In this presentation, we will take a look at a method to track tax deductions related to education within our business account with what I'm calling an equity method within QuickBooks. Here we are on the homepage, we currently have the open windows open, you can open the open windows by going to the view drop down and selecting the open windows list. We're going to go back into the check register, we're going to enter this data directly into the check register from the bank statement. Remember that our first step is to be paying these out of our checking account the business checking account, and then track them within our QuickBooks file, but track them as an equity account rather than an expense account. So to do that, we're going to go to the banking up top and go down to use register. And we're gonna have the checking account.

That's the one we want in the checking account. And then we're going to add some more information from our bank statement. Our bank statement looks like this. So we've made payments. We're focusing in now to the college so we're same word paid that college. We don't I'm not going to be specific on which college here.

But it might be the case that we have to wish in. And that might be something that might be deductible or be applied to some type of credit possibly on the books, but may not be something that we want included as an expense for the business. In other words, it may not be a business related expense, but be something that we want to track for some other location. On the tax return. One method we can do that is to say, okay, it's still going to be a draw, but make a specific draws account that we can then track and provide nice, easy reports for payments made to our tax preparer and be able to collect and gather this data easily. To do this, we've made the payments out of the checking account because it's a tax related item.

And we're going to then apply them out. We're going through a method of just going through our bank statement and applying outs our mock bank statement, our information into QuickBooks. So now we're going to enter the stuff that we need made the payments into QuickBooks, we're using checks here doesn't have to be checks, we could have electronic transfers or payments. And we'd have the same information. As long as we know who the vendor is, we can enter it into the QuickBooks system directly into the register, as we'll do here. So we're going to do this one, this is the mundane one to post office again, and that one is going to be standard.

And then we'll go into our other transactions that have to do with personal deductible but not business related items. So let's do this. We're going to go to the post office first. So I'm going to go up here, we're going to say this is on three, seven is the date, the numbers going to be 1025. This is going to be to the post office. So I'm just going to type that in, it's going to autofill because we've written checks to the post office before, and the amount is going to be for 320.

And it's going to go to an expense account. So that's what we would expect most of the time when we make a payment. It's going to the accounts going to be an expense account and then we'll Say Enter. And again, the cheque number, there's another check number, I'm not gonna, we're gonna say that's okay, we're going to go to the next item and highlight this. And we're going to go to the college now and say, now we're going to pay the college now, obviously, we would have the college name on the bank statement. I'm just gonna say my college generic college here.

But we would know then that it's our college that we're paying the tuition for with a check. So then we're going to go back to our account here. And we're going to say that this is on the 10th check number. Hopefully it's available this time check number 1026 is going to be we're going to set up a new vendor, my college, so generic name college, we're going to say, tab, click Add. It's going to be a vendor type account, and we paid 900 for it. And then we don't want to put it into an expense account.

That's the point. Typically, it's not going to be something that's business related, this is a personal thing. But it's a personal thing we need to track separately so that we can provide it to the tax preparer at the end of the year. So this is one method we can do, we can set it up as a draws account. So we don't have it yet. So I'm going to say draws.

And we can say education. We might say college education or something like that to distinguish it, but I'm going to say draws educate, and then we'll say tab and add this. So we're going to set it up. And it's not going to be an expense account. That's the point we're going to say no not an expense account, it's going to be instead an equity type of account. We want to make it an equity type of account being on the balance sheet not affecting net income for the business.

And then say Save and Close. And we should probably do a memo. I'm not going to put one here though and say okay, and once you get a check number has been taken. I'm going to keep the check number, sorry about the check numbers. Okay, so that one is inserted And we have that next one we're going to put in when right click and highlight is going to be for the bookstore, that might be something that could be included as well. Again, not a business expense, but we could put it in as part of our college and see if that we can deduct it as college in some other area on the tax return.

So we're gonna say this happened on 310, as well. And this is check number 1027. And this is going to be a new vendor, generic vendor book store, my college and so that's gonna be our vendor. And we're gonna set that up, it's gonna be a quick add vendor, and that's going to be for $100. And it's not there in the bookstore, but now we have the draws for education. So draws for education, and enter that we're going to keep the number one We're going to go to the reports up top reports, we're going to go to company and financial.

And let's take a look at the balance sheet standard. And we'll change the dates up top customized reports to a 10119 to 1230 119. And, okay, so that's, by the way, customized reports that's January 1 to December 31 2019. The year we're working this problem in. So if we scroll down, then of course, the checking account is going to go down by the amount of payments we made, but they're not business related payments. That's okay.

Because it's just like a draw. We took it out of the checking account as if we gave it to the owner as a draw, if it was a sole proprietor taking it out, in we paid it in this case directly to something that the owner would want to apply it to something that would be tax deductible, as well not as a business expense, but in some other area. So possibly, and so we'll close that back out, where did we put it in into draw? So this equity sections becoming more detailed. Now we're going to say, Okay, here's the draws for education. This is a specific draw, we took it out of the business.

But we took it out for a specific reason, we paid it directly to what the owner would want a education account. And we're going to track that specifically. So that we can then provide the tax preparer at the end of the year and say, Hey, this is how much we paid for books and tuition. And let me know if if one of those aren't deductible, you can go in here and double click on it, give the report. This is what we paid for tuition. This is what we paid for books, you can decide if books is not deductible, or what not so you know, if we're not by giving the detail, so this will give us a nice report, giving us the detail that we can then provide at the end of the year and make sure we can say okay, here's our business expenses.

Here's all the other stuff that I think is tax related, that I can generate reports for from the same QuickBooks file and be able to provide that information at the end of the year, too, for tax purposes. Then let's take a look at the profit and loss Report, we're going to go to the reports drop down company and financial profit and loss. And we have a 10119 to 1230 119. And the point here is that it's not included here, because this isn't this isn't something that should be in net income, because it's not something that we used in order to help generate revenue. It's a personal item, and therefore we shouldn't have it included in the net income calculation, because it has nothing to do with helping our business do well. You can say, well, it does, because it's education.

It's helping me learn more, and that that's true to a degree. But just note that typically, it's it's a personal item. And that's why we're taking it out as a draw, yet still finding a way to track it. It shouldn't be included in the business expenses, and if we're tracking it just for taxes in any case, in our example, it's not going to be something that will be a business expense, but possibly deductible some places Like a credit or possibly a deduction, some other area on Schedule A or the front page of the 1041 of those areas might be an area that it can be deducted and probably possibly worth more than even if we could deduct it here on the profit loss. So that is the case with this item.