 QuickBooks Online, void check prior period adjustment. Get ready to start moving on up with QuickBooks Online. We're gonna be using the free QuickBooks Online test drive searching in our search engine for QuickBooks Online test drive selecting then the option that has the Intuit.com within it, Intuit being the owner of QuickBooks Online selecting the United States version of the test drive and verifying that we're not a robot. Zooming in a bit by holding down control up on the scroll wheel currently at 125% on the zoom in. We are in the accountant view. If I select the cog dropdown, we could toggle back and forth between the two views. Currently we'll be looking at the accountant view. We'll try to toggle back and forth from time to time to look at the differences. Right-click it on the tab up top to duplicate it. This is what we do every time to put our reports in these duplicated tabs. Right-click in the duplicated tab to duplicate it again back to the middle tab and then I'm gonna go to the reports on the left-hand side to be opening up the balance sheet report. Back up top again to the tab to the right reports. Again, this time the income statement or profit and loss report. Changing the dates for these reports, I will do that manually by selecting the date range, type it as fast as possible, as easy as possible, which I think is two digits 010122, January 1st, 2022, and then tab to 123122, December 31st, 2022, tab on the keyboard. Run the report. I'm gonna close the hamburger holding down control, scrolling in a bit, there it is, tab to the left and then I'll close up the hamburger, scroll up a bit, change the range, same way manually, 010122 to 123122, and run the report. That's the setup we do every time. Back to the first tab. 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. So we've been going through, if I hit the dropdown on the new button, the vendor items and that the vendor represents people that we are paying for goods and services, money going out at the end of the cycle, which we can either do through an accrual process, bill first and then the pay bill, which is in essence a kind of check form or directly we pay the bills as they become due, not entering bills, but entering expenses and checks. Now we wanna just touch on the idea well, what if something gets in the system that is incorrect and I need to remove it from the system, delete it or avoid it, there's an incorrect transaction. Most of the time when you're talking about these type of transactions on the payment side, you're gonna have a check or bill, I'm sorry, check or expense that was entered into the system, which isn't clearing the bank. It needs to be removed. It's not something that has cleared so you have to avoid it typically. Now QuickBooks is quite forgiving in terms of allowing you to delete things, but you wanna be quite careful deleting things and you also wanna be very careful if you're dealing with something that's in a prior period, especially a prior year, because the way the accounting system works that could mess things up. So let me show you what I mean here. Let's first enter a check or expense form. Let's just make it an expense form and we'll enter that into the system and let's say we're gonna do it in the current year, which is 2022 here. So I'm gonna say that we are gonna say, let's just say AAA, we're paying again, I'm just making up a name for a vendor that will show up at the top of the register and then it's gonna be coming out of the checking account. I'll put the current, I'll put the date in December this year is the point. So I'm gonna keep it in the current year and the method that we're gonna have, I'll just say, I don't really need something else, say cash, no reference number and then down below I'm gonna put it into a test account. I'm just gonna call it a test account that I'm gonna set up. It's gonna be an expense type of account and I'm gonna say it's gonna be other business expense and it's a test account of the name. That's all I'm gonna put here, add it and we're gonna have no description or I'll put test on the description so I might be able to see that and then 350 amount, not gonna make it billable, not gonna add a customer. So we have a standard expense that we've seen in the prior presentation. What's this going to do? It's gonna decrease the checking account and the other side is gonna go to the account we assigned it to, which is gonna be this test expense account right here. Let's see that, saving it and closing it and then I'm gonna go back to my reports and refresh the reports so I'll run it again and then I'm gonna dive in or drill down on the checking account. So if I go into the checking account and we scroll down to the bottom of the checking account there's the AAA transaction there for the test account. That looks good. I'm gonna scroll back up, back to my balance sheet and then check the income statement side tab to the right making sure we refresh, run the report, holding control, scrolling up a bit and then I'm gonna move on down to that test account. There's the test account here. So there's the transaction. Now what if that transaction was wrong? We need to delete it. It was duplicated or something or it was entered in error. Now if we need to adjust it, then of course I can go into it here. I can click on it and say, I could go into it and actually change the data in the transaction and adjust it. Now that's not something that you would often wanna do in a full service accounting system because usually you don't wanna go back and adjust transactions that were put in place but rather make adjustments going forward into a transaction in the future that corrects the problem so that you can see the problem and then the correction so that you have an audit trail would be the point. But oftentimes like let's say that you got the bank feed and the bank feed says that it was $300 and not 350 for whatever reason and you might then just adjust that transaction if you know that that transaction was right to basically be the proper transaction. So you gotta be very kind of careful of doing that but obviously QuickBooks has a lot of leeway to do that. If you're working in an accounting department in a larger company they might restrict your capacity to of course change transactions that have already been put in place so you don't kind of mess up the prior transactions and so that we have an audit trail of everything that is happening but a lot of flexibility in QuickBooks which can be good but also can lead to problems. Now also you can think, well what if I need to delete it entirely it was duplicated, it's not gonna clear the bank. I know it was wrong. Well, again you could go into the transaction this way and in the more item you can delete it and you can void it. Now there's a difference between these two things. If you delete it it's gonna remove it entirely so it's as if it was never there. If you void it then once again you kind of have that audit trail. So voiding it is kind of like deleting it but you still have the remnants of it there so that you can see that you voided it in that there but even voiding is not perfect because you have to be careful if you're doing something in a prior period if you're gonna mess up the prior period especially the prior year. So for example let me show you what I'm gonna close this out and scroll up and go back to the report. Notice that this amount that we have included in here is in net income. It's included in the net income down below and that net income is gonna be part of the balance sheet so it's over here on net income in the balance sheet in the equity section. Now let's say that you entered this into the system as of 2022 that means for small businesses in the United States filing their taxes they would have got the deduction because it's an expense if they deducted on their taxes they would have gotten that in 2022 when they wrote it off and it would be part of the balancing here in the equity section of the balance sheet. If we then rolled up to the next year 2023 for example if I go up to 2023 and 2023 and then run the report and I scroll down that the net income that was down here has now rolled in to the retained earnings. So if I go back in and delete something that happened last year I'm messing up kind of the beginning balance of the retained earnings which becomes a problem going forward. And if I so what we wanna do is make the reversal make the adjustment basically in the current period and to make that more clear let's go from prior year 2021 into 2022. So I'm gonna go back into that transaction again let's go into the let's change the range again let's go from 2022 to 2022 run the report. I'm gonna go back into that checking account and then I'm gonna scroll down and find the transaction that we so there it is I'm gonna go into it and let's change the date to make it at the end of 2021. So I'm gonna make this as of 12 31 21 12 31 21 and then I'll change it. So notice you can change a quick books allows you to go in and change things. Now we put it into the prior period. So if I scroll back up I go back to my balance sheet and I look at that same kind of problem if I go from 0 1 0 1 2 1 to what happened there from 0 1 0 1 2 1 to 12 31 2 1 and then run it. So now that has been included in the checking account for 2021 by going to that there there it is I'm gonna go back to my balance sheet and if I go to the tab to the right on the income statement and I go from 0 1 0 1 2 1 to 12 31 2 1 and run that report for the prior year again you could see the expense in the prior year which is part of which is part of the retained earnings. If I'm currently in 2022 and I go back to 2021 and delete that because for example it wasn't clearing the bank account then I already you can already think of like I deducted it last year what I really should be doing is reversing it this year. I don't wanna redo my financial statements which have already been finalized for the prior year from a small business perspective for example you don't wanna redo your taxes for last year because you had a deduction that wasn't really a deduction because that expense wasn't right or whatever you wanna reverse it in the current year. So if I void the transaction which I need to do for the bank reconciliation because those are gonna show up on the bank reconciliation even though it's not something that was a true transaction then it's gonna mess up that rollover process. So let me show you that if I go back on over usually when you adjust these you would then adjust them possibly in the register. So oftentimes instead of going back into it from the financial statement and voiding it if it was a prior period adjustment I would go into the register which is in my accountant I'm sorry it's in the accounting area on the left hand side I wanna see the chart of accounts and then I'm gonna close the hamburger I'm gonna go into the checking account and I'm gonna go into the register so I'm gonna go into the register and my goal is at the end of 2021 so I'm looking for that transaction there it is what my goal is to void it but also make the reversal happen in the current year as of the current date in the current year so what I'm gonna do is I'm gonna actually make another transaction which will duplicate this so that I can still keep it in the prior year then I'm gonna void this transaction so that I can see in the detail that it has been voided and I have a paper trail and then I'm gonna actually do the reversal in the current period so it's kind of a tedious process that you gotta be aware of if you're kind of adjusting something in a prior period. So I've sorted it so I can see that one right next to it I sorted the date field and then I'm gonna select a journal entry right here so I'm gonna add another item I'm not gonna make it another expense form I'm gonna make it a journal entry because that'll be something distinct that'll kind of show that this is kind of an adjusting process as part of the voiding process to me and then I'm gonna make this as of 12, 31, 21 and then I'm gonna say this is gonna be for AAA and I'm just gonna mirror the transaction I'm gonna just call it avoiding entry and it's gonna be for the same 350, 350 and the account is gonna be going to the test account so now it's gonna be in there two times once I record this so it's in there with the original one and then once again and so I'm gonna say save it and so now what I can do is I can void the original one so now I'm gonna avoid the original one so I can go on to this one I'm not gonna delete it, I want to void it so I'm gonna go into the editing of it and then down here we've got the option of voiding so now I'm gonna void that one so now are you sure you want to void? I'm gonna say, are you sure you wanna void? I'm gonna say yes, I would like to void it so there it is, so now it still shows up with it for audit trail purposes as avoided amounts so the check would still be there or the expense form but now it is voided and then I'm gonna enter the transaction into the current period for the reversal of the transaction and this time I'm gonna do that with a journal entry because that'll be an indication that it's part of the voiding process so I'm gonna say journal entry as of the current period which I'm gonna say 12, 21, let's say 22 and that's in the current year now not in the prior year of 2021 and I'm gonna say this is gonna go AAA again and we're gonna say the memo voiding entry and so the amount is now gonna be on the deposit side of 350 and then the account is gonna be the test account so now this one is gonna net out so it's gonna net out against this item which will basically neutralize it but it will do so in the current period I'm making the adjustment in the current period as opposed to kind of deleting it from the prior period because I already finalized the financial statements in the prior period so if I save that and check it out let's see what happens and why we would do this well if I go back to the balance sheet now and if I'm going into the balance sheet and running the balance sheet as of 2021 I can go into the detail for 2021 and now we've got the voided item I can see the audit trail for the voided item but I put the voided item back on the books here so we're basically at the same place but now I can see basically the audit trail and then if I go back on over and then we fixed it as of the end of 2022 so if I bring this up to 010122 to 123122 and then run it so now if I go back into here we made the adjustment so when I reconciled in 2022 we'll be able to see the adjustment which is this journal entry right here so now we've reversed it but we did so in the current period rather than the prior period now this amount was probably still showing on the bank reconciliation which would alert us to the fact that we have this transaction that's not a real transaction so we have to get rid of it somehow and these two amounts then these two journal entries if they show up on the bank rec we can just check both of them off and that would neutralize them so they would kind of net off against each other so I'm gonna go back on over on the income statement side of things if I run the report and currently in 2021 the prior year I still have this 350 there I didn't change it I didn't change the equity at this point in time that's what I want because I already finalized the income statement and possibly used it for example to do my taxes with I'm not gonna redo my taxes in 2021 unless there's a substantial kind of problem with it so if I go into it and I say okay then there it is I can see the audit trail but I'm back into the same position and then I'm gonna go back on over if I change it to 2022 010122 to 123122 and run it and I scroll down to the test account now you'll note that I have a negative expense account because it's the only thing in there and so basically I'm reversing the fact that I overdiducted I had too much expense in the prior year because it wasn't a valid transaction I don't wanna reverse it in the prior year because I already finalized the financial statements I wanna reverse it in the current year which you could see is what is happening here and that's why we have a negative kind of expense account and so that now also just note that if you're working with an accountant and you delete things in the prior year that problem will show up on the balance sheet because your beginning balance will not tie out properly so if I go down to my balance sheet if I was to run my report on my balance sheet from 0101221 to 123121 and run that report you can see now that I had net income last year of the 350 if it was 350 on the net income in my equity section and then I deleted that transaction the beginning balance in my equity wouldn't roll over correctly it would be 350 off in the current year so when I roll this up to 2000 and 2201122 to 123122 and run it so now that 350 rolled over to retained earnings so if I was doing someone's taxes or something like that and I was trying to reconcile their balance sheet from last year to the current year then I would expect there to be the 350 and if the 350 wasn't in the retained earnings and if it was instead zero because I deleted it that would be an indication that there's a problem we wouldn't be able to reconcile the equity section of retained earnings the statement of equity wouldn't roll over properly and that's an indication that someone deleted something in the prior period and then you get into this whole mess so bottom line when you're voiding checks you wanna be very careful when you're deleting anything be very careful and be very, very careful if it's in a prior period whether that be a prior month but especially if it's in a prior year because you have probably finalized the year already and so what you wanna do is try to make the changes in such a way that it's gonna have an impact the reversal happens in the current year because you're not gonna reissue the prior year financial statements in other words for small businesses you're not gonna redo your taxes typically unless you have to unless there's significant error or something like that you want to make the adjustment in a way that'll fix the current period so you might wanna talk to your accountant and is another point when you're kind of deleting the stuff or thinking about reversing things or avoiding items