QuickBooks Pro Plus desktop 2020 to reversing entry, accounts receivable or sales Get ready because we bookkeeping pros are moving up the hilltop with QuickBooks Pro Plus desktop 2022. And 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 it to the gray area. Reports drop down company and financial looking at that balance sheet standard.
00:29
Customizing that report up top changing the dates with a range change from a 1012 to 202 2008 to two fonts and numbers, then we’re going to change that font size on up to 14. Okay, yes, please. And okay, we’re going to go to the reports drop down again company and financial profit and loss standard reigns change a 101 to 202 2008 to two, customizing that report fonts and numbers change in the Font bringing it once again to that 14. Okay. Yes, please.
01:05
Okay, one more time, slightly different going down to the accounting and taxes this time for the trustee TB Trial Balance range change, oh, 101 to two to 202 28 to two, and customizing that report fonts and numbers changing the font size on up to 14. Okay, yes, please. And Okay, last time, we did an adjusting entry imagining a situation where we entered an invoice in the accounting process after the cutoff date of February 28. But for which the sales should have been recorded before the cutoff date.
01:47
And therefore we entered an adjusting entry to in essence, mimic the same transaction of the sale but as not with an invoice, but rather with an entry so that it can be an adjusting entry, so that we can get our revenue properly implemented. So one account, we can see that in. And so if we go to the income account, and we go to the sales item here and double click on it, then we have this this last sale item for the 5000 that was entered with a journal entry down below. And that’s going to be mimicking if I bring this up 203, let’s say 31 to two, the item here there’s the the item that was entered after the cutoff date for the three 522.
02:33
So now what we want to do is recognize the fact Well, that’s a problem, because now that’s going to record the sales twice by the point in time that the actual sale was input in the first place. So we have made the financial statements more properly correct recognizing the revenue when the work was done by the cut off date, so that we can make our financial statements correctly.
02:56
However, by the third here, or the fifth, we’re gonna have it in the system twice at this point. So what do we want to do to fix that, you might say, well, we should delete the journal entry. But we don’t typically want to delete the journal entry, because we want the journal entry to be in there. And then we want to reverse it. So we want to have a reversing entry as of the next the next period. The next thing you might say, well, let’s do the reversing entry as of three 522, because that’s when it’s going to reverse itself.
03:26
So so I can have it properly done up until three five, in essence, but we’re not going to reverse it and three, five, we’re going to reverse it on three, one, because the goal isn’t to try to have the perfect accrual accounting for the entire midpoint, the goal is to basically know exactly where my reversing entries are, so I can locate them. And then I’m okay with having these these incongruence between the perfect accrual method and the accounting process so that we can make the accounting process more easy to do. And then at the end of the periods when we do the financial reporting,
04:06
we’re going to do the adjustments that might be necessary again. So we’re going to do a reversing entry which will reverse this out and the other accounts that will be impacted, and we’re going to be putting it in so next you will see then On three one here, a reversing entry, which in essence reverses out this 500 After we enter that process. So to do a reversing entry here then what we’re going to we’re going to do is possibly we could just copy the actual first journal entry and then reverse it exactly.
04:35
It’s a complex journal entry it’s dealing with an invoice so we know when we deal with an invoice the accounts that are going to be affected are going to be if we go to the trial balance here, we’re gonna have the accounts receivable that’s going to go up, we’re going to have to sales account that’s going to go up because we sold inventory. We’re going to have the sales tax payable that’s going to go up although we entered it into a new payable so that we didn’t have to deal with Problem of messing up the payable account, because it has a widget and it has a vendor that’s tied to it. And then we also know that inventory is going to go down.
05:10
And we know that the cost of goods sold is going to go up. That’s what we normally think of when we enter an invoice. But if you try to think of that in reverse to do a reversing entry, you get confused. So what I would recommend doing is writing it down or copying the original journal entry. And then you can just basically reverse it exactly, not trying to rearrange the debits and credits even. But just simply reversing it top to bottom in the exact same format as we do.
05:39
We want to be careful once again, with the accounts that have sub ledgers, that being the accounts receivable having a sub ledger of the customers. And so that’s why we created like a new customer in that area, in order to in order to deal with this adjusting entry process hoping that that will not mess up the customer sub ledger that QuickBooks is forcing us to enter.
06:00
When we did the inventory, we saw that our inventory sub ledger is actually going to be off until we do the reversing entry here. Let’s take a look at that. Now let’s take a look at these sub Ledger’s reports drop down, let’s go to the the customers and receivables and the customer balance detail. So we did the reversing, we did the entry not to the customer involved, which was Anderson guitars, we did it instead to this zzz adjusting entry in a hope that because they made us apply it to a customer, it’s not going to mess up the customer list and it will mess up the activity in Anderson guitars.
06:42
So if I was to make this date range from Oh 101 to 2202 28 to two, we then see the total down here is still tying out to the 22 701 50. And that’s going to be the 22 701 50. Here, they forced us to tie it out by making us use a customer which QuickBooks does some other accounting software doesn’t do that. The inventory they did not force us to to enter an inventory item. Therefore our inventory sub ledger is actually off right now. Reports drop down inventory. If we go to the inventory valuation summary as of Oh 228 to two, it’s going to the 4007 46 as opposed to the 4003 46.
07:31
And the difference is due to the fact that we entered an adjusting entry, and they didn’t make us or force us have an item related to it. Therefore, the sub ledger couldn’t tie out what we did, even though we posted something to the inventory account, we also have an issue with the payable for the sales tax payable down here. And to deal with that, because there’s a widget a special widget with the payable. So they always want to go into the preferred vendor. And we don’t want to mess up the widget.
08:01
For that we made another account that’s kind of tied or next to it a sub account, which can more easily be seen on the balance sheet here. So if we go to the balance sheet, you’re going to see, here’s the sales tax payable. And you got these two accounts that are involved here. And you can kind of collapse them. And so we’re going to use the adjusting account there. Okay, so let’s go in, let’s go into it.
08:23
And let’s take a look at the actual journal entry. So if we go into the journal entry, I’m going to double click, and I’m going to go into the actual entry. So I’m going to double click here and go into that journal entry. And there it is. So there’s our journal entry, I’m going to copy it, I’m gonna try to do a screen clipping, you could also go into let’s do it with word because you could see it more.
08:45
So if I open up a Word document, I go into insert, and then I use my screenshot here, I could screenshot my actual journal entry like so. So there we have it. And then I’m just going to do the same thing, but increase the date, and then reverse this, this whole entry. So this is the entry, I just want to reverse it. That’s going to be the goal. That’s what we’re going to do. Okay, so then we’re going to go back on over and let’s, let’s do it then. And I’m going to close this out.
09:14
And I’m going to go into I’m going to close this out. And I’m going to close this out. And then let’s do it again, I’m going to go to the company drop down, we’re going to go to the make journal entry. And then I’m going to close this we’re going to make this as of the day after the cutoff date Dave cut off date into the month for us of February February 28. This is going to be as of Oh 301 to two and then I’m just going to close up the carrot, close the carrot.
09:41
And let’s just say the first account is accounts receivable, and I’m just going to do the exact the exact opposite. I’m not going to try to reverse it to put the debits on top. I’m just going to work it from top to bottom because that’s just the easiest thing to do. The debits being on top if you’ve learned that is just a convention. That is nice to do. but not required in order to make the financial the journal entry correct. So I’m going to say okay accounts receivable accounts receivable is going to be here, and we’re going to,
10:11
we’re going to, we’re going to credit it for the amount of what we’d say it was the 525, to five to five, and then I’m going to call this a reversing entry. And then we have to have a name. And remember, the name that we put here was the zzz, adjusting entry. So I’m gonna say zzz, adjusting entry. And then the next side of it is sales. So it was credited, so we’re gonna debit sales. So I’m just gonna say sales was 500. And this is I’m just gonna copy this adjusting entry, and put it right there, right there.
10:50
And then we had the the sales tax payable, but the adjusting account, which is a sub account, so I’m going to center it sales tax payable with the adjusting account. There’s the 25, it was a credit over here, so we’re debiting it, and then we got the cost of goods sold was a debit, so we’re going to credit it. So I’m going to say alright, cost of goods sold was a debit. So we’re going to credit it for 400. Was it I think? Pretty sure 400 Yeah, it was right. Why am I even guessed like double checking myself, I know when I know it was right, inventory is going to be a debit.
11:30
So then inventory is going to be a debit. And so there we have it, I think everything lines up here, so we just did the exact reverse. That’s why it’s called a reversing entry as of the first day after, so let’s save it and close it, and then check it out. So I’m going to save it and close it every account that’s affected will now have you know, the adjusting entry and then the reversal to it. So once again, we’re still correct as of the cutoff date, February 28, having pulled the revenue into the proper time period.
12:03
And now we reversed it as of March 1, which is going to cause some problems until the invoice is in place. But that’s okay, because it should be logistically the easiest thing to do. So we’re going to open up the carrot on the left hand side. And let’s take a look at it. Let’s first look at the trial balance, probably the easiest place to go. And let’s bring this on up now to the the let’s bring it up to the fifth because then we’ll be able to see everything including the invoice involved. And then we’ll go on up and say okay, accounts receivable, what happened now,
12:36
we have then in the detail, we had the adjusting entry that we pulled the sale in from this original invoice that was on three, five, which was after the cut off, we pulled it back into before the cut off. And then we reversed it right after the cut off on three one, because that’s when we want all of our adjusting entries, which is going to look a little bit funny until the actual invoice was entered, which was on three, five, and then it should knit out and everything should tie out.
13:05
Now we’ll also have to take a look at the sub ledger for that. But let’s go to the second side, the sales side of things double clicking in on it. And we see once again the original invoice was on the 500 down here and the invoice on three, five, we pulled it back before the cutoff date by putting it in place with a journal entry journal entry as of 228. And then we reversed it right after the cutoff date to put us back to the original point. And then it’s not quite it’s gonna look a little funny until the actual invoice was in place. But we don’t want to put our reversing entries in there as three five,
13:40
we want to put them in there on the first day after because that logistically is going to be the cleanest cut between what we do in the adjusting process and in the bookkeeping process, the other side is going to go to the sales tax payable, sales tax payable we put it into this adjusting account which is now back to zero makes sense given the fact that it was you know increased and then we’re going to decrease it back on down after we reversed it out.
14:08
And the other side of this one of course is the invoice that which isn’t in here because we were scared to actually put it into the sales tax payable account. So the actual other amount is in the sales tax payable which is 25 and the five right there, closing that back out we also have the inventory, double clicking on the inventory. And then we can see the same kind of thing we had it and the invoice was after the cut off we pulled it back into the cut off with a journal entry additive to 28.
14:39
Then we reversed it with the journal entry after the cut off on On three one bringing us back to where the original accounting process was. So they can go on with their normal billing cycle and so on and then we have the cost of goods sold finally with the same kind of routine that we have seen. If we go on down, we’re gonna say the original invoice was on three, five, we pulled that before the cut off on to 28 for 400. And then we reverse it right after the cut off on three, one for the hunt 400.
15:12
Bringing us back to that same point in time closing this back out, we can also scroll back up and say, Okay, well what happens, I’m kind of concerned about the accounts receivable subledger. So if we go to the sub ledger for the accounts receivable, say the customer balance detail, for example, and bring this date on up to the fifth. So we could see all the activity, all the stuff going on, there’s our ZZ account, it goes up, and then it went back down. Now again, these you might say, well, these two things kind of tie out, you can have issues with the invoice to tie out to the invoice and are they netting out.
15:48
And because they’re in a separate customer, we’re hoping that’s not going to cause any problems, even though again, they forced us to put it into the sub ledger, if that’s worrisome to you, if that’s going to bother the accounting process, then you might want to actually make another account. That’s not an accounts receivable account. That’s an other current asset type of account and put your adjusting entry there, if necessary. And then we have our Anderson guitars, which has the original invoice down here, the 525, you can also see that information, if you go to the company drop down in the Customer Center. And look at the the left hand side.
16:26
Once again, there’s our zzz, which I would assume they would have put at the bottom on alphabetic Wolf, it’s sort of this way, the herd ghosts. So now we could put that on the bottom down there. Hopefully it’s not bothering anyone, because we’re just going to use it for our justice entries that will be involved here. And then Anderson guitars is is not messed up, or doesn’t have these two kind of adjusting journal entries inside of it, which could cause the accounting department some problems.
16:53
So that was the hope on that. So I’m going to close this, then back out, we can also go to our inventory, let’s go back to the trial balance, check out the inventory account, which hopefully is back in balance as of three, five now because we reversed out the adjusting entry which threw it out of balance. So now we’re at the 4346. If we go then to the inventory valuation summary, as of Oh, or 22030522, we’re at the 4346. Now for 346. Tying back out to what is on the trial balance. So that looks good.
17:35
So we’re back in play back in place back where we need to be there, let’s just take a quick look at it in terms of the balance sheet. So the balance sheet is as of a point in time. So again, we made the accounts receivable and everything correct as of the balance sheet point in time, and then everything, then we entered the reversing entry, which should reverse it back out and everything should be good as if oh five to two. And we should be back in place for the accounting department to move forward, we could see those changes a little bit more clearly.
18:07
But just the accounts that were affected here, the receivable account, the in so that’s in the receivable section, the current assets, the inventory account up here and the other current assets section. And then down here, we had the loan payable or sorry, the sales tax payable that was impacted down here, the changes to the income statement can be a little bit more striking. So if we go to the Profit and Loss report, and we see this, we still see that the income is included in sales, as of the cutoff date with the journal entry, if I change this and just look at the next month now from oh three, let’s say,
18:45
Oh 3012 to 203 31 to two. So now we’ve got the sales went up and it went back down to zero. So if I go back into this, you can see what would happen. What happened here as we increase the sales. And then as of three, five, it went back down to zero. So in other words, if I, for example, change this date to Oh 301 to two. Now I’ve got a negative sales. That’s kind of ugly, right?
19:13
That’s kind of like well, why you know, you know, the bookkeeper might say, Well, why is it negative sales, and we’re gonna end that’s a reversing entry, though they don’t need to do anything, it’ll fix itself when the invoice goes into place. So that means that if I move this on up to three, five, then then it looks correct, because we basically negated the invoice and pulled it into the prior period. That was the point but we didn’t want to delete the invoice. We just wanted to net it out.
19:43
And we didn’t want to put the reversing entry in as of March 5, the invoice date because that we want all of our reversing entries to be as of the first day after the cut off. And that’s why we have that kind of that kind of lag in in between the next period Which is okay, because our goal here is to say, we’re okay with having that difference that problem, that deviation from the accrual method within the month to some extent that we will then fix periodically at the end of the month or possibly at the end of the year,
20:16
whatever your system is. So that so that we can make the data input as easy as possible allow the clients to, to put in whatever they want, or allow the bookkeeping process to use the cycle that works best for them, in this case for the billing cycle, and, and then make the periodic adjustments periodically. Okay, so that’s going to be so that’s the sales.
20:38
And the same thing happens. Of course, with the cost of goods sold, it was we negated this 400 negates the prior journal entry that we pulled it back into the prior period, and then negates out this invoice that happened, because we in essence, again, pulled that invoice into the prior period, recognizing it in the prior period with these adjusting and reversing entries. So to check this stuff, then you can also of course go to we’re going to be building up our journal accounts now.
21:08
So the reports drop down, if you go to the accounting and taxes, and you look at your journal, report, the journal report and report this as if Oh, 228-222-0301 to two, we got our adjusting and reversing entries. This records all the transactions, let’s customize it now, customizing that one, and we’re going to go then down here and go down to the filters, I’m sorry, let’s go to the filters. And then we’re going to go down to the transaction type, transaction type.
21:43
And we just want the journal items to journal stuff. And then Okay, and so now we’ve gotten to adjusting and reversing entries. And we could see what what we have done. And basically this adjusting and reversing department items. And we might want to say well, we’ll do this later, looking at just the adjusting entries, which will all be as of 228. And then the reversing entries, which will all be as of three one, that’s typically how you’d kind of want to see these kind of broken out.
22:12
But it’s also nice to see them, you know, side by side here as well. So those are those, here’s the trial balance going back to the trusty treat TV if you’re checking your work following along. And this is what we have thus far.
22:12
We’ll also be trying to make those backup files so if you want to jump back and forth and rework some items you can do so this is one of the more complex adjusting entries in terms of the number of accounts. That’s why we use the journal entry instead of the registers in essence to do it. We’ve got the sub ledgers to deal with and so on and so forth.