 QuickBooks Online 2023 Enter transaction for owner withdrawal or personal payment using bank feeds. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our bank feeds 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. You can open incognito if using Google Chrome by selecting the three dots in the browser. Incognito window, type in into the search engine. QuickBooks Online Test Drive. We're going to be using the sample company to compare the accounting view, the one 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. Change the view down below. We're now going to be opening a couple tabs, duplicating tabs that is as we do every time. So we can put reports in them, right-clicking the tab up top to duplicate it. And then we're going to, oh, there's an error. Okay, I've restarted and now I'm going to duplicate again. And then I'm going to right-click and duplicate again. And then I'm going to go back to the tab to the middle as the one to the right is thinking. And then we're going to go to the reports on the left-hand side. Open up one of the faves, that being the balance sheet. And we can also see on the business view, by the way, if we take a look at the business view that the reports are located in the business overview and then the reports on the left-hand side back to our practice file tab into the right reports on the left. This time, the P&L, the profit and loss, the other favorite. And the hamburger up top. Let's change. 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. Range that range. 010122 to 123122. I'm going to run it to refresh it. Tab to the middle, close up the boogie, scroll to the top, change the range 010122 to 02123122, run it to refresh it. That's the setup process we do every time. Let's open up the bank feeds now, which are on the tab to the left. We set up the bank feeds in a prior presentation. Of course, they're under the banking if using the accounting view. And then we have our bank feeds up top. If you're on the business view, by the way, the bank feeds are in the bookkeeping and then transactions and then the bank transactions up top. Okay, so now we're going to be thinking about, I'm going to close up the hand boogie, a transaction where we have a bank feed decrease here. And the other side is going to be for a personal draw out of the business. So we're taking it from the business for personal. So let's just give a quick recap on the system, how this basically works. I'm going to collapse everything to the accounting equation just to think about it. Remember that as we put the business together, what's happening is the assets that we have on the balance sheet are only in the business and not for our personal use. They're not in our personal checking account. They're in the business because we expect to use them in order to generate revenue in the future. We hope that the investment of those assets in the business will give a better return than we could get if we just take them out of the business and put it in an investment like stocks and bonds. We're financing those assets in the business either through liabilities, us taking out loans or equity. That's the money that we put into the business and or the money that has been accumulated, earned, retained through the business and not yet been distributed out in the form of the draws if it's a sole proprietorship or dividends if it's a corporation. So now of course as the business gets in place when you start up the business, it's likely that we're going to be investing in equity in order to purchase the property, plants and equipment we will use for future revenue generation. But as the business gets going, we're hoping that the equity that we accumulate through the income statements or revenue our earnings will generate assets and yet we can take those assets out of the business for personal use. So as the business starts to be more secure, that of course is the flow that we would kind of expect to happen. How are you going to set that up in QuickBooks? Ideally, we would like to have a separate set of books, a separate checking account, separate QuickBooks file for a QuickBooks business versus the personal. Again, you can imagine a situation if you're a small business, you just have gig work or something. You might use class tracking or tags possibly to break out kind of business and personal in the same file. But ideally, we would like to have separate separate books and we're going to track the business side of things in part because we want to do our taxes and stuff and financial reporting, external reporting at the end of the year. We could do our personal reporting in QuickBooks too. Works great. I do that. Love it. Good stuff. But this is going to be the business side of things. So ideally, we would like to set it up so when we take the money out for personal use, we take it out as a draw, meaning I'm going to see it coming out of the checking account. It's going to come out of the bank account and it's going to be a draw of some kind that I can see go into the personal account. There's a danger if you're trying to create all of your financial statements with the bank feeds that you won't recognize a draw as a draw, but rather you'll see it as an expense and you'll mistakenly put it on the books as an expense instead of a draw. It shouldn't be an expense. It should be decreasing the equity directly. The other side should be going into some form of equity like a draw's account here. So that's easiest to pick up using the bank feeds if you actually draw the money out whenever using personal stuff. So in other words, you have your business checking account. If you're going to go on vacation for a personal vacation, you draw the money out of the business checking account which can clearly be seen as a draw easily recorded. So even if you're not doing the one doing the bookkeeping, even if you have someone else doing it or you're doing someone else's bookkeeping, that's how you'd like them to set it up and then they can spend the money on the personal and it won't be business related. However, sometimes we mingle things together accidentally or we're not as careful as we should be or whatever so you might make amounts that are going out of your checking account for personal costs meaning you went on vacation like to Disneyland or whatever and you bought the tickets out of your checking account which is the business account. What do you do then? Well, you're going to see them come through the bank feeds as an expense for Disneyland and the question is going to be well, what do I do? Do I record it as Disneyland travel kind of expense over here? Probably not unless you can justify it as something for work. You're going to just record it directly as a draw. You can just record that directly as a draw. Now you don't like doing that because it's kind of difficult to do that because now I have to weed out the expenses that I made out of my checking account that are personal versus business and put all the personal expenses over here as draws. It's easier, it's more separating the business, it's clearer if you have separate accounts and you drew the money out first and then bought the tickets out of your personal account because then it would be easier on the bookkeeping side of things but either way it's not the end of the world if you're able to separate that kind of stuff. Also if you're using one QuickBooks file for business and personal it's possible to use class tracking so you can label it as class tracking of draws of personal versus business and that way you can have an income statement broken out by class and it will show you your income for the business which is basically all you really need for a small Schedule C type of business because a Schedule C is basically the income statement and you can have your personal side so you can actually call it personal travel expense or Disneyland expense or whatever you want and you can separate it out that way. So those are some options that you can have. So let's imagine the first scenario. We see a draw coming out, it's just money going from the business account to a personal account and it's clear, clean, we know that it's going to the owner's personal account. So let's imagine this one here, we have like a transfer. Now QuickBooks is trying to record it as a transfer because it sees it as a transfer from one account to the other but I'm going to imagine the other account is not a business account. It's the personal account. So I'm not going to use a transfer form because that would be one if it's going to one business to another business account. So I'm just going to categorize it basically like normal with an expense type of form. It's going to be transaction date. We could put owner or vendor, we might just put us owner which is a little bit tricky to do because you could be a vendor or in this case we're kind of like a vendor but we're not really a vendor or a customer. Like when you put money in it might be a more categorized as a customer but in any case I'm going to say that the category is going to be some kind of draws. Now if I didn't delete all the accounts they might have like a draws for us. The point is it should be an equity account. So I've got the owner's equity and I've got opening balance equity. So I need to make another one. If you just kept all the file, all the accounts that QuickBooks gives you it'll probably have like an owner's draw account because they have a billion accounts but we're going to construct this as we go. So this is a personal draw. It's coming out of the business for personal use. So I want it to be an equity type of account is the point. The other type down here I'm not as concerned with but I'm just going to say it's going to be, I'll just call it owner's equity, part of owner's equity and then over here I'm going to call it draws. You might call it withdraws or owner's draws or something like that. I'm just going to call it draw. Alright and then, so I already recorded it here. So it would look something like this, right? So then once that's in place I'm not going to put a rule for it or anything. You could put a rule on it if it's a standard type of transaction but the point is when I see the money coming out of the business account to a personal account that'll be a good indication on my bank feeds that it is a draw. So if I record it and then take a look at my accounts I can go into my checking account and I can look for that 75. There's the draws there. If I go back on up the other side went into the draws account down below in the equity section. So there that is nothing happened to the income statement. That's the point because if it went on the income statement it would be an expense and it would be distorting the activity of the income statement. Now remember the draws can be a little bit tricky to understand down here because the equity section within the equity section the net income will automatically roll over by QuickBooks at the end of the year into the owner's equity or retained earnings account and that'll happen automatically. So if I changed the dates up to 2023 this amount would roll into here. But the draws do not do that automatically. So in a traditional accounting you would have to do closing entries. So if you want to close out the draws yearly you have to do a journal entry to close the draws out into the owner's equity or retained earnings type of account or let's say owner's equity type of account. If it was dividends for a corporation you have a similar kind of situation for dividends for a corporation. Otherwise you're just going to have the draws that will not close out and that's fine too not a big deal but it'll just mean that the draws are not there for just the current year those are draws that have just been accumulating upward for the life of when you started to account for draws. Now let's imagine a situation if I go back to the bank feeds where we've got like a personal account and notice that what QuickBooks is doing here is they're trying to give me like a suggestion with a green item here even though I didn't create an actual rule which is clearly indicated by a rule because it's trying to guess what I should do with it. So be careful that that's not actually a rule. I suggest trying to make concrete rules instead of just adding the suggestions because then you have more control over the rules and your bookkeeping will likely make more sense. Okay I'm just going to pick another one of these Primerica ones and I'm just going to pretend okay this let's just pretend that this was for something personal. So we had a personal purchase of something from this particular vendor and so if I can recognize it as something that I purchased for personal use then I can say okay I don't want to put it to an expense I want to put it to that draws account. Note how much harder this is to do especially if you're not the one that is doing it like if you're a bookkeeper for somebody else it's going to be difficult to go through their transactions and say was this personal or was this business. So you'd like to deal with them as a bookkeeper or accountant and say hey look would you don't do that right? Anytime that you have a personal thing try to take the money out first otherwise I don't know where to categorize the personal expenditures. So that's the general that's what you would like to do ideally but if there's an expense in here and you can say okay that's always a personal thing then what I'm going to do is I'm going to say it's not going to go to an expense account I'm going to take it directly to the draws account and you can imagine why that would work you could say well that would be kind of similar to as though whatever this thing that they bought from this vendor would be as if they took the money out with a draw and then they purchased it with the personal money out of their personal account which is kind of said okay we're just going to assign whatever they purchased to the draws. Now note that that works from the business side of things if you can pull those out although it's a little bit more confusing but it doesn't give you detail in terms of like a personal financial statement because you might want to do your personal financial statements in QuickBooks and be given a personal kind of grouping of your groceries versus your travel expenses versus so on and so forth and if you just record things to draws then we're getting the business thing right but we're not really having our personal financials being constructed as we do that so you could set up like class tracking so if you turned on class tracking then you can set up your income statement which will have personal and business but every time you enter a transaction then you would have to assign it as either personal or business so it can work for small businesses, sole proprietors and give you a little bit more detail use one QuickBooks file and one checking account to record everything but it's not usually what people recommend because obviously from an accounting standpoint we like to try to keep everything as separate as possible but you have that option anyways if I record this let me show you that record that and then if I go into my cog up top just to show you where those class trackings are if you go to the account and setting and you go to the advanced tab on the left hand side then you've got over here your class tracking categories, class tracking so if you turn on your class tracking what that will do is allow you to construct an income statement over here by class and your two classes might be personal versus business so every transaction you assign you either assign it to personal or business class it'll give you two columns then of the income statement personal versus class your total income statement will still in essence remain the same generally so that your balance sheet will still be kind of like the same like a mix of business and personal but if you're just doing gig work or something like that and you need your income statement for tax preparation purposes which is basically schedule C which is just in essence an income statement then you could think about setting something like that up for your accounting needs otherwise it's going to show up here just like it did before the draws have now increased so if I go into the draws we assigned this even though it wasn't money coming out we paid for something and we assigned it to the draws so the fact that it went into draws perfect for the business side of things but again you're not tracking what you actually paid for from an income statement on the personal side of things so then if I go to my tab to the right obviously that expense didn't get recorded over here it got recorded to draws if you don't pick those things up then you're going to end up with categories over here like miscellaneous expense with a bunch of stuff in it or people stuff it into supplies or something like that or you might have travel and meals and entertainment travel which has a large amount in it which are kind of red flags on a schedule C because it's going to look ballooned it's going to look bloated compared to other businesses possibly that are in the same industry that you are in which are the kind of things that might result in audits and whatnot and they're going to be like what are you doing putting Disneyland in travel here as a bookkeeper did you have to go to Disneyland in order to do the you get that kind of thing so let's open up our trial balance and I'm going to duplicate the it won't let me duplicate hold on a sec I'm going to go to the tab to the left let's go to the reports I'm going to type in trial balance and then this is where we stand so I just think it's useful to look at the trial balance from time to time so this is we're kind of constructing things in terms of the bare bone construction as we go as we do the data input with the bank fee