 QuickBooks Desktop 2023. Add new accounts and opening balances. Let's do it! Within two weeks, QuickBooks Desktop 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 QuickBooks Desktop. Get great guitars, practice file. We started up in a prior presentation going through the setup process. We do every time maximize in the home page to the gray area. Noting in the view drop down the hide icon bar and open windows lists checked off. Open windows open on the left hand side. Opening up the reports and the reports drop down company and financial. Let's look at the profit and loss, the P and the L range into the change in 010122 to 123122 January through December 2022. That is, let's customize the report with the fonts and the numbers. I'm going to bring the size of the font on up to 12. Okay. Yes, and okay. Let's open up the balance sheet to with the reports drop down company and financial. These are the major two financial statement reports, of course, and then we're going to do the changing of the range in here in the customization to 123122. I'm also going to go to the fonts and the numbers while I'm here changing it to 12. Okay. Yes, please. And okay. Let's also open the trial balance, which in essence is the balance sheet on top of the income statement without all the subtotals by going to the reports drop down accounting and taxes and then the trial balance. This is a useful report even if you're not totally familiar with debts and credits because you could just look at those ending balances change in the range in 010122 to 123122. And let's customize it as well with the fonts and the numbers change in the fonts and the numbers to 12. Okay. Yes. Okay. There we have it. That's our starting point. Now we've been adding the beginning balances from our prior system imagining that we started our new QuickBooks file. We had prior accounting system in the past. Instead of uploading all the data from the prior system, we're just taking the ending balances as of the last cutoff date from the prior system and putting them into the current system. We've been looking first at those accounts which are more complex because they have sub accounts needs. The accounts receivable as we saw needs to be supported by the customers that owe us the money. The inventory needs to be supported if we're tracking inventory in QuickBooks on a perpetual system by the items. The accounts payable needs to be supported by the vendors that we owe the money to in that case. Now we're going to go to the rest of the accounts, much of them being a little bit easier. So we've got the checking account. We're going to have to add the furniture and fixture and the accumulated depreciation and the visa, the loan that we'll have to add. And then the equity account will kind of fall out because everything else will be going to equity as we add the beginning balances for all other line items on our balance sheet. And then we'll just adjust the equity account. Okay, so we'll try to touch on some of the issues which each of these line items, they still have some issues. And so for example, the checking account, we've got 25,000 in the checking account. Now I'm just going to add that as one line item into our system, but realize that if we were doing bank reconciliation and there were outstanding checks and deposits, it's possible that that 25,000 doesn't match what's on the bank statement as of 1231 2 2 due to outstanding checks and deposits. That's often a problem when people start a new new accounting system. And we'll get into that when we do the bank reconciliation. So for now, I'm just going to enter that one balance. And I'm going to recognize that I might have to make some adjustments and we will make adjustments for outstanding checks and deposits to do a proper bank reconciliation and understand that process, the bank reconciliation being a reconciliation of our books to the banks books of vital internal control. We'll talk more about that later. Just keep that just be aware of that. Alright, so if I go back to the homepage, we could enter that in as a deposit. That's the form that would typically be used. But usually I only use this deposit form if I'm entering a receive payment or create sales receipt that went through undeposited funds, which we'll see in the future. If not, I usually go to the register, which I could go to here, or I usually get there by going to the banking drop down and use register. Now we've got the checking account set up. That's our main account. So we had to add the checking account. So remember in the past, the other way we can get there, by the way, lists chart of accounts, we added that checking account in the past by going to the account drop down or rise up new account. We added a bank type of account and just called it the checking account. Now let's go ahead and if I double click on this account, it will take me to the register. And so I'm going to enter this in a register style fashion here as of 1231 222. And I'm going to say this is going to be a deposit of what did we say 25,000? I believe it was was our beginning balance. And the other side, I'm just going to put the opening balance equity, opening balance equity. And you might just call it beginning balance for the memo that should do it. And that'll create a deposit. So let's go okay. And then close this out. I'll close this out. If I go back to my trial balance, there's the checking account with 25,000 in it. The other side went into opening balance equity. See how easy it is to see on the trial balance. We can also see that on the balance sheet, of course, we've got the checking account double clicking on it. It actually entered it with a transfer form. You would think it would have used a deposit form. So that's kind of a little weird, but that's okay. Transfer form 25,000. So that looks good. So I'm going to say, Okay, close that out and close that out. The other side went into opening balance equity right here. So there's the 25,000 right there. This particular transaction had no impact on the income statement, just the two balance sheet forms. Okay, so let's go back to the homepage. Remembering again, we will have to deal with any outstanding checks with the bank reconciliation receivables we already had inventory we already did. And then we've got these two which are kind of related, meaning you've got possibly property, plant and equipment, which you might call depreciable assets, fixed assets or different terms for the same thing. And usually we would think of it as the furniture and equipment first, because that's the actual thing that we purchased. And then what has depreciated or what we have already depreciated being the accumulated depreciation. Notice the reason that these are reversed or backwards upside down, or meaning the accounts, the accumulated depreciation is before the furniture and equipment is because we don't have account numbers set up and these two are in the same category as before f. That's one of the problems with with not having account numbers. We could adjust for that multiple ways. We could try to use sub accounts to adjust for that, for example, and fix that without account numbers, but just kind of be aware of that. Also note with the furniture and equipment that we're going to have to calculate depreciation and any kind of fixed asset or depreciable assets, we have to deal with that problem. Even if you're on a cash basis, you might say, Hey, look, I'm only going to record expenses when I actually pay the cash. I'm on a cash basis. That's the easiest thing to do. However, if you go to taxes, the taxes will force you to deviate from a cash basis, even if you're on a tax basis for purchases of large items, like furniture, equipment, buildings and whatnot, because the distortion is so great from an accrual to a cash basis, meaning when you buy a building, for example, you're going to use that for a long period into the future. So the timing difference of just expensing it in this period is so great that we still have to basically use an accrual concept, even when you're generally using a cash basis. So we have to basically deal with this. Now, the other problem is that how are we going to do our depreciation calculation? We have different methods to do that. We have courses on it. If you want to look at it in more detail, straight line method, double declining method, some units method, but we also have the tax code method that we're going to have to deal with, because when we do the tax return, the taxes are going to calculate the depreciation on whatever the tax code says. So the fact that we already have to use tax depreciation means that we might want to use the tax software. This is quite common, especially for small to midsize companies to rely on their tax software on their CPA firm, if they have one, or the tax software, if they don't, if they're doing their own taxes, to actually run the depreciation schedules, calculating depreciation on a tax basis, which you might keep your books on a tax basis as well to keep it easy. Or you can use the tax software to also calculate a book basis. So you might be having a tax basis depreciation schedule as well as a book basis on like a straight line method or something like that for the book basis. But the sub ledger instead of being within QuickBooks, because it would be too redundant to keep it in QuickBooks often is done with the third party software, the tax software, and then you can run reports to do the periodic adjustments in the QuickBooks system, like monthly or yearly. So we'll talk more about how to do that in the adjusting entries process, but just realize we're not going to have a sub ledger calculating the depreciation schedules, you could track the different categories of depreciation, but we're just going to add the amounts here. Okay, so we're going to go Okay, let's go back on over and say that we're going to say that if I go into my let's go into my lists again, the chart of accounts, and we've got the furniture and equipment right there. If we didn't have it, or there's some other one that we wanted to add, we can write, we can add a new account. If we chose to do that, which would be the account type would be a fixed asset type of account, which is right here fixed asset type of account. I'm going to close that though, because we already have one. If you wanted to edit or change this account, you can right click on it and edit the account. So here we have the editing of the account. And what we would like to do is enter an opening balance for it. So I'm going to click on the opening balance. And we're going to say that this one was for I believe it was 75,000 75,000 as of, we're going to say the end of 2022, because we're starting our books in January 2023. So this is the last date of the prior year. What will QuickBooks do when I enter this? What form will it use to enter the transaction? Probably a journal entry, because there is no standard form for the purchase of of equipment, because we don't do it all the time. So so it's probably not going to use, you would think maybe it would use a check form, but probably not because sometimes we finance the purchase of equipment. So it's probably just going to be a journal entry instead of an invoice or bill or something like that. Okay, so we're going to say, okay, save it. So there's the 75,000 here. Also note that you could support that with the list drop down in the fixed asset item list. This is kind of like a place where you can track your sub ledger account. But it's a little again, a little bit redundant to do it here, because you would be tracking it, you would think in the tax software and notice equipment is something that you don't really purchase all the time. It's not a day by day purchase. So we would expect the transactions of large pieces of equipment to be somewhat periodic or rare, not a daily occurrence. So we can we can and same with the disposal. So all we have to do in the current year or current period is track the equipment that we increased or decrease and give that to our tax software so that they can record the date of purchase and so on at that point in time and then give us the calculations for the periodic adjustments for depreciation. And so that's the method that we're going to imagine we are using here. So there's the 75,000. If I go to the balance sheet and check out what happens, there's the 75,000 double clicking on it. It made a journal entry as expected. That's the format used. If I double click on it, it goes to a ledger. But if I double click on that, it goes to the journal entry. So there's the journal entry that has been put in place and closing this back out, closing this back out the other side, I believe it put to opening balance equity. And so there's the journal entry there. No impact on the income statement. If you look at it in the form of a trial balance, here it is in trial balance form nice and nice and tidy to see. Okay, let's go back on over again and say now we've got the accumulated depreciation related to it. So there's kind of a whole lot of things we can think about with the format of this accumulated depreciation. We might get into later. But notice that you could have like an accumulated depreciation that would be for each different category of property plant and equipment account. So for example, I might have buildings, I might have equipment, I might have furniture that are separate, right? And then I might have an accumulated depreciation as a sub account to each one of those accounts. That's one way that you can enter the data into the system. Or it might be easier to say I'm just going to put my furniture and equipment in the multiple accounts and then just have one accumulated depreciation account for all categories of the fixed asset. That's another method that you can use. We'll talk about those methods more when we get into future presentations and when we do the adjusting entries. But I just want to kind of touch on them now. The best practices oftentimes if you're depending on a tax software to calculate and support your sub ledgers would be to ask your CPA or your tax preparer or look yourself at the categories in the tax software to see how the tax software categorizes. And it's usually going to be equipment and then furniture broken out and then building. And so and then make your fixed asset accounts the same categorization as what will be on the software because that's how the sub ledger will be calculated. And then I typically would create another accumulated depreciation account for each of those categories as possibly a sub account, which we'll talk about later. And because the accumulated depreciation will be calculated by category oftentimes. So that's my recommendation for it. If you're thinking about how to set up your fixed assets, you want to kind of tie it out to the sub ledger, which might be done by the tax software, which is might be outside of the quick book system. So you want to get in in communication with them. But we're just going to tie it out to what is on our trial balance for now and get into that in more detail later. So I could go to the to the ledger and enter this, but instead I'm going to right click and edit the account. Now the funny thing about the accumulated depreciation, it's still a fixed asset type of account. But it's it's a contra asset, meaning it actually brings the assets down, it's a credit, it brings the assets down. So QuickBooks is often trying to make us enter things as plus and minus amounts. So the question here is, do I enter this as a positive or a negative number? Because because of that, right? So I think it's a negative. So seven negative seven thousand five hundred. If that was wrong, I can always go back into the into the register and change it. It will most likely default to a journal entry form to enter this transaction in a journal entry form, which is the reason we use debits and credits, it's more clear because it's a credit. There's no question. But here it's like it's okay, it's an increase to the to the accumulated depreciation, or is it a decrease because it's an asset account and it's a negative asset account, right? So okay, so I'm going to bring this to the end 1231 22. Okay. Save it and close it. And let's go to the balance sheet and see what it did. So now we've got the accumulated depreciation. So there it is. It did it correctly because we can see it took the difference. It should be decreasing the asset. So we put it on the books for 75,000. And we've depreciated already 7,500. Therefore, the book value is 67,500. If I double click on the accumulated depreciation, it did this with a journal entry type form, double clicking on it, there's the register double clicking on this. Here's the debits and credits for the actual journal entry. Close it out, close it out, close it out. The other side went to the opening balance equity. So there it is. No income statement impact profit and loss. In other words, trial balance here it is on the trial balance. Look how nice and easy it is to see there. Okay, I think we got one more that we can add which is the visa. And then we'll check that the equity account. Well, no, we got two more visa and the loan. And then we'll check that the equity accounts have played out as we would expect. Now the visa account is like the checking account in some ways, even though it's a liability because you could set up bank feeds with a credit card account. And because you might want to do what you should do like a reconciliation process with the the credit card accounts, although that usually is much easier because oftentimes people enter transactions that they make with a visa card with electronic transfers and possibly with the use of the bank feed. So they're kind of tracking it real time. So we're going to we're going to add that and say, Okay, let's go to the chart of accounts again. And let's see if we have any credit card accounts that they gave us. So it would be a liability assets, liabilities, I don't see any credit card type of account. So I'm going to make a new one. So I'm going to say accounts drop down rise up. And then we're going to go to new. And this is going to be a credit card account. And we'll say continue. And this I'm just going to call it visa visa account, I might call it credit card visa. Now, as you add these accounts, remember, you could try to organize these multiple ways. For example, I might call it a visa account, I might make a parent account. If I have multiple credit cards, and then make the visa and whatever other credit cards subsidiary accounts to it, so that I have a sub account, we'll talk about those kind of subsidiary accounts later. Right now, I'm just matching it out to the trial balance. I'm just going to add one account, I'm just going to call it visa, because that's what we called it in our trial balance, and then add the beginning balance, which was $1,000. And the statement date, which is the end of December 1231 22, it'll probably enter this with a journal entry form or possibly a credit card payment form. Let's see. So it'll be a credit card payment form, I'm guessing that QuickBooks will use. So let's check it out. It says, Do you want to set up bank feeds on paraphrasing? No, we're not going to do that yet. We've got a whole nother course or section on bank feeds, if you want to look at that, we first want to understand the accounting process. There it is visa on the trial balance. If I double click on it, it made a credit card charge, of course. So if I double click on it, there's the credit card charge, the other side went to opening balance equity, right, it went to an opening. So it still went to opening balance equity instead of to the income statement. So that's good. So if I go to opening balance equity, there's the 1000 there, I can see that as well on the balance sheet, where I've got a liability of the credit card, there's the credit card visa, other side is an opening balance equity, we've got one more, that's going to be the loan. Well, imagine this is an installment loan, for example, that we're making installment payments on it, we would tie it out or the sub ledger related to it would typically be outside of this, it would be the amortization schedule that we would be tying to when we make payments. So this is a pretty straightforward one to enter into the system. So I'm going to go back on over to the trial balance and go to the chart of accounts and see if we have any loans we can add. So this would be a liability type of account. So if I look by type, did they give me a loan account? I don't have any liability account. Now the problem with loans is that sometimes we got to think, well, is it a short term or long term liability? If I go to the balance sheet, notice the short term liabilities are those that are going to be doing a year, long term liabilities are going to be those that are due in over a year. It's important to break those two things out, because you want to see if you can pay off your short term liabilities with the cash you have on hand, and your current assets. So we're matching up our current assets and the current liabilities. The problem with a loan, especially a long term installment loan, is that there is a short term component to it and long term component, meaning you're going to be paying 12 months out is short term. Everything you're paying beyond that is going to be the long term component. So how do you deal with that when you do the data input into the accounting system? Normally, it's easiest to just have one account per loan, because you can tie that account then out to the amortization table as you make your payments. But then we might break out the short term and long term portion periodically at the end of the month or the end of the year using adjusting entries. So that's the method that I would basically recommend. So and then the question is, well, should I put my one account on a short term loan or the long term loan? I'm typically going to make it a short term loan because we're going to be making the payments out of the current, the current asset account, and then I'll break out the long term portion at the end of each period using adjusting entries, which we'll talk about later. But that's the general idea with the loans. If I go into my chart of accounts, I'm going to make another short term loan account, even though I think there's a long term component to this loan, because one, I'm just mirroring what's on the trial balance. And two, that's my thought process in terms of how I'm going to be dealing with the short term and long term portion, I'll break out the long term periodically using adjusting entries. Okay, so it's going to be a loan account, we're going to say continue. And I'm just going to call it generic loan account loan payable, because that's what it was on the trial balance. But there's a couple of methods you might enter the loans in practice. Remember, you might have like multiple loans, depending on the business you're in. So you might set up a parent account called loan payable, possibly short term and a long term loan payable. But and then you're going to have the actual loans underneath it, where you might indicate which loan it is by having the last four digits of the loan number, so that you can tie out which loan ties to what and you can tie each of the loan balances out to the amortization table. And you can then minimize if there's sub accounts of a loan account, so that you can have external reporting with one loan account number. That's what that would be the general gist of it, we'll talk more about that when we get to the adjusting entries. But here, we're just going to add the opening balance, which we said was 22,000. As of 1231 22 boom. And what's it what's QuickBooks going to do? What's the form it's going to use? Probably a journal entry, because because there aren't any normal forms for us taking out a loan. It might use it like a deposit form, not but no, usually it's going to be a journal entry form. So we'll say okay, close. Let's check it out. Let's check it out in the balance sheet. We got the loan payable down here. And loan payable 22,000 double clicking on it, it entered it in the system with a journal entry, double clicking on it. There's the register double clicking on the journal entry. There's the debits and credits the other side they put to opening balance equity, close it out, close it out, close it out, opening balance equity down here. There's the 22,000 closing this out. That looks good. And so that looks good. This is what we have thus far. There's no impact on the income statement from that particular transaction. So we've got the two main things on the income statement, I believe only the entering of the receivables and the payables which resulted in invoices and bills are impacting the income statement, but that's for the prior period. Let's look at the trial balance now. And let's see if we can do kind of a comparison between our trial balance that we're comparing to, and the QuickBooks trial balance here. So if I say let's see if I can bring this down a bit, bring this over here. Let's close this and we'll bring this over here. So I can see a side by side. So we'll go back on over and say trial balance. Boom. And so now we can do our side by side comparison comparison. So we got the checking account 25,000 accounts receivable 20,000 five inventory assets 289675 for the accumulated depreciation 75,000 for the furniture and equipment 15,000 for the accounts payable visa on the 1000 loan payable 22,000. And then we have this mess for the owner's equity. But if I pull up the trustee calculator calculator to do some trustee calculation, we've got then we're just going to add together these balances 72396 plus 25 minus the 15,000. That gives us the 77896. It has to tie out in total equity to what we have here, because of the double entry accounting system, everything else is correct and in balance. Therefore, equity washes out and is correct. But it's broken out between these three categories. Now these three categories are opening balance equity, which is a made up account. So we're going to get rid of that. We're going to make a journal and should to take it out of opening balance equity. Then we've got the uncategorized income and expenses, which are income statement accounts, which I'm not worried about, because they're going to roll into the equity account in the next year, the first year that we're going to be doing business on meaning if I take this from 010123 to 123123, the income statement washes out. And now we've just got this amount in equity, and we just got to remove the opening balance equity. Let's look at it in the format of a balance sheet. I'm going to say show me the open windows again, balance sheet. So down here, total equity is correct, right? Total equity ties out to here. So that looks good. And then we're just going to need to break out. And if I bring this up one day to 1123, now it's an owner's equity. Now, remember that the next step would be to do whatever you need to do to the equity section to make it correct. And that would be if it's a sole proprietorship, we'll just take the money out of or the amount out of opening balance equity and put it into the one equity account for one owner. If there was multiple owners in a partnership, then in our beginning balances, we would have multiple partner accounts, most likely, and we would have to break out each capital account for the partnership accounts in accordance with their whatever the balances are there. And then if it was a corporation, we can break it out into retained earnings and possibly a common stock account, because the retained earnings would still be pretty straightforward and easy, usually for a corporation, because the corporate interests are not broken out by individual capital accounts per partner, but rather by the fact that they own different amounts of shares, the shares being equal units in the corporation. So that's what we'll do next time. We'll just do a journal entry, closing out the opening balance to the equity account, and then we should have our opening balances in place.