QuickBooks Online 2021 vendor expense purchases or accounts payable AP cycle, let’s get into it with Intuit QuickBooks Online 2021. Here we are in our Google browser, we’re going to search for QuickBooks Online test drive. And then we’re going to go into the QuickBooks Online test drive from Intuit to get to our practice file, verifying that we are not a robot that keep on trying to think I’m a robot, but I’m not. So I’m going to say no and continue here.
00:31
Here we are in our Craig’s design and landscaping services practice file, we’re going to be going through what we could call either the vendor section or the expenses section or the purchases section or the accounts payable or AP cycle, or section. Those are all areas are different names for things that are typically grouped together. And you can think of this basically, if you’re in different if you’re in an accounting department, for example, you might be in the department of basically accounts payable, or the payable cycle of the purchasing cycle versus the accounts receivable cycle, or the employee payroll cycle. And what we want to be able to do is visualize what is going on basically by cycle here.
01:12
So these things are going to be grouped by cycle most easily seen in QuickBooks Online. By this new tab, if we go into this new tab here, we’ll see the cycles and then the forms in those cycles. That being the customers, the vendors and the employees, we’re going to be focusing first on the vendors cycle. So again, the vendor cycle, it means that we’re paying somebody else we’re thinking vendors. Now we could think of, of course, ourselves as a vendor if we sell stuff, because it’s the vendor, someone who sells things. But for QuickBooks terminology, we’re talking about vendors means the other side of the transaction, when we are purchasing from somebody else we’re purchasing from a vendor.
01:49
So we could then call it the vendor center, if we want to think about it that way. Because we’re going to be grouping who we’re going to be paying, many people will think about the vendor cycle as basically the expense cycle. So especially if you’re on a cash basis system, and you’re basically doing electronic transfers or checks, your main focus is going to be the expense form or the check form. Basically, cash decrease type of forms, you might think of it basically as the expense cycle in that case, or you might think of it as the purchases cycle, when you’re thinking about paying either with an expense or check form for the purchase of something such as inventory.
02:24
So if you have inventory, oftentimes people will then call it the purchases cycle. Or even if you do not have inventory, you might be purchasing things, such as equipment and whatnot, and not just have expenses. So you might say purchase a cycle. And then you might call it the accounts payable cycle, if you’re going to be running through things through the AP account, the liability count account. So that’s another name for this cycle. If you’re in a larger company, you will definitely have accounts payable, you can have a whole department based on you know, the accounts payable and tracking the bills that will be there.
02:56
And so you can call it the accounts payable cycle, but they’re all listed in the same kind of group, you’d want to kind of group them together in your mind, I think it’s easier to visualize that grouping, if we see the flowchart. And there’s a flowchart in the desktop version. So I’m going to jump over to the desktop version, not because we’re going to do anything in it. But just so we can look at the flowchart and then tie that information out into the online version. So here’s the desktop version. And we’re going to be concentrating in on the vendor section up top. And just thinking about the flow of what happens within the vendor section. So let’s in, what we want to do is break this information down by section.
03:33
So now I’m going to, I’m going to think of it in terms of vendor section. That’s what QuickBooks basically calls it. And then the customer section and then the employees section. And then within each one of these sections, what we want to do is then memorize the major forms that are going to be in those sections, visualize the flowchart of how the normal process will work over time between those forms. And then think about what those forms will do to the financial statements, these forms being the driving component that will then create the transaction, which would be called journal entries.
04:08
If you’re from an accounting background, they’re going to be the things that actually affect the financial statements, that being the balance sheet, and the income statement. So we’re first focusing here on the vendors area, and we’re thinking about, okay, this is the place where we like buy stuff from other people, we pay for services, goods and services, we buy things from a vendor, the most common, then form in this section would be the check or the Expense Type form. You might ask, why is that down here in banking? Why isn’t that up here in the vendors section. And I think QuickBooks is basically saying, it’s a little bit deceptive to have the checks in the vendor section. Because you could write a check.
04:47
You know, for different reasons. There could be you know, check that was paying something other than a normal expense or something like that. So they put the check in the desktop version over here in the other section in the banking section. But it’s basically one of the primary forms you’ll think of when you’re paying a vendor. Of course, if you go to the QuickBooks system, then those expenses and the check are under the vendor section, which I think is probably more appropriate, because that’s where you would mostly think of it being, that’s going to be one of our major forms. Now, note that even if you’re using bank feeds, you’re still going to be applying these forms out to the transactions that are flowing in from the bank feeds.
05:25
So we got to have an idea of what those are doing that that form, then I’m going back to the desktop version. Now, the check form will be decreasing the checking account cash, and it’ll be recording some other accounts, you can typically think of an expense account if you’re for normal kind of business transactions. So that’s going to be one of the primary things you do on the vendor section, you’re paying for expenses, you’re going to be paying the vendors in there, that’s going to result in a journal entry or transaction, every transaction affecting at least two accounts, the two accounts at least being or often been decreased to the checking account, that’s what a check will always do. And then the other side, often being an expense account.
06:04
Now then if we expand out a whole accrual kind of cycle with regards to the purchasing cycle, instead of simply writing a check, then maybe we want to enter the bill when we received the bill, even though we’re not paying it at that point in time. And that could be useful for multiple reasons. One reason is that we want to get the bill in the system closer to the time period that we consumed the goods or services that the bill is related to.
06:29
So for example, if we got the phone bill at the beginning of January, but it’s not due till the end of January, it would be best for us to enter it into the system in January and then show the expense closer to the point in time that the expense was actually incurred was which was probably in February, right, we want to we want to record the bill closer to the time it was consumed, even though we’re going to try to wait till as long as possible to pay it. And that would be the typical strategy. If you work in accounts payable for larger organizations, that’s always going to be their strategy at a cash typical cash management strategy will be I’m going to hold on to the cash until the last possible day that I can without getting penalized for holding on to it.
07:10
So what you will typically want to do then is then enter the bill when you know as soon as you can. So the expense is being recorded at that point in time closer to the time that you consumed it, but then not pay the bill until the last point and type that you can. And so when you enter the bill, the transaction here is going to be an increase to the accounts payable a liability account, the other side go into an expense, we’ll show some examples of that shortly. And then you can pay the bill over here, which is basically a check form decreasing the the bank account and decrease in the payable the liability at this point, you can also use this tool to sort the bills, meaning you can then sort the bills that are going to be payable, you could sort by date of when the bills are going to be payable, and then pay the bills that you would like to pay.
07:58
If you look at that in the online version, then of course, we have this item here, that would mean we’re entering the bill here. And then we would be going to pay bills. So once we had entered the bills, we can then go to pay bills here. And we can kind of sort the bills that we want to pay. And then and then try to manage our cash flow by paying the bills you know, as late as possible is the general policy that you’ll be you’ll be doing as late as possible without being penalized is the general is the general idea. Back to QuickBooks desktop to see the flowchart then. Now if you have inventory, that’s going to be a little bit more complicated of a transaction.
08:37
But it’ll have both a vendor side of things and a customer side of things. If you’re purchasing and selling inventory. And on the vendors side of things, you’re going to be purchasing the inventory. Now the purchasing of the inventory has got this one form that’s a little bit tricky. We’ll talk about we’ll talk about all the forms in depth in following presentations. But that’s going to be the purchase order the purchase order is actually not a form that will affect the financial statements balance sheet or income statement. It’s just a request for inventory.
09:06
And it’s a little bit backwards than what we really think of when we purchase something, say from Amazon or some online vendor where we have to pay for it at the point in time we want it to be delivered. Where as in a business business to business transaction, oftentimes, the purchaser kind of has more of the power to be able to say I want the to order something received the order and then pay for it, you know, and in that case, you have this purchase order where no financial transaction has because the inventory has not been received and the payment has not been made.
09:36
Then once we receive the inventory, the inventory will come attached typically with a bill to it. And that’s the point in time that we will record the increase in the inventory and the increase in the payable and then in essence will pay off the payable. So that’s going to be the inventory, cycle or flow. So that’s going to you want to be able to kind of visualize this flowchart basically by section and that’ll make it a A lot easier to understand the whole accounting cycle because you’re grouping it down not simply by chronological order by the date of every transaction that happens, but in kind of chronological order by cycle, so that you can visualize the cycles that will happen.
10:14
And now and now you want to kind of see these forms, how these forms will be related within the cycle. And then the next step we’ll do is we’ll break down each of these forms, and we’ll see what the impact will be on the financial statements, meaning balance sheet income statement, otherwise known as the profit and loss, and we will then every transaction that you know has to accounts that will be affected. And then once you once you can visualize what is happening on the financial statements, you’ll have a much better idea of how the financials are being created. And then if there’s a problem with the financials or you need to fix something, or make any adjustments to it, you have a lot more, you know, confidence to do so.
10:49
Otherwise, if you do not do that, what happens is you start entering these forms and hoping you’re running out hope that things are gonna turn out well, but if you if you know what these forums are doing, you can kind of verify double check that hope and feel more secure about it. So we’ll we’ll drill down on each of these forums in following presentations.