 Zero accounting software receive money form cash basis sale get ready to be an office hero with zero 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 custom zero home page we set up in a prior presentation holding down control scrolling in on the mouse to zoom to 175% zoom in we're going to be opening up the demo file but I will do so by resetting the data reset the demo that will open up the demo file with the resetted data in it and I'm gonna hide this item up top gonna open two more tabs to put financial statements in them as we have done every time right clicking duplicate right click the duplicated tab to duplicate it again with a double duplication in the middle tab accounting drop-down balance sheet report and then tab to the right as that is thinking accounting drop-down income statement the major two forms their reports I mean middle tab let's change the date range and customize it we want to go to 2022 the end of it and update now let's go back to the first tab we've been thinking about now the revenue cycle the customer cycle the accounts receivable cycle the cycle in which at the end of the process we expect money to be coming into the company typically for goods and services that we have provided to customers so the major forms we're using are in this drop-down we've talked about the invoice form and the receive money form now if I look at the flow let's take a quick look at the flow chart over here it'll depend on what kind of industry you're in in terms of how you're gonna set up your revenue cycle if you have gig work you're just getting paid from YouTube or something you can wait till something clears the bank possibly use bank feeds to use in essence like a deposit form to record the deposit at the point in time that you actually receive it however a full cashed-based system will typically record the receipt possibly at something like a check register for example and you're gonna want to receive the receipt and then make the deposit oftentimes because in that situation if you have a food truck or a restaurant or something you might be getting cash you might be making multiple sales and when you deposit the cash into the bank you're gonna deposit it at one lump sum so if you made five sales of five dollars you're gonna deposit not five individual five dollar amounts into the bank typically but all 25 of them at one time and and that means and you also want the internal control of when you make the sales you want to be able to print out the register tape on how many sales you may tie that in to the to the count you have for the cash for example and those internal controls will be necessary unlike a situation like gig work where you're just getting money from like a platform and it is what it is therefore although both systems are a cashed-based system the one where you're just getting money from gig work is a lot easier because you could just basically use the bank feeds whereas if you have a register situation you're typically want gonna want to collect the money cash or credit card or whatever and then group it so that when you make the deposit into your system it's going to be in the same format as we'll show up on the bank statements making the reconciliation process as easy as possible which you can do with bank feeds the use of bank feeds or just a normal reconciliation so that's different than if we have the full invoicing process that's the accrual component where we do the work first invoice the client and then we have to track the accounts receivable okay so that said let's go back on over here and we're going to say that let's say that we're gonna have some cash sales so I'm gonna just kind of say receive money form it looks a lot like the invoice form I'm gonna hit the checking account that we saw in a previous presentation this form increasing some kind of cash account as opposed to the invoice increasing and accounts receivable now first we have this direct pay that's usually what we're gonna be using we might be able to touch on these other items prepayment and overpayment but generally you're looking at the direct pay I'm gonna make a new customer just a that we're going to be setting up the date I'll keep that as the date that's fine now the items that we sell whether we're selling services or whether we're selling actual inventory we're gonna want to set up the items typically first now note that if you're selling inventory then you have the problem as we saw with the invoices of tracking the inventory do you want to do that on a periodic system possibly outside of QuickBooks possibly using Excel or something and then then adjust the inventory periodically within the system having the physical count outside or use a perpetual inventory system in which case you're gonna have to set up the items to be tracking the inventory within the system or you can have a service item if you're in a service situation then you still typically want to have the items you could charge by like hours but usually it's easier once you set up the items to charge people by what it is you do if you have something that you can group into items of service items so let's take a look at that first I'm gonna hit the drop down and let's make a new item as we go so the item let's make it let's make this service item one I'll just call it I'm gonna say that's gonna be the name to and all I need here I don't need any purchasing information because it's a service item I'm just gonna say that's for $500 let's say sales account is gonna be let's just call it sales and then the tax implications I'm gonna say there's no tax on the service items so we'll say tax exempt we'll say on it so let's do it we'll say okay and so in the United States oftentimes when we talk about the sales tax it usually happens at the point of sale it's a local tax as opposed to a federal tax and then you would and and so but and then service items are often exempt now if you're if you're in a different location then of course whatever the whatever the taxes are for like a sales tax type of situation you want to comply with them most of the general taxes taxes aren't new they've you know and they've governments have tried to tax just about every way they can the only question is which tax is being applied where and how and by which institution generally but in any case $500 so this is gonna be fairly straightforward increasing the the checking account and the other side then going to the revenue driven by this item so I'm gonna say okay that's gonna be the most easy kind of item that we can enter let's go into the balance sheet I'm gonna update it and then in the checking account if I go into the checking account that's not the checking account that was accounts receivable the checking account is overdrawn which kind of messes me up sometimes but it's down here because it's overdrawn therefore it's a liability if we go into the checking account and we scroll on down we're gonna scroll down we're gonna see then this receive money for a AA if I go into that we got the receive money form if you wanted to change it you can edit you can edit the transaction here and then it looks like the data input form gonna go back gonna go back gonna go back and then let's look at the income statement update the income statement and go into the sales item the other side hit the income statement in sales so if I scroll all the way down we've got a AA there so there is that let's go back now that the next kind of level of complexity is well what if I had those multiple sales that took place and I can't really just deposit it directly into the checking account because that's not how it's gonna show up on the bank statement and so let's run that scenario and let's add inventory to it as well so for that I'm gonna what I'm gonna do is add a clearing account which is gonna be holding the cash in a separate account until we deposit it into the checking account because we want to group the cash in the same format that it will show up on the bank statements so that we can reconcile so to do that I'm gonna hit the hit the accounting let's go into the the chart of accounts and I'm gonna add a bank account which is a little tricky we've seen this in a prior presentation because it's gonna try to connect to the bank feeds I don't want to connect to the bank feeds so I'm just gonna pretend that I'm connecting to the bank feeds but I'm totally not gonna do it so and then we're gonna say skip that skip to the loo and don't connect to the bank feeds and I'm just gonna call this undeposited funds or you might call it cash clearing account and I'm gonna say it's an other type of account I'll give it a 5 5 5 number because it won't let me go forward if I don't do something there and it's a US dollar account of course in our practice problem so now if I go into the bizd accounting chart of accounts chart of accounts and we check it out check it out now we've got the undeposited funds so let's make another a couple transactions go into undeposited funds now like so hitting the drop down we're gonna go to receive money and I'm gonna say this time I'm gonna put it into the undeposited funds and then group two items together when I then deposit it into the checking account with a transfer so I'm gonna say let's do the undeposited funds account because I'm gonna make multiple sales go into that account that's the purpose so I'm gonna say let's make this BBB just to switch things up five okay and then let's make another account here let's set up a new item so I'm gonna hit the item drop down new item I'm gonna call this inventory item one very creative name I'm a very creative person come up with very interesting names so purchase this thing the price we're gonna purchase it for I'll say 700 again we'll say 1000 and then and then the purchase account I'm gonna say is cost of goods sold and then the tax there's a tax on the sale of the item tax on the sale and then the unit price I'm gonna say we sell it let's say for $1,600 and the sales account is the sales account we sell it for and there's a tax on the sale so tax on the sale so there we go and then I'm gonna track this so that'll actually track and that's gonna be tracking to the inventory account so if I was to make a purchase it would increase the inventory account let's say save it and it says it doesn't like that one I think it deleted it when I added that other one so I'm just gonna put cross goods so back in it and then save it again there we go okay so now we have this item in here and so what's this going to do when we record it I'm gonna hold down control and scroll up it's similar to what we did with the invoice when we dealt with the inventory but instead of increasing the accounts receivable this time it's gonna go into the undeposited funds the clearing account and then it's also going and it's gonna go in there for $1,748 which includes the sales tax that we are gonna have to collect on and then the other side is gonna go to inventory but that's only gonna go for the $1,600 we're not putting the full amount we're gonna collect $1,745 and in revenue because the idea is that that tax isn't really what we're charging we're the collection person for the government to for that $148 you could think well why don't I put in his revenue and then decrease it with the expense when I pay the sales tax no it's not gonna go through the income statement because in theory it's not our charge we're just a tax collector therefore that's gonna go into a payable account for the sales tax payable and then inventory is gonna go down not by any amount on this this received money form but rather by the amount driven by the item that we set up which I believe was a thousand dollars and cost of goods sold will be going up that's an expense that will bring net income down so the net impact on net income will be the increase of 1,600 revenue minus the 1,000 in the cost of goods sold also because we tracking this in a perpetual inventory system will have the inventory tracked as well now before I record this I'm actually gonna have to put some inventory on the books because there's currently no inventory on hand so I'm gonna right click on this again and duplicate again and then I'm gonna go up to my accounting drop-down and let's go into the let's go into the products and services down here products and services and now we have this new item that we added on the fly as we go I'm gonna hide this but I need to I need to put some of the inventory on the books so where's that inventory item 1 so I'm gonna go into that and then I'm gonna make an adjustment which I'm gonna adjust it I'm gonna say there's an increase and I'm gonna say the quantity let's just put like five of them on there and the cost where that was a thousand dollars I think so the new quantity five and the adjustment account I'm just gonna put the cost of goods sold and the reference I'll just put beginning balance so this will put some inventory on the books it'll make a journal entry increasing inventory by 5,000 the other side going to cost to goods sold just so we can put it on the books normally it would go on the books of course by making a purchase alright closing that tab out back to the first tab I should have what I need to record this now so let's say save it and let's see what the impact is on the financial so I'm gonna go to the balance sheet update the balance sheet and scroll down and now we have undeposited funds for the full amount the 1,748 that includes the sales tax so scrolling down and we'll talk more about how to set sales tax up later so we're just using the sales tax now so we've got the 1,748 and that's for the full amount including the sales tax let's go back and let's go back again and then let's go into the income statement on the right and then update that item cost of goods sold if I'm sorry income let's go into income first on the income side we've got then the amounts scrolling down all the way down down down down here it is there's the income notice for the 1,600 not including the sales tax let's go back and then let's go back again and then back to the balance sheet the sales tax is a liability account that we're gonna have to pay in the future sales tax here let's go into the sales tax and scroll down and we could see of course that's gonna be the sales tax scroll down this way might be a little faster my scroll fingers getting tired 1,480 so there we have that let's go back and then the inventory is gonna go down so if I go into the inventory here and I go into that there's the 4,000 in the in then Tory inventory by the amount not on the actual form but driven by the item so the form is still driving it but it's not on the form because the item is there to tell us the system what to use and the cost of goods sold I went back too far on this one so let's go forward back to the income statement hopefully and the cost of goods sold here is the 1,600 so there we have that and where is it it's what we just did right now this one's a little bit tricky because we made this beginning balance adjustment and we put that to cost to get sold which made it kind of flipped it negative but in any case there's the 1,000 this is the entry that we put in place to put the cost to get to put the inventory on the books and also if I go back to the income statement so that and and we look at the inventory I could have a sub account right-click I'm gonna duplicate the tab just to look at the next report related to inventory accounting drop-down reports I'm just gonna type in here in then Tori inventory so we got the inventory item summary let's say and again I think the system like let's put this up to December the end of the year end of the year boom okay I think the system didn't put the beginning balances in place when they when they when they ruled for the demo file so all we really have is this should that's I want to say the beginning of the year January 1st to December so what we did is we added we had an adjustment of 5,000 and then we we sold 1,000 which leaves us with the 4,000 which I believe is currently what's on the the yeah the balance sheet right there for the 4,000 the point being that we're tracking by item in a subsidiary report we'll do that in a bit more detail in the second half of the course when we when we enter a whole new a whole new company now let's do one more sales receipt I'll do a quick and easy one so we're gonna go into a new receive money form receive money form I'm gonna put it into undeposited funds so that we'll have two items from different sales in there that we can deposit together I'm gonna say CCC is gonna be our new customer again and we'll just say that this is gonna be a service item so let's say service item that we set up last time $500 let's say you know there's let's say there's three of them just to change the amount to 1,500 so I'm gonna assume that these two are made with cash even though there's large dollar amounts or possibly a credit card that's gonna batch them together when they get deposited into our checking account so now we've got this this up here so we're gonna say okay let's gonna record this this is gonna increase the revenue the other side going to the undeposited funds so if I go to the balance sheet and update the balance sheet now we have in undeposited funds 3,248 and then the other side went to the profit and loss into the income statement now the point here is that if I go to the first tab now I've got these two amounts in here that represents two deposits now if that was cash I would not deposit them as two individual transactions that are going to the checking account possibly I mean I might if they were this large but if they were a bunch of small transactions I wouldn't do that I would deposit it just at that 3,248 it's important that we do the same thing on our side in QuickBooks because the bank's gonna see it as 3,248 not 1,500 and 1,748 that's gonna help us to reconcile so that's when the next step would be and that could also happen with the credit card you'll recall that if you have a credit card the credit card might batch multiple transactions and put it into your bank account in one lump sum you want to have it on your books in the same format to reconcile so the next transaction you can say is a transfer 3,248 so let's say we add a new item and say transfer money and we're gonna take it I'll put the amount here first 3,248 we're gonna take it from undeposited funds and now put it into the checking account for you know that deposit so we're gonna say okay let's transfer that money and now if I go into the balance sheet and update it we're gonna have the undeposited funds is gone and we put it into the checking account now because the undeposited funds is at zero that's why it's gone it's clear the clearing account has been removed and it went into the checking account now as one lump sum as opposed to two transactions and the idea being that I can tie this one lump sum out to what gets deposited in the same format one lump sum in the actual bank to the bank statement possibly with the use of the bank feeds now in future presentations we might get in you can imagine a situation in the flow here where we have the the create the sales receipts and then recorded deposit you might think well what what what would happen if I receive the money before I do the work right I get that would be like unearned revenue you have an unearned revenue situation that's more unusual but sometimes it's getting more usual these days it used to be certain industries are set up that way such as newspaper companies magazines they make the sale before they provide the subscription service but now with computer apps a lot of the apps are set up that way so you're gonna pay for a year subscription before you actually they actually give you anything right so that's gonna be we'll talk about that in a future presentation how we might want to deal with that because normally you can see the flow here we usually do the work at the same time or we do the work before and then we bill the client or collect at the same time well what if we collect the money first so again that could happen in a subscription service it might happen in rental company when you get the deposit first it might happen for example if you have large custom things that you're doing for a company ordering custom guitars or having custom construction they might give you you know the deposit before you actually do the work in order for you to have some guarantee that they're gonna complete the process so we'll talk more about that kind of situation in a future presentation