 QuickBooks Online 2023, trial balance. Get ready to start moving on up with QuickBooks Online 2023. We're gonna be using the free QuickBooks Online test drives searching in our online search engine for QuickBooks Online test drives, selecting the option that has Intuit.com and the URL Intuit being the owner of QuickBooks, picking the United States version of the software, verify that we're not a robot. 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. Zooming in a bit by holding down control up on the scroll wheel. We're currently at one to 5% on the zoom and noting that in the cog dropdown we're currently in the accounted view as opposed to the business view. We'll try to toggle back and forth between the two views so you can see where stuff's located in each of them. Right-click in the tab up top to duplicate it as we do every time. Right-click in the duplicate a tab to double duplicate. Then we're gonna go back to the tab to the middle, open up the reports on the left and then open up the balance sheet as that's thinking tab to the right, reports on the left. This time opening the profit and loss, the P&L, the income statement, closing up the hamburger, the hamburger up top, changing that range in from 01, 01, 22 tab, 12, 31, 22 tab and run it. And then we'll go back to the tab to the middle, close up the hamburger, scroll up and change the range from 01, 01, 22 to 12, 31, 22 and run it. That's the setup process that we do every time. These being the major two financial statement reports. Now we're gonna open up a trial balance which is a great report to kind of summarize this data. Let's take a look at it now. Tab to the right, right-clicking on it. We're gonna duplicate the tab again to open up another report which will be the trial balance on reports on the left. Let's close up the hamburger up top. I often when I go into the trial balance just search for it like this up top or I'll save the trial balance as one of my favorite reports. But the trial balance is located down here just so we know where it is at in the accounting area. I believe it's under the for my accountant area because it has debits and credits in it. So that's gonna be the general idea for it. So let's open it up. Even if you're not familiar with debits and credits I think the trial balance can be a really good report and we will be using it in the second half or future course when we start a practice problem from scratch and start to build it because the trial balance is thought to be kind of that building component or stepping stone before we get to the actual construction of the financial statements. Let's think about that in more depth in a sec. Let's go from 010122 to 123122 and run it. So the trial balance, you can think about in essence as being the balance sheet on top of the income statement while taking out all kind of subtotals within the trial balance. Therefore, you have a much more streamlined report. In essence, you have the balance sheet over here. That's assets, liabilities and equity. You have your accounting equation. It ends in the equity section, retained earnings being the bottom account. And then you've got the net income which is really part of retained earnings. That's basically the income statement. And then you have the income statement which is the income and cost of goods, sold expenses and so on. In the trial balance you could just, if you could just see where the cutoffs are then you can use the trial balance even if you don't understand the debits and credits to be kind of that report that you use to verify transactions. So I could see balance sheet accounts. Here's the assets. And then when it goes over to a credit that's the first liability which is accounts payable in this case. And then you go down to the equity section which is going to be landing here. Here's the accounts payable and the opening balance. So there's the equity section for the opening balance. And then you've got the income statement accounts and you've got all these income statement accounts because it's a landscaping business, cost of goods sold and then the expense accounts. So the reason that's useful is that because when we do the data input up top and we select the plus button, for example all these transactions are being used to do actual journal entries. We've talked about every time we enter a transaction we kind of want to verify or think about what it's doing to the financial statements, balance sheet and income statement. So we went to these transactions and then went to the balance sheet and income statement to drill back down. Now, if you understand the trial balance you can just have this report open instead of the balance sheet and income statement. And as you enter checks for example you can go into this account and drill down from the trial balance which can be a little bit more streamlined. If the other side was some kind of expense the expense is on the same report down at the bottom in the expense area just without the subtotals and you could still use that to drill down. And so that's a nice quick way that you can kind of verify the activity. So I'm gonna go back again. Now just a quick review on how we would think this, these items to be constructed if you were to do them by hand like what's the software kind of doing here. Note that and this will help when we build and try to make adjustments to our system. If I go to the first tab and we go into the accounting down below the first thing we do is to set up I'm gonna see see the chart of accounts is to set up the chart of accounts which you can also see is usually an order by type. And would we say by type not alphabetical order by type but balance sheet on top of the income statement same orders in essence to trial balance as well. So we set up our chart of accounts then we do the data input. The data input is usually done with these forms. These forms are what create the journal entries from a bookkeeping standpoint from a double entry accounting standpoint. These create the journal entries and then the next step is usually we think about the creation of a trial balance. So here's the trial balance that's been created from in essence to journal entries. Now oftentimes we kind of skip this step and we go straight to the financial forms that are being generated. But just so you can see how this fits in the normal construction process what's the software actually doing? You can kind of think of it as well first we've got our accounts then we enter the transactions to create a trial balance. If you were to do this by hand this would often be the easiest way to do it. And then from the trial balance we take these accounts and break them out adding those subtotals and transferring them from a debit and credit format which is actually a little bit more efficient of a format to think about it to a plus and minus format in the format of a balance sheet and an income statement. So now we've got no more debits and credits we have it in the form of a double entry accounting system with an accounting equation. So there's that. Now also there's another little thing that you kind of have to understand with the trial balance is that it could be if you're running the trial balance for a whole year or a year to date it works quite well but you'll note the relationship between the balance sheet and the income statement that we talked about before. If I go back to the balance sheet you can see down here you've got the net income right here which is the income statement bottom line in the trial balance that rolls into the retained earnings. So if I was to change the date up one date here and go to 2023 to 12, 3123 and run it now you've got that retained earnings moved up or that amount moved up into the retained earnings. So QuickBooks does that's the closing process. So it closed out the income statement into retained earnings automatically and it does that quite well when you're talking about year to year type of stuff but it doesn't do it quite as well when you're like in the middle of the month. So for example, if I ran this report from 1201, 222 to 1231, 222 then I scroll down the amount that they're putting in net income is for the whole year, right? They didn't break out like one month of net income and then break out the other months in retained earnings. So now when you transfer that concept over to the trial balance the trial balance has the balance sheet on top of the income statement. Well, how is that possible? Because on the equity side down here when you go down to the equity which starts right here opening balance. So it has the opening balance equity and then it has all of the income statement accounts down below instead of just and so it's got all the income statement accounts instead of just putting that net income down there. So you have that same kind of closing entry problem and that works quite well the way they close it out if you're running a year to date report but it gets a little messy if you're trying to run it for like one month. So if I was to try to go from 1201, 222 to 1231, 222 for one month of December and I scroll down you can see the income statement didn't really close out here and showing an income statement for one month because the way the closing entry is set up is to do it on a yearly basis. So you still have the income like for a full year. So that basically means that if you're processing if you're running your trial balance as most of the time you do from a year to date standpoint or for an entire year, it works quite well if you're trying to use like one month within the year it's not gonna adjust your income statement accounts properly all the time given the fact that it's designed to close everything out on a yearly basis. So I can be a little bit confusing from time to time but once you understand that then the trial balance can be quite useful. You can also see this issue notice up here we have it doesn't have all the options for the comparative reports that you saw on the balance sheet on the balance sheet and income statement you've got all these other kind of comparative options within here and you've got these options over here. Now interestingly, the trial balance does have this month by month comparison. So let's check that one out just so we can see this issue in a little bit more detail. So I'm gonna change the date just for the last two months I'm gonna go from 11 0122 to 12 3122 and then I'm gonna change this from the totals to the months and then I'm gonna run it. Now you can also see that up top there they're saying it's as of a point in time. So they're saying it's more like a balance sheet report than an income statement report because it's as of a point in time. That's a little bit deceiving when you talk about a trial balance because the balance sheet accounts are as of a point in time but the income statement accounts are still reporting a timing kind of a timing type of thing it's reporting what has happened over time. So the balance sheet isn't really the problem here because that works fine as of a point in time it really gets down to the income statement where you're like, okay, well, what did they do with the income statement down here? And so we still have the retent nothing's in retained earnings. So what we have here, I believe is a income to date. So it's recording the year's income up until this point in time and this isn't just recording one month's worth of income this is recording income year to date up until this point in time. So that's how it kind of works. The trial balance is good recording if you're looking at data up until a point in time but it's not, it won't work the way you might think if you're trying to run just like December the month of December alone and you're looking for the income statement accounts to just record that one month's worth of data because it can't rule everything into the retained earnings automatically because it's set to do so at the end of the year. So you can see down here that it does tie out for each of these because it's basically reporting each of them the income statement items income up through November not just November's worth of income and expenses expenses and income up through December not just December's. So if I go into like the detail on this one, for example and let's go into this one and I go into that income account it's recording the activity there just shows the December activity or November activity if I go back on over and I go into this one it's just showing the activity in December but it does give us the beginning balance. So it's starting with the beginning balance and then give us the activity for the month of December. Okay, so anyways, that's the trial balance we will be working with the trial balance in the future let's go back to the first tab and just note where we've been in terms of the business view. So cog dropdown, business view we've been looking at the reports obviously so in the get things done place, the home people you got to get things done at home and then we're gonna go to the reports that's where we've been and then we also went down here to the chart of accounts and that's under the bookkeeping I believe chart of accounts and then under the bookkeeping under manage there's the chart of accounts.