 QuickBooks Online 2024, void check prior period adjustment. Get ready and relax because it's so easy using QuickBooks Online, you'd think it'd be a crime. But it's not, unless you're doing bookkeeping for bad stuff or something. Anyway, let's get into it. Here we are online in our browser, searching for QuickBooks Online test drive, looking for the result that has Intuit.com in the URL Intuit being the owner of QuickBooks, selecting the United States version of the software and verifying that we're not a robot. Why do you keep on asking, do I sound like a robot? I guess you can't tell anymore. Whatever, any case. We're going to duplicate some tabs to put reports in. We'll do it a little bit differently this time though. Let's start by going to the reports down below. And then we have our two favorite reports, balance sheet income statement. Let's right click on the balance sheet and open it in a new tab. And then right click on the profit and loss and open it in a new tab. Let's check those out, go into the tab to the middle. We now have our balance sheet. I'm going to close up the hamburger tabbing to the right. We have our profit and loss otherwise notice the income statement closing up the hamburger. First, a word from our sponsor. Yeah, actually we're sponsoring ourselves on this one. Because apparently the merchandisers, they don't want to be seen with us. But that's okay whatever. Because our merchandise is better than their stupid stuff anyways. Like our CPA six pack shirts, a must have for any pool or beach time. Mixing money with muscle, always sure to attract attention. Even if you're not a CPA, you need this shirt. So you can like pull in that iconic CPA six pack stomach muscle vibe man. You know that CPA six pack everyone envisions in their mind when they think CPA. As a CPA, I actually and unusually don't have tremendous abs. However, I was blessed with a whole lot of belly hair. Yeah, allowing me to sculpt the hair into a nice CPA six pack like shape. Which is highly attractive. Yeah, maybe the shirt will help you generate some belly hair too. And if it does, make sure to let me know. Maybe I'll try wearing it on my head. And yes, I know six pack isn't spelled right. But three letters is more efficient than four. So I trimmed it down a bit. Okay, it's an improvement. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Let's go back to the tab to the left. That's the setup process we do every time. Data input on the first tab. I have my two other tabs open to check the results of that data input on the major financial statements. Selecting the plus button, noting that we've been focusing in on the vendor cycle. Vendors for QuickBooks being people that we eventually pay for the use of goods and services. We talked about the fact that we could have an easier or more complex system depending on the type of company, industry and size of business that we have. The easiest system, most likely being one where you use the bank feeds, wait till it clears the bank. You would want to use electronic transfers in that case generally. And then you can record it with the expense form. The slightly more complex cash-based system would be using checks because the checks are something that you can't really wait till they clear the bank because you want to check and track the outstanding checks. We talked about a cruel system where we enter a bill increasing accounts payable and then we pay off the bills basically with check forms, but a special check form that's going to decrease the accounts payable. We talked about inventory and how you might have a purchase order, a request for inventory when dealing with inventory. Now we want to think about a system or a process for deleting or voiding a transaction that has been put in place and we'll look specifically at the check and expense forms, but you want to think as well about any other kind of form that you may end up needing to void or delete to make sure that you're doing that properly and you don't mess anything up. So the general idea would be if what we want to do is usually void the transaction from a pure accounting standpoint instead of deleting the transaction because we would like to usually keep the audit trail. So normally we would like to have the audit trail in place and then fix it with a new transaction instead of adjusting the current transaction that we have. That's one thing to keep in mind. The other thing to keep in mind is that whenever we're in a new period, so is that a new month or especially if it's a new year and we're looking at a transaction in the prior period that has a problem in it for some reason and we need to remove it, delete it or void it, we have to be careful about that because we've already finalized the financial statements for that prior period, for that prior month or prior year and if we delete something that's impacting the temporary accounts, income statement accounts primarily, then it might mess up the prior year stuff which will mess up the current year's retained earnings and things will not roll over properly. So that's the other thing we really want to keep in mind. So if something needs to be adjusted in the current period, it's not as big of an issue usually. You might be able to adjust that without causing any big problems. If it's something that happened in a prior period, you want to make sure that you're thinking about what the financial statement impacts will be so you can adjust it properly. And that most often happens with the check forms because what happens with the check and expense forms is that we write them and then when we do the bank reconciliation, possibly there's a check or an expense form that was entered two times. It didn't clear the bank or we had two transactions possibly that came through the bank feeds, for example, and we need to delete one of them because they pulled in two times for whatever reason. And because the checks are the most common forms, the payment out of payments is the most plentiful or biggest number type of transactions. That's where the need to delete something is most likely to happen. So if we were to enter something, let's just enter like a check. Let's imagine it was a check form and let's enter this one. We'll just make up vendor. Let's just start over with one again, vendor one. It's coming out of the checking account. I'm going to say save. We're going to pay a check and let's say it happened in 2024. So I'm going to go from go to 01, 15, 2, 4. There's the check number. Okay. And we're going to say that this is going to be going to, I'm just going to say expense, making up a generic expense, expense one. Going to add an account. We're going to call it expense numero, expense other business expense, boom. All right. There's our expense form and we'll say, make sure to put an amount this time, 110. We're not going to make it billable or anything like that. It's not an inventory item or anything like that. So what's this going to do? Well, it's a check form. So we can say what's going to happen. The checking accounts going down. If we're talking debits and credits, and the other side's going to be an expense. So we have an expense 110. This is just the debits and credits just so you can see it on a debit and credit standpoint. There's nothing in cash. So it's going to go down to the negative. Let's put something in cash to start off with just for negative 10,000. I'll just put 10,000 in cash. So it goes down to 9890. And then the expense is going to be that. So it actually makes a loss, right? So the income statement is impacted in this case, lowering the net income. Let's check it out this way. Let's save it and close it and check it out. Going on over to the balance sheet. Let's change the dates to bring it up to 2,024. 2,010124 tab, 123124 tab, running it to refresh in it. And then we're going to go down to the checking account and check it out. And you have the new format, the cool new look that's in here. And it's not there again. Let's refresh it again, another refresh. Okay, there it is. So it pulled in, there's the 110. So if I go back, the other side should be on the income statement. Let's go to the income statement and change the range. 1,0124 tab, 123124 tab, running it to refresh in it. And there's the 110 on this side. Now if we needed to adjust something, the easiest thing to do is you could go into it. You could drill down from here to get to it. Or you might look at it from the register standpoint. So when you're trying to look for the check, what might happen is that you do your bank reconciliations and you notice that there's an outstanding check that doesn't clear for multiple periods. It's been like a year now. So you're saying, well, I need to get rid of it because it's not going to ever clear at this point, I don't think. So I need to delete it. Well, you could go in and find the check by going into the checking account and you could find the check this way and then drill down to that original check. And then when you're in here, the temptation is to change the date or whatever you need to do if you needed to adjust it or to adjust it here. If you do need to adjust something that way, QuickBooks is very flexible in doing that and sometimes that might just be the easiest thing to do if you just put the wrong number in. For example, if this goes through the bank and the amount was actually 100 and 11 or something and you're saying, oh, I put it in there for 110. Well, the easiest thing to do would change it to 111. However, normally for bookkeeping, we don't usually like doing that because we would like to not delete transactions but rather keep the transaction and then put more transactions to adjust it. Why? Because then you have an audit trail, right? Otherwise, if you mess something up, you can't see what happened because you kind of deleted what happened. So you could print the check down below. We can order checks. You can make it recurring. And then under the more, we can also void it and delete it. Now, again, deleting it usually isn't what we typically want to do because then we remove it entirely. We don't have any audit trail. Voiding it is, in essence, a similar thing that we're basically removing it, but we'll still have the shadow of the voided check there so we can still see that we input it and then voided it. So that's what we would typically want to do but either one, whether we delete it or void it, if it was something that happened in a prior period, that's going to be a problem you can see because it impacted net income and the net income has now been closed out to retained earnings. Net income is a temporary account. It restarts every year or every month. So if it was in the current month and you just void it, then you could just go in here and void it and it will, in essence, be voided. But if it's not in the current month, you've got to think about what's going to happen to the income statement. Let's go back to the first tab over here. The other place you might go to void the check is you might go into the transactions on the left-hand side. You might go into the chart of accounts and then within your chart of accounts you've got your register. So I'll go into my register, view the register and so then you can find the check in here. So there's our check. This one I entered on the 24. And then we can delete it here. But again, you don't typically want to delete it. You could just remove it entirely. But normally we would want to void it so we would go to edit and we can then void the check. So we can go down here. Let's actually do it. Void the check. Are you sure you want to void the check? I'm going to say yes. I do. Transaction successfully voided. So now you can see the transaction is still there but it has a zero dollar amount within it. If I go into my balance sheet or let's go into the income statement and refresh it. Now it's back down to zero. If I go into that transaction then we still see the check here but it has been voided. It's pulling in and showing a zero amount in here. So we see the audit trail. And if I went into the first tab here and I go into my expenses and I go into my expenses tab on the left and I look for my checks. So I can look for my checks and I can say the status all status 12 months payee and category and then I'm going to close this out and we could check out my check within here. We could find the check within here and we could find the check in the vendors and if we had a call from the vendor or something and we're saying this was vendor one so we can see the activity within here and again we've got the audit trail to show what happened with it which is nice. So now what if this happened in a prior year so let's go back into the register to do this. Let's go to the transactions and say okay let's go to the chart of accounts let's go to the view register and let's pretend we entered a transaction we had a transaction in the prior year I'm going to make it in 2022 so I'm going to say it was a check and let's say the check number that's final but I'm going to put the date as 010122 and so then I'm going to in 2023 I'm going to say oh we made a mistake it didn't clear in 2023 it was written in 2022 okay that's the scenario so this is going to be vendor vendor one again let's say this was for 200 and let's say this is going to go to once again expense account number one so I'm going to save it and close it so now we have a transaction that went in there if I look at the profit and loss from 010122 to 123122 tab so there's the $200 so notice that this $200 here is now going to roll into the equity section so in other words let me show you that if I go to the balance sheet and go from 010122 123122 run it in the equity section we've got that $200 nothing's in retained earnings the net income is just pulling in here if I then go into 2023 010123 123123 now that $200 rolled into the to the retained earnings account and the net income is now the current net income so and that's because when I go into the following year this income statement starts over again and it's connected or part of the balance sheet because it rolls into the balance sheet so if I void this this amount now as of 2023 that's going to mess things up because if I go back into my profit and loss for 2022 it's not going to be there anymore and you might say well that's not a problem it shouldn't be there because it didn't actually clear but we already finalized 2022 and we already used it to create our taxes or whatever for it and we already got the deduction in that case possibly so we have to that's set in stone basically right now and so so we can't do that and you might say well what's the point because like in the current year it'll be fine but in the current year it's not going to be fine exactly because the balance sheet will not roll over properly right because now we this retained earnings isn't going to roll over properly so so what should so we could adjust the prior year period and adjust our tax returns and all that kind of stuff but no we don't usually want to do that we want to reverse it in the current period so how would that work well if I so what I really want to have happen if I go if I look on over here we're going to say okay this is if this was the 200 now we're going to say this one was included here and then it rolled into it's part of equity at this point in time so as of 2023 what's actually happening is this expense rolled into the equity and so now it's no longer part of the income statement in 2023 it's part of equity because this is the prior year let's call it check for the prior year so so what happens in the current year then what if that check is not valid then I can't really mess up the equity section I've got to do something in the current period income statement so if I need to reverse this I'm going to say cash I'm going to go back up so that's going to happen and so we'll say cash goes up but then the other side is going to go to the current period expense which will actually create a negative expense meaning it's kind of like we're recognizing basically income right because because we reversed it last time so this was actually a negative expense which is actually income I know it's a negative number it looks a little bit confusing but that's actually what we want to have happen so how can I do that over here I can't really I'd like to basically void this check and so I can see it as voided and also have it be recorded in the current period but if I just void this check it's going to mess up the prior period so like the fastest thing you can do is you can actually enter the current period and reverse it but then you wouldn't be able to void it so one way you can do it is we could say okay what I'm going to do is I'm going to re-enter this check in the prior period and so it'll cancel itself out and then I'm going to reverse it in the current period now actually I like to make this a lot of times a format of a journal entry because that'll show me that it's an actual voiding adjustment so I'm going to make it a journal entry I'm going to make it a date down here as of 01.01.22 and the reference I'm going to say void 72 that's the check that I'm voiding I'm going to say this is we could say vendor number one and I'm going to say in the memo void check 72 and then the payment is going to be $200 it's going to go to the same expense account expense number one and I'm putting it in here two times because I'm going to void this one I'm going to void the original one so I can see that it was voided so if I enter this it's going to be in there two times so let's just check that out if I go to my profit and loss run it now I've got $400 in the prior period now I'm going to void the original one so I'm going to go back on over and I'm going to say that we're going to go to the original one I'm going to go into it edit it and I'm going to void it and the more button we're going to go ahead and void that one so boom are you sure you want to void it I'm going to say yes and so okay and so now if I go back into the profit and loss run it you can see it's back to $200 and so the retained earnings is now correct if I go into it I can see these two transactions I see the second one is a journal entry so I can see like the audit trail right I can see it's a check for 72 I can see it was voided I voided that check and I can get an idea of what actually happened so I'm going to go back on over and so there's the $200 and now let's go back into the first tab and now I want to reverse it in the current time period so I'm going to say drop down and we're going to say it's going to be a journal entry and let's say we're in 2024 now so let's go from 010524 let's say is the current date and we're voiding the check 72 again and it's for vendor 1 void check 72 and this time it's going to be on the deposit side and it's going to be for the $200 $200 and the other side of the account is going to be going into the expense 1 so I'm going to end up with that negative expense in the current period that I'm voiding in which is 2024 in our example so if I say okay and then I go back to my income statement I can see in 2022 if I run this nothing happened here I'm still at that negative $200 it's pulling into my retained earnings at that $200 if I go up to 2024 010124 $123124 let's say I voided it in 2024 then that $200 rolled into the retained earnings and now I have another $200 in 2024 going the other way 010124 $123124 running the income statement and so now I have this negative expense which is actually like income which makes sense because if you think about it from taxes for example we deducted the expense in the prior year we shouldn't have because it didn't clear we didn't actually pay it we found out that that's the case through the bank reconciliation in the current year and now we've added it as a negative expense which is in essence income so if you're thinking about an income tax perspective we would have to pay taxes on it this year right because we got the deduction from it in the previous year and we didn't have to pay taxes on it so we shouldn't have because it didn't actually clear and we could see that's a journal entry now if I did the bank reconciliation you might say well this is kind of messy what happens with the bank reconciliation and the idea on the bank rec is that is that it's now been voided but we can check these two things off once they clear the bank reconciliation so if I go into the transactions here bank reconciliation reconcile and then start and I'm going to say dude and I'm just going to say checking account okay and let's just I'm just going to make up an ending balance 10,000 as of 0124 0128 let's say 3124 let's say and reconcile and so we'll get into bank reconciliation later but the idea is there's the 200 check that was voided and here's the 200 down here and then here's the journal the voided check so here's the check that was voided and remember that the problem the thing that got us to figure this out is most likely we did a bank reconciliation and this check the 71 cleared for over a year so we said we have to delete it or void it but if I void it then it messes up the prior period which stops people from doing it right that's what this process is doing so now it moved it to zero that's what we want because I can check it off and finally not have it bother me on my bank reconciliation but I need to check these two off too because the 200 here and the 200 here are allowing me to pull the transaction into the current time so I don't mess up retained earnings but it'll still reconcile because these two cancel each other out so that's the general idea now notice if you used I think the desktop version of QuickBooks actually kind of does that automatically for you so if you're moving in from the desktop version I think it gets you like this little warning saying hey this is a prior period do you want us to do this adjusting entry thing for you and we'll just do it for you and it does it which is nice although sometimes it might you have to be careful that it pulls in with the online it doesn't always just give you that warning to say or give you that automatic thing that says I'll delete it last year and do the suggesting entry so we have to kind of manually put that in place you have to think about that process anytime that you're doing something to a prior period if you have accounts receivable that's been outstanding for a long period of time and you're saying I need to delete this stuff you got to think about well what's going to happen to my net income when I entered it in the prior period it becomes kind of an an issue and and the idea is just like this you're going to say well anything that hit the income statement anything that hit the income statement is now inequity at this point in time so I can't mess up prior years income statement because that rolled into equity and I'm going to mess up equity and then you can work from there to see how you can kind of fix everything so and the bottom line is obviously if you're deleting anything from a prior period and you're a bookkeeper or you're working in an accounting department make sure to talk to the accountant or the supervisor or the CPA before you delete everything anything or do anything to a prior period in particular is the general the general rule