would you like your income accounts to reflect income from build expense
items to clients 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 click like
and don't forget to subscribe to get updates on new videos that come out all the time two-sided
items are also items that vendors provide for us and get placed on a check or a bill at the
moment we purchase them the item is attached to an expense type of account and also to an
income type of account that's what makes it a two-sided item so why do we use two-sided items
well if you need to use expense items for the reasons that we spoke about in the prior video
you may want to track the income from billing them in an income account instead of
a reduction of the expense account the way it was in the previous video the only way to do that
when using expense items is to use the two-sided items so let's imagine that this is what our items
list looks like it's very extensive here at the end of the course and when we click for a new item
we get this window and if you click the check mark here it will become a two-sided item that means
the bottom of the window will open up and you will have a field for placing the income account for
when we bill or sell and also have a field for the expense account when we purchase the item
for example you could have indoor job materials as a special contractor expense
those expenses might be for window panes they might be for brackets they might be for sheetrock
we know that the indoor job materials would be an account in your chart of accounts as
an expense but the items themselves would be the detail of what you actually bought and
you're actually billing the client for so each two-sided expense item needs the following it
needs an expense side where you connect it to an expense type of account and you input the purchase
cost when you purchase then it needs an income side that you connect to an income type of account
and you input the price that you charge or sell when you're billing the client for example let's
add two accounts into the chart of accounts for this new thing called indoor job materials let's
imagine that we have indoor job materials expense and indoor job materials income we'll put them in
the chart of accounts before we put the items very simple list chart of accounts account new
expense indoor job materials expense you can pause the video if you're still typing it in and click
save and new now we want the income account indoor job materials income and again you can
pause the video if you need to type it in save and close now our chart of accounts is ready with the
accounts that we need and now let's go and put in the items we will add two items to the items list
sheetrock that we purchase for three dollars each unit and sell to the client at five dollars each
unit and brackets we buy them for four dollars each unit and we sell and bill them to the client
at ten dollars each now how are we going to do this once we put the items and the purchase cost
and sales price we will connect them both to the indoor job materials expense that we just created
and the indoor job materials income account that we just created a second ago
the type must be non-inventory type and you must put the check mark where it says
this service is used in assemblies or performed by a subcontractor or partner you must put that in
order to get the two-sided item like i showed you a moment ago so let's put in this first one here
we go list item list item new now it's a service but you must click this check mark to make it
a two-sided item now the first one will be sheetrock and we will connect the exp oh by the
way we purchase sheetrock for three dollars each and sell it for five dollars each cost three price
five now the expense account for sheetrock will be indoor job materials expense and the income
account for sheetrock will be indoor job materials income and this is the way your first two-sided
item would look like when you click next you're lucky that it will remember the two accounts both
for expense and income so now we want brackets buy for four and sell for ten okay brackets
we purchase for four dollars each unit and we sell for
ten dollars each unit click ok now we have the items on the items list and we follow
the instructions exactly as they're written and now we're ready for our first transaction
let's imagine on february 2nd we purchased seven units of sheetrock and five brackets and these are
the purchase costs that we bought it for and that's what we already set up seven sheetrock
and five brackets and it's billable to the lillian court job under brown company so what
would be the money amount of this transaction i happen to know seven times three is 21.
five times four is twenty so the amount would be forty one dollars that we're purchasing this
expense so what would change in the trial balance at the moment we record purchasing this expense
well if we pay 41 dollars for the first time for indoor job materials then indoor job materials
expense will show up for the first time as 41 and because the money came from cash and bank
cash and bank will decrease by 41 and become 8 000 eighteen dollars so that will be the results and
let's go and check let's actually go ahead and record this transaction we click banking write
a check and the date was february 2nd it comes from chase bank and it's home depot as the vendor
and of course if you don't see home depot on the list what do you do add new vendor home depot
enter and now it's on the list now be careful do not put a money amount if
you're dealing with items do not put anything in the expense tab if you're dealing with items
you have to click the items tab then choose the items themselves now when we
click the uh sheetrock click for the sheetrock notice quickbooks remembers
the purchase cost that we buy it for and the quantity of sheetrock would be seven units
and of course it's billable to lillian court under brown company
we're also buying brackets and quickbooks remembers that we buy them for four dollars each
and in this example we're buying five of them and it's also billable to that specific
job so this is the way the check looks when you purchase these could be two totally different
clients that it's billable for that would be fine as well so now when we click save and close we
can open the trial balance and the numbers are exactly as what we expected indoor job materials
showed up for the first time as forty one dollars and the cash and bank account went down to eight
thousand eighteen dollars are we done checking the results after the trial balance no we must always
check the profit and loss by client to make sure that lillian court got billed to the proper amount
of indoor job materials expense 41. now let's bill brown company for the lillian court job materials
that we just purchased let's imagine on february 5th we build brown company for
the indoor job materials for the lillian court job that we purchased on february 2nd
and we will charge him the amount that was already recorded five dollars a unit for
sheetrock and ten dollars a unit per bracket now what will happen in the trial balance
at the moment we bill the client i happen to know the total sales or billing price would be 85
that means that indoor job materials income will show up in the trial balance for the first time
as 85 and because the client owes us that money and is responsible for it accounts receivable will
increase by 85 dollars and become one thousand excuse me one hundred twenty five thousand
forty one dollars at the moment we bill for this eighty five dollar uh invoice what do we do well
it's very simple we open the invoice window and we make the date february 5th in our little story
it's for the lillian court job under brown company we will not we will not use the available
estimate click cancel because sometimes the reimbursable expenses are not part of the estimate
but what we have to do is select the outstanding billable times and cost now we click ok
remember there's nothing under expense this time that was the way we did it earlier in the course
we have to click items because now we're billing for items notice because it's an
invoice rather than an expense or check it remembers the price rather than the cost so
we click both of these and click ok and notice because it's on an invoice rather than a check
when we wrote the check it remembered each individual purchase cost for sheetrock in brackets
but now that it's on an invoice it remembers the price that we put for sheetrock in brackets
for this client on this date for this amount now we remove the email later and then of course we
click save and close and then when we check the trial balance the results are exactly as what we
expected indoor job materials income showed up for the first time as eighty five dollars
and uh indoor job materials expense did not and should not change
so why well first let's check the profit and loss by job you can see under lillian court we have
eighty five dollars more of income instead of losing this forty one dollars in expense
this forty one dollars an expense stays here be when we after we purchase because we're using two
sided items and instead of disappearing the way it did with the one-sided item it stays here and the
income including the markup shows up in the profit and loss by job in the income section for that
client so please understand account settings are not relevant regarding billing for expense items
or even two-sided items the two-sided expense item like we're doing here will always increase
the income account when you bill the client the good news is you could mark up the expense by
simply charging more on the invoice to the client than what you paid for on the check or the bill
it now these settings remember you click edit preferences and you go to the expense tab and
click this check mark these settings are not relevant when you're dealing with items
so if you want the expense to reduce when you bill you do what we learned in the previous
video you use a one-sided item if you want to keep the expense and increase the income when
you bill the client you do what you learned here the two-sided item you can learn everything you
need in quickbooks regarding contractor features by watching the full playlist that this video
is a part of you can just click the link in the comment field or under the first paragraph in
the description field and there's also links in the top right of the video as it plays you