QuickBooks Pro Plus desktop 2022 adjusting entry unearned revenue customer deposit and get ready because we bookkeeping pros are moving up the hill top with QuickBooks Pro Plus 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 dropped down homepage in the middle maximizing to the gray area reports drop down company and financial looking at that balance sheet standard. We’re going to customize up top with a range change from a 1012 to 202 28 to two fonts and numbers change in that font size on up to 14.
00:41
Okay, yes, please. And okay, reports drop down company and financial looking at that profit and loss with a range change of a 101 to 202 28 to two and then customizing the report fonts and numbers changing the font size on up to 14. Okay, yes, please. And Okay, one more time with the reports drop down account and taxes, Trial Balance range change from a 10122202 28 to two, customizing the report fonts and numbers changing the font size on up to 14.
01:21
Okay, yes, please. And okay, let’s recap what unearned revenue is by going to the home page. Normally, the process for the revenue cycle would be something like this, we enter an invoice, then we receive the payment, and then we make the deposit or we get paid at the same point in time and then make the deposit but it’s possible we get paid first by the customer before we do the work.
01:48
So that would mean we’d have a backwards kind of processor, we’d have the receive payment before we invoiced the customer, that’s going to be something that is more likely to happen in certain types of industries, subscription models, types of industries, for example, newspapers, magazines, and many applications which are growing these days in popularity, the subscription model in that area as well, these are going to be areas where they’re going to get the money first, and then they provide the services on an accrual basis, then they shouldn’t be wrecking the recognizing the revenue until they actually get paid the revenue.
02:24
So when they get the money, then they would be increasing cash. The other side instead of going to revenue go into unearned revenue a liability account because they either owed the revenue back if they don’t do the work, or they owe the work, they owe something in the future. Therefore it is a liability until it has been earned. That’s the general concept. You might also see it in a situation like our situation where we have a large product that possibly a customizable product or one that needs to be ordered.
02:55
Specifically for first personalization, such as a guitar, and someone wants the order of the guitar, we’re gonna say we would like a down payment, we would like to get paid a portion of it first, in order for you to be committed to the sale. So it will be worth our while to go through the actions to complete the sale.
03:13
And then we’ll invoice you after that. If you have a rental type of situation, you might also have that rental situation that deposit is a similar kind of of idea that you’re getting money, it’s not going to be your money, it’s a deposit, in essence that you might earn at the end, if there’s a problem with the apartment or whatever, or and then and then you’d have to pay it back.
03:33
So you might call them the account that’s going to be increased unearned revenue, or you might call it you know, the customer deposit or something like that, it’s typically going to be a liability account. Now, when we when we do that, in a classical type of accounting process, what would happen is when we get paid first, we would get the money first and increase the checking account with a cache and then the other side would then be going to unearned revenue.
03:58
So if I went to my trial balance, then you would have an increase to the checking account and then a liability. Let’s look at it on the balance sheet. Actually, let’s go to the balance sheet, you’d have an increase in the checking account other side would be down here in a liability type of account other current liability, we discussed the fact that in practice, however, that causes a problem, because the other current liability account unearned revenue, for example, does not have the connection to the customers that we want to be linking up the payments and the invoices.
04:32
So oftentimes, logistically, it’s useful then to put the information up here as a negative receivable instead of as a positive liability. And so that’s what we’ve done here because it’s kind of something fairly common you’ll see in practice, but that means the adjusting entry will be different than you might be used to when you’re looking at this in a normal accounting kind of situation for a classroom type of situation, which would usually be that you Have unearned revenue down here. And you’re trying to determine how much of the revenue have been received.
05:06
So for example, you’ve got unearned revenue that we’re just going to accumulate upward, which might be the case if you have a subscription model for for software or newspapers and so on. And you’re telling the accounting department, I want you just to record unearned revenue every time you make the sale because we always record the unearned revenue, because we always basically make the sale before we actually provide the goods and services in that particular industry.
05:31
And then at periodically monthly, for example, we will go into it lower unearned revenue, and record the revenue as it is been earned, which we will have to determine we’ll have to go in and determine how much of the of the revenue that we already got paid has actually been earned and do the adjusting entry for it. Now we’re not we don’t have that kind of system here. Because we’re looking at unearned revenue. That’s not usually something that we do all the time. It’s not like all of our revenue is going into unearned revenue, we have those deposits that are going to be in place that we expect to invoice as soon as we’ve received the guitar.
06:07
And it’s useful for us to tie those out and track that information by making a negative receivable. So we discussed that earlier if that’s if you’re confused on that take a look at when we record these transactions as the negative receivable for more detail about that. So then our situation is if I go to the sub ledger for the reports drop down, and we go to then the customers and receivable detail. So the customers the customer balance detail. And we look into it and we’re gonna say okay, they’re in let’s make it as of
06:41
Oh 10122202 20 822. And we’ve got some of these, some of these balances are going to be negative, I believe here’s one, Eric music has a negative balance. That means that we owe them money, which is weird, because it shouldn’t be on this statement, it should then be a liability because we owe them money.
07:03
So it’s a negative receivable instead of a liability. And so we also have that down here same kind of concept with Sam the Guitar Man, I think that is it. So those items are making them the accounts receivable be too low, we need to increase the accounts receivable for those items. And then we should be putting them into unearned revenue. It doesn’t really have any net effect on the balancing of the balance sheet. But then it’s understating if I keep it this way, it’s understating the accounts receivable and understating the unearned revenue.
07:36
Now once we once we receive the actual guitars and complete the process, enter the invoice, it won’t be a problem, because then we’ll be back to our normal state. And we’ll have the invoice and the payment will match out together. However, if that has not happened by the cutoff, to 28, the end of February in this case, then periodically, we’re going to make this adjustment to make it look correct. for reporting purposes for external use, then we’re going to reverse it to get back to the normal usage that is used by the accounting department.
08:10
So again, this isn’t wrong, what we’ve done right here for accounting purposes, we’ve decided that logistically, this is an easier thing to do for data input. And that’s why we’re doing it, even though for presentation purposes, we don’t have that liability account. And then we planned to periodically at the end of the month, have the habit broken out if necessary, into the liability account.
08:36
And then again, we want to reverse it back to the normal state after we’ve done the adjusting entry process to get back to where we are. That works logistically well. So that’s going to be the journal entry. Now the problem with the journal entry, then, when we increase the accounts receivable, they’re going to force us because QuickBooks forces us to enter a customer and I don’t really want to mess up the customer.
08:58
So there’s two ways you can deal with that. You could say one, I’ll make another account called accounts receivable just for my adjusting entries, and record to it and make that account not a receivable type account, but rather just an other current asset. So you don’t have to deal with the sub ledger, which receive which the QuickBooks forces you to deal with otherwise, or you might just record it to like another account here.
09:26
So we made this other entry in a previous presentation for a customer named zzz adjusting entries and we’ll try to just use that one for our just interested that it minimizes the detail that are going to be in the the actual customers when we get back to the normal day to day accounting process. So that’s what we’re going to do it’s if I go back to the trial balance, it’s simply going to be an increase to the accounts receivable and the other side then is going to go to a liability that we’re have to will that we will have to create which is going to be the unearned revenue.
10:01
Actually, we do have it down here we got the unearned revenue account we set up in the past. So we’ll do that with an adjusting entry, we could use a journal entry, but we can also use the registers here, we can’t really use the ones for accounts receivable, it gets a little tricky to use a register account for accounts receivable. But the unearned, big, and that’s because there’s a there’s a sub ledger related to accounts receivable, which could complicate things, but I believe we can use it for the unearned revenue. So that’s what we will attempt to do the entry.
10:33
Let’s just see what the amount will be real quick. So pull up the calculator, we have these two items that were negative, so it was the 200. And it was the 250 down here, the 250. So that’s the 450 is the adjusting entry that we need. That might be like irrelevant, you might save lots of small amount might not be worthwhile.
10:56
But you can see situations where of course, this would be a material component, something that would impact the decision making process for people and therefore something you need to record for reporting purposes. So we’re going to then going to go to the list strop down Chart of Accounts, let’s try to then go to the to the liability account that we called unearned revenue. So other current liabilities, double clicking on it close in the carrot, it’s going to be as of 228 as our all adjusting entries. And we’re going to say that this is going to be an A, this is an increase to the liability account.
11:34
And the other side is going to go to accounts receivable, accounts receivable. And this will be an adjusting entry. Now it’s going to cause me a problem because they do not have a place here where they’re going to allow me to be entering the customer. So if I just hit enter here, it’s going to cause me a problem, I could try hitting the split down below, which gives me this little drop down detail. And then I can put my adjusting entry a DJ entry here, let’s just call it a DJ, as has been our custom, you might want more details saying which customers for example, in your memo, which might give make a little bit nicer.
12:15
And the customer field, if I don’t add the customer won’t let me record it. So I’m going to record the customer. But I’m not going to put the actual customers that are related to it, I might put that in the memo. But from the adjusting entry, I’m going to try to pick this zzz or I will pick it and that hopefully will allow me to not mess up the bookkeeper too much with my adjusting entries is the goal.
12:37
Let’s go ahead and record it. We’re gonna say okay, let’s do that there’s the 450 and the unearned revenue. Closing this back out, I’m going to close I’m going to open the caret and then close out this as well. And then go back to the let’s go to the balance sheet. Everything’s on the balance sheet here. So we’re going to say now the accounts receivable if I double click on the accounts receivable, scroll down, there’s our 450 increase in that. So if I double click on it takes us to the register, double clicking on the journal entry there.
13:10
There it is in journal entry format, unearned revenue going up with a credit and the accounts receivable going up with a debit. So that looks good. I’m going to close this back out, close this back out, close this back out other side is in a liability account for the unearned revenue Where where is it? Where is it unearned revenue is way down here. I like panic for a second I had a little bit of a panic there. It’s not here. It’s not here the world is ending.
13:42
Okay, so there’s the 450 right there journal entry, closing that back out. So you can see what happened. Instead of having a negative a negative asset account, we brought it down here to the unearned revenue, which is correct for reporting purposes, but doesn’t really work for us logistically because this unearned revenue isn’t tied to the sub ledger account.
14:06
So I can’t really assign when I build them later with an invoice, I can’t assign the invoice to decrease the unearned revenue causes a problem. That’s why the accounting system has been set up to have a negative receivables. So I don’t want to mess up the accounting system.
14:20
So after having done this, after having making the financial statements, I’m then going to make an adjusting entry as of the first day of the following period. So I can keep the accounting department on their normal basis, which is good for them. logistically it’s working well. It’s not an error.
14:37
And and so then we can we can have the successful reporting look good, as well as do the data input as cleanly and efficiently as possible. So where we stand on the trial balance over here, there’s a trial balance. This is where we are at at this point in time. If you want to check your numbers we’ll also be providing those backup files so hopefully you can use those to jump to The place that you need to be if you want to rework anything or jump forward