would you like to track the income from build items into a separate
income account well then you need to learn how to use two-sided expense items
if you have any questions about this topic you can leave them in the comments section below and
I'll do my best to help you and of course if you feel the video helped you I hope you will
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two-sided expense items are items that vendors provide for us and they get
placed on a check or expense or a bill from a vendor when they are purchased
these same items are placed on an invoice when we Bill the client the expense account increases
when we purchase it for the amount we paid for the purchase the income account however
increases when we invoice the customer for it it will be the amount that we place on the invoice
so if you think of the items list you know you can click item new and when the new item window
opens up if you click service you will have the ability to check this box here where it says this
service is used in assemblies or is performed by a subcontractor or partner if you click that box
you will have the ability to put in an income account associated with the item and an expense
account associated with the item and the expense account goes up when we buy and the income account
goes up when we bill so why would we use two-sided items well if you need to use expense items you
may want to track your income from billing them in an income account instead of a reduction of the
expense account so the only way to do that when using expense items is to use two sided items
for example if we have research expense we could build out the way we learned earlier in the course
with just the account but if we want to bill with more details on the invoice we can make two items
associated with research expense title search and case law research and these could be two separate
items that get tracked to the expense account now research expense is the account these two things
here are the items that will be connected to the account so let's add these two items to the items
list title search and case law research we will connect them to the research expense account and
the income from billable research account so how do we do that well it's very simple
we click list item list and then of course we click item new and it's a service but the most
important thing is checking this check mark here click once you do that you have the ability to
put in an expense account and an income account so first we want to put in the research item
so we type in title search
and we'll put it nicely in capital and the expense will be research expense notice as
soon as I choose research expense income from build research comes up because in
Prior videos we mapped them together so that will make it a little convenient but
you don't have to map them together you could simply choose the income account that you want
now we click next and the next will be case law research
and once you type in case law research leave the same expense
account leave the same income account and click ok
and now we'll record the example of purchasing or paying for these items let's imagine on
August 19th we paid Ronnie the research guy for two hours of title search at fifty dollars each
and two hours of case law at a hundred dollars each so how do we record this it's very simple
we close here and we click banking write a check or you could click check from the main menu here
the money's coming from the bank account and the date is August 19.
and we paid Ronnie the research guy so you just put research guy you do not put a money amount
you do not put an expense account instead click items and choose the two items the case law item
and the title search item and the both of them were two hours
at different rates the rate of the case law research was a hundred dollars each
hour now I suggest that we click don't display and no because this is going
to be different almost every time that you pay and Bill so you could make it remember
but you don't need to so we're going to put no and then this would be fifty dollars each hour
making a total of three hundred dollars you know hundred dollars of title search 200 of case law
and in both cases it's billable to Allen Arby the client so we have to make sure before we save it
that we choose the client and make sure that it's marked as billable now what will happen in the
trial balance at the moment that we save this well research expense just increased by three thousand
so as soon as we save this check research expense will increase to two thousand three hundred and
because the money came out of cash and Bank cash and bank will decrease by 300 and become 11 509.
so let's try it we click save and close and then we open our good friend the trial balance notice
research expense increased to 2 300 just like we expected and cash and bank account decreased
to eleven thousand five hundred nine but don't forget to check the profit and loss by client
if we open profit and loss by client and we look at the column of Allen we can see
or actually uh Betty Who has the reason oh no sorry it was and it was Alan you see Alan has
500 in research expense but if you double click the most 300 the most recent 300 in research
expense is under Allen in the Allen column here on August 19th so we know we recorded it properly
now Will Bill Allen for the research so let's imagine on August 25th we build Allen for the
August 19th legal research what will happen if we then Bill 300 to Allen for this legal research
well income from build research will increase by 300 and it will become 1700 because we just
built the client for that income and because they owe us more by 300 unearned legal fees which at
this point in the course represents what they owe us if we Bill them they owe us 300 more and
it will become 687. so let's go ahead and Bill we click invoice we put the date as August 25th
Alan Arby the answer is yes so watch carefully we click ok
but we do not choose expenses we choose items and we click and choose the two items that we're
billing for and click ok now in our example we are not marking it up if we wanted to we could
increase the price each on the invoice and make it more than what we paid and then of course the
income account would go up more than the expense account but it's not always appropriate to mark
up expenses when billing clients so you'll decide that on your own we will click save and close uh
after removing this check mark and then when we look at the trial balance the results are exactly
as what we expected the income from legal reason income from research went up to 1700 and unearned
legal fees which at this point should be named legal fees receivable because they owe us is 687.
but don't forget to check the result in the profit and loss by client if you click the
profit and loss by client and you look at Allen Arby he now has three hundred dollars more of
income from build research and the research expense that relates to Alan did not change
so please note I'm sure that the video was clear and you can use it but you must remember that
account settings are not relevant regarding billing for expense items two-sided expense
items like we're doing here will always increase the income account and will never change the
expense account when you Bill the client you can mark up the amount if that you Bill if
you are allowed simply enter the amount you are billing for on the invoice to the client that's
the amount that will increase the income account now remember this video only affects the items it
will not have I mean this setting that you click here when we learned it before track reimbursed
expenses as income it is not relevant to what we're doing it only affects us if we're doing
it the old way with accounts and expense accounts instead of the new way by using detailed items so
whatever you check mark in this preference window will not affect everything we did in this video
thank you