QuickBooks Pro Plus desktop 2022. entering transactions for the purchase of investments using bank feeds Get ready because we bookkeeping pros are moving up the hill top with QuickBooks Pro Plus desktop 2022. Here we are in our bank feed practice file going through the setup process with a view drop down the open windows list on the left hand side, the company dropped down the home page in the middle, maximising it to the gray area.
Reports drop down company and financial go on down to the balance sheet standard. We’re then going to customize the report up top changing the range from Oh 101 to one to 1231 to one fonts and numbers bringing that font up to 14. Okay, yes, please. And okay, then we will go to the reports drop down again, company and financial look at that profit and loss standard.
We’re going to change the date range from a 101 to one to 1231 to one, then customize the report up top fonts and numbers changing the font size up to 14 again, okay, yes, please. And okay, then we’ll do this one more time with the reports drop down accounting and taxes, go into the trial balance with a range change from Oh 101 to one to 1231 to one customizing this report, and then go into the fonts and numbers changing the font up to 14. Okay, yes, please.
And okay, then we’re going to go into our bank feeds center by going to the banking drop down and going into the bank feeds and the bank feed Center, which would only be there if you had turned on the bank feeds, which we have done, and maximizing it to the gray area.
And then I’m going to go over to the unrecognized items here, we’re going to be looking for transactions where there’s a bank feed going out of the checking account that we’re imagining that we’re putting into some type of investments, such as stocks and bonds. Let’s go back to the balance sheet and think about what would happen with regards to this, noting that if we’re taking money out of the checking account and putting them into stocks and bonds, this is something that might happen on the business side.
But if your business is not in the business of investing in stocks and bonds, it might not be as you might not have as many transactions there for that particular purpose. Unless you’re kind of holding on to the stocks and bonds that you’re later going to use for investment in the business. For example, if this business was in the business of selling guitars, then if we had excess cash that we plan on using in the business to expand later, we might put that into investments like stocks and bonds.
But if we have cash that has accumulated and we don’t expect to be using it at some point in the future, then it would be best to give it to the owner and the form of draws or dividends so that the owner can take that cash and make a return on it investing as well. If you’re in on the personal side of things, and you’re using QuickBooks for personal bookkeeping, which is quite common as well, you have similar kind of issues.
In that case, you would most likely have money that you’re investing in investment accounts. And you have to think about well, how exactly am I going to track that information? Can the bank feeds help with that. So the transaction we’re looking at now is taking money out of the checking account, putting it into some type of investment account, it could be like mutual funds or something like that, with an investment company possibly like an E trade, or Vanguard or something like that.
And so clearly, the transaction is going to be a decrease in the checking account, which is when we will see it hitting the big feed transactions and when we can record it. And then we want to put the other side not into an expense account, which would typically be what we would do for many decreases to the checking account, but instead to an asset account, similar like what we did with the inventory and equipment.
But this time and other current asset account, possibly simply called an investment type of account. So there’s a couple kind of issues you have with this kind of process. One would be what about the beginning balance on my investment account for the transactions I had before I started entering the data. In other words, the stuff that’s going to be clearing the bank at this point in time are the current transactions, but I already have money in the account.
In that case, you would have to do a transaction that’s not journal and that is not cash related. Because it happened at some point in the past, just doing a journal entry or possibly just going into the register and entering that beginning balance. So that’s one kind of issue. The second issue is how am I going to set up my investment accounts? Do I just want one account called investments for all of my investments, all my different mutual funds and bonds? Or do I want multiple different accounts?
And for that, normally, you don’t want to get too overboard with multiple different accounts. And the detail that you’re going to be putting into QuickBooks, because that’ll get make it a lot more difficult for you to enter the data into QuickBooks, it’s not really designed for day to day kind of transactions, it’s designed to give you a summary, periodically, most likely monthly, or on a yearly basis.
So one method, you might use this to say, I’m going to basically put stuff into one investment account, and then possibly make sub accounts related to either account types types of investment, or possibly more easily by the type of entity that I’m investing in, or the financial institution like a Vanguard, or like an E trade, or like your bank or something like that, and listed out by the institution, because that’s going to be the statements that you will have, and then tie into those statements periodically.
And, and then have the detail with the statements, you also might break out the short term and long term investments, which is another kind of issue. In other words, especially on the personal side, you might have retirement accounts that are in a 401k or an IRA, those are items you might want to break out as long term because you can’t touch them as easily, you can’t take them out.
So that until you’re retired, so that in those investments, you might want to have a short term and a long term broken out between whether something is under the umbrella of a 401k or an IRA or something like that, or whether it is not. And you can, those are some ways that you can break it out.
The next thing we got to think about is well, what about the income that I’m going to have in terms of gains, and what about the dividends and so on. When we’re talking about the income with regards to dividends and interest, that stuff will flow through typically to it might flow through to your checking account, if you’re to receive the gains, I’m not the gains, but the dividends and the interest.
At that point, you can then record it just like you would on a cash basis. Or you might have a system where you’re reinvesting the dividends and interest, in which case, they’re going to be reinvestments into the to the actual stock price. And you’ll see the value of the of the stock going up as you have the reinvestments. You also could have short term gains or unrealized gains.
And then there’s a question of how am I going to recognize the unrealized gains? And do I want to recognize the unrealized gains? So we’ll talk a little bit about that as well. Because there’s a question of do you want to put the gains on the balance sheet or in essence, on the income statement, where do you want to put them on the income statement?
Okay, so now let’s go to the lists drop down, I’m going to go to the list drop down, we’re going to go to the chart of accounts, we’re going to set up our investment account, I’m going to set this up as if we have one investment account a parent account, and then I’m going to put by institution, the accounts underneath it by the institutions, financial institutions I’m investing in.
So I’m going to save the account rise up down below new account, I’m going to make this the parent account, which I’m just going to call other current assets, other current assets. And I’m just going to call this in short term investments or just say, in investments, investments,
investments, and then this will be the parent account. So I’m just going to say save it. And then I’m going to make another one, which is going to be the account rise up new account. And then this one, I’m going to say is going to be an other current asset as well. And this one is going to be the financial institution that I’m investing in from America,
we’re gonna say primerica, and that’ll make it easier because I’m going to get the statements from them, which I’ll then take a look at monthly or when transactions happen that clear my actual bank account. And I’m going to make this a sub subsidiary account of the investments account.
So now, we’ve got kind of this breakout, we got the investments, and then the sub account, I’ll make one more just to give an idea of how this would work account rise up new account, I’m going to make this one like a like the financial institution, other other assets. And let’s just call this pretend it was our bank, like Bank of America, Bank of America.
And then I’m going to make that a sub account of once again, the investment account, it’s an other current asset, not an other asset, other current asset, sub account of the investments account, and then save it and close it so that you can see how this works out. I’m going to have the investments and then these sub accounts that will be put in place underneath them.
Let’s pretend that I have a beginning balance in the primary account from my statement. If I go into that register by double clicking on it, I’m going to close the carrot. I’m going to put this in place as of typically say to the beginning of the year. So Oh 10121 And I’m going to say that we have it Increase, let’s just pretend there was no 10,000 in it at the beginning, it’s a non cash transaction, therefore, the other side has to go somewhere.
And it would have to go to some kind of equity account. So it would be going into some kind of equity down here, which I’m going to say is owner’s equity. So, and this is to record in this show investment inish in a Yo, ti, Al investment, or original investment. And so it’s going to retained earnings, and it’s 90 days older, okay, that I’m okay with that I’m okay with that.
And then if I close this, I’m going to close this out, close this out and open up the carrot. So now we’ve got under the investments here, we’ve got this caret that allows you to expand it. And then we have that original 10,000, which is a non cash type of transaction. Now if we would have put more money into it from this point forward, we would see those happening in the bank feeds.
So if I go over to the bank feeds, for example, and say, Let’s close up the caret. And I’m going to open up this, this one, and I’m just going to look for for these types of items. Here’s one, I’m just going to pretend that this isn’t an investment account, even though it’s life insurance here, but we’re going to pretend that’s going to be an investment. So we’ll put that in there.
And we’re going to say, okay, and the PE e once again is going to be prime America. So I’m gonna say prime America, TAB TAB. And the account now is going to be the investment account. In this moment, instead of an expense account, we don’t have a job there is that and so we’re going to then say okay, and if I hit the drop down and add more details to it, the date matches out that was given to us here we got the payee, the investment, the customer job memo, we could make it billable.
But we’re not going to we could create a rule for this. But we’re not going to here because we were just going to do a practice thing here, we’ll get into the rules later. So I’m going to just save that, save it to the register. And so it’s been added to the register, as we can see here, let’s go back to the carrot on the left hand side, and then go back to our balance sheet.
Where we can see now it’s been added here. So we’ve got the inclusion here, double clicking on it. Now we’re at that 10,025 50 Or whatever the primary key, if I double click on that is the check. If I double click on it, it takes us to a check type of form. Closing this back out, closing this back out the other side, of course is in the checking account.
So we’ve got all this activity happening in the checking account. So that’s how we can of course, I’m going to close this back out, I account for the US putting more money putting more money into this account. So that’s one kind of issue that that is taken care of the other issue is going to be well, how do I account for the income.
If I’ve dividends and I have interest? If I have that dividend and interest that’s going to be flowing into my checking account, we will see them in the bank feeds as well. And we can simply record them to interest income and dividend income as they come through. But what about the unrealized gains, meaning you might want to check periodically to your statements and try to increase your accounts or decrease your accounts, whatever the market is doing to the market value periodically.
The problem with that is is that you haven’t yet sold your investments, therefore that increase in decrease is is temporary. We don’t know if it’s going to be a long term thing or not. That’s just the current value. We call that having not realized it yet. So if we’re going to say okay, I want to record my investments at the market value to then adjust them to what they say on the statements, then the question is, well, I can I can then increase this.
But where does the other side go? Where am I going to put the other side. And there’s a couple couple of responses to that. Traditionally, I won’t get into it in detail. But one, you can record it as income, even though it’s unrealized income on the income statement, which could be kind of a distortion because again, it’s unrealized. So you could have major increases and decreases in the market that haven’t locked in.
So So you haven’t realized them or two, you could put a contra account on the equity section down here. That would then be in recording the increase and decrease down here and that way it wouldn’t hit the income statement and distort the income statement.
Most of the time, the easiest thing to do is actually recorded on the income statement, but put it at the bottom in other income so you have a subcategory of your normal income and then the other incomes that are basically like investment income. You could also if you choose Make a sub account Here, that’s representing the changes that are the unrealized gains and losses.
So let me just show you what that would look like. And this would be an adjustment that’s not cash related, it would be an adjustment that you would do periodically at the end of the period, based on your statements that you get from your financial institution, possibly monthly. And then you want to just record some summary of the data, you don’t want to put too much detail into QuickBooks.
If you’re looking at the day to day changes, you want to look at that with the actual reports that you’re getting from the from your your company, your investment institution, and possibly other software that can help you with the day to day transaction, QuickBooks is here to give you a good snapshot on a period by period basis. So let’s let’s let’s go ahead and add a sub account of this, I’m going to go into the end, let’s imagine that this this account now is has gone up to 10,525.
So I want to record that increase of $500. If I go to my list strapped down my chart of accounts, one way I could do it is I could go directly here and increase this one by the $5,000. The other side having to go to some something like undeposited funds, or I might want to create another account and say let’s make a new one.
And let’s say that we’re going to say that this is going to be an other current asset account. And I’m going to call it unrealized gains slash loss for Prime America. So I’m going to save it and then I’m going to make um, so I’m going to make this a subcategory subcategory of the primary account, and then save it and close it. So now record my gain in here.
So I’m going to double click on that unrealized gain and loss account, let’s make this as of 1030. To one, for example, this is going to be an increase of that $500, we’re matching the other side needs to go somewhere, I’m going to make it go to an income account. So I’m going to call it an realized gain slash loss space space because I want to make a new account and income statement account and then tab,
it’s going to set it up set up a new account, we’re going to put this as an income account but not a normal income, other income account, which we’ll put it at the bottom of the income statement, and then save it and close it, I could put a memo but I’m not going to here, I probably should. And then I’m going to close this out and close this out. So now you’ve got the investments, you’ve got the primary HCA and then you’ve got the two components to it, the primary key this is the original investment,
what you have put in to that to kind of like the costs, you can think of it kind of like the basis. And then we’ve got the unrealized gains and losses that have not been realized that are just representing increases in the value over and above what we paid for. And then you get the total, that adds a little bit more detail.
Although it’s also a little bit more complex to deal with, you could just put them into one account, if you if you so choose, depending on how much detail you want. Now, you can imagine this other side the unrealized gains and losses, if you wanted to record them in the equity section, then you would have the equal and opposite account down here, representing the other side of it.
So it wouldn’t be on the income statement. But I think for most people, it’s easiest to put on the income statement, which is what we did, if I go to the profit and loss on the income statement, we’ve got the unrealized gains down here, this is an income account, but it’s not at the top, we put it down here in the other income so that we have our net income from ordinary operations.
And then we can also see the other kind of unrealized stuff down below. So oftentimes, this, you know, tracking of the investments can be a little bit tricky for people to understand or think about how they want to record the investments, what are they going to do with the unrealized gains and losses? How do you break out those from the normal gains and losses and investments as they happen? So it’s in how to the bank feeds, of course, work into that.
So that’s the general idea is that you could basically put this information onto the balance sheet when you’re paying for the investments, which you might be doing periodically, because you might have a system that you’re periodically putting money into like a 401k plan, or into your investments or something like that.
And then you might want to adjust your investments periodically based on this would be possibly monthly or quarterly, based on the current market value from the financial statements, and then record the increases and decreases the unrealized gains and losses periodically at that point in time and then the dividends and the interest would generally flow through if you’re receiving them in your checking account to your checking account.
And you could basically record the gains and losses otherwise they would be part of the increase to the value that you’d be paying back into the into the into the stocks and bonds that you could see when you get the financial statements in and record them at that point in time. When you get the data the financial reports from the financial institutions