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Here we are in our get great guitars 2024 QuickBooks Online sample company five we set up in a prior presentation continuing to lay down those foundational items necessary to go through our normal accounting process, the normal accounting process, including the entering of transactions with the use and help of forms found in the plus or new button broken out by cycle, customer cycle or sale cycle, vendor cycle or expense cycle, employee cycle or payroll cycle. We can then communicate with those individuals, customers, vendors and employees in the centers, the sales center or customer center, expenses center or vendor center, payroll center or employee center, the setup process, the foundational items that we do basically not so much cyclical. But at the beginning, generally found under the cog, we looked at your company files, the lists. We are in essence continuing with the lists in part now looking at the chart of accounts, which can also be found under the transactions on the left chart of accounts on the right. And we're now thinking about entering the beginning balances. Imagining we had a prior accounting system, and we're pulling those numbers into the current accounting system, these numbers being our prior accounting system numbers that we pulled from that system as of the end of the last period in the prior system, in our case, 12 31 2023, so that we can start our data in the new period as of January 1, 2024, noting that you will generally not have any income statement accounts here because we're having the cutoff as of the end of the year, even if that means I have to run duplicate accounting processes, duplicate accounting software or systems for part of the current year so that I can then have all of one year's worth of data at least in the current year is the general idea. We noted that we can't just enter a journal entry even though this is basically a journal entry format to put all these beginning balances in place given the fact that many of these accounts have special needs. We then went over the accounts that have the special needs in particular, generally from the most complex to the least complex to most complex if you're tracking inventory within QuickBooks is often the inventory because you need a sub ledger broken out by inventory. We went to the accounts receivable because you need a sub ledger breaking out who you owe the money to customers that is. We then went to the accounts payable because you need a sub ledger there tracking the people that you owe the money to that's the vendors. This is who owes you money. I hope I said that right accounts receivable but if not that's who owes you money. This represents accounts payable who you owe money to. Now we're going to pick up some of the rest of the ones which generally are a little bit more easy meaning we could almost just simply do a journal entry for those items as you might first think for all of these. So for example we're going to the checking account. Now with the checking account it's an increase so I think even though it's the beginning balance format you could enter it with the journal entry but we might want to enter it with a deposit form because that's the form typically used to increase the checking account. The checking account will still have some other special needs with it in particular if we have outstanding checks and deposits from the prior accounting system that we'll see on the bank reconciliation. We will hit on those problems more when we get to the bank reconciliation in a future course or section but the general idea will be what if as of 1231-2023 our system says 25,000 here but our checking account as of that same date says 30,000 dollars. What am I going to do? Well I have to put it into the system at 25,000 because I have to be in balance when I put these beginning balances in place but it doesn't match what's in the bank. Why doesn't it match what's in the bank? Because as of 1231-2023 there were outstanding checks and deposits so what we will do is we'll put the 25,000 in now to make everything balance and then we'll go back when we do the bank reconciliation and deal with what we'll have to deal with with regards to those outstanding checks and deposits which is typical thing that we'll often have to deal with. We have the accumulated depreciation related to the furniture and fixture meaning these are fixed assets property plants and equipment. Usually it's pretty straightforward to do the data input for these but you might have to adjust the accounts and you want to have some concept of the sub ledger which oftentimes might be not be tracked in QuickBooks because you don't really need to manage it in the same way that you need to manage who you're doing business with with regards to the customers for the accounts receivable and vendors for the accounts payable. You need to track this information so that you can properly record the depreciation and that's often done with outside software at least for small to mid-sized businesses because the tax code requires you to do that at least on a tax basis and if you're going to break out all that information on a tax basis then you might as well also use that other software to give you both book and tax basis so we'll touch more on that in future presentations but entering those beginning balance pretty straightforward. The visa the visa usually if it's a credit card pretty easy to enter the beginning balances it's similar to the checking account in that you might tie the visa card into the into the financial bank feeds but you don't usually have the same kind of outstanding checks and deposits detail with a credit card because you're usually recording all your credit card transactions as they pass through the system because they're all electronic transfers so that's usually pretty easy to enter into the system loan payable also typically pretty easy to enter into the system it's a little bit more difficult to actually pay the loan payable but it's pretty easy to enter the beginning balance into the system and then we have the owner's equity which which will fall out so this will just automatically fall out after we do all of these other balances this number will be in multiple different accounts but it will be the correct in total for equity okay and note I also often misspell things like loan and stuff so bear with me with that not my strong point the spelling aspect of things so that's just you'll just have to deal with it all right let's go back on over here so we have a cash account that they gave us which in our general ledger which they just called cash account we could change the name here so if that's basically our checking account maybe I would just adjust the name to it following our general rule so if I hit the drop down I might say okay edit this one maybe I want to say that's going to be a bank account type but instead of just cash on hand I'm going to make it into my checking account and call it checking checking now if you have multiple accounts you might put like the last four digits of your account number on it that's useful for internal purposes but it can be kind of an issue for external purposes because you probably don't want to be reporting that to external users so just be aware of that one way you can get kind of the best of both worlds is to make a parent account called the checking account and then put all of your checking and savings accounts underneath it with with then the last four digits of the number so that you can so you can see and distinguish them and then you can collapse the parent account for external reporting so it's just showing all the bank accounts as one lump sum but if you if you're just trying to get your internal reporting down then it's often useful to put that in place I'm going to say so I'm not going to adjust the description I could delete the description maybe and then just save it there so change the type of tax form section of the account may affect your accounting I'm going to say okay and so that would be our checking account now obviously we'll talk more about the bank feed situation in the future course or section so I'm not going to get into that right now but we will we have a whole another course or section on the whole bank feed thing so then the easiest way to enter these you could enter it with a deposit form if you're going to increase the checking account plus button and then we go into a deposit form however when I make deposits into our system I have a general rule of of how easy things are to enter if I'm entering a system where I'm using sales receipts and I'm getting receiving payments then I use the deposit form because that will go that will help me to go in and out of an intermediary account which is amounts to be deposited which is a clearing account allowing me to group together cash payments and credit card payments more easily before I deposit them into the checking account to better do my bank reconciliations if the deposits are just coming from the bank feeds and I'm adding them that way then you'll have kind of a quick deposit form which will still be a deposit form but the data input screen will be faster if I'm entering a deposit that that is not coming through the bank feeds and it's not from the receipt payments or sales receipts instead of using the deposit form I'll typically go to the register so let me show you what I mean this is what a deposit form looks like if I go into the deposit form so we have the checking account it's going to go into and then we have the ad funds to the deposit here and so we can add the here and and then add the accounts if I go into the register I'm going to close this out then I can go to the register here close up the hamburger and now you have something similar to like a check register kind of looking feel to it and I'm going to hit the drop down it's still going to be a deposit type form but I have more of a minimal screen to enter this in so I'm going to enter this as of 1231 23 the end of the prior period and I'm just going to call it the beginning beginning balance and then I'm going to say that this is going to be a deposit of what did we say 25,000 and it's going to the other side is going to go to an account let's call it opening balance equity it's going to go into that that opening balance equity clearing account that we've been doing we've set up just as part of our first balance entry data input so when I input this it's still going to create a deposit form when I drill down on it I'll see it still basically a deposit form but it's an easier data input screen to put into here note also if you were to attach your bank feeds to this then if you enter this beginning balance you want to make sure that you're pulling in the bank feeds only from January onwards because you have a set cut off as of 1231 23 all the stuff coming in from the bank should be tied out from the prior period before in the prior accounting system and you only want to start the new bank feeds in the current period going forward we'll still have an issue with those outstanding checks and deposits as of 1231 2023 which we will deal with in a future course or section on the bank feeds let's save it and let's open up some reports go into the to the hand boogie down to the reports on the left hand side we're going to right click on the balance sheet open link in a new tab right click on the profit and loss open link in a new tab I'm also going to scroll down to that trustee trial balance and let's put let's bring that I'm going to put a star next to it because that one should be brought up to our favorites so if it's not you can always type it in up top but I like to have it up here because then I can right click and open in a new tab I really like that I'm liking it more and more every presentation I'm going to close up the hand boogie and let's bring this back to 010123 tab 1231 23 tab run it to refresh it and there is our balance sheet so now we have the checking account we've got the 25,000 in the checking account if I drill down on that number what's going to happen it's going to take us to the transaction detail deposit form was created if I drill down on the deposit form it takes us not to the register but to that deposit form so whether we enter it with a bank feed with an actual deposit form that looks like this or the check register quickbooks sees it as a deposit form generally increases to the checking account generally deposit forms let's go back let's go to the tab to the right and look at the profit and loss from 010123 tab 123123 tab run it to refresh it nothing new happened to the P&L the profit loss where did it go where did the other side go it went back to the balance sheet into the opening balance equity let's go into the opening balance equity and we can see there's the 25,000 we put in there with a deposit form so we're just dumping everything into equity one way or the other either goes to the income statement here ends up in equity and the income statement will then zero out as of the first day of the next period and this will roll into retained earnings or it goes into here at which point we will at the end of this process move it to where it needs to go to the proper equity account but in total the total equity after we're said and done with this should equal the total equity 77896 that's the idea all right what's the next one we did we did the checking accounts receivable inventory let's do these two now these two are kind of backwards you can see because the property planting equipment should basically be on top why is it backwards because these two have the same account type of property planting equipment or fixed assets and then it's in a in order of alphabetical order within it that's why it's kind of upside down like this so a couple things to note as we add these we'll touch on this more as we go through the practice problem and as we then do the adjusting entries in a future course or section but remember that if you're talking about property planting equipment fixed assets then you're doing something that has an accrual basis to it meaning you can't be in a cash based system purely even if you're using a cash based system because in the United States at least for taxes they will still force you if you purchase something large to do an accrual thing put it on the books as an asset even if you purchased it for cash and depreciated why would that be it's just a quick explanation just note that if i go into the to the profit and loss imagine that you bought an office building for a hundred thousand dollars cash and then you just expensed it which would be done in a cash based system you would have a hundred thousand dollars office building expense but that would mean you'd have a huge loss in the year or month of the purchase and if you compared one month to the other month you it would look it wouldn't be comparable because because of that huge expense what's really happening is you're using the building for like 30 years that's like an extreme example where you're going to be using it for a long time so what should happen for comparative purposes is you only expense the portion of the cost that you're actually consuming the rest of it is actually an investment represented by the balance sheet account of an asset that you will then be consuming over a long period of time into the future so that's the general idea but any kind of a cruel thing like that causes more problems because now i've got to put this on the books as an asset and then how am i going to allocate it over the the useful life or whatever you want to call it that's an estimate anytime we have an estimate that's going to be a problem and we're going to have to you often work with our accountant for that because in the united states the tax code is more restrictive in the type of allocations you can make so so that means that for taxes you're going to have to do it according to the to the tax law and then you have a little bit more leniency oftentimes for your personal bookkeeping but then the question is do you want to have something different from taxes to your personal bookkeeping small businesses may not even though it would be better for decision-making processes because then it's just going to take more work or but if you do the tax software will typically have the capacity to calculate both tax depreciation and book depreciation so again the sub ledger might be outside of your quickbooks file in like tax software that you can use to then make periodic adjustments possibly on a monthly basis possibly on a yearly basis depending on what your needs are the sub ledger that we're imagining would be created outside of quickbooks online possibly by the tax professional using tax software supporting the fixed asset or property and equipment account this 75,000 might look something like this we'll talk more about this in a future course or presentation when we get to the adjusting entries but the idea here being that we have the total category of furniture and fixture and machinery and equipment in this example but within that category we're very descriptive in terms of exactly what was purchased the purchase is possibly happening on different dates and each of them having to be depreciated on their own in their own way using whatever method is applicable to them and the tax method might actually differ than the book method so you might have a depreciation schedule looking like this on a tax basis which you can also use for your bookkeeping in some cases or you might have a whole different depreciation schedule with the dollar amounts of the purchases being the same but the calculation of the depreciation being different so in this case for example we've got the 15,000 plus the 23,000 plus the 12,000 plus the 5,000 plus the 2000 plus 3000 plus the 7,000 plus the 8,000 equals that 75,000 those are the things purchased in 2023 we're going to purchase more stuff in 2024 the current period and this is this worksheet will serve as our practice worksheet for that as well and then you can see over here if I added up the accumulated depreciation then it should add up basically to this 7,500 so if this is done outside in tax software for example then managing the data input in our system will be easy if we set it up properly in that we're just going to do a periodic adjustment possibly monthly or yearly from the sub ledger created by the tax software so right now it's already been done we already have our accounts we're going to set the accounts up the way they're showing now but just remember if you're setting this up from scratch what you want to do if you're using this method using tax software to support you make sure you have an accountant that knows what they're doing on the tax side and they're properly recording every item so that when you sell the items you can identify the thing that you sold and you you also want to basically set up your sub accounts here to kind of match the sub ledger that's created by the tax software so you want to ask them what are the account categories that are going to be used in the tax software so I can mirror them when I set up my chart of accounts okay so let's let's do that over here we currently have furniture and equipment and accumulated depreciation let's see what QuickBooks gave us if I go into QuickBooks first tab and I go down into the to the chart of accounts go in into the transactions chart of accounts and scrolling down I'm looking at the fixed assets now they gave us a bunch of stuff so now we've got land we've got building land long-term office equipment and then they got really detailed in here computer tablets copiers custom and I think they did this because they're trying to like tell you the kind of things that you might need to put on the books as an asset versus expensing them however you probably this is probably not the way it's going to show up on the tax software and that's going to be your sub ledger possibly so so I would basically remove these or change these to try to to try to give the supporting information to whatever the sub ledger will be because that's going to be the cleanest process so I'm just trying to tie it in right now to what we had in our prior system over here so I'm just going to remove everything or I'm going to have to make them inactive and then I'm just going to change one of them to the to the current name that we are going with so I'm going to say okay let's just go ahead and go into each of these I'm going to make them inactive I'm going to say let's make this inactive uh yes I have to make the sub accounts inactive first before I can make the parent account inactive so I'm going to say all of these phones really phones are cheap you know aren't they I mean unless it's like a cell phone I guess if it's a normal desk phone do you have to I don't know anyway furniture I'm going to make this inactive because it's a sub account and I'm just going to say make it inactive and then I'm going to say custom software app I'll make it inactive I don't have a custom software app I'm not that cool I'm not that up to date and then copier make it inactive and then uh and then computers and tablets I'm going to make it inactive and then and then so now I've got land that's these are classic ones right building land and uh uh that we have as a fixed asset long term office equipment tools and machinery vehicles so those are kind of standard although I might change the name so I'm just going to be picking let's pick uh this one tools machinery and equipment versus and let's just change the name on that one I'm going to edit it and I'll change the name and I'm just going to call it what it is on my prior accounting system which is furniture and equipment boom I'm going to get rid of the description I'll just call it that and then okay and so there we have it so now it's furniture and equipment now I could enter something into here with a form of a journal entry because there are no other forms that are here for that are designed for the increase of the equipment account if we paid cash under the normal system we might use a a expense form or check form but if we we might buy equipment by financing it we might take out a loan for the equipment in which case there's no form for it because these forms are typically designed for things that happen routinely in a cyclical process and the purchase of equipment is really a big investment it's more of an investment thing that doesn't happen all the time so I could enter a journal entry but then you're going to have debits and credits on the journal entry form here so so there it is but there's only two accounts affected so the easiest way to do this might be since I already have an account set up if I entered a new account then I can enter it into the opening balance and there might still be could I do like if I edit this if I edit this does it still give me the ability to opening balance no if I added a new account it might give me that option for an opening balance but I don't need it because I could go into the register so I'm going to say furniture and equipment and I'm going to go into the register and I'm going to say since there's only two accounts affected the register like the check register now except now you're in the asset account so I'm going to say that I want a journal entry form and I'll do it as of 1231 23 the end of the last period and then I'm just going to say this is the beginning balance and it's going to be an increase of 75 thousand and the other side is just going to go wherever the other side's going to go right which I'm just going to put into beginning balance equity so beginning beginning where is it beginning oh my goodness I can't find it that's because it's called opening balance equity so I'm just going to dump it into that retainer so I don't really care the debits and credits it's showing as an increase and the other side is being dumped into opening balance equity which is our normal process if you want to know the debits and credits it's an asset account so we're going to debit it to increase with it but we'll see that in a second so let's do that so now it's been entered as a journal entry now that is still going to create a form called the journal the journal form so if I actually edit it now then it's actually going to go out of the register into a journal form which is in debit and credit format debiting the furniture and equipment increasing an asset crediting the opening balance equity and which is increasing an equity account and then I'm going to put I'm going to copy the description and put it in both places and then save it again and then let's check it out so if I go to my balance sheet now run it to refresh it I can see now that I actually have furniture and equipment on there boom let's go into that and there it is there's our journal entry it's still created a form but this is the last resort form that QuickBooks wants to use the journal form it's not tied to anything else doesn't have any sub ledges or anything tied to it if there's nothing else that other form to use that's when you use the journal form debit and credit form journal journal entry everything else is doing a journal entry but they don't use the journal form all right so then we're going to go down in opening balance equity the other side went into opening balance equity 75,000 okay same thing for the accumulated depreciation let's go back to the first tab and I'm going to go back now to my register let's see if they gave us an accumulated depreciation account so I'm going to say fixed asset we got building furniture and equipment land nothing here for accumulated depreciation now this is another one that you have to be kind of careful with if you're setting it up from scratch because you could imagine if you had multiple types of property planting equipment like here we had furniture and machinery two categories you could still just have one accumulated depreciation account for both of those categories however it's often the case that whatever categories you have over here you want to mirror possibly with its related accumulated depreciation which is the what we're estimating as the decrease or the up out that we consumed of of the asset and and so so so we're going to go and say okay I'm just going to make up another account let's make a new one a new account it's going to be called a it's going to be an asset type of account and it's going to be a fixed asset type of account fixed asset type and then the the tax I'm not as concerned with it accumulated depreciation because I'm not going to connect this directly to software I haven't seen that work well yet I've tested it out many times when it I will keep testing it out and if I see it work I'll I'll let you know but we're going to call it a cumulative depreciation now that's what it's called in our prior software so I'm going to keep the name as is later we're going to dive into it and and talk about different formatting that you might use for the recording of property planting equipment using sub accounts and possibly I abbreviate accumulated depreciation to make it related to a particular fixed asset account like furniture and fixture but I'm just going to keep it the way it is at the ending balances of our prior software and then if I want to change it I want to change it from there so that I can see my audit you know trail of what I did and why I did it so there it is accumulated depreciation let's go ahead and uh and save it so boom I think I got that right so if I go down we've got then there's our accumulated depreciation and there's our furniture and equipment so now I'm going to enter the balance into here the same way this is how you would normally enter like an adjusting entry which we will do in a future course or section for depreciation but I'm going to go into the register instead of doing a journal entry again select the drop down and I want a journal now this is going to be as of 1231 23 again I'm going to say it's a beginning balance now this one's confusing here even with the register because if you look over here this is an asset here but it's actually what we call a contra asset it's actually these two instead of them being in one account they wanted to break it out into two accounts kind of to show that this is an estimate we don't really know how much of a piece of equipment has been consumed or what the book value is we only know what the estimate is and how much we have kind of expensed in the form of depreciation over the life of the thing thus far so instead of decreasing this account directly we have this other account which is an asset but it actually decreases so the question is is QuickBooks thinking of this as an asset in which case it would be a decrease because it's a credit or is it thinking of it as a contra asset account which in that case it would be an increase because this is if we this would really be an increase to that to the to this account but I think QuickBooks actually thinks of it as an asset so it's decreasing it's decreasing it so that's confusing but that's why debits and credits are actually easier to use sometimes but I'm going to guess that it's a decrease right now and if it's going the wrong way then I just go back there's only two it's only two ways it can go I'll go back in there and fix it because there's only two accounts and then the other side's going to go to opening balance equity just like always so we're just going to make this one right stuff the other side and opening balance equity record it there it is 7500 if I go into it we can check it out now let's look at the edit it opens up a journal entry so what did it do it credited the accumulated depreciation that's what we want so see see how that's confusing but then if I go into here I'm going to copy this description save and close it so we I think we went the right way but the contra asset was confusing and if it was wrong back to the balance sheet run it to refresh it if it was wrong we would be able to see it why because we this subtotal would be off right the 70 so if your total assets doesn't tie out like if you're out of balance when you're done with everything then it's it would be because your contra asset is wrong going the wrong way that calm is commonly the case and all you would have to do is switch the debits and credits if that happened but we guessed the right way because now you've got 75 000 of the furniture and equipment minus the amount that we have expensed thus far in the form of depreciation this is the accumulated depreciation the difference being the book value kind of like the estimate value of the fixed assets thus far this being all the fixed assets if we saw them one at a time we would go to the sub ledger so we can identify the actual things that we're talking about and their current book value or cost minus the accumulated depreciation which again could be different for taxes than for books but from the accounting side of things hopefully it'll be straightforward because we have a tax preparer that's helping us with that sub ledger stuff we'll talk more about that in future course or presentations all right we got those two accounts payable the visa this is going to be a credit card so let's go back on over here let's go that that one should be pretty straightforward we'd set up a credit card like a checking account but then but then we won't have to deal with those outstanding items in the same way so pretty much similar to a checking account let's see if they gave us a credit card account over here so if I go down and say other current assets I don't think they gave us a credit card so we'll just make one so I'm going to go up top and say new and let's make this one a credit card and we're going to say boom it's under credit cards and I called it uh tax section credit card we're going to call it visa because that's what we called it there if you have multiple credit cards you might make a parent account called credit cards and then put the multiple credit cards as subsidiary accounts within it you also then might add the last four digits of the credit card number so that you can identify it from an internal bookkeeping standpoint although you might not want to give those numbers outside that's why you might make sub accounts so that you can collapse them so they're not visible when you make external reports possibly so starting date so here's where the opening balance is here so I could see how when I open it this way it gives us the the opening balance capacity beginning of the year today let's put in other date and let's just choose the end of 2000 and so so there we go and then I'm going to say the balance the balance as of the end of that day as the balance as of the end so start date I can say is the first of 2024 duh duh and that means they're going to say the balance as of the end of 1231-2023 so that's a little tricky so it's as of the end so we're going to enter the journal entry here one thousand dollars so so if I didn't do this bit I could just enter it with it with a with a normal transaction into the like an expense form into the into the system or or journal entry but I have the capacity to enter the beginning balance here when I make it you would never do that after the first setup because you would think it's going to have to force a journal entry of some kind that's what it's going to have to do to put that beginning balance in so let's go ahead and save it and see what it wants to do with it so if I go down here we can see then here's the credit card now if I go into the register this way here's the register that it made it put an opening balance transaction in there and so and basically recorded a charge for it and it dumped the other side into opening balance equity did not put it on the income statement okay that's fine note that if you're connecting the visa accounts to the bank feeds just remember that you're entering this beginning balance and therefore when you do the bank feeds you want to start the bank feeds as of the first day of the current period 2024 not pulling in everything from 2023 because that's stuff from the prior accounting system that's our cutoff date all right let's go ahead and go into our balance sheet and check it out running it and we're going to go down and say credit card is down a donor and it's not there why because I put the I tried to put the beginning balance right at that date and it put it in there is one one so that's not what we want because if I go over here 1231 234 let's go I'm sorry 010124 to 1231 24 then it shows up I would stink but I want it in there as of all of our beginning balances as of the same date so I'm going to go back to this transaction and change it to 1231 233 and save it the transactions are editing has been reconciled save it I told you what I want to do quick books don't you talk don't you talk back to me I know what I'm 010123 tab 1231 233 tab run it and then we can see now there it is so there's our credit card if I go into it then we have our detail it put it in here as a credit card expense okay that's fine if I go into it that means the form it used as a as a as a credit card credit form and that's fine and so it used that for me to close that back up go back on over the other side it dumped into opening balance equity which is fine didn't put it on the income statement put it into opening balance equity no problem all right do we have any other ones here we have a loan payable also pretty straightforward transaction loans are a little bit difficult to deal with the payments on we'll talk about that more later but the transaction is pretty straightforward let's go to the first tab back to our chart of accounts did they give us a loan payable account they probably did I think they usually do did did did did loan lines of credit sales long term so long term uh business loans now note the way the loans work is that I would typically want to put the loans in the short term amount and then break out the long term portion periodically that's how I normally do it the general idea would be that if you have a loan oftentimes if it's kind of like a mortgage that people are used to you pay it off on a monthly basis then there's going to be a short term and long term component to the loan because short term liabilities if I go to the balance sheet short term liabilities represent those that are due within a 12 month period and if you're paying it off every month you will have a short term portion to it so so that but I don't want to have to break out my loans between short term and long term every time I make a payment that's way too tedious therefore I'm going to put all the balance into one account loans payable breaking them out periodically end of month or end of the year depending on our needs if we need to and so the question then would be do I want to put the balance into a short term current amount or long term amount now some softwares they kind of restrict the long term liabilities in terms of what you can what you can do with it payments made from it and whatnot that's why I usually put it put the full balance into the current liabilities and then I break out the long term portion of it periodically also time also if you have multiple loans some of them might be short term in nature meaning all of it might be due in some time period so if you put all of them in a short term category you can make like a parent list of the loans payable and a drop down of all the loans payable under it and then you can break all of the short term amounts out into their long term components on a periodic basis if you need to that's what I typically do so I'm going to go over here and make another account loan payable I'll call it the current portion although I'm going to put the full loan in it and which might include some long term portion we'll talk more about that later but let's go ahead and and by the way I would also just follow whatever was done in the prior software and then if I want to make changes to it I will I will mirror this exactly and then I will make changes to it so I can see the audit trail as to why I made those changes but in any case I'm going to imagine it's in short term so I'm going to say new and we're going to say this is going to be the let's say we go over here to liabilities so liabilities dropping it down I'm going to say it's an other current liability because it doesn't have any special sub ledger loan payable I'll spell it right this time even it was spelled wrong for loan payable and I'll say current portion or something like that meaning the stuff that's due within the first period and then it gives me the starting time again let's see if I can get it right this time other date I'm going to say as of the end of December and then the beginning balance we said was on the loan 22,000 okay so that should record a journal entry you would only do this for the beginning balances you wouldn't want to do this when you create an account other than that because then you would enter a journal entry to record the transaction let's go ahead and save it and see if I got it right this time so let's go into the loan payable I'm looking for other liabilities there's the loan payable I'll go into the register and so there it's been entered it was entered with a journal entry form that's typical because there's not a normal form up top for a loan you might end up using a deposit form if it went into the checking account normally but that you might have got a loan for the purchase of equipment or something in which case there's not a form for it because loans are not something that happened routinely in any normal accounting cycle that's why you would default basically possibly to a journal entry in that format so let's go into edit it and so we have loan payable increase with a credit opening balance it dumps the other side into opening balance equity like is our normal custom so that looks good let's go into my balance sheet now and run it and so now we've got the loan on the books so I put the loan on the books at 22,000 if I go into it and then I open up the 22 there it is there's our journal journal entry closing that out back the other side was dumped into opening balance equity so there it there it is here what was it 22,022 there it is right there okay let's go back so I think we have it here on the income statement I don't think anything new was posted to the income statement this whole time if we look at the trial balance then as of the end of 2023 or 10123 1231 1231 23 running it there's our trial balance looks a lot cleaner doesn't it then looking at the balance sheet in the income statement we just have the balance sheet on top of the income statement there's our checking account accounts receivable inventory contra asset accumulated depreciation furniture and equipment liabilities accounts payable visa loan payable current portion our equity accounts 72 396 being the opening balance equity if I and then the income statement accounts which were posted as of the last year which will roll into equity which includes the the 20,500 minus the 15,000 net income of 5,005 plus the equity 72396 gives us the 77896 which should match 77896 right so so everything looks like it's matching up here if I go to the balance sheet this way notice if I scroll down there's the 55,000 net income there's the opening balance that net income will roll into retained earnings so if I go up to the next eight oh one oh one two four 1231 24 that net income rolls into retained earnings the total equity is at 77896 that looks correct the income statement has something in the prior year but it will be a clean slate in the current period oh one oh one two four 1231 24 so that we can start a new odometer's reset for the new journey of the new year and then if I if I go to this tab we have this if I go to the next date up it will squish all this together into the equity or these two will be squished into retained earnings and the debits and credits will still match going from oh one oh one two four to 1231 24 run it so now we have the 5,005 that's in retained earnings and the opening balance equity if we compare that to what's on our worksheet over here maybe we can do a side by side possibly tau vase poor K no why not I guess let's do it so we've got then the checking account check the accounts receivable check inventory check 7,500 on accumulated depreciation furniture and equipment accounts payable the credit card the loan payable but it's spelled better it's spelled more better than the last thing and then we're going to say everything in equity these two tie together to equity that so that's the last thing we need to fix is the equity because these two need to be put together 72396 plus 5500 77896 that's what this should be that's what these two are and then I can change the name from so I'm going to dump this into here fix that later and then we'll change the name from retained earnings to owner's equity given the fact that we're talking about a sole proprietorship rather than a corporation we'll do that in a future presentation