 QuickBooks Online 2023. Purchase and finance equipment. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our Get Great Guitars practice file. We started up in a prior presentation using the 30-day free trial. We also have opened the free QuickBooks Online sample company. If you want the two open at the same time, we suggest using Incognito or another browser. You can open Incognito window if using Google Chrome by selecting the three dots in the browser. Incognito mode typing into the search engine QuickBooks Online Test Drive. We're going to use the Incognito sample company to compare the accounting view, the view that Get Great Guitars is in, and the business view, the one the sample company is in. If you want to toggle between the two, select the cog up top and switch the view down below. Let's open up a couple of tabs to put reports in like we do every time. We're going to right click on the tab up top so we can duplicate it. And then we're going to do that again, right click on the tab up top so we can duplicate the duplication process. Back to the tab in the middle, going down to the reports on the left. And then open it up one of the favors like we do every time the financial report, the balance sheet, where's that located in the business view, those reports you might ask. They're in the business overview section on the left and then the reports. Then we're going to tab to the right 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. Open up the reports on the left hand side and then take a look at the P to the L the profit to the loss report. The other favorite close up the hand buggy and then change that range from 0101232022823. And then we'll go from total to the months so we can see the months on a side by side. We've got Jan, we've got Feb, we've got the total back to the tab to the left closing up the buggy and then change that range. You change that range 0101232022823 and then run it changing with authority here. Okay, so that's the setup process we do every time. Now we're going to go to another transaction that isn't normally a day to day type of transaction and one which therefore there's not a standard form for. So in other words, remember the general process whenever doing a data entry type of activity. We're going to look through our forms up top and the day to day forms are going to be in this plus button and under the cycle customer cycle vendor cycle and employee cycle. But sometimes we might have a transaction that doesn't happen on a day to day basis and therefore there might not be a form for it. What do we do then we fall back to the question of generally is cash affected. If cash is going up, we might use a deposit form if cash is going down, we might use an expense or check form. If there's no cash impacted and it's not a day to day transaction, then and only then generally do we go to the general the journal entry entering debits and credits. That's difficult for somebody that we learned accounting in a textbook to do because when you learn in a textbook all you learn is debits and credits and you want to do everything with the journal entry. But if you try to do everything with a journal entry, you don't get that nice linkages between the forms that you can be tracking such as an invoice or receive payment such as a bill and a pay bill form such as the purchase order and the bill forms and whatnot that you get when you use the forms in the system. So that everything has a journal entry, but we want to use the forms that are designed in the system because that helps us better track and communicate with information's not just create the end result being the financial statements balance sheet and the income statement which are constructed with the journal entries. This time, we're thinking about the purchase of equipment, but we're going to finance it. So you would think, okay, purchase of equipment. Well, it's a purchase. So, so maybe that would be like in the vendor cycle here, but it's not a day to day purchase. It's not like a utility bill or a telephone bill or something that happens on a monthly basis. We only purchase large pieces of equipment from time to time. And so you don't have a form designated just for that. And so you might think, well, then if cash is affected, then I can use an expense form or check form, even though it's going to be for an asset account. But if we financed the purchase of equipment, took a loan out for it in other words, then now I can't use the cash form and now I have to default basically to the journal entry to enter that transaction as the general idea. So one more recap on the purchase of equipment and how it differs from other purchases. Normally, if we have normal transactions for the phone bill, the utility bills, supplies and whatnot, usually we just pay for those with cash or we enter a bill into the system. Cash goes down or accounts payable goes up. And then the other side is going to go to the income statement, which is going to be an expense because we incurred the expense we used it at that point in time. Now, if you're on a cash based system, then then you're going to try to have everything on a cash based system to the point that you can. But some things you're going to have to steal, even if you're on a cash based system is the point, move away from a cash based system. If there's an extreme difference between the time that you actually use whatever you're purchasing to generate revenue in the business, which is the goal of the business versus when you paid for it. That means if we're going to these, these fixed assets, which are going to be here property, plants and equipment, building machinery and equipment, then you're going to have to then put it on the books as an asset when you buy it, which is an accrual thing. And the tax code, if nothing else will force you to do that. So even a cash based system will typically still be forced to kind of do that. Whatever we record something in the fixed assets, we want to make sure that we track all the data to the best of our ability so that we can give that information to the tax preparer at the end of the day. So we're going to give them possibly the detail in these accounts to see what was purchased, what was disposed of so that they can create the sub ledger with it, which is often done in the tax software rather than in QuickBooks. So we can get the depreciation schedules. So in other words, it's kind of like inventory here that we put the inventory on the books when we buy it, and then we expense it when we consume it. Same concept here, we're going to put the equipment on the books when we buy it, and then we're going to allocate the cost over the useful life, the theory being when we consume it. However, because that's just an estimate, that's why we use this separate account instead of decreasing the account directly as we do with inventory. We're going to make this other account, which is a contra asset account, so that we can see how much has been allocated, and we can see the book value, which is the difference between the two. Also, just realize that whenever we're dealing with the fixed assets, you want to be able to line up to whatever you're going to use for the sub ledger that's going to be calculating the accumulated depreciation often done with tax software. So you might want to talk to your accountant to see what format or categories their tax software uses for property plants and equipment so that you can name yours in a similar fashion, making it easy to do adjusting entries at the end of the month or year. So for example, this is kind of a quick little look at a depreciation schedule showing all the things that were purchased, the date of the purchase and how much it costs, and then a depreciation calculation. Now, the other problem is you've got differences between tax depreciation and book depreciation. Tax software can usually calculate both of those things. So you might want to discuss how exactly you're going to deal with fixed assets and recording the depreciation, book basis, tax basis, adjusting entries. Are you going to do it? Are your accountant going to do it? How are you going to deal with those things? You probably want to talk those over with your accountant. So given that then we're going to enter this into the system. Now, even if you paid cash for it, you'd still have to put it on the books as a fixed asset. But in this case, we're not paying cash for it, which means we're going to finance the equipment. So that's why we have to enter a journal entry. Because there's only two accounts impacted, then we might be able to not just go directly to the journal form here, but use the registers to enter the journal entry, which is kind of nice system. You don't have to use that system. You can just enter a journal entry, but I'm going to use the registers because QuickBooks is kind of designed to use the registers when you can. And I think it's a useful tool for some people. And then down here, I just note that we have a liabilities down here is going to be our loan. So we're going to have another loan that we're going to be putting on the books that also causes us some issues. Do we want the loan in one account having two loans then in one account? Or do we want to break out the loan in two accounts? What about whether it's a short term loan or a long term loan? And my general policy on that would be I would rather have like a parent account called loan payable that I can collapse to one account if necessary, and then break out each loan into its own account so I can tie out to the amortization table related to it, and then collapse it into one account if I want external reporting. And I'm not going to break out between short term and long term portion because I want to do that periodically at the end of the month or year for financial reporting purposes, which we will talk more about in the adjusting entry process in a future course or section. All right, so that said, let's go to the tab to the left. I'm going to try to organize my my loans first and then we'll try to enter this. We're going to go into the chart of accounts, my accounts on the left. And that's my accountant accounting on the left and then the chart of accounts. And then where's that located under the business view? You might ask it's under the bookkeeping the bookkeeping and then the chart of accounts. So there we have that hold on a sec. That's not where it's at. It's under that's right. It's under the bookkeeping and then and then it went up here to the transactions, but we want the chart of accounts and then the chart of accounts. That's where it's at. And then you have to hit the chart of accounts. Okay, so there it is in that view. All right, so I'm going to close this up. I'm going to look at my loans down here and I'm going to try to fix up my loan payables before we enter the transaction. So the loans are down here in other current liabilities. There's my loan payable account. I would like to make a parent account called loan payables and then make this a sub account of it. Now I have a problem because I called this one just a generic loan payable account. And I would like to give it a more specific name such as the loan, like the name of the institution, the financial institution and possibly the last four digits of the loan number. So I'm going to first change this one. I'm just going to change the name of it. So let's go into the drop down edit. And I'm going to call it it's going to be a loan. Let's say the name though, I want to change the name. I want to change to I'm going to call it B B of a that's Bank of America loan. And I'm going to pretend I had the last four digits of the loan number so that if I had multiple loans from the same institution, then that will help me to differentiate one loan from another loan. So I'm going to save that and then I'm going to make a generic loan payable, which is going to be a parent account that I want to put the other two. As sub accounts underneath. So I'm going to make a new one. I'm going to call it a liability account liability account. It's going to be a current liability account. And I'm just going to give it the generic name of loan payable again loan payable. I had to do that this way so I so I can have the parent account that I didn't post anything to here. So I'm going to say loan payable. And I think that looks good. No description. I'm just going to say that looks good. Let's save it. Okay. So now we've got our loan payable account down here in the payable section. We should have an other there's this one and there's my loan payable. Now I'm going to make the B of a account a subsidiary of the loan payable. So I'm going to go into here, drop down, edit it. And I want to make it subsidiary to the loan payable. So I'm just going to change it right here, make it a sub to the loan payable. It's kind of funny when you go into the chart of accounts, they have like a different layout than when you add an account when you're doing the data input. We'll see if they stick with that system. I mean, I'm not quite used to this layout as much as the other, but it works. So it's a little bit different. It's got a pros and cons. I won't sit here and bad mouth it, but I'm not as used to it as the other one. I'll say that much, but it's still not bad. I guess I'm going to add a new account then for the new loan. And this one I'm going to say is a liability and it's going to be a sub account of the loan payable again. And then I'm going to call this, I'm just going to call it the name of the second one, which I'm going to say is chase loan. Actually, I chase loan. I think I want to switch the name. I want this one to be the B of a B of a loan 557. Let's say, let's say B of a loan 2791. Let's say I'm going to change the other one back to chase just to differentiate it. Not that it matters. So, but if it was the same institution, I can differentiate the loan by the last four digits of the loan number. So let's do that. And then this one, the last one I did, the one that already has money in it, I'm just going to make that one. I'm going to change it again to chase bank because I think that's what our story was saying before. You're making your stories not making sense. Because you said you got the loan from Chase Bank. Okay, so there it goes. So let's do that. So now I'm going to record the transaction and I wanted to increase the loan. We're going to finance the loan here and the other side is going to go into the fixed asset account. Now the registers, remember that the register is the thing that many people are used to using with like the checking account. And they've seen this like register format, which looks like the old check checkbook registers. You can have a register for any balance sheet account. However, so if you need to enter a journal entry, sometimes the best way to do it or an easy way to do it is to use the register. Because you can still think of it as increases and decreases a little bit more easily sometimes rather than dealing with the debits and credits. So if I scroll down, you got a register for all the balance sheet accounts. Now I can choose either of the accounts involved because neither of them are income statement accounts. I need to choose a balance sheet account to work so I can go into either the loan payable balance sheet account or I can go into the equipment. I think it's usually easier to think about the thing that you're purchasing oftentimes. So I'm going to go into the furniture and equipment account, the asset account and say that let's go into there and show the increase in it that for the purchase of the equipment that we financed. So I'm going to edit it. I'm not going to edit it. I'm going to go into the register. And then in the dropdown, notice the only forms I have here for transfer or journal entry. We're going to use a journal entry, even though we're entering it in like a register format. So that's going to be that. I'm just going to say that it's going to be on let's say 022723 and journal entry number. That's fine. And then I'm just going to say it's for Bay B of a Bank of America. I'm going to add Bank of America. I'm going to say that it's going to be a vendor. I even know it's not really either because it's a bank that's financing us. So it's not like we're buying it from B of a, but if those are our choices, I'll do that. I'll stay alone for purchase of equipment. You might want to be more detailed in the memo as detailed as we can be because we want to know exactly what we purchased so that our accountant can put it on the amortization schedule as detailed as possible so that in the future when we sell it, we can determine what thing we sold. Not all of people do that are very specific and if you're not, it's one of those things that's not a big deal in the year that you buy it. You won't have a problem. It's going to be an increase by the way. It's going to be a problem in the year that you dispose or sell it and you don't know what you actually dispose on. You can't tie out what you disposed of to the amortization schedule or they're grouped together in like a package of like 20 computers and you just sold one of them or something or 20 forklifts on one line. You don't want that. You want them broken out so that when you sell them, you can see which one you sold and do the proper accounting at that time. So the other side is going to go to the Bank of America B of A, the loan account. There it is picking that one up. What happened? It's going to go to the loan, let's say loan payable B of A. That's the one I want. Okay. I think they got it. So that's it. So that's the one. Let's go ahead and save it. What's this going to do? It's going to increase the equipment. The other side is going to go to the loan. Let's save it and see if that is indeed the case. We're going to go back on over here and we'll run it. Run it and then down below. Nothing happened to the cash, but we have the furniture and equipment go up. So if I go into that, notice we've entered two months of data input, very little activity in the furniture and equipment account. That's what's going to happen in fixed assets. That's a good thing because it allows you then to give that detailed information that those few purchases and disposals if you had any to your accountant so that they can then populate those into the tax software producing the amortization schedules and hopefully being able to help you or make any of the adjusting entries for accumulated depreciation. But when you give them this information, you might give them the sub ledger and you might want more detail than just it was a journal entry. You want something more like this, right? I got sofas. I got chairs. I got office equipment. I bought three forklifts or whatever. Here are the numbers of them. Here's how I can tie out what's on this schedule exactly to what's on my books. Not because it's a problem for me to figure out this year's taxes, but because it will be a problem if I can't figure it out in future years when I dispose of or sell of one piece of equipment. Okay, I've emphasized that enough, but still it's kind of annoying when that when you hit it could cause problems. Okay, so I'm saying. And then down here we've got this collapsing of the loans payable can be collapsed to one for external reporting. Then we've got our two loans broken out in here, which is great. And we can break out the short term and long term portion according to the amortization schedules periodically at the end of the month or year and then reverse the entries back into one account. So that it's easier for bookkeeping, which will do in future courses or sections on the adjusting entry process. So that looks good. If I go into that, it's a journal entry entered with a journal entry. If I go into the actual journal entry doesn't take us to the register that we use to do the entry, but it gives us the debits and credits, the journal form, the default form, the last form to fall back on for QuickBooks if no other form will fit. Closing this back out and scrolling back up and back to the report. Nothing happened to the income statement. When will stuff happen to the income statement? Why didn't anything happen to the income statement? Is it because we didn't pay cash? No, even if we paid cash, nothing would have happened to the income statement. When is stuff going to happen to the income statement when we depreciate the equipment allocating the cost to the period in time that we used it in order to generate revenue in accordance with the accrual matching principles. It's just an estimate. However, it's not a perfect thing. That's why we use depreciation instead of like equipment expense. All right, let's look at the trustee trial balance and see where we're at at this point. I'm going to duplicate the tab. We're going to go to the reports on the left hand side on the left hand. So if you hold up your left hand, it's right next to where your left hand is. If your left hand is in front of your face. And then we're going to go down and we're going to type in trial balance here. Trial balance. The balance is once again on trial. Your balance is on trial. Let's see if it passes the trial. The jury's not fair. That's okay. We'll see anyways. All right, so then we're going to say this is it. If your numbers tie out to what we have. Nice. We're on the same page. If not, try extending the date ranges. Sometimes it's a date issue. You could then change the dates, which is great for a practice problem, but be careful doing that in practice at the end of the month of data input. We'll do some transaction detail reports to further drill down on any differences.