 Hello and welcome to live tutorial Tuesday in this presentation, we will be going over a problem in which we will be entering the data into the financial statements in the format of an Excel problem and we will be entering that same data into QuickBooks to see the relationship between the Excel data as we do it kind of more by hand and the traditional by hand type of accounting structure when we learn accounting. And then we're going to look at it in QuickBooks in terms of the data input that most people nowadays will do whether you're in a large business or a small business. Idea being to look for those areas where the accounting theory is relevant and how do we use that theory in terms of accounting software that will be the objective here. We've had a few of these prior so if you haven't seen the prior lectures that's okay. We're going to start in part four here I'll tell you what we have done before. We don't need that in a prior information to move forward from this point because we're going to start at this point and it'll be a point that we can start at and move forward from here if you want to go back and look at that process. The idea here is that we're going through the steps of the accounting process in terms of generating the financial statements by hand and looking at that same process in a system, a database and accounting database like QuickBooks to see what the similarities are to the two types of processes. Last time we have been putting in journal entries in terms of both Excel and also putting those journal entries into the QuickBooks and in order to do that we need to, especially on the theory side, understand what debits and credits are, what normal balances are and how to enter journal entries. Then we went to Excel and there were some times or we went to QuickBooks and there were some times when QuickBooks will basically try to make it so we don't need to know as much of that stuff but the idea here is that we want to see those areas where we still need to know some of this stuff and when it's applicable, how it's applicable, how we're going to need to know how the thing gets put together. And that happens in a similar way as basically needing to know something about math even when using a calculator, meaning if we put 20 times 20 into a calculator we would still need to know that if the answer came out to be five, for example, then the data is probably not in there correctly. So that setting up of the data, that entering the data, the setting up of the system, those are areas where we still kind of need to have some good understanding. Once that stuff is set up, then it's possible to set it up in such a way that we have data input individuals that can input data with very little accounting knowledge but really the value now is in understanding how to set the systems up and so that's what we're trying to see as we go through these two processes. So we've got our T account here and we needed to first of course memorize the assets are going to be on the left-hand side of our board of our T account here, the liabilities on the right-hand side, equity in terms of the capital accounts of retained earnings, right-hand side credits, and then on the income statement, revenue as a credit expenses are a debits. We're using a similar cheat sheet as we go through this whole process, that cheat sheet being the trial balance. The trial balance is a great cheat sheet and we're going to have it open as much as possible as we go through here. Then we had the rule that basically said if we want something to go up, we do the same thing to it. If we want something to go down, we do the opposite thing to it. This seems abstract when we look at it at first, but if we go through these rules multiple times, it starts to pull together and it starts to make sense. So repetition is really going to be helpful here. This basically just means that if we have a normal balance debit, then the same thing will make it go up a debit. The opposite will make it go down a credit. If we have a normal balance credit account, the same thing will make it go up another credit. The opposite thing will make it go down a debit. So as we go through the journal entries, we just need to repeat that in every journal entry and that starts to make sense so that we can understand what the language of debits and credits are. So that's going to be the quick side of it. Then we're going to use this Excel worksheet this time. This is what we've been using before. You can see that this one has a few tabs prior. That's what we've been working on in the prior presentations. Again, you don't have to know that from this point forward because this could be a standalone topic or it could be thought of in the context of the bigger picture. And we want to kind of see it in both terms. So in terms of a standalone concept from here forward, the idea is that now we have a trial balance and we want to make that trial balance into the financial statements. So we've got the trial balance. We know it works because the debits equal the credits. We can see the debits equal the credits, meaning the debits minus the credits, how it's represented in this particular trial balance is zero. That means it's in balance. Therefore, we should be able to reformat that in terms of debits and credits for the balance sheet and also tie in the income statement and the statement of equity. It has to work. If the trial balance works, it has to work. What we did last time, just to put it in the bigger context, the bigger picture context, we did the journal entries and we started off a new company. So we're saying it started in May. We did the transactions in terms of journal entries in May. We posted those to the general ledger. The general ledger then created the trial balance. We did that same information in QuickBooks as well, just putting that start in a new QuickBooks file, starting that information, putting that information into QuickBooks. This Excel sheet and QuickBooks is available during the presentations. If you wanted to download that, take a look at it, work through the problems with us. We're going to be at this point in time, so the prior data will be in there. We also have a live worksheet, which is Google Sheets. Google Sheets is another one that if you don't have Excel, Google Sheets does the fundamentals, which is what we need to do. Excel does a lot beyond that in terms of formulas and whatnot. So it has a lot more broader capabilities, but most of people just do adding and subtracting. That's all we're doing here. This whole worksheet, it looks like it's got a lot of numbers and whatnot, and it's got some kind of colors and formatting, but most of that stuff, that's the fundamentals, not complex formulas. It's just if we take it one cell at a time, not that difficult or complex, at least in terms of spreadsheet programs. If you go to Google Sheets, you can download the Google Sheets as well and or work the problem live, and multiple people can actually work through Google Sheets if you wanted to do that. The QuickBooks file is also available, so it's in the link below in the description if you wanted to download the QuickBooks file, which we'll start at this point in time. The QuickBooks file, however, is going to be something that is a backup file, so you would need the QuickBooks program. I don't expect everybody to have the QuickBooks program like they would be able to have Excel or Google Sheets, Google Sheets being free. If you want it, it's there, and it's something that we're going to use basically to go back and forth in order to answer this question like what would happen in real life if I went to the workplace and I'm using a database system such as QuickBooks. How does that relate to what we're doing in terms of theory putting stuff into a spreadsheet? Okay, so that's going to be the resources, so we put that information in, then we took this balance, the trial balance, and we took it to the adjusting process which we kept separate in our minds. Different set of rules, I'll let you go back and look at the adjusting process, process rules, but in an accounting system we could still just put that into the general ledger, but oftentimes we break it out in a separate worksheet so that we can see what the unadjusted trial balance is, what our adjustments are as of the cutoff date, and then have our adjusted trial balance. And this is also one similar closer to the type of thing that would be done in public accounting, meaning we're kind of testing the balances or making them correct on an accrual basis as of the end of the time period. Not necessarily because there were errors in terms of the normal accounting process, not in terms of kind of auditing, but in terms of the normal accounting process we set it up so that we know that we're going to make these adjustments at the end. So then we have this adjusted trial balance, this is just basically a trial balance, we have these different names for it, the unadjusted just means we haven't done the ending adjustments yet. And these are the adjusted trial balance, it's just the same as just the trial balance, but now we've done those ending adjustments. Assuming at this point we've done everything we need to do to the trial balance, meaning the accounting department put their data in, and the data's been put in there, and then we did the adjusting process at the end of the time period. We've reconciled the bank account, and we're ready to take these numbers and make the product that we make, and that of course is the financial statements. And that's where we're at now, so you could think of it as standalone at this point, we've got this is the format of our data, kind of like a puzzle piece, we're going to take that data, we're going to reorganize it in terms of financial statements. So we're going to go to this tab, I'm on the third tab now, and we're just going to take this data, which is ordered in terms of debits and credit, reorder it for financial statements in terms of plus and minus financial statements. Now, as accountants, if we know debits and credits, we can kind of get all the data we want from or at least a lot of the data from just a trial balance. It's kind of a cleaner way to look at the data in some ways, because it's kind of looking at the building blocks. For example, if I wanted to know what the assets were, I can just highlight the green accounts. Excel sums them up to 4660, right, the liabilities sums up to 4376. The net income is the credit here minus the debits, that's going to be the 3684, which is going to be added up. If I want to know what total equity is, that's two ways I can do it. We can add up all the blue accounts, equity down 41684, that's what is basically owed to the owner of the net value, the net value of the company, or its assets, debits, minus liabilities, credits of the 41684, which matches of course all the blue accounts, 41684. Notice that the trial balance is kind of a simple, really compact way to have all the data, that's the point. We're going to blow it out into a more complex way of having the data, but a way that more people can read, that way not dealing with debits and credits, that way being the financial statements, the balance sheet, the income statement, the statement of equity. That's what we're going to do. Now when we look at QuickBooks, QuickBooks does that. So when we enter the data, QuickBooks is already just going to crank out these reports, that's what QuickBooks does, that's the great thing about QuickBooks. What we want to do, just like what we want to do with a calculator, is basically know how to enter the data, how is the data being processed, how is the data going from the input to the end result, so that if I look at this end result and something funny, something doesn't look right, we can go back and test the data. We can set up the system so that the data will be produced correctly. We can set up the system so we can categorize our accounts and know how these accounts should be set up. So we can see our trial balance, if I was to generate a trial balance. All we've done here is enter the same data into QuickBooks, and QuickBooks just generates the trial balance, here it is. And QuickBooks is just a jigsaw puzzle. So QuickBooks can just take these and reformat to any programmed reformat in that has been programmed to QuickBooks. And QuickBooks will of course have the balance sheet and the income statement as things that they are programmed to reformat. So the balance sheet here could be a couple different formats. We could have a general format, or we can have a summarized format with less detail. But we'll go over that in a bit. But the point is that the assets equal the liabilities plus the equity here. And we're going to see how that is done from the data based on the Excel sheet that we have been putting together. Alright, so that's what we are going to do. I'm going to take a quick break, make sure everything's working as it should. So here's the first comic, and I will be right back.