QuickBooks Pro Plus desktop 2020 to reversing entry accrued interest, get ready because we bookkeeping pros are moving up the hill top with QuickBooks Pro Plus desktop 2022. And we are in our gateway guitars practice file going through the setup process with a view drop down the open windows list on the left hand side company dropped down home page in the middle maximizing to the gray area reports drop down company and financial looking at the balance sheet standard.
00:30
We’re going to be customizing it up top with a range change from a 101 to 202 28 to two and then go to the fonts and numbers change in that font. Bring it on up to 14. Okay, yes, please. And okay. Reports drop down company and financial go into the profit and loss this time with a range change. Oh 1012 to 202 2008 to two, customizing the report. fonts and numbers change in the Font bringing it up to 14 as well.
01:03
Okay, yes, please. Okay, one more time reports drop down accounting and taxes, Trial Balance range change from Oh, 101 to 202 28 to two customizing VAT report with the fonts and numbers change in the Font bringing it up to 14. Okay, yes, please. And okay, and the prior presentation, we did an adjusting entry for the accrued interest. And that made an interest payable of the 7292.
01:35
Here on the balance sheet. On the income statement, we had the pay the interest expense included down here. Now what we would like to do is make the process as easy as possible. After the adjusting entries have been made after the presentation of the financial statements for whatever use, it needs to be presented in during it for the cut off period of February 28.
02:00
And then reverse it as of March if we need to, to make that cut off as easy as possible between what needs to be done for the data input process, the bookkeeping process and the reporting process at the end of the period. So in other words, if I go back on over to what we did, with regards to the adjusting entry, you’ll see that we have this 7292, let’s bring that on down here, which was half of the interest that we needed to pull into the current period that we were working on into February before the cutoff date, because on an accrual basis, it had been incurred at that point in time.
02:40
Now, if you were to say, Okay, I’m going to leave it like that, and let the bookkeeper fix it when they make the next payment. So let’s say where they were going to make this payment, you could kind of fix the adjusting entry at that point in time by doing an entry like this, you might say,
02:55
Okay, well, then, like the normal entry that you would do if there was no, if there was no payable, when you make a payment on the loan would look like this, I’m going to use debits and credits here, but you can think about it increases and decreases as well, we would have a credit of the 1007 6282, we would have interest expense as the debit.
03:21
And if we had no adjusting entry, we needed to reverse it would be that 145 83. And then we have the loan payable, which would be the difference, the reduction, which is going to be that 1618 99, which is this number here. Now if they were to take into consideration the fact that we have this component on the books this liability on the books, then the entry would have to look something like this to remove that liability, it would be cash would have to go down this would be the entry instead would go down.
03:58
And then you’d have to take the payable off the books, interest payable would go off the books for the 7292. And then the end tourist expense would be the difference between the total interest minus that amount, which would be the same because we took half of it and then the loan payable payable would be the the negative sum. And that would be the 1618. We get those same 1618 here but we would have to break out the interest expense between reducing the payable and the expense.
04:39
This entry will be kind of complicated. If your normal entry it’s already confusing enough just to do this and enter the data in accordance with the amortization table. This would further complicate things and sometimes you might have a system where every time you make a payment you just record it say to the loan payable account and then out rely on the adjusting department to to adjust out the interest as well during the during the adjustment process.
05:07
So you don’t really want the the bookkeeping department to really have to do this, you’d like them if they’re just going to be relying on the amortization table to enter what is on the amortization table. Two ways you can do that. You could say, Okay, I’m just gonna leave this interest payable on the books until the next time I do the adjusting entry. So it’ll just, it’ll just be there, you could just record your normal journal entry, which would be this when you make the payment in accordance with the amortization table. And we just won’t touch this interest payable.
05:37
And then when I make the adjusting entry in the following month, I will just adjust this interest payable to the proper amount at that point in time. That’s one way you can do it. Or you could say, I’m just going to remove the interest payable, so that the bookkeeper doesn’t have to see it or deal with it. So that’s what we’re going to do here, we’re going to remove the interest payable, so that the bookkeeper doesn’t have to deal with it so that the financial statements would have been correct as of the point in time, we needed them as of the cutoff date to 28.
06:08
And then back to the normal data input process to make the data input easy as of the next month. Now, when you do the reversing entry, you might say, well, the best timeframe to do the reversing entry would be this on 315. Why don’t I reverse this on 315, because that’s kind of when we make the payment. So you would think then that it would it would kind of cancel out at that point in time. But that we don’t want to make it as of 315, we want to make it as of three one generally.
06:40
Because even if that’s not an a perfect, a perfect accrual period or perfect accrual setup for the 15 days of March, it is the easiest thing to do from a logistics standpoint. In other words, I want to see exactly where my reversing entries are, I don’t want them scattered around the next period, it’ll be more difficult to find them, it’ll be more difficult for us to deal with the accounting department, what I’d like to do is be able to say, hey, look, we made these adjustments the way we needed to make them to make the things correct for on an accrual basis for reporting.
07:14
And then we reverse them the day after to bring back to your point on the journal entries that we needed to do that with. So we’re not going to try to try to shoot for making the first 15 days as appropriate on an accrual basis as possible, we’re going to accept the fact that they’re not going to be on a perfect accrual basis with regards to some of these items, because the whole system is set up so that we’re going to be more on an accrual basis as of the end of the time period when we do the reporting, and then not as perfectly on an accrual basis during the midpoint, because that is going to be an easier system for the accounting department.
07:52
So we’re going to put all our reversing entries as of the first day of the next time period, which in this case, is going to be the march 1. So let’s do it. Now we’re going to say okay, what we’ll do is say I’m going to go to this journal entry and just reverse it exactly. So if I then go to the list strapped down, go to the chart of accounts, we entered this by entering basically a journal entry into the register in the payable, all I have to do is reverse it. Now going into it, I want to make sure I make me close the carrot, closing the carrot, bring that up to the three one.
08:26
And we’re going to say this is not going to be a decrease of the 72.9 to the other account is going to be the interest expense. And this is going to be a reversing entry, reversing entry that we’re going to have. And so it’ll just bring it on back down to zero. Let’s close that out. And see what happens. I’m going to close this out, open up the caret, go back to the trial balance. And it’s still there as of the cutoff date, march 28. But now let’s bring it up to the next month. And I’m going to just look at it as of Oh 3012 to 203 31 to two. And so now it’s it’s going to be gone.
09:11
As of that point in the interest payable is back down to zero. If I double click on it, there’s our entry we called it a reversing entry here so we can tell that it was something done by the adjusting and reversing department or process. Double clicking on it, it takes us to the register. Double clicking on the register we got our journal entry which is the reverse in terms of debits and credits as the adjusting entry. But as of the following day, first day of the next period debiting the payable bringing it down to zero and crediting the interest expense.
09:44
I’m going to copy the reversing entry and put it on down here as well for the memo save it and close it. Yes and then close this back out. Close this back out the other side thing is going to be reversing out on the interest expense. So if I go into the Interest expense, we’ve got the reversing entry at the 7292. Closing this back out. Now the notice that this down here is really showing for the for like the year.
10:12
So if I change this to a 101 to two, then we’ve got that same amount down here. So it’s really showing the year because it’s kind of an as of type of report here, let’s look at the balance sheet and income statement to get a little bit more clarity on it. If I go to the balance sheet, then as of 228, the reporting or the cutoff date, there it is. And if I go to the next day up, three, one, then it will be gone.
10:37
We know we no longer have the loan payable, it has now disappeared, because we reversed it. If we go to the Profit and Loss report, and I go to to the as of the cutoff date, we still have it included in the interest payable interest expense here, I should say, because that’s what it is, right there. 7292.
10:55
But if I increase it, then, or just let’s run it for oh, 3012 to 203 31 to two. Now we just have this negative 7292. If I double click on it, and change the beginning date. So you can see it goes in right there with the 7292. And then out of the 7292. But it happened on the cutoff date. And then the day after the cutoff date, the end of the month, and then the day after. So what that means is that if I ran this just for the period of March, the month of March, I have this funny negative 7292, which shouldn’t be an interest expense, interest expense isn’t negative, interest expense should be positive, that’s wrong.
11:43
That’s going to make the bookkeeper say that’s funny as well. But we’re gonna say don’t worry, that’s, you know, that’s what we did in order to be in order to reverse it. So we didn’t have that funny payable, and allow you then to basically just enter this transaction on the adjusting entry as you normally would. And the result then will be if they do this entry as they normally would, would be to post to interest expense 145 A B three, that’s what they’re going to do.
12:10
And that 145 83 netted out against the negative 7292 will report the proper amount, which of 7292, because there’s only 15 days in March that have to actually accrued for interest, even though we’re paying, you know that that payment in March. And then of course, we’ll have the next interest payment that will happen on the next month. And we’ll do it like a similar process. But the interest will change fairly substantially given given the rate of the interest here for the next kind of accrual component, which will be half of the 9861, and so on. So that’ll be basically the adjusting process.
12:48
So this will be kind of incorrect until they make the payment until they make the entry. And then they’ll post here when they make the entry like they normally would 145 83, which will net out against this 7292, which will make it correct as of the 15th as of the time they make that payment. And then they won’t make the next payment until April, which will go past the cutoff period again, and they’ll have the accrued interest of 9861, which will have to do the same adjusting entry to at the end of the time period, that’ll be the general idea with it.
13:24
Remember, when they make the payment, they’re probably going to do something like this, they’re going to write a check and go to the let’s go to the homepage want to write a check, there we go. And then I’m going to say that the check would be for the amount of this 1764 82 Sobey 176 4.82. And then you’d have the breakout between the interest expense, which would be the 145 83. So this would be one four, or 5.83. And the interest payable, which would be the 11618 99. So the 1618 99. And when you make that payment, this would be reported to the interest. And this would happen as of Oh 315 to two, that’s when it would happen.
14:19
And so this would be posted then to the interest that would net out to make it the proper amount as of the point in time that we make this payment. So there’s that I’m going to close this back out and say no, here, we’re not going to record it. And so there is that and then if I go to the trial balance, we could see basically this is where we stand let’s make it as of the cutoff date.
14:41
We didn’t change it as of the cutoff date. So here it is after the cutoff date so you can see the trial balance after the cutoff date and check your numbers if you so choose this way. The other way you can kind of check your work is to is to look at the journal report. By going to the reports drop down, go into the accountant and taxes and take a look at the journal. And we’ll do the same process with the journal. I’m going to say don’t show me that again, don’t show me that again.
15:09
And then we’re going to customize it. And let’s make this as of Oh 331. Let’s make it as of sorry, oh 228-222-0228 to two. And then we’re going to say that we just want the transactions on the filters that are journals. Well, let’s do this first, I’ll say okay, there’s this. Now we want to filter it to just show the journal so it doesn’t show all the other types, just journals, then we’re going to go okay, filters. And let’s bring it on down to the type, the type transaction type, which is going to be a journal. And we’ll say, Okay, so there’s our adjusting entry.
15:55
And if I bring this in date up one day, now we’ve got our reversing entry as well. So it just went in, and then it went back out again. So at the end of this, this is a nice report that you can basically take a look at, to help to provide to the accounting department or something like that or to look at to see what has been done during the adjusting process for it. And it’s nice to have these memos in here to identify that these are going to be the adjusting entries and the reversing entries.