QuickBooks Online 2021. Purchase depreciable asset and make investment in securities. Let’s get into it with Intuit QuickBooks Online 2021. Here we are in our get great guitars practice file, we’re going to be opening up our balance sheet income statement and trial balance we’re going to do so by adding three new tabs up top, I’m going to right click on the tab up top duplicate, going to do it again, right click on the tab up top duplicate, and then right click on the tab up top one more time and duplicate again, the one on the far right, this is where I’m going to open up the trial balance.
So let’s go on down to the to the reports on the left hand side, we’re going to open up the good old TB trial balance, I’m going to search for it to find it. So I’m going to type in trial balance, trial balance, there it is, I’m going to open that up. And let’s do a range change up top from a 101 to zero to 1231 twos to one, I’m sorry, a one, a one to one, to 1231 to one, run that report, then I’m going to close the hamburger hold down Control, scroll up just a little bit.
So we’re at that one to 5%, then go to the second report, this is going to be the profit and loss, we’re going to go down to the reports on the left hand side, we’re going to be opening up the P and L Profit and Loss income statement. Selecting the P and L range, changing it up top from the first range is correct, it’s going to go to 1231 to one, let’s run that report, no activity here, I’m going to close up the hamburger.
And then I’m going to go to the second to last tab or second to first tab whichever way you want to look at it, go to the reports on the left hand side, open up our balance sheet report, balancing the sheets, and then we’re going to go up top range change it first range is good second 1230 121 running that report. And there we have it. So this is what I would do. Basically, every time I start to open up the QuickBooks file, we don’t have anything in the income statement because everything we’ve been doing thus far has been affecting the balance sheet only.
And you could just run just the trial balance if you get used to that. And that instead of opening up the income statement and balance sheet that’s a little bit easier to take a look at, although you don’t have the subtotals our first transaction, it’s going to take some of this money that we have put into the company and put it into investments such as investing in securities, something like investing in stocks and bonds.
A couple things we want to point out as we do that, however, note that most businesses we’re not talking about, in this case, a business that’s in the business of investing in securities, most businesses are not our business in this case, is going to be selling guitars and possibly doing like guitar lessons and music lessons and that type of thing. So therefore, when we’re thinking about our investments, if I was to take this money and put it into an investment account, I would typically think of it as having a little bit excess money that I do expect to be using within the business.
But I want to put it temporarily into a holding account. If on the other hand, this excess money was money that we had generated through sales, and it’s and now we have money in our business account that we want to then invest in something like investments, then most likely, we would want to take it out of the business, right, I would take it out of the business as a draw, and then invest it on the personal side of things. Because this money right here in the business, all the assets in the business theoretically, are there so that we’re going to use them, we’re going to use them in order to help us to generate revenue.
That’s why we have the assets in the business. If this asset up here, like cash isn’t helping us to generate revenue, because we don’t need to do anything with the cash in the business to help us to increase the revenue, like invest in equipment or something like that, then possibly I would want to take it out of the business. And I would then want to make a personal investment on it as well. So in this case, it’s a temporary thing.
So it’s a holding, we have a money that we’re going to spend in the business buying equipment or something like that. But we want it for a short term time period, put it into some other securities so we can get a gain on it in the short term. Also note that if you are in the business of investing in something like stocks and bonds, and that’s why you’re putting the information into QuickBooks, the QuickBooks system itself can be used to help you with your financial analysis.
But it’s not there designed for day trading or anything like that. It’s not designed really to keep up with the activity of the market in like real time or anything like that you’re going to need if you want to do that, then you need software that is designed to be keeping up with the market to help you out with your trading and that type of thing. And then you would take your information periodically and put it into QuickBooks possibly monthly or so so that you have your financial statements correct on a periodic type of basis. So that’s how you might work out a system like that.
So we’re gonna take some of our money from the checking account and put it into the investments that means the checking account is going to go down. Some other type of investment account is going to go up I’m gonna put that into an other current liability type of account. And we can think of investments in like, mutual funds. And so you could put it into something like an E trade or like a Vanguard or something like that. That would be managing, you know, mutual fund type of investments. So let’s let’s do that. I’m going to, I’m going to go back on over here.
Now there. Now, if I look at the forms for this kind of transaction, there’s not really a form designed for this transaction. Specifically, we could use basically an expense or cheque type of form, because it is a decrease to cash. So anytime we’re thinking about a financial transaction, we’re trying to think, does it fit in our normal cycles, like a customer cycle, or sales cycle or vendors or payable cycle or employee cycle? If so, what form Do I need to use to drive that, in this case, it doesn’t fit into one of these cycles, necessarily, because it’s not something that we do all the time and one of the normal type of cycles.
So then the next step I would look at as well is cash affected if cash is affected, and and then we might be able to use something like expense form, or cheque form, or if cash was going up, we can then use a bank deposit. And just like we saw with the other with the other side, however, when we look at deposits from the owner, if we’re thinking about a transaction that’s affecting cash, where I don’t need these forms to be used, I might just go directly to the register. So that’s what I’ll do here. Again, I’ll go directly to the register.
So to do that, I’m going to go down to the accounting down below. And I’m going to go into the checking account, there’s the checking account, let’s use the register. And so I’m going to use the register. And we could use basically, I’m going to use an expense type of form, which is kind of like a cheque type form, but I’m imagining it’s an electronic type of transfer. So there’s no check number. And I’m going to put in here, oh 10421. And I’m not going to have a reference.
And then let’s say it’s going to he, we’re going to say each raid, which is a brokerage type of account, online brokerage type of where you can put money into mutual funds, we’re going to set it up as a vendor, even though that’s you know, it’s not really like a vendor because it’s more like an investment area. And then I’m going to say memo mutual funds, possibly. And then we’re going to make a payment, we’re gonna say it’s for 12,000, that we’re going to be putting into there. And then we need an investment account. Now, we probably don’t have an investment account set up. So I’m just going to add a new account just as we go.
So now I’m going to add a new account, instead of going to the register and adding it, I can just add it just as we go here, you could type it in first, and then add it or you can go up top and say new account up top. And we have to choose the account type. So the account type is going to be an other current acid, other current assets, and it’s going to be an investment type account, investment, mortgage investment tax exempt, I’m saying investment other. I’ll just keep it at that investment other.
Well, we named it here, let’s just name it short. I’ll say short term investment just to emphasize the fact that it’s a short term investment here. And so we’re going to then save and close that. And let’s go ahead and record it, recording it. So close the hamburger and save it here to record it. And then let’s check out our our reports. Now I actually did this in the tab that had our balance sheet on it.
So let’s open up a balance sheet again. So I’m going to go down to the reports tab on the left hand side, open the balance sheet backup, I was supposed to do it on the thing to the left, that’s where I wanted to do it. And I’ll close up the hamburger range change up top. So I’m going to take this out to a one, let’s take it out to 1231 to one, run that report. So then the checking account should have gone down if I go into the checking account to check it out. We’ve got the checking account decreasing there, it’s done with an expense type of form into the each raid. If I select that item, it’s not going to go to the register, but to the form that we used when entering into the register that being an expense form.
There’s the payee, there’s the other side, going to the short term investment. Notice we didn’t use items here, it’s not going to an inventory item went to a category directly to an account, closing this back out, then the other side went to the investment. So I’m going to go back on over and it went to the investment. There’s the short term investment, there’s the 12,000 in it, so that looks good. Scrolling back up top, and that looks good. Anything happened to the income statement. Let’s refresh that report. No, nothing happened there. That’s good.
We don’t have any effect there. Trial Balance. Let’s check out the old TV. The trial balance we can see quickly then that the checking account went down, other side went into our short term investments type of account. Let’s go back to the balance sheet, the second item here now we’re going to be printing property, plant and equipment. So we’re going to be down here in the furniture, we just put it under furniture and equipment.
So we’re going to purchase more items here. And this is a common thing when you start the business as well, because what we did is we put money into the business, oftentimes, you have to take that money and then purchase a machinery and equipment, which you’re going to be using to generate revenue, that’s where your return is going to be. So we’re going to now be buying the furniture and fixture. So we’re just going to call it furniture or furniture that we’re going to be buying. So I’m going to go back to the first tab this time, we can’t do that we’re going to pay all of it with cash, so we’re not going to finance any of it.
So then if I think about the forms that are going to be used again, does it fit into my customer cycle or vendor cycle? Not really, because we don’t typically buy these things like large equipment on a daily basis. But since we’re paying all cash for it, then cash is affected, we could use either the expense form or cheque form again, however, I think it’s easier to if I don’t need to use these forms entered directly into the register. So if cash is affected, oftentimes, I’ll go directly to the register.
So let’s do that. Again, I’m going to go down to the register, we’re going to go to the accounts down below, we’re going to go to the chart of accounts, we’re looking for the checking register, I’m going to open that up, I’m going to close the hamburger up top, and then we’re going to say money is going out. So once again, it’s going to be an expense type item. Note that you might have money going out and you might be actually paying checks for it, if you write a check for it, then you could either have your checkbooks separate, where you write a check, and then you entered into the system and you just want to make sure you’re still lining up the check number.
Or you might be in a situation where you are, you might be in a situation where you’re printing the checks out of the system, in which case, you would still need pre printed checks that you would then put into a printer and check out you’d still need to check the check number, or make the check number correct. Let’s go ahead and try a check just to look at it, we look at the same as the expense type of form. And I’m going to try to check here and this is going to be for the date, let’s say oh 109 to one. And then it’s going to be check number now I need to put a check number here to our 102.
So 102 that should match the check on your physical check whether you’re going to print them or whether you have a checkbook that you’re just matching your information in the system or taken from the bank statement, whichever we’re gonna say we’re paying Office Depot. So a new vendor, I’m just adding the vendor as we go, we’re just adding the vendor as we go, I’m going to say tab it will be a vendor. So that’s correct. So I’m going to save that. Note that if you’re doing bank deposit information, like direct deposit or bank feeds, meaning you’re connected to the bank, many times people don’t enter the vendor, because it can be inconvenient, you can record it without a vendor.
But if you don’t record a vendor, you’re you’re you’re losing a level of data that you can kind of sort by because it’d be nice to be able to sort your information by who you paid. So you’re losing that if you don’t have you could still make the financial statements because the account will be right. But you may not have the vendor information. So I’m just going to say purchase of furniture. And then I’m going to say the payment is going to be 18,000.
And then I’m going to put it into that property plant and equipment account which we simply called furniture and fixture, you can search for it on the left hand the right hand side because I’m searching for the account of furniture and fixture or you can type it into the bottom here. And it’ll start to populate until you see it and you say that’s the one that’s the one we want.
Now as we enter these types of items. Note that next time I pay something to Office Depot, for example, it may memorize that I want to go to furniture and fixture. And I may not want to go to furniture and fixture next time because I might be buying small something that goes to supplies. But the fact that it will kind of memorize transactions will make it a little bit easier to enter transactions after we’ve gone through like the first month of operations.
Also note that if we’re purchasing something large, like furniture and equipment or something like that, then we’re not tracking the actual individual items. in QuickBooks, we’re not recording the depreciation or calculating the depreciation at least in QuickBooks, we will record it. But we’re thinking that we have to actually calculate it using outside software that being done by the tax professional, most likely.
So you want to make sure that you’re tracking the furniture and fixture and that you have a list of the furniture and fixture that you are buying, and then provide that to the tax preparer who can then create depreciation schedules which they can then provide to us. So we can enter in the proper amount of depreciation on these assets. So in other words, let’s check it out. If I save this item, and I go back to the balance sheet, I’m going to go to the balance sheet Report. I’m going to freshen it up because this is old again I can tell it’s old, it’s getting a little stale.
Then we go down and now we got the furniture and fixtures. Now if I go into the furniture and fixture I’m going to have this item here that has been purchased at the taxes at the end of the year. I don’t need to give my tax preparer information on the 75,000 if they did my taxes last year, because they already know the furniture and fixture equipment that makes up that 75,000. But the new purchases and the things that I sold, I need to give them this information. And this is probably too general, I just call the office equipment,
I need to tell them exactly what it was. And I want them to give it a nice good detailed list of what it was so that if I sell it in the future, they can identify it easily on the depreciation schedule, and be able to properly record the sale and the gain or loss on the sale, and so on, and so forth. So you want to you want to kind of make sure to track the furniture and equipment use, there shouldn’t be too many transactions in here. So it should be pretty easy to do.
And then make sure that your tax preparer you know is recording the depreciation schedules properly and see if they can give you the information to do the adjusting entries, which we will see at a future point in the practice problem. Now the other side because we paid fully cash for it is going to be up top in the checking account. And so we have the cash going down there is our check number cash going down. If we go on that that item will see a form similar to the expense form now called the check form.
Difference being of course that we have an actual check, if we want to print the checks, we can check this off to print later. And then we can go through the printing process, which would include actually purchasing the checks with check numbers on them, putting them in the printer in the proper way. And then we can print on the pre printed checks. So then I’m going to I’m going to close this back out. And I’m going to go back on up. Let’s go back on up.
And let’s do let’s do one more here, I’m going to go back to the first tab this time, this time, let’s actually use a forum. So again, normally, I wouldn’t use a form, I would just go right in here and enter another check. But we’re gonna go to the forum. Also note that check number 103 is populated automatically when I choose a check. And that shouldn’t be the case, because the check numbers should obviously go in order. And that’s going to be your internal control with your checkbook.
So let’s go up to the hamburger open up the hamburger, let’s hit the New button. Let’s enter this one with an actual check form. So into the vendor section, we’re going to enter it this one with a check form, which is a basically or it is almost exactly the same thing, just a different layout. So now this one, I’m going to say we bought it from Amazon. We’re buying stuff from Amazon tab. And I’m going to add that as a vendor and say yes, so we’re adding it.
Now notice I’m not adding detail to the vendor, I’m just adding a kind of generic vendor there. And we’re gonna go meaning I’m not entering their address and all that kind of stuff. And then I’m going to go, I’ll keep the same date. And notice the check number populating for us automatically, I’m not going to print the check for it. And then tags, no tags, we’re going to go down to the category down below and say that the category once again,
I’m going to type in this time furniture and equipment, same thing. And then you might want to put in the description what it actually was, what it actually was. And then I’m going to say it was for 7000 7000. It’s not going to be billable, because we’re not going to be charging it to a customer. And so we don’t need a customer thing over here, those things are going to be irrelevant to us. What’s this going to do? Well, it’s a check, it’s going to decrease checking account the other side, then go into the account that we assigned it to furniture and equipment.
Let’s save it, close it, check it out, save it, close it, check it out, go to the balance sheet, freshen up this report, make it fresh, throw it in the microwave. Now it’s nice and warm. So we’re going to go down and then in the checking account, we’ve got the 7000. There it is there. Check number 3103. If I go back, then the other side’s going once again to the furniture and the equipment, which now has 100,000 in it even. That’s neat. All right, then I’m going to go back up top. And did anything happened to the profit and loss? Let’s freshen it up.
Nope, nothing happened yet, right? We’re just doing investments in now equipment that we’re going to use to generate revenue. And then if we look at the TB trial balance, which we will provide a report for so you can check them out at the end of the process. And that checking account changed the other side went to the furniture and fixture which you can see nice and quickly. Also just realized that if I go back to that to the left hand side here, and we go into the expenses tab, and we were to check out the vendors. If we go to the vendors, then now we have these new vendors that we set up we got Amazon each raid and then Office Depot.
Now we only owe Epiphone something that was when we first set up the thing, but these three we just added kind of as we went which is enter the data and who we paid and just added the vendor as we went now you want to be careful that you don’t like add duplicates like to to Amazon’s or something like that. You should because you want to be consistent with it.
But as you enter the data, especially for the first month, you can enter the vendors pretty easily so that you can populate that information. And then we can run reports by who we paid. So remember, remember that if you’re used bank feeds, then you could easily start entering information and not add the vendor, which means that your, your financials will be correct, it’ll still flow to the financial but you won’t be able to run the added reports that will sort the information by who you paid by vendor, it’ll only be by account that you assign them to.
So to add that extra level of detail that you can then drill down on if necessary, you got to make sure that you’re adding the vendors and when applicable the customers when you’re recording deposits, and especially when you’re using the bank feeds. We’ll talk more about that when we get to the bank feeds.