 QuickBooks Online 2024. Adjusting entry and reversing entry reports. Get ready and some coffee because we're off to a quick start with QuickBooks Online 2024. Here we are in our get great guitars 2024 QuickBooks Online sample company file. We set up in a prior presentation opening the major financial statement reports as done every time the reports on the left were right-clicking on that balance sheet in the favorites to open a link in a new tab right-clicking the P&L the profit loss the income statement right-clicking the trustee TB to open a link in a new tab tabbing to the right hamburger close it for crying out loud change the range 010124 tab 02 let's go to 03 3124 tab dropping down for the month and then run it and then we'll tab to the right to the right repeating the process hamburger close it range change it 010124 tab 02 2029 no 03 3124 and then month by month run it one more time on the trustee TB tab closing up the hamburger changing the range in 010124 tab 03 3124 tab dropping it down for the month and then running it again for the refreshment of it let's go back to the balance sheet and we're now going to be looking at the reports that we have generated after having done both the adjusting entries and the reversing entries remembering the adjusting entries are there to make the financial statements as close to the accounting basis being used typically an accrual basis but can also use the same concept for cash basis tax basis so you can get the books as close to that method as possible as of the cutoff date which for us was February 29th the end of February we then do the reversing entries only for those journal entries that aren't permanent differences where we need reversing entries so that we can get the financial statements correct as of the cutoff for external reporting purposes taxes management management's internal but taxes and then like bank loans and investors and what not and then we reverse it so that we don't mess up the internal bookkeeping process noting that what we want to have is a clean separation of duty neither the bookkeeping nor the adjusting process being like correct or incorrect meaning we're not correcting errors we're setting up a system designed specifically to to have it work as smoothly as possible and as easily as possible on the bookkeeping data input and then shoring it up as necessary with the adjusting entries okay so that being the general process we now want to take a quick recap of the reports that we have constructed possibly reviewing one more time the adjusting entries noting that sometimes the adjusting entries might be done by say an accountant directly to the QuickBooks file but sometimes that's not the case sometimes we don't want to like actually do the journal entries in QuickBooks possibly maybe you want to do that the journal entries outside of QuickBooks so traditionally a lot of times what would happen and the old days before you actually had access to the QuickBooks file at the CPA firm is that we would get the actual reports and then plug them into Excel or some other kind of software do the adjusting entries and then decide how we're going to put them which adjusting entries need to be put back into the QuickBooks file right so you still might have similar processes at this point in time in other words if I'm taking the books and I'm adjusting it so that I can then prepare the tax return on a tax basis then I might take the books as they are within QuickBooks do my adjustments outside of QuickBooks in Excel or something like that to prepare the tax return and then the question is what needs to be entered into QuickBooks right so just the workflow could change depending on again what your setup is between the bookkeeping process and your accountant or your tax preparer so you want to be clear these days we have a benefit of being able to give the tax preparer the actual books tip typically because most tax preparers in CPA firms have access to QuickBooks that's why QuickBooks is a great tool to use because you can give access 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 but that's 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subscribing to our website at accounting instruction dot com or accounting instruction dot think of it dot com but but you still might end up in a situation where you're saying I want to communicate between myself and the accounting department the actual journal entries that were entered right so to do that we're generally going to run a report let's go to the first tab over here and let's go and close up the hand bogey I'll scroll all the way down to the report so we can find it but you probably would be easier just to type it in as a journal report so here's the journal report if I go into the journal report that's the report that shows everything in journal entry format so so notice that it gives all the transactions check transactions deposit transactions so on invoices and whatnot as a journal entry let's hit the drop down and make the date for a custom date for the cutoff date where we made all of our adjusting entries 0 to 29 to 4 to 0 to 29 to 24 now by restricting the date then I'm going to eliminate a lot of the other activity just by doing that so these are the transactions only that happened on that date noting that the adjusting entries we can identify them by a few specific things one being they all happen on the same day to 29 24 in this case the end of the month if they were year and adjusting entries they would all be as of December 31st 2024 to we're going to put in the memo that it's an adjusting entry and three they're all going to be the transaction type of journal entries so you can see we have other stuff happening here but a lot of it are other kinds of forms so we can then further filter this report by transaction type just looking for the journal entries so let's go ahead and do that filter and select the drop down and then we want the transaction type of equaling the journal entries I'll just type in journal and there we have it so now this trims it down to basically just the adjusting entries although we still might have a couple other ones in there we can see the description here adjusting entries so everything here this one is not an adjusting entry so tax adjusting it says adjustment oh what happened there caposso tax taxed adjustment so I don't believe this one was an adjusting entry so I'd still like to clean that one out so how can we clean that one out well the easiest thing is I can export it to excel from here and just delete it right so if I'm going to give this information to my book the bookkeeper or something I'm if I'm communicating the adjustments that we made this is a way that we can filter down the adjustments that basically we made and we can do the one last filter by exporting to excel so export it to excel open it up and then we'll say let's do that last bit open it up here I'll edit it and then we can do whatever we want to do on the editing typically I'll I'll go to the to the tab to the right back to the tab to the left it's a long report so it's on multiple pages as you can see so then I might want to go to the layout and make it landscape orientation landscape that's going to help it out a little bit then I can remove a lot of the stuff that I might not need the transaction type looks like it's a very long ID I might not need that cell at all that at all but I'll just minimize it here to make it smaller you've got the date that's going to be necessary all the journal entries let's see if I can minimize that a bit and maybe wrap the headers so I'll take these headers and maybe go to the home tab and wrap them and so this transaction ID maybe I just call it ID so it's not so long and then we could we could say okay the account number this one doesn't have anything in it so I'll remove that now to remove something I'm going to see how this cell up top is has a merged I'm going to unmerge it and unmerge this one that's in the home tab alignment and unmerge so I so now I can delete stuff more easily there's no names in any of these so I'm just gonna say alright let's take that whole field and delete it account I don't need anything in there let's take that whole field delete it and then this this one let's delete this bit down below I don't need that delete that and then then this one I can make a lot smaller by wrapping the text so maybe I select the whole thing home tab alignment wrap the text so it's wrapped and then I can make this a lot smaller and just make sure that the text is I could double I can select this whole thing and then double click on it and it'll double click on anything inside I know I'm doing this fast but this is more Excel than anything else and then I'm gonna take these two and if I make these a little bit smaller it should be enough right boom boom almost there come on come on oh there it is so now we're in the line we're inside the line alright so let's go ahead and we could make borders around now I made it too small see now I did it too small but let's go to the home tab font group and make some borders around it I'll make these two a little bit larger and a little bit larger okay now it's too long so I'll make this one a little smaller and so now it fits on one page alright so let's just recap some of these so if we if we look through it we have the journal entry to adjust taxed adjustment payroll liability so this I'm gonna delete I don't need this one all together so I'm gonna remove that one boom boom boom and just right click and delete it so these are our adjusting entries so we have the interest payable and the interest expense this was an adjusting entry to account for that 15 days of interest which is going to be paid in March but which had been accrued in before the cutoff date in February this one just will just recap them quickly this one was the accounts receivable this was for an invoice that was entered in March but for which the work was done in February therefore the revenue should have been pulled back to February so we increased the revenue with a credit counts receivable went up we also recorded the sales tack the cost of goods sold and the inventory and then we had the insurance so the insurance was an adjusting entry to represent the portion of the insurance that had been consumed in the current month and the portion that is going to be for for that was prepaid because we paid for a year's worth of insurance and we expense it as time passes and then we've got the depreciation adjusting entries representing the expensing of the cost of the large pieces of equipment that we purchased over time in accordance with some depreciation method such as straight line or double declining balance and we did that according to our subsidiary ledgers which are actually came from the tax return this is the same thing for depreciation for another type of fixed asset and then we had the accounts receivable and unearned revenue unearned revenue being for revenue that we get that we or money that we got from customers in advance of doing the work and then we had to record this negative receivable because that's the easiest thing to do in the bookkeeping side this one being the journal entry that's a little bit different than the book problem for unearned revenue because we have a little bit different of a situation or issue with software oftentimes given the fact that we need to track not only the journal entries but the sub ledger accounts and the the internal information for the customer center and then we had the adjusting entry for the loan payable breaking out the short term and long term portion now we've reversed some of these so let's go ahead and do the same thing but up up the day to one three right so now we're on one three and so these are all the reversing entries so let's go ahead and export these and these are just the ones that we had to reverse and see which ones we did reverse and recap which ones we did not reverse right so I'm going to go in and say let's say export this one to excel as well I'm going to open it up but then I'm going to going to take take it and put it into the other worksheet so what I'm going to do is I'm going to say I'm going to right click on this tab below move or copy and then you can see in this drop down it we have the other one open so I'm going to open the other one and then move the sheet to it so we'll move it I'll pull it to the right we can name these so this was the adjusting entry ADJ and this is reversing entry I'll just put a read and then I can format this in a similar fashion so I'll go to the tab to the right tab to the left and I'm going to say I just call this the ID I don't even think I really need the ID we don't need no stinking ID ID ID we don't need okay I don't know this is going to be let's unwrap this let's unwrap oh wait let's wrap let's unmerge and then unmerge okay and then we're gonna say transaction type I can make this a little smaller and these I want to wrap so wrap I'm wrapping we're gonna wrap it dog we're wrapping homie I don't know okay sorry about that let's keep on going we're gonna say hold on I hit my I hit my soundboard that was the wrong sound I didn't mean to do that that's gonna be the evil tax the government stealing our money that's good but anyway I'll delete this and then the reversing entry so they're all reversing entries we don't need the account so we're gonna take that and right-click and delete that and then I'm gonna take this whole column and wrap it home tab font group and wrap the text and then we'll pull it in to something maybe around there and then I'll take this whole thing and expand it by double-clicking in between the cells to make it long enough for the descriptions and then everything looks like it's working well okay so let's review these again for the well let me put some borders around it too that's a put some borders around it because that's what we did last time and then this bottom bit I don't need that get this out of here get out of here delete that okay so then we can say so this first interest one we entered in an accrual entry for the interest and then we reversed it as of the first day of the next period so that's just basically a timing difference that we had we reversed it so that the the payable doesn't get in the way of the bookkeeper in their normal accounting as they as they record the entry according to the amortization table and then we had the accounts receivable the invoice that was entered in March but for which the work was done in February this one then we pulled into February with a journal entry that mirrors the transaction that happens when you do an invoice we have to reverse that one for sure because if we don't it would double record the the entry as of the date of the original invoice so we reversed it notice all reversing entries happened on the first day of the following period we're not trying to get fancy and say I'm gonna reverse it in in the middle of the month when the actual invoice was created why because that'll make it more difficult to determine which entries are reversing entries we know which entries are reversing entries because they all happened the day after the cutoff because we applied reversing entry to all of them and because they're all journal entry type forms okay and then we had the journal entry for the prepaid insurance I mean yeah this was the adjusting entry this one doesn't have a reversing entry because if we're doing the insurance properly we typically put it on the books as an asset and then we depreciate it using the adjusting entry as time passes and that's a permanent difference so we don't need to do any reversal for that similarly with the accumulated depreciation and depreciation expense this is a permanent difference it's really similar to the prepaid insurance we put the stuff on the books as an asset because it's an investment we prepaid for it it's going to benefit multiple periods in the future and then we basically expense it as time passes this time instead of reducing the actual account of furniture and fixture or the property plants and equipment account we make another account accumulated depreciation to note the fact that it's an estimate in essence and so we have no reversing entry for those and then this one is the accounts receivable and unearned revenue now this one's a little bit different than what we did with a book problem in a book problem it would be a permanent difference that you would not have a reversing entry for in other words if you were a newspaper salesman and you're selling the years you're still hawking the legacy the lame lame legacy leap media newspapers which is kind of an it's kind of an evil business these days I hate to say it you should probably look for better work do some good in the world if you could but in any case if if if that was the case then we would have unearned revenue every time we make a sale it would be going up and up and up and then and then we would basically be recording on a periodic basis with the adjusting entries how much revenue has actually been consumed reducing the liability of unearned revenue recording the income as it happens now this is something again with quick book software you might not need to do like with adjusting entries you might be able to automate the system basically saying I'm going to put if that was your your business model and this would be the same for like computer applications which are doing good things that you know not all subscription models are as evil as the legacy media you know but if you would so then you could have like you could get all of your your revenue when it comes in and then basically try to automate the invoices to apply against it possibly with with with memorized transactions I think we have a section or course on that if you wanted to take a look at that specialized area in more detail our issue here is different though and that is that the accounts receivable makes more sense a lot of times to have a negative receivable per customer why because there's a sub ledger for the accounts receivable and when we track the customer center internally it's tied to the accounts receivable not to some other liability account called unearned revenue so we end up with these negative receivables which is not something we typically worry about with book problems because we don't have that issue of trying of having to tie out the sub ledger in the same way we're just looking at debits and credits so in this case what we did is we did an adjusting entry to deal with those negative receivables increasing the receivable increase in the liability periodically which is only a balance sheet type of activity something you might not even have to do if you're doing it for taxes for small business reporting on a schedule C because the schedule C is basically the income statement so you might not have to do this adjustment just for that purpose you would need to do it for external reporting to the bank or to the or something like that so then for this one we had to reverse it then so we had to reverse it back so that we can show that liability and then and then undo the liability so it doesn't mess up the bookkeeper on their end so that so just want to reiterate the unearned revenue scenario we ran here is very common for software but different than the common scenario you see with the book which is often reflecting the same textbook problems that you know they're back in the days when the legacy media was actually saying truth stuff so that so if so there's there's living in the past man so it anyways then we have the next one which is the loan payable breaking out the current and long-term portion of the loan payable and so this is going to be something that we're going to reverse because we want it to have all of the loan in one account for internal bookkeeping but break it out so that we can see it in two accounts for external bookkeeping so therefore after we broke it out which is again a transaction you might only need to do if you're reporting something other than taxes for like a schedule C this is a another transaction balance sheet to balance sheet doesn't have the income statement impacted therefore if your small business reporting on a schedule C which is equivalent in essence basically to the income statement you might not need this one you would need it for external reporting reporting to like the bank to try to get a loan or to investors or something like that then we would reverse it to get everything back into one account per loan so that's the general the general overview if we look at our QuickBooks file if your trial balance here was in balance before we went through the adjusting entry section then and all of your adjusting entries tie out to our adjusting entries your ending balance here should match if and if your ending balance in February ties out to what we have here and all of your reversing entries match our reversing entries then your Indian balance as of the next month following the cutoff March should match our numbers so here's where we ended off on the trustee TB the trustee trial balance