Reversing Entry Accounts Receivable Sales QB 10.32

QuickBooks Online 2021 reversing entry related to accounts receivable sales or revenue within QuickBooks, let’s get into it with Intuit QuickBooks Online 2021. Here we are in our great guitars practice file, we’re going to start off opening up our financial statements by duplicating some tabs up top right clicking on the tab up top duplicate, we’re going to do this two more times, right click on the tab up top, duplicate a right click on the tab up top duplicate, then we’re going to open up our trial balance, then our profit and loss and balance sheet reports.


So we’ll go to the reports down on the left hand side, we’re going to start off opening up the trial balance by searching in the fine field for the good old TV the good old trial balance. So we’re going to say trial balance, open that up, we’re going to range change it up top Indian Point being Oh to 28 to one, and then we will go ahead and run that report. Close up the hamburger hold down Control, scroll up just a bit to get up to about one to 5%.



Next tab to the left, we’re then going to go to the reports at the bottom left hand side. Scrolling back up once again, I’m sorry not scrolling back up yet, we’re going to open up the income statement, income statement report now scrolling up range change at the end at o 228. To one, run that report. Close up the hamburger next report on the tab to the left is going to be the balance sheet. So we’re going to go on down to the reports on the left hand side, open up the good old and favorite of the balance sheet report range change up top ending at Oh 228 to one, run that report, close up the hamburger.



And now we’re going to be entering our reversing entries. So we did this in excel in the prior presentation. The quick recap is that we had a transaction that was an invoice, the invoice was entered in after the cutoff, which in our case was March 5. And now we want to bring the invoice back into the current period that we did bring the invoice back into the current period before the cutoff because the work was actually done before the cutoff even though the invoice was entered after the cutoff, that being the February 28 2020 was the cutoff date.



So then we entered for example, in our accounts receivable, here we have our adjusting entry. So this is going to be our adjusting entry which is journal entry three up top. And that’s going to be our adjusting entry pulling it back into the accounts receivable, we’ll see similar activity in the sales and so on. And then the actual invoice took place. If I bring this out to the fifth, we bring this out to the fifth. We have this actual invoice here. So as of March 5, it will be in there two times. So we had to bring it back before the cutoff date to be proper under an accrual method.



But now it’s in there two times if we get past March 5, so we got to reverse it, we’re not going to reverse it as of March 5, although you might think that because we want all of our reversing entries to be in there as of the first day after the cutoff. So we’re going to reverse it like all other reversing entries on March 1. So we’re going to go back up top and go back to our balance sheet. We won’t go into much more of the recap, because we did the recap in the Excel worksheet last time.



So we entered this into the Excel worksheet, we have these two entries, which are the reversing entries. This was the adjusting entry up top, we simply reversed it exactly, we’re now going to be entering this reversing entry into QuickBooks. Once again, I’m going to unblu I’m going to ungreen this one for now make this the standard blue. And then notice that once again, we’re going to do this with a journal entry because it’s a bit more complex than using a register. So we use the register when we enter these top two into QuickBooks.



And it was still a journal entry, but we use the register format to do so if you have over two accounts, and especially when you have some of these complex accounts with a sub ledger, then it can be somewhat complicated. Also remember that when we do this in an adjusting entry in a book problem, or if you’re doing this basically, in an accounting department just to make the financials correct or for taxes, you do not run into the same issues that you have when you put this into QuickBooks, which you want to understand before you put it into QuickBooks, so that you can make the life easy for the bookkeeper.



You don’t want to mess up. You don’t want to mess anything up for the normal accounting process. And those problems include the fact that this accounts receivable if I hit the actual accounts receivable account needs a customer related to it, or else they won’t be able to to record it to the accounts receivable account. If you just give this to an accounting, a bookkeeper or something they might try to enter it and then they’re gonna say hey, I don’t know what account to hit with it.



There’s two ways around that one you give the account and you’ll have an in and an out for the adjusting entry and reversing entry under that account customer or you set up this accounts receivable as a separate account not as an accounts receivable type of account. But as an other accounts receivable simply for the The adjustment to be taken place and then reversed. So we’re going to use the first method. And then we have the sales tax, same issue here, or similar issue in that QuickBooks, you don’t want to mess up the sales tax line for QuickBooks because QuickBooks is the one that tracks the tax per location.



And so what we want to do is just have kind of like a generic sales tax account that won’t mess up the normal accounting process within QuickBooks for the collection, and then payment of the sales tax, we set up another account to do that there. And the inventory has a sub ledger as well, which doesn’t have the same issue with the accounts receivable. But it still has this ledger that we need to make sure is in reconciliation, after our adjusting and reversing entry. Once we enter this reversing entry, it should be then back into reconciliation. So we’re just going to go back to QuickBooks and enter this in the system. So we’ll go back on over.



And we’re going to go to the first tab to do so first tab, we’re going to go to the New button and just go down to the journal entry. So we’re going to be entering a journal entry. This one like all reversing entries, we’re going to enter as of the first day of the following period, that being Oh 301 to one, and then we’re going to say just copy this down, it’s going to be accounts receivable, accounts receivable, we’re going to use the actual accounts receivable account. And then we’re going to have to then say that’s going to be for the 399, it’s going to be a credit because we’re reversing what happens with an invoice credit.



And I’m going to call this we’re going to call this thing, RJ E, RJ e number four should be number four, RJ e number four, let’s say and let’s put it up top RJ e four. And that should then populate for all of the descriptions. Let’s see if that pulls over for all the descriptions or whether or not I have to put the descriptions here. So I’ll leave it for now. And then this is going to be for Anderson. So this was for Mr. Anderson, guitars. And then the other side is going to the sales.



So that’s going to be our income account sales of products, revenue, income, sales of product income account, that’s gonna be the debit, but it was for the 100 or 380. So that’s for the 380 don’t need to have any name over here. And then we need the sales tax, which I set up another account for that’s not the one that’s used for the the normal sales tax within QuickBooks has the California Department and so on. That’s who we pay and our example form problem. So there it is, that’s for the 19. And so we don’t need any name or special thing over here, then we might skip a line just to it.



So we can see it in our case, as kind of like a number another journal entry that’s within the same journal entry format here, that’s going to be then the cost of goods sold 304 cost of goods sold, and credit for the 304. Notice how I’m reversing this exactly. And and in order of top to bottom and just having the credits and debits opposite. That’s the easiest way to do it. I believe instead of reversing the debits and credits, which is not easy, I don’t think maybe my mind just gets mixed up. But I’m sure that’s the case. But in any case, your mind might get mixed up too. So so this is going to be inventory. Inventory.



And so there we have that, and that’ll be in this doesn’t need to have any sub ledger, we don’t have any like item that we need to be hitting for the inventory. Either here, although again, because we do not, we got to be careful that we don’t throw off the sub ledgers related to inventory. So this is as of three one, remember, that’s the reversing entry that’s important. So we’re going to then say save it and close it, save it, close it, and then we’ll check it out, we’re going to go to the balance sheet.



And let’s bring this up to the next time period, let’s bring it up to three, one, run the report and see what we have if I go down to the accounts receivable for example, and go on down, we’re gonna say then that we have, there’s our adjusting entry, there’s our reversing entry that reverses it back out.



And then if I bring this up to three, five, when the actual invoice was made, then we’ll see the invoice to which will be super neat. And so there we have it. So then we have so here’s the here’s the the journal entry, and then we reverse it. So we’re back to where we kind of were before even though this reversing entry is after the cutoff, so it’s in the next month. And then we have the actual invoice that happened which now the invoice is kind of taking precedent given the fact that these two should then cancel each other out.



Scrolling back up top, going back then to the balance sheet. Let’s go to the income statement other sides on the income statement. So we could see this in a couple different ways but it’s probably most clear to see this as If I run the report as if, oh 301212, let’s say, Oh 30121 just that one day, because then we’ll see just our reversing entry. So we have the negative sales that took place. And then basically the negative cost of goods sold, if I go into that sales item, there’s my reversing entry. If I change the dates up top, one day back to prior, so that’s prior to the cutoff date. And then let’s bring this up to the fifth. Then we’re going to say,



All right, now I’ve got the whole range here. So now we’ve got 228, there’s my adjusting entry, bring it before the cut off last in the month before we before you know the month in, and then we reverse it right after the cut off. Now it’s back to zero, even though these two things affect two different months on the income statement. And then we have the actual invoice, which records it kind of where it was where it starts back out, these two kind of cancel out in that case, and then in As of March, then it’s actually zero in March, because these two things are in March.



So they cancel each other out. And it was actually recorded, then in February, even though it was reversed in in March, and then the actual invoice was in March. So if I go back up top and then go back, then we were gonna see a similar kind of thing. If I go back to the balance sheet for the the difference, which is the tax. So the tax I put into this separate account so that we don’t mess up the sales tax calculation. If we go into the sales tax, then we see once again, our adjusting entry here, and then our reversing entry going back up top, then we can check out the inventory. So inventory, and why wouldn’t we sounds like good times.



So I’m going to scroll down just a little bit. And there’s the inventory if we go into the inventory, and scroll down, and there’s the adjusting entry, and then the reversing entry for the inventory. And then once again, if I bring this back up to the fifth, March 5, to see the actual invoice, now we have the the adjusting entry, the reversing entry, which brings us back to the starting point. And that is the actual invoice so that we don’t enter it like two times in that case, right.



So we have the actual invoice here, the actual invoice here, taking down the the inventory, and then the adjusting entry and the reversing entry. All right, going back up top, then the other side of that is on the cost of goods sold. So if I go back on over to the income statement, here’s the cost of goods sold for 304. And that’s going to be our reversing entry as of three, one. So there’s a reversing entry. If we if we take it back a day back to the prior month, take it back to the prior month, and then forward to 235. We see our activity here is the journal entry that brings it back into the prior month. So that brings it back into February, then we reverse it in March.



And then here’s the original invoice these two cancelling out in March as of three, five, so that we actually recorded it basically in Martin February, because that’s when the work took place. Scrolling back up, going back then to the profit and loss report. Let’s go back to the balance sheet here and then check out our accounts receivable subledger. So I’m going to go back to the last tab, right click on it, and duplicate that tab, right click on this tab, duplicate the tab, we’re looking the accounts receivable subledger. And see what happened with the activity for Mr. Anderson, our client customer, that it’s always Mr. Anderson having these problems. So then we’re going to go down to the reports down below on the left hand side.



And we’re scrolling down to who owes you money. who owes you. We’re after you Mr. Andersen. And we want the customer balance Detail Report. And then if we go back up top, I’m going to minimize this report. So here’s what we have. Now then we have these two journal entries right and they cancel each other out, they kind of cancel each other out but we still see the activity in this report.



And then the invoice here is the original amount that was entered in the invoice so we’re back to where we start, but it does kind of mess up the bookkeeper in that these two are like kind of muddying up their customer balance detailed report once again to get around that you could just have another account called accounts receivable and set it up as an other current liability other current asset instead of an accounts receivable type of account, and then have this activity in that account to reflect our adjustment and not affect the sub ledger at all in that case.



So that’s a nother workaround, you can kind of do if I if I go to the bottom of this then we’ve got the 13 872 if I go back to the balance sheet and I bring this back out to march 5. So and that’s when we as of the point we entered the invoice we got the 13 872 so we’re back to where we should be as of As of that point in time, everything is kind of netted out. And then on the inventory, we have a similar issue on the inventory. So let’s go to the inventory, or the last report, right click on it, duplicate the tab again. And now let’s look at the inventory sub ledger.



Go into the reports on the left hand side, we’re going to look at the inventory valuation summary inventory, because we want to, we want to see the valuation of the inventory. And this is the report that does it the inventory valuation summary, changing the date up top. Now if I change the day to Oh to 28 to one and run this report, that’s our cutoff date. Now we’re at the 1248. If I go back to the balance sheet, and I run this for the cutoff date, oh 220 821. Running that report, we should be out of balance, we’re actually out because this is one 944. The sub report is at 1248.



But if I run this report, 4030521 run it here. Oh 30521 wrote the 944. If I go back over here, and I run this 4030521, run this report, then we’re at the 944 and the 944. So that’s because when when I entered the adjusting entry, we did an entry that affected the parent account here, the inventory on the balance sheet, but not the sub report because I didn’t name an inventory item because I can’t unless I do an actual invoice. And then we and then so that threw us off and then we reversed it.



So then we were back on once we reversed it. So after the reversing entry, we should be okay with that. Now let’s take a look at the income statement one more time, let’s take a look at the income statement. Here. That’s this one and run this for let’s make it Oh 1012120 228 to one, run this report and just see if it ties out to our worksheet. So we got the 10 349 85. If we go to our worksheet, scrolling down, we got the 10. Here, right there’s there’s our adjusted balance as of 228, to 10 349 85.



And the 10 349 85. And then if I if I look at it, adding one more day. So I run the report, including the reversing entry here on the income statement, I bring it up a day. Now we’ve got our reversing entry included, scrolling down with a 10 33010. So the 10 33010 By the way, this will only work in QuickBooks, if there were no other transactions. If you if you did this in QuickBooks, if there are no other transactions on March 1, there are other transactions other than the reversing entry, then you know, those will be affecting as well. And then if I run this report for just March, say, say I make this Oh 301 to one, run that report.



And then I say now I’ve got a negative 1975 just for March 1, just our reversing entries. And I go back over here we’re at the 1975 in our worksheet as well. So you kind of go back and forth and see how all that ties out you can see how much more kind of overwhelming I guess the the Excel sheet can be. But how much more transparent it is than jumping back and forth from the reports and whatnot, the dates that kind of just magically changed the numbers over here in Excel. So if you can understand those Excel worksheets, it’s actually you’ll have a good understanding of it. Let’s go to the trial balance. Now just run the trial balance.



This is as of the cutoff date. This is where we stand as of this point in time, maybe I should run it 403 since this is a reversing entry. Oh 301212030121 running that report. Now once again, it’s not going to close out everything down below. So we might as well run this from a 101 to 1203 or one to one. So this is where we stand for that date range. And you could check that out to your numbers. We’ll also print this out so you can look at it on your own time.

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