Accounting for Stock Market Investments

Recently I was privileged to work with a client whose income came half from real estate rentals and half from stock market investing. After a series of QuickBooks accountants and bookkeepers had messed up his bookkeeping, it was like a tangled mess of hair. Different people had tried this and that way of tracking his stock market investments, none of which were successful.

QuickBooks is the ideal software for business, and property rentals, so I recommended he leave that part of his business there. But I recommended that he switch to Quicken to account for his stock market portfolio. Quicken is better suited for stock market investments than Quickbooks. For example, one drop down choice in Quicken includes "stock split". How else would you track that one share became two shares, but the purchase price and brokerage fees didn't change?

What tax preparers want to know is date of purchase, # of shares purchased, total cost, minus any brokerage fees. Even if you hold that stock for years, decades, you still need this information when you sell for tax purposes. Make a file for "stock purchases" to store the paper that outlines the trade there. One advantage of Quicken is that if the stock pays dividends and interest, you can see watch how profitable this stock is for you. 

If I had to track stock market investments in QuickBooks, I would use items and track it the way one tracks job costing. Each stock would be an item, with additional items for brokerage fees, etc. The purchase would be tracked as a purchase order, and the sale as a sales receipt or invoice/payment. There is a job costing report to show profit. But once again I recommend Quicken for tracking your stock portfolio.

Better Money Management

This awesome book, "Dollars and Sense", taught me how my mind works when it comes to spending and saving. The authors outline a variety of techniques marketers know well, and now you can too. 

Problems with spending and saving include the following:

• ·         We forget to consider Opportunity Costs.
• ·         We spend Relatively.
• ·         We use Mental Accounting to budget.
• ·         Anchoring causes us to spend relative to our anchor.
• ·         We overvalue Fairness & Effort.  
• ·         We overvalue what we own already, also called the Endowment Effect.
• ·         We value Loss Aversion more highly than increases.
• ·         Language and Description affect our purchasing decisions.
• ·         We Discount the Future Value of Money.

After you hear all the ways you get into trouble financially, they outline ways you can succeed:

• ·         Consider Opportunity Costs as you budget.
• ·          Consider the Pleasure the purchase will bring to you
• ·          Consider the true Benefit a purchase will provide.  

If you think these tricks and techniques don't apply to you, what do think of this epigram:

"A wise woman knows herself to be a fool;

a foolish woman opens her wallet and removes all doubt."

QuickBooks Desktop Bank Feed Gone Wrong

As a systems analyst, I've developed a way to both do and teach QuickBooks Desktop bank feeds that utilize all the best practices, so that you'll have the best experience possible.

First download the bank feed file to the hard disk before importing it into the QB file.

Second, always run a backup before you import.

It may take a bit longer, but very little time if you do it automatically, and the disasters prevented more than make up for any time savings. It's when you least expect it that things go wrong.

Last week I did a bank feed for a client with a bank account at Washington Federal. I ran a QuickBooks backup, download the .qbo file to the hard disk, and then imported it. There was no vendor information and no memo field. How useless could that be? I went back to download it again and the bank website knew I had downloaded that date range and would not allow it again. So I ended up having to type in all the expense transactions to do the reconcile. The next day, the client called and asked me, "Did you run a backup before you imported the bank feed?"

He was stunned when I said, "Yes".

He was stunned because almost no one follows a systems approach to accounting. I've never had a single problem with a bank feed before, so why bother to run a backup every single time? I've seen a couple of problems from bank feeds because people call me when it goes wrong for them but I've never had one myself. After I explained to them that it's best procedures to download the file to the hard disk first, and did it that way, their bank feed was fine too. I never imagined that today's bank feed would be a disaster but it was. The bank feed hosed his customer list. Absolutely trashed it. I didn't even imagine that could happen as the bank feed is technically not inside of QuickBooks data file yet, and I had not imported a single transaction. But looking at QB data file before and after backup, that is exactly what happened. I only had a backup because I automatically make a backup before every bank feed. Every single time. Follow a systems approach to accounting and you'll have a much better experience in life.

Accepting Bitcoin Payments

Have you thought about accepting crypto currency in your business?

 All these definitions are thanks to Wikipedia. A Cryptocurrency (Crypto-currency) is a digital asset designed to work as a medium of exchange, that uses strong cryptography to secure financial transactions, control the creation of additional units, and very the transfer of assets.


Bitcoin, Litecoin -- these are types of crypto-currencies.

Bitcoin is a decentralized digital currency without a central bank or single administrator that can be sent from user-to-user on the peer-to-peer bitcoin network without the need for intermediaries.

Litecoin was an early bitcoin spinoff or altcoin. Litecoin is a peer-to-peer crypto currency and open-source software project released under the MIT/X11 license. Creation and transfer of coins is based on an open source cryptographic protocol and is not managed by any central authority.

It's all techie and complicated. Youtube videos by Andreas M. Antonopoulos are a good place to start. I tried to read his first book but it was too technical to be helpful.

Do you conduct business internationally? Is it time for your business to accept crypto currency? I could help you with that business feature. Here is a great article on how to accept Bitcoin. I'd be setting you up with Coinbase and optionally Bitpay too. 3 ways to Accept Bitcoin Payment

Then you would need help in how crypto currency is taxed in the USA, which I now know about too. Therefore, I know how to do the accounting for buying and selling.  Also, if your need is for specialized bitcoin tax preparation help, I can refer you to a crypto tax preparer. Her name is Laura Walter. She calls herself the "Crypto Tax Girl". Her website is Crypto Tax Girl Website.

This is 100% more than I knew a month ago about this subject, and 100% more than the month before that. Perhaps my learning curve is as radical as the rise of Bitcoin. Between being out there working for very sharp small business owners (and very sharp non-profit managers), plus constant studying, I learn more about this subject every day!

QuickBooks Online Exchange Rate Entry

Here is the scenario. You are getting paid for an invoice in Canadian dollars, and deposited the money into a US Bank. The bank adds an expense to your bank account for the difference in exchange rate. Say the customer owes you $4000. You deposit the  $4K, and the bank adds an expense from your bank account for $968.72. How do you enter this into QB Online?

1^st way: You mark your $4000 invoice as paid in full. Then you add an expense to the bank account for $968.72. Post that check to Income. In WA State you're paying taxes on income, so it's important to post this correctly and reduce income. Now you can reconcile your bank account. Also your P&L and income are correct, but your sales report is short for that customer.

2^nd way: Once you know what the exchange rate is you go back and enter a credit memo for the $968.72. A credit memo reduces an invoice. You have to redo the deposit too, because the invoice is only paid off with $3031.28 and the credit memo covers the rest. Your sales report and P&L are correct. You could even force a bank account reconciliation, because you'd be equally short on both sides, but that’s lousy bookkeeping. It's a pain for the next person to follow. I only do clean bookkeeping. 

I thought it was a bug. Tech support didn't think it was a bug, because this is double entry bookkeeping. What an idiot. I had to get off that call. Resolved to figure this out myself, I researched it late into the night. Turns out that QB Online software has a special feature just for this kind of problem.

Correct 3^rd way. Once you know what the bank is going to deduct from your account, chose Refund Receipt from the + menu. Refund Receipt allows you to issue the client a refund and cut them a check too. You're not actually going to send them a check, so leave check # blank. It shows up as a bank withdrawal so you can reconcile cleanly, reduces your P&L income, AND your sales reports are correct. Success!

If I make consulting look easy to you, I'm giving you good customer service. If I don’t smile enough, it's because I've momentarily forgotten that this is fun, and not hard work, hard won from hours and years of study and research. Smile at me. Remind me that we're having fun. Are we having fun yet? 

QuickBooks Mac 2019

It's back! QuickBooks for Mac has a new update for 2019 (last update was for 2016 at which time Intuit announced it would never update the Mac version again so this is a happy surprise). Here are a few of the more prominent features released with this update:

iCloud Document Sharing – Convenient method for sharing QuickBooks for Mac file using iCloud sync. Modify your books on your work Mac computer then continue where you left off on your home Mac computer.

Bank and or Credit Card Reconcile Discrepancy Report – Identifies changes made to reconciled transactions (for newly created transactions, not those prior to this release).

Square Import - Importing sales data from Square via use of .csv file type.

Email Tracking – Track dates emails sent with a tab in the Vendor or Customer Centers.

Report Windows – Improved spacing and readability.

User Passwords – Now required. Personal information is encrypted.

This content is from Laura Madeira's, QuickBooks Desktop 2019: What's new and improved. For all the changes coming with various versions of QB 2019, here is the link to her Firm of the Future blog:  Laura Madeira's, QuickBooks Desktop 2019: What's New and Improved.

The picture is from Insightful Accountant. Here is the link to their article:
QuickBooks 2019 Desktop - 'Our Summary'

Income from a Property Management Company or Use Sales Receipts for Depositing Income

Almost every day I learn something new. Today is was how to enter in income from property that you own that is managed by a property management company.

Every month the owner of the property will get from the property management company a statement similar to the following:

Rental Income $1000
- Property Management Fees $100
- Repairs this month $45
= Total Check (direct deposit)  $855.00

Typically bookkeepers enter these 3 lines directly in the "Make Deposits" window in QuickBooks. Unfortunately, it won't appear connected to the customer in the customer center because QuickBooks is "forms based" software. A sales receipt is a form, so if you enter it there, instead of directly into the deposit screen, the data will be attached to the customer.

Your customer is the Property Management Company.

Add 3 lines items in the Products and Services List for each property.
1. Location Rental Income (default amount to rent), posts to Rent Income
2. Name of Property Management Company fees (default amount to their monthly fees), Posts to expense account Property Management Fees. 
3. Location Repairs, Posts to expense account Property Repairs. 

Every month, enter the deposit using a Sales Receipt with these 3 line items.
Location Rental Income is positive.
Name of Property Management Company Fees as a negative
If there are repairs, Location Repairs will be negative too.
The total of the Sales Receipt is the amount of the check.

Note on the accounting: While it may seem counter intuitive to post a negative line item to an expense account it works out perfectly, because a double negative is a positive, so your rent income is positive, and your expenses are positive on the P&L too.

Enter the check # into your Sales receipt. If the money is direct deposited, you can deposit it directly from the sales receipt. And it all shows up under the customer center!

This is a terrific solution, because I'm wondering if one property management company overcharged my client? Now I'll be able to show him clearly what happened and let him sort it out.

Isn't this the coolest solution ever?