 QuickBooks Online 2023. Enter transaction purchasing investments using bank feeds. Get ready to start moving on up with QuickBooks Online 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 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 two open at the same time, we suggest using the incognito window or another browser. You can open incognito if using Google Chrome by selecting the three dots in the browser incognito window, typing into the browser or search engine, QuickBooks Online Test Drive. We're using the sample company to compare the accounting view, the one that the bank feeds practice file is in, and the business view, the one the sample file is currently in. If you wanna toggle between the two views, you can go to the cog up top and switch the view on down below. So we're gonna be opening up a few tabs as we do every time so that we can put reports in those tabs. So to do that, we're gonna duplicate the tab, right click on the tab up top to duplicate it. We're gonna right click on the tab up top again and duplicate again. We're gonna populate these two starting with the middle one with our financial statement reports. Reports are on the left. And then we're gonna go to the balance sheet, one of the favorites. And then as that's thinking, let's think about where the reports are in on the business view. They're in the overview, the business overview that is. And then the reports on the left hand side, back on over to our sample company tab to the right. And we're gonna go down to the reports on the left hand side. This time the income statement or profit and loss report. Let's close up the buggy. I'm gonna change the range for, I'm gonna say 010122 to 123122, run it. And then I'm gonna go to the tab in the middle, close up the hand buggy, scroll up, change the range, 010122 tab, 123122 tab, run it to refresh it. That's the setup process that we do every time. So now we're gonna think about investments and the bank feeds. So let's just open up the bank feeds on the left. I'll go to the tab to the left. And the bank feeds are under the banking. And then the bank tab, I'm gonna close up the hand buggy. If you were in the other view, by the way, the bank feeds would be located in the bookkeeping on the left hand side in the business view transactions tab. And then the bank transactions. Okay, so we're gonna now be thinking about investments. So this is another one that's a little bit unusual. So we started off with the most common type of thing, us making payments, or these are outflows that we've been talking about in general. You could set up the bank feeds most easily for paying things that you pay electronically, like the telephone, utility, and so on and so forth. We talked about the fact that paying for inventory could quite likely complicate things because it's a deviation to an accrual kind of component. And we talked about the payment for things like equipment, large purchases, also something you have to be careful of. Another one that we've got to kind of watch out for is if we were trying to track our investments, putting money into, say, stocks and bonds or an investment account in some way, shape, or form. Now, if you're a small business, if you're doing this for like a schedule C or something like that, it's likely that you do not generally want like your investments, your personal investments in your business account, because the general idea is that we're trying to separate business from the personal. Now, there might be some exceptions to that if you're a small business, you're just doing some gig work or something and you want one QuickBooks file that does everything. You might be able to use class tracking or tags or something like that to get what you need to do the basic tax return at the end of the year from like a schedule C using those methods. But the general idea is that we would like to separate in some way, shape, or form, usually with two separate accounts, checking accounts if possible, and two separate QuickBooks files if possible on the business and personal side of things. That said, it is quite possible to use QuickBooks for personal accounting. It's the same thing. It's just that there's a different objective. The objective is not simply revenue generation. The objective is to live well. So you don't have that same, it's a little bit more difficult in that way to deal with your personal finances because on the business side, you have that general kind of driving thing which is competition and trying to generate revenue versus the personal side of things. But the same double entry accounting system will work in either method. So on your business side of things, then it's possible that a business would wanna take some of their excess cash and instead of giving it to the owner in the form of a draw for sole proprietorship or dividend for a corporation, they wanna hold onto it because they think in the future they're gonna save up and purchase something like equipment in the future within the business. So you might think about like Apple, for example, trying to save up having a bunch of cash because they're gonna try to open up a new plant in some location that's not under like a communist regime or something like that. And so they might try to save up money to do that. If there is no plan for the business to then invest, you would think that the business would take the cash that they've built up through operations and give it to owners because the only reason the investments are in the business is because the business is thought to be able to get a better return through the investment in inventory and equipment, then you can get elsewhere if you took the money out of the business and invested in say stocks and bonds or something like that. So if you have the money in the business, you would think like short-term type investments or you might be investing in some ways in like a benefit plans, like a 401k plan or something like that. But you have similar rules if you're trying to do QuickBooks for the personal side of thing where you're trying to actually track your investments kind of in a balance sheet type of format. Now, in that case, note that there's a difference between what you wanna use like a QuickBooks software for and what you might wanna use other finance software for. So for example, you might use like a personal capital or I think Quicken, which is different than QuickBooks has the capacity to pull in the end balances from your financial institutions. And that would include banking balances, that would include credit card balances, that would include investments, oftentimes in stocks and bonds and possibly even loans like mortgages and whatnot. And that gives you a great snapshot based on these financial institutions that you're working with for your personal finances. But remember, that's not what QuickBooks does. QuickBooks pulls in the detail, the detail for the checking account and possibly other accounts as well. So that you can record the information necessary to create the story of the income statement, right? We wanna see the income statement story. So you don't wanna think about QuickBooks as the place you're gonna go for like day to day kind of ups and downs in the market to record that kind of stuff or to record just the balance sheet created from the ending balances, which you can use other software to do. What you wanna do is be able to set up QuickBooks so that you can adjust it fairly quickly to give you a nice snapshot on the balance sheet and generate an income statement, a story of what is going on. So from the cash side of things, of course, because cash is part of our normal business operations or personal operations on the personal side, we wanna take all the information that's going through the checking accounts and record it through our bank feeds. And that'll intertwine with all the other cycles in the business, the customer cycle, the vendor cycle and the employee cycle if there is an employee cycle. When we have investments in like stocks and bonds, obviously we're just kind of holding on to the stocks and bonds and we're gonna have to make periodic adjustments to those investments into the stocks and bonds, possibly for the earnings that have been made such as interest and dividends. So therefore we want like investment accounts that aren't too detailed, because I wanna dive into the detail with possibly my investment companies like a Vanguard or an E-Trade or something like that. I can look at the day-to-day activity and charts and that kind of stuff there and I can get just a snapshot balance sheet with something like a personal capital. I just wanna recap it with all my other data in QuickBooks here and basically adjust it periodically. So what we're gonna do then is I'll set up a couple of accounts and this will be similar again if you're doing this for your own business or if you're doing it like for your personal QuickBooks there's similar kind of problems that we'll have to deal with. All right, so first let's set up some accounts that we're gonna be putting our investments into. So I'm gonna go to the tab to the right, I'm gonna right click on left, I'm gonna right click on it and duplicate it and then I'm gonna pull that to the left and then I'm gonna go into my chart of accounts which is on in the accounting view under accounting and then there's our chart of accounts if you're under the business view by the way, the chart of accounts are located under the bookkeeping and then manage and chart of accounts. So let's first just add the accounts that we're gonna be putting in place for the investments and then the investments when we initially invest in like stocks and bonds, we'll see it come through the checking account with the bank feeds and we'll have to record it then. So I'm gonna record it as an investment so I'm gonna try to make a parent investment account and then I'm gonna put sub accounts for the institutions that I'm investing in. This is one method that you could use. So I'm gonna say a new account and I'm gonna say it's an asset account and I'm gonna make it an other current asset account, other current asset. And so you could try to make it like if you're trying to link to your financial institution, then you might be able to make it like a bank type of account and link to the financial institution. You can think about setting that up because the finances or stocks and bonds with some financial institutions may be able to give you bank feed data similar to what you have in the checking account. But what I'm gonna do here is set it up as an other current asset and think about just making periodic adjustments to it. So I'm gonna hit the, I'm gonna say other current asset. We're gonna go then this is gonna be, I'm gonna say other current asset. I'm not too worried about the tax category here. I'm just gonna pick one. So I picked investments other and then I'm gonna call it investments. So investments, this is gonna be what I'm gonna call my parent account and then I'll put the other investments within it. Here's what it shows down here. That's where it's located in the chart of accounts. So I'm gonna say, okay, so if I scroll down, I should have an other current asset type of account of investments. Now within under investments, I'm gonna put a subcategory of the places I'm investing in, which would be like a Vanguard possibly or your bank, Bank of America or I'm gonna say or like an E-Trade. So I'm gonna say new and I'm gonna make it another asset account. It's gonna be an other current asset account, but it's gonna be under investments. So it's gonna be a subsidiary account of investments. And I'm gonna say that it's gonna be, I'm gonna call one B of A. I'm gonna say we have investments in stocks and bonds with the institution of Bank of America, let's say. And then I'm gonna say save it. So now when I start to populate this on the balance sheet, I'll have a parent account of investments and then Bank of America investments. Now I'm not thinking about checking account, saving account here. I'm thinking about investment accounts like stocks and bonds with them that I would be tracking in here. Now note, you could make investments and break it out other ways. You could say I'm gonna break it out by mutual fund. You might have one mutual fund that basically covers everything or you might have multiple mutual funds, for example. And so you could break it out by mutual fund. But if you're planning on having many mutual funds that gets quite tedious, even that, right? So you might wanna say, hey, look, I'm gonna look at that detail of multiple mutual funds. When I go to my actual Bank of America reports there, here I just want a summary so I can see a snapshot of my balance sheet and record the income periodically. Another way you might do it is you might say I'm gonna make subcategory groups based on the type of investment like stocks and bonds, for example, but even that becomes difficult for small investors oftentimes because you're often investing in mutual funds that might have a mix between stocks and bonds. Another way you might do it on the personal side is to make sub-accounts for short-term and long-term investments, whether or not the investments are under the umbrella of like an IRA or 401K or retirement plan or not. Because if they're under a retirement plan, those would be long-term investments. So you might have a long-term investment by institution for those that are under a retirement plan and then short-term investments by institution for those that are not under the retirement plan. And then the idea would be that any investment that goes into the investment account, I would see because it would come out of the checking account and I can just record the other side to the investment. Any decrease in the investment that I'm taking out that's going to the checking account, I would see as a deposit to the checking account and I can then record the other side to the investment account when it comes out. But we also have dividends and interest, which we might take out and put into the cash account at which point we'll see them being drawn out into cash and we'll be able to record them as income when we receive them or you might reinvest them into the investment account. In that case, we're going to have to pick them up possibly periodically kind of like in the statement in order to pick up the investments to show that increase and we have this change of the investments, meaning they could go up or down in market value over time. So then we have to think about am I going to record my investments at real time, even though I have not yet sold them. So I'll talk more about that in a second. Let's add one more account under here. I'm going to say new and I'm going to make this an asset account too. It's going to be an investment account. And I'm just going to call this Primarica, Primarica. That's going to be another financial institution we're imagining we're investing stocks and bonds under. Okay, so those are the general concept. Now, if I go back, the other thing that we're going to have here if I go back to the balance sheet and I imagine I have my investments on the books as other current assets. Once I start to add the investments, we're also going to have an issue of what happens when the investments go up in value. Usually that the standard rule for generally accepted accounting principles is we don't adjust for the increases and decreases in the value because they're temporary. We have not yet realized them. That's the rule we use for like equipment or property planting equipment because we use a depreciation method that allocates the cost over the time as opposed to trying to value the equipment over time. But if we invest often, the argument is if you invest in real estate, then the real estate might go up in value and you should be using fair market value is the argument. Now, the problem with fixed assets and trying to record them at fair market value is that we don't know what the fair market value is because it's just an estimate and if you allow people to make estimates based on it, then they're probably gonna start, that's an area where they can distort things and whatnot. But if you look at like investment accounts, they, you can know pretty clearly what they're valued at at any given time. They might be over or undervalued on the market, but you do know what the market is currently trading them for if they are investments currently trading on an exchange. So that gives us the capacity to be a lot more sure about any given time what the value is at least for that particular point of time because other stocks are trading at the same value. So there's a better argument in my mind to say, okay, I am gonna adjust my investments according to fluctuations in the market, possibly monthly, possibly quarterly. I'm not gonna try to adjust it every day because again, I could use for just valuation purposes, I could use other software to do that like a personal capital and I can use the running charts within the actual, you know, my investment software. Here I just wanna adjust it periodically so I can see the snapshot and see it with everything else as well as populate the income statement in accordance to those changes. Now, when we record an increase or decrease in the value of an investment, then the next question is, well, what are you gonna record the other side as? Is it income, even though you haven't sold the inventory or you can put the other side into equity? I think most people would record it as income because it's the easiest thing to do. And so, and I would report it as other income, kind of at the bottom of my income statement because it's not the main source of income that we'll be dealing with. So we'll get into some of those issues shortly for now. So for now, let's say, if you just start off your investment account, let's imagine there's a beginning balance in it. So I'm gonna go back on over to the tab to the left and the register I just set up is this pryamerica. So I'm gonna imagine before we set up the bank feeds, there's already a beginning balance in this account. So I'm gonna add, I'm gonna, I could go into the register and add this. This is the same kind of beginning balance kind of situation you might have with the checking account. So I'm gonna say, all right, I'm gonna add, let's say a deposit type of transaction. I'll make it as of the day before we started the current year, which is I'm gonna say 1231 to one. And I'm not gonna put a payee. I'm just gonna say this is the beginning balance. And I'm gonna say it's an increase of, let's say it was 10,000. I'm just making up a number here. The other side I'm gonna put into the equity, owner's equity account. Now I'm putting it into owner's equity because it's not income. It shouldn't be on the income statement. It's also in the prior year. So it's before we started doing the income statement in the current timeframe. So it's not gonna really affect the income statement in the current timeframe due to both of those kinds of checks. And so I'm gonna go ahead and save that. And so if I pull that over into my balance sheet, run it, then now we've got the investment account down here, Primarica on at 10,000. And I put it on there with a deposit type of form in the prior period. So if I go back a day, then run it, boom. So there it is, scrolling back up. And then the other side is going into the equity. So now we have it in the equity. I can't see the detail here, but you could run a GL account to see the detail. They don't let you kind of drill down on it because that's the rollover account they use, kind of like the retained earnings account. So now let's just imagine a scenario where we took money out of the cash account and we put it into the Primarica investment account. We would see that in the bank feeds. So I can go to my bank feeds for the checking account here. And I'm just gonna pick one. I'm gonna go down to Primarica. So here's one. I'll just pick this one. I'm just making this up as, imagine this is an investment account. And so I'm gonna put it in there as a normal category type of account. You might consider it like a transfer because it's going to another investment account, but I put the investment account as an other asset and I'm gonna be regulating it through the checking account. So that's good, I'll keep that. And then the vendor, I'll go ahead and keep, I probably should, I'll keep the vendor uncategorized. We're gonna say it needs to be categorized and I'm gonna put it in the Primarica account. And so now it's going in there, no tags and there we have it. So I'm not gonna make a rule for it because this is just gonna be a practice one here. So I'm gonna say, add it. And so there it is. If I go to the balance sheet then and scroll up and run it. So now if I go into the checking account, into the checking account, then we're gonna say that we have the other side going into an investment. So which one was that? They're all Primarica. So everything's a Primarica inventory. Here it is, the investment 25, boom, expense form. There it is, let's close it back out. And we're gonna go back then to the balance sheet. And then we've got our Primarica here. So there it is. And then we had it increased once again by those 25. So if we were increasing an investment account, we would see it go through the checking accounts, the general idea. Then once again, we could have income from that, which might be in the form of dividends and interest, which if we were getting the checking account stuff from it, we would see that come through the checking account and we can record that as we go. If we're reinvesting the dividends and interest, then we'd have to get the statements, right? And record the increase that are due to dividend and interest that way into the system, which would be an increase in the Primarica. And then the other side would be income, dividend and interest, which you might put on the bottom of the balance of the income statement. It's your, if it's not your primary income as other income, instead of your primary income. And then we have the issue of this Soxson bonds, we're saying held under the account of Primarica going up or down in value. So then if we're gonna record that, there's a couple of ways we can do it. We could take the possibly the statement that you might get monthly or quarterly. And if it went up in value, then I can either increase this account directly and then put the other side somewhere. Most likely income is the easiest thing to do, but you're probably gonna have it called unearned income on the income statement somewhere as other income at the bottom is what I would think most people would probably be the easiest thing to do. Or you could make another account, which would be a sub-account of Primarica so that you can have the actual amount that you invested versus the amount that is gain or loss, unrealized gain or loss. So if you were to do that, I could go to the first tab just to show you and I'm gonna go back to my chart of accounts and let's go into that account again and let's make another account that's gonna be a sub-account of Primarica called unrealized gains and losses. So I'm gonna say new and I'm gonna say this is gonna be an asset type of account and it's a sub-account of Primarica and I'm gonna call it unrealized gain slash loss Primarica. Unrealized, unrealized. I didn't realize I could not spell unrealized. I did realize that. I'm quite aware of my spelling deficiencies. So now you can track the cost, increase and decreasing over here and the unrealized gains and losses. The unrealized gains and losses would not be coming through the bank feeds or anything like that because there's no financial transactions. It's just the value of the thing that you're holding went up in value, which you can determine from the statements, which is determined from the market because other same type stocks are trading at that point in time for whatever the value is. So you'd have to enter a journal entry increasing or you can use the register increasing the unrealized gains and loss, other side going to something like unrealized gains and loss, which would be an income statement type of account, which would be another current other income. So let's enter one just to show you what it might look like. So I'm gonna say, okay, we got our statement. The statement says that the value of Primarica is higher by $500, let's say. So I'm gonna go, okay, I'm gonna go into my view register. It's not gonna go through the bank feeds. I'm just gonna enter a journal entry and I'm gonna say it's as of whatever 10, 31, 22 and memo, we're just gonna say, adjust to fair market value or something like that. It increased by 500. I'm gonna set up another account as we go. It's gonna be another income type of account. So I'm gonna add another account. It's gonna be an income account, but I wanted to make it an other income type of account, not just income, other income. So that'll be at the bottom instead of the top of the income statement. I'm gonna call it other income, other miscellaneous income. Hold on, I have it as an expense. I'm gonna say other income. And then we're gonna say other investment income and I'm gonna call it then unrealized gains. And loss, let's just call it that. Boom. And so there's the other side. Let's see what this would do if I save it then. Now I can go into my balance sheet and I would do this periodically when the statements come due. And I can say, okay, the total in my Primarica accounts, where did they go? Are right there. Our 10,025 is what I invested. That's the cost. Plus they went up in value by the 500. So the total value is now at the 10,525.50. And so if I sell it, I can kind of see what the unrealized part is. You might not need to do that. You might just put this right in the Primarica area, but then that gives you that little breakout to see you. You get a quick look at what your gain is over time or loss, if it was loss. And you can collapse it to see just the Primarica total. And then if I go to the tab to the right and we run it again, we can then see that the unrealized gain is at the bottom because it's not part of like your normal income. So we're gonna put it down here at the bottom of the income statement instead of the top of the income statement. Now, if you were doing this for your personal finances and it was your ordinary income, then maybe you just recorded as, you know, that your income is from dividends and interest and whatnot, you might put it up top. All right, let's go ahead and I'm gonna duplicate this. Just take a look at a trial balance just to see how the trial balance is growing as we go. That's a good report to keep in mind. In my mind, trial balance, trial balance. My mind's a little strange though, so maybe, but I still feel strongly 123122, let's run it. And so there's what we've been constructing just in terms of the bearer bones, debits, credits, accounts impacted thus far. So we're building this up mainly from the bank feeds, but now we've taken some deviations to show you where the bank feeds are not gonna be perfect and you won't be able to construct everything just with them for certain things. And you've gotta know what those things are so you can work around them.