QuickBooks Online 2023 Enter transaction for owner withdrawal or personal payment using bank feeds, get ready to start moving on up with QuickBooks Online 2023.
00:15
Here we are in our bank feeds practice file. We started up in a prior presentation using the 30 day free trial, we also have opened the free QuickBooks Online sample company. If you want the to open at the same time, we suggest using incognito window or another browser, you can open incognito.
00:32
If using Google Chrome by selecting the three dots in the browser, incognito window typing into the search engine, QuickBooks Online test drive, we’re going to be using the sample company to compare the accounting view the one bank feeds practice files in and the business view the one that sample company is and you can toggle between the
00:51
two views by going to the cog up top, change the view down below, we’re now going to be opening a couple tabs duplicating tabs that is as we do every time. So we can put reports and then right click on the tab up top to duplicate it. And then we’re going to oh there’s an error.
01:09
Okay, I’ve restarted and now I’m going to duplicate again. And then I’m gonna right click and duplicate again. And then I’m gonna go back to the tab to the middle as the one to the right is thick and go to the reports on the left hand side open up one of the faves. That being the balance sheet. And we can also see on the Business View,
01:29
by the way, if we take a look at the business view that the reports are located in the business overview, and then the reports on the left hand side, back to our practice file tab and to the right reports on the left, this time of the p&l the profit and loss the other favorite clothes in the hamburger up top, let’s change that range a 101 to two to 12,
01:54
that one to two, I’m going to run it to refresh it, tap to the middle, close up the buggy, scroll to the top, change the range, oh 101 to 202 1231 to two, run it to refresh it.
02:11
That’s the setup process we do every time. Let’s open up the bank feeds now which are on the tab to the left, we set up the bank feeds in a prior presentation. Of course, they’re under the banking if using the accounting view.
02:23
And then we have our bank feeds up top. If you’re on the Business View, by the way the bank feeds are in the bookkeeping, and then transactions, and then the bank transactions up top.
02:38
Okay, so now we’re going to be thinking about, I’m going to close up the ham buggy transaction where we have a big feed decrease here. And the other side is going to be for a personal draw out of the business. So we’re taking it from the business for personal.
02:55
So let’s just give a quick recap on the system, how this basically works, I’m going to collapse everything to the accounting equation. Just to think about it.
03:03
Remember that as we put the business together, what’s happening is the assets that we have on the balance sheet are only in the business and not for our personal use.
03:14
They’re not in our personal checking account, they’re in the business, because we expect to use them in order to generate revenue in the future, we hope that the investment of those assets in the business will give a better return than we could get
03:27
if we just take them out of the business and put it in an investment like stocks and bonds, we’re financing those assets in the business, either through liabilities, as taken out loans, or equity.
03:39
That’s the money that we put into the business and or the money that has been accumulated, earned, retained through the business and not yet been distributed out in the form of the drawers if it’s a sole proprietorship, or dividends, if it’s a corporation. So now of course, as the business gets in place, when you start up the business,
04:02
it’s likely that we’re going to be investing in equity in order to purchase the property, plant and equipment we will use for future rest revenue generation. But as the business gets going, we’re hoping that the equity that we accumulate through the income statement, our revenue, our earnings will generate assets, and yet, and we can take those assets out of the business for personal use.
04:29
So as as the business starts to be more secure. That of course is the flow that we would kind of expect to happen. How are you going to set that up in QuickBooks? Ideally, we would like to have a separate set of books, a separate checking account, separate
04:43
QuickBooks file for QuickBooks business versus the personal again, you can imagine a situation if you’re a small business, you just have gig work or something you might
04:54
Use class tracking, or tax possibly to break out kind of business and personal In the same file, but ideally, we would like to have separate, separate books.
05:05
And we’re going to track the business side of things, in part because we want to do our taxes and stuff and financial reporting external reporting, at the end of the year, we could do our personal reporting, and QuickBooks two works great, I do that love it, good stuff. But this is going to be the business side of things.
05:21
So ideally, we would like to set it up. So when we take the money out for personal use, we take it out as a draw, meaning I’m gonna see it coming out of the checking account, it’s going to come out of the bank account.
05:33
And it’s going to be shown, it’s going to be a draw of some kind that I can see go into the personal account, there’s a danger if you’re trying to create all of your financial statements with the bank feeds, that you won’t recognize the draw as a draw, but rather, you’ll see it as an expense.
05:53
And you’ll mistakenly put it on the books as an expense, instead of a draw, it shouldn’t be an expense, it should be decreasing the equity directly,
06:02
the other side should be going into some form of equity, like a drawers, I count here. So So that’s easiest to pick up using the bank feeds if you actually draw the money out whenever using personal stuff.
06:14
So in other words, you have your business checking account, if you’re gonna go on vacation for a personal vacation, you draw the money out of the business checking account, which can clearly be seen as a draw, easily recorded.
06:26
So even if you’re not doing the one doing the bookkeeping, even if you have someone else doing it, or you’re doing someone else’s bookkeeping, that’s how you’d like them to set it up. And then they can spend the money on the personal and it won’t be business related.
06:40
However, sometimes we mingle things together accidentally, or we’re not as careful as we should be, or whatever.
06:47
So you might make amounts that are going out of your checking account for personal costs, meaning you went on vacation, like to Disneyland or whatever,
06:57
and you bought the tickets out of your checking account, which is the business account. What do you do, then? Well, you’re going to see them come through the bank feeds as an expense for Disney Land. And the question is going to be well, what do I do? Do I Do I record it as
07:12
Disneyland travel kind of expense over here? Probably not. Unless you could justify it as something for work, you’re going to just record it directly as a draw, right, you could just record that directly has a draw. Now, now you don’t like doing that.
07:28
Because it’s it’s kind of difficult to do that, right? Because now I have to, I have to weed out the expenses that I made out of my checking account that are personal versus business, and put all the personal expenses over here.
07:40
As drawers, it’s easier, it’s more separating the business, it’s clearer, if you have separate accounts, and you drew the money out first, and then bought the tickets out of your personal account,
07:52
because then it would be easier on the bookkeeping side of things. But you know, either way you can, it’s not the end of the world if you’re able to separate that kind of stuff.
08:01
Also, if you’re using one QuickBooks file, for business and personal, it’s possible to Use class tracking. So you can label it as class tracking of drawers of personal versus business.
08:16
And that way you can have an income statement broken out by class, and it will show you your income for the business, which is basically all you really need for a small Schedule C type of business.
08:29
Because a Schedule C is basically the income statement, and you can have your personal side. So you can actually call it travel, personal travel expense,
08:36
or Disneyland expense or whatever you want. And you could separate it out that way. So those are, those are some options that you can have.
08:44
Okay, so let’s imagine the first scenario we see a draw coming out. It’s just money going from the business account to a personal account. And it’s clear clean, we know that it’s going to the owner’s personal account. So let’s imagine this one here, we have like a transfer.
09:02
Now QuickBooks is trying to record it as a transfer because it sees it as a transfer from one account to the other. But I’m going to imagine the other account is not a a business account.
09:13
It’s the personal account. So I’m not transfer, I’m not going to use a transfer form because that would that would be one if it’s going to one business to another business account.
09:22
So I’m just going to categorize it. Basically like normal with an expense type of form. It’s going to be Transaction Date, we could put owner or vendor we might just put us owner, which is a little bit tricky to do because you could be a vendor or in this case,
09:39
we’re kind of like a vendor, but we’re not really a vendor or a customer. Like when you put money in it might be more categorized as a customer but anyways, I’m gonna say that the category is going to be some kind of drawers. Now if I didn’t delete all the accounts, they might have like a drawers for us. The point is, it should be an equity account.
09:58
So I’ve got the owner’s deck Woody, and I’ve got opening balance equity. So I need to make another one. If you just kept all the five accounts that QuickBooks gives you, it’ll probably have like an owner’s draw account because they have a billion accounts.
10:11
But we’re going to construct this as we go. So this is a personal draw, it’s coming out of the business for personal use. So I want it to be an equity type of account is the point.
10:20
The other type down here I’m not as concerned with, but I’m just going to say it’s going to be, I’ll just call it owner’s equity part of owner’s equity. And then over here, I’m going to call it draws, you might call it withdraws or owners drugs, or something like that, I’m just gonna call it draw.
10:38
All right, and then, so I already recorded it here. So it would look something like this, right, so then once once that’s in place, I’m not going to put a rule for it or anything,
10:48
you could put a rule on it if it’s a standard type of transaction. But the point is, when I see the money coming out of the business account to a personal account, that will be a good indication on my bank feeds, that is a draw.
11:01
So if I record it, and then take a look at my, my accounts, I can go into my checking account. And I can look for that, that 75, there’s the drawers there. If I go back on up, the other side went into the drawers account down below in the equity section. So there that is nothing happened to the income statement. That’s the point.
11:25
Because if it went on the income statement, it would have been an expense, and it would be distorting the activity of the income statement.
11:31
Now remember, the drawers can be a little bit tricky to understand down here, because the equity section within the equity section, the net income will automatically rolled over by QuickBooks at the end of the year into the owner’s equity or retained earnings account. And that’ll happen automatically.
11:49
So if I changed the dates up to 2023, this amount would roll into here. But the drawers do not do that automatically. So in a traditional accounting, you would have to do closing entries.
12:02
So if you want to close out the drawers yearly, you have to do a journal entry to close the drawers out into the owner’s equity or retained earnings type of account or let’s say owner’s equity type of account,
12:16
if it was dividends for a corporation, you’d have a similar kind of situation for dividends for a corporation, otherwise, you’re just gonna have to draw that will will not close out. And that’s fine too. Not a big deal. But it’ll just mean that the drawers are not there for just the current year.
12:29
Those are drawers that have just been accumulating upward for the life of when you started to account for drawers. Now let’s imagine a situation if I go back to the bank feeds where we’ve got like a personal account.
12:43
And notice that what QuickBooks is doing here is they’re trying to give me like a suggestion with a green item here, even though I didn’t create an actual rule, which is clearly indicated by a rule,
12:54
because it’s trying to guess what what I should do with it. So be careful that that’s not actually a rule, I suggest trying to make concrete rules, instead of just adding the suggestions. Because then you have more control over the rules and your bookkeeping will likely make more sense.
13:10
Okay, I’m just gonna pick another one of these primerica ones, and I’m just gonna pretend okay, this, let’s just pretend that this was for something personal. So we had a personal purchase of something from this particular vendor.
13:22
And so if I can recognize it as something that I purchased for personal use, then I can say, okay, I don’t want to put it to an expense, I want to put it to that drawers account.
13:33
Note how much harder this is to do, especially if you’re not the one that that is doing it. Like if you’re a bookkeeper for somebody else, it’s going to be difficult to go through their transactions and say, was this personal? Or was this business? So you’d like to deal with him as a bookkeeper or accountant and say, hey, look, would you don’t do that?
13:54
Right? Anytime that you have a personal thing, try to take the money out first. Otherwise, I don’t know where to categorize the personal expenditures. So that’s the general, that’s what you would like to do,
14:05
ideally, but if there’s an expense in here, and you can say, okay, that’s always a personal thing, then what I’m going to do is I’m going to say it’s not going to go to an expense account, I’m going to take it directly to the drawers account.
14:16
And you can imagine why that would work. You could say, well, that would be kind of similar to as though whatever this thing that they bought from this vendor would be as if they took the money out with a draw, and then they purchased it with the personal money out of their personal account.
14:33
And we just kind of said, well, okay, we’re just going to assign whatever they purchased to the drawers. Now, note that that works from the business side of things,
14:42
if you can pull those out, although it’s a little bit more confusing, but it doesn’t give you detail in terms of like a personal financial statement, because you might want to do your personal financial statements in QuickBooks,
14:53
and be given a personal kind of grouping of your groceries versus your your your travel expenses versus so on and so forth. And if you just record things to drawers, then hope we’re getting the business thing, right. But we’re not really having our personal financials being constructed as we do that.
15:13
So you could set up like class tracking. So if you turned on class tracking, then you can have an you can set up your income statement, which which will have personal and business, but every time you enter a transaction, then you would have to assign it as either personal or business.
15:30
So it can work, you know, for small businesses, sole proprietors, and gives you a little bit more detailed use one QuickBooks file and one checking account to record everything. But it’s not usually what people recommend, because obviously, from an accounting standpoint,
15:44
we’d like to try to keep everything as separate as possible. But you have that up. So anyways, if I record this, let me show you that. record that.
15:53
And then if I go into my cog up top, just to show you where those class tracking things are, if you go to the account and setting, and you go to the Advanced tab on the left hand side, then you’ve got, you’ve got over here is your class tracking categories, class tracking.
16:12
So if you turn on your class tracking, what that will do is allow you to construct an income statement over here by class and your two classes might be personal versus business, so that every transaction you assigned, you either assign it to personal or business class,
16:31
it’ll give you two columns, then, of the income statement, personal versus class, your total income statement will still in essence, remain the same generally, so that your balance sheet will still be kind of like the same like a mix of business and personal.
16:44
But if you’re just doing gig work or something like that for and you need your income statement for tax preparation purposes, which is basically Schedule C, which is just in essence, an income statement, then you could think about setting something like that up for your accounting needs.
17:00
Otherwise, it’s going to show up here just like it did before the drawers have now in increased so if I go into the drawers, we assigned this, even though it wasn’t money coming out, we paid for something and we assigned it to the drawers.
17:16
So the fact that it went into drawers, perfect for the business side of things. But again, you’re not tracking what you actually paid for, from a from an income statement on the personal side of things.
17:28
So then if I go to my if I if I go to my tab to the right, obviously, that expense didn’t get recorded over here, it got recorded to drawers, if you don’t pick those things up, then you’re going to end up with categories over here, like miscellaneous expense with a bunch of stuff in it,
17:45
or people stuffing into supplies or something like that. Or you might have travel and meals and entertainment travel, which has a large amount in it,
17:54
which are kind of red flags, if you report that on a schedule C, because it looks it’s going to look blue, and it’s gonna look bloated compared to other businesses,
18:03
possibly that are in the same industry that you are in, which are the kinds of things that that might, you know, result in audits and whatnot, and they’re going to be like, what do you what do you do and putting Disneyland and travel here?
18:15
Did you dish as, as a bookkeeper did you have to go to Disneyland in order to in order to do that, you know, you get the you get that kind of thing. So let’s open up our trial balance,
18:26
and I’m going to duplicate the tech. It won’t let me duplicate Hold on a sec, I’m going to go to the tab to the left. Let’s go to the reports. I’m going to type in trial balance.
18:39
And then this is where we stand. So I just think it’s useful to look at the trial balance from time to time. So this is we’re kind of constructing things in terms of the bare bone construction as we go as we do the data input with the bank fee.