 QuickBooks Online 2023. Entering beginning balances, customers, vendors, and items overview. Get ready to start moving on up with QuickBooks Online 2023. Here we are in our get great guitars practice file. We started up in a prior presentation using the 30 day free trial. We also have open in another incognito tab, the free QuickBooks Online Test Drive sample company, which if you want open at the same time, you would need to open in an incognito mode or another browser. Incognito mode could be found if using Chrome and the three dots up top and then new incognito window. You can then search for QuickBooks Online Test Drive. We will be using the sample company to be comparing and contrasting the accountant view, which is what the get great guitars file is in and the business view, which is what the sample company is in. You can toggle back and forth between the two views by selecting the cog up top and the switch to accounting or business view on down below. I'm gonna then note that we are zoomed in a little bit. You can zoom in by holding control and up on the scroll wheel. We're currently at the one to 5% on the zoom in. Now we are now at the point where we set up our company file. We've done some of the underlying foundational stuff such as setting up our account settings, managing our users and so on. Now we gotta think about if there's gonna be any underlying or beginning balances from a prior accounting system. In other words, most of the time if we're gonna start a new company file, we are either doing so from a system that has already been going in the past in another accounting software. Or at the very least, we might have a couple transactions like a bank account that has already been set up that we need to be putting into the beginning balances that we can formally track within our new QuickBooks online software. Now if you had a prior accounting system in another accounting software like QuickBooks desktop or some other accounting software, then the question is, do I wanna pull in all the prior data from the prior years in the prior system into QuickBooks? Or do I just wanna start at some cutoff point using the prior system for prior data? And then at the cutoff point from this time going forward, I'm gonna be using the QuickBooks system. Support accounting instruction by clicking the link below, giving you a free month membership to all of the content on our website, broken out by category, further broken out by course, each course then organized in a logical, reasonable fashion, making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files, and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Now if you pull in the prior data, if you like have your accounting system for 10 years or something, and you're pulling in all that data into your new QuickBooks system, then the downside is you've got a lot of weight in the system already, you've got a lot of data that you might not need. You may only need like one or two years back. On the plus side, you've got a lot more rich data that you can drill down on if you can get it all into the system, running reports such as comparative balance sheet reports, comparative income statement reports comparing to the prior year. Your other option is to put a cutoff and say, hey, look, I'm just gonna run the balance sheet, for example, at the beginning of the year and start in the current year in the current system. In that case, you don't have all that prior data, which could be a little bit lighter on the system, but you don't have that comparative reports that can go back to multiple periods in the past, you would have to actually go to the prior accounting software to look at that. Also note that you really want to have a full years of data typically in one accounting system. So if your fiscal year is the year, a calendar year, January to December, and you're thinking about making a change sometime in March or something like that, or even at the end of the year, what you would like to do is run a parallel system, enter the data into your new accounting system for the entire year, so that at the end of the year, when you do tax preparation and whatnot, make financial statements, you don't have half of a year's worth of data in the prior system, and half of a year's worth of the data in the current system. So those are just some couple things to keep in mind. Now, even if you're starting a new company business, it's often the case that people set up a bank account and they've already made a couple transactions, so you'll at least have some beginning balances that you're gonna have to enter into the system for the beginning bank account. We'll talk about some of the issues with that shortly. So to do that, we have to think about the chart of accounts, so we're gonna have to be managing then our chart of accounts, which we could find under the lists over here, the chart of accounts on the left, or we can go down here into our accounting on the left-hand side, accounting, and then our chart of accounts is here under the business view. If I jump on over to the business view, we can then go into the bookkeeping, the bookkeeping, this is under the business view, and the chart of accounts. And I have to see and manage the chart of accounts, there it is. So we're gonna imagine that we have a beginning set of data balance that we wanna pull into the system as our beginning balance. So it's gonna look like this, this is gonna be our beginning balances. We are imagining that we pulled from the prior accounting system. I'm gonna imagine that we printed this out as of December 31st of 2022. That's gonna be the cutoff date for the prior accounting system. And then when I put the data into the current accounting system, I wanna run a full year's worth of data starting January 1st, 2023, and then we're gonna enter data from that point going forward. So note, if you have a formal prior accounting system, if you're able to do that cutoff at the end of the year, then you shouldn't need any income statement accounts because the income statement accounts rolled into the balance sheet. And so we should only have basically balance sheet accounts for our beginning balances. And then we're just gonna start entering more data in the year that we're gonna be working in, in this case that being 2023. Now again, even if you don't have a formal prior accounting system, you might at least have some money in the checking account. So you might have to enter that basically as a beginning balance and we'll go into that process as we do this process of entering these beginning balances. So I've printed it out in the format of a double entry accounting system in terms of debits and credits here. You can also think of it as assets equal liabilities and equity, but the bottom line is it's in balance here. We have something that's in balance. We have to enter this into our current system in a way that's in balance. They also have an issue in that each of these accounts might have like a sub ledger need to it as well. So if you have an accounting background, for example, you might just say, okay, that's gonna be easy. I'm just gonna enter as of the end of last year, 1231-22 or the beginning of the current year, January 1st, 2023 for our practice problem, a big journal entry that's just gonna debit the checking account, debit accounts receivable, debit inventory, credit, the accumulated depreciation, debit furniture and equipment and so on and so forth. And then that'll be fun. However, we can't really do it that way. So in other words, you might think if I jump back on over, I can just go to say, I'm gonna go back to the home page up here, and then I'm gonna go into the plus button. You might think I could just enter like a journal entry. Just enter a journal entry into the system and hit all those accounts. You could do that, but you're gonna run into problems because some of those accounts in the QuickBooks system have needs to make the subledgers related to them. So let's take a look at these one by one just real quickly and take a look at some of those needs and then the approach that we will be using to enter these into the system. We've got the checking account. Now the checking account is a special account because one, you might connect it to the bank feeds and two, it's kind of like the lifeblood of the company. It has a lot of different transactions in it. And three, when we reconcile it, we might have this issue with basically outstanding checks and deposits at that beginning starting point. So for those reasons, we're gonna run into some issues when we enter the information into the checking account and we'll have to think about how we're gonna reconcile the checking account. So we'll dive into that more in future presentations. We've got the accounts receivable. Now you can't just enter 20,500 if you have accounts receivable because the accounts receivable represents money that is owed to you by a customer. And within QuickBooks you have to enter the customer in order to enter something into the accounts receivable which is kind of nice because it allows QuickBooks to automatically create the sub ledger breaking out who owes you the money. So therefore we're gonna have to use some method that I can enter the accounts receivable as well as the customers. That means I'm gonna need a list of the customers not just the balance of 20,500 in order to enter this into the system. We then have inventory. Now inventory can be tracked multiple different ways. If you're selling inventory, you might do a periodic inventory system in which case you count the units of inventory and the flow of inventory outside of QuickBooks and then you make periodic adjustments within QuickBooks based on a physical count that you make at the end of the night, week or month. Or you can track the inventory within QuickBooks which will track the increase and decrease in inventory as you make purchases. Not only a dollar amount in the GL account but also in the amounts for the units of inventory. So if we're gonna do that, then, which we will do, then we have to not only add just the a dollar amount of inventory but the items, the inventory items that we're selling. And so that's gonna add a level of complication. Then you've got the furniture and equipment and the related depreciation. Those are fairly straightforward although there is also a sub ledger that we'll have to track with regards to accumulated depreciation. Oftentimes that's not done within QuickBooks but done by tax software because we have to do at least tax depreciation outside of the system for the law. So if we're using tax software, then we might try to tie in what we do in QuickBooks to the depreciation schedules that will be generated in tax software. We'll dive into that more when we get into those accounts and then accounts payable. Like accounts receivable, it has a sub ledger attached to it generally. Accounts payable representing what we owe to third parties. Therefore, if we're tracking accounts payable to liabilities, then we also need a list of who we owe the money to. And QuickBooks will force us to have that list of vendors as we enter the balance. The Visa account is a credit card account we're gonna say. It has a special need like the checking account in that we might connect the bank feeds to it, for example, and we have that same beginning balance issue. And then the loan payable is a fairly straightforward account to be entering into the system for you could just do a journal entry basically for the loan payable but we might have a sub ledger account that we have outside of the system which would be the amortization table. And then the equity account here is represented by just one account called owner's equity because it's a sole proprietorship. If it was a partnership, then we have an issue of multiple partnership accounts that we would have to deal with. If it was a corporation, we'd have to deal with retained earnings and that. And notice what I do not have here are any income statement accounts, revenue, income or expense accounts because we would like to be able to have a system where the revenue accounts have already closed into the balance sheet. We're only entering the beginning permanent accounts, they're called the balance sheet accounts, the ones that aren't temporary accounts which are the income statement accounts that close out into the balance sheet periodically, typically at the end of the year so that we can show the activity going forward in the current year a full year's worth of data in the activity accounts to temporary accounts, the income statement account, the profit and loss accounts in our case starting January 1st, 2023. Okay, so then how are we gonna do that? What's the strategy for doing this? If I'm not entering a full journal entry that I know is gonna be in balance, I'm gonna try to enter everything one account at a time but if I enter it one account out of the time from a journal entry standpoint, how am I gonna make this thing reconcile? How am I gonna make it be in balance? Because I have to enter all of them in a journal entry to make them in balance. And the strategy QuickBooks use which works quite well is that we'll enter the beginning balance one at a time and then QuickBooks will force the other side of the transaction to go into some kind of equity account. The equity account they will usually use is this opening balance equity account. This opening balance equity account therefore is not like a real account. It's not like an account that you want to be presenting to people. It's a temporary account that QuickBooks is using to say, hey, I forced this thing to go into opening balance equity in order for the accounts to remain in balance. You should probably take it out of opening balance equity and put it into the appropriate account which is most likely in this case, the owner's equity at the end of the process. But if we do that with every account, I put the checking account in, it puts the other side to opening balance equity. I put accounts receivable in and I do this by adding customers. I add the customers that owe me 20,500 and I say that that customer owes me a beginning balance of whatever they owe me, that the sum of which will add up to 20,500. Then QuickBooks will usually not put the other side to opening balance, but usually to an income statement account called uncategorized income or something like that. But I'm gonna enter the transaction as of December 31st, 2022, which is prior to the date that I'm gonna be worried about going forward, which is January 1st, 2023. Therefore, that income account will roll into equity, owner's equity. So once again, it'll basically be in equity this time in net income or the owner's equity account. So no matter which way it goes, it'll basically be in the equity account. And I'm not worried about if it goes to an income statement account because I'm gonna enter it in the prior period which will roll into equity in the current period, January 1st, 2023, which means that we're good going forward. Anything prior to the cutoff January 1st, 2023, I'm not gonna look to this accounting system, but to my prior accounting system for added information about it. And if the tax return has been filed and whatnot, that I'm gonna say hopefully that's closed off and we're moving forward. And then the inventory assets, same thing, I'm gonna enter the inventory items and then how much those items cost. And as I do that, it'll create a transaction into the inventory account. And the other side there might go into opening balance equity or it might go into like an uncategorized expense account or something, but either way it'll flow out to equity and it'll use some kind of form to do that. That the receivables will usually use an invoice form. This will use like a change inventory form or something. And then if I do the same for this one, I'll enter the beginning balance for the accumulated depreciation and the furniture and equipment. And it'll put the other side, typically the opening balance equity, it'll just automatically do that. Accounts payable, I will enter each person that we owe money to and the beginning balance for them, the sum of which will open up at up to 15,000. It will put the other side typically using a bill to possibly uncategorized expense, an income statement account. But I'm gonna enter it as of 1231, 2022, therefore it should roll into the equity again. So it should just wash out into the equity. And then the visa account, the other side should go into the equity, opening balance equity you would expect and same with the loan account. So therefore, even though I entered each of these one at a time, the other side is gonna wash out one way or the other to an equity account. And then all we have to do is verify the equity account that needs to be, we need, right? So if we only have one equity account here because it's sole proprietorship, then I'm just gonna take whatever's an opening balance equity and allocate it to where it should go, the owner's equity account. If it were a partnership, then I would take whatever's an opening balance equity and retained earnings or whatever and allocate it to however many partners and their capital account balances. If it was a corporation, I would take whatever's an opening balance at the end of this process and allocate it out to the proper accounts, which would be the retained earnings account and possibly the stock account, right? And so those are gonna be, so that's the general process that we're gonna use. So now we'll go through this one by one, line by line, and you'll see how this kind of works. We'll enter the balances and attend to the special needs of each of these accounts as we enter the beginning balances. The other sides will wash out to equity as we'll see and then we'll adjust the equity and then we'll have our beginning balances in place ready then to enter the current data in the current system starting in our case, January 1st, 2023.