 Zero accounting software 2023. Enter transaction for purchasing investments using bank feeds. Get ready to become an accountant hero with zero 2023. 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, purchased, and used ourselves. Here we have a western digital WD elements 20 terabyte USB 3.0 desktop external hard drive we use as part of our backup system, noting that if you lower the number of terabytes of storage, the price will lower dramatically as well. When you're thinking about a backup system, you're usually thinking about an online system or an external hard drive system like this or ideally some combination between the two, giving you some redundancy. 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We are in our custom zero homepage going into the company file we set up in a prior presentation the bank feed file will duplicate some tabs to put those reports in like we do every time right click in the tab up top so we can duplicate it and then right click in the duplicated tab again to duplicate it again back to the tab to the middle accounting drop down we want that balance sheet report we will then tab to the right accounting drop down and this time the income statement or profit and loss report changing the date range up top we're going to go to 2022 to match our data input from the bank feed so 2022 January to 2022 December 31st and I'm going to update that so this is what we have constructed thus far on the income statement thus far on the balance sheet let's go to the first tab now we set up our bank feeds and so most of the transactions are in what I call bank feed limbo accounting drop down to find it bank feeds here's our checking account I'm going to go into the account manager transactions to open up our transactions area our major focus being on the reconcile tab and we are basically constructing our financial statements from the information that's pulling through from the bank so now we want to think about investment type of situation so I'm going to go to the balance sheet to just kind of think through this first thing I want to point out is that as a general rule we want to be separating our business financial information from our personal financial information and typically we think of zero as being used for the business side of our financial information however we can use accounting software like zero to be tracking our personal financial information as well the reason we want to be separating the business from the personal is that's going to help us hone down on the different goals and objectives from a business versus our personal financial situations on the business side of things the things that the business has the assets for example we have them because we want to use them in the business to help us generate revenue in the future whereas the assets on the personal side of things have a different goal and objective we want assets on the personal side of things to help us live well so we're not just using those assets for future revenue generation those different objectives are one reason we want to basically be separating out our business from our personal obviously on the business side we might have reporting purposes as well that we have the financials for such as in the united states tax preparation at the end of the year and possibly external reporting as well as our internal decision making needs now note that if you're a small business you might be able to get away with basically one zero file to be tracking your personal and your business because you might be doing it primarily to get an income statement that you can use for decision making and possibly for tax preparation at the end of the year and you might be able to use categorizations so that you could basically have an income statement where you're breaking out the business versus the personal on a column by column format so in that case you might be able to use you know one software to still get an income statement on the business side of things and on the the personal side of things however the general concept would be that it would be you would want to have a separate zero account for your business and you could have a separate one for your personal as well tracking your personal information in something like a zero two and the reason I point this out is because when we think about investments you could have investments in say your business in stocks and bonds for example but normally you're not going to have a lot in the investments for stocks and bonds in the business account unless your business is the generation of revenue from things like stocks and bonds right if your business is selling guitars or something like that then you're not going to have a whole lot in stocks and bonds under the business except just to be holding on to that cash for the short term so that you can reinvest it back into the business buying equipment for example what are you going to do instead well as the as the assets accumulate upwards typically you're going to use those assets if you're growing to buy more equipment however the other thing you can do with it is give it to the owner if your sole proprietorship that would be in the form of draws if your corporation that would be in the form of dividends so that if those assets aren't intended to be used in the business to generate revenue we give them to the owner so the owner can then invest them personally in say stocks and bonds and they might then still track that using zero for example and having their accounting tracked there as well now the other thing I want to point out with stocks and bonds is that oftentimes people think that these like accounting software like zero should be tracking the day-to-day activity or should be able to tie out to the ending balance as it applies to the stock market for the stocks and bonds but that's not really what accounting software is designed to do you could have financial software that can do that right you could actually get financial software I think there's like a personal capital there's there's other softwares you can look into which can connect to your financial institutions and give you a balance sheet as of a point in time based on the current market value of stocks and bonds given the fact that stocks and bonds are being traded on a market and therefore the current value is no is knowable right the reason you can't do that in accounting software like zero is because zero is designed not to just pull the ending balance in but rather to make an income statement so that means that it can't just just like with the with the bank accounts it can't just give you the ending balance of the bank account it has to give you all the information that's going through the bank account so that you can construct not only the balance sheet but the activity that has happened which is your timing statement your your income statement so that said we want to kind of think about how you would put investments on the books then if they come and they how are they going to kind of fit in to the bank feeds whether it be your personal account or kind of your business account so obviously when you purchase the investments then it's going to be a decrease from your checking account and then you can set up an asset account for the investment so the thing you want to make sure that you see is when it comes to the bank feeds you're going to be able to recognize that this is a transaction that happened for the purchase of an investment instead of expensing it like you would with most other outflows of the checking account we're going to put it on the books as an asset for an investment now then what happens when when it goes forward is you might have uh you might have revenue from dividends and interest which again if you're receiving the dividends and interest are going to come through the bank feeds so you can basically hopefully record them as revenue as they come through the bank feeds or they might be reinvested which could make things a little bit more complicated because to to track within the system but and then you're also going to have a situation where you could have the increase in the value of the stocks and bonds and you might have unrealized gains and losses which we can talk about shortly as well but right now let's just think about where are we going to put the account so we're going to put like some assets on the account now if if you're talking about a business account then you would think the stocks and bonds would normally be short term holdings so you'd probably put them on the books as a short term asset a current asset because you can dip into it fairly quickly if you needed to because that's the point if you were doing this for your personal investments and you were tracking your personal accounting in zero then you might try to break out between like the the short term and long term possibly trying to break out the short term being the items that are not under the umbrella of an IRA or 401k plan in other words a lot of people have a lot of their investments and stocks and bonds under the umbrella of an IRA which is usually just like a mutual fund but it's under this added level of umbrella that you that you can't get into it or you get or you get penalized right if unless unless you certain requirements are met you're past a certain age therefore you might try to categorize everything that's under that IRA or something as long term and everything that's not under that umbrella that you can get to a little bit faster you're not going to be penalized as current right and another issue that people have is they might have multiple different stocks and bonds that they're invested in or multiple mutual funds that they're invested in what you want to avoid typically is trying to add all that detail of every mutual fund into something like a zero you would rather summarize it normally in the zero software to get your financial statements correct and then look at the detailed day to day activity on the actual platform wherever that is like your bank or each raid or vanguard and and then you could use other software to track the the your current balance sheet by pulling it in from the financial data I think there was a personal capital or there's like quick in I think was one that that does that kind of thing you could even do it in excel I think you can connect to the bank if you have some some formats of excel so so if you have say multiple multiple mutual funds then maybe you want to put the the parent account the similar of a parent account which you could do with the edit layout as basically the investment in a certain financial institution like e-trade or vanguard or something like that and then possibly list out stocks and bonds like you can break it out by stocks and bonds maybe to do that breakout which is difficult sometimes if you have mutual funds that have both stocks and bonds in it right or you could just kind of break it out by the financial institution that's what I'm going to break it out by financial institutions let's go to the first tab here and let's first go to our accounting drop down and go into our chart of accounts and I'm just going to add a couple accounts that we're going to imagine we're putting investments in so I'm going to make them asset type of accounts I'm going to put them I should put them in here now I'm actually going to change the account number for this equipment account to bring it down here somewhere I'm going to make it like a 1600 I'm going to go into that and say say 1600 and so I'll move that down a bit okay and then and then I'll put inventory inventory so let's make let's make the investments like 1450 so I'm going to say let's add an account we're going to say add an account and I'm going to say 1450 it's going to be a current asset type of account and I'm going to say it's going to be B of A in the investments and like stocks and bonds with the financial institution I'm imagining a bank of America now I'm not going to put investment as the name because I'm going to group these two together on the reports so I'll show you what that looks like in a second so I'm going to save that and then let's make a 1455 let's say is that what I had here 1455 let's add another one 1455 this is going to be another current asset and let's say this is going to be America investments alright and then just checking if there's spell check there so let's save that and then when I go to my balance sheet if I go to my balance sheet there's nothing there yet because we have not yet put anything in there but I'll still see those accounts in the edit layout tab so in the edit layout tab I can group those two accounts together so I can select these two and I can group them now I'm not going to do that yet because I'd like to put some numbers in there first and then I'll go back in to show them as grouped so that's like that parent account situation which is similar to if you know the parent account kind of thing from like QuickBooks this is actually a lot more flexible within zero that nice reporting tool they have now the other thing that's that is often an issue is that when you first start putting your information in something like a zero you've got that same kind of problem you have with your bank accounts in that you probably had something in the investment account before you started tracking it within zero so let's imagine that that we had some information in the investment account before we look at the last financial statements and I'm gonna I'm gonna put that information directly into our investment account here not using the bank feeds because the bank feeds would only be tracking the current information going forward so I'm gonna try to input I'm gonna say let's say that we have let's call it a spend money form or you might even do it with a journal entry so it doesn't show up on the bank fee well we could do yeah let's do a journal entry so I'm gonna go to the accounting drop down let's go to the reports and let's go to the journal journal report this is where we go to find get our journal entries so we're gonna go into the journal report and then I'm gonna add a new journal and this is going to be for the beginning balance in investment accounts investment accounts and I'm gonna say this would possibly be like as of the end of the end of the prior period if we were entering data in the current year so it might be as of the end of like at the end of last year so we're doing 2022 so maybe December of 2021 but I'm gonna put it in 2022 so we could see the transactions and I'll just put it July 2022 okay and then I'm gonna say the account that's going up is the B of a investment account let's say that one had 2000 in it let's say and then the other one was the prime prime prime America let's say that it had 10,000 in it now the other side of this of this transaction I'm not going to record to the income statement I'm gonna record it to the equity it's not on the income statement because it's not part of our timing accounts it shouldn't be affecting income this was something that happened before we started tracking the information in zero that's why I'm going to the retained earnings account which is not something you normally post to unless you're entering the beginning balances in okay let's post it and okay let's go back to the balance sheet and check it out now so I'm gonna say all right there's our where there they are there's the prime America and B of a now what I'd like to do is group these two under one account called investments so I'm gonna make a subcategory to do that we got this great tool over here for the edit layout and I can select this one I'm holding down control as I sell select this one too and then I'm gonna group them together and I'm gonna call the group name investments boom that's it and then update and let's see all right we're gonna see so now we've got our investments grouped together in the subcategory that's great all right now you might also want the invest in the inventory above the investments so I could edit the layout over here and say let's pull that inventory above the investments and same with this inventory one boom update that one all right so that looks great so now we've got our our investments here now if I was external reporting I can collapse the investments and put them into one investment now from here then we might buy more investments if we buy more investments we're going to see that coming through the bank feeds on our checking account as a decrease to I mean yeah decrease of the checking account which we want to make sure that we put into our investment account here and then we might have income that comes through the bank feeds and the form of dividends and interest which we might want to record just as revenue as those come through if that happens and then periodically we have the issue of the value of these may have gone up or down even if we have not yet sold them and and that's where you have this unrealized gains or losses and a lot of times people want to adjust their investments to recognize the current market value which you might do like on a monthly basis and you would do that basically with a journal entry normally right we would increase this account with a journal entry and the other side would have to go somewhere you could put it into equity but the easiest thing to do would be to put it on the bank on the income statement and I would recommend putting it at the bottom as like unrealized gains or losses so that you could see your gains and losses without your investment income and then see those uh investment income at the bottom is the general idea so let's let's go to the bank feeds now and imagine something's coming through on the bank feed so I'm going to go accounting and let's go into our account here again account transactions I'm going to go to the reconcile item and then I'm looking on 9 15 let me find my item here all right so I'm going to use this one and pretend it was for uh investment we're buying more investment for big $25 going in for the investment so I'm going to add the details on this one and so I'm going to say all right primarica do I want to shorten this out it's going to be primarica life insurance prim all right I'll keep that and then I don't have an item because I'm not buying inventory items I'll keep the description quantity we want there's that's good and then the account that it's going to go to is the primarica uh investment account no tax now if this was like an investment that happened every uh every month or something then I could set a rule for this just like I would for the other rules except that it's not going to an expense account it's going to be an investment from my checking account into the financial institution account now also note sometimes as these banks uh these financial institutions we get better with this bank feed kind of thing you might at some point be able to track some of your your investment accounts with the with zero and connect to them kind of like you would with your bank accounts now not all of them it's not a perfect system at these at this point that you can connect to all of your financial uh accounts and get all the transaction details a little bit uh a little bit different sometimes but if you can do that then you can pull in the information on the financial transactions side where you have your stocks and bonds and you would have interbank fee transactions bank feeds between between the two of them but a lot of times right now what that what you have is your checking account connected and then we're setting up our financial institutions as other current assets because we have to it's a little bit different to track them than just pulling information in like we do with the bank feeds because of things like the unearned revenue and stuff like that so uh that's what we're doing here so let's go ahead and save it and then I can match it and that would show our increase so if I go back to the balance sheet and update it then we can now see that we had the increase another $25 in the primary investments now the last thing just to note here before we stop this one is like the primary investments let's say at the end of the month or the end of the quarter it went up by $500 so you look at your investment accounts and they now are at $10,525.50 right if that if that were the case then you're going to say well I want to write my amount up to the market value that you might do periodically that increase is not going to go through the bank feeds because there's no we didn't realize that we haven't yet sold it so the easiest thing to do is do that with a journal entry periodically from the financial statements and record the other side to the income statement you could record it to the balance sheet but a lot of times people like to record it to the income statement I would record it at the bottom as some kind of other income so let's just see what that would look like so if I go to the tab to the right I'm going to go to the accounting drop down and let's go into our chart of accounts and let's add another account for like other income it's going to be at the bottom somewhere so we have you know bank record let's say let's say it's $7500 let's go with so I'm going to add an account I'm going to call it $7500 on the number and it's going to be an other income type of account so other income and so then the name of this thing is going to be unrealized unrealized gains slash losses now it could go either way so I'm going to say slash losses because we could have gains we could have losses they could flip this account it could be positive or negative right so I'm going to I'm going to add that and then let's enter a journal entry so let's go to the I'm going to accounting let's go to our reports and then I'm going to go into that journal report that's where we find our journal entry journal reports and then let's add a journal and this is going to be to recognize gains unrealized gains and the date and sometime in 2022 we're going to say 2022 and so so now we could we could put it into the primary account directly or we could add a new account that recognized the unrealized gains in other words you might try to track your actual uh the actual investment amount versus the amount that is hopefully an a gain due to unrealized gains the value of the stock going up and you could try to make that a subsidiary account let me just show you what I mean I'm going to make this one 1456 so I'm going to say 1456 is that right let me check that one more time uh investment account 1456 yeah why am I doubting I'm doubting myself so let's do this again uh 1456 1456 it's going to be an other current asset I'm going to call it uh primary unrealized gains slash losses all right and then I'm going to say save it now this isn't an income statement account this is going to be the balance sheet account it's going to be next to the primary account let's say it went up by $500 and then the other side's going to go to unrealized gains and losses on the income statement right here boom and for $500 so there we have it uh that looks good so let's save it and check it out so if I go back to the balance sheet then now I update this now instead of putting it into here directly I made this other account I want to make this account a subsidiary account in essence of the primary primary investment account let's see if we could do that we're getting double layers layers upon layers of our groupings so I'm going to go into here and say that I want to make uh this this account uh we're don't a this one and this one I'm going to group those together as uh primary America primary America investments and then see if I can do that that so now I've got that let's see what it looks like update it and check it out all right so now we've got we've got the in in investments we've got the b of a and then we've got the primary got investments and under the primary got investments we have this amount which were which represents hopefully our actual investment this amount represents the uh increase for unrealized gains this is the total amount which should tie out to our current uh our current statement balance and then this is the amount of the total investments so you can see it gets a little bit complicated when I add that the other methods you could use is just combine this into this number and you won't be tracking your investment versus the unrealized gains but if you use this kind of reporting method you could collapse some of these columns too so for example if I wanted to go in here now and say I just want to see investments and then these two I can collapse the primary a bit right and then I can just say update it like this and now I've got my uh investments and then and then b of a and primary America and these two have been combined together which is neat if I just want to see my investments this is more flexibility than a lot of other software that can I can collapse my investments and check that out and so now I can go down and I can see just our investments account with both of them combined together so really pretty cool so you can have you might have external reports that you that you make and internal reports that you make so that you could see that detail I'm going to unco undo that so we could see it again update let's go to the income statement and update the income statement to see that and on the income statement the unrealized gains and losses are at the bottom here which is what we want because we haven't really realized them this is my income from normal operations this is my other income to get to the net income so that's why it's a it's nice tool to have that unrealized items kind of at the bottom so that you could predict what's going to happen in the future from the normal operations and then tack on this stuff that's not really part of the normal type of operations all right let's go ahead and open a trial balance and just see where we stand tab into the right accounting drop down or let's let's actually add another tab and then and then do that accounting drop down reports and I'm going to go into the trial balance type in in trial balance trial balance and let's go ahead and keep that so you can see this is basically constructing things as we go right the checking account the accounts receivable here's our investment accounts they're not sub-categorized out in here because we're not we're taking away the sub-categories and just kind of showing just the balance sheet on top of the income statement without the subtotals and then there we have it debits and credits are in balance that's the same thing as saying the balance sheet is in balance assets equal liabilities plus equity how does the income statement fit into this whole thing this retained earnings is pulling in from the income statement the income statement giving more detail about that retained earnings