 zero accounting software 2023 purchase and finance equipment and organize multiple loan accounts get ready to become an accountant hero with zero 2023 here we are first a word from our sponsor well actually these are just items that we picked from the youtube shopping affiliate program but that's actually good for you because these aren't things that were just given to us from some large corporation which we don't even use in exchange for us selling them to you these are things that we actually researched purchase and use ourselves acer 27 inch monitor i've been using an acer monitor as my primary monitor for a few years now this is the first acer monitor that i have used after having used a series of different brands of monitors in the past the acer monitor has been performing well and i'm trusting the acer brand more and more as i use the monitor i have a 27 inch monitor which i think is ideal for what i do which is of course the screen recording and the editing if you would like a commercial free experience consider subscribing to our website at accounting instruction dot com or accounting instruction dot think of it dot com where we have many different courses you can purchase one at a time or have a subscription model giving you access to all the courses courses which are well organized have other resources like excel files and pdf files to download and no commercials in our custom zero home page going into the company file we set up in a prior presentation get great guitars duplicating some tabs to put the reports in like we do every time right clicking the tab up top and duplicating it and then we're going to right click on the tab and duplicate it again to put the balance sheet and income statement in place back to the middle tab accounting drop down we want the balance sheet back to the tab to the right accounting drop down the income statement but we're picking the comparative income statement if you don't have it you can just open a normal income statement the comparative income statement comparing the month we're working on February to the prior month January back to the tab to the left we're going to go to the date drop down now customize in that date bringing it to 2023 the end of it and update after the date has been changed okay so now we're going to be purchasing equipment this time financing the purchase of equipment so a couple things that we're going to have to deal with here one's going to be a loan account that we're going to have to deal with as we have the purchase because we're financing it in other words we're not paying just cash for it we're taking a loan out for the purchase and obviously the fixed asset account will be impacted as well now a quick note with the equipment remember that when we purchase something if we're purchasing supplies the normal transaction would be an increase to the expense account typically and the other side being a decrease say to a cash account however if we're purchasing a large piece of equipment we have to deviate from the cash based system even if we're using a cash based system usually because there's such a big change or difference between the time frame in which we pay for the equipment and the time frame that we use the equipment in order to generate revenue so in the United States for example even if you're on a cash based system you're gonna have to do taxes and for taxes they're gonna force you to put it on the books as an asset and then depreciate it which is an accrual type of concept as opposed to a cash based type of concept so just remember whenever you're using a cash based system it's not really a pure whenever really using like a pure cash based system because there's some things that we might do an accrual thing for such as equipment because again the timing difference between when we use the equipment and when we purchase it is so great also note that when we purchase the equipment for something other than cash say we finance it we're going to put it on the books as equipment not because we didn't pay for it it's not because if we're on a cash based system we're going to put it on the books until we pay for it that's that's not why it's going to be an asset instead of an expense it's going to be an asset it would be an asset as we saw in the in the prior month transaction even if we paid cash for it because we have to do this accrual kind of thing now on the liability side we already have a loan outstanding now if you're in the kind of industry that has a lot of different purchases of equipment like a construction business for example you might have a bunch of different loans out that you have for different pieces of equipment and so on and so forth and so you would need to organize your loans now the loans get kind of messy to organize because there's reporting requirements that are a little bit have different needs than possibly your internal bookkeeping needs so for example from a reporting standpoint we need to be breaking out short-term and long-term loans and that's kind of a mess because some loans might have a short-term and long-term component to them such as normal installment loans if you pay off a loan every month you have short-term amount that's going to be due that's going to be due within a year you have a long-term amount that's going to be due the amount that's due after that year you don't want to have to break out from a bookkeeping standpoint however the short-term and the long-term portion of the loan every time you do a transaction and therefore we would probably I would suggest only do that periodically at the end of the period as an adjusting entry so we'll see that in the adjusting entry area the other thing about the loans is that we're usually going to have an amortization table to help us track the interest and the principle as we saw in a prior presentation when we built amortization schedules now with the amortization schedules that'll help us to break out per payment interest and principle but remember that that the fact that we have to break out interest and principle and they differ from payment to payment still makes it a little bit difficult for us to automate the loan payments so you might come up with a system where you just record loan payments to the loan account and then make periodic adjustments at the end of the year we'll talk about that more in future presentations when we get to adjusting entries also went for reporting purposes for external reporting purposes we usually only want one short-term and one long-term loan but from a bookkeeping side of things it's quite useful to have a different loan account per loan and only one loan account instead of two loan accounts per loan so that you can tie out the amortization schedule to what is on the books to make sure that everything is is being properly recorded so we could make like a parent subsidiary account type of relationship have possibly a loan payable account and then list all of our other loans underneath it so we can collapse that account and that's what we'll first take a look at and the way we do that here is a little bit different than other popular software like QuickBooks Online and QuickBooks Online you have a sub-account kind of structure here you actually have a little bit more flexibility with it although it might take a little bit longer to kind of understand the concept but I think it's a really good way that Xero has to do that we go to the edit layout tab in here and we can format our groups kind of like the group has been formatted here we can format a group for our our liabilities and then we can kind of memorize our report that has the proper grouping in it so what we're going to do is we're going to we're going to create the proper accounts and have a different account and then we'll go back in here and we will group it so that we have this collapsing kind of feature that we can see in our reports all right so let's do that I'm going to I'm going to bring this back I'm going to cancel this and let's go to the first tab and let's go to the accounting drop down to do this and go into our chart of accounts so I'm going to go into my liability accounts so and again I really like that Xero has this kind of layout up top I've kind of gotten to the point where that is something I quite appreciate because in other softwares such as quickbooks if you have a long chart of accounts and you don't have this breakout up top every time you do something you have to go all the way back to the top of the forms whereas here you've got it you've got you can break it out by a section so I'm liking that more and more that I use it in any case if we go down to the loan payable I'd like to make this loan payable account a like a subsidiary type of account for a specific loan so I'm going to change that one first and then I'm going to create other loan payable account which will be the parent account so that I can kind of put this subordinate to the parent account so I'm going to make another account which I'm going to call like two three five zero let's say uh or let's say yeah two two three five zero and then well let's first go into this one I'll edit this one and let's actually change maybe I can change this to two four uh two four two zero and then instead of calling it loan payable I'm going to call it uh uh chase loan so I'm going to say chase loan now in practice if you're listing out your loans then you might have you might list out your loans individually by the financial institution but sometimes that's not enough detail because you might have multiple loans with the same financial institution so you might differentiate each loan by taking the last four digits of the loan number not the first four digits the last four digits because those are the ones that are more likely to be distinguishable from other loans all right so we're going to say let's save that and so so now I'm going to make a parent account which is going to be the loan payable just a loan payable parent account at two four zero zero so I'm going to add a new item up top add an account account code number two four zero zero it's going to be another current liability account so liability current uh current liability account I should say and it's going to be just called loan payable this will be the parent kind of account when we make our grouping so I'm going to say okay save that so now we've got these these two next to each other because the numbers are next are next to each other and then I'm going to make another one which I'll call two four uh three zero now note that you want to kind of space out your account numbers to some degree uh at least so you have some so you have some room to put loans in between them you know if you want so but I'm just going to make it two four two four three well let's make it yeah two four three zero so I'll say all right another one add account two four three zero it's going to be a liability account and uh current liability and I'm going to say this is going to be the other loan which I'm going to say is with b of a b of a this is the loan we're going to take out to finance the new purchase we're going to make now with a second loan when we purchase the piece of equipment not for cash but financing the whole thing so I'm going to say okay let's save that so so now we've got the loan payable we've got uh uh chase loan and then the b of a loan so now if I go into my balance sheet over here here I can update my balance sheet and all it's showing at this point in time on the balance sheet is the chase loan but I'd like to have that kind of drop down it being kind of like a subsidiary account of the loan payable account so I can go into my edit layout let's see if I can figure this out and I want to make a group so I'm going to go into here into my loan payable okay so I'm going to be picking this one this one and I had to update the report by the way to to show all these and then the loan payable and then as I select those by the way I'm selecting them by holding down control as I select each of these items so this one holding down control so I could select non-adjacent or not next to each other's sales and then we've got the group selection so I can then say group them and so there they have it now notice I added this group name because I'm kind of used to the to this other sub sub account I didn't need to add this loan payable account because I have the group title up top so notice that was kind of redundant of me so I can go in and actually delete that the row heading I'm going to call loan payable and then so this is correct credit positive because it's a liability and then opening balance total okay so there it is so I think that should do it so there's the loan payable let's group it oh hold on a sec I'm going to undo that last bit so I added another group here let me see if I can just delete that okay so there we have it so it's accounts payable and and then we've got our loan group which I can collapse or expand so cool okay so let's update the layout so if I go into my layout now I can see that and let's check it out and so now down here I've got the current liabilities and then I've got the loan payable so again I think this is kind of neat that it's able to do this a little bit differently than other software like a quickbooks online that I don't have to have the parent account that I can sometimes post stuff too which kind of messes up the sub account kind of structure because you can't post anything to the title here because it's a separate title so I can actually go back to my tabs over here and this loan payable account I don't need that one I can check that one and say I'm going to just delete that one because I don't need a parent account because we have a whole different system going on here which I I think is works quite well it's actually more flexible than some other systems okay so now we're going to we're going to finally record the purchase of the equipment so we're purchasing furniture and equipment and the other side isn't going to be a decrease to cash but rather an increase to the loan now this is not a transaction that happens all the time so when we think about how we're going to record something usually we're going to say okay if I hit the drop down is there a form that is designed for the purchase here well there's not a form that's usually designed to purchase equipment because equipment is not a normal day-to-day transaction it doesn't happen all the time we only purchase it periodically so then we could say well is cash effective because then I can use a decrease to cash a spend money form but in this case we're not spending any money we're financing the entire thing and therefore that's when you usually have to default to a journal entry so we're going to enter this basically with a journal entry which is the last thing you want to use because usually you want to use the data input forms to do the data input so that the system can manage anything else that needs to be happening also as we purchase the equipment remember that you want to try to set up your equipment accounts so they match the sub ledger that you'll be creating which will be your depreciation schedules which in the United States is often done in an external software like tax software because you have to do depreciation for taxes and the calculations for depreciation for taxes are different than than book depreciation oftentimes therefore even if you have perfect depreciation schedules and your accounting software you still have to do them externally in the tax software so it's kind of easy as to use the tax software to calculate both the tax depreciation and if you want different schedules for book depreciation to use it to do the book depreciation as well and then do subsidy you know adjusting entries which we'll talk about in future courses or sections so as we put the equipment on the books this is like a depreciation schedule from a tax software and note that you want to break out as best you can what you are actually purchasing and possibly put the receipt of what you're purchasing in the documentation so you can provide that to your tax preparer so they can put it in the system not as one lump sum of just like furniture and equipment and then one lump sum but rather in a detailed way so you can tie out to what you actually purchased which isn't as important when you first put it on the books because you'll still be able to do your taxes and what not on the purchase side but later when you sell or dispose of the property if you don't know which property you sold or disposed of on the depreciation schedules that's when you run into a problem and the problem was created because you didn't put it on the depreciation schedule separately item by item and or in a way that you can tie out to so you want to give this detailed information to your accountant that sounds quite tedious but it's not too bad because you only have to give them the changes to your furniture and equipment which shouldn't have too much activity in it because we don't buy furniture and equipment or fixed assets property plants and equipment depreciable assets too often okay that said let's go to the first tab and do our journal entry so i'm going to go to the plus drop down and let's do a uh a journal and actually we have to find the journal entries by going to the accounting reports and then we go into the journal report journal they kind of bury the journal entry we go into the journal reports which is probably good because you don't want to enter them all the time but and then we're going to add a new journal uh so we're going to add a journal this is going to be for the purchase of equipment that we financed the date that this happened we're going to say 227 again feb 27 let's say feb 27 and uh default so we're not going to do a reverse and entry default narration to journal line description okay and then we're going to say that we increased the furniture furniture and equipment and we're going to say we're going to purchase five thousand dollars of furniture and equipment and the other side is going to go to the b of a b of a loan account that we just set up so this will be an increase debit increase to the equipment if you don't know your debits and credits then you know if you get it going the wrong way not a big deal because you'll you'll figure it out and you can just switch your debits and credits but liability is going up with the credit equipment's going up with a debit all right so let's save it and close it and then we'll just check it out it so we're going to go to the balance sheet and update it and check it out it so we're going to go into the furniture and equipment is now at 103 uh what is this leave did i not update it save update go in here okay leave i don't know why you're telling oh that's because i changed the format uh i made a custom report i know why okay so there's the five thousand looks good journal entry has been made uh the other side go into the loan account okay back up and the other side break on back to the other side breaking back to the other side that's a song i don't think i'm singing it right the other side is 5000 in the b of a account right there so no impact thus far on the income statement even though we purchased equipment not because we didn't pay cash for the equipment mind you we still wouldn't have recorded any expense if we paid cash for it when will we have an expense related to this purchase when we record the depreciation with adjusting entries which for small businesses often happens at the end of the year with the help and use of tax software because the tax software is going to help us to generate our subsidiary ledgers uh but you might do it monthly as well all right let's open up the trusty trial balance let we might save this balance sheet uh here because we had uh see now i lost my grouping see my grouping went away so let's save my custom balance sheet so i'm going to edit this thing and format it the way i like it these two holding down control and group those ones poor favore this is going to be uh this is going to be uh loan payable is the grouping that we're looking for and uh group it all right i think i can update the form and if i scroll down did it do it it did it now now i can collapse that if i wanted to by going into the edit layout and for external reporting i could collapse it like this boom and that would be good for external but i'm going to open it up this way for the internal and i cancel that update and then let's memorize this report put some memorization uh we're going to save as a custom custom balance sheet balance sheet uh standard custom custom standard because i don't want to change i'm not going to make it make custom report the default i kind of could i should because that's kind of the custom but i'm not going to instead i'm going to just save it that way and then i'm going to go into because i don't like to change i'd rather keep the default setting report the way it is so i'm going to go into my reports here and just put a little star uh because i could say maybe i don't want to star by the normal balance sheet but instead in my custom balance sheet i'll put a little star uh next to that one and so then when i go to my accounting drop down it has the balance sheet custom in the defaults so that looks good but i didn't mess up the original one so that if i want to start from it and make another custom report i totally can all right let's open up the trial balance we're running long on time you're running long on time the clock is ticking you're breaking your own rules man we got to get out of here you're pulling too much time okay accounting drop down reports and we're going to go into the trial balance trial balance and uh we want 2000 custom date 2023 end of it updated okay so uh if you're if you're following along your numbers tie out great if your numbers tied out last time but they're off this time they were on before but they're off now we made a change too you would think the accounts would be would might be off would be the furniture and equipment and of course the loan accounts down here which we changed the names to and then added another loan account to that 5000 that's pretty much all we did even though we talked about a bunch of cool stuff uh as well that everyone was uh undoubtedly completely engulfed in the interesting conversation so uh if your numbers tie out great if not try to change in the date range drill down into the source document make any changes that's that is needed