QuickBooks Pro Plus desktop 2020. To add new accounts and opening balances, get ready because we bookkeeping pros are moving up the hill top with QuickBooks Pro desktop 2022. Here we are in our get great guitars practice file going through the setup process with the view drop down the open windows list on the left hand side company drop down home page in the middle maximizing that homepage to the gray area. We’re going to open up our financial statements with the reports drop down company and financial let’s start off with that balance sheet report.
00:33
Going to customize the report up top changing the date range from a 101 to one to 1231 to one, then I’m going to go to the fonts and numbers make the font a little bit larger, a little bit easier to see changing it to 14. Okay, I’m going to apply it to everything. Yes. And okay, let’s go to the profit and loss reports drop down company and financial first report being the profit and loss changing the date up top from a 101 to one to 1231 to one, then customizing that report fonts and the numbers change the font to 14 and okay apply it to everything Yes, please. And okay,
01:15
let’s open up one more that be in the trial balance reports drop down accounting and taxes this time that Trial Balance Report changing the dates up top a 101 to one to 1231 to one, and then customizing that report changing the fonts and the numbers to the font size of 14 for fonts sake. Okay? Yes, please. And okay, we’ve been entering our beginning balances, we’ve been starting off with the balances that are a little bit more difficult, because they need a sub ledger, like the accounts receivable, the inventory and the accounts payable needing a sub ledger breaking out by customer, by the inventory items and by the vendors.
01:55
Now we’re going to go to the items that should be hopefully a little bit more easy. And that we can just basically enter the beginning balance. And we could do that various different ways. But we’ll see how to do that. So we got the checking account will add at this point. And then the accumulated depreciation and the furniture and perfect the fixture the VSA account the loan payable, let’s start with the checking account. So we could just add this right into the checking account, generally, the same principle is going to take place and that the other side, we’re going to let the system wash out or just add it to then the equity account in some way, shape or form.
02:30
So I’m going to go back on over and say, Okay, let’s go to the checking account. Now, are there any special needs with a checking account, remember, the checking account, you might try to tie the checking account, say to your bank feeds, we’ll talk about bank feeds later. But if you’re doing it tying them to the bank feeds, then you just want to make sure that what your cut off is in the system is going to be then your cut off. And then the data that you pull from the bank feeds have to start from the cut off point.
02:56
Also note that you’re going to have some issues that if you’ve been entering your data into your system, and reconciling to the bank account, you’re going to have a difference between the amount in your accounting system meaning this $25,000 Here, as of 1231 21 may not match what’s on the bank statement as of that same point in time due to outstanding checks and deposits. So in that case, we’re still going to have to use this 25,000 Because that’s what our records are, we assume our records are correct, because we know about the outstanding checks and deposits.
03:31
And when we do the bank reconciliation, we’ll have to deal with those timing differences when we reconcile. So what we’ll do, we’ll deal with that in the future. Once we look at the bank reconciliation for now, that’s the 25,000 that we have. So all I have to do is add it to the beginning balances. So that’s what I’m going to do, I’m going to go back on over here, we’re going to go to then our Chart of Accounts List strop down at chart of accounts. And you could basically go into the register here.
03:58
And so if I double click on any balance sheet item, we could add in essence, a deposit to the register, or I’m going to close this back out, when you set up the account, you can add the beginning balance, I’m going to go on the checking account, go down to the account drop down or rise up and edit the account. And then let’s make this then a beginning balance where we have the beginning balance right here. And just say I’m going to add the beginning balance the statement, the statement ending balance.
04:26
Now it’s trying to say that we want to do this with the bank statement here. Otherwise, we’re going to enter a transaction, I’m going to go ahead and enter basically the balance that we have, which is going to be that 25,000. And I’m going to put that in there as of the end of the prior period, which I’m going to say is 1231 to one because we’re starting once again on January first 2022. So I’m going to have to write the first reconciliation that we deal with no matter what we do, we typically have to have a little bit of an issue with those outstanding checks and deposits.
04:58
We’ll deal with that later on. I’m going to say, OK, here, so we got the beginning balance, I’m going to say save it, and close it, like so. And then we’re going to see that amount. Now here in the the trial balance, or in the Chart of Accounts, if I double click on it, we’re going to see it here. So it basically recorded a transaction for it, you can see the other side went to the opening balance equity, which is what we would expect to happen. So in other words, if I just check this, let’s just go to the trial balance to check it, it’s going to update the data, I’m going to say yes.
05:30
And so now this would go the income statement, I’m trying to go to the trial balance, trying to go to the trial balance. So now we can see the checking accounts at the 25,000. If I drill down in on it, then we see the transaction, it’s a deposit type form. So we entered a beginning balance, they used a deposit type form. So if I double click on it, we see a deposit type form the other account being assigned to the opening balance equity, closing this out, closing that out, that’s going to be down here in the opening balance equity. There it is, let’s try again,
06:03
let’s do the next one. We’re gonna say okay, let’s try then the the furniture and fixture I’m gonna do furniture and equipment first, and then accumulated depreciation, that’s the order, you would generally think of it in this representing those large property, plant and equipment, which you might call depreciable assets. So another kind of category. Now, these assets will typically be supported by the actual pieces of furniture and equipment that couches, the equipment, the forklift hours.
06:28
So you need some kind of sub ledger generally, but oftentimes, the sub ledger is going to be generated possibly some other location, such as tax software, because the tax software is going to have to calculate the accumulated depreciation on a tax basis, and usually has the ability to calculate it on a book basis as well, if we so choose, that’s usually the easier thing to do. So what we want to do normally, oftentimes, the setup will be, I want to record my furniture and a fixed fixtures into all my and that would include all my fixed assets into the QuickBooks software.
07:03
And then I want to mirror that and give that to my tax professional so that I can get the supporting schedules, which calculate the accumulated depreciation on either a tax or book basis, however, I want to record my books in. And then every time I make a purchase, or a disposal, I need to notify my tax professional, at least by the end of the year. So they can make those changes to the schedules that are supporting it. And then allow me to give me the adjusting entries basically, as we enter it. So that’s the that’s the system that we would imagine basically taking place here. So that means that we could just put this on the books fairly straightforwardly.
07:38
So I’m going to go back on over our our general ideas, I’m going to go to the chart of accounts and say is there is there a furniture and equipment account that has been set up and and an accumulated depreciation account related to it. So we can see here that we have an account called furniture and equipment, if I wanted to call it something different, such as I break out my furniture and equipment separately, which you may want to do, because what you might want to do when you set up these items, is talk to your tax preparer, and say what are the standard categories in the depreciation schedules on the tax return, and then mirror those categories as you enter them into QuickBooks,
08:18
so that you can kind of tie those two things out and make the adjusting entries easy as possible things like the accumulated depreciation, and accumulated depreciation that you should be recording periodically. But for now, I’m just going to use this item here. So if that if that were the case, then you could change the name here, you can add multiple accounts and so on. But I’m just going to go into this, I think we have another section that goes into that whole process in more detail. But we’re going to add it here. So I’m going to then do a same process, you could go into it, like double click on it. And then now we’re in a register related to this particular account and increase it.
08:53
But I’m going to do it this way, I’m gonna close this out and say I’m on that account, go to the account, rise up and edit the account. And we’re going to say that this one needs how much is in there 75,000 75,000 In the opening balance 75,000, we’re going to say that is as of 1231 to one the end of the prior period, we’re going to be starting our books on January 1 2022. Okay, and then save it and close it, save it and close it. There it is. Then I go on over to the trial balance again, let’s check out the Google TV. Don’t ask me again. Yes, please. And then we have the 75,000 right there double clicking in on it. There it is and the other side went to opening balance equity.
09:40
Notice there was no form it could find to use it just use the journal entry. So if I double click on it, it takes me to the register. If I double click on this little item, it takes me to the journal entry. That’s the default form that are the form that is used when there is no other default form. Just a journal entry just debits and credits. Closing this down account, closing this back out the other side going to the opening balance equity, which is down here double clicking on it, we see it in opening balance equity with that journal entry right there. So that looks good. Closing it out next, what’s now we have the accumulated depreciation, let’s go back on over say, okay, that’s the same process that’s going to be related to the furniture and equipment.
10:24
And that’s going to be the decrease in value. That’s an accrual adjusting entry that we have to make periodically. Again, we might do that periodically by talking and working with our tax preparer, to know what the adjustments are. Also note that if you had multiple furniture and equipment accounts, multiple depreciable asset or fixed asset accounts, then you could break out the adjustments with having multiple accumulated depreciation accounts that would tie to each category of the fixed assets.
10:55
Or you might try to just group them all together into one accumulated depreciation account that being easier, but also given a little less data. So that’s kind of your, your options. But if I go back on over to the to the chart of accounts, we have an accumulated depreciation here, so we only have one. So again, you might want to change this, you might say I want accumulated depreciation related to the furniture, and then accumulated depreciation related to the equipment, so that I have the cost and the accumulated depreciation for each category.
11:27
Or you could just kind of group them together into the one account here. So let’s do that. I’m going to go to the account drop down or rise up, and let’s edit it, edit the account. Now this one’s confusing, because it’s a contra asset account, meaning this is an account that’s in the asset category, but has a credit balance, or in other words, actually decreases the acid balance. So the question is, do I put that in place as a negative number, or positive number when I’m trying to avoid debits and credits the way QuickBooks is doing for us here? So when I, when I go into this item, the question is, do I put that in as a positive or negative, I’m just going to guess.
12:05
And if it goes the wrong way, then I’ll fix it. So I would think it would be seven, five on the positive, that would increase that account, which was seven, five. And so this is going to be as of 1231. To one, and if it’s wrong, I’ll go in there and fix it. So I’m going to say OK, and then save it and close it. And then we’ll go on over to the trial balance, did we get it right? Did I guess the right way I did not, I did not guess the right way. Because it put it on the debit side. And if I go to the balance sheet, you can tell to if you go to the balance sheet, and say okay, it put it added these two together, and it should be subtracting them.
12:44
So okay, so that means what I’m going to do is I’m just going to double click on the accumulated depreciation, and double click on the transaction, which they use a journal entry for. And I’ll just reverse the debit and the crediting. I could do it right here. But I’m going to go into the entry. And let’s say hold on, this is backwards, 7500, and 7500. There we go. Now let’s save it and close it, save it and close it. QuickBooks lets you do this. But it’s not a good idea. Here’s why. Whatever I’m doing, I’m going to do it. Here we go. And then close that back out. So there we have it. So now it’s subtracting the two that looks good. Notice that in this category, it put the furniture and fixtures on the bottom, because within this category of furniture, a fixed assets, the accumulated depreciation starts with an A.
13:40
So that’s not good, because it’s backwards, that looks that looks really pretty ugly, because because it should be the other way around. But that’s the lack of control you have if you don’t use account numbers. So that’s what you kind of have to deal with those little weird kind of things when it’s in alphabetical order inside the category. And you don’t have control over that other than to change the account here to try to put a z in front of it or something or to use account numbers. And that case, so then, let’s go back on over if we go back on over so now we’ve got these two have been done. Now we’ve got the liability of the VSA, which is a credit card account.
14:17
So we’ll say okay, do we have any checking accounts? So now I’m going to go to the check the Chart of Accounts, and say, Do we have any this would be a liability type of accounts? Do I have any liability kind of accounts that are credit cards? I don’t, I don’t have one. Now the credit cards a special current liability because again, a credit card you can connect to the bank. So you might be able to use the bank feeds which we’ll talk about in the bank feeds section more. So that means you got it you got a special category. So I’m going to go to the account drop down rise up I don’t have this account in the chart of accounts that was provided to me by QuickBooks.
14:52
So I’m going to add a new item, new item, it’s going to be a credit card type of item I’m going to say continue in And then we’re going to just call it a visa, VISA credit card. Notice as you add these accounts, you might want to say I’m going to call it a credit card, and then have a subcategory, possibly. So in the subcategory would be here, which would be under the credit card, which would be called a Visa card versus also an American Express, and so on and so forth if you had multiple credit cards, but we’re just going to keep it simple with one item, don’t need anything else on the description, and so on, we do want to put the opening balance and as we go,
15:30
notice it’s referring to a statement because you have a similar process as you have with a checking account, which means that that first reconciliation problem is going to cause us problems. And we could, we might want to say I’m not going to put the statement balance here, because this balance on our books might be different from the statement. So I might be so you know, I could enter this as a transaction. But I’m going to I’m going to show us how we can deal with that when we get there.
15:55
So we’re gonna say 1000 here, and I’m going to do the same thing as of 1231 to one the end of last year, and okay. So again, the problem here that we’re seeing is on the checking account, and on the Visa card, our balance, if we’re tracking our balance could differ than that, from that on the bank statement as of the same date due to outstanding checks or deposits or transactions that have happened, that the institution bank or financial institution, in the case of the credit card does not yet know about. That’s why we reconcile, but we’ll talk more about that later.
16:30
So I’m going to save it and close it. And so now it says do you want to set up the bank feeds, we’re going to talk bank feeds at a later point. So we’re just going to say no, there’s the credit card, and if I go back to the T B Trial Balance, there’s the credit card double clicking in on it. Other side, they put the opening balance, they called it a credit card transaction, which makes sense. That’s the form they used. So if I double click on it, we can see what it looks like. So there it is the VISA credit card purchase item. So Okay, close that out. Closing that out.
17:05
And then what else we got? What else we got here? loan payable, loan payable. Let’s assume that’s a long term loan. The tricky thing about a loan payable is that you might have a current and long term portion because oftentimes, it’s going to be extending over a year, meaning it’s going to be long term, but you have a current portion, meaning you’re making payments monthly. So the first year of payments would be short term. So your credit. So then the question is, well, what
17:31
do I do about this balance? Normally, what I would suggest normally is I would put it on the books as one kind of account, possibly a long term account for the starting point, or actually, I’ll start it off as a current liability as the starting point, because you could pay it off from the current liability section. Otherwise, it could cause some problems and transactions sometimes. And then, and then periodically, what we’ll do is break out the current and long term portion when we need to create the financial statements at the end of the month, and or a year. So that’s how one way you might want to do it. The other thing with loans is that you might have multiple loans.
18:07
And you could put the multiple loans into one loan payable account, which is how you’d want to see it on the financial statements. But from a practical standpoint, when you’re doing the books, you probably want to break out each loan that you have, if you have multiple loans, so that you could track the balances in each of those loans, it would be nice to be able to track the balance in one loan as opposed to a short term and long term loan account. And then just makes adjustments for the short term and long term portion periodically again at the end of the month, and or a year.
18:36
So that’s what we’ll do here. So I’m going to say loan payable, I’m going to I’m going to set it up as a current liability. So I’ll go to the chart of accounts. Do I have anything for loan payable yet? Did they give me something with a loan payable? No. So I’m going to say, All right, I’ll just make one, we’ll make it accounts rise up new account. And this is going to be a loan type of account, we’ll call it and I’m gonna say continue on that loan type of account. And then it’s an other it’s an other current liability.
19:08
So other current liability loan type of account, I’m just going to call it loan payable, loan payable, and then enter that beginning balance, which I’m going to say is what did we say it was 22,000 22,000 as of 1231 to one the end of last year, we’re starting our books on January 1 2022. And okay, and then save that thing. There we have it right there. And let’s go then to the trial balance and good OTB there is the loan payable, double clicking on it. There it is put it in place with a journal entry because there’s no standard form so it had to default to the journal entry which is good old debits and credits. Just a good old debits and credits.
19:55
Closing that out. That looks good other side go into opening balance equity I believe so there it is on the loan payable that is it. Okay, so then if I look at my balance sheet now if we look at the balance sheet, this is what we have, we’ve got the checking account, we’ve got the accounts receivable, we got the inventory on the books, we got the accumulated depreciation and furniture and fixtures, the accounts payable the VSA account, the loan payable, and then and then the other current liabilities, and the total current liabilities.
20:30
And then we’ve got our net of these two accounts down here, where they dumped everything into equity into the equity section. So let’s just check it with our trial balance if we did a side by side with a good OTB and tried to check this because that can I put this like over here. And then if I was to look at this, we got the 25. We got Look how nice the trial balances by the way to check these numbers because we don’t have the subtotals 20,500, the 2896, we got the seven, five, we’ve got the 75,000. We’ve got the 15,000 to 1000 to 22,000. And then down here, you got this grouping of funniness, like what is going on down here? I don’t know.
21:09
But let me see. calculation, we need the help of the calculator. We need your help calculator to make sense of the world. The calculator makes sense of the world. So now we’re going to say that this is going to be the 72 396 plus 225 minus the 15,000, which is the 77 896 that matches over here. Why do we have these added accounts down below? Because the opening balances were dumped most stuff, because QuickBooks is telling us hey, look, I didn’t know where to put it. So I dumped everything in the opening balance, equity. And then sometimes they put stuff into the uncategorized income and expenses.
21:51
Typically when we made the transactions for the receivables and the payables because they used an invoice and Bill form, these two would cause us a problem on the income statement statement. But we entered it as of last period, which we don’t really care about. If I roll this up to the current period changes to 22 to 1231 22, then that rolls out. So we don’t see those two income statement accounts because it rolled out into the equity, we still see opening balance equity, which is ugly, because that’s not a real account. So what we would like to do is change that account to to adjust it into basically the equity account.
22:28
That’s what in essence will do next time to finalize this thing to clean this thing up, finalize it. So you can see that that lines up good. It’s just this last account that we got to basically adjust. That’s the typical method that you’re going to that you can use. And then this last adjustment might be easy for the sole proprietorship, which is adjusting to the opening balance equity are a little bit more complex. If you have a partnership with multiple capital accounts or a corporation with a retained earnings and a common stock. But same process, you can use the same idea for all of them.
22:59
So if we look at the balance sheet right now we’re looking good on the balance sheet, same kind of concept down below this net income looks funny until you roll it in to 2022, which is where we’re going to be starting. And now it’s in owner’s equity, which looks proper the income statement Profit Loss, same thing you got this funny business happening as of last year, but I don’t care about 2021. In this system, I just want to make it correct as of the starting point which starts on
23:26
Oh 101 to two with 1231 to two and that should have nothing in the profit and loss because we haven’t had any activity yet that we have entered for the current year that we’re going to be entering data for. So that’s going to be that’s going to be the basic breakdown and again note how nice the trial balances to kind of check our work on these items.