 Zero Accounting 2023. Entering beginning balances, customers, vendors, and items overview. Get ready because it's time to become an Accounting Hero with Zero 2023. 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. Here we are in our custom zero homepage going into the new company file we set up in a prior presentation that being get great guitars. Now that we have our company file set up we want to put data into the company file. Once everything is all set up we will normally do that by entering data input forms or possibly creating those forms with the help and use of bank feeds. Many of the forms can be found in the plus button up top like the invoice the bill and so on and so forth. As we enter these forms we're populating the information for financial transactions which will then be used to create the financial statements balance sheet income statement or profit and loss and the related reports. But before we start just entering the data input we might have some beginning items we need to put into the system for a couple reasons. One we want to make sure that the data input with these forms is as easy as possible and two we want to have any beginning balances that we might have from prior accounting systems or things that we have just set up prior to opening up and getting our zero account rolling we want to put those into the system. So first off when we look at these forms for example what we would like to be able to imagine is I want to have a system where I can make it as easy as possible to input these forms and I think it's useful to imagine two people doing the bookkeeping one being more of the bookkeeping kind of professional of the person that's going to be doing the setup process the other being the data input you might be doing both but it's kind of easier to picture it with two different people when you're doing the data input the person doing the data input the idea is that they don't need to know anything about the accounting system how the thing is set up what the impact is on the financial statements the data input should be just easy someone calls in and wants it has to send out an invoice or whatever we're going to put the data input into the invoice as easily as possible when we pay the bills we want that to be as easy as possible if we could automate it we would like to of course automate it as easy as possible and so that means that the setup process that we put in place we have to put the foundation down so that that is indeed the case and with invoices that will be with the use of say items the things that we are selling will help us to populate the invoices so that's one thing that we want to make sure that we set up the underlying foundational stuff so that the data input is easy that's going to be the accounts that's going to be our customers that's going to be our vendors that's going to be our items or like inventory items and service items the things that we actually sell and then if we're setting up our bank fees the bank fees setup if we have payment options on the invoices and stuff that stuff to be set up is the general underlying setup process also the second thing we need to do is think about any prior accounting we had before starting our zero system so for example if we had another accounting system entirely like a QuickBooks or something like that and now we're moving to zero for whatever reason then we want to think about how we're going to pull the data into the new accounting system or possibly we didn't have any real formal accounting system before starting zero maybe we were just using spreadsheets maybe we just started a bank account already but we haven't really done anything with it but we already have a bank account so there's already an account set up with money in it right so that's still a beginning balance that's still kind of like a prior accounting system something we need to track something we need to pull into the zero accounting system so we can get basically our balance sheet correct so that's the first thing what we'll try to address these two things kind of at the same time this idea of pulling in the beginning balances from the prior accounting system and as we do also setting up those core foundational things the underlying foundational things necessary to make the data input as easy as possible possibly automated to the extent that we can in some cases so we will imagine that we have these beginning balances here so these are good we're gonna imagine these from a prior accounting system now note that if you had a formal prior accounting system like a QuickBooks or something like that you have two options to pull that information into your new accounting system in zero you can one try to import all that data into the zero accounting system from your prior accounting system and sometimes there's integrations that allow you to do that the benefit of that is that now you've got all your financial data in one place so if I have to go back to prior data in the past I should have it all you know in one place and I can run comparative financial statements from this year to the prior year which is great so that stuff is great however the downside is that you're pulling in a lot you could be pulling in a lot of information much of which might be obsolete for the most part you might not need like 10 years back data that you're pulling into the system you might not even need it more than a couple years data back in the system so and if you have a whole lot of data it could basically slow down the system if your prior accounting system was not optimized in terms of a chart of accounts and how you're organizing everything in the chart of accounts then now you're starting with that same kind of messy situation when you start the new system which can be kind of an issue that often is the case like on the income statement where you have the income statement is not quite organized the way possibly you would like to have it organized and you're going to pull in all that stuff that you had before the other the other method you could do is you could try to say hey look I'm going to start my new accounting system as of this point going forward and the prior accounting system I'm going to go to the prior accounting system to get what I need from there now one of the problems with these online accounting systems when you use this method is like say you're going from QuickBooks online to zero then once you lose your subscription with QuickBooks online after you switched over you can't easily go back into QuickBooks online like the data I believe is still going to be there but you'd have to you'd have to pay for the subscription to go look at your prior data for prior years whereas it used to be with the desktop version of the accounting software you can always kind of go back to the old stuff because you actually owned the software so that means that that if you're if you're saying hey look I'm going to just take the beginning balances put them into my new zero system I'm going to go forward from this point in time forward in the new accounting system and anytime I want to look at the prior data the prior financial data I can go to my prior accounting system that would mean that you would have to have your prior accounting system available at least for some period of time you'd like an overlap maybe like a year or six months so that you can make a clean transfer one tax season right that you can make a clean transfer from one to the other and make sure you don't need any of the prior data or and or you print out all the information from the prior system so you have it in excel format in a spreadsheet or something like that so that you still have all the data even after you're you're no longer subscribed to whatever the system is so then what when you do that if you're using that method which is what we will imagine here and it also mirrors the method that we would do if we just had a checking account that it was just set up already and we need to put that beginning balance into our system what we would want to do then is get the information as of hopefully the last period of the the last year usually because if you're a sole proprietor type of business if you're in the united states for example and you have to have income taxes that's one of the reasons you need the accounting system and you'd like to have the whole year if you're a calendar year taxpayer on one system even if you're not a taxpayer sometimes payroll has similar issues it's kind of a mess to break up stuff in the middle of the year so even if you're transferring from one accounting system to another in the middle of the year what you would like to do is mirror the data generally for that overlap so for example if i started to put the data in this year in may then what i would like to do is pull in all the data i can from january through may into my current accounting system so that i can then and i have an overlap with my prior accounting system so that i can have a whole year's worth of data in the current accounting system instead of having half a year in the prior and half a year in the current so what we would like to do then i'm going to imagine here that the prior period the data we printed the balance sheet as of december 31st 2022 i want to put that into my new accounting system as of december 31st 2022 which means it's going to be there on the balance sheet at the start of the new year which we're going to imagine january 1st 2023 for our current data so notice when you do that the other thing to point out when you're pulling this data in you might say hey this is an overwhelming project because when i look at all the accounts i had in my prior accounting system there's a huge list of accounts but most of the time most of those accounts are expense accounts because that's the biggest category of accounts the expense accounts will roll into the equity because the whole income statement is simply a timing statement it's not a permanent thing it's just it's going to show how you did over a time frame a month or a year so really we're only looking at the balance sheet accounts which is usually not that overwhelming of a set of accounts to be to be pulling in so that's why we want to we want to do the balance sheet accounts as of the end of the year so we don't have to deal with the income statement and then we'll have our beginning balances and then the income statement will start when we do the data input for the current year which starts in january of 2023 in this case so then so what we'll do is we'll imagine these are the accounts that we pulled in from the prior accounting system and as we do the data input into the current accounting system we'll take a look at the issues related to to adding each of the accounts because you might think this will be easy if you took accounting courses and and no journal entries you can see this is basically just a journal entry this is in journal entry form debits and credits you could have the balance sheet in non-journal entry form but you could just say i'm just going to enter this one big journal entry and that will enter the beginning balances into the system which is true however there are other issues with accounting software that we need to we need to deal with when we're entering the the data into the system that's why the forms are there so oftentimes people that have an accounting background they try to get into accounting software and they try to do too much with journal entries and and they don't see all the other kind of things that are involved that you're going to mess up if you just put a journal entry in so for example with the checking account usually the forms used to increase the checking account are a deposit form and and that's big and and in the accounting system there's going to be a register the register has a deposit form with it usually and and it would make so so that's why the system kind of works better with a deposit form than a journal entry oftentimes you often you also have to reconcile the checking account and this beginning balance becomes a reconciliation issue oftentimes the accounts receivable is supposed to represent customers that owe you money so if that's the case if i just enter it with a journal entry i might not be hitting the sub-ledgers of the customers that owe the money and i won't be able to easily then enter the the receive payment forms and then the inventory if we're tracking inventory if i if i just put it on the books with a journal entry i'm not going to have this subsidiary ledger tracking the inventory by item and then the depreciation is it has its own kind of issue there's depreciation schedules but sometimes those are external accounts payable has vendors that we have to deal with and so those are some of the main big ones so what we'll do is we'll use a strategy of looking at each of these line items we will enter them one at a time instead of one big journal entry and the other side of the transaction will go to equity in some way shape or form so when i enter the checking account the other side of the transaction as i enter the beginning balance and the checking account will be some kind of equity account when i enter accounts receivable the other side of the transaction will be some kind of equity account or possibly income but it will be income as of the prior year which will roll into equity as of january 1st 2023 so either way it'll go into equity and inventory same thing everything's going to go into equity and after we enter all of these balances the equity balance must be in balance it has to it has to work because because we're looking at a balance sheet so that might seem a little bit overwhelming a little bit confusing you might not need you might be in a situation in your practice where you don't need all of these balances you might just have like a checking account that you've already started before opening up your zero account and that might be the main thing but conceptually that's going to be the idea and this will also help us to set up those foundational things we need to do for the data input to be easy like setting up customers when we do the accounts receivable like setting up items like inventory items and service items so that's what we'll dive into in future presentations