 QuickBooks Online 2024, new customers set up and accounts receivable beginning balances. Get ready, because we're going to Bookkeeping Cloud 9 with QuickBooks Online 2024. 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 okay, whatever, because our merchandise is better than their stupid stuff anyways. Like our crunching numbers is my cardio product line. Now, I'm not saying that subscribing to this channel, crunching numbers with us, will make you thin, fit, and healthy or anything. However, it does seem like it worked for her, just saying. So, yeah, subscribe, hit the bell thing and buy some merchandise so you can make the world a better place by sharing your accounting instruction exercise routine. If you would like a commercial free experience, consider subscribing to our website at accountinginstruction.com or accountinginstruction.thinkific.com. Here we are in our Get Great Guitars 2024 QuickBooks Online sample company file. We set up in a prior presentation, continuing to lay down those foundational items necessary to run the normal accounting process. The normal accounting process being a cyclical process, including the input of transactions typically done with the use of forms, forms located in the plus or new button broken out by cycles of customer cycle or sale cycle, vendor cycle or expense cycle, employee cycle or payroll cycle. We then communicate with customers, vendors and employees with the help of the centers found on the left side, sales center or customer center, expenses center or vendor center, payroll center or employee center. In order to get the foundational items set up, which are typically more of a one time thing instead of a cyclical thing, those are typically found under the cog. We've been looking at the your company items. We're now looking at some of the lists, one of the primary lists being the chart of accounts, which typically can also be found over here in the transactions chart of accounts on the right hand side. And we're now going to be imagining we're pulling our data in from a prior accounting system. We want to also put the beginning balances in as we add our accounts. This time, we're also going to be talking about customers, which is another foundational item that we might lay down from the start, if we know or have a customer list, or we might create as we go as we do business. So let's take a look at our beginning balances. Once again, these are as of the end of the prior accounting system. We're imagining that we're going to stop that one at 12 31 23 and then start the new accounting system. January of the current year, 2024. If there's some overlap, if we were using the prior accounting system for part of 2024, we might want to run the two systems parallel for that part of the year so that we can get the full year in the current accounting system. Our strategy is to take the balance sheet items. We don't have any income statement items because they rolled out to equity. Take the balance sheet accounts from our prior accounting system, put them in our new accounting system and move forward from there. But we can't do that with just a journal entry. We have to do that by acknowledging that each account might have its own special needs and take care of those needs as we go. We started with the most difficult one inventory. If you're tracking inventory on a perpetual inventory system, because we had to then enter the inventory items that make up this balance. Now we want to think about the accounts receivable, the next kind of most difficult one, typically. And that's because I can't just enter this as the beginning balance, this 20,500 because it's consisting of multiple different customers and because I want to be able to track the outstanding balances in my receivable center and the customer center so that I can communicate with those customers and follow up on collection with those customers. So what we want to do then is add the customers themselves and then add these beginning balances to each customer and then the other side of the transaction will fall out in one way or the other to the equity section. Now most likely, because it's accounts receivable, if we use this method, what's going to happen when we put beginning balances per customer into QuickBooks? QuickBooks will create an invoice most likely, right, because the invoice is the account that increases the accounts receivable. The other side of the invoice typically goes to the income statement, income. However, as long as we put it in the books as of a date before December 31st of before January 1st of 2024, which means we're going to put it in there as December 31st, 2023, the income statement will roll into equity. So I don't care if it goes to opening balance equity to owner's equity or to income, it will end up in some kind of equity account. That is the point. Let's check it out. So if I go back on over here, then we're going to be going into our sales area and this is kind of like our customer center. And then you can go into the customers. This is basically our list of customers. So if you had a new company file, notice we put this generic customer in there already. But if you already had a new company file, then what would happen is you might just try to construct your customers as you go, meaning you might just do business and as you do business, you add your customers. For some businesses, the customer data is a lot more important than other businesses. So for example, if you have like a Shopify store or something like that, you probably don't have a lot of information about your customers because you're just trying to sell them like one off sales typically or have them repeat visit to your website. So all you really need is the information to record the customer and have the payment information and possibly get them on your newsletter. And that's what you need for that kind of system. If you work at a restaurant or something like that, it's a similar thing. You probably aren't getting a whole lot of data from your customer, at least not in your system. You know your customers personally if you're in an on ground type of store that could help, obviously. But you might not need a lot of information, just collecting money at the point of sale. But if you're in some kind of businesses that have a lot of repeat businesses, such as if you're in a law firm or CPA firm, then it might be the case that you really want to have a lot more detailed communication with particular customers because a lot of your business is more reliant on a certain group of customers that you're going to have a lot of repeat communication with. So again, that will kind of change how you're going to set up your customers. So in other words, when you set up your file, you might already have a customer list which you highly prize and value given the fact that that customer list is the primary tool that supports your business because those are the people that you... So then you want to make sure that you import the customers, put all the detail that you can. If you have shipping information, you put that information in here and all that kind of stuff. However, if you're in other kind of businesses like a Shopify store or something like that or you have on ground sales, then in some cases you might not even put the customers in here because if you have a sales at a restaurant, then you might just have one generic customer and you're just recording everything as sales at the restaurant, not to a particular customer because you don't need to mail them an invoice or anything. And if you're in a Shopify store or Amazon or something like that, all the customer data is probably being kept on the third party website. So maybe you don't need to pull it all into here. So just some things to think about with the customers. You might create the customers as you do the invoices and the sales receipt forms in a lot of cases, in which case you might not need to upload a whole list of customers. But if you have anything that's in accounts receivable, meaning you're doing a full service accounting system and that you're invoicing people, then it becomes a lot more important to track the customers because you have to follow up on the billing to make sure that you can collect on it. And if we're entering a beginning balance, therefore we have to, of course, add the customer. So this is going to be our data. We're going to imagine that that accounts receivable has supporting data of this. We have the name, first name, last name, company name, main phone, the billing address, the email, the customer balance, and the as of date, which I'm going to change here, to 2023. And that is really important because we want to put it in there as of the prior accounting period so it rolls out to income if QuickBooks records this as it most likely will with an invoice put in the other side to the income statement. All right, that's going to be the general idea. Now note that if you download this kind of information from another system and then you need to upload it into QuickBooks, some problems that you could come up with. One is that you might end up in a situation where one system records the name like this, like first name, last name, and another system wants to record it last name and then first name. Or you might have a system where it has it listed out like this and then but really you want to be breaking out the first name and the last name, something like this. So just note that there's some nice little tricks that you can use, same with the billing address. You might have the billing address all in one cell sometimes, or some other places might be breaking out the number versus the city and the state and the zip code. So there's some nice little Excel tricks. If you can get this thing into Excel, sometimes you can deliminate or separate stuff with the use of the commas. And sometimes there's other techniques if there's only like... So let me give you just a few tricks here. You can look up a lot more depending on what your needs are on the internet. So let's take these ones here. If I was to copy this and I'm just going to put them down here and let's imagine that I needed to put these together. One way to do that is with a formula. So I could say this is going to be equal whatever's in this cell and then I tie it together. I think about doing that with the and as a not. You could think of it as kind of a not, but I don't want to put it right next to this one. I could do that and this, but then I'm missing the space. So let's go back in there in between this after this and I need a space. You have to use the space as a text to put a text in a formula. You have to put quotes around the text quote space text. And then I need another and to tie in that space to the next piece, which is Anderson. So that I'm going to say and again and boom, there we have it. And then you can copy that down. So that's one way that you can do it. Now, if you don't want a text in here, then then you simply copy this and paste it one, two, three. So now it's not a formula anymore so that you can save it as like a CSV file easily because it doesn't have any formulas in it. Now, if you wanted to go the other way and put a comma between them, then that's the same kind of idea, but you're just going to start with this one. This equals this one. And then I'm going to say and and then quotes and then this time a comma and then quotes to put the comma in there and then tie together and with the first one and boom. So now we have it with a comma. We want we might also want to space after the comma. If I double click in there, we have the comma and then the space. I can put both of those in one spot and then copy that down. Boom. That's another idea that that you could use. Now, if you need to break something out, let's go the other way and say it's this way. And now I need to break that out to two cells because it's only in one cell. You could select this one and we can go to the data up top and within the the data tools over here, you've got text two columns. So in text two columns, it's now saying deliminated characters such as comma or tabs and so on. I'm going to pick that one. And then I want to say that there's a space between them. So that's what I want to use to break it out. So I'm going to say, okay, and then finish. So now it puts it into like that. Let's just show that same thing over here with the whole address right with an address. If I pulled out like this address and I put it in its own column over here just to play with that address. And now I want to break this out to columns. Well, I could select this. Let's just do it again for this one. I'll say that data and I want to make it into columns. And this time it's going to be deliminated characters such as comma or tabs separated each field. This one says fields are aligned in columns with spaces between each. That's what we have here. We've got a comma and a space. So that's the one we want it defaulted to the correct one. It's breaking it out. So boom, and let's just do it. And so now it broke it out into its separate fields. So just a couple techniques. Those are common kind of problems that people run into when you try to try to export to a spreadsheet and then import to another spreadsheet. There might be a different format of the fields. Let's see if we run into that problem now that we have some tools to deal with it as we go into our worksheet over here. If we want to add a new customer, you could do so with the new button here if we wanted to enter them one by one, which we only have three. So that would be easy to do. But we're going to try to upload it. Let's just go through the customer fields though to get an idea of what it's here. So let's just tap through it. You've got the title, first name, middle name, last name, company name. This is going to be the display name. That's why it's got an asterisk. So that's going to be the only thing you really need because it's the only asterisk one. But you might want all this other information. Email, again, might not be important. Unless, of course, it is really important if you're invoicing the client. It wouldn't be important if you're just dealing with someone like a food truck or something like that and collecting the money at that point in time possibly, although you might want them their email for your mailing list, which is another thing. So the phone number, mobile phone, fax, other website name out to print on checks. If you're doing checks, is it a subcustomer that deals with like job costing kind of things? Typically we have a whole nother course or section on that. Then we've got the address, which will be important if you're shipping things to them and possibly important if you're dealing with some kind of sales tax situation where you have to apply it possibly to where they're located. And then we've got the notes and attachments attached. We've got the payments primary payment method, which could be, you know, whatever the payment methods that we are using. And then the terms, if we send them an invoice, we might want to set their particular terms or just use our default terms for all customers. I use company default English versus other languages, which is pretty neat that we could change like the language of the forms we're giving them. That would be nice possibly for some people credit limit, additional information customer type. So we could start typing to create a customer type. If we want to create customer types, possibly helping us to group our customers by type. And then this customer is tax exempt, meaning sales tax. When we issue a invoice or sales form, are they exempt to tax? Usually not. Usually it'll be with the default. We went over that in our sales tax setup process. And then we could set the sales tax that they're subject to here. If we don't do that, it'll use the default settings based on location. And then the beginning balances. You would never use this unless you're first starting up the file, which we are doing at this point in time. So you'll notice that we are going to have a field showing the customer balance, which will be the opening balance. If you put something in there, QuickBooks will create a journal entry. You don't typically want to do that after you do the setup process because every new customer will you'll invoice them to have to have a balance. So let's close that out. I'm going to say, do you want to leave without saving? Yes, we do. So we could do it that way. Or it says import customers here. And then we've got the multiple customers. So notice they still have the import field here. I didn't see the import field in the products and services that they generally had here. So notice you can imagine that they might try to put it in the same place we went up top. So if that button goes away for whatever reason, and they want to move it over here, then you can imagine them doing that into the import data under tools, import data. And so if I go into that, we've got the bank data. There's our customers, vendors. We did this with the products and services. But since they still have that button there, and it makes sense to me that they would within the center, I'll go back into the sales center. I'm going to use it here. We're in the new customers dropdown. It makes sense to me to have the import customers here. So first time importing customers, all your customer information must be in one file. So the top row of your file must contain a header title for each column of information. Custom name is the only required field. So select a CSV file or Excel file. So they've expanded from what we saw with the products and services they want a CSV or an Excel file. So we might just be able to use our Excel file. But we probably want to use their template just like we did before to make sure the headers line up. So what I would do is open up their template and use their headers and then line up our information to it. Let's see what they have here. How did they save this? Is it a CSV file or Excel file? It looks like an old Excel file. Let's save it as, I'm going to put it in my folder here. I'll say boom, save it in my folder. And it's actually an Excel file, an old one, 2003. So we're going to put it there and we'll say this is going to be customer list and balances Excel. So I'll save that. I don't need to convert it to a CSV it looks like. So I'm going to just use their thing here. So here we have the same information up top, the name, the company, the customer type, the email, the phone, the mobile and so on. So let's just look at, let's delete this down here. I don't need this right click and delete that. And then I'll just see if I can pull in my information. So if I go from here, I've got the name. So here's the name, boom. See if I can pull that in here. So they have the name in the same format where it has first and last name. So I'm going to say, okay, that's the format they want. We'll put this here. Hold on. I lost my copy. I'll just copy that and put that here. And then the company name, the company name, I'm just going to say is the same thing. Company name. So I'm going to go. Dirt company name. I lost it again. Copy and then boom customer type. So I'm not going to put a customer type. We could get more detail on that than the email address. I think I have an email address. Let's go from this one, this side over this way. So I don't keep losing my, here's my emails. So I'll copy that, pull that over here. Email addresses. Phone number. So let's copy that. We could have multiple different phone numbers, but I just got the main phone number here. Main phone. I'll just put in here. Let's go. And then delete everything below it. And then mobile. I don't have a fax. I don't have, I don't have a website. I don't have that. And then there's street addresses. So notice we ran into that issue here, right? Because now they've got the street as street, city, state, zip, and then United States. Okay. So now we've got our issue. So now we can apply the technique that we thought about. We could say, okay, I need to break this out. So I'm going to take this billing address over here. I'll copy it over here. And I'll just do the same thing we did before. Let's see if I can do all of them at once. Does it allow me? Let's go to the data. And then I'm going to say convert to a column. And then I want to fields aligned in column with spaces between characters such as comma. I'm going to do the second one. Okay. I think I have to do it. I think I have to do it one at a time. So I'm going to go in here data. To text. There. Yeah. I have to do it one at a time. Boom. Okay. It's a little tedious. If you had a whole long list, but not too bad. Better than copying and pasting each one of them one at a time. So I'm going to say, did, did, did. Okay. So now we have it. So now I can say this is going to be, what do they want it looking like? They want the number this, this, this. Okay. So now these three need to go together on these three. Okay. So, and I'm going to get rid of the commas here too. I don't need this comma. Do I need that comma? Get rid of these commas. That's kind of annoying. It's kind of tedious. You know what I could do on, on that thing, by the way, I could like to get rid of those commas, I could take this whole thing and then say, I want to go to the home tab and say, I want to find the commas and go boom. And then on the replace, I say find the commas and replace them with nothing. Right. Next, or find all, and then replace all. Okay. There we go. So that pretty easy way to remove the commas. Now I need to combine these three back together again. And how did this get, this one road, Beverly Hills, this got off. So there we go with that. All right. So let's go. I know I'm doing this kind of, let's see if I can combine these three together. This equals this. And then I'm going to say and tying it together with a, with a, with a space space and then and tying it together to this. And then I'm going to say and tying it together quotes with a space and then and this tying it together with an and and wait, no, that's it. That's all I need. You're getting to getting it. All right. So there we go. So now I can just say, let's copy those three. Okay. And then I'm going to copy it again and paste it one, two, three. So it's not a formula. Okay. So let's copy that and see if that works. So then if I go back on over here, it wants these three. So I'll put that here and then delete this and then it wants a city field. So I can go back on over to this one and say this was the city. Beverly Hills got broken out. Okay. That's great. So let's do this again. This equals this and space quotes space this. This and quote space and then and again, tying it together to this doing Beverly Hills. Copy that. I'll just copy that and these all three of these, but no, it's a formula now. Paste it one tooth. Oh my goodness. Let's go back over here, copy it, paste it one, two, three, and then copy it and go back on over and paste it to these three Beverly Hills. And I'm just going to say California. So California and then the zip code 90210 California zip code is going to be here. 90210 boom and we'll keep the country United States. Okay. That's cool. Opening balances. Then I have where were the opening balances. We have this one opening balances copying those and put that over here. Opening balances boom. And then I'm going to say that the date, look at the format of their date. Do we need it in that format? That's going to be 2023 dash 31. No, dash 12 dash 31. So year month day. Okay. I think that's right. You probably okay. So there we have it. So I think that's it now. And this if we sum up the balances. That should add up to 20,500, which is the amount here, 20,500. So I know that I did that a little bit possibly not as smoothly as I could have, but a couple things to do. I think everything is in there. So we've got the name, the company, customer type, email, phone, mobile facts, street, city, zip, state, zip country. That's good enough for our example, I believe. Let's go ahead and save it. Let's say save it and close it. We'll close this one as well. And then I'm just going to upload the Excel worksheet. I don't say I don't need to save it as a CSV file this time because they, they're not requiring me to customer list and balance. It's got the old look, the old look. It's not a CSV file. I don't think it's just an old Excel 2003. So they're going way back, way back. All right. So let's update it. I don't think you need to use an old version, by the way. I think they're using that template. It used to be that you use that template so it didn't mess people up that had the old version of Excel. But I mean, that's pretty far back. So I think most people have upgraded from that point if they're using QuickBooks online in any case, but in case customer list and balance Excel, that's the right one, isn't it? I'm talking too much, but I have to because that's what I do. Otherwise it'll get boring, but it's hard to concentrate when I'm talking so much. Okay. So there it is. So we're going to say next. So now the headers line out. They're going to line up perfectly now because we picked our headers up and lined them up to the same headers in the worksheet. Instead of trying to upload our worksheet and then tie out the headers, which is the other methods you could use, which might work. But I think this is actually easier if you just take their template and then put your information into their template, then the headers should tie out. So there we have it. It's pulling in. And so name, company, email, phone, street, city, zip. Let's make sure we have the date correct. 1231-2023 because we're starting January, 2024, movie B to the N, BN. So there we have it. So now we're back in our customer area, which you will recall is under the sales tab and then customers close in the hamburger. So now we've got our three customers plus this generic customer we set up before. Now, if you hit the dropdown once they're set up, you can send reminders, create statement, create invoice, create sales receipt, and so on and so forth. And you can make them inactive if you so choose. Notice they all have balances in them now. So if I go into a particular customer, they have an invoice there. Like, well, I didn't create an invoice. How did it do that? It did that when we entered the beginning balance there. Why is that important? Because you have to have the invoice. If you're going to collect on it, if it was a journal entry in there, when you receive payment on it, you wouldn't be able to tie it out to the invoice. So even though it's not the same invoice that we put into the prior system, it's still an invoice, right? So it put down here just service item. So it just charged it to a service item so it can put the other side most likely to income. Now, if you don't want it to go to income, possibly you want it to go to opening balance equity. You could create an item that then goes possibly to opening balance equity, the equity count if you want to. But if this goes to the income statement, like you would assume it would, not a problem if it's in the prior period to when you're going to start in this period, in our case 2023, which will roll into retained earnings as we start the new period in 2024. So now I can collect on this, right? So I have this, if I receive a payment on it, I can simply go to the receive payment, which we'll see in the future, and I can get a payment on it just like we would with a normal invoice as if we issued the invoice normally with an invoice form, which an invoice form would of course look like this. Here's the attachment to the invoice form. All right, let's close this out. Let's close this out. We'll also be able to track that information if I go back to the customers internally in the all sales area. So we have our invoices in here and our invoices tab. We have our invoices in here, right? And then we can see the impact on the financial statements. So let's do that. Let's open up the hand boogie. Let's go down to the reports and words. Doneday. Doneday. Okay, there they are. Calm down. Close up the hand boogie. Let's right click on the balance sheet and open link in a new tab. Right click the profit loss, the P&L open in a new tab. If we go on to that balance sheet then and scroll up. Let's go back to 2023 now. So I'm going to go from 010123 tab, 123123. We entered everything as of December 31st, 2023. That's at least what we're trying to do. So on the balance sheet, AR we entered last time. Here's the inventory we entered last time. AR we entered this time. There's 20,500. That looks right. That looks like this balance. Good. Okay, if I go into it, what's comprising that? How did QuickBooks do that? Well, we entered the beginning balances and QuickBooks created an invoice from it. So if I go down and drill down on the invoice, we're going to say, hey, look, I didn't enter an invoice like that. All we did was enter a beginning balance into the data input. Well, QuickBooks has to enter a journal entry because that's how the double entry system works. And the entry that it uses or the format that it uses to increase accounts receivable is the form of an invoice. And the other side you would think would be going to sales. That's what it looks like. That looks good. Mui B to the end, BN. Let's go back on over. The other side you would expect is now in net income. It's meaning it's pulling in from the income statement. Okay, let's go to the income statement then and check it out. Closing up the hand boogie, changing that range, bringing it back to 0301, 0123 tab, 1231, 233 tab, run it to refresh it. There's the service income. So they dumped it into service income. You might say, well, that might not be perfectly right or whatever because it was last year or maybe it was some other kind of income instead of service income. But it doesn't matter because we don't care about 2023 because we have that information in our prior accounting system. It's closed. It's over. All we need to know is that that amount is going to roll into the equity section, which it does, right? It's down here in net income. So as long as our balance sheet is good, we're okay. Why? Because if I go to my income statement, when I reset the income statement starting in the current year, it's like we're driving a car and we reset the Odominator every time we have a new journey, right? So it goes back to zero. So I'm going to bring this back to zero, 010124 to 123124. So if I'm measuring performance in 2024, nothing's in it. So I'm okay with something being in there last year because I reset the Odomator as of the current year. So we have a clean slate where we need the clean slate. If I go back to the balance sheet, how does that work on the balance sheet? Well, it's an income to here. If I go to the next date up, then it's going to roll into retained earnings. So if I go from 010124 to 123124, then it's going to take that number that was in income, roll it into retained earnings. Remembering that retained earnings is kind of like a corporation type of account or name of the account, but it's all the closing processes, all the same. The system for QuickBooks will close out your income statement to the balance sheet and it'll show this net income to show the process separately, even though that's not actually an account, and then roll it into the retained earnings on a yearly basis, not on a monthly basis. It will do it on a yearly basis even if you change the dates to like a monthly kind of setup. That's why you want to have like a whole year's worth of data in one accounting system, even if that means that you have to basically run a few months or whatever part of the year you need to in the current year that you're switching in, which might be good because then you can run a parallel accounting system for some time to see if it's accurate and then move forward to it. So there it is. So that our plan has worked because now it's in the retained earnings. We've got this amount in opening balance, which we'll put into retained earnings. If it was a partnership, we would then at the end of the process have to break out the retained earnings between the partners or whatever. If it was a corporation, we'd have to break out the retained earnings to the retained earnings versus the common stock at the last step. If it was a sole proprietorship, we'd have to put it all into retained earnings and possibly change the name to the owner's equity or something like that because retained earnings is not the proper name if you're a sole proprietorship. Those little touches, by the way, could really make people feel like you know a lot more about what you're doing. If you get your retained earnings setup right, I mean if it's a sole proprietor and you have stuff in opening balance equity that if you're anything and you have stuff in opening balance equity, it doesn't look as professional. You probably want to clean that up. You have retained earnings as the name of the account, but it's a sole proprietor. Not the end of the world, but doesn't look exactly correct. Touching that up and calling it owner's equity would clean it up a bit, make it look a little bit nicer. If it's a partnership, you would have capital accounts, right? But they're basically the same thing. Let's do one more thing. If I go back up top to the accounts receivable, we should now have a sub ledger breaking it out by customer, which we already saw internally over here in the customer center. So we can see that internally this amount is being broken out by customer this way. But we also can see that in a sub ledger. So let's right click on this tab, duplicate it to see the sub ledger report breaking out accounts receivable by customer, scrolling down to the reports, closing up the hand boogie so we can boogie on a bigger dance floor. We've got the show who who owes you. So all of these reports are supporting accounts receivable. The classic kind of just sub ledger playing sub ledger is the customer balance detail or customer balance summary. Let's go into the detail one and see what we have here. So as of custom dates, let's just make it 1231 to four. We've got the invoices. Here's Anderson Jones Smith invoices and those invoices five thousand seven five eight thousand tie out to the twenty thousand five hundred and that amount is what is on our our balance sheet over here twenty thousand five hundred. So they're there that that's the general process for entering that. Let's go ahead and open one more thing the trial balance because that's the easiest report to see us constructing this step by step. So I'm just going to type in trial balance because QuickBooks doesn't give the trial balance any respect puts it on the bottom of the reports treats it like Rodney Dangerfield even though he was the like the funniest guy around. Oh one oh one two four to twelve thirty one to four. Let's do that. So that will give us then accounts receivable. Here's the balance sheet. Here's the asset of inventory opening balance equity and retained earnings. Note that if I bring it back and notice there's no subtitles look how much easier that is to look at than this. This looks like we have a lot going on even though we've only we've only got like two entries that we put into the thing because of all the subtotals and this would if I bring this back to the prior year. Oh one oh one two three twelve thirty one two three. We've got some detail in here it looks like a lot's going on over here. It's cleaned down you can say OK this is pretty straightforward even though it's in debit credit format now if I bring this back to oh three what happens what's going to happen if I bring because I entered this as of twelve thirty one twenty three if I bring this back then this retained earnings is going to break out the part that was assigned to income. So I'm going to say run it and so now I don't have a retained earnings right instead I've got the opening balance which you can think of maybe as the beginning retained earnings and then the income statement account of revenue or sales. If I pull out the trustee calculator we can see of course that that means when I construct this the equity section on the balance sheet is including the income statement the income statement is part of retained earnings or owner's equity or whatever you want to call it capital account depending on if it's a corporation partnership sole proprietor right right so I had sales twenty thousand five hundred plus the two eight nine six is going to give us the twenty three three ninety six which if I go up one more date I just go boom then you get the this plus this would be the twenty three three ninety six right it's going to be twenty thousand five hundred plus two eight nine six twenty three three ninety six so that's it that relationship between the balance sheet and the income statement is something that a lot of people don't fully understand and as we construct this it's the easiest way to see it as we build it step by step we can see that the that if I was to look at this trial balance and break out the income statement of it what's it going to do going back again it's going to say that the retained earnings the retained earnings which we can kind of imagine is opening balance equity is kind of representing everything that's rolled into retained earnings that hasn't been distributed in the form of dividends if corporations or draws if a sole proprietorship for prior periods and then the income statement accounts revenue minus expenses are broken out into a long form which are going to just add up to net income is going to be the current performance which is just part of the equity right all of that rolls into the equity it's all part of equity so normally for external reporting purposes we don't usually break out net income we say on the balance sheet it's part of equity it's part of retained earnings already QuickBooks is trying to show that relationship by showing you the net income when you're in the prior year 010123123123 and run this isn't an actual account the net income it's trying to show you that the net income is in here it really should all be part of retained earnings right and we just know that the income statement shows the last year we're looking at it in terms of years it shows the last years of performance which is part of the equity section included in retained earnings if it was a corporation the capital accounts if it's a partnership and the equity accounts if it's a owner's equity if it's a sole proprietor alright we'll continue on with adding the beginning balances next time