In this presentation, we will discuss a method to track charitable deductions in our business QuickBooks accounts using equity accounts using draws accounts within QuickBooks. Here we are in the home page, we currently have the open windows open, you can open the open windows by selecting the view drop down and the open windows list. What we're going to do is enter data directly into the check register, we're going to have a simplified method more of a cash basis system where we're going to enter all of our transactions directly from the bank statement into the check register. As we do so, we will talk about these items that will be related to tax deductions, this time being charitable deductions typically something that would be deductible on Schedule A of the 1040 not typically Schedule C if we were a business owner, not in other words, a business expense, but something we typically need to track to do here in taxes.

How can we then input that into our system. To do that, we're going to select the banking drop down, and we're going to go to use register. And we're going to select the check register. So we're going to say okay, and here's going to be our check register entering data just as we would if we had a checkbook. Entering the data into the system. We've got two months of data.

So far, January and February, enter directly from the bank statement, we're now going to enter the next month of data from our bank statement. And this is just one method we may use in order to enter the data fairly simplified method. It's more of a cache based method. But whatever method we can use to enter the data into QuickBooks, we can use a similar system with regard to the payment for something like charitable deductions. So then we're going to take a look at our mock bank statement. Here's our mock bank statement for March.

Our goal then is just to enter this data into our QuickBooks system. So we have here The beginning balance the additions that subtractions, the ending balance for March, then we have the deposits that are going to add up. This is the detail of that 19 520, which are the increases, and then the decreases, mainly being checks, and then some other items down here for the decreases to give us that 16 683. Now, it doesn't matter if we don't write checks, and we do a lot of electronic transfers, that's okay. As long as we paid it out of the checking account of the business checking account, then we're going to see it on the bank statement. And we can then use that data to enter into the QuickBooks system, using whoever we paid as an indication as to which account we need to assign to.

That's going to be our goal here. So we're just going to go straight through these then these payments and we're going to enter them into our system. The ones that we have created, red made red here are the ones that we're going to focus in on in our case, this time, we're going to focus in on the American Red Cross and save the children, these been two items that we paid out of our business account. And we paid them to charitable deductions to charities. Now, we typically wouldn't do that for our business account. And we would want to pay that out of our personal account.

However, if we do pay it out of the business account, then we can track it as we enter the data from the business account into QuickBooks, that's going to be our method here, we're going to intentionally pay these out of the business account, so that we can then assign them to an account within QuickBooks, being careful that it's not an expense account under this method, but rather an equity account so that we can track that and be able to provide that information with urine tax planning as well as the normal documentation for the business. So that's the method here note that as we do this, if we look at just the cash account for the business, it's kind of a little bit more money now because the transactions involved here already. Not all going to be business related that are in our checking account. So from the bank's perspective, just looking at their books, us their records of our business, it looks a little bit more muddy.

However, when we put it into our system, we're going to be able to separate this stuff out and put the expenses that are going to be business related on the income statement, and break out the items that are not business related into an account that we can then track. So those are kind of the pros and cons of a method like this. So we'll go through this adding a new normal account, the post office first on 35. So I'm going to go back to QuickBooks, and I'm just going to say this. Oh 30519. That means I've got three March 5 2019.

If the time period we're entering this data for the check number is 1021. So I'm going to put 1021. Again, if you have electronic transfers, that's okay. Just don't put a check number there and put Other or electronic transfer, something like that in the check number. And this is going to the post office. So I'm going to type in post office, the vendor is already there, because we have paid it in the past.

So I'm going to select tab, it's already given me the account, all I need is the amount. And we're going to have 520. So I'm going to say 520 here, and that's the first one, nothing unusual there, it's going to an expense account. That's just the normal type of process, which is entering this data from the bank statement into our system, making sure that what we pay out of the bank statement for the checking account is what we want to track in this QuickBooks file. So I'm going to say okay, and it's got the same check number, I'm going to keep it so something's wrong with the check number on that's okay. And then I'm going to highlight this and say that we have found that one so let's highlight the text, make it okay, now we have the pizza place.

Now the reason we have the pizza place is I want to give an example of that. pizza places often something This happens all the time that we could pay something out of the business account and ask ourselves, well, is it business or personal, and a pizza place could be meals and entertainment, we might have a business meal there. But it might be personal, we might have had, you know, some soccer practice game after the vet was there something like that that was personal and we put it on the business checking account. Well, if that's okay, again, it kind of muddies the look of the checking account, if I was to just look at this checking account, but when we put it into our system, as long as we put it in the system correctly, then we should be okay. If we determined this pizza place is a personal expense, what should have happened it should have gone to the owner should have taken the money out and then paid for it out of the personal account.

If that didn't happen, though. That's That's okay. We could still basically do the same thing on the QuickBooks side, even though the checking account is a little bit more messy because you have this personal expense there. So this happens often so Now we're going to say, Okay, this is a pizza place. So that's the name of the place. So it's not a very interesting name.

So we're going to say the date is five, three, and the check number is going to be 1022. So that looks good. And I'm just going to call it piece. Place, that's the name of the place pizza place, we're going to add it, it's going to be a new place, it's going to be a new vendor, even though it's a personal vendor, and we're going to put it into our system at $98. So $98. Now the important thing is here, we can't put that to an expense account, because if we do, we're going to lower net income.

So we don't want to do that. What we want to do instead is put it to an equity account, we typically call it draws. So if we selected the drop down, I don't want to put it into one of the expense accounts. I'm going to put it into the owner's draws. That's the typical method for us to take care of things that are not business related. Now I don't need to track this pizza place, particularly at all I just need to know hey, it's not up Business thing, I don't want it on the business, profit and loss, I just want it as a draw.

So it doesn't affect net income. So that's what we're going to do there. And we're going to say, okay, that's the normal method for something that is not business related. Now we're going to go to our account, which is the charities and do a similar but slightly different method as we did with the pizza place. So that's on three, seven, so we're going to say, okay, it's on three seventh, I say plus plus to the seventh. So March 7, the check number is 1023.

And this time, we're going to say that this is going to the American Red Cross, that of course, is a charity. So we're going to say okay, that's a charitable organization. Typically, as a sole proprietor, we don't put that on the business. We don't deduct that as a business, we deducted somewhere else on the tax return. So that's what we're going to assume is the case here that we're sole proprietor and that this isn't an actual business expense. It has nothing to do with our profit on the business, it has to do with something that may be deductible somewhere else on the tax return.

So what we want to do then is we're going to, we're going to say this is going to go to a new vendor, American Red Cross, I'm going to add it just like we would with any other vendor, we're going to say add, and then it's going to be for 250. Now, I don't want to put it to an account, that's just going to be called charitable expense. Because the expense shouldn't be on the profit and loss. It has nothing to do with my business. How much money I'm generating, the expenses should be things that I use in order to help me generate revenue on the business side. So what we need then is to put it as it should be personal, it should have been taken out the personal, we're going to do the same thing, put it to draws, but we want to make a new draws account, we want to make a draws account specific to charity.

To do that, I'm going to select the drop down and we could say new, or I'm just going to type in that I'm going to call it draws charity, and it's not there. So I'm going to select tab and it'll say, do you want to set it up? I'm paraphrasing, yes, we're going to say I would like to set it up, please. And then we're going to set up the account. And the account is going to be an equity type of account. So it's going to be an equity type account.

The name is going to be it draws charity, that's just going to be it. And that's all we're going to keep it here. Now, you could put it under a subcategory of equity. So you could put it under subcategory of the draws here and have them as a subcategory, but I'm just going to keep it as its own category and say, Save and Close. And then we could put a memo here that this is a charitable gift or something like that. I'm not going to put one here I'm just going to say Enter.

And there we have that. Now we're going to do this one more time and then we'll take a look at the financial statements. So the next one is we're going to say goes to save the children. So I'm going to right click on this highlight this That's another charitable organization. So we're going to say this is on seventh. It's the check number 1024 1024.

And it's going to be for Save the Children. tab, click add new vendor, it's gonna be a vendor, we're going to say that that is 250. That's what it was. And we're going to put this once again to the draws. I'm just going to type it in there that we set up draws charity, we could put a memo, I'm not going to put one here. And actually, this shouldn't be for 250.

This one was for 6565. The Red Cross was the 250. So we're going to say, okay, record that and we're going to keep the check number. It has a duplicate check number. I'm not going to go through that there's a problem with the check numbers. That's okay.

Well, we'll deal with that. And then let's take a look at the reports now. So if we go to the main two reports, Reports drop down, we're going to go to the company and financial, we'll take a look at the balance sheet. And the balance sheet I'm going to put the dates up top are going to be from Oh 10119 to 1230 119, or January 1 to December 31 2019 is the year we're working in. Okay. And then of course, in the checking account, we're going to have these two checks.

If we scroll down, if I double click on the checking account and zoom in, here are our two checks, they're going to decrease the checking account just as we would want because we paid them out of the checking account and we need them in there. If we double click on any of these items, we will get to the check that we have written. closing this back out, closing this back out the other side of it now if we scroll down, it's going to be in the draws. So here it is in draws, and now we have draws for the charity drops. Right there. And if we double click on that item, then we see these two accounts that are the charity charitable accounts.

And we can then provide this data to the tax preparer at the end of the year, we could say, Okay, here is mainly what we need for a sole proprietor is going to be the profit and loss, and then any other information. And we can track this information. By providing this report, we can actually go to the balance sheet, customized reports, double click on this and give this report to them as supplemental information or just keep it here on the balance sheet and say, Hey, remember to pick these up. These are what happened during the current period for charitable, charitable donations that need to go on the schedule a, as opposed to if we hit the drop down and we go to the profit loss, reports, company and financial and profit and loss if we change the data From Oh 10119 to 1230 119, we could see that we don't have a charitable expense.

And if we if we change the dates in restricted even a bit more, and say that we want to say, Oh 30119 because we're This is the month that we're entering now in March. And I'll just go to the end of the year, there's no other data after March. Then here's the information that has been entered for March. Most of these are going to be adjusting entries, but we don't see anything related to our charitable donations here or to that pizza place. And that's the point. So if we go back to so that means it's not affecting the net income.

If we go back to the balance sheet, then this is this is where it's going to be tracked in the equity just like if it was a draw for business purposes for business purposes. Charitable gifts are not something that's business related typically. So we're not going to include it on the process. And last, we're going to include it on equity as if the owner took it out for personal use and then spent it somewhere but we're just going to categorize it now as a specific type of equity specific type of draws that we can then track in this account then and provide it to the tax prepare at the end of the year.