 QuickBooks Online 2024, reversing entry related to loan payables, short-term and long-term portions. Get ready and some coffee because we're diving into it with Intuitz. QuickBooks Online 2024. Here we are in our Dick Ray Guitars 2024, QuickBooks Online sample company file. We've set up in a prior presentation, opening up the reports on the left-hand side. We're in the favorites. Right-click it on that balance sheet to open it in a new tab. Right-click the profit and loss to open in a new tab. Right-click the trial balance to open in a new tab. Let's go to the tab to the right, close up that hamburger and change the range. We're going from 010124 to 033124 because it's the reversing entry. We're going to select the drop down months and run it and then we'll tab to the right. Repeat the process. Hamburger needs to be closed so we can eat it. 010124 tab, 033124 tab, selecting the drop down months and refresh the report tabbing to the right. Once again, hamburger closed and we want the range at 010124 tab, 033124 tab, month by month, side by side, running it. Let's go back to the balance sheet, recap what we did last time, which was an adjusting entry. The adjusting entries are entries that happen at the end of the period, typically month or year to make the accounting or financial statements as close to the accounting basis being used, which is typically an accrual basis, but could also be a cash basis or tax basis as possible as of that cutoff date. We talked about last time the loan payable. We had our loan payables down below and we talked about the fact that there's many different issues with the loan payable that you want to consider and a few different options on how you're going to deal with those issues. The main issue, however, for us here was breaking out the short-term and long-term portion of the loan. So the general concept, the general idea would be that I would suggest having our parent loan payable account. 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 crunching numbers is my cardio product line. Now, I'm not saying that subscribing to this channel, crunching numbers with us, will make you thin, fit, and healthy or anything. However, it does seem like it worked for her, just saying. So subscribe, hit the bell thing, and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com, typically a current portion or current liability, and then have your loans underneath it as subsidiary accounts, possibly including the number last four digits of the loan number, as well as the institution where the loan is at. So you can identify each loan. Then when you pay off the loans, you can do so according to the amortization schedule, which is what we did in our practice problem, decrease in cash by the amount of the payment, and properly allocating the loan interest and principal, being able to then tie out to the current loan balance after each payment. So that's one method that we can do. Remember that you could use another method, however, because that method of recording each payment and breaking out the proper interest and principal makes it difficult to memorize transactions and simply use bank feeds to record the transactions, because although the payment repeats and is the same, the interest and the principal differ. Therefore, if you want to make it easy, you can say, hey, look, all I'm going to do is record the decrease in the payment to the loan account. It's respective loan accounts, so I can automate that process with the bank feeds. And then at the end of the period, myself or my CPA, my tax preparer can create the amortization schedule and properly break out the interest at that point in time as part of the adjusting process, as well as break out the short term and long term portion. So those are a couple options that you could use. No matter which option you use, however, I think it would be best to basically have a parent account and then break out all of your loan accounts underneath it so that you can look at each loan individually from an internal perspective while still being able to collapse the loans into a loan payable current portion for external reporting, something like doing the tax return or presenting it to a bank. Then we have the breaking out of the short term and long term portion. So once everything is in the short term or one loan, one line item per loan on the balance sheet, then some loans are going to have a current portion to them. If they're like an installment loan, for example, that we pay monthly, so we have to break out the short term and long term portion. So we mirrored this same structure down here in the long term loan payable and only one of them had a long term portion to them. So we then broke out the long term portion according to our amortization schedule. So now we've got the short term, which is going to be just the principle, not the interest payments for the next year because that's what a current liability is, what is due in the next year. The interest is not due in the next year, even though you're going to be paying it in the next year because the interest has not yet been incurred in a similar fashion as signing a lease today for an office building has committed you to pay for the office building, but you haven't incurred the expense given the fact you haven't used the office building yet. So you wouldn't record the expense at this point in time. So we only have the principle payments as the current liability that we would pull in. And then so we have the short term and long term portion that we broke out short term portion being these payments to long term being where we're currently at minus the short term, which will be equivalent to 12 months down the line on the amortization table. So 12 months later, we'll make these payments, we'll break out the interest and principle properly. The balance will be going down by the principal amounts to get us to, you know, where we will be a year later, which is equivalent to this to this short term portion here. So that's going to be the idea. I'm sorry, where we're going to be at the end is going to be the 56769, which will be equivalent to the long term portion and the difference between the two points is the short term portion. That's a couple different ways that you can look at it. All right, so we broke that out properly. Now what's the problem with that? Well, now I don't want to leave it that way for the bookkeeper, because this is great for financial reporting, because now I can do my taxes or give it to the bank or give it to the investors, whoever needs these financial statements, properly breaking out the short term and long term portion. But in the internal bookkeeping side of things, now it's like, okay, well, what happens next time? Do I make a payment? Do I make the payment to the current portion? Do I make the payment to the long term portion? Do I really have to break out the short term and long term portion every time I make a new payment? Because it's going to be tedious to do that, because you would think I would make the payment out of the short term portion and then I would have to do this calculation again every time and do an adjusting entry for the long term portion. That more added difficulty is the reason that we have adjusting entries in the first place, to not have to do things that are too tedious during the bookkeeping process, but still be able to shore them up to make the financial statement reporting correct at the end when we actually present the financial statements, month end, quarter end, year end. So we're just simply going to reverse the entry we did, closing this long term portion back into the current portion so that everything is represented with this one account so that when the bookkeeper makes the next payment, they can just do the same thing they normally do according to the amortization schedule and put it to that normal current account and tie out to the balance for that current account. All right, so let's do that. So note that if I go in here, we could do this a couple different ways if I look at the reversing entry. Here's the journal entry. If I go into it, QuickBooks has this pretty neat just reverse thing down here now, which will reverse it exactly. So we could use that. That would be the easiest thing to do, but since there's only two accounts affected, we can also kind of use the register. So let's practice using the register and then we'll look at the journal entry. So I'm going to close this out and then I'm going to go back and then I'm going to go into the first tab and let's go down to the transactions and into the chart of accounts, close up the hand buggy, and then we're looking for the account type of current liabilities. So we've got other current liabilities, then I'm looking for the loans. Here's the two loans. You can see them with these indented items. And so what I want is this loan that had the current portion. I can use the register on any balance sheet account. This is a reversing entry that doesn't have an income statement portion to it. It's only a balance sheet activity. So I could use either the short term or the long term. If I go down to the long term, I could use either one to do the entry in. So let's go back to the short term. I think that's where we entered last time. And I'll go into the register with that one. And we're going to say, actually maybe it would even be easier to go into the long term. Let's go back. The long term might be easier to see because it'll close out to zero. Let's go into the long term one. Sorry, I'm getting confused. I'm confusing people. But here's this one. Let's go into this register here for the chase. And so this one needs to go down to zero. So that's easy to see. So I'm going to go, okay, let's hit the dropdown. Let's make a journal entry to do that as of the day after the cutoff date. The cutoff date for us was 229, the end of February. So 0301, 224, reversing entries always the day after. I'm going to call it a reversing entry, entry. And then I'm going to say that it's going to decrease by the amount that's in there, 56769.59, bringing it back down to zero. The other side is going to go into loan payable short term portion. There's this one for chase. And that should bring it back to the current balance, including both short and long term. All right, let's close it or save it, which will close it. And then we'll go into it again, edit it, see it as a journal entry. So you can see now I'm going to copy the reversing and put it in the description on both line items. So you can see now that the loan payable, we reversed it, the long term portion, we debited bringing it down. It was, you know, at 56769, 59, it's going to go back down to zero. And then we're going to credit or increase the current portion so that the whole loan is represented in that one account under the current liability. Let's save and close it. And then we'll check it out. I think that looks good thus far. So we've done well. We're going to go over to the balance sheet here and then and then run it and let's see what we have. We're going to go down and say that we have then in the current liabilities, the, the, uh, as of, so as of the cutoff date, it's at 1310854. And then we reversed it back to this 6987913, which matches the full balance on the amortization schedule so that if the bookkeeper is making payments according to the amortization schedule, they can just worry about that one account making the decrease to cash recording the interest portion and the reduction of the principal, which will make the new total loan balance in one account go down to 6881056. So that's the general idea. If I go to the long term side of things, we broke out the long term portion for the purposes of reporting. And then we closed it back out so that the bookkeeper doesn't need to work, worry about it, even if we're the bookkeeper internally. If I go into one of these accounts, you can see that here it is with a journal entry. There's the adjusting entry. If I bring it up to 131, we have the reversing entry. So we entered the adjusting entry, and then we simply reversed it right back out. Okay, so that's the idea. Looks movie B to the end. So let's go ahead and take a look at our trial balance, see where we stand. Well, this is where we are on the balance sheet. I know I'm going fast. And then here it is on the income statement. We didn't do anything to the income statement. So nothing happened there. It's the same low mizmo. And we're going to go to the tab to the right. And then here's our trusty trial balance. So February is the cutoff. We didn't do anything to February this time. We reversed what we did to February in a prior presentation on the loan payable short term versus the long term portions. Where was the short term? Uh, uh, short term versus the long term portions. Income statement remains the same.