 QuickBooks Online 2022, adjusting entry, loan payable, short-term and long-term portions. Get ready because it's go time with QuickBooks Online 2022. Here we are in our gig-rate guitarist practice file we set up with the 30-day free trial, holding down control, scrolling up a bit to get to the 125% we're currently in the home page, otherwise known as the Get Things Done page in the Business View as compared to the Accounting View, if you want to change to the Accounting View it's something you can do by going to the cog up top, switch to the Accounting View down below. We will be toggling back and forth between the two views, either here or by jumping over to the sample company file currently in the Accounting View. Back on over to the Get Great Guitars, let's open a few tabs to put reports in. Right-clicking on the tab up top to do so, duplicating it. Going back to the tab to the left, right-clicking again and duplicating again. One more time, tab to the left, right-click again and duplicate another time. As that is thinking, let's see where the reports are located over here in the good old Accounting View. They're going to be on the left-hand side under the reports, jumping back over to Get Great Guitars which is in the Business View. It's still thinking, hold on a second, there it goes. It's going to be left-hand side business overview on the left-hand side in the reports and then I'm going to close up the hamburger and pretty soon the reports are going to pop up here including the big balance sheet and that's what we want. That's the one I want picking that one up. Let's do the range change from 010122 to 022822, 0228 being the cutoff date for our adjusting entries. Drop down, let's take a look at the month by month, the side by side and run it. So we've got the Jan Feb and the Jan Feb. Let's go to the tab to the right. Let's go down to the Business Overview again, the reports and then close up the hamburger and go into the profit and the loss, the P and the L, the income statement. Change in that range, change that range 010122 to 022822 and then change the weeks to months. I want totals to months and then run it. So now we've got Jan Feb and Tote on the income statement. Tab to the right one more time. Business overview reports, close up the burger, type in the trial balance so we can locate the good old TV trial balance going into it. Let's do the changing of the ranging. The rangeings, they are changing to 022822 and let's say let's just run that one as is. There we have it. Let's go back to the first tab now, which is where our balance sheet is at and we're looking now on these liability accounts. Yeah, the liability accounts which are going to be the loan liability accounts. Now we talked a little bit about the different kind of structures you might use and the interplay between the accounting department that's going to be entering into the system or possibly a bookkeeper entering into the system and the adjusting department or possibly CPA firm tax preparer possibly at the end of the year or possibly on a monthly basis for reporting purposes. There's a couple different methods that you can use. One is that you might say that you want, for example, all loans from a reporting standpoint usually are going to be grouped into one account. It's going to be called loan payable and then have a short-term and long-term portion. So two accounts, a short-term and long-term portion of the loans. So you could do that internally, have one account, short-term and long-term portion and then the subledgers which are in essence going to be the amortization tables helping you to break out the detail. However, I believe that from an internal standpoint it's easier to break out each of the loans independently. So that's what I would typically recommend doing and it's typically easier to break them out independently in one account as opposed to having a short-term and long-term portion because the short-term and long-term portion will change with every payment and you already have enough to worry about considering that every payment is going to have three accounts affected instead of two accounts affected. So I would then recommend when you set up the loan to basically put them in the loan payable, possibly a sub-account of a loan payable, then list the loan in some kind of identifiable way possibly by institution, but most likely also by the loan number because you might have multiple loans in the same financial institution and then you can have your loan balances which should tie into the amortization tables that you will be making. Now note that the amortization tables looking something like this may be something you get from the financial institution with the loan. However, it might not. Maybe they don't give you an amortization table in which case you could create the amortization table or you could have your CPA firm or accountant or tax preparer possibly create the amortization table to help you break out the interest and the principal portion of each payment. That's one method you could use. You could also use another method. Hey look, I'm not even going to record. I'm just going to be on a cash basis. You might be working with the accounting department with your CPA firm for example and you might say, hey look, I'm going to try to do everything as close to with bank feeds possibly as I can mainly on a cash transaction method and I would like you to please shore it up, fix it to whatever it needs to be periodically at the end of the month or the end of the year. In that case, you might set up a loan account and just record the transactions that are cash related to it possibly not even putting the loan on the books unless you got the cash for it, right? But if you got the cash for the loan you could put the loan on the books and then record all the payments directly to the loan meaning instead of breaking out the interest and principal I'm just going to record the whole payment to the loan which would reduce cash the other side reducing the loan. That would not be correct because we would not be recording the interest but it would be the easy thing to do from a data input standpoint because now you only have two accounts affected and you can memorize the transactions because the transactions would not be differing between the interest and principal portion possibly being able to use bank feeds possibly being able to use kind of a rule to automate that transaction and then at the end of the period month or year ask your accountant to make the amortization schedule based on if it's a new loan and then break out the interest and principal portion with a journal entry and then also then tie out to the loan balance on the amortization table and break out the short-term and long-term portion pretty much no matter what you do your accountant is probably going to have to work with these amortization tables anyways so for them to do all of that together isn't too bad of a process it sounds kind of tedious but you're already going to be doing it anyways so it's not that much more work just to say hey look you do it on a cash basis and I'll just fix it I'll just shore it up at the end that's one method you could use or you can get your amortization tables and record them properly with each payment into one account per loan tying out to the loan balance after each payment and then at the end of the period you or the accountant in the adjusting process can simply break out the short-term and long-term portion that's the method that we're going to be using here so in other words you can see we had two payments that comes out to the loan balance after the two payments 69, 87, 8, 13 that ties out to the second loan we have here and then the first loan we had was on this loan amortization table and we haven't it's still on the books at the 5,000 at this point in time and then we had to do it at adjusting entry for the interest so that's a short-term loan we don't have to worry about short-term and long-term portion this one however is longer than a year long therefore if it's an installment loan a typical type of installment loan we're going to have those payments that are going to happen for the first year, for the next year and then payments after that point in time so we should break out the short-term and long-term for external financial statement reporting purposes I would also recommend in general as current loans so that you can then have all your loans under the same umbrella of the loan payable and then break out the long-term portion because all of your loans are going to have a current portion to them not all of your loans will have a long-term portion to them so we've got these two loans then this 5,000 we're not worried about because that's all current portion this one now I need to break out the short-term and long-term portion it's a little bit different than normal adjusted entries in that we don't have an income statement and balance sheet side to it there's not a timing issue with it it's just all balance sheet side of things in that we need to break out the short-term and long-term portion but it's the same as any other adjusted entry in that we're trying to do what helps the accounting department throughout the accounting process and then shore it up for reporting purposes periodically at the end of the month so we've got to figure out how much am I going to take out of this amount and put into the long-term amount so to do that I'm going to go to my amortization schedule and we've got to say okay if I make monthly payments then I'm going to count the payments that are going to happen for the next 12 months and I've got to figure out how much of that is current and long-term so I'm going to say if this is my starting point how many payments am I going to have 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 I'm going to end here let's make that green and so this is where we would expect to end after one year of data input I'm going to make this a little bit smaller so that would mean then that if I was to look at the payments that we're going to make in that time frame notice I'm not exactly looking at the payment you might say this you might say hey look why don't I just say obviously this times 12 is going to be the short-term portion because I'm going to be paying 16, 304, 75 in the next year that's the short-term portion and therefore the long-term portion is going to be this minus that but that doesn't quite work because this amount then is including interest and you might say well yeah I'm including interest because I'm going to pay the interest I've already committed to paying the interest but you haven't you haven't incurred the interest at this point in time that would be like saying I've already signed a 10-year lease and it's going to cost me $500,000 for 10 years or something and therefore I'm going to record the liability today even though I haven't used the office building at this point in time that's not how it works because you have to incur the expense in this case you've got the use of the money which you have not yet incurred even though you have committed to using it in the future you can't get out of paying it but you haven't actually consumed the thing that you're going to be paying for in the future and until you do you shouldn't record it as a liability even though you have that commitment that you're expecting to use it in the future in the similar way as any other kind of rental item that means that we have to pick up just the amount that's the loan principle not the interest not the rent component because we haven't incurred the rent component yet so we're going to pick up just the principal portion so I have to say the sum we're going to say the sum of everything all the payment side so we're taking the loan principle after this point just the principal portion of the payments that we're going to make down to this last one here which will be 12 payments and then I'm going to say enter so the short term is going to be that 1310854 the long term portion is what we'll still be owing after that point in time which is the 56769 or in other words you might look at it up here and say the short term portion is the same thing short term portion is going to be the sum of these items so that's what it is here and if this is where we are at this point in time including the short term and the long term portion and this is the short term portion short term then the long term must be the difference between the two and of course those two still add up to the current balance at this point in time see so that's going to be our journal entry so now we have everything in the short term at this amount therefore we have to do a journal entry to break out the long term so that's going to be amount of this decrease in the short term of that amount by the long term portion which will leave in the short term the 1310854 that will be our journal entry so let's go back and do it let's do it going back over it now note that if we had multiple loans that had a short term and long term portion you might do the same kind of process of having the loan payable and then basically multiple loans in a sub account to it to make it easier to see the short term and long term portion so that you can review it it's also easier for a supervisor to review it that way so you can actually just take and tie out okay this is what's on the amortization schedule instead of grouping those loans together we only have one loan that's going to be broken out but let's still kind of make another sub account for the long term and put that loan underneath it which is going to be the chase loan so let's go back to the first tab to do that I'm going to right click on the tab and duplicate it because I would like to change it from the business view to the accounting view because I'm going to add some accounts and right now I don't think QuickBooks' business view is that's the thing I don't like about it with regards to the business view adding accounts that is so I'm going to switch it to the accounting view switch it to the accounting view so QuickBooks doesn't drive me crazy they're trying to put me in the car that's going to drive me to crazy and I'm like no I've got my own car I'm not taking you can't drive me to crazy QuickBooks I'm going to drive where I want to go and then I'm going to I'm going to go into the accounting on the left hand side and then I'm going to close up the hamburger and we're going to create I'm going to create two more accounts a long term account which will be the parent account and then a long term account which will be the sub-account for our our loan so I'm going to say let's make a new account new account and it's going to be a loan payable account so I'll call it another current well it's going to be a long term liability that is rather note payable other long term liabilities we'll keep it at the note payable and I'm going to call it loan loans payable instead of note payable I'm going to add that so let's put that on down it's going to be in order here by the by accounts we got assets liabilities and then we've got the long term loan so there's the loan payable I'm going to make a sub-account I'm going to mirror the short term liability account we have up top for chase loan which is the $2791 so I'm going to take a $2791 chase loan for the long term portion so let's say new and I'm going to say this is going to be another long term loan and I'm going to say this is going to be called chase loan and then $2791 long term portion I'm going to make it a sub-account of the loan payable loan payable we just set up the long term loan payable see how it gives me that it's long term that's important to note to see that because it lets me know that it's not the short term one and I don't think that's always there in the business view and if anybody cares that wants to fix that no one cares what I think they should fix that so we're going to be down here loans payable chase loan the $2791 $2791 so now I can enter the adjusting entry I could do it with a journal entry of course I could go up top and say I'm going to add a new journal entry but we could use the register there's only two accounts affected and enter the journal entry that way we can go into either account because we're looking at we're looking at the the equivalent sheet of accounts it might be easier let's go to the first one because then I can see the result of it going down to what it should be so let's go into the register for the short term chase loan payable going into it and then we're going to say let's hit the drop down and do a journal entry a journal entry type of thing 022822 and then this is going to be an ADJ ADJ so that we can distinguish it as an adjusting entry and we're going to be decreasing it by it's got the full amount in it so we've got to decrease it by the 56769 59 to leave us with the 1310854 so let's do that let's do it 56769 59 decrease that's an increase don't you know the difference okay so 56789 59 okay and then the other side is going to go into the chase loan the long term portion there it is long term portion picking that up that should do it that should do it let's save it and close it and see if it does what we expect it to so if I go back on over to my reports report run it again for freshness's sake for freshness's sake put it back in the oven re cook it make another loaf of bread that's fresh so we're going to go down and we're going to say now we've got the 5000 we didn't do anything to that we've got the 1310854 which should tie out to what we have here 1310854 notice if you're reviewing it or for supervisors reviewing it how easy it is as opposed to having these kind of ticked together and if you have a lot of loans to try to pack them all in one loan and then try to tie out your sub ledgers in the amortization schedule it's easier to have this breakout although you don't typically want to report these externally you would like to collapse them or possibly if you're exporting and using excel to do a little formatting then that would be fine as well I'm going to go down and say now we've got this one with the drop down and the long term portion is the 5676959 which matches the 5665959 which is of course where we would be at after 12 payments that's why it's long term because it's the amount after the after the year of time frame so that's going to be that will be that again just note that how we listed these items you got to keep in mind you know how is it going to be listed in terms of the bookkeeping versus the reporting and then how can I make this as easy basically to review as possible and also as easy to then adjust for whatever reporting method I'm going to be using for external reporting because we don't want like a loan number in this long term we want to basically collapse it which you can do that way to report it externally or possibly you're exporting it somewhere else it just depends on what your display method is for it but from an internal standpoint it's nice to have these other loans broken out and then we're going to do a reversing entry however next time because notice every payment that we have going forward it's going to mess up the short term and long term portion so it's unreasonable to think that every time you make a payment you're going to do the adjustment between short term and long term that's kind of tedious like you'd rather do that periodically typically and so we're going to reverse it so it doesn't mess up the accounting department so they can get back to just having one account that they can tie out to okay so let's go back to the to the trial balance now this is where we stand at this point in time let's run it as of the cutoff date 228 this is our debit leg and our credit leg and you can see if your numbers tie out and if they do great if not try a date range change and we will then be running a journal report to diagnose any differences at the end of the section