When I have a prepaid subscription that includes 12% tax that I pay in July but want to create a JE over 12 months how/when do I record the tax? Do I need to use the tax column in the JE for each of the recurring JE's or only capture it when I prepay in July?
You would just skip the recurring posting journal entry part of this video. You can record the expenses on a monthly basis once knowing the exact amount using the same journal entry, debiting the expense and crediting the prepaid asset account. The only difference is rather than setting it up to post automatically using the same monthly amount, you just put in different expense amounts per month based on the actual used, but the journal entry layout is the same. In QBO you can still create that Journal Entry template by choosing it as "Unscheduled".
Great video thanks. What about prepaid expenses that are different each month and those expenses are billable to clients. Tolls equals to a prepaid amount and then debits that prepaid amount. I pass tolls onto my client. What should Indiana ezpass toll be in QBO as? Indiana ezpass charges a deposit for tolls to be debited from. Then when a toll is processed and debited from the balance of ezpass, how should that entry be put in QBO? When the balance gets to a certain point, Indiana ezpass charges the bank or credit card to build its balance. How should that entry be put in QBO? Thank in advance, hope to see a video of setup and then how to process it.
When EZ Passes charges you can classify this as the prepaid expense asset account. Then, when charged create a new expense in QBO an make sure to choose the same Prepaid Expense Asset account under the "Payment account" section of the expense, then the rest is the same as a normal expense and you can click the "billable" expense box to pass onto the client. Creating the expense with the prepaid expense asset account as the payment will essentially debit (increase) the billable expense account and credit (decrease) the prepaid expenses asset account.
How do you make adjustments for when your 12-month insurance policy doesn't divide out perfectly like with your example. My premium is $3276.20/12 which rounds to 273.01. That ends up being over by 4 cents by the end of the year. Would you do 11 months of reccuring and create a one-time expense for the last month? Or would you set it for 12 months and just make an adjustment at the end? I feel like either way, I'm not going to remember why I'm off when I go to balance that last time. :)
Either of the two options you provided would work. However, I personally would probably prefer to set it to 12 months and make the adjustment at month 12 because I feel you would have a better chance of noticing the negative prepaid asset balance on your Balance Sheet at month 12, which will remind you to make the adjustment that month. Another option that I realistically would do as I wouldn't want to trust myself to remember to make that adjustment 12 months in the future is to first set the recurring monthly transaction and set the end date for month 11. Then, create a second “recurring” transaction for the adjustment amount that will be left over during month 12 and set both the start and end dates for month 12 only. That way, everything will be set to take care of itself automatically! Thank you for watching and let me know if you have any other questions.
@@essentiallyintentional I think you're right. I probably would remember when I see the negative balance on the balance sheet. Plus I put a reminder in the description so it should show up on the transactions to remind me. I like your other recommendation, too. In fact, I may change it to that just so I don't have to think about it later! Thanks so much for responding! Great video.
I don’t believe you can directly as you need to choose a bank/cc account when marking a bill as paid. You can indirectly though by creating a journal entry, debiting Accounts Payable with the bill vendor name chosen and crediting the prepaid expenses asset account. This will still show up on your UnPaid Bills report per vendor as a positive for the bill and then a negative for this JE bill pay. So the ultimate outcome will be what you’re looking for, but it won’t be incredibly direct and the bill will still remain “open”.
My boss bought/pre paid $17,000 worth of dyed diesel. Once I post that as an “other asset” - then how do I keep track of it once we are starting to use it for the fuel on jobs for others or ourself’s? How can I post against that asset?
You can periodically enter Journal Entries like shown in the video around 10:30 the difference being you most likely won't want to set up a recurring transaction like I show in the video because the prepaid write off will not be consistent. So, what you can do is periodically enter a Journal Entry into QBO that Debits the associated Expense(s) account for the diesel use and then you would Credit the Prepaid Asset account. I can't speak for how to track it and there are no features in QBO to track Assets like this, the tracking itself will need to be completed using outside sources. My guess is to have some sort of total volume recorded when the $17,000 was purchased, and then complete periodic checks of the remaining volume and use the percentage of total diesel used and multiply that by the $17,000 total to get a "book" value of diesel used in order to know how much to periodically write off as an expense via the Journal Entry I mentioned above. If you have a Tax Accountant, it wouldn't hurt to ask them how they would prefer this tracking and expense recording of the diesel to be handled as well. Thanks for watching!
I would use inventory for that, lets say for each job, include that as shop supplies until it gets consumed; of course you'd use COGS type instead of asset instead of trying to do this and then include this as income whenever a job is sold; call it shop supplies category income when doing this transaction and you can just tie it to that until all inventory goods are sold off. Your boss would also want to make some sort of margin for this so, the buy vs the sold price would be set-up during the initial part number setup, etc.
If I understand you correctly and if your taxes are filed via the "Cash" method, then you will be able to enter Prepaid expenses and run reports as Accrual throughout the year in order to get a more accurate picture of your business, but at any point, you can run reports under the “Cash” method and the expenses will automatically only be counted when they were actually paid. So simply, if you run your reports for tax reasons as “Cash”, the expense will all be counted in total when it was paid.
Good job, clear explanation of prepaid expenses.
I really appreciate this method. Thanks for the video.
hello - my template is not saving - the red error says (The recurring start date can’t be before today.)
Love it, Thank you
When I have a prepaid subscription that includes 12% tax that I pay in July but want to create a JE over 12 months how/when do I record the tax? Do I need to use the tax column in the JE for each of the recurring JE's or only capture it when I prepay in July?
What if the prepaid expense is for fleet fuel?
How would that be recorded since the amounts are different every month?
You would just skip the recurring posting journal entry part of this video. You can record the expenses on a monthly basis once knowing the exact amount using the same journal entry, debiting the expense and crediting the prepaid asset account. The only difference is rather than setting it up to post automatically using the same monthly amount, you just put in different expense amounts per month based on the actual used, but the journal entry layout is the same. In QBO you can still create that Journal Entry template by choosing it as "Unscheduled".
Great video thanks.
What about prepaid expenses that are different each month and those expenses are billable to clients.
Tolls equals to a prepaid amount and then debits that prepaid amount. I pass tolls onto my client.
What should Indiana ezpass toll be in QBO as? Indiana ezpass charges a deposit for tolls to be debited from. Then when a toll is processed and debited from the balance of ezpass, how should that entry be put in QBO? When the balance gets to a certain point, Indiana ezpass charges the bank or credit card to build its balance. How should that entry be put in QBO?
Thank in advance, hope to see a video of setup and then how to process it.
When EZ Passes charges you can classify this as the prepaid expense asset account. Then, when charged create a new expense in QBO an make sure to choose the same Prepaid Expense Asset account under the "Payment account" section of the expense, then the rest is the same as a normal expense and you can click the "billable" expense box to pass onto the client. Creating the expense with the prepaid expense asset account as the payment will essentially debit (increase) the billable expense account and credit (decrease) the prepaid expenses asset account.
How do you make adjustments for when your 12-month insurance policy doesn't divide out perfectly like with your example. My premium is $3276.20/12 which rounds to 273.01. That ends up being over by 4 cents by the end of the year. Would you do 11 months of reccuring and create a one-time expense for the last month? Or would you set it for 12 months and just make an adjustment at the end? I feel like either way, I'm not going to remember why I'm off when I go to balance that last time. :)
Either of the two options you provided would work. However, I personally would probably prefer to set it to 12 months and make the adjustment at month 12 because I feel you would have a better chance of noticing the negative prepaid asset balance on your Balance Sheet at month 12, which will remind you to make the adjustment that month. Another option that I realistically would do as I wouldn't want to trust myself to remember to make that adjustment 12 months in the future is to first set the recurring monthly transaction and set the end date for month 11. Then, create a second “recurring” transaction for the adjustment amount that will be left over during month 12 and set both the start and end dates for month 12 only. That way, everything will be set to take care of itself automatically! Thank you for watching and let me know if you have any other questions.
@@essentiallyintentional I think you're right. I probably would remember when I see the negative balance on the balance sheet. Plus I put a reminder in the description so it should show up on the transactions to remind me. I like your other recommendation, too. In fact, I may change it to that just so I don't have to think about it later! Thanks so much for responding! Great video.
is there no way to create a prepaid expense, but also enter bills and pay bills using money from prepayments?
I don’t believe you can directly as you need to choose a bank/cc account when marking a bill as paid. You can indirectly though by creating a journal entry, debiting Accounts Payable with the bill vendor name chosen and crediting the prepaid expenses asset account. This will still show up on your UnPaid Bills report per vendor as a positive for the bill and then a negative for this JE bill pay. So the ultimate outcome will be what you’re looking for, but it won’t be incredibly direct and the bill will still remain “open”.
good job
My boss bought/pre paid $17,000 worth of dyed diesel. Once I post that as an “other asset” - then how do I keep track of it once we are starting to use it for the fuel on jobs for others or ourself’s? How can I post against that asset?
You can periodically enter Journal Entries like shown in the video around 10:30 the difference being you most likely won't want to set up a recurring transaction like I show in the video because the prepaid write off will not be consistent. So, what you can do is periodically enter a Journal Entry into QBO that Debits the associated Expense(s) account for the diesel use and then you would Credit the Prepaid Asset account. I can't speak for how to track it and there are no features in QBO to track Assets like this, the tracking itself will need to be completed using outside sources. My guess is to have some sort of total volume recorded when the $17,000 was purchased, and then complete periodic checks of the remaining volume and use the percentage of total diesel used and multiply that by the $17,000 total to get a "book" value of diesel used in order to know how much to periodically write off as an expense via the Journal Entry I mentioned above. If you have a Tax Accountant, it wouldn't hurt to ask them how they would prefer this tracking and expense recording of the diesel to be handled as well. Thanks for watching!
I would use inventory for that, lets say for each job, include that as shop supplies until it gets consumed; of course you'd use COGS type instead of asset instead of trying to do this and then include this as income whenever a job is sold; call it shop supplies category income when doing this transaction and you can just tie it to that until all inventory goods are sold off. Your boss would also want to make some sort of margin for this so, the buy vs the sold price would be set-up during the initial part number setup, etc.
How does my tax accountant include in the year the expense was paid?
If I understand you correctly and if your taxes are filed via the "Cash" method, then you will be able to enter Prepaid expenses and run reports as Accrual throughout the year in order to get a more accurate picture of your business, but at any point, you can run reports under the “Cash” method and the expenses will automatically only be counted when they were actually paid. So simply, if you run your reports for tax reasons as “Cash”, the expense will all be counted in total when it was paid.