 QuickBooks Desktop 2023. Balance sheet report overview. Let's do it within two weeks. 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 sample raw castle construction practice file provided by QuickBooks going through the setup process we do every time. Maximizing the home page to the gray area going to the view drop down noting that we have the hide icon bar and open windows lists checked off open windows on the left hand side opening up the major two financial statement reports reports drop down company and financial profit and loss let's start out with tab for the date range change 010124 1231 24 tab January through December customizing it so I can go to the fonts and numbers and change it to 12 okay yes please okay then reports drop down again company and financial this time the big balance sheet tab for the date 1231 24 customizing it up top going to the fonts and numbers changing the font size to 12 okay yes please and okay now that's the thing that's the setup process we've been doing every time noting that every time we work on anything we've been opening up the major two financial statement reports that being the balance sheet and the income statement because those are the reports that were primarily constructing those are the end result that's the goal that's what the accounting process is aimed at creating every time we enter something for example in the home page we are typically entering something that will have an impact on at least two accounts on the major financial statement reports in accordance with the double entry accounting system that being the balance sheet and the income statement our focus now will be on the balance sheet so we can break that down in more detail get a better understanding of it so to do that I'm going to open up a few more things here I want to open up the the general ledger I'm going to go to the list drop I'm sorry the chart of accounts list drop down and then the chart of accounts which we've looked at in a prior presentations this is the baseline accounts that we need in order to set up the data input forms in order to create the end results with them the balance sheet and the income statement and so you can notice that the top half of this is in essence balance sheet accounts because it's an order by type assets liabilities equity then income expenses as we talked about in a prior presentation will look at that in more detail here the other report I think it's useful to understand is the trial balance I'm going to go to the reports drop down we're going to go to the accounting and taxes for this one and look at the trial balance this is in essence the balance sheet on top of the income statement date range change 12 this is going to be from 010124 to 123124 going to customize that report fonts and numbers changing the font on up to 12 okay yes and okay I want to have this one kind of in the back of our mind because it's a useful report to kind of verify your data input when you start getting a better feel for things because you can look at the balance sheet and income statement in one place with less subtotals it's a shorter more streamlined report okay that being said let's go back to the balance sheet we're going to basically go through this kind of line by line here and try to understand how it's being constructed and possibly a little bit of why it's being constructed to do so I'm going to make all these little carrots from the inside out I'm going to collapse them and so also note you could start with like a summary balance sheet there is a report for summary balance sheet which in essence collapses these items but for internal use it's useful to use the standard balance sheet because it has all the accounts in it which which is often useful when we're trying to drill down on things even though it's a little bit longer of a report going to make this minimize I'm going to go from the inside out here here here here here and here and then here and then here okay and then here well hold on a second there so there we go okay as it so there's everything and then I could do this for the last one so notice that the balance sheet is going to be as of a point in time so that's going to be the first thing we want to note here there's no date range you may have noticed every time I enter the data you might say why do they only give us one date up top instead of a date range that's because the balance sheet is as of a point in time if I have it as of 1231 2024 it wouldn't matter if the date range was December 1st through December 31st 2024 or January 1st through December 31st 2024 or January of 2022 through December 31st 2024 because this report is reported as of the end date the last date a point in time that typically being the end of the year or the end of the month that being different than the profit and loss report as you can see here which has the date range up top income represents income that has been generated over a time range you have to have a range you have to have a year versus a month a month is gonna have less income in an income account than a year if I go to the balance sheet there's no difference between a month and a year it's just where you stand at the end of that point in time so that's the first thing to get to get a handle on the next thing is just to understand I'm gonna make this minimize is that the balance sheet is in essence the accounting equation so when we think about the double-entry accounting system we can think of it in terms of debits and credits or you can think of it in terms of the accounting equation the balance sheet is the accounting equation where we have assets equal liabilities and equity assets represent what the company has we're gonna represent those assets try to value them in cash of course in dollars that's our measuring tool the liabilities and equity represent who has claim to those assets meaning liability has third-party claims to the assets like a bank has claims to our assets for a loan or something and then equity is the owner's claim whether that be sole proprietor one owner partnership multiple owners corporations the shareholders could have different names for the equity but the equity's ownership you can also think of this equation as assets of minus liabilities equals equity which is why equities are kind of like the net value of the company to the owner right that's kind of if you were to liquidate the company in theory you'd sell the assets pay off the liabilities the difference would go to the owners the equity the value of it okay so now let's open this up piece by piece and I'll try to note to a little bit of some of the differences in quick books and why from financial accounting generally and why those differences are kind of there usually technical issues so notice that assets is of course a class that would be there on any financial statement reporting current assets will be there in any current financial statement reporting because you have to compare the assets that are going to be more liquid meaning those that are going to be used sooner consumed sooner and typically can be consumed and used in order to help generate cash they can be used to pay off liabilities that are coming due shortly therefore that's a common you know financial accounting term then you've got these subcategories under it checking account accounts receivable other assets it's not normal to have these other kind of subcategories oftentimes for normal financial accounting in other words the checking accounts we would just record as cash and cash equivalents under normal financial statement reporting typically and accounts receivable doesn't need a subcategory because there's only one account for it we might have an allowance where we have a subcategory but it's a little bit unusual to have a subcategory for accounts receivable and then everything else is in this other normally we wouldn't need an other current assets because they would all just be under the category of current assets the reason quick books has these subcategories is because of a technical reason off in general if you go to the chart of accounts as we talked about when we looked at the chart of accounts the cash accounts need its own subcategory because they have special needs in the functionality within quick books such as connecting to the bank feeds the accounts receivable has a special need in terms of how the account functions in that we need to track it by the sub ledger of the customers customer receivables and then everything else is in the sub category of current assets that doesn't have a special need that's why you have those three categories everything that has a different type is going to have the drop down when you look at the standard balance sheet if I go back to the balance sheet that's where these drop downs are coming from so if I go or these drop downs so if I go into the cash accounts then everything that's labeled as a cash account which would include things like the checking account the saving account and petty cash these are things that typically you might be able to connect to the bank will be here so we have those items and these are the accounts that are going to have the most activity if you double click on them because cash or one or one two four has as is involved in every cycle so you have more types of accounts in the cash accounts than any other account that we will see closing that back out then you've got the accounts receivable that represents money that's owed to us from customers it would only be there if we're on an accrual basis for the for the cash for the revenue cycle in other words if I go to the homepage we have to be creating an invoice in order to build the client for work that has been done instead of just recording revenue with a deposit or with a sales receipt because that means that we did the work first they owe us money and therefore we got to track the receivable so this invoice is the thing that creates on the balance sheet the accounts receivable we're also going to need a sub ledger for the receivable as we've seen in the past breaking it out not just by date as we see here which is basically a general ledger account every every account has this general ledger by date but we also need to have it broken out by this they call it a transaction report but it's basically a GL account general ledger but we also have to break it out by who owes us the money that's why it has that special need and then we've got the other current assets which has everything else that would be defined as a current asset the funniest thing here the weirdest thing is this undeposited funds which that represents money that we have collected from customers but have not yet put into a bank and so if you look at the homepage we saw that that could happen here when we receive payments it could happen here and the reason we have that is because we want to be able to group the deposits in a clearing account undeposited funds before putting it into the checking account in the same grouping that we expected to be showing on the the bank statement as so we can reconcile as easily as possible the funny thing about this however is you would think it would still be a cash type of account and therefore for normal reporting purposes you probably would want it up here in like the cash accounts but it's not actually a checking account so it works functionality wise kind of like an other current asset account so they put it down here from a functionality standpoint so keep that in mind because I can throw things off when you compare things to like the the the statement of cash flows and things like that so and so that's that we got inventory inventory would only be there if we're actually selling inventory clearly and so we're tracking the inventory that we purchased that we have not yet sold when we sell it we're going to be taking it out of inventory and recording it in cost a good sold this is also kind of an accrual type of account because tracking inventory is an accrual thing that we are doing we're not just expensing the inventory when we buy it we're putting on the books as an asset then we've got the employee advances for payroll stuff prepaid tax pay prepaid insurance so we'll talk more about prepayments in future presentations but anytime you you pay a large lump sum for expenses up front then you on an accrual basis you could have want to record them as a prepayment so that you could expense them when you consume them as opposed to just simply when you pay for them and that's makes better comparisons on the income statement so there's our total current assets that we have here then we have the fixed assets oftentimes they might be called you might hear this category called property planting equipment or depreciable assets and this is kind of a form of prepaid insurance it's the most extreme form that people are most familiar with in other words you might say hey I'm on a cash basis type of system but even if you're on a cash based type of system you're going to have to use some accrual concepts when it becomes so extreme that it just makes sense to do so so for example if you bought a building an office building for a hundred thousand dollars even if you paid cash for it you probably wouldn't want to expense it just in one year because that would distort your income statement if I went to my income statement and tried to compare this year compared to the last year and I bought a hundred thousand dollar building with cash this year then that would make it look like one year was way worse than the other year but it's just because I bought a office building and expensed it all in one year that's way extreme and therefore for better comparable purposes the idea would be from an accrual standpoint you put it on the books as an asset and then you depreciate it as you consume the building or use the building and that's kind of the idea now you might say hey I don't do that I don't buy that big of stuff but you still you have to do the same thing for furniture and fixture vehicles and things like that and you have to do it at least for taxes even if you don't want to do it internally for your own bookkeeping purposes because your small business or something taxes are going to force you to have some things that are going to be recorded and deviate from a cash basis system so furniture and equipment large purchases vehicles large purchases buildings large purchases like that and we'll talk more about this when we start to record the transactions related to them and so on then we're going to have to depreciate it this is an adjusting journal entry accumulated depreciation being us decreasing in essence the value of the assets as we consume them over time and then reporting them as an expense in the form of depreciation so we'll talk more about about that process as we enter data in the future but that's the general idea other assets these would be non current assets that also do not fall under the category of fixed assets such as here the security deposit usually I'm not a whole lot of things in that category then we've got the liabilities on the liability side of things these are things that we owe to a third party like a bank so we've got current liabilities and long term liabilities these are going to be current liabilities is a standard categorization for financial reporting but then within it you've got these three categories here which again is a little bit kind of unique it's unique in essence to QuickBooks because they're doing that because again these accounts have specific needs as we saw with the current assets current liabilities as a general category just represents that we owe these liabilities within a year's time frame it's important to note that because we want to be able to pay them with some liquid assets that's why we have the cash broken out and then the current assets broken out because the current assets are what we're going to need to hopefully convert to cash soon enough so that we can pay off the debts that are becoming due within the next year the current liabilities so we're always comparing the current assets to current liabilities you can imagine a situation where a company has a whole lot of assets but they're still having problems with their debt with their cash flow because possibly all of their assets are in fixed assets building equipment so like a form classic example where they have a lot of a lot of stuff they have a lot of value but it might be all not very liquid so they could you could still have cash flow problems because of that and that's common in many businesses because of course you're the point is you're trying to invest your cash as much as possible in property plants and equipment so that you can use that to generate revenue that's the stuff that generates you the revenue but in any case we've got then the sub accounts accounts payable similar to accounts receivable we saw over here on the chart of accounts that if we go into the liabilities down here the liabilities there's the accounts payable it's got a special need of us breaking it out not only by date but also by vendor by who we who we owe the money to in a similar way as the accounts receivable that's the one that goes up every time if I go to the home page when we enter the bills so if we're on an accrual basis method for the liability side we'll have to deal with accounts payable if we're just paying the bills as they come do and using bank feeds possibly to do that or something like that then we won't we won't have accounts payable if we're not on an accrual basis system then we've got the credit cards they have to be broken out into a special category because the credit cards are going to if I go back to the chart of accounts you'll notice they have this little this little icon here which means they can be connected to the bank so when we think about bank feeds we often think just of the cash accounts but also just realize that the credit cards are going through the financial institutions and therefore you can connect them to the bank in a similar way and that can be really you know a beneficial tool we'll talk more about that in future presentations but that's why they need to broken out and then everything else that doesn't have a special category but is under current liabilities will then be here payroll sales taxes then we've got the long term liabilities and these would be typically things like loans that are going to be extending beyond one year now also just realize that when you have loans most of the times the loans will be installment loans that we think about similar to a mortgage in that they're going to extend beyond a year but we pay them off possibly monthly so if you get technical on it there should be a short term component to them and a long term component because we're going to be paying off a year's worth in a year and then we're going to be paying off the rest of it after the year so how do you deal with that we'll talk more about that and when we get to some adjusting entries but but periodically periodically you might go in and fix your your liabilities to break out the short term and long term portion of your loans so that you have better comparability between the current liabilities and making sure you have the cash flow to pay off those liabilities by comparing them to the current assets okay and then we've got the equity section which is often the most confusing section down here where we've got the the and the reason it's let's open up let's open up a calendar the reason it's a calculator the reason it's confusing is because the equity section could be called different things depending on what kind of entity it is meaning it'll be called something different or to have different accounts if it's a sole proprietorship versus a partnership versus a corporation it also has a few things that are a little bit different in quick books than then you might see in financial reporting so for example we've got equity down here now the first thing to note is that if it was a if it was a sole proprietorship you might call it owner's equity but you can't really change the name of the drop down right so you might be thinking I'd rather call my my fixed assets property plants and equipment that's not as easy to change that because this this name right here is driven by the account type field right so so so it's it's going to be under the category driven by the type the the account types that we set up here so that that's going to give us some restriction to be able to kind of rename different things and this had to be called something so they called it equity right but if it was a sole proprietorship they might have called it owner's equity if it was a partnership you might think it called partnership equity if it was a corporation possibly shareholders equity here it's just going to all be equity the accounts underneath it we've got the opening balance equity we'll talk about that later you can really think of that as kind of like a a clearing account it's an account that shouldn't really be there once everything is set up because it's an it's an account that's basically going to try to make it as easy as possible to first set up the beginning balances we'll talk more about that later so that's an account that's going to be unique to QuickBooks you won't see an opening balance equity account on like financial reports typically and then we've got the capital stock and the retained earnings those are names that are typically used for like a corporation so note that you might have like a sole proprietorship if it were a sole proprietorship what you would generally see is one owner's account which might be called like an an a capital account for one owner because remember the equity section represents the value of the company that is attributable to the owners in other words it's going to be the assets minus the liabilities so if I take the total assets here six four oh oh seven two point three three minus the liabilities which are coming to total liabilities minus the four two oh four two point seven three we come up to the total equity the two one nine six two nine point six now if that was just attributable to one owner then you have you can imagine one capital account called owner's equity or something like that and then the net income would be there because that's kind of like unique to to QuickBooks and we'll talk more about that later the opening balance if you were to do this more professionally you would close out the opening balance once you've adjusted everything for the startup process into the capital account if it was a sole proprietorship the one capital account now if you have a partnership you've got two or more people in the equity section so therefore this total here still represents the amount of the assets that are claimed not by third party liabilities the bank for example but are attributable to the owner but then you've got to break out who is there are they attributable to tracking then further breaking out the partnership by partner two capital accounts or three capital accounts depending on how many partners you have that could actually get quite complex because the partnership agreements could be different the draws and the allocation of income could vary so they get some complicated situations the third situation you have then is that it's a corporation which could be owned by a whole bunch of different people but the corporation it could actually be a little bit easier from the corporate from the bookkeeping standpoint because then we use the term retained earnings and then capital stock for example and that would so we're breaking out the investment how much we sold the stock for generally how much the owners put into the company when we sold the stock and then the retained earnings representing the earnings of the company that have accumulated that we have not paid out in dividends and again we wouldn't really have an opening balance because we would fix that which will do in the practice problem in a future presentation the reason it's still pretty easy even though you have more people potentially even than a partnership is because of the design of having each of these stocks the same unit of ownership so instead of us are kind of tracking different capital accounts depending on the partnership agreement we just we just assign different levels of ownership depending on how many stocks somebody owns and that makes it kind of standardizes the units kind of like have kind of like using cash instead of bartering using cash is a lot easier because now you got like the standardization process that you're kind of using and then you could like have an S corporation which is a kind of corporation so similar and then a limited liability company which is kind of like a partnership same kind of thing as a partnership in essence okay then we've got the net income now the net income is a little bit weird because normally you wouldn't see net income on the balance sheet why does QuickBooks put net income on the balance sheet because they're trying to tie the balance sheet to the profit and loss and so notice that in the double entry accounting system these two things are tied together if I go to the P and L then this whole income statement comes down to one one nine one fifty four sixty four that goes into the balance sheet here normally you wouldn't record it separately it would just be part of in this case retained earnings it would just be included in retained earnings in other words the balance sheet the equity section here of the balance sheet kind of represents the income statement or in other words the income statement is breaking out the activity of one year's worth of activity to show how we got to the end point that we're saying we're at in the balance sheet so in this case assets minus liabilities shows a value as of twelve thirty one two thousand twenty four two hundred nineteen six twenty nine sixty the income statement is showing us one year back kind of showing us running the race or driving how many miles we drove right from before we started to get here it's telling us how far we went in terms of net income within a time frame in this case the last year so that can be useful so in other words if I if I was to change the date up to twenty five up top what's going to happen when I hit tab this net income is going to roll into retained earnings tab and you see the net income rolled into retained earnings where it really should be and then I'm going to bring it back down to twenty four now that's kind of good but it's kind of a mess at the same time because it only this is always there on a yearly basis so if you want to report a monthly report it can be a little bit confusing because this is net income for the year and if you're trying to break out between a partnership like into multiple partner accounts for capital accounts it could be a little confusing that you've got this net income that's in this other account so it's it's kind of nice it's trying to show you how the things tie out but it does cause problems at the same time okay so that's the general overview of the balance sheet