 The beginning balance which includes the outstanding items which in our case are those two checks now note When I check that off because those two things net out my difference is at zero So we could do that I could say okay. I'm just gonna it's my difference is zero I'm gonna move forward although it's not perfect to do that because I still don't really understand Why I have 25,000 instead of 30,000 and why I have this 4,000 and 1,000 that has cleared that's one problem the second problem is that if these two amounts had not cleared Meaning if they were outstanding and they remain outstanding they were outstanding in December They remain outstanding through January, then you're not going to be able to do that method of simply Checking it off and be exactly in balance So what we would like to do instead is really put these two on the books We would like to put them on the books as of the date the check was written or possibly as of the date of the prior cutoff period Like we did with the beginning balances As of 12 31 23 in our case, so that's what we'll that's what we will do here I'm gonna I'm gonna say let's put these on the books So we'll go back on over and say if this 25,000 I want to get to the same 25,000 But I want to represent it as 30,000 on the deposit here for my beginning balances and two checks of 5,000 so that I have my audit trail of the two checks that were written in the prior period I can see that they cleared in the current period and then if I want to go back to the prior accounting system I can get more detail about those two checks. All right, so to do that Let's go ahead and leave here. So I'm gonna say finish later So I'm gonna uncheck this for now. So it's so and then save for later and Then let's go back into my chart of accounts and then in the chart of accounts I'm gonna go into the checking account and look at the good old register And I'm gonna imagine that I went back to my prior accounting system and looked up those two checks Which I'm gonna enter as just basically expense forms because I don't want to enter a check number and let's I'm gonna put them in there as of 1231 to 3 in our practice problem You may want to put them in there as of the date the actual checks were written But my thought would be I'm gonna put them in there this way and then if I have a question about those two Checks, I can always go back to the prior accounting system and look them up This is just to give me a note that this is coming from the prior accounting system And I want to reference to the prior accounting system. So then I'm gonna say the the name I'm gonna say is epiphone Now epiphone is a vendor that we buy and then I'll say this is a prior period Expense form and So do-do-do and then I'm gonna say that this was for four thousand Okay, and then epiphone is who we buy inventory from so you might think well I have to put that to inventory But we're not gonna put it to inventory because when I put the beginning balances on the books I already accounted for inventory as of the cutoff date of 1231 inventory We made it correct by doing our journal entry process So what I want to do is just have a clearing account all my balances are correct already I'm just gonna clear this out to the opening balance equity account Which is that generic account that QuickBooks makes up, right? So I'm gonna put the two checks to opening balance equity and then I'm gonna make an adjustment to that 30,000 the other side also going to opening balance equity which will net out Opening balance equity back to zero is gonna be the idea. Alright, so let's get an idea of what that'll look like We're gonna say this is gonna be a prior period adjustment checking account The other side is gonna go to opening balance equity Let's save it and then if I go to my balance sheet and run it and we have an adjustment to the checking Account and we had an adjustment we can see down here. So now there is a balance in the opening balance equity I'm actually gonna open up the general ledger report to see the detail of that way I'm gonna go to the tab to the right right click on it and duplicate it and Then I'm gonna go to reports on the left hand side Close up the hamburger go all the way down to the accounting Reports which are for my accountant open up the general ledger and then I will type in here the Date of the transaction twelve thirty one two three to twelve thirty one two three and just see that activity So in the checking account, we have this expense form For the four thousand and then in opening balance equity We had a transaction for opening balance equity Did you do here of the four thousand right there? All right, let's do the other one now. So I'm gonna do the second one I'm gonna go back to the first tab. We're back in the register again and Let's select the drop-down and do another expense form and say this one is as of twelve thirty one two three as well This is a prior period expense Form and I'm gonna say this was for the one thousand and I'm also gonna say the payee is epiphone again But I'm gonna put it once again to opening balance equity. So same transaction opening balance equity I'm gonna run that and now if I take a quick look on the balance sheet and run that again We should have in opening balance equity now The five thousand so there's our five thousand in opening balance equity and then up top We still have we made a change to the checking account as well So now what I'm gonna do if I go back into my register and scroll up in the checking account Let's run this one again We have our activity here now this twenty five thousand we put in the checking account I'm gonna now change to thirty thousand and the other side is still gonna