In this presentation, we will take a look at tracking tax deductible items related to child care within our QuickBooks account within our business QuickBooks accounts using what I'm calling an equity method within QuickBooks. Here we are on the home page, we currently have the open windows open. In order to open the open windows, you want to go to the View drop down and select the open windows list. We are now going to be opening the register and we're going to be entering data directly from the bank statement to the register including data related to child care. Remember that this is our business account. So childcare is not a business related expense, but something that we may need to track for personal taxes, and therefore something that we are going to put into this account not as an expense but as an equity as it draws account, so that we can track it, prepare a report for it to give to your tax preparer at the end of the year.

To do that, we're going to go to the bank Drop down, we're going to go to use register, and the checking accounts the one we want. Now we've made these payments and we've consciously made any payment, even though it's not business related, that could be deductible possibly out of our checking account, so that we can then set up these equity accounts track them not affecting net income, but providing the reports necessary at year in in the same file. To do that, we're going to go to our bank statement. And we're going to go through our bank statement here. We've been entering the data related to this bank statement into our QuickBooks file. So this is the bank statement for March, we've been entering this data into our QuickBooks file, we've been writing checks are assuming that these are checked, but note that they could be electronic transfers what however, we made the payment out of our bank account.

Once we have the bank account, then the statement, we could take that data inputted into the check register in some way into QuickBooks in some way. We're doing it with the Check register, and then just assign the appropriate account out. So we've consciously in this case, paid ease, we're going to say our child's childcare, this is the childcare costs, which are not something that's business related, and therefore typically wouldn't be taken out of our business checking account, which we have here. So however, like any expense that we might pay out of our business checking account, if we were to pay something that was personal, we can then apply it not to an expense, but to something called draws. And we're going to do that same method here, but apply it to a draws account specific to tracking these items related to child care. That's going to be our method here.

As we record this, we're going to record first, just kind of a normal business transaction for Epiphone. That's what we buy for our vendors. We buy and sell inventory. We're gonna say we sell guitars in our example here. So we're going to buy Epiphone guitars and then we'll go into our new items. Hear, which is going to be the childcare and then we'll record at least one or two more related to just normal transactions.

So we get the feel of both of these types of items as we go. So first, we're going to enter the Epiphone that's going to be who we buy guitars from, we buy and sell guitars and guitar equipment in our example. So we're going to say that happened on 311, it's going to be check number 1028. We're going to put in the vendor Epiphone, which is one we already have some typing in, and it's just going to populate for us, we're going to make the amount for 5100. And it's going to go to purchase items. So it's going where we wanted already, I'm just going to keep the prior account that was selected.

You'll note that that's a cost of goods sold account. So we're not going to get into the inventory tracking and how to track the inventory right now we're going to expense it directly. Cost of Goods Sold as we did in the past point is it's a normal vendor and we're choosing kind of an expense type of account. In this case being cost of goods sold for The purchase of the inventory that we're going to sell. And so here we have that, we're going to say, okay, and I'm going to keep the check numbers, the check numbers are there duplicated check numbers. So obviously, in practice, hopefully the checkbook would be going forward, we wouldn't have duplicate check numbers that we had entered at some point in the past.

So again, hope that doesn't bother anybody too much. We're going to go back to here, and we're going to go ahead and highlight this, and right click and highlight. Now we're going to go to the new item, which is ease childcare. So this is going to be something like daycare or something that we think might be deductible, but not clearly not in the business expenses when clearly nothing related to us generate revenue, it's clearly personal. However, we're going to put it here because we want to track it because it might be deductible somewhere else, as we put together our tax return information. And this is where we do our best tracking is when we pay out of this company file.

So we're tracking To put it into the same information paid out of his account so that we can do our job tracking it as best we can. So then we're gonna say this happens on 315. This is 1029, we're going to make a new item, new vendor, ease child care. So this is we could maybe preschool or maybe childcare of some kind that we think might be something we want to track something that our tax person has been asking for at least every year. So we're gonna track it here within this account. So we're going to say that we want to have a quick add, it's going to be a vendor.

And we're going to say that this is going to be 125. And then again, I'm not the point is we don't want to put it to an expense. And we're going to treat it as if we pulled it out as cash and then paid it out of the personal account, but just skip that middle step and put it into draws, but a custom draws account. And so we'll create an account that we want to track. Therefore, we're going to create a new account, I'm going to call it All childcare, I'm just gonna type it in there. All right, I pasted it in there, but you could type it in there.

And then we'll say tab and set up the new account. point is it's not an expense account, it's going to be a drawls account. So we want to select this item and say it's going to be equity type account. That's the key. And then we're going to say Save and Close. And we could put a memo probably would be good.

We're not going to do it here, though. So I'm going to say Enter. And we'll keep the check number. So there is that item. And then I'm going to go back here. So we're going to highlight this and we'll just do some normal type of transactions just to get a feel for now these are these are business expenses, what we would expect to see paid out of business checking accounts.

So this is the rental where we do our business rental property. So where we we've rented wherever we're doing our guitar lessons and sales and whatnot. So that's our 315 the check numbers 1031 and we're just going to type in sun light rentals, and that's going to be for 1500 tab, and it's going to memorize it because we've seen this before. This is of course, a normal expense account. That's what we would typically have when we make payments out of our business account. So we're going to say, okay, there's that one done.

Next one is to Verizon. And that's going to be a typical account. That's a phone company. So that's our phone bill. So we're going to go back into the phone bill, that's normal. So it's 1032.

And we had a check number that wasn't a duplicate, that's nice. And we're going to say this is Verizon. And it's already there, it's going to go to phone expense for 10. It's going to an expense account, as we would expect, that's going to be normal. And once you say Enter, and there is that, by the way, as well. Once we set this account up, it should be something that will be memorized next time.

In other words, if I was to type in his rental again, don't do this as an example. It would then know the childcare is there and I don't have to set up another draws account. It's already done. And so So just be aware of that. That's, that's nice that that is the case. So don't record this I'm not recording, it's just to show you that once we enter this the first time, then we'll go ahead and be able to it'll memorize the correct account the correct drawls account as opposed to the account related to an expense type accounts.

So now let's see what happens in terms of reports go into the reports drop down, company and financial, we're going to go to the balance sheet. And we're going to change the dates up top customized dates from 10119 to 1230 119. I'm going to try to change the fonts here too. I'm going to go to the font size, make it a little bit larger. Change the size, let's make it 11. Okay, yeah.

Okay. Okay, so then in the checking account, so I'm going to double click on it, it won't be large anymore, but we'll double click on it. And if we scroll down, we'll see here's what we paid out. Of course, we paid it all out of The checking account, but this childcare was for personal. So it went out of the checking account. That's what we would expect.

But this is this didn't go for business, it went to personal. And that's fine. So instead of us recording it as an expense, we record it as draws, I'm going to close it out of here. And that means that we put it into the drawers account, we made a special one for child care. So you can see our equity account is getting a little long, it can be a little cumbersome. We don't want to do this with too many accounts, because then we're going to have a lot of information within our equity section.

But if we pick out some special ones that we need to track that we would like to track within QuickBooks, and put them into the equity section here, then we can track that information and of course, have this ready for us. At the end of the year. We can then provide it to our tax preparer or tax professional. And we can see the detail if we want we can double click on it and say here's who we actually paid so that the tax preparer can say okay, is this really deductible, we can give the data detail this is definitely think is deductible. Here's the report. And we can give the the detail on it and they can enter the tax preparer can do what they think is appropriate with that information.

Now we're going to go to the profit and loss by going to the reports drop down company and financial profit and loss standard. Change the date from a 10119 to 1230 119. That's January through December 2019, the dates we are working on, and we could see that the purchase the Epiphone went here, we purchased the Epiphone I double clicked on that pretty quickly, but that wasn't included there. And we can see that we paid the Verizon bill that's going to go into the telephone expense, and we paid for the rental company, and that's going to go into those are normal business expenses and the rental expense. But we're didn't. We're not including in the calculation of net income, what we paid for the childcare.

It's not it's not And include and that's the point it's a draw. We took it out for personal use, it's just like we took the money out from the business perspective. We it's just like we took the money out for personal use, just like a draw for a sole proprietor. That's how we're tracking it and recording it. We're just specifically categorizing that draw and kind of skipping that middle step, and making the payment directly out of the business checking account, but categorizing it as a draw