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8 Comments
John W on March 23, 2019 at 2:27 pm
Vicki, when you say debit to wash account, I get confused, do I add a “-” to my figure or just enter the number, apparently if there was an example for how this is done, I cannot find it, an accountant I am not and I don’t understand double entry accounting at all. I am not sure exactly how I do the wash account, if I pick it as the account in a transaction or just do the work in the wash account register.
John, the worksheet has the correct signs needed to balance the Payment Statements assuming the statement ends in a payment from Amazon and the previous payment statement was not a negative balance. So follow the worksheet signs and you should be fine. I know that sounds like a simplification, but I made the system to be as simple as possible. Now, if your previous statement ended with you owing Amazon or the current statements ends with you owing Amazon you may need to change some signs. It’s really just going to depend on the statement.
Your question about “when you say debit” “do I add a “-” to my figure or just enter the number?” Just enter the number with no sign is to debit the account in an AP transaction. In an AP posting, we are charging to expense accounts. That is a debit. If we need to reverse that as in Amz Credits like Gift Wrap Credit, then we would use the credit sign (-).
I think your question is also “Where do I find the account?” You should have setup a Wash Account in Module 2 Unit 2. Since the account is setup in that step, it is available to choose during the creation of the Bill and in Receive Payments. All the work in the Wash account is done through the transaction posting of Receive Payments, Bank Deposits and Bill using the Posting Worksheet as demonstrated in this lesson.
Vicki I simply do not understand the wash account, I owned a brick and mortar store for several years, we had inventory, items received, cost of goods sold, AP, AR and there was no wash account, what am I missing? We used Quick Books Pro to handle all of it. Also how can I substitute a “member contribution equity account” in place of either pay by credit card (do in wash account instructions from template or deposit in checking account? the wash account is supposed to be zero?)
John, the reason for the Wash account is because Amz pays a certain way. They take out fees before they pay your sales. Most businesses pay their bills and then if a vendor owes them the vendor pays them what they owe. Accounts Payable is what you owe and Accounts Receivable is what is owed to you, right? QuickBooks only allows one AP or one AR transaction per posting. Amz payment statements have AP & AR in them (Sales less Fees) so we have to do two transaction postings. The Wash account is a kind of holding account that combines the AP and AR transactions. Trust me on this, don’t try to make it harder than it is. Just use the worksheet and post with the signs that are suggested. If my terms debit and credit confuses you, just pay attention to the sign on the worksheet. If you don’t get a zero balance in your Wash account, check the signs and make sure you have done all the steps. Receive Payments, Make Deposits, Create Bill, Download Bank Feeds – then check the Wash Account balance. The Worksheet shows the signs to use and has notes as well to tell you what is supposed to be in the spaces.
Maybe you can rephrase the second part of your question about the equity account. I’m not really sure what you are asking.
Vicki, per the “equity account” when I started selling FBA, I did not begin with any start up capital for the business, all of my beginning expenses and items were paid for with personal credit cards, up until the point I had cash flow. My understanding is that you should use equity accounts to handle owner or member personal funds in and member draw out. Can I assign money to equity accounts, in or out, rather than charging to credit card or depositing to checking like the instructions say, simply substitute equity account for other account in the wash account?
Ok John, I think I understand the question. You started out with personal funds that you used to purchase inventory and pay expenses. Now you need to either take those funds back out or at least record them as Member Equity.
Member Equity is used for Deposits into the business generally and Member Draw is used to Withdraw funds from the business. Some people, including myself, just use the Member Draw account and make deposits or record expenses in the one account. Both account names are actually Equity accounts. Equity or Draw designations are just a way to see the in and out totals (debits and credits) when you use two different account names. Using one account, no matter the name, will give you just one Bottom Line total. The Balance Sheet will show the totals depending on the choice you make in labeling. You can choose to do it either way.
Now, to answer the question about using the Equity or Draw account instead of the Wash Account. I would not do that because you want the account to be easy to reconcile. Having an account, the Wash Account, that will clear to zero after each Payment Statement is a clean cut way to know the accounting balanced. You do not want your Equity or Draw account to show a zero balance. So, use the Wash Account. The Wash Account is really going to be your friend before it is all over. Rejoice you have a Wash Account!
Now to help with what to do with those deposits into the business that you used to pay expenses or purchase inventory. I would do a General Journal entry for expenses only, not inventory. Expenses would be a debit and the Member Equity/Draw (depending on the account name you choose to use) would be your credit. List the expenses in the left column (debit) of the General Journal entry and tab past the total that shows on the right column until you have entered all the expenses. Then use the total in the right column (credit amount) as your Member Equity/Draw amount.
Access the General Journal by clicking Company, scroll down to Make General Journal Entries. Be sure to date the entry in the correct year, if you are still doing 2018 accounting.
I’ll need a little more information on the inventory status of the items purchased with personal funds. It can be a complicated process so I don’t want to confuse you. I need to know: Is this inventory still active and available at Amz? Did you sell any of this inventory? Did you use the Posting Worksheet to account for any of this inventory being sold and thus made Invoices for those sales? When you imported your inventory from Seller Central, was any of this inventory imported? I’m kind of asking the same questions in different ways to get you to think through the process.
Adding inventory Items must go through a purchase instrument (check or cc transaction) not a General Journal entry. Unless, you are not tracking that inventory as items.
If you can tell me the answers to the above questions, I will try to direct you through the best course.
Can I substitute equity accounts, Member Contribution and Member Draw, in place of charge to credit card or deposit in checking as the instructions say on the template? I need to show money put in prior to any cash flow.
Vicki, when you say debit to wash account, I get confused, do I add a “-” to my figure or just enter the number, apparently if there was an example for how this is done, I cannot find it, an accountant I am not and I don’t understand double entry accounting at all. I am not sure exactly how I do the wash account, if I pick it as the account in a transaction or just do the work in the wash account register.
John, the worksheet has the correct signs needed to balance the Payment Statements assuming the statement ends in a payment from Amazon and the previous payment statement was not a negative balance. So follow the worksheet signs and you should be fine. I know that sounds like a simplification, but I made the system to be as simple as possible. Now, if your previous statement ended with you owing Amazon or the current statements ends with you owing Amazon you may need to change some signs. It’s really just going to depend on the statement.
Your question about “when you say debit” “do I add a “-” to my figure or just enter the number?” Just enter the number with no sign is to debit the account in an AP transaction. In an AP posting, we are charging to expense accounts. That is a debit. If we need to reverse that as in Amz Credits like Gift Wrap Credit, then we would use the credit sign (-).
I think your question is also “Where do I find the account?” You should have setup a Wash Account in Module 2 Unit 2. Since the account is setup in that step, it is available to choose during the creation of the Bill and in Receive Payments. All the work in the Wash account is done through the transaction posting of Receive Payments, Bank Deposits and Bill using the Posting Worksheet as demonstrated in this lesson.
Vicki I simply do not understand the wash account, I owned a brick and mortar store for several years, we had inventory, items received, cost of goods sold, AP, AR and there was no wash account, what am I missing? We used Quick Books Pro to handle all of it. Also how can I substitute a “member contribution equity account” in place of either pay by credit card (do in wash account instructions from template or deposit in checking account? the wash account is supposed to be zero?)
John, the reason for the Wash account is because Amz pays a certain way. They take out fees before they pay your sales. Most businesses pay their bills and then if a vendor owes them the vendor pays them what they owe. Accounts Payable is what you owe and Accounts Receivable is what is owed to you, right? QuickBooks only allows one AP or one AR transaction per posting. Amz payment statements have AP & AR in them (Sales less Fees) so we have to do two transaction postings. The Wash account is a kind of holding account that combines the AP and AR transactions. Trust me on this, don’t try to make it harder than it is. Just use the worksheet and post with the signs that are suggested. If my terms debit and credit confuses you, just pay attention to the sign on the worksheet. If you don’t get a zero balance in your Wash account, check the signs and make sure you have done all the steps. Receive Payments, Make Deposits, Create Bill, Download Bank Feeds
– then check the Wash Account balance. The Worksheet shows the signs to use and has notes as well to tell you what is supposed to be in the spaces.
Maybe you can rephrase the second part of your question about the equity account. I’m not really sure what you are asking.
Vicki, per the “equity account” when I started selling FBA, I did not begin with any start up capital for the business, all of my beginning expenses and items were paid for with personal credit cards, up until the point I had cash flow. My understanding is that you should use equity accounts to handle owner or member personal funds in and member draw out. Can I assign money to equity accounts, in or out, rather than charging to credit card or depositing to checking like the instructions say, simply substitute equity account for other account in the wash account?
Ok John, I think I understand the question. You started out with personal funds that you used to purchase inventory and pay expenses. Now you need to either take those funds back out or at least record them as Member Equity.
Member Equity is used for Deposits into the business generally and Member Draw is used to Withdraw funds from the business. Some people, including myself, just use the Member Draw account and make deposits or record expenses in the one account. Both account names are actually Equity accounts. Equity or Draw designations are just a way to see the in and out totals (debits and credits) when you use two different account names. Using one account, no matter the name, will give you just one Bottom Line total. The Balance Sheet will show the totals depending on the choice you make in labeling. You can choose to do it either way.
Now, to answer the question about using the Equity or Draw account instead of the Wash Account. I would not do that because you want the account to be easy to reconcile. Having an account, the Wash Account, that will clear to zero after each Payment Statement is a clean cut way to know the accounting balanced. You do not want your Equity or Draw account to show a zero balance. So, use the Wash Account. The Wash Account is really going to be your friend before it is all over. Rejoice you have a Wash Account!
Now to help with what to do with those deposits into the business that you used to pay expenses or purchase inventory. I would do a General Journal entry for expenses only, not inventory. Expenses would be a debit and the Member Equity/Draw (depending on the account name you choose to use) would be your credit. List the expenses in the left column (debit) of the General Journal entry and tab past the total that shows on the right column until you have entered all the expenses. Then use the total in the right column (credit amount) as your Member Equity/Draw amount.
Access the General Journal by clicking Company, scroll down to Make General Journal Entries. Be sure to date the entry in the correct year, if you are still doing 2018 accounting.
I’ll need a little more information on the inventory status of the items purchased with personal funds. It can be a complicated process so I don’t want to confuse you. I need to know:
Is this inventory still active and available at Amz?
Did you sell any of this inventory?
Did you use the Posting Worksheet to account for any of this inventory being sold and thus made Invoices for those sales?
When you imported your inventory from Seller Central, was any of this inventory imported?
I’m kind of asking the same questions in different ways to get you to think through the process.
Adding inventory Items must go through a purchase instrument (check or cc transaction) not a General Journal entry. Unless, you are not tracking that inventory as items.
If you can tell me the answers to the above questions, I will try to direct you through the best course.
Can I substitute equity accounts, Member Contribution and Member Draw, in place of charge to credit card or deposit in checking as the instructions say on the template? I need to show money put in prior to any cash flow.
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