 Zero Accounting Software 2023, Month 1 reports. Get ready to become an Accounting Hero with Zero 2023. Here we are in our Custom Zero homepage. Support Accounting Instruction by clicking the link below giving you a free month membership to all of the content on our website broken out by category further broken out by course. Each course then organized in a logical, reasonable fashion making it much more easy to find what you need than can be done on a YouTube page. We also include added resources such as Excel practice problems, PDF files and more like QuickBooks backup files when applicable. So once again, click the link below for a free month membership to our website and all the content on it. Coming into the company file, we set up in a prior presentation, get great guitars, we're going to duplicate some tabs to put reports in our major focus being on those reports after having entered a month worth of data input. So let's right click on the tab up top and we can duplicate it. We're going to right click on the tab again and duplicate it again. Let's go back to the tab into the middle. Accounting drop down and let's open up that balance sheet report and then go back to the tab to the right and accounting drop down looking at the income statement or profit and loss report back to the tab to the left. We're going to change the date range hit the drop down customizing the date range and let's take a look at 2023 the data input time frame has been put in 2023 the end of the year update it. And then on the income statement, it looks like we have the correct date range January to December 2023 back on over to the balance sheet. What we want to do now is look at what has been constructed after having entered the first month of data input. So we've been doing data input for the first month and the system of course has been using the double entry accounting system to create the balance sheet and the income statement. Go into these reports and drill back down onto the source data a bit to see how they are being constructed remembering that pretty much most other reports are going to be giving more detail about the major financial statement reports that being the balance sheet and the income statement. So let's go through the balance sheet and the income statement more or less line by line and see what has been built after the first month of the data input. Note that if you want to format the balance sheet you could go into the layout tab on the left hand side here and we could collapse some items. So if I wanted to see just say I collapse the assets. So now we've got the current assets, the fixed assets, the long term assets and the liabilities and equity. So let's take a look at this would be like a summarized basically balance sheet where all the categories are basically summarized together. If I update the layout and take a look this is what we have now this is a great starting point when you're trying to give reports to someone that is not a financial person and you want to give them the summarized data and then break out the data as you get into more detail. So the assets are going to be what we have in order to help us to generate revenue. Here's our total assets after the first month of data input and the liabilities and equity represent who has claimed to those assets in essence. Now notice as we're entering the assets on the books even when we're purchasing things like equipment we're not putting the equipment on the books as one piece of equipment. Sounds obvious but you have to kind of realize that because obviously the fact that we have 227,695,75 of dollars worth of assets doesn't mean it's liquid assets and that's going to be one of the key points we need to be we need to understand because we have to put the fixed assets on the books in terms of dollar amount not in terms of like units of equipment for example. So if we take this 227,695,75 minus the liabilities what we owe or who has claim to the assets from a third party perspective like the bank of the 7,737,2.31 we get the 150,323,44. So that's the equity in essence what we as the owners have claimed to the asset the portion of the assets that we as the owner have claimed to noting that if it's a sole proprietorship then we would have claimed to all of that at this point in time that would be kind of like the value of the business at least on a book basis perspective and then if we were a partnership we would have to break that equity out into the multiple partnership accounts and if we were a corporation we would break it out between stocks because all the allocations of retained earnings and investment of stock because all the stocks would then be the thing that determines who owns how much because all the stocks would be equal units of the equity amount of the corporation. Alright so now let's open this up one by one I'm going to go into the edit layout again and let's just open up the current assets so if I go into the current assets and update the layout we now have in here the checking account now if we go into the checking account this of course has I'm going to say this has the most amount of different types of transactions in it because the checking account is the lifeblood of the company all other kinds of transactions are going to be included in the checking account so you've got different kinds of receive payment spend money payments and so on the different types of forms that will be in the checking account so the checking account is unique in that way and that's why the bank feeds are such can be such a great tool because everything touches the checking account so you can in some cases build a lot of your financial statements on what flows through the bank let's go back to the balance sheet over here next we have the accounts receivable account now the accounts receivable account if we go into it I haven't saved the chain that's okay I'm gonna leave that we're gonna go back into it now this is gonna be much more restrictive you can see the types of accounts that are going in here the types of transactions are they're gonna be increasing with the invoices we have created and then they're going down with the payments and we should in essence be able to tick and tie these these transactions out they go up and then they go back down again they goes in and it goes back out unlike the checking account which is kind of more chaotic when you have a lot of different things going in and out of the checking account now of course the accounts receivable is an account that is tied to customers and therefore is tracked with sub ledger account so a lot of the reports that are the sub ledger reports I'm gonna go to the tab to the right right click on it and duplicate this tab and look at some of the other reports that are being constructed as we make the major financial statement reports accounting drop down looking at the reports if we go into and we look at these payables and receivable reports most of these that have to do with receivables are giving you more detail about a balance sheet item and that's typically the case for most other kind of reports they're giving you more detail about one or multiple line items on the balance sheet or income statement the major financial statement reports let's go back on over to the balance sheet now clearly that accounts receivable also would be tracked internally as we have seen when you're when you're looking at your customers and your invoices that are outstanding then you've got your inventory so the inventory as we saw is is going to be increasing and decreasing if we're using a perpetual inventory system so it's going to be going it's going to be going up when we buy the inventory and it's going to be going down when we make a sales type form which is a money out form or an invoice type of form so mainly when we had the inventory going up we made some purchases of the inventory up top and then down below we've got our decreases in the inventory and the other side then going to the cost of goods sold remembering with inventory you want to make sure that you know what kind of system you want to use you might not want to do a perpetual inventory system within zero there are many cases where that might not be the best strategy including sometimes when you have a Shopify store or something like that you might be tracking inventory in some other fashion and summarizing it here possibly using a periodic inventory system possibly tracking inventory in an Excel worksheet and adjusting it periodically so you want to make sure that you have your inventory strategy mapped out let's go back on over now note that the inventory is going to have a sub report as well if you're tracking it within the system so we saw that we had these inventory inventory list reports which are going to track the inventory by item not just by dollar amount and that should tie out as long as we're popularly properly populating the inventory and using the forms then we have the prepaid insurance now prepaid insurance is kind of a special account any kind of prepaid account means that we're paying for the expense before we actually consumed it to use in the business and the classic example is insurance noting that if you pay insurance like monthly you might just expense it when you pay it and that would be an easier kind of strategy but we want to show the accrual concept for prepaid prepaid expenses and the insurance is the most classic example we'll talk about the adjusting entry related to it at the adjusting entry course or section we had the short-term investments many businesses small businesses might not have short-term investments and things like stocks and bonds but you might be using zero to track on the personal side of things as well and so you might have your investments that you're tracking in there now note that investments have their own issues which include the income reporting that's going to be dividends and interest oftentimes as well as unrealized gains that we talked about a little bit with regards to the investments in other words the value of stocks or securities might go up or down you possibly want to adjust these the investment accounts for those changes even though we don't do that kind of thing for other assets like fixed assets we usually use a depreciable cost for fixed assets but with investments like stocks and bonds if they're on the stock exchange there's more justification for tracking them at a fair market value method because you know what the fair market value is at any given time because the exact same stock it's like cash it's like money is being traded at that exact same time on an exchange therefore it makes more sense in a lot of ways to say I'm gonna value this at the current fair market value you could still argue against that you might say well the market isn't correct or something like that but if you have a real market a true market you would think the market value would be correct and you're selling those that unlike the fixed assets where if you have a building for example or a piece of equipment a car those things are unique you can't just sell them very easily right and and even with the investments if you had a lot of investments it still gets quite messy because if you tried to offload a lot of investments you're gonna actually change the market price if you were a big investor right that's why when people you talk about billionaires and stuff and how they value all the money they have they couldn't just liquidate it because because the investments would not actually be valued at what they're valued at because there's no way they would be able to offload it and get that cash without the stock price going down so there's arguments as terms of should you value this at the fair market value or not but if you do then you run into the problem of where does the other side of the transaction go and you might put it on the income statement as you know unrealized income or you might put it into the to the equity section that we talked about now the fixed assets by contrast are things that a lot of people would argue you shouldn't put on their fair market value because you would want to have a more kind of conservative or people might be tempted to inflate their financial statements with the fixed assets because you have estimates that need to happen there so if you have land if you have a building if you have equipment and you're trying to value it at the fair market value you can't really take full advantage of markets to do that because the only way to really get the fair market value would be to sell the unique fixed asset that you have therefore you're reliant on estimates and people can can skew estimates depending on who's making the estimate so that's why there's an argument that I think is a stronger case to not be valuing the fixed assets at fair market value even though there's pros and cons to that because especially like land can change in terms of its valuation over time quite dramatically but in any case we got the fixed assets it's going to be going up and down based on when we purchase the fixed assets and then when we sell or dispose fixed assets notice that that won't happen too much those are not day to day transactions we don't buy fixed assets we don't buy buildings cars all the time and therefore it should be an account without without too much activity and that'll make it easier for us to do the sub ledgers which are the accumulated depreciation and recording the depreciation expense in the United States we often do that with tax software which is a third party software because we're going to have to do that kind of stuff for taxes anyways and therefore that software also has a capacity to do a book and tax oftentimes so you want to keep in mind how you're going to be doing your depreciation calculations which are adjusting entries we'll talk about in future presentations of course and then we've got the liabilities and equity down below let's expand some more stuff here so let's go to my layout down below and let's try to expand the fixed assets so we can see those long-term assets we don't have any I don't think liabilities so now we've got current liabilities and long-term liabilities and we'll expand the equity back out and then update our layout there it is expanded so cool all right liabilities so then you have the current liabilities these are the ones that are going to be coming up do soon that's why you want to make sure that we can compare the current liabilities to the current assets we want to make sure we have a cash flow there to pay the current liabilities because you can imagine a situation and many businesses have found themselves in the situation where they have assets that are sufficient over and above their liabilities by far but they're all sunk into fixed assets why because the fixed assets are helping them to generate revenue but if you have if you don't have a liquid liquid assets you can't pay off your liabilities that's why you need to have current and long-term liabilities that's the idea at least we've got the the federal now notice accounts payable would typically be first we don't have any payables we'll talk more about payables and the next month of operations when we focus more on a cruel transactions as opposed to mainly we did cash transactions for the payables so on the payable side for small businesses oftentimes you might pay your your bills as they become due and then you might have some big liabilities down here in terms of a business loan and whatnot such as those items we got the federal payroll taxes so we talked about payroll taxes remembering that's another area where you want to determine if you want to do the payroll internally with gusto and zero where you're gonna track all that information in the system or have a third-party provider help you with the payroll in which case you just need to summarize that data in some way shape or form in the zero system to get your financial statements correct you've got the loan payable the loan payable another account that doesn't have transactions that happen all the time because when you take the loan from the bank that's when you record the loan payable and then when you pay the loan that might be a monthly installment payment which we'll talk more about in future presentations which will look similar from month to month but might be slightly different depending on how you're gonna be breaking out the interest when you make those payments so we'll talk about that more in the second month of operations you've got your sales tax or usage tax the tax on the sales that you had and that will be dependent upon the location that you are in remember that the sales tax is basically going up if we're tracking the sales or usage tax as we make transactions they're going up when we're making the sales transactions because we are acting as the tax collector of the business so this would be going up when we make sales invoices for example and then it would be going back down typically when of course we pay whoever we have to pay whoever's whoever's extorting us right now whoever's whoever's telling us you know to we're paying protection money to the state or they or whatnot so then we got the credit card so the credit card acts a lot like the bank we didn't do a lot of credit card transactions here but you have a similar kind of trans transactions where of course you have expenses that are going up with the credit card so when you're making payments on the credit card instead of the checking account going down you've got the credit card going up and remember that when we get to the the section on bank feeds section or course on bank feeds that credit cards is another thing that you can link to the bank because it's running through the financial institutions as well so many times the credit cards can be recorded as you do your transactions and then you've got your equity down here noting that you've got your your current year earnings this is how zero is trying to show you that what we are creating is tying out to the income statement so you can see that number for seven four two seven forty four should tie up to the bottom line of the income statement so note when you're thinking here how is this working when my double entry accounting system is assets equal liabilities plus equity but then the income statement somehow was revenue and expenses where do the revenue and expenses fit in they are part of the balance sheet in terms of kind of like the equity their timing they're breaking out the action of what has happened in the equity section that's what zero's basically trying to show us with the the current the current earnings now note that if you try to change your income statement to like a month or something like that and then you adjust your balance sheet then this number generally I believe pulls in on a yearly basis so so if you're trying to pull in the current earnings for like a month then it might look a little funny because what what it's doing is saying I'm taking the calendar year information and then it's pulling in usually the calendar year information so for example if I if I bring this up to the next year 2024 and then say update hold on it's it k pos o next year then that account is gonna roll in that account is gone because we have no income in the in the next year yet where did it go it didn't disappear it rolled into the owner capital account which is like the retained earnings for a sole proprietorship account so in other words this number will go back down if I go back down so I'm gonna go back down here and say custom and go to 2023 and the end of it and boom up to the dated and so now you've got capital account goes back down and then the current year earnings there they are now the owner's capital account this represent earnings for the lifetime of the business in our case we have only put one year one month of data input but we put those beginning balances in place before that so this is like the earnings like we have up here that has accumulated for the entire lifetime of the business which have not yet been distributed out to the owners in the form of draws and if it was a corporation they would be called dividends right so that's earnings that have accumulated that haven't been taken out of the business now as long as this number is positive you would think you can take money out of the business but remember you can only take money out of the business if that is representing your claim not just to the assets but to cash because you're gonna have to meet cat you're like if you have all your money you might have a big equity number down here and you're like I got a lot of money I can take the money out but if your current if you're if your total assets is is all in fixed assets and you know how many cash then even if you have a big equity number you can't really take the money out right because all your money is in the fixed assets why because the fixed assets property plant equipment is what you need in order to generate the revenue in the future so keep that in mind and then we've got the owner investment which we broke out separately this is the money that we as the owner put into the business if you're talking about a corporation that would be the capital stock because when they originally issue the capital stock that would be the investment now as time passes we're hoping that this number doesn't change much we don't put more money into the investment but rather we are earning money and taking money out in the form of draws so we might add another account in the future called draws when we take money out also note that the income statement rolls into the capital account here and in accounting textbook closing entries the investment account in the equity section as well as draws accounts would close out to the capital account periodically as well zero doesn't do that automatically so if you want to close out these accounts if you don't know big deal it's just going to show your investments and draws for the lifetime of the business as opposed to in the current year but if you want to close it out so you see it in the current year you have to close those out to the capital account alright let's go to the income statement which we saw is a summary of the detail the activity that has happened this is the performance statement so we have the sales these are our revenue accounts notice that sales often is going to be representing you know a selling of inventory versus services is often how it's broken out notice it's going up with invoices clearly and if we had money out payments like sales receipts at a cash register those are the things that are going to increase the sales that's basically all we have in the revenue account because only the sales forms are going to be included in there and revenue typically only goes up services same thing we're gonna have the sales forms the sales receipts are money in forms and the invoices the cost of goods sold would only be there if we are tracking inventory and if we're using a perpetual inventory system the cost of goods sold will be recorded when we use our sales documents which are going to be the invoices and the money out forms now note again the cost of goods sold if you're not tracking inventory on a perpetual inventory system you would adjust the cost of good sold periodically based on your physical count of inventory at the end of a night week month or year or whatever and you would adjust them on a periodic basis this is the cost of the inventory that we're trying to match up to the same period in which we generated the revenue with the sell of the inventory then you've got your operating expenses remembering that the expenses down here is usually going to be your longest type of different accounts so your expenses you could have a long list of expenses usually having a longer list of expenses down here then you have for assets liabilities equity or income because every type of thing that you purchase is gonna possibly go into a different category whereas the things that you're selling are all basically the same right you have your income is from one particular thing so this is where you want to take your time and try to think about how many categories of expenses you want to have and how you want to be categorizing your expenses this is also the area where the day-to-day bookkeeping generally happens so if you have a very easy accounting system where you're just paying bills as they become due possibly with electronic transfers then you might be able to automate this process with the bank feeds which we'll talk about in a future course or section a little bit more easily if you're tracking accounts payable oftentimes for a larger business then it becomes a little bit more complex also remember that as you're entering transactions it'll be easier in the following months because you'll be able to see what you did last month and be able to copy that into the following month so you can memorize by vendor for example which account you want to be charging things to so you can be consistent going forward and if you're using bank feeds you could start using bank feed rules to help to memorize transactions and possibly automate transactions also you might want to have sub accounts down here for example you might break out utilities as a parent account for example and then have accounts under it like the telephone possibly gas and electric so you could format your your your statement using the layout down here and make groups and zero it has a really really nice functionality to be able to do that more than leading other softwares even like QuickBooks which has sub accounts which in some ways you might think are easier in some ways but there's not quite as much flexibility as this edit layout kind of thing so you can start to format your reports and in sub accounts and we'll probably talk about that more in future presentations now the bottom line of course is the net income revenue minus expenses and there's the bottom line now your other reports over here if we just look at a couple of these you've got your your financial performance this is the summary here's your financial statements balance sheet reports income statement reports here's your payables and receivables notice these are giving you more detail on amounts on your financial statements generally the accounts receivable and the accounts payable you've got your project reports which is specialized to the job cost system typically when you're using those projects we've got the reconciliations the main one being the bank reconciliation we'll talk more about those in a future course or section and those are a little bit different because those are reports about internal controls as opposed to reports that are being constructed as you do the data input so they're more like internal control reports you got your taxes and whatnot including the 1099s which in the United States we need is a filing requirement but it kind of gives you detail about the accounts payable or your expenses foreign currency gains general ledger which is basically similar to the detailed reports when we drill down on a particular account giving you detail by transaction general ledger general ledger summary the journal reports breaking things out by journal debits and credit sales tax reports giving you more detail about the sales tax payable line items you can pay your sales tax tax reconciliation and the good old trial balance that we've been taking a look at summarizing the balance sheet on top of the income statement and then your transactions account transactions duplicate statement lines inventory inventory item summary breaking out more information about the line item on the balance sheet of inventory which you would only have if or would only be useful if you're tracking inventory on a perpetual inventory basis all right let's open the trial balance and just take a look at it this is a great report as we've been mentioning as we go for the data input so you can check your numbers kind of as you go because it has the balance sheet on top of the income statement so this once again is where we stand at this point in time notice you are somewhat restricted on the balance on the trial balance as well to running it for the entire year because again it is the it's basically the the the balance sheet on top of the income statement so the income the balance sheet stops down here on the equity here's the income statement so you have everything on one report but if you go to the if you go to the next period it's gonna close out all the income statement and put it into the equity account right so if I bring if I bring this up to 2024 it's I'm gonna have the same numbers on the balance sheet until I get down to that equity section and then it could pull that information in hold on it didn't do it hold on a second I didn't pick the date right 2024 and update okay now let's try it so now down here the top half is the same but down here it closed out all the sales line items into the capital so this is the prior balances and so it does that basically on a yearly basis so if you're trying to close things out on a monthly basis you're probably gonna run into problems because the zero system is designed to kind of update on a yearly basis so so that's the that's the that's the general idea on the reports we'll go into month two data input in future presentations