, which is basically a check form without a check number. So that's just like a check form basically that's going to decrease cash. And then the other side's going to equipment. So that's correct. Sears and everything else looks good. I'm not going to do the auto add. And these particularly, you might not want to do the auto add for large pieces of equipment or transactions that have a large dollar amount because you might want to double check those that have the large dollar amount because they don't happen all the time. And because they're more significant due to the dollar amount. So let's go ahead and save it. Now just one more thing. If you did have the transaction that had a loan kind of involved in it, I'm going to save this. Then you can kind of adjust it here. So if I go back in, if I go up top and I say, I say, let's view it by matched or recognized transactions. Recognized transactions. You better recognize. So if we had this one and it was on nine twos when we're looking at, if this was a transaction that had a loan involved in it, then we couldn't categorize just the equipment account. We'd have to split it possibly with a loan type of account. So it's kind of nice that it has a split down here because we financed part of the transaction and we could put the loan on the books. Or again, we could decide not to put the loan on the books and just pay down the loan payment, which we would have to assign to a loan account, and then give this information to our accountant at the end of the year to put the proper amount of the equipment on the books, the loan on the books, break out interest and principal, break down long-term and short-term portion of the loan on a periodic basis. So there's that. Also just note that when you buy the equipment, you probably want to save the detailed information of what you're buying. You don't want it to just stay like equipment because on the tax side of things in the subledger, they want to list out exactly what you purchased. If it was five forklifts, you want to put five forklifts. If it was 10 computers, you want to list out each computer separately on the subledger because if they don't do that, some tax preparers won't. They'll try to shortcut it. It'll be fine in the year that you put it on the books. But when you sell one of five forklifts and they have five forklifts grouped together as just equipment, and you don't even know it's a forklift or whatever, you try to figure out which one you sold. And even though you figure it out, it's on the five-on-one line item on the subledger, it's going to be a mess. So you want to try to have as much detail as possible so that the subledger usually prepared by the tax return has the detail so that you can actually assign what's on each line item of particular piece of equipment to that piece of equipment in the office space or in the workplace so that when you sell it, you can know which one to sell, which one to take off the amortization schedule. All right, that said, let's add it. We get it. We get it. Let's see what happens. So we've got a new rule. If I go to the rules, there are rules here. So there we have the rules. This is the new one. If I go to the balance sheet, run it, and we dive into the checking account, diving into the checking. There's the transaction. There's the expense form. So it's like a check form, but an expense form, check form without a check number. And there it is in check form format. So we're now to the source document, which doesn't take us to the bank feeds, of course, but rather to a check form. And then we're going to go back on up, back on up, back on over to the profit and loss, the P and EL to run it again. There's nothing on the P and EL. I just wanted to point that out because it's not an expense. We did an accrual thing. Even small businesses forced to do the accrual thing by putting it on the books as a fixed asset. So if I go into the fixed assets here, there we have it. There's our expense form drilling back down on it. There's the expense form. You can see the attachment that it matches to a banking transaction. Of course it does, because we created it from the bank transaction, but that helps us to kind of reconcile that this is tying out to something that did indeed clear the bank. Now, at the end of the year, there's not going to be too many transactions in the equipment account as opposed to a cash account, for example, because we don't buy equipment all the time. You're going to want to give this detail, most likely, to your CPA along with the added detail of what you purchase, financing options and so on, to try to straighten out these transactions, which is tedious, but not too bad, given the fact that there's not too many of them, typically. So that's the general idea. When will we be expensing this equipment account? Don't I get to expense it at some point for taxes? Do I get a benefit of it to write it off? We do. That's the form of depreciation. So if we depreciate it, and that, again, usually often done by the tax software, tax depreciation is different than book depreciation. So you might keep your books if you're in a small business on tax depreciation, so you don't have two depreciation schedules, or you can have book depreciation and then the tax depreciation and have those two schedules to deal with. And so you probably want to discuss that. I would definitely discuss that with your accountant in terms of what your best options are for lining up the equipment, how to record the equipment, how to record the financing, how to categorize the categories of equipment to line up to the sub ledger and how to depreciate the equipment, whether or not the accountant is going to be running book and tax depreciation schedules, to help you out with the recording of the adjusting entries to record depreciation expense periodically. Now we also know, of course, that we did create a new vendor over here. So if I wanted to track this stuff by vendor, I could go to the first tab. We got a new GL account that we set up the GL account, by the way, as well over here. There's our fixed asset account that we set up on the fly as we were flying. And then also, if I hit the hand boogie, then we're in the expenses. We've got the vendor center, which, by the way, if you're in the business view is under the get paid and pay area. It's a little less formal terminology over here. And we're in the pay area in the vendors. So there you've got your information there. And we can sort that. Now we've got our new vendor that we set up and we can go into it and we can see the detail by vendors. You don't have to add the vendor when you do the data input from the bank feeds. But if you don't, you're losing this level of being able to sort your data. And you might as well be able to sort your data this way as well if you have the vendor information, which you often do, if they're electronic transfers because you can pull it from the bank feed stuff in the memo section. So also, if you go to your expenses, you can sort your stuff by expense forms. We've mainly been making expense forms. If you're in the business view, by the way, that's located in a bit different area. It's under bookkeeping, transactions, expense forms. All right. I'm going to actually delete this beginning balance transactions because I want to tie out to what I had before. So remember, you'll recall that if I went into this checking account, this amount was that beginning balance. I'm actually going to remove this amount and we'll deal with putting the beginning balance in place when we do the bank reconciliation. So I'm going to actually remove this because QuickBooks recorded it when I first put the thing on the books and I don't want it there. So I'm going to say more and I'm just going to delete it. So be careful deleting stuff and we could adjust it if you want to keep it there and you want to adjust it. We could do that. But for the practice problem to tie into my worksheet, I want to delete it and we'll deal with that beginning balance issue later. Now we're left with, of course, a negative balance account because we don't have any beginning balance and all we've had are outflows and we'll deal with that beginning balance issue when we do the bank reconciliation. So I'm going to right click and let's just look at the trial balance. I'm going to duplicate and take a look at the trustee TB trial balance, Teba, the Teba. And then we're going to say trial balance. And this is 01, 01, 22, to 0, to 12, 31, 22, run it. So this is where we stand at this point in time. You can see the balance sheet on top of the income statement. You can see how much more streamlined it is, of course, to see the construction of the trial balance because you don't have all the subtotals involved. This, of course, being the asset account, asset account. We don't have any equity accounts here yet. Although you could see we do have them on the balance sheet, right? You could say, well, why don't I have an equity account because its income is rolling into the equity and that income after the following year in 2023 for the next year will roll into the equity. So now it goes net income into equity. So right here, that equity is reflected by these two income accounts. If I was to go to the next year up this way just so you could see how this is being constructed, it would roll into equity. So now I don't have an income statement. I just have the equity from the prior period. You might call it retained earnings, earnings that have been accumulated, in this case losses that have been came because we only had expenses, but net loss that has accumulated. If it was earnings, it would be accumulated earnings, retained earnings in essence, which for sole proprietorship, we usually just call owners equity or something, which we have not yet distributed out to the owners in the form of draws or if it was a corporation dividends.