 QuickBooks Online, 2024, invoice form. Get ready and pack some trail mix because we're hiking on QuickBooks Online, our audit trail to success. First, a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers, they don't want to be seen with us. But that's okay, whatever, because our merchandise is better than their stupid stuff anyways. Like our, trust me, I'm an accountant product line. Yeah, it's paramount that you let people know that you're an accountant because apparently we're among the only ones equipped with the number crunching skills to answer society's current deep complex and nuanced questions. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Here we are online in our browser searching for QuickBooks Online test drive, looking for the result that has Intuit.com and the URL Intuit being the owner of QuickBooks, selecting the United States version of the software and verifying that we are not a robot. Opening up our financial statements like we do every time, going to the reports on the left hand side in the favorites. I'm going to be right clicking on the balance sheet in open link in new tab, right clicking on the profit and loss open link in new tab. Let's check to look at those links, opening up the tab in the middle. There's our balance sheet. Let's close up the hamburger tab into the right closing up the hamburger. Again, there is our income statement. Let's go back to the tab to the left. That's the setup process we do every time. This is our data input tab, the two tabs to the right representing the financial statements, which will be adjusted as we do our data input. In prior presentations, if I select the plus button, we've been looking at the customer cycle. Remember for QuickBooks, customers means the people that we do goods and services for money ultimately coming into the business at the end of the cycle. In normal terms, we are also customers. We are our vendors customers, but from this side of the table, the way the software is set up, the customers are of course the people that will be paying us for the goods and services that we provide them. We talked about the general cycle before noting that it could be quite different depending on the type of industry. We are in the easiest cycle being one where we have gig work or something. We just wait till something clears the bank. We record it as a deposit income recorded at that point in time. If we have a cash-based system, but we are at a register like a food truck, then we need to use the sales receipt because we typically need to track each of those sales as they happen. And we might have credit cards or cash sales that require us to group those transactions and deposit them in the bank in a scooping that will match what goes into the bank side of things. And then if we're on an accrual system, that's when we're going to have the invoice. So note that you would only use an invoice if you're on the accrual system. The invoice is an accrual form. You can think of the invoice as something that increases accounts receivable. That's the primary thing it does, right? Increases accounts receivable, the other side going then to the sales side of things. So that's what we will be doing this time. Now, if you are on an accrual system, you probably have a bit more complex of a system than like gig work, for example, and you're going to want to make sure that you set up your fundamental underlying foundational items to make the invoicing process as easy as possible. So if I go into the sales side of things over here and we go into our products and services, these are going to be the products and services we want to set up. We'll talk more about these products and services when we start a new company file. If you're working in a company that has already been set up, such as this one, or if you're taking a new job at the accounting department of a business, they will already be basically set up here and generally, and then you can use these to populate basically your invoices. Also, if you have sales tax, as we've talked about in prior presentations, that's in the tab down below and you would need to set up your sales tax and then make sure that the sales tax is properly set up in the items, and then also if you have any customers that are exempt from sales tax or have more complex sales tax issues because you have sales in different states, then you can have to make sure that your customers and everything are set up there. We'll talk more about that again when we start up a new company file. So you can also set up those items kind of as you go as well as you enter an invoice, but you don't typically want that to be the case that's going to be more complex. You want to set up your items first whenever possible. Now also, note that if you're in a business like you sell, you're in a bookkeeping business or a law firm, then often you bill by time. So you might just set up an item for hours, for example, how many hours it took or something like that. And then you have to track your time. And when you invoice people, you'll be tracking the time. However, more and more people are thinking that it might be easier to actually see if you can break out the things that you sell by units of things you sell, such as in bookkeeping, how many transactions did you make or the bank reconciliation billing by thing that was done. But sometimes the hours is all you can do and you could just set up your item as hours and then have your billable rate for the hours. Now when we enter the invoice on the financial statements, what's going to happen? It's going to increase the accounts receivable here. That's the primary thing that's going to happen. And the other side is going to go to the income statement. In accounts receivable, there's increases with the invoices and decreases when we collect the payments on an invoice. So let's enter a couple and let's track them here. First we'll do a service invoice, which should be the easiest kind of thing. Let's close that out. And so I'm going to say new, we'll make an invoice, invoicing a client. And let's just make this for customer number one. I'm just making up generic customers again. And I'm not going to put any of the added detail in it. Note, however, you can add the customers as you go, which might be the case oftentimes if you have like a cash register situation, which in that case you wouldn't be using an invoice, you'd have a sales receipt, but you might just need the customer name in essence to record the transaction. Of course, you might want their email and contact information too, but I'm just going to go with the name right now. If we were going to email it to someone, then clearly we would need their email address. Noting also that the invoice is one of the forms that aren't just used for internal use and therefore used to record the transaction, but are given to the client. And therefore, you might want to make a custom invoice to make it look as nice as possible, put your logo on it, and that kind of stuff. So the billing address, we don't have the billing address here because I just entered the customer name. If I entered the billing address, it would also be included there. The terms, so the terms are net 30, this becomes important on the invoices possibly more so than the bill, because when we invoice someone, we have to tell them this is when we sent the invoice out, we're emailing it out today, let's say, but then it's when is it going to be due in some time in the future? Is it going to be due in 30 days or you can make different terms, you can add terms 10 days, you can even have fees if it was late or something like that, which I will not get into at this time. So then let's put the date on this in 2024 01 15 24. So the due date 30 days later is going to be 214 24. So it does that automatically if we set the terms properly, we're not going to put any tabs in place. And I'm just going to create a new item. Now, normally, you would just select the items that have been put in here already rocks, right? So we have and we would put that in place. And it would all be taxable or not taxable and set up for us already. In our case, I want to set up a new item just so we can practice the fact that we can set up a new item as we go and see what these items are doing how they are set up. We'll talk about setting them up more in future presentations when we start the company file. So this time, I'm going to start by not having an inventory item, but rather a service item. So the service item, it might just be hourly service, which again, you would kind of try to not just do the hourly service if you could group your services together. I think that's really useful even on bookkeeping and stuff, but we'll start with the generic hourly service. The income account is going to go to the service income sales tax, it's going to apply the standard sales tax. I'm going to say that the sales tax isn't applicable. I'm going to say it's non taxable. I'm going to say that's a service item and it's going to be non taxable. And I don't purchase anything because it's a service item. If I purchase something, then I can check that and I have the purchasing side of stuff. But I don't, I don't have any purchasing side. It's easier because I just I'm selling services. So let's save it and close it and check it out. So then we can say there it is, and I can put the amount of hours, let's say it was five, and I'm saying the rate is $100. It's not taxable. That's why that's not checked off. And then if I had multiple lines, I can add, you know, another service item down below, and I can have multiple lines on the invoice. If you have a job cost system, you might have a very long complex invoice. Okay, so then we can say, okay, let's go through here. We've got add lines, clear lines, add subtotals if you needed a subtotal in there, we can message on the invoice, we have the default message here being thank you for your business. And then we have a message on statement. And then we can have attachments if we need them, we can clear, we can cancel, we can clear, we can print or preview. If I preview it, it looks a little bit different than simply the data input screen. So I'm going to say print preview here. And so here it is. So now we've got our invoice, this is what it looks like when we actually sent it out when we send it out, oftentimes as an email. So you can check out that formatting, we can make it reoccurring. If this was a reoccurring one, we can customize it. If we want to customize the invoice, you can make templates, which we have a section that we might get into that in more detail to customize them. And the more option, you can copy it. So in the event that you had multiple invoices that are going to be the same, and possibly you have long invoices, for example, then you might be able to copy them over, you can void it, you can delete it, transaction, journal and audit history. Now, what's this going to do when we record it note, there's no sales tax. So it's a pretty straightforward transaction. If I look at it from a journal entry standpoint, instead of cash going up accounts receivables going to go up the other side is going to go to some kind of income. And I said it was for $500. And so it would look something like this accounts receivable goes up, and income goes up with a credit. So the income statement net income is impacted by that credit pretty straightforward. However, we also have the sub ledger we have to track for the accounts receivable so that we can collect on it. So let's go ahead and save it. And normally we would save and send it. I'm just going to save and close it with the drop down. You can also save a link if you needed to put a link to it, but we'll save and close it. We're going to then go to the tab to the right. And let's put this in 2024. Oh, one, oh, one, two, four, tap 1231 24 tab and running it to refresh in it. And then we'll go into the AR accounts receivable are the pirate account are. And so there we have it. And so then I have entered this in here two times it looks like apparently I did a test one. But let's go into that 500. So there it is it takes us back into that invoice closing that back out. And then going back. And I'm going to go to the income statement change the range from oh, one, oh, one, two, four, tap 1231 24 tab, run it to refresh it. And there's our I put it in there twice again, you might have it in there one time. But there's his twice for the $500. Okay, let's go back. And so now let's make it and now if I go back to the, well, let's go back to the balance sheet and look at that accounts receivable, which also needs to be tracked by who owes us the money. So I'm going to go to the tab to the right, right click on it, duplicate that tab. And then let's go to the reports on the left hand side. And close up the hamburger scroll down and who owes you money. We want the customer balance detail. And so I'm going to make this all dates. Okay. And we're looking for we're looking for the number customer number one. Here it is. So here it is. And I have two of them in there because again, I entered them twice. So there you can see it down below. We can see the total is at 628152, which should tie out to the balance sheet, which is at 628152. If I go to the first tab, I can then track those items that have been input by going to the sales to see if I can collect on it. If I go to the all sales, then I told close up the hamburger for now. I can look at the open invoices. So and there we have our open invoices. And here's the two that I that I entered here. We can also check it on the invoices tabs. And we want to look at the open invoices. Not yet do let's let's select the drop down here and say unpaid. And so we have these two down here. And then we can see it by customer. So if we're going to contact the actual customer, there's our customer number one that we set up. And we have the two invoices in there. Let's do another one, making it a little bit more complex. This time, we're going to say that there's inventory involved. So let's hit the the plus button again. And say invoice. Let's say this is for going to be for customer number two tab. And I'm just going to generically set it up again. If we were going to email, we would want the email address. If we have the inventory that we were shipping to them, we would want the shipping address. But I'm going to keep it here 30 days from the date that we input. So let's say we input it on the 20th or the 18th this time 30 days from then net 30 is 217. And then I'm going to scroll down and put another item, I'm going to make another item. As we go, I'm going to add the item. And this time I'm going to make it an inventory item to make it more complex inventory item one, let's say no SKU no category, initial quantity on hand. I'm going to say that there were currently 10 on hand, that's going to actually make a journal entry. So be careful if you actually do that, because normally I would purchase it with a bill form instead of just putting 10 on hand. But I want to focus on the invoice right now. And I'm going to say that happened as of the beginning of the month. And reorder point, I will keep at zero. It's going to go to the inventory asset account when we purchase them. And when we sell them, it's going to go down this time we're selling them. And then the description is going to be the sales price, let's say we sell them for 160. And we sell them, which is going to impact the sale of the product account. That's what's happening now, we are selling them. And the sales tax is being generated for us, it's going to be a taxable item. So it says it's taxable based on location. That's what we want. So we're going to deal with sales tax this time. And then the purchasing information, which would happen when I purchased the inventory with a bill check or expense form, typically, let's say we purchase it for $100. And we sell it for 160. Cost of goods sold will be impacted. That's the expense account when we sell it. So this invoice will result in income going up by 160 and cost of goods sold going up by 100, the net $60 impacting the financial statement. I won't put a vendor, let's save and close it. So let's say that we have one of these that we sell, there's now 10 on hand, and it's now taxable. And it's being taxed based on the item that we set up and the fact that we set up sales tax, and it's pulling it by the location. So now you've got the $12 and 50 and 80 cents on the sales tax. So what there's a lot more going on with this transaction now, what is happening? Well, income is going to go, I mean, the accounts receivable, it's an invoice accounts receivable is going to go up by the 172 80. The other side's going to go to income, but it's only going to go up by 160 the amount that we charged. And then the sales tax is going to be a payable of 1280. And then cost inventory is actually going to go down by an amount not on the invoice $100 known by the system, because the item is set up and therefore QuickBooks knows it should go down by $100. And the cost of goods sold is going to go up by $100 that being an expense the net impact on net income being 160 minus 100 or $60. And we're going to have the sub ledgers for the accounts receivable tracking not just by by the dollar amount, but also by customer. And then we're also going to have a sub ledger for the inventory tracking the inventory that we're dealing with. So let's just take a look at that transaction over here. This is invoice number two for inventory. And let's say what's happening, well accounts receivable still going to go up. And then but then there was sales tax. So I'm going to say that's a liability account. And so let's say and then, well, let's say sales goes up for let's say sales is income, and then sales tax. So we sold the thing for 160, which is a credit of 160 sales tax was 8% this times 0.08 8% so accounts receivable is going to be the negative sum of those the negative sum of it won't do it. Those 173 that's what we had over here at one 172 80 let's add some pennies. I'll add some pennies. So it's exact. And okay. And then so and then we have the cost, we have the cost of goods sold is going to go up by 100. And then we've got the inventory is going to go down. We don't have any inventory on hand because I didn't put the inventory in here. But so it was if I record this accounts receivable, it's going up by this amount. The income, let's actually delete this first one. So we can see just this one. And then we've got the income is going to go the income is going to go up by 160. And then we've got the and then I'm sorry, I deleted this one down. I don't know why that was down here. And then the sales tax sales tax payable is going to go up. And then we've got the cost of goods sold, which is going to go up. And then we've got the inventory, which is going to go down resulting in negative inventory. So there's actually kind of a lot going on, right? So we have to track the accounts receivable, which will have a sub ledger related to it. The inventory will have a sub ledger related to it. We're going to have to track the sales tax payable so that we can pay it later than income statement account was affected by 160 minus the $100 or $60 net income net increase. Now you might have a question about the sales tax, you might be saying, Well, why don't I just record this whole thing as income, including, you know, the sales tax, why wouldn't the sales tax be part of income? And then when I paid the sales tax, I will then expense sales tax. And this question will come up in practice, because many times, if you're a bookkeeper, someone's going to ask you like I pay sales tax and you're not writing it off as an expense. And on my taxes, I should have an expense for sales tax expense. And the reason you don't have an expense for sales tax is because when we make the sale up top, we didn't record an expense down below, but rather we put it off the income statement on the balance sheet. And the idea there is that the government is is trying to say we're not taxing you, the store owner, you're just the collection person, we made you into our collection person, you were taxing the customer in theory. Therefore, it's not income to you. And it's not a business expense to you. It's supposed to be something off balance sheet. And therefore, I mean, off the income statement on the balance sheet, it's just and so you're not going to have either the income or the expense on the income statement, right? So when we pay this, it's not going to be sales tax expense, it's going to decrease the payable. So let's record it and check it out. So I'm going to go back on over and say let's save it and close it and check it out. So we'll go to the balance sheet over here and say let's run it to refresh it. Let's go back into the AR, the R accounts receivable R. And so there it is. If I go into that amount, we can see that that's for the total amount, including the sales tax, that's what we need to collect from the customer. Closing that out the other side. Let's go back is on the profit and loss. Let's go to the P and L and then run it to the refresh it. And now we have another product of 160. Notice that this amount is only the amount not including the sales tax. So this is what we charged not including the sales tax. And let's close that out. And then the difference between that those two amounts is the sales tax, which is back on the balance sheet. And it should be down here somewhere under the liability, one of these liability accounts. And I forget which one it might be going to both of them. Let's go to the board of equalization. There it is 1280. There it is right there. And then back. And then we also have the inventory going down. So if I go into the inventory, we can see the inventory decreasing here. Okay, for the 100, noticing that that 100 is not on the invoice. So if you're tracking inventory, you have to be careful and think, do I want to track it in a full service accounting system, a perpetual system? Can I use a periodic inventory system tracking inventory externally possibly using like a Shopify or Amazon to track it and track it and then not track it in here or Excel or something like that. So we'll talk more about that when we set up the company a new company file. And then we see that the cost of goods sold on the profit and loss has been impacted by that $100. The net impact on net income is the 160 minus the $100. If I go back to the balance sheet, we can see that the accounts receivable has a sub ledger account represented by this other report, which is breaking this out by customer. Let's run it to refresh it. And now we have customer number two, which is adding the 17280 the full amount, including the sales tax that we need to collect from the customer and then pay the part of it that we need to pay for the sales tax to the tax agency collection agency. That's going to be the 645 432 total, which should match what's on the balance sheet. And if I look at the inventory, we should have a sub ledger for inventory. So if I tap to the right, right click, duplicate the tab so I can open up an inventory report to see the tracking of it, it being inventory. Let's type in inventory, valuation summary. And in here, we can see let's make the date at 123124, run it to refresh it. And we can see there's that piece of inventory. Notice when I put it on the books, I said there were 10 of them that made a journal entry to make 10 of them. And then I sold one of them, which leaves us with nine left. So that's why we have the nine at the 900, the total adding up to the 149625, tying out to the balance sheet, hopefully 149625. If I track this internally on the accounts receivable side of things, I would be going to the balance sheet side of things. I'm going to the to the sales tab, the customer center. And then once again, I could track the receivable and the sales area. I can look at my outstanding receivables here, the open invoices. And so there they are, my open invoices. Here's my customers. There they are. I can track it in my invoices should be popping up here with the open invoices again, unpaid. Now it's on the bottom because they're due later. And then we should see it in our customers. So I can now see customer number two. And I can see my invoice. Next, we would expect, of course, to receive payment on that invoice, which would be taken it out of accounts receivable and receiving the money on it. We'll talk more about that process in future presentations.