 Zero Accounting Software 2023. Adjust opening balances. Get ready to become an Accounting Hero with Zero 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 our Custom Zero homepage, 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 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 115896 minus the liabilities, which is 38,000 here 38,000 gives us the the 77896 total book value. So when we think about the value of the company, the equity is kind of like the value of the company. So the other way you can think of it and the reason we have it set up in the accounting equation as 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 38,000 in this case, or it's the owner who who has the 77896. If you closed up the company in theory, then you should be able to get sell everything and get 115896 of cash, pay off the liability 38,000 and have 77896 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 that 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'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 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 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 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 last quarter, let's say if I do something in 2023, then you can 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 going to assume we're a sole proprietor, then it might be more proper to call this like the capital account that 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 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 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 will 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 and zero, which is unique as far as I know. I haven't seen any other accounting software that has that nice little breakout. And so we can go in and just see our equity accounts. And then I want so they have an owner's draws here. So that's good. We don't really need this capital account because I would rather have this retained earnings be called capital. So I'm just going to call it owner capital account or something like that. That's just a preference. Again, you could keep it retained earnings, but that's what I would put it down as. And then this one, I'm going to, I'm going to not use it. This is owner's capital. This is I'll call this beginning, beginning equity. This will be my equity. This will be my equity account that I used just for my beginning balances. So now I've got that amount in there. What I'd like to do is just roll that into the owner's capital account. So in other words, if I go over here and I update this, all I'm going to do is take it out of, out of this account, 5757396 and put it into the capital account. Now, sometimes they try to limit you from making a transaction into the capital account. So you got it. So because this is the account that we roll into the income statement rolls into it. So they sometimes put limitations on what you can do to the capital account. So let's check it out. So I'm going to try to do a journal entry to it and we'll say, okay, let's go to our reports. And let's go to our journal report, the journal report por favor. That's what we need. And then I'll make an ad new journal. And let's just check out down here before we started to they allow us to post to that equity account. So the owner's capital accounts. Yes, it looks like it. So we'll say this is going to be beginning balance as of December again. So the end of last year, December 22. And we'll say, okay, this is going to be the capital account. So I called it owner's capital. And that's going to be a credit, right? It's going to be, let me check it out. It's going to be a credit because it's going to go up over here to that one of 57396. If you get it backwards, then you can go back in and say, okay, I went the wrong way with it. And then the other side is going to go to the beginning equity, which is 57. So now we'll just put it all into one equity account. So we'll just say, all right, let's check it out, save it, and see if it does what we would like. So let's go back to the balance sheet and update it to refresh it. I like some up to date reports. We don't want some old stuff in our reporting. So there's the 77896. So if I go into that, then we could see our journal entry that we posted to it. And I'll change the beginning date range to see that. So here's our journal entry. If I go into that journal entry, it'll take us back to our form. If we needed to edit it, by the way, we can hit the dropdown and edit it if we had the journal entry go in the wrong way or something like that. So I'm going to go back on over back to the balance sheet. Okay, so let's take one more check down here. Notice that everything's in the owner's capital, which was the retained earning before. If I go back to 2022 now, and I say, I want to look at end of last year, and I update this. Now it's got the two items down here, the current year earnings, which is the net income, which it puts into its own account. It's going to track that as revenue happens and expenses net income on the income statement. And then it'll roll it into at the end of close of each year to the capital account, which was the retained earnings account. So in other words, it won't look quite right until we do the closeout process, which will happen in the current year. So if I then go into last month, let's say 2023, now we've got that one account that it's closing out to. So most a lot of accounting software does this where it tries to give you that linking indication between the income statement and the balance sheet by putting the current period net income into its own line item. That can actually be a little bit annoying sometimes when you're trying to break out that capital account, say to different partnership accounts in accordance with a partnership agreement or something like that. But at the other hand, it does give you that nice indication and link between the income statement and the balance sheet. So if we track this stuff now, we've achieved our goal. I think let's just double check and see if the goal has been achieved. So we've got all of our beginning balances here, which should tie out. So we've got the checking account, the checking account, the accounts receivable accounts receivable, the inventory inventory, the 7,500 accumulated depreciation, 75,000 here looks good. And then we've got the 15, 15, the one, the one, the 22, the 22, and we spelled it properly. And then we've got the owner's equity, which I called owner's capital. Okay, let's keep it at that. And the other report that you could look at over here, I'm going to go to the profit and loss and try to open a trial balance report. So you could go to the reports and see it in a trial balance format, which is often nice. So we can go to the good trial balance. And if I look at it this way, as of the end of 2022, we've got the same kind of format. So this is quite nice, a nice format to be able to do because it's a lot shorter. And you only need one report to look at it, but you don't have those subtotals. And note the balance sheet and the income statement are on top of each other. So right here, you can see the owner's capital account has the 57, 396 and then the 20,005 in 2022. If I move up a day, then this is going to move into here. So and we won't have any income statement accounts on the trial balance. So if I move this up to this year, we have the same top half. But now, hold on a second, the service item is still there. Oh no, hold on. I see what it's doing a comparison. So this is as the end of 2022. So everything's the same, but then it put in the capital account is here as opposed to there's no income statement accounts for the year to date column. And this is the last year, which it basically put instead of having debits and credits, it kind of put the credits as a negative number. All right, so we're all set up pretty much for going forward now. Now that we have our beginning balances, we can add new data for the current year that we're working in that being 2023.