Quickbooks: Recording Non-Cash Investing And Financing Activities

QuickBooks is a useful tool for monitoring and managing cash flow for your business. It classifies accounts into three categories: operating, investing, and financing activities. However, it is not designed for tracking personal investments. It is important to note that QuickBooks is not suitable for personal finance, and investments should be recorded separately from personal expenses. When recording owner investments, it is recommended to set up an owner's equity account and categorize transactions accordingly. This ensures accurate and up-to-date books of accounts. Additionally, for non-cash investing and financing activities, it is crucial to consult with accounting professionals or QuickBooks advisors for specific guidance.

Recording owner investment

Step 1: Access the "Make Deposits" Feature

To begin recording an owner's investment, go to the "Banking" tab in the main menu bar at the top of the QuickBooks screen. From the drop-down menu, select "Make Deposits." If you encounter the "Payments to Deposit" window, choose the payment and investment check you wish to deposit, then click "OK." If you only want to deposit the investment check, simply click "Cancel."

Step 2: Select the Company Bank Account

In the "Make Deposits" window, specify the company bank account where you want to deposit the investment. This step is crucial to ensure the funds are directed to the correct account.

Step 3: Provide Investment Details

In the "Detail" area, enter the name of the owner or co-owner making the investment. This helps identify the source of the investment. Next, input the amount of the investment in the "Amount" input box. This reflects the value of the owner's capital contribution.

Step 4: Select the Applicable Owner Equity Account

Click on the "From Account" drop-down menu and choose the applicable owner equity account from the list of available accounts. This step associates the investment with the specific owner or co-owner.

Step 5: Save and Close

Once you've entered all the necessary details, click "Save and Close" to record the transaction. This will finalise the process and ensure the owner's investment is accurately reflected in your company's financial records.

Additional Considerations:

• It's important to note that owner's capital includes investments, profits, retained earnings, and other funds belonging to the company owner.
• Using the Owner's Equity account is essential for tracking all transactions related to the owner's capital.
• If you need to pay the owner or another owner for funds taken from the general business assets, utilise the Owner's Draw account to record those transactions.
• Keeping owner information separate from general company finances simplifies tax preparation and makes it easier to track expenses and income.
• You can also create multiple owner equity accounts in QuickBooks, allowing you to assign a unique account to each partner in the business.
• If you're entering a loan as an investment, ensure you know the type of loan (current or long-term), the opening balance, and the interest payments.

Tracking non-cash investing

• Go to the Gear icon and select "Chart of Accounts."
• From the "Account Type" drop-down menu, select "Equity."
• From the "Detail Type" drop-down menu, select "Owner's Equity" or "Partner's Equity," depending on your situation.
• Click on "Save and Close."

Once the equity account is set up, you can make a deposit to this account, which will be used for your expense transactions. Here are the steps to make a deposit:

• Click on "Bank Deposit."
• From the "Account" drop-down menu, select the bank account into which you are depositing the money.
• Enter the date you deposited the money.
• In the "Add funds to this deposit" section, enter the name of the investor in the "Received From" field.
• Select the appropriate equity account from the drop-down list in the "Account" field.
• Specify the payment method.
• Enter the investment amount in the "Amount" field.
• Click on "Save and Close."

After depositing the funds, you can record your expenses by following these steps:

• Choose the New (+) icon.
• Pick either "Expense" or "Cheque."
• If applicable, select the VAT agency from the "Payee" drop-down menu.
• Enter the necessary information.
• In the "Category Details" section, choose the equity account for the "Category," "Description," and "Amount." If applicable, select your VAT code for the "VAT" column.
• Click on "Save and Close."

It is important to note that QuickBooks is not designed for personal finance or investing. Therefore, it is recommended to use other software, such as Quicken, for tracking personal investments. Additionally, it is always advisable to consult with an accountant or tax professional to ensure accurate and compliant recording of transactions.

Financing activities

To record financing activities in QuickBooks, you can follow these steps:

• Set up an owner's equity account: Click on the Settings or Gear icon, then select Chart of Accounts. Click on New, select Owner's Equity from the Account Type drop-down menu, and choose the appropriate detail type (Owner's Equity or Partner's Equity). Save and close.
• Record owner's contribution: Go to the Accounting section, click on Chart of Accounts, and then click on New. Select Equity under Account Type and choose the previously set up Owner's Equity from the detail type drop-down menu. Enter the owner's contribution or equity in the name or description and type the owner's investment amount in the balance field. Save and close.
• Categorise transactions (if your bank account is connected to QuickBooks): Click on New, then Bank Deposit. Select the relevant connected bank account, enter the date, and specify the investor's name in the "Received from" box. Choose the appropriate equity account and payment method, then enter the owner's investment amount and save.
• Return funds from the investment: To record an investment repayment, select +New, then Check. Enter the payee (person or company being repaid), enter a check number, and in the Category Details section, include the equity account and the amount being repaid. Add any additional lines for interest or other charges, then save and close.
• Set up an owner or partner in QuickBooks: Click on Expenses, then the Suppliers menu, and select New Supplier to add the owner or partner's information.

It is important to note that QuickBooks may not be the best suited platform for tracking certain types of investments, and other software like Quicken may be recommended instead. Additionally, it is always advisable to consult with an accountant or financial advisor to ensure accurate and compliant recording of financing activities.

Categorising transactions

Step 1: Set Up an Owner's Equity Account

Firstly, navigate to the Settings or Gear icon on the QuickBooks homepage and select the "Chart of Accounts". From the drop-down menus, choose "New", then "Owner's Equity" under Account Type, and then select either "Owner's Equity" or "Partner's Equity" from the Detail Type menu. Finally, click "Save and Close".

Step 2: Record Owner's Contribution

Next, go to the "Accounting" section of the QuickBooks homepage and click on the "Chart of Accounts". Click "New", then select "Equity" under Account Type, and choose the Owner's Equity account you previously set up from the Detail Type drop-down menu. Type the owner's contribution or equity in the name or description field, and enter the investment amount in the balance field. Finish by clicking "Save and Close".

Alternatively, if your bank account is connected to QuickBooks, you can simply categorise the transactions associated with your deposits. To do this, click the "New" button and select "Bank Deposit". Choose the relevant connected bank account from the Account Type drop-down menu, enter the date of the deposit, and enter the name of the investor in the "Received From" box under the "Add Funds to This Deposit" section. Choose the appropriate equity account in the Account field and specify the payment method. Finally, enter the owner's investment amount in the Amount field and click "Save and Close".

Step 3: Record Repayment of Investment

If you need to record repayment of the investment at a later date, you can do so by following similar steps. If you are sending a paper check, select "+New", then "Check". Enter the name of the person or company you are repaying, along with the check number in the Check Number field. In the Category Details section, include the equity account you use to track the investment and the amount you are repaying. On the next lines, enter any additional charges and their corresponding accounts. Finally, click "Save and Close".

Step 4: Set Up Owner or Partner in QuickBooks

To track capital invested by owners or partners, you can set them up as suppliers in your QuickBooks account. Navigate to the "Expenses" section and click on the "Suppliers" menu. Select "New Supplier" and fill in the required information. Click "Save" to finish.

Creating a journal entry

Step 1: Access the Journal Entry Feature

To begin, navigate to the "+ New" button within QuickBooks and select "Journal Entry" from the menu. This will open a new window where you can input the necessary information for your journal entry.

Step 2: Select the Expense Account

In the first line of the journal entry, you will need to choose the appropriate expense account related to the purchase or investment. This could be an account specifically created to track owner or partner investments. Next, enter the amount of the transaction in the "Debits" column.

Step 3: Choose Owner's or Partner's Equity

On the second line of the journal entry, select either "Owner's Equity" or "Partner's Equity," depending on your business structure and the nature of the transaction. Enter the same amount as the first line in the "Credits" column. This represents the capital contribution by the owner or partner.

Step 4: Save and Close the Journal Entry

Once you have entered all the necessary information, click on "Save and Close" to complete the journal entry. This will record the non-cash investing or financing activity in your QuickBooks account.

Step 5: Reimbursement Entry (if applicable)

If you are reimbursing the owner or partner for the expense, you will need to create an additional entry. Click on the "+ New" button and select either "Check" or "Expense." Choose the appropriate bank account that will be used for reimbursement. In the "Category" column, select "Owner's Equity" or "Partner's Equity." Enter the reimbursement amount and save the transaction.

By following these steps, you can accurately record non-cash investing and financing activities in QuickBooks, ensuring that your books of accounts remain up-to-date and accurate. Remember to consult with your accounting professional or QuickBooks ProAdvisor for further guidance and to ensure that your journal entries are correctly classified for financial reporting purposes.

Frequently asked questions