 0 Accounting Software 2023 Change Account Categorization to Other Expense Get ready to become an Accounting Hero with 0 2023 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. Here we are in outward custom zero homepage going into the company file we set up in a prior presentation that being get great guitars we're going to duplicate some tabs to put reports in like we do every time right click in the tab up top so we can duplicate it we're going to right click the tab up top again so we can once again duplicate it back to the tab to the middle we're going to go to the accounting drop down open up the balance sheet report and then tabbing to the right and accounting drop down and we set up instead of just the normal income statement that comparative income statement if you don't have that set up you can just open the normal income statement the comparative income statement we set up is just comparing the first month January of operations and now we're working on the second month and then taking the difference or change between the two going to the tab to the middle we're going to then hit the drop down on the dates and customize those dates bringing it on up to two thousand twenty three the end of two thousand twenty three and update it okay so let's go back to the income statement and think about what would happen if we wanted to do some different categorizations and if we wanted to do something like clean up some of the accounts on the the general ledger types of accounts so now that we started to do some data input we can see the accounts that we are using and we've been looking at the strategy when we do the first month of data input of first as we do the input and we add accounts we ask is there an account already set up by zero by default when we're adding our items or transactions if there is well typically use that account if there's not an account there then is there one that's named similar that would work and then we can go into the chart of account and just change the name if not then we can add a new account has been our general strategy now after a few months of data input if you go into your chart of accounts and you see that there's still a lot of accounts that you are not using you might decide to make them inactive so that it'll be a little bit easier to search around with the data inputs that's one thing to consider another thing we want to do here is just to look at this interest expense and say what would happen if I wanted to re-categorize the interest expense from an expense down to something like the other income and expenses down below so that it is reported down here we can do that generally we can change that account category and it shouldn't like throw us out of balance or anything it should hopefully take all the transactions that we had an interest expense and just move the whole thing to a new location adjusting the books accordingly and in this case bringing it down to the other income and expenses now note the rationale for doing this on an income statement is the same as we saw here with the gains on sales investment you might want to look at this subtotal for the operating income as something that's normal towards normal operation and I'm not going to get into generally accepted accounting principles on it although these touch on generally accepted you know like accounting principles ideas right so the idea would be I would like to have my operating income here be from normal type of operations and then put down below those kinds of things that are not you know normal kind of operation types of things and that way it might be easier to use that income statement for projections out into the future so for example this item down here gains and losses on sales of investment or if there were unrealized gains on on sales of investments I wouldn't want to put that up top but rather down below because that's not our principal form of income that just happens to be some investments that we put on the books but it's not what we do to generate revenue we just had some extra cash that we want to spend in the future so we part some of it in an investment therefore I don't expect this to be repetitive into the future and that's why we would maybe put it down here so so we can have this subtotal which is something that we expect to be kind of projecting or something that would be repetitive and an easier to project with the interest it's the same kind of thing the interest is only there because we're financing the business if we didn't have to if we didn't have to take out this loan that we had on our books on them on the on the balance sheet in order to buy the equipment and the inventory we wouldn't have any interest here so you might think of it as a normal kind of operation because the interest will be kind of consistent going forward if the loan terms are fairly consistent but you can also think about it as something that that is not really part of your normal operations if somehow you can pay off the financing then you won't have interest expense so you might say hey look I want to pull the interest expense down here so that I can see my reports without the financing charges pure you know performance report without the financing and then maybe have the financing down here so let's use that as an idea and see if we can move this interest expense so let's go to the tab first tab we're going to go into our chart of accounts which is in the accounting drop down and go into the chart of the accounts and we can look for that interest expense now zero has a pretty neat thing where they where they list your assets so you can go here in all of the accounts and scroll down to your interest but you can also go to your expenses tab and now you it's a little bit less scrolling work hopefully to scroll down and find our interest categories so I think that's pretty neat so then we're going to go into the interest here so we can check that out and here's the info so now we're going to see if we can change it from an expense up top to notice it doesn't have an other expense up top here but it does have the other revenue and so what that'll do is it'll make it a contra revenue account and it'll show in that actually it's not an I kind of like to have just one either other revenue or other expenses so I don't have two subcategories down below so let's put it into there let's see what happens here changing the account type will affect your non-published reports with okay so I'm going to go ahead okay that's cool because it should move it up for us and so now we put that into the income side let's go back to the income statement and check it out so if I update this and see k-passo cone the interest so then it put it down here into other income and expenses and so now we have this one category which I kind of like because you can also think of it as if you put it into other expenses then you would have this extra subtotal just for other income and then another subtotal for other expenses but this way what happens is now you've just got this one subtotal it's called it's called other income slash expenses which is kind of nice and it groups both of them in there and the interest expense portion is going to be a negative number and if it's income it's going to be a positive number and you can see how that works from just a logistic standpoint from the software because it's an expense you know and it's and I'm sorry it's listed as an income account so it's kind of like a negative income account so that's why it comes in as a negative number so so now the general idea would be that we've got this net operating income and then the expenses are going to be decreased and then the incomes going to be increased and then you get to your bottom line net income which includes the other income and expense items now so that's the general idea there now if I go back to this first tab just note that after if I go into my expenses is the main category that this is applicable to notice that zero is actually a lot better in some ways I think in not just overwhelming you with too many accounts when you first set up your your chart of accounts and you set up your software they give you kind of what you need whereas some other software namely QuickBooks Online at this point at least gives you a massive amount of accounts no matter what industry you choose and then you have to kind of go in here and delete or or clean up your accounts so notice you have not too many accounts to deal with here but you still might go in and say okay after one or two months of data input are there any of these accounts that I'm not using and then possibly remove them or make them inactive so purchase discount we haven't used that yet I won't delete all of them yet but just to get an idea subcontractors you know we haven't used that at this point in time so again you might take some of these and say I'd like to remove them and there's nothing in it yet so we should be able to delete it at this point otherwise you can archive it either way so if there was already something posted to it then you you would need to archive it because you can't delete the account because you're gonna have something in it already but if you haven't posted anything to it then possibly we could just delete it you have selected one account this account will be removed from the contacts using it as a default account so I'm gonna say okay and boom right so we could go through these some of these like automobile that's the business license dues and subscription equipment rental we haven't used that one but maybe we'll use it meals and entertainment insurance professional fees reimbursement expense so we haven't maybe we don't do reimbursement expenses right we might say maybe I'll get rid of that one wages and salaries so if you don't have payroll then obviously mileage reimbursement maybe we're not doing reimbursement of miles so maybe we say I can remove that let's leave it there because I might test out some mileage stuff later though utilities telephone bad debt so so if you're not dealing with accounts receivable you might not have any bad debt depreciation miscellaneous other expenses so most of these accounts it's not too long of a list which I basically like that they didn't just bombard us with a ton of stuff there so I'm just gonna say but you could still go through here and delete the ones you're not using so that when you go into the data input forms and you go into the accounts you don't get this massive list of accounts most of which are not accounts that you need and you could of course do the same for all the other categories but I find that zeroes pretty pretty nice anything that doesn't have a zero in it you can look at employee advance so maybe you're not giving employees advances I could say up now employees don't get advances vendor vendor deposit then we've got vehicles less so pretty pretty lean on the accounts which I again I've I approve of that so I'll just delete that one and then on the liability side accounts payable gifts federal liabilities pretty pretty good lean and mean equity is another area where on some of my quickbooks online for example they give you a ton of equity accounts that are trying to accommodate every kind of thing that you might do like give yourself personal expenses or if you were a partnership versus a sole proprietorship versus a corporation and this and then draws and and dividends and stuff so that's overwhelming to me I think and so I think that this is nice lean equity accounts and we add to it as we go so it's not bogging us down so that I appreciate and so that's the general idea so we've just reallocated this income account now be careful where where you do that obviously if you're just moving it from like an expense account to somewhere else on the income statement then it's gonna have a similar impact if you're trying to change something from an income statement account to a balance sheet account you know that's gonna have a longer term effect because the balance sheet accounts are permanent accounts and the income statement accounts are temporary or timing accounts so just be aware of that I'm not gonna run the trial balance again because we haven't really done anything different we just moved this number here from this categorization grouping down to this categorization grouping