5 End-of-Year & Beginning- of-Year Transactions 2014/008QB_Chapter 5_EOY BOY... · Record the following adjusting entries for December 31, 20XX: 116 Chapter 5 ... End-of -Year & Beginning-of-Year

5

End-of-Year & Beginning-

of-Year Transactions

Accounting Fundamentals with QuickBooks Online Essentials Edition

113

In Chapter 5 of Accounting Fundamentals with QuickBooks Online Essentials Edition, you will complete end-of-year adjusting entries and print financial statements. Chapter 5 also includes transactions for the start of the new year –January 1 - 31, 20YY (i.e., 2015). OBJECTIVES: 1. Sign in to your QuickBooks Online Essentials Edition account. 2. Record end-of-year adjusting entries. 3. Print the adjusted trial balance and end-of-quarter reports. 4. Record end-of-year closing entries. 5. Print the post-closing trial balance. 6. Close the accounting period. 7. Complete January 1 - 31, 20YY transactions. 8. Copy data to Excel. 9. Complete activities for Chapter 5, End-of-Year & Beginning-of-Year

transactions. GETTING STARTED Follow these steps to start QuickBooks Online Essentials Edition. You must complete Chapters 1, 2, 3, and 4, pages 3 – 112, before starting Chapter 5, End-of-Year & Beginning-of-Year Transactions. The exercises at the end of each Chapter must be completed, too. 1. Start your Internet browser and log in to QuickBooks Online

Essentials Edition in the usual way.

2. Click on and then when the drop-down menu appears, move mouse over “Other” and click on Journal Entry.

114 Chapter 5

Text and screen variations may occur since web-based software products backup and upgrade automatically.

The "Journal Entry" screen appears.

END-OF-YEAR ADJUSTING ENTRIES

The general journal shows the debits and credits of transactions, and can be used to record any type of transaction. For purposes of this exercise, you will use the general journal to record adjusting entries.

End-of -Year & Beginning-of-Year Transactions 115


In Chapters 4 of Accounting Fundamentals with QuickBooks Online Essentials Edition, you used selections from the "Add a transaction" drop-down menus to record business transactions. For adjusting entries, you will use the Journal Entry link from the "Other" list, which takes you to QuickBooks Online Essentials Edition's "Journal Entry" screen. Compare your screen to the one shown above.

Comment: Journal entries are in debit/credit format and must always be in balance.

QuickBooks Online Essentials Edition will show you any out-of-balance amount

at the top of the "Journal Entry" screen and will not let you submit the entry until

it is balanced.

Follow these steps to record adjusting entries in the general journal for December 31, 20XX (i.e., 2014): 1. The "Make Journal Entry" window should be displayed on your

screen. Change the date to December 31, 20XX. 2. Type Adjust 1 in the "Entry No." field. (HINT: For the subsequent

adjusting entry, type Adjust 2.) 3. In the "Account" field, select or type the appropriate account to debit. 4. In the "Debit" amount field, type the appropriate amount. 5. In the next "Account" field, select or type the appropriate account to

credit. 6. When you click on the "Credit" field, the amount is automatically

completed or you can type in the appropriate amount. 7. Type any memo information, optional. 8. Click on "Save." 9. In a few moments, a new “Journal Entry” screen will appear to record

the next entry. Record the following adjusting entries for December 31, 20XX:

116 Chapter 5


1. Adjust 1: Use straight-line depreciation for the business' equipment. The equipment has a five-year service life and no salvage value. To depreciate the equipment for the year, use this calculation: $6,000/5 years = $1,200.00. (Hint: For Account: First line-- scroll to bottom of the pull-down menu and select “Depreciation Expense—Other Expense.” For second line—from the pull-down menu select “Computer Equipment—Accumulated Depreciation—Fixed Assets.”)

Account Name Debit Credit

Depreciation Expense – Other Expense 1,200.00

Computer Equipment - Accumulated Depreciation—Fixed Assets

1,200.00

Compare your screen to the following then click on .

2. Adjust 2: During the year, $250 of Prepaid insurance expired.

Account Name Debit Credit

Insurance - Expense 250.00

Prepaid Insurance – Other Current Asset

250.00

Compare your screen to the one on the following page and then click

on .



3. Display the "Journal” for December 31, 20XX. Notice the Journal, like

the Transaction List by Date, is a chronologic list of journal entries (transactions). (HINT: Reports; Accountant Reports, Journal)

4. Customize the Journal as follows:

118 Chapter 5


Compare with the one shown below.

Observe that the first entry for December 31 is the bank service

charge. Adjustments 1 and 2 are shown after the service charge.



PRINTING THE ADJUSTED TRIAL BALANCE Print the trial balance and compare with the one shown below.

120 Chapter 5


PRINTING END-OF-YEAR FINANCIAL STATEMENTS 1. Print the Income Statement (Profit and Loss) from 10/1/20XX to

12/31/0X. Compare your printout with the one shown below. Income Statement



2. Print the balance sheet and compare with the one shown here.

Balance Sheet

122 Chapter 5


END-OF-YEAR CLOSING ENTRIES As you know from your study of accounting, the purpose of closing entries is to reset revenue, expense, and dividends account balances to zero. When you record and post closing entries, you are transferring the end-of-year (or end-of-period) balances in revenue, expense, and dividends accounts to the retained earnings account. The adjusted trial balance (page 119) and end-of-quarter Income Statement (page 120) were used to determine the closing entries. Click on "Save" between each entry to post. Record the closing entries in the

general journal (Hint: Use the Journal Entry link from pulldown.) 1. Close 1: Close revenue accounts. (Hint: After typing “Income

Summary” in the account field, an “Account” screen will ask for the Category type: “equity;” detail type: “accumulated adjustment;” and “Income Summary” for the name of the account. Save.)

Date Account Name Debit Credit

12/31/20XX Sales-Income 875.00

Services-Income 15,650.00

Income Summary 16,525.00

2. Close 2: Close expense accounts.


12/31/20XX Income Summary 12,018.00

Advertising 270.00

Bank Charges 75.00

Computer Supplies Exp. 5,965.00

Utilities 606. 00

Insurance 250.00

Office Expenses 3,147.00

Rent or Lease 265.00

Repairs & Maintenance 215.00

Depreciation Expense 1,200.00

Interest Expense 25.00



3. Close 3: Close Income Summary account.


12/31/20XX Income Summary 4,507.00

Retained Earnings 4,507.00

4. Close 4: Close Dividends account.


12/31/20XX Retained Earnings 2,000.00

Dividends 2,000.00

JOURNAL To make sure that you have entered all the closing entries, you should display your "Journal" report for 12/31/20XX and compare it with the one shown on the next page. This report will show all your December 31 entries: bank service charges, adjusting entries, and closing entries.

124 Chapter 5


December 31, 20XX Journal



POST-CLOSING TRIAL BALANCE Make the appropriate selections to print a trial balance for December 31, 20XX. You may want to compare your post-closing trial balance to the one below:

Observe that your dividends, income, and expense accounts all have zero balances. Also, your Retained Earnings account now has a balance $2,507.00.

126 Chapter 5


CLOSING THE BOOKS IN QUICKBOOKS ONLINE ESSENTIALS QuickBooks Online Essentials Edition limits the changing of prior data if the Closing date preference is selected. This feature provides data security since QuickBooks tracks any changes to data and who made them despite the closed year warning. By limiting access to prior year data and tracking those who view/change it, QuickBooks provides an accounting system internal control.

1. Move your mouse over . When drop-down menu appears, click on Company Settings.

2. When the Company Setting screen appears, pick the “Advanced” tab. Move your mouse to the “Accounting” section and then to “Close the books.”

3. Click on Off and the following screen appears:



4. Put a in the “Close the books” box. Then type 12/31/20XX (your current year for the closing date) and “Allow changes after viewing a warning.” Compare your screen to the following:

5. Click . Then “Settings.” BEGINNING-OF-YEAR TRANSACTIONS Before you start entering transactions for January 20YY (the year after your current year i.e., 2015), let's look at the balance sheet. Make the appropriate entries to print your balance sheet for January 1, 20YY. (Hint: Remember to use the next year in your date. For example, if you have been using December 2014, you will now use January 2015.) Compare your screen with the one shown on the next page.

128 Chapter 5


Comment Your new year,

i.e., 2015



Enter January’s transactions for your business. Date Transaction 1/02/20YY Issued hand-written Check No. 26 to Santa Fe Rentals

for equipment rental, $192. 1/02/20YY Received bill, Invoice 135JE and shipment from Big

Bytes Supplies for the purchase of computer supplies on account, Net 30, $1,775.

1/03/20YY Received Invoice EX99 and shipment from Sales

Products Supply for the purchase of office expenses on account, Net 30, $175.

1/08/20YY Sold 50 hours of maintenance services on account to

Michelle at Two Sisters B&B, Invoice Net 30, $1,500. 1/08/20YY Sold 2 hours of maintenance services, 10 hours of

repair service, and 10 hours of new repairs on account to Nick at Cyberconnect Cafe, Invoice Net 30, $1,560.

1/08/20YY Returned to Big Bytes Supplies computer supplies,

Invoice 135JE, for vendor credit, $100. 1/11/20YY Paid Big Bytes Supplies, Invoice 135JE, for the January

2 purchase less January 8 return, hand-written Check No. 27, $1,675.

1/11/20YY Paid Sales Products Supply, Invoice EX99, for the

January 3 purchase, hand-written Check No. 28, $175. 1/17/20YY Received a check from Nick at Cyberconnect Cafe in

payment of Invoice, Check No. 5510, $1,560. 1/17/20YY Received a check from Michelle at Twin Sisters B&B in

payment of Invoice, Check No. 335, $1,500. 1/24/20YY Cash sales $680, received check No. 804 for 10 hours

of repair service and 6 hours of maintenance services.

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1/30/20YY Issued Check No. 29 to Comtel for office expenses for the monthly telephone and Internet service, $279.

1/30/20YY Issued Check No. 30 to Regional Utilities for monthly

utilities bill, $201. 1/30/20YY Issued Check No. 31 for payment of dividends $2,000

from checking account. RECONCILE THE BANK STATEMENT: JANUARY The business receives a bank statement every month for your regular checking account. The bank statement shows that checks and deposits have cleared the bank. Use the bank statement below to complete account reconciliation for January.

REGULAR CHECKING ACCOUNT January 1 - 31, 20YY

Previous Balance $9,440.00

3 Deposits (+) 3,740.00

8 Checks (-) 3045.00

Service Charges (-) 1/31/YY 25.00

Ending Balance 1/31/YY $10,110.00

DEPOSITS

1/19 1,560.00

1/19 1,500.00

1/25 680.00

CHECKS (Asterisk * indicates break in check number sequence)

1/5 21 303.00

1/5 22 190.00

1/5 23 145.00

1/5 24 140.00

1/5 25 225.00

1/5 26 192.00

1/13 27 1,675.00

1/13 28 175.00

Comment: If a check or deposit does not appear on your "Reconcile" screen, move your mouse

over the QuickBooks Online Essentials Edition menu bar to access the appropriate drop-

down menu. Then, select the appropriate link. Select the "Edit" button and make any

needed corrections. To update the record, click on "Save."



January's Reconcile Screen

When satisfied and difference shows 0.00, click “Finish Now.” January Reconciliation Summary Click on “Print” to print your January Reconcile Report. PRINTING JANUARY REPORTS Print the following reports and compare them to the ones shown on the following pages. 1. Print the "Transaction List by Date" report for January 1, 20YY

through January 31, 20YY. Compare your report to the one shown on next page.

2. Print the January 31, 20YY trial balance. Compare your report to the one shown on the following pages.

3. Print the January 1, 20YY through January 31, 20YY income statement. Compare your report to the one shown on the following pages.

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4. Print the January 31, 20YY balance sheet. Compare your report to the one shown on the following pages.

January's Transaction List


i.e., 2015



January's Trial Balance

Comment Your new year, i.e., 2015

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January’s Income Statement


i.e., 2015



January's Balance Sheet


i.e., 2015

136 Chapter 5


CHECK YOUR PROGRESS Exercise 5-1. Using the reports that you printed in Chapter 5, End-of-Quarter and End-of-Year Transactions, answer the following questions. 1. At the end of the quarter, your business's accumulated depreciation for the equipment is: _____________ 2. The amount of accounts payable owed on

January 31, 20YY is: _____________ 3. The updated retained earnings account balance on

January 31, 20YY is: _____________ 4. On January 31, 20YY, your total fixed assets are: _____________ 5. On January 31, 20YY, your total liabilities and equities are:

_____________

Exercise 5-2. Complete the following. 1. Copy your January 1, 20YY balance sheet to Excel. Use Your Name

Exercise 5.2.1 as the file name. Print your Excel balance sheet. Hand write your name and Exercise 5-2-1 on it.

2. Copy your January 31, 20YY balance sheet to Excel. Use Your

Name Exercise 5.2.2 as the file name. Print your Excel balance sheet. Hand write your name and Exercise 5-2-2 on it.

Documents

5 End-of-Year & Beginning- of-Year Transactions 2014/008QB_Chapter 5_EOY BOY... · Record the following adjusting entries for December 31, 20XX: 116 Chapter 5 ... End-of -Year & Beginning-of-Year