Invoice & AR Adjusting Entry Part 2 Solution 10.26

This presentation and we’re going to continue on with our adjusting entry related to an invoice that was entered into the wrong period. We laid out the problem last time. Now we’re going to enter the adjusting entry of this time. Let’s get into it with Intuit QuickBooks Online. Here we are in our get great guitars file, we’re going to open up our reports.


Once again, we’re going to go down to the reports on the left side, we’re going to open up our balance sheet report and our income statement reports. So we’re going to open up the balance sheet, we’re going to scroll up top, I’m going to be changing the dates, I want to include March here, so I’m going to be including March, I’m going to go back up top from a 101. Let’s just make it for March, I’m going to actually make Oh 301-202-0310 let’s say two zero, then we’ll run that report. So there it is, we’re going to go back up top, right click on the tab up top and duplicate it. Then I’m going to go back to the tab to the left, and we’re going to open up the profit and loss.


So I’m going to go down to the report. Once again, we’re going to open up the profit and loss the P and L, the income statement. So there it is, we’re going to be changing the dates up top. So I’m going to scroll back up and change the dates. And just for March now oh one, I’m sorry, then oh 30120203, let’s say 10 to zero, and run that report. Then I’m going to duplicate that tab, right clicking on the tab up top and duplicating it. Now you’ll recall that we entered an invoice up top, so we entered the invoice and it’s in the wrong time period. So now we got to take a look at that invoice, and we need to pull it back into the prior time period, we’re going to do that with a journal entry.


So there’s really I mean, I’m not going to be able to avoid the debits and credits here because there’s going to be multiple accounts as we’ve talked about whenever we create a journal entry. So this is really good practice to kind of see the journal entry the accounts affected and the debits and credits related to an invoice with inventory, because we need to figure that out so that we can enter into the system as of the end of our cutoff date or before the cutoff date or as of the cutoff date, which is March or February 29. So let’s go ahead and open up the invoice what I’m going to do is I’m going to go into the sales, I’m going to say, hey, look, this invoice that 1023 is in the wrong time period, I’m not going to delete the date, I’m going to keep the date as is what we’re going to do is do our adjusting entry related to it and then a reversing entry for him.


So if I open this up, then I can scroll down and think about what’s in there I can pull what I can from this invoice. So now I’m going to open up Excel and just think about this gentleman. Okay, so we’re gonna have to do this in kind of debit and credit format here. So here’s going to be the debits and credits. So I’m going to underline this and underline and center it maybe.


So this is basically the journal entry that we have the accounts that we know that are affected with an invoice our accounts receivable receivable, we know that that goes up the The other side is sales, right for the product sales, I won’t put the rest. And then the difference between the do I between those two, let’s put the sales down here sales is going to be the payable, that’s going to be the sales, tax payable. Right? So if we look at that, on the invoice, we’d say, okay, what’s going to happen here again, the invoice is going to go up or the accounts receivable up by the 1000 for 2350.


So 142 3.5 is going to go up and the AR, the sales are going to go up by what we get to keep 1300 I’m going to put that with a negative number for the credit 1300 The difference is going to be the one to 3.5 or the sales tax. So negative 123 point five, there’s the difference that adds up to zero or the debits equal the credits there and we can indent the credits if we want. We also know that the There’s another side to it, meaning inventory goes down, and cost of goods sold goes up. And so I would think of that as a separate kind of journal entry typically.


So if I go back over here can’t see that on the invoice, I can close this back out. And I can go back up top and say well, I can check out the account to find that, let’s go into the cost of goods sold account. And we can see there then that amount was for the both of these are the same invoice so the 1040. So that’s going to be 1040 and the 1040. So that’s going to be our mountain. Now, you could think of this as basically to, you know, to journal entries, kind of like this and basically enter them in as two journal entries or just one journal entry that you can that you can put in place.


So let’s let’s actually do it in to journal entries, and let’s try to think about a register to do this. Now. Typically So notice if we if we see this first one, what register can we use accounts receivable, sales tax payable, those are both balance sheet accounts. So we may be able to use one of those. Now they’re both kind of tricky accounts because accounts receivable has a customer added to it. So it might be a little tricky to do, we’ll take a look at it. And then the sales tax payable, you got to track the sales tax payable, they got the sales tax payable feature for it. So those two could be a little little tricky to deal with. But let’s go into those registers and take a look at them.


See if we can enter this in terms of the register balance going up and down. So I’m going to go back to the first tab, I’m going to hold down Control and scroll down a bit. We’re going to go down to the accounting, where then and if you want to see the debits and credits By the way, of course when when we open up the report, it’ll show the debits and credit journal entry because we’ll still be entered a journal entry as well. So we’re looking for the accounts receivable.


So we’re looking for accounts receivable, we’re going to open up the register for accounts receivable and then I’m going to select the the Drop down up top. And you’ll notice they don’t even allow me to end there is no drop down for accounts receivable, so they won’t even let me enter something to accounts receivable in a form format here, or even the journal entry entered here. And that’s because it’s basically trying to force us to have the customer. So let’s go, let’s try the sales tax.


Let’s go down to the sales tax and say, all right, well, what if I go to the sales tax payable down here, which is going to be a other current liability, where we have this sales tax liability, let’s try opening that register up. See if we have better luck, getting the journal entries. So we do have a journal entry form up top there so we can go all right, I want to enter a journal entry.


Now I’m going to enter this as of Oh to 28 to zero. I’m not going to put a page here the memo is going to be an adjusting entry. And then we if we look at the sales tax, we’re looking at this item it’s going up by the one To 3.5, so it’s an increase of one to 3.5. Now, the other side is like, well, we have two other accounts affected here. And we don’t have the little split option, the way we typically have in the desktop version, so I don’t see anything that says split here. So what I can do, I can say, all right, well, let’s put the other side to two sales for now.


So I’m going to put it to sales, sales, and it’s going to be sales of the product or inventory. I’m going to record it even though that’s wrong. It’s not what I want. And then I’m going to go back into it. So I’m going to say save it. And so there it is, here’s our here’s our journal entry. And I need to add another account. So what I’m going to do is just say, go to the split item here. And then that will and then I’m going to open up the editing of it. I’m going to edit it. These options of editing weren’t there before.


Now they’re there and I can go into the end feature and that will actually open up The actual journal entry. So now I can say Okay, so here’s the full screen for me to do a journal entry. And then I can go back in and say, well, let’s just do the whole thing started overall say this is accounts receivable now that I have a journal entry open. And that’s going to be for the full amount of 142 3.5142 3.5. adjusting entry, we have to have a customer. And you’ll recall from the prior presentation, this invoice went to Anderson. And you might say, Well, why do we have to have a customer it’s because QuickBooks is forcing us to tie up the subledger and it which is the customer detail for the accounts receivable account and so they won’t let us record it typically, if we don’t have a customer so anytime you hit accounts receivable you pretty much need a customer.


Then we have the sales tax payable, and that’s going to be a should be a credit. So sales tax. tax liability is going to be a credit of one to 3.5. So it’s going to be 123 point five. And this because they’re using their little function here may need a vendor. And that vendor is going to be the California Department, and so on and so forth. So we’ll keep that as the vendor. And then we’re going to have the sales, sales of the product, sales of product income, that’s going to be the 1300. All right, so I’m going to add the adjusting entry all the way across. So there we have that. Okay. That looks good. That looks good. That’s the first half.


So I’m going to say Save and Close. And before I go review it on on the financial statements, I’m going to record the other half and try to do that with a register. So I’m going to go back to the register to the chart of accounts. I mean, and then we’re looking for inventory, that’s going to be an asset up top. So I’m looking for the inventory asset. Here it is, I’m going to view the register, go to the register. And then I’m going to do the same thing, I want to select the drop down. And I’d like to see something for journal entry, I want to make this a journal entry because I want my Justin entries to be in journal entry format, even if I enter them into the register.


So I’m going to put that here and I’m going to put this as of Oh to 28. Now the inventory account should be decreasing by 1010. And the other side, I already recorded this, I kind of messed it up and put the other side in there to the wrong account. So I’m going to go back into and I have to edit this. So we’re going to decrease here we’re going to be decreasing, the other side is going to be going to the cost of goods sold account. But I’m going to do that by going to the Edit. So we’ll actually going to see the journal entry. You have unsaved changes, I’m going to say yes, we’re going to then go into the journal entry. So there it is. We have it should be the cost of goods sold.


On the debit side, so I’m going to say Cost of Goods Sold should be the 1040. And then the credit is going to go to the inventory inventory. What happened that inventory. So there we have it, and this will be an adjusting entry. I’ll put that on this side as well. Now note what we’re not doing here on the inventory, we’re not recording an item of inventory. So that means that when we record this, it’s going to be adjusting the account but not the related item. And therefore the amount on the balance sheet for inventory will not reconcile to our inventory report. That’s okay, because we’ll do a reversing entry and fix that.


Now note that when we do that with the accounts receivable, it’s similar to the accounts receivable. Typically QuickBooks will force us to use the customer you’ll note they didn’t even let us use the register, just in case we might not add a customer I guess, I don’t know. But we don’t we couldn’t enter. So that they do that so that the customer balance detail will will Tie out to what’s on the balance sheet. So here we’re going to be off, as we’ll see, but that’s okay. It’ll be back on once we do the reversing entry. So I’m going to say Save and Close. And then let’s go back to our reports. Let’s go to the balance sheet and see what happens. I’m going to go back up top and change the dates from a 1202 310 to zero, then run that report.



I’m going to hold down Control scroll up to get up to that 125 where’s this where we like to be, and then we’re going to open up the accounts receivable. So open up the accounts receivable, scroll on down, and we’ll see that journal entry on the 29th. Now if yours is on the 28th, I might I think I entered it in in as a 28th. And then I changed the date. So you can if it’s up in the 28th I should have put it up the 29th because there’s 29 days in 2020 in February, so you can always go back in the journal entry and adjust the date to the 29th. You want to have all the adjusting entries. I have the 29. Closing that back out the other side is going to be in the profit and loss report.


So I’m going to go back to the profit and loss. And I’m going to see this, let’s keep it all the way up. So we can see the cutoff date on to 29. And then the actual invoice is going to be entered in March. So we’re going to go to the sale of product item here sale of product item. Scrolling down, we see the journal entries. So here’s going to be the journal entry for the 1300 make it a correct as of the cutoff date, the 29th of February and then it gets entered twice because it’s going to be entered as of March 10 after the cutoff date. And that’s okay because we’re going to do a reverse in entry to to solve that double entry problem as of the 10th. We’re making the financials correct as of the end of February at this point.


Then the difference is going to the sales tax payable I’m going to jump back over to the balance sheet. That’s a liability account. We have the California Department that’s where it’s been going. We also have this other account we set up. It’s basically a con a contra account to this one at this point. So these two within tie out for the sales tax liability, if I go in there, we got our adjusting journal entry for the sales tax. So then I’m going to go back up top, we also know that the inventory is going down. So if I go up to the inventory account, and you’ll notice there’s two inventory accounts. I’m not sure why QuickBooks set up to inventory accounts. But let’s go ahead and match this thing up, I put it into inventory, it should go into inventory assets. So I’m going to open up this this one in inventory.


I’m going to open up the journal entry here. And then I’m going to take this to inventory assets. So inventory asset. So do that. make that adjustment and then I’m going to say Save and Close to then if I go back up to our report then we have the one account here for the inventory asset, it’s had a negative balance because we’re, we’re what we’ll see in a second. But if I go in there, we’re going to scroll back down. And we’ll see that we have the journal entry here, which will make its correct as of the cutoff date.


So that’s going to make the balance correct as of the cutoff date, and then it’s, it’s going to be negative because it’s in there twice again. And that’s going to cause us a problem, do a reversing entry to fix that, as of the facility right as of March 10. So then we’re going to go back, the other side’s going to be on the P and L. So it’s going to be in the cost of goods sold. So if we’re going to the cost of goods sold, and scroll down, then we have the adjusting journal entries here. So the adjusting journal entry is included. And then again, it’s in there twice as of March.


So the bottom line is what we’re concerned about here is it if I if I make this p&l go to Oh to 20 920 our cutoff date, then we now have included in the sales item. That’s that sales, but we put it in there with a journal entry. So the sales and the cost of goods sold are reflected properly as of the cutoff date. We’re not worried about March right now we’re just getting the financial statements. We’re not worried about Yeah, March we’re only getting them correct as of the end of February balance sheet. If I go to the balance sheet and scroll up top as of the end of Oh to 29 to zero. Again, things are correct as of as of this point in time, the accounts receivable is reflected correctly, what is owed to us with a journal entry, and the inventory is now reflected correctly, the decrease of inventory that has been shipped out has been decreased.


Now let’s take a look at the sub Ledger’s just so we can kind of see them. If I go to the reports, and then we want to open the inventory. report that in venturi valuation summary report, take a look at the inventory valuation summary. And let’s take a look at it as of Oh to 29 to zero and run that report, I’ll close up the hamburger, it comes out to 1007 12. And if I go back to the balance sheet, that doesn’t tie out to the 672. And that’s because when we enter that journal entry that 672 minus the amount here minus the 1712 is the amount 1040 that we made a journal entry for decreasing inventory and increasing cost of goods sold, which we didn’t reflect with an actual unit an item here, so those two are off.


So what’s going to happen so that that’s going to be off right now. And then when we when we do the reversing entry, we will this will basically to reverse back out so what so the bottom Is that our financial statements are now correct as at the end of February on an accrual basis, and then next time and we’re not worried about March right now, which has a double entry in it as we as we get to march 10, because the the invoice will be entered again and we already entered the journal entry here. And then next time when we do the reversing entry will fix that component will reverse it and we’ll do all reversing entries after the first day of the next month. And then as of March 10, the two will reverse themselves out will be back in balance as with the other reverse in entries, it’s just this one’s a little bit more complex, of course, because an invoice has more components to add more accounts that are affected with it, as well as the sub Ledger’s with regards to inventory, and the and the accounts receivable

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