 QuickBooks Desktop 2023, Manage Sales Tax Form. Let's do it. Within two, it's 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, a sample rock castle construction practice file provided by QuickBooks going through the setup process we do every time maximizing the homepage to the gray area, view dropdown, open windows list on the left hand side, reports dropdown going to the company financial looking at that P&L profit loss income statement, tab 010124 to 123124, January to December, 2024 being the range, customizing the report so I can go to the font and change the font on up to 12, okay. Yes, please, okay. Going to the reports up top again, company and financial bringing it on down to the balance sheet standard this time changing the date to 123124 and we'll customize that report so we can go to the fonts and numbers and change that font size up to 12 again. Okay, yes, please and okay. That's the normal setup process. We're going to bring it on back to the homepage. Remembering that we're focused in on the vendor section, vendors being the people that we ultimately pay for goods and services, quick recap. How do we pay those people? Well, we could do an electronic transfer in which case we could be reliant on the bank fees. The bank feeds will typically record a check type form that being the form that is used to decrease the checking account, other side going to an expense. We might actually write the check. When we write a check, we want to enter it when we write it, not when it clears the bank typically and then reconcile it to the bank. We'll talk more about that in future presentations. We might move to an accrual based method where we're going to enter a bill which means we're going to enter the bill increasing the accounts payable and then increasing say and expense and then eventually pay the bill with an essence a check form but a special check form that's tied specifically to the bill decreasing the accounts payable. If you have inventory then you have this other row up top which could include the purchase order, the request for inventory, no financial transaction being entered at that time. When you receive the inventory then you can enter the bill with the inventory recording the inventory and the accounts payable at that time. Now you might then say, well, where does this sales tax kind of fit in here? I don't see any arrows going to it or anything like that. Note that the sales tax, taxes in general is going to be something that really muddy up the waters cause they're kind of inserting something into the business cycle process that's not really natural to the business cycle process. And the United States, the main federal tax is going to be the income tax. When you look at the state and local side of things they have their own tax system for the needs on the state and local side of things which might be the sales tax. So the sales tax is going to be imposed when you purchase something like a use tax so it's going to be imposed on the customer when they purchase something which might be a similar kind of system as other countries, for example. So note that if you're imposing the tax when you purchase something you might be saying why is this little button up here then why isn't it down here in the customer side of things because that's when we're going to impose the tax. In other words, in theory the idea being when someone purchases something that's when they're going to get taxed on it. So that would mean that when you create an invoice or a sales receipt those would be the forms that you would think would be triggering the tax in which case we would charge the customer the customer in theory being the one that is paying the tax and that is true. That's basically how it works. So why is this thing up here? It's because when we create a sales receipt or an invoice and charge the customer for the tax then it's going to increase the payable account. And a payable account is similar to the way accounts payable works. It's a liability account and then you're going to have to pay off the payable account which means you're paying and that's something similar to a vendor. It's kind of different. It's a little bit different because you're really paying the tax collector who is really collecting in theory from the customer and you're kind of like the in-between person. You're not really buying anything from them but that's the idea. So if I go over here to the balance sheet for example and I'm in the balance sheet, I'm in the assets. If I go down to the liabilities there's the accounts payable. If I scroll down here there's the sales tax payable. So you can see it acts kind of like a payable account because we're going to have to pay it off in the future to the government. So let's go back to the homepage. Just a quick recap on how this would basically be set up. We'll go into this in more detail in the future but the general idea is that if you're subject to sales tax that would be dependent on the locality that you're in the state and local area that you're in and then the things that you sell oftentimes in the United States services are often not subject to sales tax and so it's usually the inventory that's being sold to the end product, the customer that's usually gonna be subject to the sales tax. So then you would turn sales tax on like going to the edit dropdown, preferences and you could do this when we set up the company. We'll talk about this when we set up the company a lot more detail but there's the sales tax. You have to add the sales tax item which you could do here. The items or something we'll look at later. Usually it's in the inventory items we think about mostly that's in the lists. Here's the items list. So here are the inventory items down here that have to be set up so they can charge the inventory and then we have to set up our inventory. These are the sales tax items. Then you gotta set up your inventory items. Those are the things we talked about a little bit when we said we're gonna purchase actual inventory because the inventory items are gonna be the ones that are subject to sales tax. So you gotta turn on the sales tax code and say they're subject to sales tax and then I'll close this back out and if that's all done properly when you actually then go to the homepage and create a sales form such as an invoice or sales receipt let's make an invoice. Let's go back to the prior one. This one has some sales tax. I'm gonna close out this. Notice the sales tax is now being applied down here based on that item. So now it calculated out the total cost that we're charging and then the cost of the sales tax. So we'll talk more about an invoice later but if we just kinda analyze what's happening here with an invoice the invoice is gonna increase the accounts receivable. We're gonna say the other side is gonna go to income but it's gonna go to income at this 1-5-2-2-50 and then we charged them another 1-1-4-19. So that 1-1-4-19 you might say why doesn't that just go to income? You might think that that would go to income, income being the full 1,636-69 but that's and then when you pay the sales tax you would think that would be an expense, right? But the idea is that we're not the one paying the sales tax. So therefore it shouldn't hit the income statement at all. So basically that 1-1-4-1-9 goes directly when we create the invoice or sales receipt to the liability account and then we pay off the liability account. So for example, when I create this invoice if I go to the balance sheet and we go into the sales tax form then I'm gonna change the date up top from 0-1-0-1-2-4. We've got the increases with the invoices to the sales tax and then we make the payment with the payment. So what's gonna happen is the sales tax is gonna be increasing every time we make a sale that's subject to sales tax. The other thing that could adjust the sales tax is if we have customers that are not subject to sales tax we have to show it in the customer field that it's not subject to sales tax. We'll talk more about that later but that's the general idea. It's gonna go up, the sales tax is gonna go up whenever we make a sale which is subject to sales tax and then we're gonna have to pay it down periodically. So you can think about how this might work then of course and we'll talk more about this when we do the longer practice problem and actually set up the sales tax but if you might have to pay the sales tax say monthly or quarterly or possibly even yearly or something like that because and that would mean that if you pay it monthly for example in the month of January the sales tax would be going up and up and up and when you collect money from the customers and then you'll have to pay it by the end of February let's say right you'd have to pay it in the following month. So the way you can pay it, the way you pay it down is you can go to the home tab and that's where this button comes into play. So now the button comes into play it's a little bit different than the bill because notice in the bill we increase the accounts payable with the bill for something we actually purchased and then we pay it down. The sales tax has a payable account which is similar but we never entered the bill because we never bought anything we're just the middle man that's collecting the taxes for the government. So we actually made a sale and then the government inserted themselves into the middle of that sale and said you have to collect money from the customer for us at the point of sale at which point we created a payable account that made the payable account go up. It would be like kind of like we entered the bill when we made the sale kind of thing increase in the payable account we collected money that we don't get to keep we have to pay it to the government. So then we would go into the manage the sales tax and we have some information like the sales tax liabilities which is just basically a report which will help us calculate the sales tax and then we could pay the sales tax which will go through the process of paying the sales tax so you could pay it from the checking account the check date, sales tax do through it's gonna show the sales tax do through the fall this point in time and usually again if we pay it like monthly if it was the end of the year 2000 we would pay the sales tax that was going up or been accumulated up through November that we would pay sometime say in December would be the general idea and this will basically help you to formulate late or make the payment this will basically create a check form which will be decreasing the checking account and the other side decreasing the sales tax so it's just like a check form it's just that we're using this cool little widget to do it to help us manage the sales tax so if I go back to the balance sheet then you could see that in the sales tax table that little widget will create the payment 010124 and we'll see the sales tax payment here right there so there's ones that's been created the other side's going through the checking account so it's basically just a check it's a kind of a fancy check and here's the actual form that's gonna be created from that widget it's just like a check except that at the bottom instead of just having an expense account it's got this little sales tax thing which will look similar if I close this back out close this back out and go back up top to the checking account and change the date from 010124 and we look at like a normal check here's a normal check looks much the same except down here we've got something similar to what we saw in the bill form an expense and an item tax it's going directly to the expense because we used a little widget it basically has the bottom half taken care of for us because we set up the sales tax system in that format to do so closing this back out, closing this back out so the general idea is that we're going to once everything is set up which we'll talk more about how to do in the second half of the course when we start up the company from scratch if everything is set up properly then it should be pretty easy to move forward because we have the system set up it's the setting up that really gets you to understand it more and we'll do that in the second half of the course but when set up, when we create the sales receipt or the invoice, invoice or the sales receipt when we make a sale that then is what's going to increase the liability because we're charging the customer for the sales tax the way the government is telling us to do and then we're going to pay off the sales tax with the widget which is in essence just like a check form you might say why don't I just use a check form because we're using a special check form similar to the special pay bill form which is going to help us to manage the proper amount to pay and it's going to give us a special little icon in the GL kind of data that we've been looking at the transaction detail reports to show that it is a check that was basically done through the sales tax thing which gives us a little bit more added information which is nice