 QuickBooks Desktop 2023. Write checks for expenses and prepaid assets. Let's do it within 2-its, QuickBooks Desktop 2023. Here we are in QuickBooks Desktop. Get great guitar's practice file. We started up in a prior presentation going through the setup process. We do every time, maximizing the home page to the gray area of view drop-down. We have the hide icon bar and open windows list checked off. Open windows open on the left side. Reports drop-down company and financial P&L profit and loss. Changing the range 010123 to 123123. Customizing the report to increase the size a bit in the fonts. The numbers changing it. Let's bring it up to 14. 14 is our new standard. Yes please. Okay. Let's open up the reports again. This time company financial and the balance sheet standard report customization. Rangings they are a changing 010123 to 123123. And then we'll customize that one too and make it 14 and okay. Yes please and okay. Let's open up the trial balance as well just to get used to that in our startup process. It's under an accounting and taxes trial balance. Very useful report. The range in they are a changing. So this is from 010123 to 123123. Customize it and we'll crank that one up a notch to 1616. How about that? That's how crazy we are around here. There we go. Wild and crazy. Okay. So there it is. So that's our normal setup process that we do every time. Let's jump back over to the home page. We're now going to be thinking about cash outflows. Typical cash outflows that we would think happen on a reoccurring nature at the end of the month. Things like the utility bill, the phone bill, for example, and so on and so forth. Couple ways we can enter these items into our system. One is with a check form. The check form decreasing the checking account. The other side going to an expense or possibly to a prepaid asset type of account as we will see. We can then enter the bill form, which would increase the accounts payable. Allow us then to sort the bills and then pay the bills as they become due. We're going to do this method in the second month of operations in the first month. At this point, we're just going to be writing the check forms. The third way that we can enter this into the system is with the use of the bank feeds. Now we're going to have a whole other section or course on the bank feeds, but we just want to mention them as they might fit into the system and when they might fit into the system. So with the bank feeds, you might wait till something actually clears the bank before you record it, which is a little bit backwards because in a full service accounting system, we would record the item first. Then when it clears the bank, we match it out with the bank reconciliation, which we can use the bank feeds to help us out with that. If we're waiting for it to clear the bank before we record it, we're doing a step further than a cash based system, making things a little bit easier than they otherwise would be, but that would only work in certain situations. For example, one, we're not having accounts payable. We don't need to enter the bill and track the accounts payable. And two, we have electronic transfers. That's typically when it's going to work best. And many small businesses do at this point, paying things like their utility bill and paying things like their phone bill and so on with an electronic transfer coming directly out of the bank or possibly with a credit card, both of which are going to be electronic transactions. And because the timeframe for them to go through the bank is so short and you can verify that they have cleared quite quickly, then it becomes more and more doable and advantageous to kind of wait for those transactions to clear the bank and use the bank feeds to actually record the check or to record the credit card rather than recording it first when we enter the transaction and then using the bank feeds or reconciliations to verify that we've recorded the transaction. The electronic transfers also have the advantage of when they go through the bank feeds having a memo which usually gives you the vendor information allowing you to kind of be able to set up your bank feeds in terms of who the vendor is and then possibly have memorized transactions as well. Note that many small businesses will often, if they have sufficient cash flow or if they're using the credit cards, for example, be on more of a cash-based system or reliant on the bank feeds to record the cash outflows for goods and services they are using within the business. But on the customer side of things, the revenue cycle might be on an accrual basis or not being reliant on the bank feeds because of the industry they are in, they have to enter an invoice or possibly use a sales receipt and then make the deposit due to that industry that they are in. So just to mention that and keep that in mind. Now, if you're writing physical checks, then it becomes a lot advantageous to actually enter the checks into the system when you write them because then there's going to be a significant lag between when you write the check and when the check clears the bank because you've got to mail the check, they have to receive it, and then they have to clear the bank. And so if there's any questions about whether they got the check, did it get lost in the mail, we have to then enter the check in our system. So if they ask us about it, we can see that we wrote the check. So in that system, you don't want to be waiting until the check clears the bank to put it into the system because the whole point is to note that you've recorded the check when you wrote it and then you can track whether the check is outstanding. Again, electronic transfers, not as big a problem because those things clear in like one to three days. They can clear almost automatically these days. And so that lag time is not becoming as big of an issue and therefore waiting for it to clear the bank and then recording it is more and more doable. Although, so that means that we're going to write a check form this time and the second month we're going to write bill forms. So the check form would be used when either physically writing a check, possibly you're buying checks and then you're entering them into the printer and printing on the checks out of QuickBooks or you're handwriting checks and just entering the check into the system in QuickBooks or you're doing an electronic transfer but still doing a full service bookkeeping system where you record the transaction as you make the transaction and then reconcile it to the bank using the bank feeds or using the bank reconciliation process. Okay, so when we enter these items into the system we could use a check form or we could use the register. Now note oftentimes if I'm my default would generally be to use the register in other words. Remember the process, the thought process you want to go through when entering any transaction is first is there a form that should be used for the transaction. If so, I would use that particular form. If there's not a form then is cash affected? If the cash is affected I would typically use the register. So in this case there's a form, it's a check form but that's usually a form that I would use the register for in practice because it's a little bit faster to enter but here I kind of want to emphasize the checks so I'm actually going to write the checks using the check form. Remember that the check form is the form that's going to be a reduction to the checking account so if it's an actual physical check that's being represented or will be made from QuickBooks handwriting the check and then you're matching it up to the QuickBooks system it will then have a check number related to it. If it's going to be a decrease to the checking account for an electronic payment then you want to delete the check number because it's still going to be decreasing the checking account but it's not an actual check even though this is still the form used to decrease the checking account. We're going to make this as of 012622 I'm going to say this is going to go for insurance I'm going to make up a new vendor safe insurance company which is obviously a very generic name I'm going to say tab note when we set up the vendors typically I don't need a whole lot of detail I don't need to know their phone number their address and so on and so forth unless I'm going to mail it to them in which case I might want that but typically we just want a quick add and we're going to add them as a vendor note that if you're using bank feeds then sometimes you can enter the bank feeds without the vendor field and people skip that sometimes you want to add a vendor which you can usually get from the memo because the vendor allows you to sort your data by vendor so you get another sort field if you don't have the vendor you'll still record it to the correct account hopefully your financial statements will still be correct but you won't have the added detail of sorting who you pay by vendor so then we're going to say this is $12,000 here and then we might want to memo down here in terms of what we paid for I might say this is for a let's say a year of insurance now the one we first started out with and notice we're on the expense side not the item side items are if we were to purchase inventory expenses are going to go directly to an account we started out with one which is a little bit unusual because the insurance if we pay all the insurance for a 6 month time period or a year time period at one time for example it's often cheaper to do so but if I expense it when I pay for it then if I imagine my income statement here and if I was to compare January to December and I paid for a whole year's worth of insurance in January then it would look like January was worse than December because I'd have this big expense that's similar to the concept of basically the same as the concept of the fixed asset the property planting equipment where if I bought a building and I paid cash for it that would clearly majorly distort the income statement from one month to the next one year to the next that's why we use the accrual concept putting it on the books as an asset so we can do the same thing with insurance it's not as extreme of an issue as the fixed assets but it's still something that if I pay for a whole year's worth of insurance wanted to put it on the books as an asset so I'm going to do that here note that insurance is one of those places where you say well it's not that big a deal so I'm just going to expense it as I pay for it you may be able to do that you might want to talk to your accountant to determine whether or not it would be applicable or whether or not you want to do an accrual kind of component there you have to do it for equipment because it's such a huge deviation insurance maybe you don't need to it would be the easiest thing to do would be just to expense it although it's not as comparable but I'm going to show the example of the prepaid insurance normally you want to put it into prepaid insurance and then allocate it using period and adjustments which we'll see in future presentations so I don't think we have an account for it yet so I'm going to add an account I'm going to call it an asset account which is in the drop down it's going to be another current asset account I'm going to say okay I'm going to call it prepaid insurance prepaid insurance so insurance that we have that we have bought that we haven't consumed when do we consume insurance as the policy expires by definition you've got to pay for the insurance before they give you the coverage so we're going to say okay and that's different by the way that looks good than than any other most other things you pay the utility bill after you used the utilities for insurance you pay for the insurance before you get the coverage that's why you get into this prepayment problem or issue so let's say save it and close it this is going to decrease the checking account the other side is going to go into an asset rather than an expense let's do it let's say go to the balance sheet and check it out double clicking on the checking account and I can say okay now I entered it in the wrong date didn't I let me change the date to 2022 and let's see there it is fix the date pay attention man crying out loud this needs to be 23 you're at your world I'm working in the future I don't usually work in the future so give me a break but notice how you can change it you can double click and change it quite useful when you're working a practice problem saving it boom there it is there it is I fixed it I fixed it okay the other side is going to go to prepaid insurance there it is it's a balance sheet account so we put it here when is it going to be expensed we're going to expense it at expense it at the end of the month or year in accordance with how much of the insurance we have consumed so we'll talk more about that when we get to the adjusting entries similar kind of concept though as with the fixed assets basically the same kind of concept although we won't be using a separate account like accumulated depreciation we'll just decrease the insurance directly why because it's not an estimate down here it's like kind of an estimate up here we know how much was covered so we can hit it directly with a ratio and determine how much was used and how much was not used we'll talk more about that later let's do another one so if I go back to the home page now note if I enter another check here well I went to the register you could enter that notice how it see you see it in the register so you could enter that directly into the register if you're doing a whole year's worth of data input for example the register would probably be the faster way to go I'm going to close this back out I'm going to go back into the check form so we can see the full form though notice if I type in again the the same vendor which was safe insurance it's now populating here and it will now populate down here now how it populates down below will be a little bit different depending on your settings look up in a prior presentation if I go to the edit preferences and I look at my settings I think I changed it from this one in general automatically remember account or transaction information automatically recall last transaction so that means it's pulling in the number and everything but it also pulls into the account which can be quite useful alright now we're going to do a different one though we're going to say this is going to be from staples staples I'm going to type in this is a new vendor so I'll type it in tab this is like a department or a store for supplies store I'm going to quick add it I'm going to add it quick add as a vendor because it's something someone were paying now it's still keeping the data from that last vendor so that's okay I'm going to say alright this is for $500 same date but this time it's going to go to office supplies and I'm going to put it in as an expense now note I didn't have to add a new account for office supplies because they already had that office supplies account as the account in the general ledger from the default general ledger that was set up the normal process if I'm starting a new company file is that I'm going to use the default general ledger accounts that were set up when I started the company I'm going to try to find one that fits every time I knew a new transaction if I can't find one that I like I'm going to say is there one that's close and possibly then change the name to the name that I prefer so that I don't have multiple accounts that are in essence doing the same thing and if it's not there at all as we saw with the prior one we can then add the account as necessary and then possibly in a few months we can go back in and delete any accounts that we are not using which will hopefully clean things up and make it a little bit easier when we hit the drop down and kind of look through all of the accounts so that's going to be that we might want to put a memo here also note that supplies is another area where you might do the same concept so if I'm buying large supplies let's say you're buying medical supplies for example then you might be tracking it if I go back to the balance sheet in a similar way as you would with inventory because they're a significant dollar amount and therefore you want to track the supplies like you would inventory kind of or at least on a perpetual inventory system putting it on the books as an asset rather than but if you're buying small supplies like staples and things like that and you're not as concerned with tracking it and doing a periodic adjustment which takes longer to do then you could just expense it so we're going to use the method here of just expensing will show the concept of the prepaid item and allocation of it with the prepaid insurance but again the same concept can be done with supplies often times accounting textbooks will use supplies as an introduction into inventory and tracking inventory because it's a similar process if you have substantial supplies but it's easiest to just expense it if that would be applicable so save it and close it do I have the right date notice this is 2023 everything looks good okay got it so let's go ahead and say double click on the checking account there's the supplies if I double click on it back to the check that looks good the other side this time is going to go to the profit and loss PNL so there it is on the PNL and so it's an increase in the expense which it decreases the net income let's do another one let's go back to the home page and say we're going to say another one now notice if it was the second month I'm going to say tab tab that looks good if it was the second month of operations and if I was to then enter the same transactions in again remember it would memorize that it would help me to record the transaction helping me to be consistent with the expense accounts we want to be consistent with our allocation of the expense accounts so this one's going to be a utility bill which is Edison I'm going to type in a new vendor say tab it's going to help us to add the vendor I'm just going to do a quick add as we have done before it will be a vendor because we're going to be paying them and I'm going to say this is for 620 620 we might want to put in the memo what month we're paying for and so on and so forth but I'll keep it as is now when we choose the expense account the idea would be I'm going to see if there's an expense account that's going to be applicable if there's not one is there one that's closed that I can change if there's one that's not close at all I'll choose something else it's it's also useful to note that really there's no something it's nothing cut in stone in terms of which accounts you need to be assigning to on especially on the expenses because different companies are going to have different things that are going to be more or less useful to them so for example it used to be the standard would be that the phone bill the gas bill and the electric bill would be grouped together under utilities however the standard for most companies these days is that the phone bill is becoming its own expense why because it's becoming large enough that you want to break it out into its own expense and often times the electric bill and utility bill still seem for a lot of companies to be put together or grouped together so what you want to do and I've seen people go on two extremes of grouping their expenses one is to have too few expenses so you like you could imagine putting all your expenses into one account called business expenses but that wouldn't give you much detail on what you're spending money in so you want to give more detail than that the other extreme is to have a different expense account for every little thing your over categorizing your expense accounts which gives you a lot of detail but if you have expense accounts that only have like ten dollars in it for a larger company or even a small company with ten dollars then you're probably going to have a very long income statement with unnecessary detail it would be you'd be better off making decisions to group that stuff together so for here for example we could put it into utilities we might make another account if we spend a lot of electricity so if our guitar shop is plugged in we're amped all the time we got the amplifiers blaring and so then what I want to track my electric bill separately from my gas bill then I might do that right because that would be applicable that would be something I want to know about if not I'll group them together all right so this is going to decrease the checking account the other side is going to go to utilities I'll say save it and close it let's go to the profit and loss and so there's utilities expense another way people might group their utilities is you might see it grouped as utilities and then sub accounts of say gas electric and the phone bill and in that way you can then it'll have a carrot kind of like this that you can you can group up other people that really like sub accounts but again you can go over the top with sub accounts sub accounts can give you a lot more control because you might you might want the phone bill to be next to the the electric bill but if you put them in separate accounts and you don't have account numbers it's going to be ordered by alphabetical order in the expenses area so one way you can have controlling of the grouping of different accounts that you want in separate accounts will still be next to each other is the use of sub accounts but that makes your income statement a lot larger well we might touch in on sub accounts in the future you know as we go here if I go up to the balance sheet we can see the checking account here checking account we've got the Edison bill so there it is the other side going to utilities indicated here let's do one more I'm going to go back to the homepage at least one more we're going to go now that's a typical month in bill now if you set up bank feeds and you make these electronic transfers you can try to memorize these transactions and you can get them to be you know somewhat automatic but even if you're just entering them manually into the system it'll at least help you to memorize the account to make the data input as easy as possible I'm going to say this is Verizon is our phone company tab quick add for the vendor and then the amount I'm going to say is 410 tab tab we might want to memo telling us which month we're paying for and then down here we're going to say this is a telephone account so I'm typing in telephone I haven't never posted the telephone before but the system already has a telephone account because it's fairly standard these days to break out the phone bill from the utility bill so I'll put it there if I wanted the phone bill to be next to the to the electric bill I might then make it again as a sub or of utilities for example so let's go ahead and record this I'll say save it and close it let's check it out profit and loss now there's the telephone telephone and if I go back to the balance sheet we've got the checking account here's the checking account for the 410 now these were imagining we wrote physical checks for so when we actually do the bank reconciliation comparing our books to the bank we're going to have the check numbers and the amounts to help us tie it out if we were imagining electronic transfers then again we might wait for it to clear the bank before we record the transaction then because the transaction doesn't have as big of a time interval here we want to see make sure that these outstanding checks are outstanding right that's part of the point or we might still enter the electronic transfers as we make them in a full service accounting system but when they come through the bank then the bank is not going to have a check number anymore however it often has more detail in the memo like who we paid the memo often includes the vendor that's going to be included in it which helps us then to label the account that we wanted to go to as well as set the vendor name so just to touch on the different components again we have a whole other course or section on the bank feeds we can talk about later but just to give an idea of how different companies might be putting those into place or making their normal month in payments ok so now if I go back to the homepage here in the vendor section if I can search by vendor up top now I can go to the vendor center let's do it that way and because I added the vendors now I've got of course my vendor information here and if I look at all transactions and all dates then I've got a check and I can sort my data by vendor which is a nice capacity if you're using bank feeds remember you could possibly enter the data without adding a vendor and your financial statements may still be populated properly because you're still recording it to the proper account but you're not going to have that added detail of being able to sort and look through your vendor information if there's a question a vendor is a question a payment then you want to be able to go to the vendor center and be able to see the payment that has been processed or if it's a check the payment that's going to be basically outstanding you can say oh yeah well I wrote the check here I sent it out of this state maybe it got lost in the mail would be you know the general process so there is that let's go back up to the let's go to the trial balance now and here's what we have thus far on the trial balance now in the next month we're going to enter the same checks at the end or the same payments or the same kind of payments but we'll do it with a bill and then a pay bill and then we'll have a whole another section on bank feeds or course on bank feeds okay so let's go back to the trial balance here's where we stand at this point in time you can check your numbers if everything ties out great if not try changing the date range it's off to the date issue if there's an issue with the issue then you can double click zoom in and possibly change anything that you need to change which you want to be careful of in practice but it's a great tool for this practice problem