 QuickBooks Desktop 2023 Reversing Entry Unearned Revenue Customer Deposit Let's do it within two-inch 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 guitar practice file we started up in a prior presentation going through the setup process we do every time maximizing the home page to the gray area view drop down we got the hide icon bar open windows list checked off open windows open going to the reports drop down company and financial the P to the L range and change in 010123 to 022823 228 that's the cutoff date we're going to then customize this thing and go to the fonts and the numbers let's change the font bringing it up to 14 okay yes and okay let's also make it by month instead of having the total so i'm going to go then say from totals and bring it to the month by month and then reports drop down again and we're going to go to the company financial this time the balance sheet standard customize it from 010123 to 022823 fonting to the numbering changing to 14 okay yes okay uh and okay i missed a yes or no okay anyways the then i'm going to make this go from a month by month as well so we got the side by side january and february in a prior presentation we did an adjusting entry related to the unearned revenue recalling that that adjusting entry is a little bit different than the adjusting entry that you might see in a accounting course book problem so just a quick recap if i go into the home page here usually what happens when you're generating revenue is you collect it at the same point in time you do the work which would be recorded with a sales receipt or a deposit oftentimes or we do the work first and then invoice the client for the work at that point however some companies we have the payment received before we do the work it's more unusual of a situation but some companies do that all the time such as subscription models for things like applications these days or you also could have a situation or like a newspaper or magazines for example and then you also have situations for like rental property where you might get paid before you deliver or for rental property like for a deposit or the last month rent or in our case if we have specific things that we're going to be providing that are custom and large then we might want a security deposit so that the customer is committed for us to follow through and purchase something like for example a guitar that's custom pink plaid or something that we we don't want to really have in the store but if someone really wants it we'll buy it for you directly if you give us a deposit on it beforehand that's the scenario we have here then we did the adjusting entry instead of increasing the liability directly when we first entered the deposit for my bookkeeper stand side of things it's easier to enter it as basically a negative receivable and that's because the accounts receivable account has the sub accounts the sub ledgers that can track and tie out the payment to the invoice so from a bookkeeping side that works great however from an accounting standpoint it records these negative receivables which aren't exactly right because you shouldn't have a negative receivable you should have a positive liability down here now again that's a little bit different than a book problem in a book problem you can imagine more like a subscription model where your revenue would all be recorded to say unearned revenue for example and then you'd have to determine how much of that revenue has actually been earned by determining how much of the subscription has been provided at any given time take it out of unearned revenue and record it as income so you might have a bit different structure depending on the the circumstances that you're using unearned revenue for in our case the the idea here would be that we're trying to tie out and be able to track the invoice and the payments which works quite well you know using this method let's see it in more detail by going to the reports dropdown up top we'll go into the customers and receivables let's go into the customer balance detail report customer balance detail as of the cutoff date 022823 and let's make it a little larger because we might spend a bit more time in here let's just bring it to like 11 okay yes and okay so there we have that and so we had a couple customers here that had negative receivables such as this one and then we had another one down here that represents the fact that they paid us in our case for a guitar a down payment for which we have not yet given them the guitar so in the future we're going to invoice them and look how nicely we can apply the invoice out to the payment in the sub ledger that's what its purpose is for and then however we wanted to make an adjusting entry at the end of the period to account for the fact that the accounts receivable is low by this 250 and the last amount which i believe was 200 and then record the proper amount which would be a liability account as of the cutoff now again that's only a problem if we don't actually give the invoice by the cutoffs because you could see for example this one up top we did the same thing we got the payment first but then we created the invoice before the cutoff date at that time there's no problem anymore because it's just a timing difference but any deposits that we have that we have not yet invoiced as of the cutoff date in order to make the proper financial statements on an accrual basis then we we'd have to make this adjustment to properly allocate or have the assets versus the liabilities would be the general idea so when we did that adjusting entry we assigned it not to a cut not to the actual customers up top but instead created a new customer down here which was called zzz adjusting entries in an attempt for it not to mess up the bookkeeper now we're going to reverse this because we we don't want it to be there for the accounting department going forward the accounting department is doing fine there's just this timing difference that we wanted to make an adjusting entry for and then we're going to reverse it so we don't have that 450 on the books messing people up on our trial balance although it might not be a huge issue this particular one because it'll it'll basically just hang out there uh and and it's in an account but still i'd like to basically reverse it out get us back to where we were before as much as possible so to do the reversing entry i'm going to do it by going to the actual register here because uh that's possibly the easiest way to do it so i'm going to go to the list drop down chart of accounts we'll go down to the unearned revenue which is a liability account down here unearned revenue there it is double clicking on it we increased it with the 450 right here with the journal entry we're just going to reverse it now because this is a reversing entry 030123 the day after the cutoff date is when all reversing entries will be entered 450 on the decreased side of things we're going to say the other side goes to accounts receivable now and this is going to be an adj entry now i can't post this i tried to post it and it won't let me because the accounts receivable quickbooks forces us to have a customer related to it so i'm going to close this back out to add a customer when using a register we got to use the splits item down below now we have the customer field i'm not going to use the actual customers because i don't want to mess up the sub ledgers for quickbooks therefore i made up this new customer that's going to have my adjusting entries and reversing entries which will net out and hopefully it won't be too much of a burden on the accounting department so there we have that we're going to say save it and close it and we'll check it out then so that brings this back down to zero if i go back to the balance sheet let's uh change the date and bring out one more month here so i'm going to customize up top and let's bring the end point to 033123 and then okay so now we've got this last month out here after the cutoff date if i go into the receivables we were at the 23 150 150 and then if i double click on this item we had that adjustment so here is the the reversing entry for the 450 right here and we had the adjusting entries still in place making it correct as of the cutoff date right here so then they net each other out after the cutoff date so we're correct as of the cutoff date and then we took us back to where we originally were before that adjusting entry as of the day after the cutoff date the other side went into the unearned revenue so if i go down to unearned revenue unearned revenue is correct because we have that adjusting entry here and then we reversed it bringing it back down to zero in march so we're back to where we basically started from so we don't mess up the accounting department if i take a look at the sub ledger for accounts receivable by going into the customer uh customer balance detail then we're still going to be in balance as of 228 and then if i bring this up to 033123 we're still in balance 2270150 balance sheet is going to be accounts receivable 2270150 we basically have to be in balance unless we do something really weird because QuickBooks is going to force us to use a customer so that it could force us to be in balance the downside of that is that we had to have this kind of random customer down here that nets these these items out and they don't kind of match up as nicely as an invoice and a payment which are two things that are designed to kind of net out against each other that's why we don't want these things hanging out in the customer area when the bookkeeper goes into their customer detail in the customer center for example they don't want to be going to their customer up here and seeing journal entries in the detail that mess up the balances and whatnot so we tried to put it down here in customer z in order to eliminate that from happening and still be able to record what needs to be recorded for the adjusting entries so that's the reversal let's take a look at our reports at this point in time by going to the reports dropdown let's take a look at accounting and taxes and look at the journal report let's start there shall we let's go from 010 let's go no from 022823 to 022823 customize it then i'm going to go to the to the filters and i just want to look at a transaction type which is going to be a journal entry drop down the journals thoughts and numbers let's bring it up to like 11 this time i think that's a reasonable reasonable size i believe not too much not too little just like just like that lady that ate the porridge in the little bear's house goldilocks i don't know what i'm talking about here any case here it is so we've got these adjusting entries and the last one that we have made was for the unearned uh revenue so unearned revenue that's the one we did here last time and now we just reversed that one so if i take this one day into the future plus one plus one then now we these are the ones that we have reversing entries for again you kind of want to get a feel for which adjusting entries will be good for reversing entries you want to have a feel for what needs to happen to get the financial statements correct on an accrual basis or whatever basis you're using as of the cutoff date as well as how can i not mess up the accounting department so that they can go back to normal business uh afterwards let's go to the reports drop down see where we stand accounting and taxes trial balance changing the range in 010123 to 022823 let's customize it go to the fontine to the numbering and bring up the numbering to 16 okay yes okay so there's where we stand as of the cutoff date shouldn't be any change to it because we did a reversing entry happening the day after the cutoff date so i'm going to go into the day after the day after let's bring this to 03 well let's go all the way out to 23 not the day after but the month after and so here's where we are including the reversing entries now note that if you're used to the trial balance the trial balance is a great report to kind of check your numbers when you're doing adjusting entries just like it is when you're doing normal uh data input because it's the balance sheet on top of the income statement you can double check your numbers in one spot although you don't have the subtotals so there is that