 QuickBooks Online 2024. Balance sheet vertical analysis. Get ready and relax because it's so easy using QuickBooks Online. You'd think it'd be a crime, but it's not. Unless possibly you're doing bookkeeping for the Bidens or something like that. But anyways, let's get into it. Here we are online in our browser searching for QuickBooks Online Test Drive looking for the result that has Intuit.com and the URL Intuit being the owner of QuickBooks selecting the United States version of the software and verifying that we're not a robot. Opening up our major financial statement reports like we do every time. Reports on the left hand side. We're going to be in the favorites. Right clicking on that balance sheet report so we can open link in new tab above. Right clicking on the profit and loss. Doing the same. Open in a new tab above. Going to that middle tab. Closing up the hamburger. There is our balance sheet. Let's do a range change. Bringing it back to 2023. 010123 tab. 123123 tab. Running to Refreshing. Tab into the right end. Closing the handbook in and scrolling up and changing the range in again. 010123 tab. 123123 and run it to refresh it. Let's go back to the balance sheet because that's where our major point of focus is. We talked about in prior presentations the general balance sheet. The formatting of the balance sheet. And then we did some comparative balance sheets noting first a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one because apparently the merchandisers they don't want to be seen with us. But but that's okay. Whatever because our merchandise is is better than their stupid stuff. Anyways, like our trust me, I'm an accountant product line. Yeah, it's paramount that you let people know that you're an accountant because apparently we're among the only ones equipped with the number crunching skills to answer society's current deep complex and nuanced questions. If you would like a commercial free experience consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com that you can get a wide variety of balance sheets when you start to put the comparative balance sheets in place. And now we want to think about a vertical analysis type of balance sheet using percentages. So the way to do a vertical analysis, it's quite easy. We can go into the drop down. I'm sorry, not that drop down this one over here compared to another period. And then down below you've got the percentage of rows and the percent of columns we want the percent of columns. So we'll pick that one. And then I'm going to say okay, run it. And we get this nice column on the right hand side. This is a standard kind of tool that's often used on financial statements. And it's often useful to be comparing it possibly to prior periods, but also possibly to other companies. If we're benchmarking to another company for a hamburger shop, and we're trying to compare ourselves to McDonald's, then we can't really compare the dollar amounts that we have on our balance sheet. And we can do a similar thing on the income statement, which we'll do later. Instead, what we can possibly do is compare the percentages. So let's see how it works if I pull out the trusty calculator. And this gets a little bit confusing because it's a little bit different the way it works on the balance sheet as compared to the income statement. So this where we have another one of these differences between the types of reports that we have on the balance sheet, we're going to be comparing everything to the bottom line numbers, the balancing items. So remember, we have assets equal liabilities plus equity. So total assets is at 100%. Liabilities and equity is at 100%. Now, if you compare the assets to a similar thing, like if you were investing in stocks, for example, you might try to invest in copy or mirror some kind of index fund or possibly, you know, your index fund is basically doing a percentage or you might try to like copy a really good investor like a worn Buffett or something. How would you do that? It's not like you can just follow their investments because they have more money than you do. But you can, you can look at their percentage of total assets to see what their allocation looks like, right? And that's going to be one of the fundamental concepts whenever you're getting into an investing will be like, well, how much what percentage of my assets should be in stocks, bonds, cash, so on. So with a business, similar thing, except we have a different end goal, our goal is not simply to save like for retirement or something like that. But rather to have, you know, we might have multiple goals, whatever the business goals are, but to grow, to have money that we can use to reinvest in the business in order to generate revenue. Now also just remember that our business is not designed to just hold on to money unless unless your business is like an investment company or something like that where you're investing in stocks and bonds. If your business like this is landscaping, and the company has a whole lot of money, then, and you're not using it to grow the business, you would think that the money would then be distributed to you as the owner, you would draw it out so you could put it somewhere else like in stocks and bonds and get a return on it. So the idea from the business standpoint is that everything on the business is there to all the assets that we have are there to either help us generate revenue in the current period, or, or we're saving up to purchase something that we're going to invest in that's going to help us generate revenue in the future is the general idea. So for a landscaping, for example, we might have a lot of infer, a lot of our investment buried in assets like our truck, and we might have a lot of other equipment depending on the type of landscaping that we are doing. And that's where our money is basically going, or of course inventory that we're purchasing inventory. If we have a whole lot of cash, there's no real reason to have a whole lot of cash unless you're saving up to invest in something, because then you can you can give it to the owner and the owner can distribute it or invest it somewhere else, right, would be the general idea. Okay, in any case, how does this work then? Well, we're going to take each of these totals, this comes out to 201, and I can compare it then to the total of my total assets or liabilities and equity because they're the same divided by 23436.29. There if I move the decimal point over, we get, hold on a second, K-PASO, we've got, oh, I was looking at the wrong one, 201.52 divided by, divided by the 23436.29, moving the decimal over two places, we get the 8.54% about. So that's how much is in cash, we can compare that again, to a relative larger business to see what what they have invested in cash, and it would be likely that we're going to be looking at things like our inventory, right, and say, well, how much inventory compared to my total assets 596.25 divided by 23436.29, if I move the decimal two places over, we get the 2.54%. And then if we have many businesses are very labor, I mean, very equipment, dependent, like a classic example is farming, right? If you have a farm, then it's likely that you have a lot of assets that have a lot of value, but you could still run into cash flow issues because all of your money is in the equipment, it's in the land, it's in the equipment that's being used because that's the thing that's helping you to generate revenue. And so, and if you had more money, if you had a whole lot of money, what would you do? You'd buy more equipment to be more efficient so you can produce more stuff or you'd buy more land so that you can generate more revenue. That's why it's or if you don't want to do that, you'd give it to yourself as a draw so that you can then invest it outside of the business because this isn't an investment business, right? You would then put it into the stocks and bonds. So oftentimes, other businesses, by the way, don't have any kind of investment. So if you're working like the types of business that don't have a real barrier to entry based on how much you invest in it, such as if you start a YouTube channel or something like that, you have to buy some equipment, but it's pretty low in terms of how much you have to invest to get rolling in it. That means that you have a lot more competition and something like that, but you don't have that barrier to entry. Whereas again, like a farm or many other kind of production businesses or something like that, you have to put down the capital and get the capital for that initial investment, which is painful obviously, but it also means there's a higher barrier to entry and therefore possibly less competition, right? So in any case, if we look at the the equipment here, we could see that's at 13495 divided by the 23436.29 and that's going to give us about the 57.58 on the liability side. We can compare everything. Once again, we can compare it to the assets, but we can also compare it to the bottom line here because they will be the same assets or liabilities and equity liabilities plus equity will equal the assets. So this would be kind of like a ratio type of analysis, right? What is my accounts payable 1602.67 compared to my total assets or my liabilities in equity? Those two numbers being the same 23436.29 that's going to give us our about 6.84% if we were to round it and so on and so forth down the line. Now note that you could also do these vertical analysis possibly in conjunction with multiple periods, right? So for example, you might say, okay, I'm going to give a balance sheet. If I was to present this at the end of the month to a client, the question would be, well, should I give them a normal balance sheet and then also a balance sheet that has this vertical analysis column because that's kind of repetitive because they already have the balance sheet. So maybe I just give them the balance sheet here with the vertical analysis balance sheet instead, although that's a little bit more confusing to look at because it has a whole another column on it. You can also if I hit the drop down here if we wanted a quarter by quarter comparison, as we saw before, now we've got a quarter by quarter comparison with the vertical analysis in there as well. So so now the question would be, well, do I want to give them a normal balance sheet and then also a vertical analysis and also a quarter by quarter balance sheet without the vertical analysis and maybe one with the or maybe I could just give them the quarter by quarter analysis, which already has the indie numbers for December and has the vertical analysis. However, this report is quite cumbersome because it has a lot of numbers on it. So this might be overwhelming to many people if you give them this one. So these are the questions you want to think about when you're starting to bundle your reports because now we have a whole lot of combinations that we have now, right? I can run this by quarter, I could run it by month, and then I can add either the percentage column or without the percentage column and so on. So in any case, let's bring it back to the totals only, totals only, run the report. If I was to provide this to somebody else outside external reporting, I would usually go up to the customize up top and do our normal customization, which I like to have the negative numbers to be bracketed and read. I would remove the pennies and then in the header and footer, I'm going to get rid of that date, time and report basis at the bottom. So if I run that, so now we've removed the pennies, we still have cents, but we've removed the pennies. And then the negative numbers, if there were any, there are some are going to be read and bracketed. So those pop out, we've got nothing on the footer on down below. So the next thing we might do is to memorize this report or they call it save customization here. I don't know. They use memorize in the old desktop version. I guess they had to be different here. So customize customization seems like a longer cumbersome word to say, doesn't it? Save customization, customize versus memorize. I guess it's the same. I don't know. Anyways, if I then save customization, we can put it down here. And again, I could add a group. I can add, you know, the name. And then we could say save the group. And then we could say we're going to not I'll just keep it at that. And so let's go ahead and save it. And then what I want to open this up possibly as my external reports that I would do periodically at the end of the month quarter and or year, we can go to the first tab and then the reports on the left and in the customized reports, we now have our our report here. When I open it up, I can open that up. And then I can just change the date range. When I'm working in my customized reports, let's hit the thing again. So once again, that's going to be on the reports on the left hand side and the customized reports, you can also save it possibly to the management reports so that you can put them in into a management report format. Again, we'll look at that more in future presentations. Oh, the other thing you want to do maybe is change the name up top, I probably should have changed the name to so I can click in here and call it like a vertical vertical, I think I spelled that right, hopefully vertical analysis balance sheet, we would call it we would call it vertical, let's say analysis, vertical analysis, balance sheet, something like that for the name. So now we have it something named different than the balance sheet. That's probably the name that you would want to use in here as well. Also note that it didn't add it to my group. So if I if I want to edit this thing, I can edit it. And then in the report, I have balance sheet, I can change the name to vertical analysis. I may have spelled that wrong, my fingers aren't working correctly. And then we can add the group and I'm just going to put a name. And so when you add this custom report, the group, it will follow the schedule set for the group. You will no longer have its own schedule. Okay, share, I'm going to say save it to do it. And then boom, closes back out. And so now it's under a group. So there we have that one.