 QuickBooks Desktop 2023, reversing entry related to accounts receivable or sales revenue or income. Let's do it within 2-its, 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. We are in QuickBooks Desktop, get great guitar practice file. We started up in a prior presentation going through the setup process. We do every time, maximize the homepage to the gray area view drop down. We've got the hide icon bar, the open windows list checked off open windows open on the left reports, drop down company and financial looking at the P and L profit and lost a little bit different on the range change. I'm going to bring it through the first three months and change it to a month by month comparison. So I'm going to go from 0101, let's do that again 010123 to 033123 and change the total to a month by month because we'll be doing a reversing entry in March. So remember the cutoff is as of the end of February. We want to get the financial statements correct as of the cutoff because that's when we're imagining we present the financial statements and then we're going to reverse it in March, the first day of the next period. Let's customize it up top, go into the fonts and the numbers and changing them up to 14. OK, yes and OK. Going to go to the balance sheet and do a similar process company and financial this time the balance sheet, customizing it up top, changing the range in a similar way, 010123 to 033123, changing from the total to the month and then founting to the numbering, changing to 14 and O-Y-K. There's our setup process. So that's the set of process we do every time, although we altered it a little bit in a prior presentation. We did an adjusting entry as of the cutoff date, February 28th in our case to make the financial statements correct on an accrual basis as of that time. We're now going to do a reversing entry. The adjusting entry was related to accounts receivable or revenue income. Let's recap what we did by going to the home page. You'll recall that on an accrual basis, the invoice, if we're using an invoice to record sales, is when revenue income is then hit. That's the accrual process because the invoice is typically closer to the point in time that we actually did the work or the closest form to us actually having done the work. However, it's not a perfect system because we can imagine a system where, in our case, for example, the work was done in February, but the invoice didn't go out until March. That's most clearly evident in some cases when you have like a job cost system and you're trying to count the work that was done in the prior month or something and you're going to bill out in the following month, then you might end up in a situation where the invoice was entered in a period after the period in which the work was actually done and from a perfect accrual standpoint, you should pull that revenue back into the current period. Now, it's just a timing difference, but those timing differences can have a significant impact. So that's what we did last time. So if I go back to the balance sheet, let's check it out. I'm going to go into March. Let's look at the original invoice double-clicking on March accounts receivable. There's the invoice double-clicking on the invoice. Here's the original invoice that went out in March and the transaction related to it, we mirrored it with the adjusting entry and pulled it back into February. We didn't change the date back to February, which you could do, but you don't typically want to do that because the invoice is so important for billing the client. You want to keep your standard billing process, whatever that is, in place and then do adjusting entries typically as needed for the reporting periods at the end. Let's just recap the adjusting entry and then do the reversing entry. So if I look at this invoice, what would be the adjusting entry? What's the journal entry in essence related to it? You would say, OK, it's an invoice. That means that accounts receivable. I'm just going to do this in like abbreviated terms went up by the full amount, which includes the sales tax 525, 525. And I think actually writing this out because it's a longer transaction, even though I have to deal with debits and credits is, you know, you kind of have to do it when you get to these longer transactions. And then we had the revenue sales that we called it was 500. I'm going to put a negative for the credits. And then we had the sales tax payable, which was the difference. Negative sum or it's the 25, right, the 25, which is 500 times 5 percent, we said. And then we also have the cost of goods sold, which I believe was 400, which is an amount that's not on the invoice but driven by the item. So the system recorded it. And then we had the inventory, which was 400 as well. The asset going down. So we recorded this in a journal entry format. Instead of entering another invoice as an adjusting entry as if the cutoff date to pull this in before the cutoff date. But now we have the problem that as of three five, it will have been entered two times. And that's not good. We don't want to mess up the accounting department. In other words, we got we did what we need to do for financial statement reporting as of the cutoff date here. But that's not our only job or our other job is to not mess up the accounting department. Therefore, we're going to reverse it and we're going to reverse it as of the first day of the following month, following period, in this case, month, that being March 1st. Now, the invoice didn't go out until March 5th. So you might say, well, why don't you record the reversing entry as of March 5th and then you'll be correct for a longer period of time. Otherwise, it'll look funny from March 1st through the fourth. And that's OK. We're going to be OK with it being funny looking because I don't want to enter it on March 5th because I want all the reversing entries to be in the system as of the same timeframe. I don't want to be like staggering. All the adjusting entries are as of February 30th, 28th in this case. And all of the reversing entries are going to be March 1st. That will mean we sacrifice some days of non-perfection on an accrual basis, but that's part of the system. That's the point. We're trying to say I'm going to do what's easiest to do from a logistic standpoint and then make the periodic adjustments periodically at the end of the month and or end of the year. OK, so let's do the let's see the adjusting entry here. If I double click on the accounts receivable and then we see the journal entry that pulled it in to accounts receivable. If I double click on that and then it takes me to the here I was going to double click on the journal entry and there's the journal entries that I just basically mirrored right here. Now, we note that we had a couple special problems with this particular journal entry. Anytime you hit accounts receivable, then you have to put a customer. I don't want to put the actual customer. I put then instead a made up customer so it doesn't mess up the customer detail with journal entries. Your other strategy could be that you make another accounts receivable account, but I wouldn't make it as an accounts receivable type account, but rather other current asset account, which kind of messes up your your whole reporting system. But that way you don't have to mess up the subletters because the accounts accounts receivable account is tied to the customers. And that's what you're trying not to mess up. Instead of doing that, we made a new customer that we're going to mess up the new customer, but hopefully it'll be at the bottom of the list and not mess up the bookkeeper. The same thing with the sales tax payable. For this one, we actually did make a new account related to it so that we don't post to the actual payable account that's kind of tied to the sales tax widget. Although I don't think it'll be a big problem, but making a new account just for our adjusting entries is easier to do here because it ties in directly to the to the to the we can make it a sub account of the sales tax payable account so they're right next to each other. So that was good. And then the inventory also had an issue because the inventory is is is got a sub ledger as well. And we didn't record this to any item. Therefore, the inventory is off right now. And then it's going to be back on, meaning the inventory doesn't tie out to the sub ledger because I recorded something to the inventory account that doesn't have a related inventory item. But when I reverse it, we'll be back in we'll be back in business and everything will be good again. So we'll review all that the reversing entry, though. All I have to do is basically do this exact same thing and reverse it. Now, when you reverse something, it's similar to when you make a credit memo, right? I don't I don't want to try to try to construct something backwards, meaning reversing something is unnatural. You don't really normally do that. So what you want to do is write down. You make me take a screenshot of this, write down the actual journal entry and then just do the opposite thing to it. Also, like we did here with the with the two kind, we have kind of two journal entries we put in one, which makes sense a little bit more as opposed to putting all the debits on top and then all the credits, which is a little bit more difficult to visualize. I would not try to when I make a new journal entry, put all the debits on tops and the credits on the bottom. I'm just going to reverse exactly what I have here. This, instead of being a debit, I'm going to make it a credit that could irritate some people because some people want the debits on top. But what you want to do is the easiest thing to visualize and to be able to explain to something, someone not necessarily following a random rule of having the debits on top, in my opinion. But you know, you got to deal with whoever you got to deal with. So I'm going to go ahead and then say, let's say a new one of these, let's say new and we're going to make this a reversing entries as of 030123, the day after the cutoff. And so I'm going to say accounts receivable accounts receivable, boom. And I'm going to do the opposite now, which is it was a debit. Now I'm going to credit for the five to five. I need a name. I'm going to try not to put the name in first just to see that QuickBooks will force us to put a name in there in that case. So then I'm going to say sales and that was a debit, but only for 500. And then we're going to say the other one is going to be the sales tax payable, which we made a new account for sales tax payable, adjusting entry, not the sales tax payable, but I made a sub account related to it. And so there's that. And then I'll put the other one down here. I'll say cost of goods sold is going to be then a credit to the cost of goods sold. So we'll say cost of goods sold. This should look unnatural like credit and cost of goods sold. Why you debited income? That's not right because it's because it's the reversing one. And I'm going to then put in the memo reversing entry. I'll copy that to all the memos. Did you get the memo? I tried to copy and paste it. Now, if I try to post this, it's not going to do it because it wants an customer related to accounts receivable, I think. So let's save it and close it just to see that transactions to accounts receivable must include a customer. So that's kind of good because because they're forcing us to have our sub ledger tie out, but it's kind of bad because now I need to have an adjusting entry applied to a customer. That's why I didn't use the actual customer, but the ZZZ customer. So I don't mess up the actual customer detail. Hopefully that doesn't mess up the accountant department. They don't do the same thing. Notice again, for the inventory, they're not going to give me a little thing. They're going to let me mess up the inventory sub ledger, but I won't mess it up because I know that what I'm doing and that's kind of actually good. If you know what you're doing because then you don't have to deal with making a false item or something like that. So I'm going to save it and close it. Boom. And then we'll close this out and then we'll close this out and let's check out what happened. So now in March, we reversed it. So if I double click on March, not in the cash account, though, in the accounts receivable account, that is, then we've got the journal entry that reversed it and then the invoice. So notice those two things net out in March. So that so it nulls out the invoice. That doesn't happen until the invoice actually goes in place as of three five. So that means that I'm going to have this negative amount in there up until that point, which looks kind of funny. In other words, you might see the the bookkeeper might run a report if you do this like right after the month end. So let's go into like reports up top company and financial and make a new profit and loss so I don't mess up the current one and run it from 030123 to like 030323. So that's before the invoice was entered. And I end up with this negative sales and negative cost of goods sold. That's because it's not going to net itself out until it gets to the fifth when the actual invoice was run. And we're going to say that's OK because it nets itself out and we want all reversing entries to happen the first day of the new period so that we can locate them easily. We still have the adjusting entry here in February pulling the amount into February. So the other side of that goes on to the sales and to the profit and loss. So let's close out this one. Let's just use this profit and loss. So in the P to the L then in the profit and loss here, if I double click on it, it's netted out back to zero again. So there's the 500 and then the reversal. So this is the actual invoice. And then we reversed it back out in essence pulling it out of March when we entered the invoice, the month in which the invoice was entered. And then we actually pulled it in here to the February. So there's that. The difference is in the balance sheet again on the payable side of things. So we got the sales tax payable. We have the adjustment account. So we had the 25 that we adjusted here for. And then if I double click on it, then we reversed it back out here. And the original amount is was recorded with the invoice. If I go into the invoice, there's the amount from the invoice. Then we have the inventory. If I go back up top on the inventory, double clicking in March. Same thing, right? There's the journal entry. There's the actual invoice. They net out. They've been removed. It's been removed from March because we added it with the adjusting entry. Double clicking in February, closing this back out. The other side of that is on the P and L profit and loss. So we have the cost of goods sold is here. It's netted itself back out, nulling it back out. The invoice has been nulled out, not recorded in essence in March is the net result because we pulled it into February with the adjusting entry. Now let's take a look at the sub ledgers and see if we messed anything up for the accounting department going forward. So if I go into like the accounts receivable here, this should be tied out to the sub ledger. So if I go up top and say, OK, then we've got the account reports and we can go into the customers and receivables. Let's go into the accounts receivable detail report. And then if I if I make the end date as of well, it doesn't matter. They're the same in any case. But if I make it as of 022823, the total down here is the 22701 50. And so there's the 22701 50. And if I make it as of the end of March, 033123, then we've got the 22701 50 and 22701 50. Going back on over to the customer side of things. Also note that down here, we've got this ZZZ adjusting entries that has it going in and out with these funny journal entries. That's ugly for the accounting department, but hopefully the idea here being that it's in its own customer field. So it's not going to mess anything up. And the actual invoice is still in where we originally put it with it, which is in Anderson. So we didn't mess up Anderson's data by having these journal entries in Anderson's detail, because the other way they would see that if I went to the customer side and the customer center, if they went into the Anderson here, again, they don't want to see journal entries in here because that messes everything up. So the journal entries are still messing stuff up, but they're down here in the ZZZ adjusted entries thing way at the bottom, which hopefully doesn't bother anyone too much closing that back out, closing this back out. We also have the inventory. So inventory, let's go to the dropdown on that one and look at the, the inventory valuation summary. And I'm going to make this, let's make it first as of 022823. And this one pulling out the trustee calculator, trustee calculator. Okay. It's going to be, so this one, 4746 and then if I go back on over to the balance sheet, we had inventory minus 4346. It's all by that $400 because we did the adjusting entry and they didn't force us to, to tie to anything else, but that's okay because we reversed it. So it should be good when we get back to March. So if I bring this up to 033123 we're at the 4346 and that ties out to the 4346. So that kind of adjusts itself back out. By the way, there's a less significant, but still significant thing that happens to the revenue as well, right? Because we did a journal entry that went to the revenue account as well. And so normally like you have a sub ledger for revenue that should tie out here as well. So if I went to the dropdown up top and we went into sales and let's do it, you know, sales by customer or sales by item, right? So if I went like sales by customer as a from 010123 to 022823, it comes out to 68711. So let's say this is 68711 minus the balance sheet on sale, not the balance sheet profit and loss sales at the end of February, the total sales are going to be here. Well, actually at the end of February minus it's the same. So 69211 for the total, it's off by the $500. And then if I go back on over to sales, cause I posted something to sales without once again, having a customer or item, but if I bring this out to 0303123, then we're at 69122 profit and loss 69211. Did I dyslexic that one? 69211. Yeah. 69211 is what I meant to say. So there's that. So everything, everything's back in place at this point in time with those two. Let's run the last couple of reports. If I go to the reports dropdown and say that we're going to say that let's go down to the accounting and taxes, you can look at the journal report. And that one, what we have thus far is if I go to 022823 to 022823 and then customize it, let's bring the fonts and numbers up to let's say 14. Okay. Yes. Okay. That's way too wide. That's way too ambitious. It's okay. I could still see it. You just have to do this. See. Okay. All right. And then I'm going to filter it to just the journal entries. And then we'll say filtering journal entries or wait, filter by transactions, transactions. And then the journals. So I'm going to filter it. We'll do this at the end, but just a quick summary. Here's the journal entry. Here's that big journal entry. We entered the most difficult ones thus far. If we're bringing this one up to March, we've got the reversing entries. There's the reversing entry. All right. Let's take a look at our trial balance. Thus far, I'm going to go to the accounting and taxes trial balance. I'll run it through March. Well, let's do both 022823. Let's go from 010123 to 022823. This is a cutoff that didn't change and then we'll bring it up through March. So let's customize fonts and numbers, bring it up to 16. Okay. Yes. Okay. This is what we had as of the cutoff, which should remain the same. And then I'm going to bring this up through the end of March 033123. And this is what we have after the month after we did that reversing entry thus far. So you can check your numbers there. We will do a more comprehensive look at those journal entry reports at the end of this adjusting entry process.