 Hello in this presentation we will enter the reversing entry related to unearned revenue into our bookkeeping problem in excel keeping in mind how the same information might be input into accounting software such as QuickBooks. We will be doing a reversing entry and this is related to the unearned revenue so we do have to take consideration in terms of what was the adjusting entry that was originally made which we will be reversing. First we're going to take a quick look at QuickBooks and then move to enter this information into excel. If we take a look at the QuickBooks customer balance we see that we have reversed this negative receivable. This is what the adjusting entry was which we are now reversing. This is a little bit different than that textbook problem that we typically see for unearned revenue. In this case what we're saying is that the unearned revenue was a deposit that we received. We received money from a customer and we had to increase cash then and then we credited we couldn't credit revenue because we haven't yet earned it and typically in a textbook problem the proper thing under an accrual accounting would be to credit a liability unearned revenue but in accounting software such as QuickBooks oftentimes we actually from a logistic standpoint will end up crediting the accounts receivable account with that payment even though there's no invoice to match it up with which is technically wrong however it works well because then when we get the invoice later we're able to match it up against the invoice very easily because it's in with our customers section rather than in this other account that this liability unearned revenue which isn't tied to our customers and is more difficult for us to tie to our invoice that we will later be issuing for that deposit. So what we did then is we had this amount which was a negative receivable because it was still on the books as of the end of the time period we needed to make an adjusting entry for it we needed to take it out of the negative receivable and make it what it should be which is a positive or a liability of unearned revenue. So that's the adjusting entry we did here as opposed to a textbook problem where we are typically seeing here's how much is in unearned revenue and how much of that unearned revenue has now been earned taking it out of the unearned revenue and recording it as income that has been earned so there's a difference between those two plus two types of scenarios two types that will be encountered in practice. So we have here then what we did here on the adjusting entry is what we're trying to do is now reverse this here's the accounts receivable negative receivable and then we made this adjusting entry to get rid of it to bring it back down to zero and now as of the first day of the next month we want to get rid of this basically or reverse that with another entry so that we're left with this negative receivable again. Why? Because logistically this negative receivable works well it just it ran over the timing difference when we made the financial statements which means we had to adjust it in order to be in a proper accrual basis but when we actually do the work in our case deliver the guitar and we record the invoice if we keep this negative amount here in the customer balance it will match up against the invoice nicely and then it will be correct as of that point in time sometime in March hopefully if we issue the invoice in March we can do that usually with we usually do whether we are in QuickBooks or any other accounting software do that with journal entries do that with debits and credits that's something that we typically use still use debits and credits even with software however it is possible to use the registers to do that in QuickBooks and not use debits and credits as much I think it's going to be a little more difficult to do that but it is possible to do that right now we're going to enter this into Excel using debits and credits here we are in Excel we're going to record this transaction as of 3 1 the first day of the following period after the financial statements were created as we do with all of our reversing entries remember what we have here is we've got the post closing trial balance and what we're doing is just as of the beginning of the first month putting in the reversing entries to give us our beginning balances which will actually include in the temporary accounts these reversals that we have made before any activity has happened and so we're going to do the reversing entry related to the unearned revenue adjustment before we do that we'll just take a quick look at the adjusting entry so we're going to go back over here to the adjusting entry tab and we're going to scroll down to the bottom on the adjusting entry tab we're going down to this adjusting entry here's what we did we recorded unearned revenue meaning we increased this liability account by the 300 and we would and we increased the accounts receivable increase in this accounts receivable so again why would that be the case it's the case because we had a negative receivable meaning in the past we collected money from a customer as a down payment most likely on a guitar so we got money for work we had not yet done so usually in a book problem we would debit this checking account credit unearned revenue at that point in time however in order to track this in our subsidiary accounts it's easier not to credit unearned revenue at the point in time of the security deposit but put it into the receivable and then when we get the invoice or deliver or earn the revenue later we and you know we can match up the the later earning the accounts receivable for the invoice to the deposit so that's going to be the reason we did this and what we need to do now is reverse this and record the actual liability that's what we did in the adjusting entry as a positive liability and take it out of this negative receivable so that's the adjusting entry we made now we're just going to reverse this we're going to take this back out so that the normal process which works well logistically although it's not perfectly generally accepted accounting prop principles can be put back in place meaning we'll end up with this negative receivable for that one particular customer note that this amount isn't a negative receivable that's a positive or a debit balance of 11274 but for this one particular customer there's a negative receivable in there and that's what we are dealing with here so we'll have that negative will reverse this and have that negative receivable for that one particular customer and then when they get the invoice it'll match itself out so we're going to reverse this entry so here's the debit and the credit accounts receivable and under and revenue respectively we're just going to reverse that debiting under and revenue and crediting accounts receivable let's do that now we're going to go to the reversing entries tab and we are going to enter this information so here's the 300 in under and revenue we need to make it to go down so we're going to do the opposite thing to it which in this case is a debit so we will copy the under and revenue right click and copy we're going to put that in b13 right click and paste 123 the amount will be 300 we're going to credit something for 300 and that will be going to the receivable so here's the accounts receivable we're going to copy that going to right click and copy we will put that in cell b14 right click and paste 123 then we're going to go to the home tab but we're going to go to the alignment group and increase the indenting and then we will record this so we have generalized the journal entry into the general journal for the reversing entry process now we will post this out here's the under and revenue and here's the under and revenue here we want to post it to m17 we're going to select equals and that 300 and enter bringing the balance down to zero here's the accounts receivable if we scroll up to accounts receivable here it is here there's something in it we are in m4 therefore we will double click on it go to the end of it and say plus and then point to that 300 in accounts receivable bringing the balance down to 10,449 so that's going to be the reversing entry notice that's an unusual reversing entry then most book problems will have there's no effect on net income for that adjustment or the reversal as opposed to if we were reversing the under and revenue and trying to see how much we had earned which would be the other side would be the revenue or sales account so keep that in mind that might be a little bit different than you've some people may have seen in a textbook problem but it is something that does happen in practice just because logistically it works well to track those deposits within the receivable subsidiary ledger