QuickBooks Online 2023 short term investment sales and recording gains on sale, get ready to start moving on up with QuickBooks Online 2023. Here we are in our get Craig guitars 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 the Incognito window or another browser, you can open incognito by selecting the three dots.
If you’re using Google Chrome in the browser, select incognito window type into the search engine, QuickBooks Online test drive, we’re going to use the sample company to compare the accounting view,
the view get great guitars file is in and the business view, the view the sample company is in if you want to change between the two views, select the cog up top and switch the view down below,
opening a couple tabs to put reports in like we do every time right click to duplicate the tab, duplicate it, and then duplicate the process again duplicate.
And then we’ll go back to the tab in the middle reports on the left hand side, we’re going to open up one of the faves the balance sheet report as that’s thinking, I’m going to just see, where do we go on the Business View, by the way, the reports are in the business Overview tab, and then the Reports tab.
That’s where they are. And then we’ll tab to the right, open up the reports again, this time we want the P and the L the profit and loss we’re going to close up the ham Bogey, scroll up and change the range.
Let’s go from a one a 123202 28 to three and then I’m going to do the month by month comparison, compare the months and then run it. So now we got January we got fed and fed only has some activity thus far with the interest and then the total year to date,
January and fed. So let’s go to the tab to the left, close up that bogey this time, I’m just gonna go from a 10123202 28 to three and keep it at that and run it.
And that’s the setup process that we do every time now we’re going to be focusing in on the short term investment account. So first, I want to just give a recap of how we put that on the books.
And when you might have a short term investment account on your business books versus your personal books. So I’m going to close up the assets here. And then the liabilities.
When we first started the company file if it was a new business, oftentimes, we’re going to need assets to help us to generate revenue in the future those assets will generally be things like property, plant and equipment. In our case, it might be the building where we’re going to do our shop.
And it might be the inventory that we’re going to have to purchase, because we’re going to need to sell the inventory in order to generate the revenue.
So if you haven’t had any revenue in the past, because you’re starting the business, or you’re expanding it, then you’re going to need the capital to start the business, where’s that going to come from? Either it’s coming from you, the owner.
So you can put money from yourself into the business the owners into the business in an investment, or we can get a loan. So that’s what we did, we took out a loan and we put some money from us into the business. And then we bought property,
plant and equipment and investment hoping that that will help us generate revenue in the future as well as inventory. Now we also have some revenue or cash left over.
And this is where the key comes in with the business here because I think a lot of people get a little bit confused, separating the business from the personal books, meaning on the business side of things, this business isn’t here in order to generate revenue from returns on stocks and bonds,
it’s here to generate revenue from our business of get great guitars. That’s what that’s so any assets we have in the business, even cash, we have that in there in order to cover current costs,
as well as possibly invest into the future, and property, plant and equipment and inventory to help us generate revenue that we’re going to get a return on.
If we have assets in here that we think we are we don’t need because we generated revenue and we have cash and there’s we have no plans of putting it back into the business buying more property, plant and equipment, for example, or inventory in the future, then we don’t usually want to keep it into the business,
we would then take it out of the business, give it to the individual, the individual will then generally use it to invest in stocks and bonds or wherever else they would want to go. That’s the that’s the general idea.
Now it gets a little bit complicated when you have you know, retirement plans in the business and so on and so forth. But that’s the general concept. So from the business perspective, if we had cash that we think we’re going to use in the future, but we’re holding on to it now we’re going to buy property, plant and equipment shortly,
but we’re holding on to it. That’s when we might then put some of it into like a short term investment typically. And we have a short term investment here. Now there’s different rules for generally accepted accounting principles on how you account for an investment. If it’s going to be short term or mid or long term, I’m not going to get into details with that,
I’m just going to give kind of the over the overview concepts here. So we that’s when we would have our short term investment on the books, because now I’m still going to use that cash in the future, fairly soon,
you would think and then buy property, plant and equipment with it. Now, if this was your personal books, or you had a business, if obviously, if you had a business that was in business for financial
investments, investments in stocks and bonds, then you would you would be tracking investments in stocks and bonds in order to generate revenue from the stocks and bonds.
But our business is not bad. It’s it’s a guitar shop, like most businesses aren’t investment businesses right now, on your personal side of things. You can also use QuickBooks for your personal investments.
And in that case, you wouldn’t be tracking of course, your stocks and your bond accounts in QuickBooks, and it works quite well to do that the goal is just different for your personal than from the business on the business, you’re trying to use your assets to generate revenue in the future that you’re trying to get a return on your assets from the business.
On the personal side of things, your overarching goal is to live well or something like that, right? So because because you’re gonna have expenses for vacations and stuff that have nothing to do with generating revenue. So it’s a dip, but the double entry accounting system works in a similar fashion.
So so that means, then the question is, well, if I have the short term investments on the books, how am I going to break them out? Let’s first just do a quick look, if it was a personal thing,
if it was on the personal side of things, you might want to group your short term investment accounts into, say, your financial institutions like Vanguard versus an E trade versus your bank or whatever, if you have multiple places versus your 401 K in your business,
or that you’re employed at or something like that. And then you can adjust these periodically, when you get the statements, which might be at the end of the month, or a year, instead of trying to put every individual stock that you will hold,
or even every individual mutual fund in here, because you’re going to get too much detail in QuickBooks. Remember that QuickBooks is not here to track the day to day transactions of your investments.
There’s other software that can do that. Oftentimes, the websites themselves are the place to kind of track that day to day activity,
if you’re trying to make make quick changes in terms of your stock positions on a day to day trading basis. But you want to be careful with that too, as well.
And you have other software, like a Personal Capital, I think is one and Quicken I think is another that can give you the ending balances your balance sheets, information from the financial institutions, you know, as as the market changes,
but QuickBooks is not designed to do that you could link to the banks and linked to financial institutions. But QuickBooks doesn’t want to give us the Indian balance on the balance sheet, they want to give us the activity, so that we can create not only the balance sheet, but also the income statement. So the point is, it’s kind of cheating to just take the ending balance.
And it’s not just cheating, it’s not going to help you out from a bookkeeping standpoint, although it will give you a nice snapshot of where you stand.
So you might use these different software’s in alignment, you might have a QuickBooks, you might have a Personal Capital, that can help you to see where you stand in a snapshot kind of format.
So and also, then you might want to break out your your investments that are in that are in not under the umbrella of an IRA, or retirement account in short term.
And then you might put long term assets as those that are under the umbrella of a 401 K or an IRA or a 403 b those that you can’t get into very easily so that you can see your liquid cash versus the cash that you can’t really reach. So those are some concepts. On the personal side.
On the business side, we have similar kinds of things. If I put if I put the short term investments on the books, again, I’m probably going to try to
put it in here at one lump sum investment in whatever the financial institution I have it in might have actually multiple investments, meaning I might be in a mutual fund with multiple investments, or I might have multiple mutual funds.
So I could break it out stocks versus bonds, or just have one lump sum here that I change periodically, then I’m gonna get interest or dividends on the investments. If that interest in dividends goes directly into my checking account.
Then I’m going to see them coming through the bank feeds and I might record them just simply with the bank feeds as they hit the check in They count to income. So that means I would have income and I could go over here.
And I could, I could then just have them increased income. Now normally, if I was to increase income from investments, then I would put it down at the bottom, not an income up top. Because it’s not part of my normal operations, this business isn’t there to generate interest and dividend income.
But if we get dividend interest income, that would be great, I’m going to reflect it at the bottom, just to show my my net income before this other investment income would be the general idea.
Now, it’s also possible for you to rollover your dividend income and invest it back in which you would like to then make a journal entry once in a while to put it back into back into your investment in that case, so you have to record the the dividends and interest and then increase your investment account.
Meaning it would be a journal entry, in essence, increasing the investment, the amount that you’re investing the other side going to dividend and interest income.
Now the other issue we have is that the investment account could go up or down in value due to the market not due to dividends and interest.
So it’s just gonna go up and down in value the stock price, for example. Now, now, if we took the cost like usually when that when we think about like a building down here for fixed assets,
when a building goes up and down, generally accepted accounting principles in the United States usually says, well, we’re not going to go with the fluctuations of the increases and decreases in the market value of the building, in part, because we don’t know what the market value is, right? There’s other arguments than that.
But a building is unique, until you sell it, you don’t really know what the cost is. And people can manipulate the value of their books by having higher or lower appraisals on a building. But if you’re talking about stocks and bonds that are publicly traded on a public exchange,
then you can still have an argument that the fluctuations are not valid, or whatever, because you haven’t realized them. However, you pretty well know what the value of your stock is, because other stocks are trading for that same amount.
Therefore, there’s a good argument to record your stocks and bonds if they’re trading on a market at market value. So that but then the question is, logistically, how do I do that, if I get if I get a report saying that my stocks went up, let’s say by by $500, or something like that, then how am I going to record that I can increase this account by $500. Or possibly I make another sub account,
which shows the unrealized gain, or $500. So I tried to track it separately under the parent sub account, another method you can use. And the other side, the two methods you could use as you could put the other side to equity, the argument being that you haven’t yet realized it.
So I’m just going to have the other side go to equity and not hit the income statement. But that’s confusing to most people. So most people I would suggest, then are going to report it on the income statement, not as income again, but down here at as other income down at the bottom, and just call it unrealized gains or losses.
So those are the those are the kind of the issues just want to touch on them, we’re going to imagine that we’re going to sell our investment. So let’s imagine that we just sell it, we could just wait till it sells. So I put it on the books at at 12,000. That’s the cost, I’m going to wait till we just sell it. So later on, we’re just going to say okay, I’m going to sell it for whatever I can now and imagine that we got when we sold it 12,250.
So if I got 12,250. And I bought it for 12,000. It went up by 250. So what am I going to do, the cache account has to go up with a deposit form, let’s say by the by the 12,002 50, this needs to go down to zero by 12,000. And the other side needs to go on the income statement.
Now this is another transaction that we don’t expect to happen all the time. So if I go to the first tab, and I hit like the plus button, there’s not really a form that’s directly related to recording the changes in the value of an investment, right? Because it’s not a day to day transaction. It’s like an adjusting entry.
So then the question I would usually go through is is cash affected, and this case it is cash is going up. So I would use a deposit form. If cash wasn’t affected, and you were just recording say a gain to the value of the stock,
you can then and you would just say an increase to the stock value the other side’s go into unrealized gain, then you would have to use a journal entry, which you could enter a journal entry by using the registers meaning you could go into the chart of accounts on the left
hand side and the accounting and you then go into the Chart of Accounts close up the bogey. And by the way, if you’re in the business view, by the way, the chart of accounts is under the bookkeeping, under the bookkeeping, and then the chart of accounts right there,
and then you have to hit that thing in the sample thing to see it. Okay, and then you could go into the Chart of Accounts, and you could go into the investment account, and use the register. And then, and then enter a journal entry, you know, basically this way, and the register.
So we’re gonna go into a deposit. So I’m gonna hit the plus deposit form, my throats a little messed up here. That’s okay. I have coffee, coffee fixes, fixes stuff. So I’m going to say this is from
Oh, 202 22, not 2223 23 We’re working in now. Get up to date, man, you’re living in the past, this is going to be short term, I’m going to say, deposit form, this is going to be short term investment has to go down.
So we might want to put a description, but I’m not going to put one here probably would be good. And I’m just going to put the amount of 12,000.
And then the other side, I’m going to have to make an account for it’s going to be gains on sale of investments. So I probably don’t have an account in here for that most likely and in the myriad of accounts that they gave me.
So I’m just going to make a new one, I’m going to add it, I’m going to make it not an income account, but rather an other income, other income.
So it’ll be at the bottom of the income statement. And then you got dividends, other interests, I’ll just call it other investment income. And then I’m going to call it other income, no, I’m going to call it gains on sale of investment.
Something like maybe an S investments, no description, I’ll keep it there, save it and close it, what’s this gonna do increase the checking account, because it’s a deposit for the full amount, or hold on a sec,
I need $1 amount here, don’t get ahead, you’re getting ahead of yourself. So it’s going to increase the checking account by the 12,002 50, the other side’s going to decrease short term investment down to zero and the gains,
then we’ll be on the income statement up to 50 at the bottom of the income statement. That’s what should happen. Let’s see if that’s what does happen.
So let’s record it, go back to the tab to the right, run it, go into the check in, we’re going to check out the check in once again, we’re always checking out the check in, there’s the deposit right there, the checking is so interesting.
And that’s why we check it out all the time. And then the other side is on the the loan went down, or the investments down to zero, because we no longer have it, we cashed it in to buy more stuff.
Because we’re going to make more money selling guitars than we ever would, from the dividends and interest, we’re going to be billionaires with our business. And then on the tab to the right. I’m going to run it again.
And then down below, we’ve got then the interest and the gains are down here. So notice, now we Why would we do that because I could have put the gain up here.
But we don’t typically do that, because that’s not part of our normal operations. And we haven’t realized the gain. So we’re going to say, hey,
look, this is the gains from actual operations that we can count on in the future. And then these are gains from investment stuff that we don’t isn’t really part of our business. But we just put some money in the investments and we got a gain. So we put it down here. Don’t expect that to happen again, in the future. That’s not part of our business model or anything.
But hey, we’ll take it if it comes. And so that’s that’s how it works. So we might show you how to move this one down there to at a later point because sometimes some businesses want might want to do that.
So I’m going to right click on the tab up top and let’s see where we stand on the trusty trial balance. So let’s go to the reports down below. And I’ll just open closed the bogey type in trial balance. The balance is once again on trial.
And then I’m going to make from Oh 10123202 20 823 And I’m going to run it month by month. So you can see the beginning balances for Jan and Feb Jan and Feb. So we are of course at the end of Feb. And so you can check out those numbers if they tie out great.
If not change the range try to expand it. And if they still don’t match, we’ll do a transaction detail report at the end of the second month of data input, which will help us drill down on any differences