Enter Transaction Purchasing Inventory Using Bank Feeds 380

QuickBooks Online 2021 enter transaction for the purchase of inventory with the use and help of bank feeds. Let’s get into it with Intuit QuickBooks Online 2021. Here we are in our quickbooks online bank feed test file and prior presentations, we set up our bank feed and started to enter transactions from basically bank feed Limbo into our financial statements. So we could see that on the transactions tab, or it might be the banking tab, if you’re looking at it on the left hand side, and this is where we are when we enter the data into the system.


Basically, in that kind of bank feed limbo. We’ve been adding items from here so that they’re into our system. And let’s check that out by opening up the financial statements going to the tab up top right clicking on it, duplicating that tab, we’re going to do that again, right clicking on this tab, duplicating it again, so that we can then open up our two major financial statement reports that being the balance sheet and the income statement or Profit and Loss report, we’ll start off opening the PnL profit and loss by going to the reports on the left hand side.



So we’re going to go to the reports on the left hand side and then open up the PnL. So there it is, we want the profit and loss report, we’ll do our date range change up top from for my purposes, it’s going to be from a one a one, a 120 to 1231 to zero, we’re going to go ahead and run that. And then I’ll close the hamburger hold down Control scroll up just a bit. That’s what we’ve included thus far, just straight from the bank feeds. Going to go then to the next tab over this time opening up the balance sheet by going to the reports down on the left hand side, opening up the BLS balance sheet report, we’ll do the date range change up top once again.



And that’s going to be from a one a 120 to 1231 to zero, we’re going to go ahead and run that report. Here’s what we have in terms of the balance sheet thus far. Now we’re going to be thinking about inventory inventory is going to complicate matters a bit, because usually inventory is going to be on an accrual basis. So let’s first jump over to our flow chart, this is going to be on the desktop version, you don’t need the desktop version to follow along. But we just want to show you the flowchart that’s going to be on it.



Now if we think of inventory with a classic perpetual type of inventory system where we’re actually tracking the inventory through the system, then of course it would be going on both the vendor or purchasing side. And on the customer side, when we sell the inventory on the purchasing side of things, we might have a purchase order, but we would then enter a bill most likely, and then we’re going to be paying for the bill with basically a cheque paying for the inventory. When we buy the inventory, we’re gonna have to put it on the books as an asset that in and of itself is basically an accrual type of thing.



Because even if we paid cash for it, instead of expensing it, we’d put it on the books typically as an asset, we also might be tracking that inventory, not only in terms of dollars that we paid for it, but also in units that we have so that we can sell them and track the cost that we sell using some flow assumption, such as first in first out last in first out or average. Then on the customer side, we sell it either with a create sales receipt or a I’m sorry, an invoice or a create sales receipt.



And these two forms would then be making the sale, the invoice increase in the accounts receivable, the sales receipt going directly to cash or undeposited funds, and then the other side would be decreasing, we would have a decrease to the inventory and record the cost of goods sold with these forms as well.



That’s kind of where the complication happens here. Because in order to use that perpetual inventory system, you have to set up inventory items so that the QuickBooks system can track the inventory by unit and then make this allocation as we create the invoice and the sales receipt. And then we would receive payment make the deposit. So where do the bank feeds fit into this? Now notice what we just went through is kind of like the full service type of inventory. If you’re using a perpetual inventory system, which many people when they first hear inventory, they just figured that they have to do that.



But that’s not necessarily the case, you don’t have to use an inventory system that’s going to track everything through QuickBooks, you might have some other system like a periodic type of inventory system that you might use, that might make it easier for the for the inventory to be tracked using basically bank feeds. So you can kind of simplify the system if you have a smaller kind of company in order to do that. So let’s go from the easiest thing to just be more reliant on bank feeds to the more complex full service kind of inventory and think about your options if you have inventory.



So the most easy system to do with inventory is to still basically use the cash basis method even though you have inventory. So check with your accountant if you can do this or not. But the idea being that if you have a limited amount of inventory, you’re not holding on to a lot of inventory, and possibly you’re just purchasing something and then selling it you can put like just in time type of inventory system, possibly contractors and whatnot that buy stuff and then they sell it, you know, pretty close in the same timeframe. Then you might just say hey,



Look, when I buy it, I know I should be putting it on the books as an asset of inventory, but I’m going to sell it quite quickly. And the easiest thing to do would simply be to record it when I purchase it as cost of goods sold at the point in time of purchase. When you do that, that means you’re recording. Instead of recording it as inventory, you’re basically hitting the expense before you have used it really to help you generate revenue, because normally, you don’t record the expense to cost of goods sold until the sale has been completed.



With its with which is done typically when you create the invoice or the sales receipt. In this case, you would be recording the inventory before you create the invoice and the sales receipt. And then when you create the invoice or the sales receipt, you would not be turning on that tracking of inventory, you would basically be using an inventory item just as if it was like a service item, meaning when you create the invoice, it would be increasing the accounts receivable, the other side would be going to sales, it would not be recorded any decrease the inventory or cost of goods sold, because you’re not going to turn that on because you’re not tracking inventory within the system.



But rather, using a cash basis system expensing the inventory when you purchase it, meaning you expense it up here, when you purchase the inventory, you never put it on the books as an asset. And then when you make the invoice, you’re not going to decrease inventory, you don’t have to worry about that, you’re just going to record the sales side. So that’s going to be the easiest thing to do. And then obviously, when you pay for the inventory, if you were to do that, then you can use the bank feeds. And you can just pay for the inventory possibly electronically, and then just record it as Cost of Goods Sold when it clears the bank.



That would be kind of the easiest method to do. But it won’t work so well if you have inventory that you’re holding on to. So if you’re in a type of business, like a business where you’re holding on to inventory for a longer period of time, then you should be tracking that inventory as an asset, not recording the expense until you sell the inventory. So the second method that you might use, is to say is a periodic inventory system. So once again, instead of using a perpetual inventory within QuickBooks tracking inventory within QuickBooks, you can use an Excel worksheet or something to track the units of inventory that you have.



And then when you buy the inventory, you can use the bank feeds, and then buy the inventory. But instead of putting it to cost of goods sold, you just put it on the books as an asset of inventory. Then when you make sales, however, you’re not going to make a sale and try to try to use the perpetual inventory system to decrease the units of inventory within QuickBooks because you’re not going to turn that on. But instead you count the inventory in a worksheet and then you make adjustments either daily, weekly, or monthly, basically counting the inventory that is left compared to the inventory that you purchased, the difference being how much you sold.



And then you can make a periodic adjusting entry recording the expense cost of goods sold and the decrease to the inventory periodically. So that would be the second kind of easiest method to use, so that you can kind of integrate bank feeds into the system very easily. And then of course, the third method is a full service bookkeeping system, in which case you can’t really depend on the bank feed to record the increase in the inventory because you have to use inventory items.



So if you turn it on inventory and tracking inventory in the system, then you have to enter the bill at least before before you can match out what goes through the bank feeds so you’d enter the bill and then you purchase the inventory you can match the bill then to the purchase of the inventory that would go through the bank feeds and then when you make the sale of the of the invoice you can then use the inventory tracking feature to decrease inventory as we go.



So let’s look at those methods now in in QuickBooks and we’ll kind of just run through them quickly with the bank fee so we’ll start with the easiest transaction where we’re just going to expense the inventory and then just expense it as we go so I’m going to pretend that these primerica ones are going to be inventory here so I’m going to sort of by description hold down Control scroll down just a bit and I’m going to go down then to these primerica items these three I’ll choose the oldest one first so let’s just use this one first. So now notice it tried to pick a vendor primerica life but I don’t want primerica life



This time I want primerica ca so I’m gonna I’m gonna update the vendor here. To that I’m gonna say tab. Let me do that again here and then tab and see if we could set up this vendor, I’m going to save the vendor. So there we have it. And then the expense that I’m going to have, I’m going to take it directly a cost of goods sold. So I don’t have there it is I got Cost of Goods Sold right there. We’re going to take it to the cost of goods sold account, expensing it directly as we go, no tag memo is good. I’m not going to create the bank rule, because I want to test out the other methods after this point in time, so that would be the easiest thing to do.



I’m just gonna go ahead and confirm that And so there we have it. And then if I was to see what happened, if I go to my banking, then to my balance sheet, I should say and scroll back up top, run the report, hold down Control, scroll up just a bit, we’re going to go into the checking account, we’ve got this decrease for the primerica for this amount, the other side go into cost of goods sold, that’s on the income statement. So if I scroll back up, and I go back to the other side, to the income statement, and then refresh this report running it, there’s the cost of goods sold. So I recorded that before I made kind of any sale.



And then if the sale took place later, as long as it’s close in the time period, then I can imagine, okay, what would happen when I make the sale. So let’s open up another tab, right click on this tab, duplicate it. And let’s pretend we’re going to make a sale with a with an invoice now, and it happened at a later point in time, then I can go to the plus up top, I’m going to create an invoice. And this is going to be our sale item. And we’re going to sale sell that thing that we purchased which we already expense.



So I’m going to just say it’s going to go to customer one, customer one, and we’ll set up that customer closing this out and setting up the customer, I’m just going to save that customer as is. And this happens on we’re going to say the date here is going to be Oh 715. Tuesday, I’m not sure if that’s very close to what what it should be closing time to if you’re using this method. But in any case, and this I’m going to say item one. Now I’m going to create an item here, but I’m not going to create an inventory item. Even though we’re selling inventory, we could use basically non inventory, I’m just going to create a service item.



That means that it’s not going to try to track on a perpetual basis the inventory within the system, because we’re not basically tracking the inventory in the system. So this is going to record just the increase in the accounts receivable and the other side, then go into the sales side. So I’m just going to call it item one, it’s going to be the price, let’s just say the price is $300. Sales is going to be the other side, that’s going to be our sales account. Let’s say we’ll call it sales. All right, and then we’ll say save it and close it. And so this is going to increase accounts receivable, the other side go into sales.



Nothing happened with inventory here, because we’re not using a perpetual inventory system, save it and send it or let’s just save it, I’m not sending, because I don’t have an email address. And then if I go back to the balance sheet, and run this report, now we’ve got the accounts receivable here. And the other side on the income statement, the P and L on the income statement. There’s the sales. So these two things oftentimes would be recorded with the invoice if you’re using a perpetual inventory system. But in this case, we’ve recorded the expense beforehand, and then recorded the sale afterward. Alright, let’s do the second method.



The second method, meaning we’re going to we’re going to put the books, we’re going to put it into inventory when we pay for it. So I’m going to say all right, let’s hold down Control and say what if I want to track the inventory, but I want to use a perpetual I mean, a periodic inventory system, count the inventory myself, instead of tracking it within QuickBooks. So then I can say, Alright, let’s do this second. primerica and it’s not going to go to cost of goods sold this time, it’s going to go to inventory.



So inventory right there inventory. So now we’re going to put it into an asset of inventory. Again, I’m not going to save the rule, because we’re just testing this out. So I’m going to save it in inventory. And then I’m going to scroll up and say All right, now if I go to my balance sheet, and I run this report, we’ve got the checking account should be going down and the other side is increasing the inventory. no effect on the income statement at this point in time. What we would do then is just keep tracking the inventory as it goes up on a separate sheet, possibly an Excel sheet, because I’m not tracking the actual units within QuickBooks.



And then at the end of the day, the end of the week, or the end of the month, we will use our Excel sheet to track the units that we had the units that we purchased versus the units that we sold. And then on a periodic basis, we will just do a journal entry, the journal entry then decrease in the inventory for the cost that we sold, because we’re going to do our our cost of goods sold calculation beginning inventory, plus purchases minus ending inventory, gives us our cost of goods sold. And we’ll do that calculation on a separate worksheet.



So we’re not tracking it within the system on a periodic method, and then we’ll do a journal entry which will decrease the inventory that we be sold. And the other side is going to go to the, to the income statement over here to cost of goods sold. So once again, under that method, when we make the sales items up top, we’re simply going to record a sale up top, and it’s not going to be tracking perpetually within the system. And then we will do a journal entry periodically in order to record the cost of goods sold, that allows us to do the bank feeds to always record the increase into the inventory.



But then we have to track that in some way on a separate sheet, Excel or something like that. So that we can then do our cost of goods sold calculation, beginning inventory, plus purchases minus ending inventory, to figure out our periodic adjustment, decrease in the inventory and the cost of goods sold. So that’s method number two. method number three is to track the inventory within the system, which means you got to deviate from a basic, you know, method of cash basis method. So in that case, we’d have to put it on the bill, because notice, if I go back on over to the first tab, and we try this again, and let’s say I want to put it into inventory here again, but I want to track it within the system, I can’t really do so here, because I can only put it into inventory directly.



I can’t track it to an inventory item, which is what QuickBooks needs in order to properly track the inventory. So in that case, we’re going to say, all right, well, let me first go to the first tab and say, let’s add a bill for the inventory, and then see if we can match the bill. Or we could do an expense form if it wasn’t expensive. And then we can match it out to what goes through QuickBooks. So in this case, we can use a matching type of format. So I could say, All right, let’s turn on it, we’re matching, we have inventory turned on now.



And we’re gonna say, let’s say that we have a bill form that we’re going to enter, which will increase accounts payable. And the other side, in this case, go into an inventory item, this is going to be vendor or vendor one, or let’s say it’s prime America. So we’re gonna say this is prime America. And the terms will say 30. And then the date, we’re going to say this is on. What do we say 717. We’ll keep it there. 717 2020. And then we need not the category here. But now I need an item, I need an inventory item. So I’m going to add an inventory item this time, this time, I’m going to make it an inventory item.



So I’m going to say inventory or free item, these are the things that we sell, I’m going to set it up this time not as a service, but an inventory item, I’m going to try to spell it right. Not that I care that much. And then we’re going to go down and say inventory item, we’ll say this is for $400. And this is going to go to product, sale of product income. And then the purchase will say 400. And then the cost of it, we’re going to say is this amount here $30, we’ll say $30 cost and we’re selling it for 400. It’s quite a markup. And that’s going to be the cost of goods sold.



Now, I’m not going to turn on any sales tax or anything here, we’re just going to keep it as it is I’ll save that. And they want to start date. So I’m going to say zero, how many on hand zero, as of January, let’s say January or 2020. Zero on hand. And so I’m going to say save it. So now we have our bill on hand. Right, so we’ve entered the bill, I’m going to close this back out. What that does is if I go to the to the balance sheet, run this report. Now we’ve got our accounts payable on the books, and we now have the inventory.



This time it’s tracking the inventory, put it in another account, called inventory asset. It’s tracking that inventory. And we have the detail of it tracking it, meaning we got the sub ledger, if I go back to the tab to the right, for example, reports down below. And I take a look at the inventory reports now. Meaning I go to the inventory. Inventory Valuation summary for example, then it should give me There’s my our unit of inventory. Now we’re tracking it perpetually within the system. So then when my bank feed comes through, now I’m going to say I’ve got this $30 that was paid. I’m going to match it now. And sometimes QuickBooks will do it automatically if I already have this transaction in place. But I could say now I want to find a match.



I’m not going to use this to record a transaction, or I will but I’m going to match it up to the bill. So here’s the payment that’s going to match up to the bill. So this payment then is going to reduce the amount of the bill that we have And that means the accounts payable is going to go down and the other side will be decreasing the checking account. So let’s see that if I save this, then we’re going to save that item. And then I’m going to go back on over to the balance sheet, let’s refresh the balance sheet, hold down Ctrl and scroll up just a bit.



And then if I scroll down to the accounts payable, it’s back down to zero now. So now we’ve matched out our bank transaction here. So it was a bill, bill check now. So now we use the bank feeds to match out the bill check. And then if I go back up top, it’s going to be a decrease to then the checking account. So now we’re tracking the inventory this way in the system, but we had to use a matching feature a little bit, we couldn’t just rely on the bank feeds to build the books. And then when I make the invoice, then if I was to make another invoice, go into the first tab, for example. Now this let’s make one more tab, I’m going to right click on this tab, duplicate it again.



And now let’s make an invoice and say we’re going to sell this thing, and we’ll see it go down. So I’m going to make another invoice and track this, hold down Ctrl and scroll down just a bit, bring it down to that 100% again, and let’s make this customer two, this is going to be customer number two, we’re going to set up customer number two. Actually, I got customer number one, this customer number two totally different person. And so we’ll set that up. And let’s say we sell it on like the 20th, let’s say and this is going to be our inventory item inventory item for 400.



Now when I record this, it’s going to do more than the last invoice we recorded one it’s going to it’s going to do partially the same thing, it’s going to increase the accounts receivable the other side go into sales, but it’s also going to be decreasing the inventory and recording the cost of goods sold because now we’re tracking the inventory in QuickBooks using a perpetual inventory system this time. So let’s save it and close it, save it and close it. And then we’ll check that out by going to the balance sheet again balance sheet and let’s run that report.



And so now that inventory item has gone back down to zero and it did so with the invoice because now we’re tracking it with the invoice we’re doing the full service system this time going back on over the other side went to the to the income statement. Refreshing the income statement, we see then that in the sales of the product there’s the 400 with the invoice and then we have the decrease to to the inventory item back to the balance sheet. inventory item should go back down to zero it was the second one with the second method.



So it went back down to zero here because we sold it and it did so with the invoice so we decreased it with an invoice and the other side went to the income statement in the form of cost of goods sold. And it did so once again with the invoice and note that that $30 is not on the invoice. So if I go into the invoice, we don’t have that $30 there is nowhere on the invoice but the invoice knows about it because this item is what tells QuickBooks what the amount is and how to track it using the perpetual inventory system closing that back out.



We also know that on the sub ledger for inventory that should go back down to zero. If we refresh this it goes back down to zero because we sold the inventory. So there’s just some thought to be on on the inventory. Just note you don’t have to use like the full service inventory within QuickBooks, you could use some kind of other method of a periodic method instead of the perpetual method, or even try to use a cash basis for inventory. But check with your accountant first before before moving forward with either of those

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