 QuickBooks Desktop 2023. Purchase of fixed assets. Let's do it within two weeks. 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. Get great guitars practice file. We started up in a prior presentation going through the setup process. We do every time maximize on the homepage to the gray area view dropdown. We've got the hide icon bar and open with lists checked off open windows open on the left hand side reports drop down company and financial P&L just to note there's nothing yet in the profit and loss going from 010123 to 123123. Then we're going to go to the reports drop down again company and financial this time the balance sheet report. Let's customize it up top then do the range and changing 010123 to 123123 January to December 2023 fonts and numbers changing it on up to 12. We're going to say OK, yes and OK. Now in prior presentations we imagined we had another accounting system. We took the ending balances of that system put them in as the beginning balances of our QuickBooks system planning on entering new data for the year of 2023. Even though we had that prior information in the accounting system as though we were doing business before that time. We wanted to practice looking up those types of transactions that would often occur when you first start a business. That would be getting the capital of the business the money needed to buy the initial investments of things like property plants and equipment and inventory. So we then invested money from us the owner putting that into the checking account. And we also thought about a transaction related to a loan those two transactions being such that they're not happening all the time. They're unusual transactions. They're startup type of transactions. Once the business gets going we expect the cycle to be running in these cycles and using the forms that would be in the vendor cycle customer cycle and employee cycle. For example, we then transferred a little bit of that money into a holding for our short term investment. Now we're going to be using some of that money to buy the property plant and equipment. So in our case we're going to sell guitars. So we're going to imagine we're buying furniture and whatnot for our store or shop. And then we're going to have to buy inventory for our store or shop would be the general thing we would have to invest in before we can really start making money off of the property and plant and equipment that we have as well as the inventory in this case that we are selling. So when we buy furniture and fixture once again if I go to the home page that is not a normal transaction. We don't always buy the furniture and fixture is something that's going to be happening periodically. And so we could think of it kind of as a part of our vendor cycle because we're purchasing something on the vendor cycle. However, notice that when you buy large things like equipment, building or furniture and fixture you might be financing part of it. And therefore it might be it might fall into something a little bit different than just going through accounts payable. So again we would think of it kind of as a separate type of transaction. In our case we're going to be put we're going to imagine we're paying cash for it. In this case therefore we could use a check form the form that would be decreasing the checking account or we could use the register once again. And like I say I would always use the register generally if there's not some other widget to use like a pay liabilities widget which is basically a check form or pay bills form. So I'm going to go to the register which you could find in the drop down you could you could go to it here use register or you could go to the list drop down chart of accounts. Let's do this format and then double click on the checking account opening up the register. So we're going to say this happens on the 9th let's say 1923. Now we're going to have a check number. So when we enter an actual check into the system it's a physical check that we're going to be writing and it may not be because you might say it's an electronic transfer. It's still entered into the register you just wouldn't have a check number in that case. If you are using physical checks then there's two things you can do are two ways you can use them. You can actually purchase physical checks. They still need to be physical checks that you're going to put into the printer printing the information on it such as the date and the pay and you know all that kind of stuff. But you still need the external checks and you want to tie out the check numbers that we're putting in place to the physical checks or you might be handwriting a check not planning to print it through QuickBooks. But you still want to make sure you're matching up your check numbers to what is in QuickBooks so that everything ties out and you can reconcile and all that kind of stuff. Okay so I'm going to say this is going to go to Office Depot which is a new vendor so I'm just typing it in because there's no vendor yet. Notice I can add the vendors as I go so I'm going to hit Tab. It's going to say do you want to add the vendor. This is actually a vendor this time because we're purchasing something instead of before we had the other transactions when we're dealing with banks and what not and loans and everything. So I'm going to say okay it's a vendor because that's we're purchasing from somebody. We're going to say it's for 16,000 we're going to say and then I'm going to put it into the fixed asset account which in this case is the furniture and equipment. Now important thing to note here notice we're paying actual cash so you might say if I'm paying cash and I'm on a cash based system why don't I just expense it. And the reason is because if you're buying something large for cash even if you're on a cash based system you typically have to deviate to an accrual based system. And even if you don't want to for that reason you're going to have to for taxes because for taxes they're still going to force you to deviate from a cash based system when you make large purchases like a building or like large pieces of equipment and so on and so forth. And the rationale would be well it's such a distortion from the norm that when you're going to use what you actually purchased that we have to go to an accrual system in that case. If you didn't do that if you just expensed a large purchase and you tried to compare say January your performance in January for an income statement account to a performance in February. January would look a lot worse because you made these really large purchases but you didn't really perform worse in January because the things that you purchased are going to have a benefit over the next 20 years or something like that right. So that's so the comparability is is what we're kind of looking for with this accrual concept and because they have such a large impact over many years into the future then you're forced to go to this accrual method. So we're also going to use the furniture and equipment later on we might break out the furniture and equipment to some other like subcategories we might talk about that more in a second. Also note that you might want to put in the memo what you actually purchased whatever whatever it may be you know couch or something you might want to put the actual number unit number of whatever it is you purchased. Because at the end of the year you're going to have to give this information to your tax preparer because they're going to have to to record the depreciation on a tax basis at least and they also could calculate the depreciation on a book basis. Let's talk more about that in a second. Let's go to the balance sheet and see what happens with this transaction by going to the checking account. We're going to say there it is if I double click on it it takes me to a check form not back to the register because the check is the form used to decrease the checking account. The other side goes into expenses tab selecting the furniture and equipment account closing this back out closing this back out. The other side of course goes into fixed assets furniture and equipment double clicking on the furniture and equipment. There's the check 16,000. So that hopefully that makes sense. Notice that we have to break out the furniture and equipment separately than other assets because these large assets although they're still valuable to us and they're part of our total assets are not as liquid. So we're not going to be able to pay off our current liabilities with these investments into the the fixed assets. We need the fixed assets in order to help us to generate revenue in the future in order for us to facilitate our shop and whatever and sell the guitars. Also remember that we're going to have to depreciate these in the future which is an accrual concept which is going to increase the accumulated depreciation and increased depreciation expense. Oftentimes we're going to let the tax software calculate that QuickBooks is not tax software. So we're going to have to inform our tax preparer of the purchases we made and the distributions we made so that they can then add that to the tax software on a unit by unit basis. Which is why we need to know which couches which you know what furniture is what what equipment is what and let them put it on their system line by line and then depreciate each of them. If and and also just realized that they already have the detail from the prior year so they already have the seventy five thousand if I didn't sell that equipment in the prior year. They already have that in the system they can record the depreciation on it. I need to give them the additions and the subtractions to the fixed assets so they can update the depreciation schedules and then calculate the depreciation for us. We'll talk more about that when we get to the adjusting entries process. Now also realize that since we have the sub ledger kind of outside in a tax software and also note that there could be a difference between tax depreciation and book depreciation. The tax software most tax software could calculate like a straight line depreciation if you want for books and then using the makers whatever double declining methods for tax or whatever is applicable. With a one seventy nine bonus depreciation and all that kind of weird tax stuff. So you could try to have your books on a tax depreciation although that's not ideal for comparison purposes but it's easy. So you have one depreciation method or you could try to try to have them calculate the book depreciation as well and then they got to make the adjustments between tax and book on a year in basis. Also note that when you're looking at your categories you probably want to be matching out the categories that you have in QuickBooks to those you expect to see in the tax software. So if the tax software has equipment and then furniture which I believe is often the case broken out into two separate categories and then building and then automobile or cars. Then that's probably the same kind of breakout of that you want in your system so that you can easily take their data externally from QuickBooks the external sub ledger report which calculates the depreciation into periodic adjusting adjustments at the end. We'll talk more about that when we get into the adjusting entries process. So let's just imagine we do another one now so I'm just going to buy another piece of equipment. We're going to deal with more accrual kind of kind of entries later so we're doing more cash based entries in the first month. We'll do more accrual based stuff in the second month. So I'm going to say in the ledger let's bring it up to 11. Let's say we buy this from Amazon. So I'm going to type in a new vendor because we've never paid Amazon before. I'm going to say tab quick add and we're going to say it's a vendor. So I'm going to say a vendor now also realize if you have a vendor like Amazon you might buy multiple stuff from them. You might buy supplies. You might buy you might buy you know equipment and you might buy a bunch of different stuff. So you might actually want a different vendor depending on what you buy because that might help you to kind of memorize the transactions for the second round. In other words, if I say OK in the same with the Office Depot and I say this was for 7,000 and I'm going to say this is for furniture and equipment. Then again I might want to actually say what I purchased here. So the item names and numbers so that when I give this general ledger to my tax preparer they can put it on their line by line. What I mean about like if I type in Amazon again it's going to try to it's going to try to memorize the transaction and it's going to put it into furniture and equipment. Now if I don't if most of the time I deal with Amazon I'm buying something like even inventory or if I'm buying something like something like like supplies then maybe I want a different vendor even though it's actually the same vendor so that it'll populate the proper account down here when it memorize the account. I'm going to actually record this one. So I'm going to say don't record that. Let's delete it. Delete. Okay. Okay. And so then so that's going to be that and then actually it's still recorded it. Hold on. I'm going to double click on it and delete it. Don't record that. Delete it. I'll close it back out. So there we have it. So now if I go back to my balance sheet. In the checking account double click in the checking account. We've got the Amazon double clicking on it. We've got the check decrease in the checking account. Other side went to furniture and fixture. And then if I close that out and look at the other side it's in furniture and equipment furniture and equipment. So I think the tax software usually uses furniture and fixture. That's why I say that. But there it is double clicking on it. There it is. So that looks good. Also note when you give this detail. Like this is the report that you might give to your tax preparer to tell them hey this is what I purchased. That's why in the memo you want to break out what you purchased. Because say the 16,000 represented like you know multiple different things like six different things. If they put it on the books as one 16,000 like lump sum generic fixture or furniture item. Then you're not the problem is that will be fine when the year that you put it on the books to tax person is not going to have any problem with it. But if you then dispose of one of those six different things. Then you're going to have a problem if you sell one of those six different things that the tax software is not that the tax preparer is not going to know which of those things they sold because they put it on their sub report as one grouped general. Thing that they can't they can't separate out. So you want to make sure you're working with a good tax preparer that's singulering out and identifying. Especially if you have relevant large pieces of fixed equipment so that when you sell that equipment or dispose of that equipment, they can properly maintain the schedules. It will not be a problem at first. It becomes a problem down the line. However, so just another thing to keep aware of. Now if we go to the profit and loss, there's no activity on the profit and loss yet. When will the profit and loss be impacted? It will be impacted when we do the adjusting entries when we apply some of the cost to the period that we used it in in the form of depreciation. So we'll go through a whole section on depreciation and we'll talk about that and we'll talk about how you might get the depreciation from your tax preparer and so on at that point. Also just note that as we added these vendors, we just did a quick add. So if you go into the to the vendor center vendor center now, of course you've got these more vendors and you can run different reports now on what you purchase from the multiple vendors. We gave very limited information on most of these vendors because that's all you really need. But you could set, for example, the account settings and you could try to set which account are the default accounts because QuickBooks will memorize the prior account that you posted to. So if Amazon, for example, had multiple accounts that you typically use like supplies, fixed asset or something, you might try to put those in here to try to organize and make the future transactions as easy as possible. Note that as you enter the first month of data input, it's going to be much harder than the second month because in the second month, you're typically paying the same vendors, but you can memorize the account transactions that have been hit and just simply be consistent going forward. So I'm going to then close this back out. Let's open up our trial balance just to check our numbers reports drop down account taxes trial balance going from 010123 to 123123. Let's customize the report up top fonts and numbers and bring the fonts on up to 12. Okay. Yes. And okay. So you can check your numbers here. If any of your numbers don't tie out, try changing the date range. It's often a date issue, especially when you're not working in real time. And then if it's a date issue and there's a problem, you can drill down on that particular account, find the transaction that's out of whack, drill down on it and then change the date. And then we can go back into it here and then you could you could check your numbers and we'll move forward from this point.