QuickBooks Online 2021 void check prior period adjustment. Let’s get into it with Intuit QuickBooks Online 2021. Get into it. Here we are in our Google search page, we’re searching for QuickBooks Online at test drive. And then we’re going to be selected QuickBooks Online test drive for Intuit, the owner of QuickBooks, we’re going to verify that we are not a robot, and then we’ll continue.
Here we are in the Craig’s design and landscaping services a practice file, we’re going to go up to that new tab up top. And in prior presentations, we’ve been looking at the vendor sections and the forum’s in the vendor section last time focusing in on those forms that are decreasing the checking account, including the check form, and the expense form.
Now we want to think about the concept or the idea of or situation where we have to delete something or in other words, avoid something voiding a check or avoiding an expense type of form. Now, you can do this quite easily within QuickBooks. But you got to be very careful about doing that, especially if it’s in a prior period. So that’s what we want to cover here.
And this is going to be a general concept you want to think about anytime you’re thinking about deleting something, the general rule, when you’re thinking about deleting something from an accounting standpoint, is not to delete something, because you’re going to have it you want to keep the audit trail that’s going to be involved, and then add something else that will basically reverse the transaction, that one keeps the audit trail.
So that’s one reason you want to do that. The other reason is that if it’s something that happened in the prior period, then you gotta be very careful to delete it. Because if you do the temporary accounts roll into retained earnings, and it can throw off kind of the retained earnings.
So if you ever work in an account and accounting department, the CEO or whoever’s you know, in charge of the bookkeeping may be very strict about things that are going to be deleted, they’re going to say, hey, look, if this period is closed, don’t you know remove anything, or make any changes to the prior period before the cutoff date, you know, if we reconcile, for example, January, then don’t go back into January and make any changes. Because that can that can mess things up. As we roll forwards, I got to be careful with those prior period of changes, especially for small companies, we’re thinking, the yearly cut off.
So if you have a 1231 year end, financial statement, and you know, you don’t want to be making any changes, like in January, that are gonna affect December, in the prior year, unless you’re very conscious about about what you’re doing, because it can mess up kind of the rollover. So let’s just kind of think about that concept. And it’s easiest to think about with these with these forms that are going to affect the checking account. So typically, what’ll happen is, I’m going to go into the check register down here in the accounting, go into the chart of accounts, the chart of accounts,
I’m going to want to be able to see the chart of accounts, I’m going to click that little green button. So that allows me to do so we’re going to go into the register, let’s go into the register. And then we have our activity here. So this is the activity for the checking account. Now this is a practice file. So they haven’t been doing all the reconciliations at the end of the at the end of each period, basically monthly. But typically what you would happen is you enter the stuff in, and what you would want to do as an internal control is compare this information to the to the bank statement with a bank reconciliation.
And this might be a little bit easier to do if we use bank feeds as well. But you still you still should do the reconciliation process. And what’ll happen is when we do the reconciliation process, meaning we’re entering checks and expense forms and deposits and whatnot. If something doesn’t clear after, after a few months, it’s going to be obvious that that’s the case on the bank reconciliations if a check that we thought we wrote that we entered in the system doesn’t clear for a long period of time, at some point, we’re gonna say, hey, look,
I don’t think that check is going to clear at this point, you know, I’m going to void that check. Otherwise, it’s just going to be on the books and it’s it’s never it’s not decrease in the checking account. If we determine that that check, it should be void, meaning it’s not actually going to be decreased in the checking account, then we’re going to want to avoid it. And that would basically fall out if when we do the reconciliations, which we’ll talk about at a later at a later point.
But basically, I’ll just give a quick example if we go to the reconciling item here. And I’m going to say we’re in the reconcile tab. And then we’re going to go to get started. And I’m going to say maybe later, and then I’m going to say we’re in the checking account. And the ending balance, I’m just going to make up an ending balance of 6000. That would be on the bank statement. we’re comparing our books to the bank statement imagining to be doing so at least.
And let’s say that we are doing the reconciliation for the end of January meaning we have January’s bank statement in front of us and we’re going to compare what we have in QuickBooks to January’s bank statement. That’s the point of the reconciliation which again, we will talk about at a later point. So in more detail here, so and then if we go into the reconciliation, then basically what we’re gonna do is check these items off that have cleared everything that has cleared, we’re kind of check off we’re gonna Put a little checkmark over here, and then reconcile them.
And that means that in the following month, when we reconcile, they won’t pop up here anymore, because they will have cleared will mark them off as cleared. Now if we have some check that’s standing out that we wrote a check, and it’s not clearing for multiple months, at some point, we’re going to say, hey, that check is not going to clear, I need to avoid it, because it’s just basically, you know, we might have all these checks that build up over time that we need to avoid.
The problem is that the checks that we need to avoid could be in the prior year. And that causes a problem for the rollover. So let me see if I can kind of demonstrate that. To do that. I’m going to duplicate the tab up top, I’m going to right click on the tab up top, and we’re going to duplicate the tab. And we’re going to be opening up our favorite two reports, those being the balance sheet, and the income statement. So let’s open up the balance sheet in the income statement. So I’m going to open up another tab, we’re going down to the reports down below.
And then we’re going to be opening up one of our favorite reports the financial statement, report the balance sheet, report. And we’ll open that up. And then I’m going to open up another tab for the income statement, I’m going to right click up top, we’re going to open up another tab. For the income statements, I’m going to duplicate the tab again. And this is our other favorite report. Of course, our two two favorite financial statement reports this one being called the income statement, otherwise known as the profit and loss. That’s what goes by with QuickBooks here QuickBooks calls it the PnL the profit and loss. So there’s going to be that information,
I’m going to then go back to the first tab, and I’m going to enter another transaction into into our register just so we can see a fresh new transaction and what it will look like here. So I’m going to go then, down to the accounting tab, we’re going to go into the chart of the accounts again. And I’m going to go into the check register. And I’m going to enter a transaction, I’m going to enter it in 2021. So what I’m going to do is I’m going to say add a check, I’m going to make it a check. So we’re going to add a check, and I’ll add it as of 12, let’s say 2620. So that’s as of last year.
So I’m in 2021. Right now, and this was done in 2020. And the check number, I’m just going to keep that check number 71. And I’m going to say the payee, let’s bring it to that Bob’s burger joint again, the first one there. And we’ll say that this one is for just 500, even to make it nice and simple. And this is going to go to meals and entertainment, again, meals and entertainment. Okay, so then we’re going to say, let’s save that. So if I save that now, there we have it. Now what’s going to be the impact on the reports?
Well, if I go back to our reports here on the balance sheet, and I refreshed the balance sheet now. So I’m going to go up top and refresh the screen, I’m going to close up the hamburger, I’m going to hold down Control and scroll up a little bit. And so now I’m at let’s say 150. And so then I’m going to go back up top, and let’s bring this back to 2020. Now, so I’m going to say,
Oh 101 to zero to 1231 to zero, and then I’m going to run the report. So then if we go down in the checking account, the checking account side of things, I’m going to go into the checking account, and we have the cheque that we wrote all the way down here on there’s that check, there it is. So I’m going to go back up on up top, so the balance sheet seems correct. But we’re going to imagine that that checks not going to clear and we’re going to want to avoid it right.
And so if I go then to the income statement, what happens over here, let’s go back to the prior year, again, we’re gonna go back to 2020 Oh, 101, to zero to 1231 to zero, we’re gonna go ahead and run that report. And then if I scroll down, we’ve got that meals and entertainment down here, where it went into down here went into the meals and entertainment. And if I select that item, then we’re going to have all these all these items here that we go to Bob’s burger joint a lot. So there’s the 500 in there.
So if I go back up on top, and we go back to our report, now that’s an increase to the expense account, which is going to decrease this net income. And that’s going to kind of be the issue. Because if I, if I then go into 2021. Now we’re gonna imagine it’s 2021. And we’re gonna say, hey, we’ve determined that this check right there shouldn’t be there. It should be voided. It’s Miss input, we’ve determined it’s not going to clear the checking account. And we need to avoid it for whatever reason. It’s 2021. Now, and we’ve already basically closed out the year and we’ve done our tax returns and our tax returns have been done and we’ve done our financial statements.
And then if I go back in and void it, it’s going to change my net income for the prior year, which we have already finalized. We’ve already run our reports on it. We’ve already done our tax return, you know, based on that based on that information, so we can’t really avoid it. We don’t want to avoid it. In the prior year, because if I run my income statement for the prior year, then it’s going to be off, it will also affect basically the balance sheet. Because this Income Statement number, this 117 646 is part of the balance sheet, if I pull over the balance sheet, which is the double entry accounting system, it is assets up top.
And we’ll talk more about the double entry accounting system, but assets, liabilities, and an equity down here and you can see this net income, there it is, it’s part of the balance sheet. So again, if I’ve already used this balance sheet, have already done the reports as of 1231. And then I delete something that’s going to mess up this number in the prior period, then it’s gonna it’s gonna have some now we got something different in our system than what we finalized when we did like our tax returns and whatever else and did our financial statements as of 1231.
And if I, if I go one period up, let’s say I bring this to the 21st. Even if it’s January 1, I’m going to run the report now. So now I’m in 2021. And if I go back down here, notice this net income number is zero now, because that amount rolled into retained earnings, so the net income rolls into this equity section in retained earnings. So the question is, how do I avoid it? How do I get rid of these checks, then, without messing up that process in the prior period process, now there’s a couple ways you can do it, there’s kind of a one way you could do it, is to basically keep the check here and say just edit the check and then make another transaction in the current period, that will reverse it out. In other words, I’m going to hit Ctrl, and zoom back down to 100%.
Because I’m doing data input. Now, I could go in here, and then basically indicate that it has been voided by just basically putting a memo in here, saying that it’s been void, right, I could say this has been void right there. But if I do that, it’s not really, it’s not really saying void on the cheque, I’d rather just completely void the check. And then and then when I go in and look at it, I’m not going to get confused as to whether it because what I want to do is check it off as cleared on the bank statement. If if it looks clear, and it’s still a check. Even if I have that memo that says void, it might it might not, I might get confused as to whether it’s void or whether it cleared.
So what I’d like to do is actually void the entire check. But if I do that, I’m going to avoid it, I’m gonna avoid it and change the transaction that happened in the prior year. So what we got to do is I’m going to re input this thing with basically journal entries, which is which I will not be able to, I won’t be as likely to be confusing for the check when I do that. So what I’ll do, though, I’ll add another transaction. And I’m going to call it a journal entry this time. So I’m going to make it a journal entry, and not a check. And I’m going to read input this as of the same date, so it’s 1226 20.
And I’m going to call it now a journal entry. For the payee, you could add the same payee, and it’ll go in and out as the same payee again, or you could leave it leave it blank and just show the voided check. Because when you go into the vendor detail, you want to be able to see that the check basically was voided. In the vendor detail. If you if you add the vendor again, it’s going to go in and out again, because we’re going to add two more transactions. And then I’m going to show it in the memo This is to void This is to void check checks 71 to Bob’s burger joint.
So I’m going to put that as the memo, we’re going to go ahead and copy that. And then I’m going to say that this is going to be for the $500. And the other side is then going to go to that meals and entertainment, so meals and entertainment. So then I’m going to go ahead and save that. So I’m going to save this transaction.
And so there we have it. So now we got these two side by side, and they line up. Now if I go back on this transaction, and then let’s just take a look at it by editing, I’m going to go ahead and edit and this will take me into the more detailed look or the actual journal entry form. And the reason I like to do that is because I want to add the the memo down here as well. So it’s on both sides. So this is going to record you know both sides of this transaction. And then I’m going to say save, I’ll save that, and then close this back out. And then I’m going to then we’re going to have to add another one, which is going to be in the current period in 2021.
And then I’ll go back in and void once I got all three of them in there, then I’m going to go back in and void the duplicate one or the original one. So then I’m going to go back in again, I’m going to say now we want to enter and I’m going to make it in the form of a journal entry in the current time period. Because again, that’s going to make it easier for me to see that this is something a little bit different than a than a standard deposit thing. This is something that we had to do to make an adjustment. I’ll make it in January 1 2021. It’s going to be a journal entry.
And I’m not going to put the payee here once again and I’m going to say the memo is going to be the same check setting one. So void check 71. This is part of avoiding process and this time, we’re going to add it as a deposit on this side. So meaning we’re going to increase, basically the checking account on this side. And we’re going to record the meals and entertainment as the other side of the account, which seems kind of funny, because obviously, the meals and entertainment is an expense account, it’s going to be increasing in this time period, but we got to match it out, so that we get the voiding happen in the proper time period. In other words, since we already recorded the expense last period, we got to basically record it as a negative expense in the current period to basically void it out.
So then I’m gonna say save it. And so now we’ve got these three transactions, right, we’ve got these two that are duplicated checks, and they’re in the same time period, and then we’ve got this one, that’s going to be a deposit in the next time period. So now what I’m going to do is I’m going to void this one, the original check, this is the one I want to avoid. So I’m going to go into that one. To avoid it, I’m going to go I’m not going to delete it because I want it to say void, so I want it to you know, show it as a voided check rather than just vanishing all together, because we want that audit trail. So we’re going to go into the Edit then.
And now I’m going to go ahead and go to the More button on the bottom. And we’re going to go ahead and void that check. So we’re gonna say void, it says, Are you sure you want to do that? We’re gonna say yes. And so now it has been voided. I think I said no, before, I’m gonna say yes, I want to do that. So now transactions successfully, transaction successfully voided. So now we have our three transactions here. So we have it on the books. But now we put it back on the books as a journal entry, we voided this one, which now shows as zero, and then we have the one that’s going to be there on January, that’s going to reverse out.
Now, the point here is that that when we look at the at the reconciliation, something has to clear on the reconciliation, and these two will match each other out in order to clear on the reconciliation, this one will show as void. So let’s just take a look at the reconciliation to see what that would look like when we’d reconcile now, if I go down to the reconciliations to to I’m sorry, the accounting down below, not not in reports, accounting down below. And then we want to go to reconcile accounting reconcile, we’re in the reconcile tab up top, and I’m going to be in the checking account. And I’m just going to resume what we did last time.
And then when we check these off, we’re going to have these items, if I go all the way down, we got these two, three at the end. And I can check these off. And because these two are equal and opposite, they will be removed from our reconciliation process. So we can reconcile them. And the zero balance because it’s zero, it can be removed as well. In other words, these will not throw off our reconciliation. Now when we reconcile. So we should be we should be good there to to reconcile. And then if we go back to our reports up top, let’s consider what will happen on the income statement.
So if we then go to the income statement, or Profit and Loss Report, I’m going to run the report again, that should refresh the report. And then if I go down to the affected account, which is the meals and entertainment, I’m going to go to the 528 mT 528, we still have that 500 in there. So there’s going to be the 500. But now it’s showing us basically that voided check with with the journal entry. And we couldn’t really remove that expense, because if we did, it would mess things up, because we already finalized the income statement with it there. And now we’re avoiding it in the following period. So we still want that there. So that looks good. But it’s showing us and then we have that same 117 646 here. Now if I go to the next year, if I go to 2021.
Now, let’s bring this up from a 101 to one to 1231 to one, then run that report. And then we scroll down, we got the meals and entertainment is in there as a negative number. And that looks funny as an expense. It’s not generally a negative number. But that’s what we had to do in order to avoid the item that’s in we had to avoid a prior period item. And instead of going back to the prior period, and amending basically our return and whatnot, which might mean like amending the taxes and everything like that, we wouldn’t we kept the expense in the prior period. And therefore we have to have a negative expense basically in the current period that would that would match it out.
So that we can basically void the check in the proper time period. And then if we go into the the balance sheet over here, and I bring this back to 2020. So I’m going to bring this back to 2020 and run that report. And we scroll down. We still see that 117 646 that is now in net income. So we haven’t really messed up then our balance sheet as of 2020 because again, imagining that you already did the taxes and you did the financial statements, when you run your 1231 2020 report, in 2021, you’re running the prior year report prior your year end in 2021, it should match what you ran when you ran the report, you know, basically for your taxes or whatever you did at the end of the year.
So when you finalize the reports for 2020 1231 2020, going forward, you really shouldn’t have any changes, if you run the balance sheet as of that date, right, if you’d have, if you do have changes, that means that something got changed in the prior period. And and that could cause problems, basically, when you’re trying to when you’re trying to match things up and going forward. So that’s going to be that item. And then if we go back on over, I’m going to go to the first tab again. And then if we go basically down to the expenses area, and we were going to say go to the vendors, if we go to the vendors and we say we want to go to Bob’s burger joint, because that’s where the check was voided at, then we’ve got this check.
And it’s just showing this one check that was voided. So if there’s a question about that check, there’s there’s really no No, no question about I can’t mistakenly say, oh, was that voided or not? No, it’s, it’s pretty clear that you know, it wasn’t, it was a check here. So it was voided. So we have the full, the full voided check and then brought it basically down to zero, right, the status of the check is void, we can’t, we can’t really mistake that. Whereas if we just put a memo in the description, then we you know, we might, we might not fully get that right, it won’t, it won’t be a complete, you know, voided check. That’s why we did the two transactions.
But you could, instead of having done that, you could have kept the original check and just put in the memo voided. And then you would not have had to add the journal entry. So that’s one less step. But I don’t think it’s going to be quite as clear to do that. So just know that this similar kind of process is going to be the general kind of process you have with anything that you’re going to be deleting or thinking about changing the general accounting rules, don’t change it add something else that is going to be keeping the audit trail, although we will break that rule from time to time.
And QuickBooks makes it easy to break that rule from time to time. And then However, if you are changing something in the prior period, then you got to be really careful about the temporary accounts and the ruling over the temporary accounts. So if anything is going to be affecting the income statement, income and expense accounts in a prior period, especially a prior year, for smaller companies that are that are relying on this for tax preparation and whatnot. Then you want to be careful about about how you go about doing that so that everything rolls over properly.