 Zero accounting software 2023 reversing entry related to accounts receivable sales or revenue Get ready to become an accountant hero with zero 2023 first a word from our sponsor Well, actually these are just items that we picked from the YouTube shopping affiliate program But that's actually good for you because these aren't things that were just given to us from some large Corporation, which we don't even use in exchange for us selling them to you These are things that we actually researched purchase and use ourselves Acer 27 inch monitor I've been using an Acer monitor as my primary monitor for a few years now This is the first Acer monitor that I have used after having used a series of different brands of monitors in the past The Acer monitor has been performing well, and I'm trusting the Acer brand more and more as I use the monitor I have a 27 inch monitor, which I think is ideal for what I do which is of course the screen recording and the editing if you would like a commercial free experience consider subscribing to our website at accounting instruction.com or Accounting instruction dot think of it dot com where we have many different courses You can purchase one at a time or have a subscription model giving you access to all the courses courses Which are well organized have other resources like Excel files and PDF files to download and no commercials Here we are in our custom zero home page going into the company file We set up in a prior presentation get great guitars Duplicating some tabs to put reports in like we do every time right-click in the tab up top to duplicate it Right-click in the tab up top to duplicate it Back to the tab to the middle accounting drop-down opening the balance sheet We're looking at a comparative balance sheet if you don't have that you can open the standard balance sheet Tapping to the right accounting drop-down same thing on the income statement We're looking at a comparative one if you don't have that you can open the standard one We are now doing a reversing entry for a sales item that we entered in a prior presentation So let's just do a recap of the adjusting entry We did last time the general concept being that we had an invoice that was entered after the cut-off date But the work was actually done before the cut-off date now This is most easily visualized I think if you think of a job cost kind of system where you can imagine people are Putting their time together and then they possibly have a billing cycle every two weeks or so So it's quite possible then that when you enter the invoice which is the form Used by the zero software to record revenue it happened after the cut-off date Even though the work was done before the cut-off date So you would need to pull the revenue into before the cut-off date So in this case then you can see here that we have the invoice in March After the cut-off date as well as the cost of goods sold because we want to do it with inventory To add that added level of complexity and then what we did is we did a journal entry Putting it before the cut-off date now note a couple things on that you might say why do that? Why not just change the date on the invoice you could but that kind of messes up the normal Bittling cycle the billing cycle happens every two weeks or something like that Then what we'd like to do is say if this is logistically working well for the business I don't want to mess them up just so I can kind of tweak this this reporting What I'm going to do instead is the standard adjusting process and say you do what works logistically on the bookkeeping side And we'll just do an adjusting entry at the end of the period then you might ask well Why don't you just enter an invoice another one? before February that just mirrors this invoice and we don't do that because we don't want to we don't want to have an Actual invoice that also triggers the internal reporting things as well such as having the invoice that needs to be paid tracking in the internal contacts and the invoices that would also hit the sub ledgers for accounts receivable and The sub ledgers for inventory so what we do instead is just enter a journal entry We also want to see the journal tree as a journal entry because that's one of the indications that it's an adjusting journal entry and not Part of the normal bookkeeping system So we've entered the journal entry in now This is basically the accounts that are affected with the journal entry This is more of a complex type of transaction with an invoice even though the data input of an invoice is fairly easy So it's useful then to map out what's actually happening when you enter the invoice So if I was to go into this one, let's go into like the actual invoice and Just kind of analyze it now when you when you look at the reversing entries What you want to do what you don't want to do let's start with what you don't want to do is say okay Let me try to build a reversing entry from top to bottom Putting the debits on tops and the credits on the bottom if you can do that if you can visualize that then you have a quite good grasp of The accounting system Because that's kind of a long journal entry and it's unnatural to think of a transaction of a reversing entry So what you want to do instead is think of what's the transaction related to an invoice? write it down and Then just flip flip the signs or flip the debits and credits and I would keep it Going from top to bottom with the same accounts not trying to realign the accounts unless you need to for a book problem or something like that In which case then you can realign the accounts. That's the system. I would go to so we built the adjusting entry Based on this invoice right that we put in the adjusting entry before the cutoff So the invoice has a transaction which is a debit to the accounts receivable of the full amount the 525 The credit goes to revenue for the 500 the difference of the sales tax Which is the 20 and the 25 the 5% is going to go to a payable account sales tax payable the inventory is going down By I believe 400 and then the cost to good sold is going to go up by the 400 So we've written that down here. We used this to make the adjusting entry now What you want to do in practice is possibly take a picture of the Adjusting entry and then reverse it zero also has a nice system with a little checkbox that lets you reverse it automatically Which is great. So I'll show you that as we go We're just going to write down if you had to write this down and say what's the reversing entry look like? Let's just copy the headers. I'm not going to try to again Realign my accounts to have the debits on top I don't think that's a useful thing to do and if you need to do it you could do it after I think it's easiest to see if you just copy this down This way and we're going to say well if you debited the accounts receivable last time I'm going to credit it this time Top-to-bottom it's but you shouldn't have a credit on top not a big deal really because it's the same thing That's just like a convention if it works this way to see it better Do it that way if you need to rewrite it to make someone else happy or Line up to a book problem and then rewrite it afterwards So the sales we're going to debit the sales if we credited the sales last time now We're going to debit the sales and the sales tax payable. We're going to debit it now This should look like an unnatural transaction Because for one and and most extremely we never really debit sales sales only goes up It's a revenue account So it should look unnatural to kind of debit sales and it is unnatural because we are We're reversing an entry. It's a reversing entry. We're reversing what we did last time. That's why it's kind of hard to construct Without first thinking about the the normal entry and they cost a good sold Well if we debit it cost a good sold last time We're going to credit it this time and the inventory will on the inventory if we credited it last time We're going to debit it this time Now note that this also has the added problem of accounts receivable has a sub ledger Tracking by customer and we don't want to mess up what's happening on the customer side of things now zero actually Forces us not to mess up what's happening on the customer side of things because they won't let us do a journal entry to Accounts receivable because usually Our accounts receivable goes up with an invoice and down with payments and they're trying to track the invoices and payments in the Customer contacts and if you just record a journal entry to accounts receivable, you'll mess everything up So zero actually forces us not to do that and so we made up another account called accounts receivable Counts receivable adjusting entry and posted to that so this is what it looks like in zero That's a little bit tedious to do but zero actually has that great Ability to format the layout which is much more flexible than other software such as QuickBooks online Allowing us to basically put these into a subcategory and we can collapse them if we wanted to to have one accounts receivable Category for these two accounts within it So that's really neat because that allows us to have this second account Which doesn't mess up the sub ledger to post our adjusting entries to and still be able to format our Reports the way we would like to directly within zero same thing with the inventory Inventory if I post something to inventory Without the normal inventory forms when doing perpetual inventory tracking Then I'm gonna throw off my sub ledger again and and zero saying we're not gonna let you do that So they didn't let us post anything to inventory. They they forced us to put it into Another account which is kind of a pain But again because of the flexibility of the reporting Allowing us to put these two inventory accounts together and even collapse them under the heading of inventory It's it's fine like so that's even that's not too bad to do Let's open up our sub ledger reports just so we could see what we're talking about here I'm gonna I'm gonna bring this back to the Income statement right-click it on the tap to the right duplicating and Anytime we're dealing with accounts receivable you got to keep in mind these sub ledgers and if zero doesn't let you do something It's because zero is trying to say hey, you're gonna mess up the sub ledger most of the time If it's to accounts receivable or inventory for example, so they're trying to help you out man They're trying to help you out, you know, so if we go down here, we're gonna say aged receivable summary and We'll go into that and sometimes you're like I don't need no help Man, I'm I know what I'm doing with the adjusting entries and that's true sometimes But you can't get too upset with zero for trying to I mean, they're they're they're sincerely trying to help here You know, so we're gonna any case so we're gonna actually get we're gonna go down to February and Update it so here's our accounts receivable broken out by customer and that's 23151 50 23151 50 if I go to the balance sheet we have the 23 The 23151 50 and that's because I'm running it through July over here I'm back over here on let's I thought I changed it to February though. I Could have swore I could have swore, but I didn't I had an opportunity to swear And it would have been really cool to swear and I could have swore But I didn't swear and I missed my opportunity. There's the 22 626 50 if I go back on over here There it is on the February 22. Okay, so it's not including our adjustment account So it does our adjustment accounts not messing that up and that's cool because we're gonna reverse the adjusting entry and this account Won't go down to zero if I go to the Inventory sub ledger. Let's do the same thing duplicate a tab look at the sub ledge for inventory and reports and Say inventory item list and Let's do that as of the cutoff date Feb 28 the cutoff date Feb 28 bam and So if we look at the bottom line of that one the five three four four should tie out to the five three four four not including our adjustment account and Okay, so then we did our adjustment last time as a journal entry so if we just take a look and go down to the source document of The journal entry on the adjusting entry here's the manual entry we put in last time and So there's what it looks like so basically it looks like what we did over here So now we're just gonna reverse that so I'm gonna go back I'm gonna go back and Let's go to the first tab we find our journal entries in the reports tab so we're counting Reports, I'm gonna type in up top a journal report journal report Because that's the one we want and then in here. We've got the ad the journal Add the journal. This is I'm just gonna say a this it call it a reversing entry the date is always on February the date after the cutoff in our case March 1st March 1st because February 28th is a cutoff date for us now note that When we did the adjusting entry we have this automatic reversal thing which would basically do it automatically So we could do that but again, we want to we want to show what the reversing entry does So we're gonna manually put the reversing entry as of March 1st now also you might say hey look this transaction over here on on the income statement Happened on the fifth this inventory happened on the fifth So why don't you do the reversing entry on the fifth because then it'll be correct for five extra days But we don't want to do it on the fifth Because we want a reversing entry to happen the day after the adjusting entry so we know exactly where we are and where they are and We're gonna sacrifice the fact that we're not gonna be perfectly on an accrual basis in the middle of the time period All right, so we're gonna say then this is gonna be a debit to our accounts receivable But it's the adjusting accounts receivable There's the one There's the one and that's for five. That's a credit for five. I gotta make this is the one I'm on Let's make it green So I don't get confused Let's make it that's too dark And I need borders. It has to have borders around it. I don't work without borders Otherwise, you can't stay in the lines So I count 525 so 525 and Then this one is gonna be sales Sales will during the unnatural thing debiting it for 500 because debit usually is a credit to sales But there's a reversing entry. So and then sales tax payable Sales tax is the 25 not done yet Even though we're in balance right now because cost of goods sold Also needs a credit because we're reversing it of 400 400 and then inventory And we only have the adjustment account not the actual inventory account of The 400 and so now we're in balance So it looks good looks movie B to the end BN So let's go ahead and post it. I Think we're okay. Let's go back to the balance sheet and update the balance sheet and All right, we did the reversing entry here So now if I go to the accounts receivable and I go into the accounts receivable We are going to see then that we had Reversing entry happening down here So so where did it do what it did that? I'm wait. This is the actual accounts receivable. Hold on I'm on the adjusting accounts receivable. That's where the actual invoice happened But we did the adjustment here and it went back down to zero. Let's go into that one so We're gonna go down and say, okay, there it is Reversing entry brings it back down to zero. So we did the adjusting entry in February pulling the revenue into February and then we reversed it in March the first day after and it's gone now and the original invoice was actually made in the This accounts receivable account in March in March 5th. So it was there, but it was in the wrong date It was in March. We need to bring it back to February. We're not gonna mess with the invoice We then increased February with a journal entry and then decreased it the day after so we're back down to where we were before Because it was just a timing difference the other sides on the income statement if we update the income statement You can see we had that sales that was here when it went up and then back down. So if I go into the sales item, we're gonna say there's the Reversing entry here's the here's the invoice that happened on the 5th and We reversed it here. So here's the reversing entry now the adjusting entry if I bring this back to Feb 28 let's say Feb 28 we're gonna say we had The adjusting entry so we brought it before into February There's the cutoff and then we reversed it as of the first day afterwards Because the actual invoice was entered on March 5th All right, so then Then let's go back up The sales tax is on the is on the balance sheet So if I go into the the liability account for sales tax and we check it out. Let's go to the March area So we can march in March So we're gonna say the sales tax the invoice there's the actual invoice that happened for the sales tax here is the Reversing entry and there's the adjusting entry. So the actual sales tax happened with the actual invoice in March, there's the 25 we brought it before the cutoff date into February and then we reversed it Right after the cutoff date so that we're back to where we should be Here so we're gonna say, okay, let's go back and then we also have the inventory That we did stuff too. So inventory Is here's the adjustment account. So we did something to the adjustment account So let's go into that one because we didn't want to mess up the sub ledge and So we're gonna go down and say K. Paso our key. Oh, what happened here? We got the adjusting entry that Decreased the inventory that we pulled in right here and then we reversed it right after Because the actual inventory decreased with the actual invoice and the other account the actual inventory account So the actual invoice here is Located and the other account so it's gonna be over here now note We still have this adjusting account here because we did we had a negative inventory We brought the inventory below zero so that doesn't have to do with the adjusting Part that was some another kind of issue. We had Going through the practice problem. So don't let that throw you off And then if I go on to the to the income statement, we got the cost of goods sold It went up and back down in March again. So if I go into this one, we can see it. Let's bring this back to Fed wary February 28 Feb 28, that's the date that we want to see so we had the actual transaction here happened with an invoice in March and then we brought it back into February and then we reversed it on the first day of March so that so that it nets out So we don't double input the item and it nets out on this side. So if I go to the income statement then And look at the timing statement of the income statement This is the one if this was a tax related thing if this was like income taxes as of the end of the year for example We pulled the revenue properly before the cutoff date, which is now in February The revenue that we had recorded in March because that's when we entered the invoice is now being netted out But when we track the open invoice the open invoice is still there from March So if I go back on over to my sub ledgers over here I didn't mess up the the actual invoices that were entered in March So if I go like if I go to my contacts And I and I look at mr. Anderson All always causing us troubles Here Let's go in and see We still have the invoice that we can track in here and you know and receive the payment on the invoice So that didn't get messed up and our sub ledgers are still good because if I go to my accounts receivable here And I take a look at my sub ledge sub ledge sub ledge sub ledge We see that we have the 22 6 to 6 50 and That's if I go back on over to here 22 6 to 6 50 looks good, and if I bring the sub ledge sub ledge to March Then we should be good there as well. So I'm gonna say March and That takes it up to 22 to update it 22 To 6 to 50 it's still at February Thought I thought I could have swore. I could have swore But I've reframed from swearing Because I didn't want to upset anyone 23151 50 23151 50 and then the inventory is still at the 5344 if I go to my inventory sub ledge updated We've got The 5344 if I bring the sub ledge up to March you better do it this time Don't make me look bad. You make me look bad zero when you don't do what I tell you to do So we're bring that then it comes up to 4944 and If I go back on over here Inventory that's not the right form 4944, okay So it looks good. Let's open up our trial balance and see where we stand at this point in time tap into the right Let's just go here and hit the drop down Into our reports and we'll type in trial balance because that's what we're looking for and if you type it it shall come you just got to type it and so then I'll just keep it till the end of 2023 and It'll have everything in it because we did a reversing entry and So this is where we stand as of this point in time if you were On last time, but you're off this time We made changes to the accounts receivable because we did basically a reversing type of entry we made a change to the The inventory Account the adjusting inventory account. We made a change to the sales tax account We made a change to the sales account and we made a change to the cost of the goods that are sold