QuickBooks Online Tutorial: Clean-up last year's erroneous balance sheet (Advanced Webinar)

[@ToniInbusiness]

Its 2024 and I'm watching this as an aspiring bookkeeping business owner. I started recently training and have watched a million videos but never found someone doing real work for a real client, and a clean up at that! This is the kind of thing I need right now, and it was nothing like watching paint dry. I've never been so excited while looking at taxes before 🙂 Thank you

[@HectorGarciaCPA]

That is awesome!

[@jeanetteAlazzam]

I finally found a video that explains how to match tax balance sheet to qbo, this was the most exciting informative video I have ever come across. You are my hero!!! Thank you for this. I now, finally, understand the balance sheet vs tax recon.

[@HectorGarciaCPA]

Great!

[@melissadelong5659]

This was great information that most CPA's are not willing to disclose. Well done. Very helpful. Thanks for taking the time and allowing us to peek over your shoulder to learn. The concept was great and taught me to think of the balance sheet in a much different way.

[@HectorGarciaCPA]

Awesome

[@niajeannine]

watching in 2023... doing my own books... im a rideshare driver... 2023 i made a few errors and literally went mind numb trying to fix it.. came across this video and it all clicked! thank u for keeping this video active❤🦋

[@HectorGarciaCPA]

Awesome

[@davidbud5535]

I really appreciate your turn by turn instructions!

[@HectorGarciaCPA]

You welcome

[@financiallyspeakingbookkeeping]

Hello :) I just wanted to let you know that you have a wonderful teaching style ... very calming and yet inspiring. This is a wonderful quality for individuals watching your videos ... especially on a somewhat intricate yet boring topic like QuickBooks lol. New Subscriber!!!

[@HectorGarciaCPA]

You are so welcome!

[@tinahargrave1454]

your the most helpful person with all the questions I have. I do have a few how to questions I subscribe so I will ask on that link. thank you for all your expertise

[@HectorGarciaCPA]

Thanks

[@valentinahenson7253]

i love this! it's like a big giant puzzle work! thank you for this!

[@JulieChrisman-d3u]

Hi Hector! This tutorial helped me soooo much with a cleanup. HOWEVER, I went a little overboard after I force reconciled to get the previous end of year balances right. I had something I missed and thought I had to go back and change, so I UNDID the reconciliation and then did it again. This time the forced reconciliation balance was different. I guess I assumed the first forced reconciliation journal entry would be undone also but it was not. HELP!

[@HectorGarciaCPA]

You can delete the old entry

[@Julie_Chrisman]

When I deleted the old entry, it screwed up my year-end checking account balance that I had matched to the Sched. L. I feel like everything I did, screwed up something else. 🙂

[@Sundus-m9n]

Thanks for the video. I just wanted to ask that adjusting the prior year's ending balance to start off the current year clean up with right balance requires making a dummy account like you made 2017 bank difference. I did that too with my 2020 and 2021 balance sheet. But now on both year's balance sheet a negative amount is showing for the dummy account(that is obviously the difference) Is this acceptable?

[@HectorGarciaCPA]

No… all dummy accounts need to be reversed

[@KatieFunk12]

Thank you so much for this detailed video Hector. It is helping me prepare and complete my first big clean up. You mentioned forcing accrual basis to cash basis with a journal entry. What does that look like? I have a negative number in AR when I run the Balance sheet in cash basis because of the initial adjustment I made.

[@HectorGarciaCPA]

Means making a journal that makes the accrual reports look like cash basis, by Zero-out A/R (against sales) and A/P against purchases or expenses

[@JuricaJurial]

Hi Hector! do you have an updated version of Cleaning up QB accounts ? Thanks :)

[@HectorGarciaCPA]

No need… this one is perfect, nothing has changed

[@ssunkim89]

Hi Hector, even if you’re just reconciling the opening balance sheet amounts in QBO, retained earnings won’t match the tax return since it is a balance sheet item and will be carried forward to the current year. Am I misunderstanding how the retained earnings work?

[@HectorGarciaCPA]

You can make it match like everything else

[@ssunkim89]

Then you would eventually have to offset it to income statement

[@HectorGarciaCPA]

@@ssunkim89 yes eventually

[@jordanstaubs5123]

Why would you reconcile the bank accounts & include the pending checks in them?

[@jordanstaubs5123]

Would you re add these to the following year or reverse the reconciliation? I followed your tutorial for a huge clean up I'm doing & now trying to reconcile the following year, but the pending checks that were written in the previous year and cleared and the following year were reconciled into the previous year. I would really like an explanation. I NEED HELP ASAP.

[@juliesotelo3771]

Great video! Once you move amounts to match the 2017 taxes to Retained Earnings or as Karen said an equity account “Prior Year Adjustments” is this amount just always there?

[@44magg]

Hey Hector! thank you so much for these in depth videos, finding them has saved me from a few headaches 😂 but one thing I wanted to double check..when it comes to making adjustments to match the prior years return is the schedule L the only portion of the return we need to adjust to or is it necessary to make sure everything referenced on the return (ie other pages or sections) are adjusted as well? I'm running into some discrepancies in expense account balances that arent matching and this client just migrated to qbo from desktop and had a bookkeeper who made a mess of things so I just want to be sure that if line by line adjustments of the entire return is needed or I can focus just on schedule L and move on. Thanks for your help!

[@HectorGarciaCPA]

I just do Schedule L, so i can move forward with the next year.

[@jenns5922]

Hector, thanks for your great videos. Taking over new account, previous bookkeeping was poor. What do you do when the bank balance from TB from the year end tax return does not match the bank statement? The accountant simply made a note "Poorly tracked, likely duplicates." Do you ignore the tax return and do a journal entry in QBO to match the bank statement?

[@sverreslotfeldt7674]

Yes, watching someone do a journal entry is like watching paint dry. 😆 However, this video has helped me SO much. Thank you! Had two cases one year apart when I needed this information. You rock! Subscribing.

[@HectorGarciaCPA]

Great!

[@sverreslotfeldt7674]

@@HectorGarciaCPA And...your voice sounds exactly like a friend of mine! 😄

[@cathyperez5209]

Hello, what is the company did a renovation and filed a short year taxes in Oct of 2023 and will fill and for Nov and Dec of 2023 but the balance sheet and P & L don’t balance. What can I do, please help

[@HectorGarciaCPA]

I would need to look at it..

[@michellemcdonald4735]

Do you have a video about this that is more recent?

[@HectorGarciaCPA]

Nothing has changed.. same extact process

[@michellemcdonald4735]

@@HectorGarciaCPA Thank you

[@pianoplaya1115]

What if instead of making the entry to tie the prior year balance sheet accounts to the prior year tax return schedule L as of 12/31/17, could you instead make it as of 1/1/2018? Then the beginning retained earnings (partners capital in this case) will still be correct in matching the prior year ending from Sch L. Then you can continue the process of your other current year entries to adjust bank balances, AR, AP, etc to the actual confirmed balances provided by the client. And then no reversing entries would be required, correct?

[@HectorGarciaCPA]

That could work. But i prefer my method so i can run comparative balance sheets

[@pianoplaya1115]

Thanks for the reply! I’ve been trying to research this topic and find examples all over KZbin and forums online and your video was the most helpful I could find. You would think there would be one set process to know since we all run into it often but it seems like many people have many different approaches, just like other accounting issues I suppose! Thanks again for the help. 😃

[@leannramosbookkeeping3537]

If we are hired to cleanup the current year; what account would we post against in the journal entry? Is it the same basic steps as the video above, but just a different account (NOT retained earnings since it is the current year)? Thank you for the awesome videos. They are extremely helpful and informative!

[@HectorGarciaCPA]

There is no single account; depends on what you are adjusting, thats where the accounting knowledge and experience kicks in. For example A/R goes adjusted against income and Possibly sales tax. inventory Against COGS, etc..

[@leannramosbookkeeping3537]

@@HectorGarciaCPA thank you for your help!

[@mattmclean6332]

Hi Hector very good stuff. What would you recommend if the fixed assets did not match up after you added the accumulated depreciation? Thank you for time.

[@HectorGarciaCPA]

That answer is too complex for a KZbin comment

[@collincleaning]

I know this is a very basic question but here it goes.....When making an Opening Balance Adjustment in QBO, using source documents during a cleanup, and the cleanup year is say 2023 but the business has been in business during 2022 as well, and the Visa card statement closing date is 1/21/23 Previous bal 30,524 and new balance 27,274. Do I enter 01/01/23 as the beginning date even though the statement is partially for Dec '22 and partially Jan '23? Statements don't often go from the 1st-30th.....is there any free trainings dealing with this anyone can point me to?

[@HectorGarciaCPA]

If you are going to have a clean 2023x you should make any adjustments in 2022. This video might be the only real free training available with this type of issues, “cleanup” of bookkeeping is very hard to teach without real data and real situations

[@rosanneturkington8622]

Hi Hector, what do you need to do if you have a cc acct never reconciled and no begin balance start in Jan but ending balance in Dec. previous year?

[@awebs7486]

What can be done if there was no balance sheet?

[@HectorGarciaCPA]

Can’t do much; or zero all the numbers out except bank and credit card balances

[@alpitpatel4799]

Hi, Hector, Thanks for sharing detials, I have question that there is possibility that book depreciation may be different then tax depreciation so still there is need of adjustment? Also, after doing all adjsutments tax balance sheet data matching with book balance sheet, however retain earnings in schedule L (M-2) and book retain earning is different so how to correct it?

[@HectorGarciaCPA]

This video was based on using tax depreciation = book depreciation

[@alpitpatel4799]

@@HectorGarciaCPA thanks for confirming and can you confirm for retain earning in schedule L vs retain earning in book after adjustment because it is not matching so how to match it any quick feedback?

[@HectorGarciaCPA]

@@alpitpatel4799 i would be ok with that

[@amandaruiz6184]

Hi Hector, love watching your videos...They are very helpful. I do have a question though. I am currenty trying to do a big clean up myself. First clean up job ever, but what do you do if you have 2020 outstanding checks that cleared in 2021 if I reconcile the bank accounts according to your video?

[@sarathkumarnowpada1122]

Sir please create video QuickBooks Adp payroll it will helpful to our career

[@HectorGarciaCPA]

Thats not planned

[@sarathkumarnowpada1122]

@@HectorGarciaCPA can we expect from you sir

[@victorjacobo5948]

Hi Hector, I don't know where to begin. I'm in charge of cleaning up QuickBooks. My boss wants me to clean/match QB files 2018-2021 to the tax returns. I guess my dilemma is that I have four years of tax returns that don't match those QB files. is this approach of adjusting previous years in QB to that specific year of the tax return viable for my case? or should I focus on cleaning 2021 and force year 2022 with more accurate numbers by following this approach?

[@HectorGarciaCPA]

If my boss had a $15k budget for this, i would have an expert do it.

[@vitajulej.escalicas2721]

Hi Sir Hector! This is very comprehensive. However, can you make a Video on reconciling the ‘Clearing Account’ on QBO? Amounts in there were fed by Clover POS with a restaurant’s sales. Please help me out 😞

[@HectorGarciaCPA]

Clearing account needs to be zero at the end

[@vitajulej.escalicas2721]

@@HectorGarciaCPA Do you suggest I reconcile it by line item? or should I just close the whole amount to Retained Earnings or AR/AP? Please advise

[@tinahargrave1454]

should this be done prior to reconciling current years taxes?

[@HectorGarciaCPA]

Ideally

[@manishsood9665]

HI Hector - Thank you for some good info here. I have a quick question - This is for an S-corp. As you know, you can only deduct 50% meals on the tax return. But my books show 100% as an expense on the P/L. What journal entry can I make at year-end to reconcile my P/L on the books with the tax return?

[@HectorGarciaCPA]

I do it in the return only

[@kendavisbiz]

Your the master. Very impressive

[@uroospunyali8861]

Hello great Hector, why you credit all accounts to retain earning?

[@HectorGarciaCPA]

I explain it in the video.. is a long and nuanced explanation.

[@anesiasmith1677]

Hi Hector! Thank you for an awesome tutorial. In this video, you reference a part 2 to the video featured above. I signed up for you $50 monthly subscription, how do I find the second part to this video?

[@HectorGarciaCPA]

That part was never recorded because there was an issue with zoom :( I will refund the $50

[@anesiasmith1677]

@@HectorGarciaCPA Oh nooooo I was looking forward to Part 2 as I have an almost identical situation as the one you are working through in this video where the client doesn't want any historical work done however I'm trying to reconcile the 2021 return to the balance sheet. Really wanted to see the reversal process of everything and what to do next. No need to refund the $50, you have a HOST of very useful and beneficial content that I'm eager to watch. Thanks so much Hector, for all that you do, and for responding!