 QuickBooks Online 2023. Adjust opening balances. Get ready to start moving on up with QuickBooks Online. Here we are in our get-gray-guitars-practice file. We started up in a prior presentation using the 30-day free trial. We also have open the free QuickBooks Online Test Drive sample company which if you want open at the same time. We recommend using the incognito window or another browser. You can get to the incognito window if using Google Chrome with the three dots in the browser. New incognito window and then search for QuickBooks Online Test Drive. We'll be using the sample company to look at the difference between the accountant view, the view that the get-gray-guitars will be in, and the business view, the view that the sample company will be in. You can switch between the two views by going to the cog up top and switch the views on down below. 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We're gonna open up some tabs to put reports in as we do every time right-clicking the tab up top to duplicate it right-clicking the duplicate a tab to duplicate it again back to the tab to the middle as the tab to the right things going to the reports on the left-hand side to open up the big balance sheet report in the favorites noting that if you're in the business view by the way it's in the business overview section and then your reports can be found thusly. So let's go back on over back to the tab to the right we're gonna go down to the reports on the left this time opening the P to the L the profit to the loss the income to the statement and we'll close the hand boogie up top let's do the range change starting with 0 1 0 1 2 2 tab 12 31 2 2 tab run it to refresh it tab it to the middle doing the same thing for the balance sheet burger closed scrolling up changing the ranging 0 1 0 1 2 2 tabs 12 31 2 2 tab run it remembering that we entered the data that we imagined was from our prior system as of the cutoff date 12 31 22 so we can start entering new data as of January 31st or January 1st 2023 so we could see that prior data here this is the data as of the prior December 31st 2022 from the prior accounting system our strategy has been enter each one one at a time letting QuickBooks record the other side of the transaction to whether wherever it feels it should which could be to the opening balance account which is an equity account or it might have posted to the income statement either to revenue or expense the revenue when we made the accounts receivable the expense when we made the accounts payable though the the revenue or accounts receivable using an invoice the payable using a bill basically but because we entered those in the prior period December 31st 2022 they will roll into equity so the strategy then being we've got all of our accounts lined up the other side due to the double entry accounting system has to work if the other side is simply equity it's just going to be in the wrong equity accounts and now we're gonna have to just shuffle them around and fix the equity accounts the main one being that opening balance equity which is not an actual account does not look professional is not something you typically want to be presenting because people will will have less confidence in your accounting system if there's information in that account in general because it's not an actual kind of financial reporting account it's just a holding account that QuickBooks use so you can enter the beginning balances okay so let's go back on over and recall this so if I scroll down everything should be lined up what I'm worried about here or the only place I'm focused on is the equity section so I'm going to close up equity and just give a quick recap of what equity is and remember what we have up top what we've created is the accounting equation assets equal liabilities plus equity so the assets are what we have liabilities and equity represent who has claim to what we have either third parties liabilities like the bank and the accounts payable and equity us therefore you can also format the accounting equation assets minus liabilities equals equity equity representing in essence the book value the value of the company on a book basis so if I was to increase this then we've got the balances on the assets and the liabilities and then what does equity mean then it means what we have claim to on the assets the book value of the company then the accounts within equity will depend on the type of business that we are in in terms of what the appropriate names would be and which accounts that we should be allocating the retained earnings to in essence so the opening balance account you'll recall is just a clearing account QuickBooks is putting the money into here basically telling us hey look this is where I just dumped the other side which I believe should be in an equity account when you enter the opening balances so that no matter what type of business we are corporation sole proprietorship partnership should generally be closed out to some other account and then if we're sole proprietorship we would be using an account called owner's equity because the whole thing is basically in one account owner's equity although we might also have draws that's the money that we take out of the business in order to to help in order for our own business use or our own personal use out of the business and we could add an investment account money that we put into the business rather than money that has accumulated over the business from activity through the income statement now if we were a partnership it gets a lot more complicated because then you're going to have multiple claims to the equity it's owned by multiple people more than two people two or more people so therefore you kind of have like a similar account down here as like an accounts receivable account broken out by customer you're going to basically have to have your partners and then track their balance and their equity account which you might call a capital account and you're going to have to apply out your net income in accordance with the the agreement of the partnership and you might have separate accounts for each partner like a draws for the money that each of those partners take out of the business for personal use and possibly each partner's investment account so what happens with a partnership then is QuickBooks will roll everything into net income you can you can see right here and then it will roll into some account on the balance sheet which they put as default retained earnings which is actually a corporate name but you get the idea it's the earnings from the income statement that roll in so if i go up and i change the date up top to 010123 to 123123 and run it you can see that that net income rolled in to retained earnings so that account we have to have some account that QuickBooks uses as the closing account it's going to close the income statement out into some account they name it retained earnings by default if you are a partnership you're going to have to take it out of retained earnings and put it into the applicable partner accounts in accordance with the partnership agreement so the partnership accounts are properly reflected if you're in a if you're in a sole proprietorship we can just basically rename retained earnings to owner's equity to to the capital account right because there's only one owner so that's that's an easy situation a corporation you would think would be more complicated than a partnership but it's actually generally easier because the idea of a corporation is that we're not going to break out a bunch of different owners within the equity section the way we basically do with a partnership but instead we're gonna break out the ownership of the company out into equal units kind of like dollars a measuring tool of units which are the stocks and therefore for the for the amount of money that was invested in the company that the that the owners put into the company that will be a cap the capital account because we issued the stock for that money and remember that a lot of times people buy stocks on the secondary market this would be the primary issuance of the stock the money coming into the business and then we'll track the retained earnings which represents the money that has accumulated in income that has not yet been distributed in the form of not draws as it's called with a partnership but dividends the reason it's dividends and not draws even though it's a similar kind of thing is because you can't have one owner of a corporation taking out a different number of dividends than another owner base and you know they have to have the same amount of dividends per share basically so that means that you have to have some agreement when there's going to be a distribution of dividends there also could be tax implications and so on so we're going to we're going to imagine we're sole proprietorship here so what i'm going to do is i want to change the retained earnings to an appropriate name which would be something like owners owners equity so i'm going to go back on over and do our standard process to the first tab i'm going to go down to the to the accounting our standard process in terms of the accounts that are used i mean and by the way if i go into the business view that chart that general chart of accounts is going to be under the bookkeeping and then the chart of accounts there under the business view and then the idea being that if there is an account that's in use that is similar i'm just going to change the name and not add a new account now with this retained earnings account it's a super special account because this is you have to identify the account that quickbooks is using to close out the income statement you can tell what it is because like it's the only equity account that doesn't have a register it's it's you see all these other equity accounts have a register they have a balance in it there's no balance or register here because because this is the account that they're using to roll over into so you gotta be you gotta be quite aware what that account is i can't just make another account retained earnings i can't just add a retained earnings account that will function in the same capacity there's only one account that's that quickbooks is going to use to roll over into what i can do is change the name of it so i'm going to say let's edit it and say i want to call it uh i want to call it the name owner's equity owner's equity i think that that looks right right owner's equity and it's still going to be an equity account we'll put it in equity tax section retained earnings i'm fine with that okay and so let's just save it and so that is done so now if i go back to the balance sheet now and i and i run it again we've changed the name to be more appropriate for a sole proprietorship okay so that's that's step one and then step two is to get the opening balance to be closed out and then i'm going to put it into the the uh owner's equity account so i'm going to zero out the opening balance account so i'm going to go back to the first tab and there's a couple ways you could do this you could do this with a journal entry because this would be the type of thing done with a journal entry there's no other form that is used to close out the opening balance so it's going to be a journal entry but you might go to the registers which which could you could do instead of having debits and credits and enter the journal entry that way and i like to point that out because a lot of times we only think of the register as something applicable to the checking account but you have these registers for each of the balance sheet account not the income statement accounts mind you because the income statement accounts are temporary balance sheet accounts are permanent but if i go into the the balance sheet account for opening balance equity i could say okay there's opening balance equity i can see the balance there i can use the register to enter the transaction and then i can see the balance as i enter the transaction so i then i can do a journal entry notice the options that i have here a transfer or a journal entry we don't have any check or expense form or any deposit it's just a journal entry to enter a transaction to this and then we're going to say this is going to be as of i'll do it as of uh 12 31 22 let's say which is the day before our cutoff when we've been entering our beginning balances i might do beginning balance adjustment in the memo something like that it's going to decrease by the full balance which is seven two three nine six the other side is going to go into the retained earnings account that we now change to owners equity so i'm going to type that in here hopefully it'll show up owners equity owners equity i think that is that the same one account i think it is hopefully if it's not we'll see and we'll see it on the balance sheet so what's this going to do it's going to decrease this account the other side i believe wait this is owners draws hold on a second there's owners equity so owners equity okay so the other side might say hey you're hitting the retained earnings type of account and it might give us a warning as we do that but and so that's a nice check usually because usually you don't enter a transaction to like the retained earnings or owners equity account but you might do it when you first set up the the accounts so let's save it and we saved it okay so i'm going to go then to the balance sheet and refresh it again run it to refresh it and then when i scroll down now it went into the owner's equity so it looks like it did what we needed to do so that looks good so just to recap if i take this back to 010122 to 12 3122 we entered all the data as of the date of 12 3122 scrolling down then we've got the opening balance equity is now zeroed out the the owner's equity is here and then we've got this net income that net income ties into what's on the income statement for the period january to december 2022 or we entered all the data on 12 3122 the cutoff date from our prior balance information here that we're imagined came from our prior bookkeeping system and they put in services and other miscellaneous expenses when we entered the beginning balances for our customers and accounts receivables and our vendors for the accounts payable and that's where this 5500 comes from i don't want anything on the income statement but i'm okay with it in there as long as it's prior to the the date that i'm going to start adding new data january 1st 2023 because this will close out into the balance sheet how do i know that because if i bring this up a day to go from 010122 to 1231 actually 01010123 123123 and run it there's nothing in it so i've got a clean income statement going forward as i enter new data for the year starting january 1st 2023 and if i go to the balance sheet and i scroll up and i run this up a day what's going to happen is this this week this income is going to roll into the owner's equity account so i'm going to go from 010123 to 1231 23 and run it boom and so now we've just got that one owner's equity account because it's a sole proprietor later on we might add draws the money that we take out for personal use and we might add like an investment account owner investment for money the owner puts into the business but you could account you could account for it with just the one owner's equity account if you so choose if you're a sole proprietorship okay let's now open the trial balance just to check it out in that form gonna go to the tab the right right click duplicate and let's go down to the reports on the left hand side it's down right there and close the boogie and i'm just going to type in trial balance i think that's the easiest way to do it and i like the easy way and so there we go let's change the range from if i go to 010122 to 1231 222 run it there's our trial balance as of the prior period 1231 22 the cutoff i compare that if i compare that to my data that we entered from the prior accounting system that we are imagining then there we have it we've got the 25 the 25 the 20 the 25 the inventory the accumulated depreciation furniture and fixture 15 000 for the accounts payable the visa the loan payable and then opening balance is now at zero and then equity should be at the 77 896 and it's different here because we've got those two income statement accounts in our trial balance remembering that the trial balance is the income statement on top of the or the balance sheet on top of the income statement 72 396 plus 205 00 minus the 15 000 there's the 77 896 if i bring this up a day what's going to happen is these income statement accounts are going to roll into the equity and we should match so i'm going to change that it'll be magical it'll be a magical moment get ready for 0012 3 to 1231 23 and then run it and then there we have it so now it's all in the one report and we were matched up we're good to go as of the new period so as of as of january 1st 2023 we're good to go so if you're following along you can check out your numbers they should match our numbers here and i'll try to write a trial balance every time we close up so you can kind of check your numbers going forward and if you're working along with the practice problem we'll just keep on adding stuff now we're going to start adding new data into the system from this point