 Here we are in our custom zero home page opening up the new company file we set up in a prior presentation that being get great guitars. Thus far we set up the new company file we entered some of the beginning balances imagining we're pulling that information in from a prior accounting system as we did so we also tried to set up some of those foundational type of items necessary to make data input in the future easier now we're just going to do some last little tweaks to those opening balances made mostly within the equity section of the balance sheet but before we do let's duplicate some tabs to put reports in by right clicking on the tab up top and duplicating it we're going to right click on the tab up top again to duplicate it again as the one to the right's thinking I'm going to go to the tab to the left open up the balance sheet report which is under the accounting and then the balance sheet as it's thinking we'll tab to the right go to the accounting and this time the income statement the profit and loss as it's thinking we'll tab back to the balance sheet and we see that we're on December 31st so that looks good this is what we have thus far when I go to the income statement nothing's in there as of 2023 which is basically what we want so let's go a recap and then look at our issue here so if I go back to our beginning balances our strategy has been that instead of entering these beginning balances as one giant journal entry we put them in one at a time and as we did so the other side of the transaction for each of them we put in some way shape or form to the equity account down here so we put the checking account we increased debit of the checking account the other side went to equity we increased the accounts receivable debit the other side went to equity and so on and so forth we did it that way so that we can accommodate any special needs for particular accounts such as the accounts receivable needing customers to be able to populate the sub ledger inventory needing items so that we can track a sub ledger by item and unit of items accounts payable needing the sub ledger tracking by vendor for example so that all ties out now everything looks good and we set up some of those fundamental fundamental items necessary for data input in the future but we could have some discrepancy in our owner's equity account so quick a quick thought about the owner's equity account down here note that your owner's equity is often the most confusing part of the balance sheet for many people because when you think about different types of companies the owner's equity section could look different let's go back to our balance sheet to see what that means it's also confusing because the equity accounts basically roll into or the balance the income statement accounts basically roll into the equity accounts so let's just quick recap on what equity is you can think of it as like the book value of the company meaning it's going to be the assets minus the liabilities equals the equity so if I was to say okay my assets my total assets here in dollars not in terms of units of fixed assets or equipment or something right in dollars that's how we measure things or whatever currency we're using one one five eight nine six minus the liabilities which is thirty eight thousand here thirty eight thousand gives us the uh the seventy seven eight ninety six total book value so when we think about the value of the company the equity is kind of like the value of of the company so the other way you can think of it and the reason we have it set up in the accounting equation is assets equal liabilities and equity the two balancing out is because you can basically think of liabilities and equity as the other side of the coin to assets assets in other words is what the company has in total dollar amounts here liabilities and equity flip side of the coin represents who has claimed to those assets either it's a third party like the bank liabilities thirty eight thousand in this case or it's the owner who who has the seventy seven eight ninety six if you closed up the company in theory then you should be able to get sell everything and get one hundred and fifteen thousand eight ninety six of cash pay off the liability thirty eight thousand and have seventy seven eight ninety six for yourself right but that's just in theory because obviously these are cash is what we're trying to measure things in dollars but when we actually liquidate a company we might not have the same amounts that we would receive when we're paying off or selling the assets for example all right so that's the general idea also if you were a sole proprietorship then equity is quite easy because you only have one person so all the equity is then basically yours as the sole owner of the business however if you have a partnership two or more partners then the net equity of the business has to in some way then be broken down to who has claimed to the equity side of the business which would then be broken out to different capital accounts which is actually oftentimes the most confusing set or thing to do more confusing than a corporation sometimes because the capital accounts could differ meaning you could have partnership agreements that have different profit sharing so you so you'd have to break out your equity to the partnership accounts if you're a corporation then all of the equity instead of having different owners having different amounts which are attributable to them with different capital accounts we say the corporation is just going to this was the genius of a corporation we're going to make it one lump sum corporation and we'll divide out ownership in equal units kind of like currency equal units of the corporation and then different people own different amounts of the corporation by owning a different number of equal units within the corporation that makes it easy on the bookkeeping side because now I can just record everything as basically retained earnings versus the capital stock the investment so whatever your your corporate your structure you might have to do a last minute adjustment down here to get your equity accounts to be lined up one last thing that's confusing on the equity accounts if I go to the income statement we did some things where there might be an impact on the income statement in the prior year so if I go to last fiscal year for example I can see here I've got 20,500 because I recorded income I'm okay with that because that 20,500 it's going to roll into the balance sheet and we can see it here in current year earnings and it's not going to impact the income statement as of the current period I'm going to be working with going forward as we can see if I change the date again to this fiscal year and that's that's fine anything prior to the cutoff I'm going to say I have the data there from the prior accounting system however that might be either I still have the prior accounting system up uploaded or I've printed everything out and downloaded everything so I'll go there for the prior stuff I'm using this system for January 2023 going forward on the balance sheet you can see it here they give you this current year earnings this account will change to retained earnings when we when we flip to 2023 so if I go to this year to date end of last month end of end of last quarter let's say if I do something in 2023 and then you could see now they call it retained earnings so retained earnings is usually an account name that we use for like a corporation we call it the earnings that have been accumulated over time which have not yet been distributed to in that case the owners which are shareholders in the form of dividends in that case in our case if we're we're going to assume we're a sole proprietor then it might be more proper to call this like the capital account like we did up here so I don't want this one basically maybe to be the capital account and then maybe I should change this one to like draws so in a in a sole proprietorship one owner we're going to have an increase you could keep it retained earnings but it probably be lined up to a to a sole proprietor better if you changed it to like owner's capital and then we'll have our investments and then we'll have our draws instead of dividends because we draw the money out and we don't have to go through the board of directors or anything to do so we could just take the money out as a draw as opposed to a dividend and we don't have the same tax impacts in the united states okay so with that said let's go over here and do those changes so I'm going to go let's go down here and say chart of accounts and I'm going to go into my equity accounts which I can do up here which is kind of cool they have this little thing up here