QuickBooks Desktop 2023 vendors section. Let’s get into it with Intuit QuickBooks Desktop 2023. Here we are in our sample Rockcastle construction practice problem provided by QuickBooks, we’re going to go through this routine, every time we open up the QuickBooks file,
we’ve got the homepage, you can find the homepage by going to company and then homepage, I’m going to maximize the homepage to the gray area here. And then I’m going to open up the open windows, it’s already open here.
But if it were not open for you view drop down Open Windows only thing we have open currently the homepage, then I always open up the major two financial statements, balance sheet and profit and loss or income statement.
Those being the main two reports that everything we do in QuickBooks from a financial perspective, we’ll be building, that’s what we’re building, when we’re entering the data into the system.
And all other reports feed into these main two reports in some way or in other words provide more detail about these two main reports. So we’re going to go to the reports drop down to do so company and financial profit and loss report. And then I’m going to change the date, I’m just going to make it for the year of 2024.
We’ll talk a lot more about these reports in detail when we get to the Reports section. But for now, just note that this is the main thing that we are constructing, we’re building the end result the end product that all the data we put in place are trying to get to,
I’m going to change this by going from Oh 101 to four to 1231 to four, I think that’s the easiest way to type it in. There we have it, I’m going to go to the end, you also you could change like the size, if you want to try to make this a little bit bigger. Remember that I
increased the size of the screen on my Windows system. And then you can also change the size of the font, for example, by going into the customize reports, fonts and numbers.
And we’ll talk about these options a lot more later. But I might try to increase it from time to time just so you can you could see and do less zooming as we look at these actual reports.
And then I can change the font size and I can change it let’s make it like 11 for example, I’m going to say okay, yes. And okay, so now it’s just a little bit bigger. And then let’s go to the next report reports drop down company and financial,
let’s go to the balance sheet. This time, these domains are two reports, it only has one date 1231 to four, I’m going to make it as of the end of the year that we’re looking at 24. And let’s go to the Customize reports, fonts and numbers.
And then here again, I’m going to change the font, let’s make it 11. I could probably go 12. But we’ll keep it at 11 Just to make it a little bit larger. There we go. Okay, so now we’ve got these three windows open on the left side, I’m going to go back to the homepage.
And I’m going to minimize this icon up top with the caret. So we can focus in on the homepage, the homepage being the flowchart that we want to kind of drill into our head, we want to have this burned into our mind, because this is the easiest way to visualize what actually goes on in the accounting department.
By cycle we’re focusing here on the vendors cycle. So the vendor cycle could also be called the accounts payable cycle, or the build cycle, the payment cycle or something like that.
Ultimately, it’s going to be the outflows of the money in order to be making the purchases of goods and services. So also note that these icons here are typically representing what we call forms.
That’s going to be a technical kind of term for QuickBooks in that we’re talking about data input forms. These data input forms are the things that enter journal entries, which is the accounting term for double entry accounting,
meaning the two sides of the ledgers, the debits and the credits are going to be entered. When we fill out these forms.
The idea of the forms is that you should not need to know basically the full concepts of double entry accounting debits and credits in order to enter the forms and we want to set up the system so we could just enter the forms, do the data input process as easy as possible.
Now also note that everything you see in the vendor center here can generally be found also with the drop down up top. So we have the drop down up top. So we got the vendor center, the bill tracker, the Enter Bills and some of the pay bills and so on.
So once you get good once you’ve burned this into your mind this flowchart, then when you’re in other windows like a report or something, you don’t have to go back to the homepage to find say, the inter bills or to go to the vendor center. Instead, you could go to the drop down vendors up top and find it with the drop down, which doesn’t give you that nice visualization.
But once you have it in your head, it’s an easier way to get there from the dropdowns would be the general idea.
Now we’re gonna go into each of these is a forms in more detail and see how they impact the financial statements balance sheet and income statement and related reports in future presentations. For now, we want to give an overview of the vendor section and the expenses cycle,
we want to think about it from the easiest kind of business that you might be working with to more complex businesses and why it might be basically more complex, the easier side of things usually being the kind of industries where you can have a cash based business.
Now note that you want to think about it differently from the vendor section to the customer section or the receivable section, the expenses side to the revenue side, for example, because it’s possible, you have an easier vendor side, for example, in terms of one that you can have more on a cash basis system.
And even though on the revenue side, you have to have more kind of accrual components to it. So when I say it’s a cash based system on the vendor side of things, that doesn’t necessarily mean that we’re more on a cash basis on the customer side of things, which we’ll talk about the customer side of thing or revenue side of things, and a future presentation.
So we’re thinking about the expenses cycle, the money that’s ultimately going out for goods and services that we’re purchasing, in order to facilitate the needs of the business, the easiest way that could be to be recording is if you were on a cash based system, and you make most of your payments, basically electronically, some way electronically, right?
Because then you could say, I’m going to not only be on a cash based system, but I’m going to be dependent on the bank, possibly waiting for those transactions to clear the bank. Because there are electronic transfers, that will the bank was usually have the data to give you the vendor and the memo so that you can actually know who the vendor is.
And you can put basically the detail in as you have the outflow. So that would basically be kind of this form down here the writing the check form.
Note that they put the check writing form down here, even though the check form is usually the form that’s going to be decreasing the checking account directly.
They put it I think down here, because you can think of it not always as something that you’re going to pay from a vendor, meaning for an expense, someone that you’re buying someone something from, because you might write a check, like to yourself, for example, or something like that, or be paying off a loan.
So the check, the decrease in the checking account isn’t always related to an expense, but most of the time it is so you would think the cheque form,
you can kind of think of it as basically part of the vendor section, because that would be the form most likely and most easily used. When you have, you’re just paying your expenses basically, on a cash basis. It’s the form also generally used if you’re using bank feeds.
And you’re and even when you use the bank feeds, it’s still going to basically be applying out these forms. And so you’re still gonna have like a check form that’s going to be applied with a bank feeds. We’ll talk about the bank feeds later.
So that would be kind of like the easiest kind of business that you can have a cash based business, even more than a cash based business, one in which you’re dependent on the bank. And, and then and then and then you’re going to use the bank feeds possibly.
Now notice that if you were on a cash basis, you could be on a cash based system, but not be dependent on the bank, let’s say that you actually write physical checks. If you write physical checks,
then you probably don’t want to wait for the checks to clear before before you enter them into the system. Because the whole point of the of the process is that you write the physical check and you want to make sure that that check is cleared or not, is it cleared or not.
So in that kind of system, when you’re writing physical checks, you want to actually write the check in the system.
Typically, it’s still a kind of a cash based system because you’re decreasing cash with the same form here, but you’re not waiting for it to clear the bank. And then when it clears the bank, then you’re going to reconcile to the bank.
So again, the cash step above the cash based system, the easier way than the cash based system is one in which you’re dependent on the bank, which you can basically do more and more if you’re doing electronic transfers,
because the memo on the electronic transfers will show you who you pay, for example, the cash based system that you still need to do one more step would be one where you’re writing the actual check.
And then you want to write the check generally both and enter that into the system as you write the check and then the bank will clear it and then you’ve got to use the bank feeds.
If you use the bank feeds or just use your reconciliation to match the two and a reconciliation. We’ll talk about that later. The next step and complexity would be one in which you’re not paying your bills as they as they come in, you’re going to enter them into the system and then pay them at some later time.
Now as as the business gets larger and larger, then it’s becomes more and more appropriate that you want to then then try to pay your bills as late as possible, right because you want a cash management strategy.
So you’re At that point, you’re typically going to go and larger businesses have people, of course, that just do the accounts payable, they basically just manage the accounts payable and try to try to determine what’s the best cash flow strategy,
the cash flow strategy that’s best with a lot of transactions would be one in which you’re going to pay as late as possible that you can as long as you unless they give you some kind of discount, like a cash discount, and then then you pay as late as possible that you could take the discount, usually, would be the the general idea,
a small company, if you pay your bills, right, when you get the bill, and you don’t wait till the last minute, probably not going to be having a big impact, because you’re not doing a whole lot of transactions.
But if you’re a large company, and you and you do more and more transactions, then holding on a little bit longer. And whenever you can, on millions of Trent is becomes a lot of traffic, a lot hundreds and 1000s of transactions can be significant credit card companies, for example, get very into this kind of thing, right?
So so then or if you’re just sorting your bills, because you want to sort which ones are the most relevant that are going to be due, then you’re going to enter the bill, let’s say you get the bill, whatever Bill utility bill, you’re going to enter it into the system as a bill, track it in the accounts payable account.
So in that case, when you enter the bill, now, you didn’t pay any cash, it didn’t hit the checking account. This is where you can’t really use bank feeds just dependent on the bank feeds.
Because now you’re tracking accounts payable, you now went from an cash based system to an accrual based system, because accounts payable, the account that tracks who you owe money to is an accrual account.
So if you’re using that kind of system, you’re going to enter the bill. And then you’re going to sort those bills. And this, this thing helps you to do that, and then you’ll pay the bill.
And that’s a little bit more complex, of course, than just writing a check, or just depending on the thing clear in the bank and then using the bank feeds. So that’s the other one more step and complexity. And then one more step and complexity would be that you have inventory.
So if you have inventory, then then you’ve got to track the inventory inventory is another step away from a cash based system typically, because when you have inventory, you got to put the inventory on the books as an asset.
So when you buy the inventory, you’re not just expensing the inventory, the fact that you’re putting it on the books as an asset means that that it’s going to be it’s it’s not,
it’s not a cash based system, right, the asset account of inventory is an accrual account. In essence, you also might have a purchase order, but this was one of the most confusing forms, we’ll talk about the purchase order later, which would be a request for the inventory.
And then when you receive the inventory, you generally would enter the bill at that point in time when you got the inventory and then you’ll pay off the bill and kind of the normal kind of accounts payable process. But the inventory is another one usually complicates things,
it makes a pure bank feed cashed based system much more difficult. So we’ll talk about that in future presentations. Remember that each of these forms the inter bill, the pay bill are having an impact on your financial statements.
So whenever as well as the writing of a check. So whenever we see these forms, we’re going to jump I’m going to go to the character, the financial statements, we’re going to go to the balance sheet and the income statement and look at those.
So if I open up the checking account, I can drill down on the checking account by double clicking on it, I’m going to change the first date reg a 101 to four.
And then there’s all the detail right, so the check, here’s a check. For example, if I double click on the check, you could see the detail. So each of these forms are going to have an impact on two accounts because we are using a double entry accounting system.
And you can think of a journal entry being made every time we enter something. So this had an impact on this account 206 and decrease the checking account. So there is that.
And then and then the accounts payable is the other form that we’re tracking. This represents us owing people money, this is increased by the bill form.
So I’m going to change the date up top from a 101 to four. So the bills increase it and then the check, the payment of the bill decreases it. So there’s a bill form.
Notice these forms become very useful because they show up in the Type field. So you can see that that’ll tell you what the transaction is. So we’ll get a feel for what accounts are impacted by the forum that’s going to be used.
Because in QuickBooks, it’s not just about the journal entries. If you have an accounting background, you don’t want to just think debits and credits.
You want to think form, and then what the form is making in terms of debits and credits. The form will really help you to understand things and a lot of times when people come into accounting from QuickBooks or bookkeeping from an accounting background, they want to just jump to the debits and credits.
And there they’re missing the added value of the forms. There are There is value to the forms that you want to you want to make sure that you understand how the forms kind of fit into this whole thing.
Okay, so we’ll go into each of these in more detail in future presentations. One more thing on the homepage over here, homepage is the vendor center, which you can get to here.
This will be tracking who’s your pain, the vendors, the people that you’re paying here, and, and it will also give you the detail of each transaction by vendor and so on, which can be a useful tool.
You can also get to that by going to the vendor drop down vendor center. You can also enter the bill from here and pay bill as we talked about in prior or before we talked about that before.