 QuickBooks desktop 2023. Adjust opening balances. Let's do it within two-inch QuickBooks desktop 2023. Here we are in QuickBooks desktop get great guitars practice file that we started up in a prior presentation going through the setup process we do every time maximizing the homepage to the gray area in the view drop-down noting we got the hide icon bar open windows lists checked off open windows open on the left-hand side going to the reports drop-down to open up the major two financial statements and the trial balance starting with the profit and loss the P and the L will run the date range from 0 1 0 1 2 2 to 12 31 2 2 and let's customize it to bringing the fonts and the numbers up changing the font to 12 you're not required to do this but I'm gonna do it so you could see it better then we're gonna go to the reports drop-down and look at the balance sheet this time the big balance sheet and do the changing of the ranging up top I'll say this is 0 1 0 1 2 2 to 12 31 2 2 and then fonts and the numbers changing the font size up to 12 again okay yes please and okay let's open up the trial balance to by going to the reports drop-down and going to the trusty TB the trial balance 0 1 0 1 2 2 to 12 31 2 2 and then customize that report with the font team and the numbering to change it team to 12 in and yes scene and okay in there we have it the project we have been working on is imagining that we had another accounting system before starting our quick books accounting system we took the ending balances as of the last day of the prior period this is our worksheet to do that from the prior accounting system as of 12 31 22 which only includes balance sheet accounts because we're just because the income statement accounts roll into the equity section and we're entering these as of our beginning balances and then we're gonna start entering new data into our system starting after the cutoff date of January 2023 now the process that we used to do this is instead of having one large journal entry to enter this transactions to enter each account one at a time allowing quick books to use whatever form appropriate to enter the transaction and also allow any other bookkeeping needs to be put in place including allowing the sub ledgers as well as allowing the process for us to complete any future transactions related to these balances the checking account for example being entered with a deposit or transfer form the accounts receivable being entered with an invoice allowing us to create sub ledgers by customer and allowing us to receive payments on the invoice in the normal accounting process inventory having the sub ledger account breaking out the inventory by item these two are pretty straightforward the accounts payable also having a sub ledger account entering with the format of a bill so that we can then pay the bill in the normal accounting process because we did it that way quick books put the other side to equity because every transaction has at least two accounts impacted the other side went to equity possibly in the format of just going to opening balance equity which is kind of like a holding account which is quick books telling us hey look we just dumped the other side into this equity account and so you should basically double check that at this point in time which is what we're going to do or they put it into the income statement for example with the invoice that was created when we put the accounts receivable and the bills which were put in place when we made the accounts payable but because we entered it as of the prior year those will still roll into equity in terms of the equity account and still be part of equity so everything's in equity all of our beginning balances are correct total equity is now correct but we want to adjust our equity account to be appropriate at this point in time to one account so let's see that over here we entered each of these transactions they look good and we checked them last time so they look good until we get down to here where we've got the equity accounts broken out now on the trial balance you can see both the income statement accounts and the balance sheet accounts so if I run this report for 2022 the prior year then you can see the whole thing and I can say okay well this the 72 396 plus 20,500 minus the 15,000 that gives us the 77 896 which is our equity here if I increase this to the current year that we're going to start entering data as of after the cutoff date January of 2023 010123 to 123123 then we see that those income statement accounts are gone and it rolled into this account which is an equity account and and therefore we still have the same balance of 72 396 plus the 5500 of the 778 which is the balance that we want now in our scenario I'm not worried about the income statement for the prior period because if I go back to the income statement here we could see that we have this amount in the prior year in uncategorized expenses and uncategorized income that doesn't really make sense we shouldn't have uncategorized income and expenses but it's in the prior year and if I want to look up the detail for those transactions I'm gonna look at my prior accounting system because I just want the beginning balances in place for January 1st going forward of 2023 so if I was to change the year here once again just to show just to make sure we understand this 1231 1231 23 there is nothing in the current year because it rolls into the balance sheet that's how the income statement is related to the balance sheet so I'm not worried about it if you were worried about it however I could I could say 010123 to 1231 23 I could make I'm sorry 22 to 1231 22 I could make a journal entry closing the 20,500 and the 15,000 out to the balance sheet account of opening balance equity if if if I chose to do that that's one way you can do it I'm not gonna do that because I'm not worried about it because it closes out to equity anyways and I'm only worried about what's happening after the cutoff date so you can see that here too because I got the net income if I run this as of 2023 but if I run this as I'm sorry if I run this as of 2022 if I bring it up one day to 2023 that income will now roll into the equity account which is owner's equity so so now everything looks good except that I have this opening balance equity which is ugly you don't really want to report opening balance equity to like external users because it indicates that that you haven't really cleaned things up it's kind of not really professional because QuickBooks is using that account as an account to tell you that that's where they dumped the other side of all the transactions instead of just put it into the equity so that you can double check it basically so what we would like to do is take the money out of there and put it into the equity account so that it looks proper more professional and just to get a recap on this remember that we have the assets and then the liabilities and equity right so you got assets liabilities and equity assets minus the liabilities equals the equity the equity represents then the book value of the company so it represents in other words the owner's ownership interest in the assets of the company as opposed to the third party often the banks ownership interest in the assets of the company right claims to the assets of the company it's the other half other side of the coin this is what we have this is who has claimed to what we have now the equity section if we only have one owner because it's a sole proprietorship for example then I should only have one account in the equity section unless you want to have another account for draws for example and owner investment but we only have accounts representing one owner and we could just use one equity account to do that if however you have a partnership then it's going to be more complex and because you're gonna have two or more partners and you can have at least one equity account per partner called a capital account and you'll have to break out the equity per partner which becomes a little bit more tedious especially since QuickBooks uses that income net income account kind of messes things up when you're trying to break out the income to the to each partner but you've got you've got that and so you have to consider that if your partnership partnerships are actually more complex on the equity side of things because each partner might have different partnership equity accounts corporations are actually in some ways easier than a partnership because the corporation then is just gonna have in essence one account called retained earnings and possibly a common stock account representing the investment from the owner and the company and then the retained earnings income that hasn't been given back to the to the shareholders in the form of dividends and then the ownership interest is not broken out by separate capital accounts as in a partnership but rather by who owns how many shares all the shares are equal units of ownership in theory so that's gonna be the idea we only have one owner a sole proprietorship so all I'm gonna do then to clean this up is to take that 72 I'm just gonna write it down 72 396 just so I have it here and do a journal entry out of owner's equity and put it into the equity I could do that my most natural response would be to open a journal entry to do that and do it with debits and credits here but I'm gonna try to use the registers whenever possible and and remember the general format whenever you're entering data into QuickBooks you you're gonna say usually I'm gonna go to the homepage I'm gonna use a form whenever I can use a form because as we saw when we entered the opening balances here the forms are often connected to things like the sub ledger as well as to making the data input on the customer center and vendor center tracking the transactions as easy as possible from the bookkeeping side of things as well as making the general ledger accounts correct if there is no form to enter the transaction the form will then typically be the journal entry debits and credits that we will then have to use but you don't have to use a journal entry to enter the transaction because we could use the register which is like in a plus and minus format so for example I could go to the list drop-down chart of accounts and I've got the checking account which were familiar with the register look on a checking account kind of because it looks like a checkbook but each of the balance sheet accounts have a register as well so if I go down to the to the equity accounts I might not be able to enter it into the to the owner's equity directly because owner's equity is kind of a special account because that's the account that net income rules into and whether you're a partnership or whether you're a corporation or sole proprietorship you want to understand which account the equity is rolling into and you can see out here because it doesn't have you know the balance in it because it's kind of it's changing with the income statement the income statement is rolling into the equity so I'm going to go into the to the opening balance equity account double-click on it here's the register and I'm just going to enter a journal entry as of 12 3122 and I'm just going to say there's 72,396 in it I want it to go down to zero so I'm going to decrease it in the decrease side notice the terms up here increase and decrease I'm going to take it down seven two three nine six and I'm going to say the other side is going to go into equity or what did I say what do they call it owner's equity owner's equity and this is going to be the beginning balance adjustment I'm going to call it so there it is so now the balance goes down to zero they moved it up here because everything's at 12 31 but there it is if I double-click on that I could have done it with a journal entry here's the actual journal entry that's the actual form that's being used I might put the adjustment here to on the memo so so there it is I put it into owner's draws that's not where I wanted to go I wanted to go to owner opening I wanted to go to owner's equity not owner's draws change that I changed it to equity save it and close it it says you have changed it I'm going to say yes and then it gives me this little little message and this is a warning telling me well it's rated you are about to post to retained earnings account owner's equity QuickBooks uses this account to track profits from earlier periods that have not yet been distributed meaning earnings that have been retained it's kind of like a retained earnings account that have not been distributed in the form of draws or dividends this is an automatically generated account and in most cases you should post to another equity account so generally we don't post to that account but we can we just got to make sure we know what we're doing so that's a good warning I'm gonna say okay I know I hear you but we're we know what we're doing here I'm gonna close it out and then go back to the balance sheet and say okay so now we have that one account because they have one owner of the 77 896 now again I might break out if I have an assault proprietorship another account for draws when I take money out of the company so I can track in a separate account the money that we took out we also might have another account for investments which is not as common but still could be useful for the money that I'm putting into the company for my personal checking account but the total equities is just one equity account in this case because it's just a sole proprietorship one owner and that's the general ideas so we should tie out there's the 77 896 and everything is in place we can see it here on the balance sheet and we can also see it here on the trial balance format let's go to trial balance so it looks good you could check your numbers and everything looks good going forward nothing's in the income statement and so when I go to the profit and loss next time and I go to the current year 0 1 0 1 2 3 0 and 12 31 2 3 we have nothing in it going forward and everything should be set up and we're ready to go and enter data for the for the following period which we'll do in future presentations