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copy2014 Pearson Education Inc publishing as Prentice Hall7-1
Chapter Focus General Accounting Procedures for a Merchandising
Business and Partnership
bull General Accounting procedures include Customization of the Chart of Accounts Maintaining a Fixed Asset Item list Recording adjusting entries for Accrual Basis Accounting Bank and credit card reconciliations
bull Partnership Company owned by two or more individuals Partners do not receive a salary Rather than issuing paychecks owner withdrawals are recorded Each owner receives a portion of the profits based on the
percentage of hisher investment Net Income to Ownersrsquo Capital accounts will be distributed
based on percentage of ownership
copy2014 Pearson Education Inc publishing as Prentice Hall7-2
Fixed Assets
bull Fixed assets are long-lived assets such as land buildings furniture equipment and vehicles
bull Fixed assets are kept longer than one yearbull QuickBooks can keep track of fixed assets
in one place
copy2014 Pearson Education Inc publishing as Prentice Hall7-3
Fixed Asset Item List
bull To track fixed assets you create a Fixed Asset Item listbull Fixed Asset Item List keeps records for each assetbull This includes
Asset Name Date of purchase Cost Location Warranty information Serial number Asset account etc
bull Fixed Asset Item List does not record depreciation or book value
copy2014 Pearson Education Inc publishing as Prentice Hall7-4
Fixed Asset Manager
bull The Accountant or Enterprise versions of QuickBooks include a Fixed Asset Manager
bull More comprehensive than a list of fixed assetsbull When used the Fixed Asset Manager pulls
information about the fixed assets from an open company file
bull The accountant can determine the depreciation for the assets and post a journal entry back to the company file
bull The Fixed Asset Manager also integrates with Intuitrsquos ProSeries Tax products and must have tax forms identified prior to use
copy2014 Pearson Education Inc publishing as Prentice Hall7-5
Create a Fixed Asset Item Listbull To create click the Lists menu then click Fixed Asset
Item Listbull To create a new fixed asset item
Use the keyboard shortcut Ctrl+N or Click the Item button on the Fixed Asset Item screen and click
New
copy2014 Pearson Education Inc publishing as Prentice Hall7-6
Add Fixed Asset Itembull Enter the
information for Asset Name
Store Fixtures
Purchase and Asset Description Store Fixtures
Item is new Date
123112 Cost $4500 Asset
Account 1520 ndash Store Fixtures
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-7
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2014 Pearson Education Inc publishing as Prentice Hall7-8
Credit Card Reconciliation
bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity
accounts Income expense and cost of goods sold accounts
are not balance sheet accounts and may not be reconciled
bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account
bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-2
Fixed Assets
bull Fixed assets are long-lived assets such as land buildings furniture equipment and vehicles
bull Fixed assets are kept longer than one yearbull QuickBooks can keep track of fixed assets
in one place
copy2014 Pearson Education Inc publishing as Prentice Hall7-3
Fixed Asset Item List
bull To track fixed assets you create a Fixed Asset Item listbull Fixed Asset Item List keeps records for each assetbull This includes
Asset Name Date of purchase Cost Location Warranty information Serial number Asset account etc
bull Fixed Asset Item List does not record depreciation or book value
copy2014 Pearson Education Inc publishing as Prentice Hall7-4
Fixed Asset Manager
bull The Accountant or Enterprise versions of QuickBooks include a Fixed Asset Manager
bull More comprehensive than a list of fixed assetsbull When used the Fixed Asset Manager pulls
information about the fixed assets from an open company file
bull The accountant can determine the depreciation for the assets and post a journal entry back to the company file
bull The Fixed Asset Manager also integrates with Intuitrsquos ProSeries Tax products and must have tax forms identified prior to use
copy2014 Pearson Education Inc publishing as Prentice Hall7-5
Create a Fixed Asset Item Listbull To create click the Lists menu then click Fixed Asset
Item Listbull To create a new fixed asset item
Use the keyboard shortcut Ctrl+N or Click the Item button on the Fixed Asset Item screen and click
New
copy2014 Pearson Education Inc publishing as Prentice Hall7-6
Add Fixed Asset Itembull Enter the
information for Asset Name
Store Fixtures
Purchase and Asset Description Store Fixtures
Item is new Date
123112 Cost $4500 Asset
Account 1520 ndash Store Fixtures
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-7
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2014 Pearson Education Inc publishing as Prentice Hall7-8
Credit Card Reconciliation
bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity
accounts Income expense and cost of goods sold accounts
are not balance sheet accounts and may not be reconciled
bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account
bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-3
Fixed Asset Item List
bull To track fixed assets you create a Fixed Asset Item listbull Fixed Asset Item List keeps records for each assetbull This includes
Asset Name Date of purchase Cost Location Warranty information Serial number Asset account etc
bull Fixed Asset Item List does not record depreciation or book value
copy2014 Pearson Education Inc publishing as Prentice Hall7-4
Fixed Asset Manager
bull The Accountant or Enterprise versions of QuickBooks include a Fixed Asset Manager
bull More comprehensive than a list of fixed assetsbull When used the Fixed Asset Manager pulls
information about the fixed assets from an open company file
bull The accountant can determine the depreciation for the assets and post a journal entry back to the company file
bull The Fixed Asset Manager also integrates with Intuitrsquos ProSeries Tax products and must have tax forms identified prior to use
copy2014 Pearson Education Inc publishing as Prentice Hall7-5
Create a Fixed Asset Item Listbull To create click the Lists menu then click Fixed Asset
Item Listbull To create a new fixed asset item
Use the keyboard shortcut Ctrl+N or Click the Item button on the Fixed Asset Item screen and click
New
copy2014 Pearson Education Inc publishing as Prentice Hall7-6
Add Fixed Asset Itembull Enter the
information for Asset Name
Store Fixtures
Purchase and Asset Description Store Fixtures
Item is new Date
123112 Cost $4500 Asset
Account 1520 ndash Store Fixtures
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-7
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2014 Pearson Education Inc publishing as Prentice Hall7-8
Credit Card Reconciliation
bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity
accounts Income expense and cost of goods sold accounts
are not balance sheet accounts and may not be reconciled
bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account
bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-4
Fixed Asset Manager
bull The Accountant or Enterprise versions of QuickBooks include a Fixed Asset Manager
bull More comprehensive than a list of fixed assetsbull When used the Fixed Asset Manager pulls
information about the fixed assets from an open company file
bull The accountant can determine the depreciation for the assets and post a journal entry back to the company file
bull The Fixed Asset Manager also integrates with Intuitrsquos ProSeries Tax products and must have tax forms identified prior to use
copy2014 Pearson Education Inc publishing as Prentice Hall7-5
Create a Fixed Asset Item Listbull To create click the Lists menu then click Fixed Asset
Item Listbull To create a new fixed asset item
Use the keyboard shortcut Ctrl+N or Click the Item button on the Fixed Asset Item screen and click
New
copy2014 Pearson Education Inc publishing as Prentice Hall7-6
Add Fixed Asset Itembull Enter the
information for Asset Name
Store Fixtures
Purchase and Asset Description Store Fixtures
Item is new Date
123112 Cost $4500 Asset
Account 1520 ndash Store Fixtures
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-7
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2014 Pearson Education Inc publishing as Prentice Hall7-8
Credit Card Reconciliation
bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity
accounts Income expense and cost of goods sold accounts
are not balance sheet accounts and may not be reconciled
bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account
bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-5
Create a Fixed Asset Item Listbull To create click the Lists menu then click Fixed Asset
Item Listbull To create a new fixed asset item
Use the keyboard shortcut Ctrl+N or Click the Item button on the Fixed Asset Item screen and click
New
copy2014 Pearson Education Inc publishing as Prentice Hall7-6
Add Fixed Asset Itembull Enter the
information for Asset Name
Store Fixtures
Purchase and Asset Description Store Fixtures
Item is new Date
123112 Cost $4500 Asset
Account 1520 ndash Store Fixtures
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-7
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2014 Pearson Education Inc publishing as Prentice Hall7-8
Credit Card Reconciliation
bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity
accounts Income expense and cost of goods sold accounts
are not balance sheet accounts and may not be reconciled
bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account
bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-6
Add Fixed Asset Itembull Enter the
information for Asset Name
Store Fixtures
Purchase and Asset Description Store Fixtures
Item is new Date
123112 Cost $4500 Asset
Account 1520 ndash Store Fixtures
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-7
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2014 Pearson Education Inc publishing as Prentice Hall7-8
Credit Card Reconciliation
bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity
accounts Income expense and cost of goods sold accounts
are not balance sheet accounts and may not be reconciled
bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account
bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-7
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2014 Pearson Education Inc publishing as Prentice Hall7-8
Credit Card Reconciliation
bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity
accounts Income expense and cost of goods sold accounts
are not balance sheet accounts and may not be reconciled
bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account
bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-8
Credit Card Reconciliation
bull All balance sheet accounts may be reconciled These include assets liabilities and ownerrsquos equity
accounts Income expense and cost of goods sold accounts
are not balance sheet accounts and may not be reconciled
bull Reconcile credit card prior to payment to make sure amount of bill is in agreement with your credit card account
bull Lecture will also demonstrate what to do when your reconciliation does not have a 000 difference and you click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-9
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-10
Reconcile Credit Cardbull Click the transactions for Sierra Office Supply Company Snow
Supplies and Winter Sports Accessories Do not select Shoes amp More
bull Notice Ending Balance of $122198 and Cleared Balance of $82198bull Difference is -$400bull Click Reconcile Now
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-11
Enter Adjustment for the Credit Card Reconciliation
bull Since there is a $-40000 discrepancy you may click Return to Reconcile to correct the discrepancy Leave Reconcile to complete reconciliation later Enter Adjustment to force QuickBooks to match your
statement QuickBooks will post a journal entry to a Reconciliation Discrepancies expense account
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-12
Enter Adjustment for the Credit Card Reconciliation
bull Click Enter Adjustment
bull On the Make Payment screen click Cancel
bull Select Detail for the Reconciliation Report
bull Click Display
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-13
Enter Adjustment for the Credit Card Reconciliation
bull Note the General Journal entry for -400
bull Close the Report
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-14
View the Adjustment for the Credit Card Reconciliation
bull Open the Chart of Accounts and scroll through until you see 66900 Reconciliation Discrepancies
bull Double-click the account to see a QuickReport
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-15
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Undo Last Reconciliation
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-16
Undo Last Reconciliationbull Click Continuebull The screen
Recommends that the file be backed up
Tells you the Current Beginning Balance and the Previous Beginning Balance
Removes the cleared status of transactions service charges interest and balance adjustments
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-17
Undo Last Reconciliation
bull To undo the reconciliation click Continue Beginning Balance will be changed to $15000 Undoing a reconciliation does not remove any service charges
interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-18
Redo Credit Card Reconciliationbull Redo the
reconciliation Account 2100 ndash Visa
bull Statement Date 01312013
bull Ending Balance $122198
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-19
Redo Credit Card Reconciliation
bull Click Mark All to select all of the Charges and Cash Advances Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation Click the
013113 transaction for 400
Click Go To
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-20
Redo Credit Card Reconciliationbull To Delete the Journal entry use the keyboard shortcut
Ctrl+D or Click Edit on the Menu bar Click Delete General Journal Click OK on the Are You Sure dialogue box Close the Journal
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-21
Redo Credit Card Reconciliationbull The previous
Journal entry is no longer shown because it has been deleted
bull The Ending Balance and Cleared Balance match
bull The Difference is 000
bull Click Reconcile Now
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
Redo Credit Card Reconciliation
bull Click OK on the Make Payment screen
bull Display or Print the Reconciliation Report
bull Print the Check
copy2014 Pearson Education Inc publishing as Prentice Hall7-22
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-23
Organize Individual Partner Equity Accounts
bull QuickBooks groups the partner accounts together by account number
bull It would be easier if each partnerrsquos investment and drawing accounts were organized individually by partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-24
Organize Individual Partner Equity Accounts
bull Each partner will have a separate capital account with subaccounts for investments and withdrawals
bull Each partnerrsquos separate capital account will be a subaccount of the primary capital account Your Last Name amp Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-25
Organize Individual Partner Equity Accounts
bull Click Chart of Accountsbull Click Account 3010 Your Last Name amp Muir Capital bull Use the keyboard shortcut Ctrl+E to Edit the accountbull Change the account number to 3100bull Add a comma after Muirbull Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-26
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equity
bull Click Continue
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-27
Organize Individual Partner Equity Accounts
bull Enter the new Equity account information Number 3110 Account Name First
and Last Name Capital
bull This should be your full name Example Janet Horne Capital
Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp New
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-28
Organize Individual Partner Equity Accounts
bull Add Equity Account for Larry Muir Number 3120 Account Name Larry Muir Capital Subaccount of 3100 ndash Your Last Name amp Muir Capital
bull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-29
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accountsbull Click 3011 ndash Your Name Investment
Use Ctrl+E or click the Account button click Edit Account Change the account number and name to 3111 First and Last Name Investment
Subaccount of 3110 ndash First and Last Name Capitalbull Notice how the account is now listed under 3110 First and Last Name Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-30
Organize Individual Partner Equity Accounts
bull Change Your Name Drawing to First and Last Name Drawing Account number 3112 Subaccount of 3110
bull Change Larry Muir Investment to Account number 3121 Subaccount of 3120
bull Change Larry Muir Drawing to Account number 3122 Subaccount of 3120
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-31
Organize Individual Partner Equity Accounts
bull The partnership capital account Your Last Name amp Muir Capital contains the total of the all the partners equity accounts
bull Each partnerrsquos section contains information for investment drawing and capital for the individual partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-32
Partner Withdrawal of Funds
bull An owner in a partnership does not receive a paycheck
bull If an owner relies on the income from the partnership for his individual income a withdrawal is made
bull An owner withdrawal is recorded on a check
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-33
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
First and Last Name
Click QuickAdd and add the your name to the Other list
Click OK
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-34
Withdrawal of Funds by Partner
Date 013113 Amount $1000 Memo Owner Withdrawal January
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-35
Withdrawal of Funds by Partner
bull Complete the check detail Account 3112 ndash First and Last Name Drawing
Click Save amp New Repeat to issue a withdrawal check to Larry Muir
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-36
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First and Last Name Capital is $19000
bull The total value of 3120 - Larry Muir Capital is also $19000
bull 3100 Your Last Name amp Muir Capital Other shows $2615944
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
Distribute Capital to Each Ownerbull Double-click Your Last Name amp Muir Capital ndash Other to view the
Transactions by Account reportbull Transactions include assets liabilities and ownersrsquo equity amounts
copy2014 Pearson Education Inc publishing as Prentice Hall7-37
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-38
Distribute Capital to Each Owner
bull The $2615944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull Each owner has the same investment in the businessbull The $2615944 from Your Last Name amp Muir Capital
should be equally divided between First and Last Name Capital and Larry Muir Capital
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-39
Distribute Capital to Each Owner
bull Prepare a General Journal entry to transfer the amount to the two owners Click Company on the Menu bar Click Make General Journal Entries Debit 3100 for $2615944 to transfer the capital Credit 3110 and 3120 for $1307972 Use the Memo Transfer Capital to Partners
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-40
Distribute Capital to Each Owner
bull Review the Equity section of the Balance Sheet
bull Note 3110 ndash First and Last Name Capital ndash Other and 3120 Larry Muir Capital ndash Other contain the same amount
bull Each ownerrsquos total capital is $3207972
bull The total 3100 ndash Your Name amp Muir Capital shows the value of capital for the business which is the same as it was before distributing the capital to each owner
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
Closing Entries
bull Traditional accrual-basis accounting has four closing entries Close Income Close Expenses Close Drawing Transfer Net Income into Ownersrsquo Equity
bull When given a closing date QuickBooks closes Income and expenses
bull You must Close Drawing and transfer net incomeloss into ownersrsquo
equity
copy2014 Pearson Education Inc publishing as Prentice Hall7-41
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-42
Transfer Net Income to Partners
bull The Net Income of $276675 shown in the report needs to be distributed to both partners equally
bull Record a Journal entry to close Retained Earnings and transfer the Net Income to each partner
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-43
Transfer Net Income to Partners
bull 013113 Journal entry Debit 3000 Retained Earnings for $276675 Credit 3110 First and Last Name Capital for
$138338 and 3120 Larry Muir Capital for $138337bull The difference between the two amounts results because of
an odd number in the amount
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-44
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -276675 and Net Income shows 276675
bull Note the value of the equity section for each owner
bull After the distribution of Net Income the Total Equity amount remains the same
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
Close Drawing
bull To close each partnerrsquos drawing into individual capital accounts make a General Journal Entry
bull Close First and Last Name Drawing Debit 3110 First and Last Name Capital for $1000 Credit 3112 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-45
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
Close Drawing
bull Close Larry Muir Drawing Debit 3120 Larry Muir Capital for $1000 Credit 3122 First and Last Name Drawing for
$1000
copy2014 Pearson Education Inc publishing as Prentice Hall7-46
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
Balance Sheet After Closing Ownersrsquo Drawing Accounts
bull Drawing accounts no longer show
bull 3110 First and Last Name Capital and 3120 Larry Muir both show $1000 less (after drawing was closed)
copy2014 Pearson Education Inc publishing as Prentice Hall7-47
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-48
Merchandise Inventory
bull When a business sells merchandise it is possible that the number of items on hand is different from the quantity shown in QuickBooks when a physical inventory of the merchandise is taken
bull This can be caused by Loss due to theft fire or flood Damage to an item in the stockroom Error in a previous physical inventory
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-49
Prepare Adjustment for Merchandise Inventory
bull 013113 Found two damaged hats for $8 each that need to be discarded
bull Adjust Merchandise Inventory $16 and change the quantity of hats on hand to 27
bull Add a new expense account 6190 Merchandise Adjustment to use for the adjustment Removing an item from the inventory that was not
sold is treated as an expense Damaged merchandise that is not salable is
considered an expense of doing business
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-50
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Adjustment Type Quantity
bull Enter the Adjustment Date 013113
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-51
Add Account for Merchandise Adjustment
bull Account Type Expense A reduction to inventory because of damage is an increase in the cost
of doing business so it is an expensebull Number 6190bull Account Name Merchandise Adjustmentsbull Click Save amp Close
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-52
Prepare Adjustment for Merchandise Inventory
bull Click the Item columnbull Click the drop-down list arrowbull Click Hats bull Enter the New Quantity of 27bull Press Tabbull Notice the Qty Difference is -2
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-53
Prepare Adjustment for Merchandise Inventory
bull Number of Item Adjustments is 1bull The Total Value of Adjustment is -1600
This reduces the value of merchandise inventory by $16 The decrease in hats increased expenses $16 which reduced
Net Income and Retained Earningsbull Click Save amp Close when finished
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-54
Adjust Retained Earnings for Merchandise Adjustment
bull The extra $16 in expenses from the merchandise adjustment needs to be subtracted from the Net Income and Retained Earnings
bull Access the Journal entry for Retained Earnings
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
copy2014 Pearson Education Inc publishing as Prentice Hall7-55
Adjust Retained Earnings for Merchandise Adjustment
bull Click Company on the Menu bar
bull Click Make General Journal Entrieshellip
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $275075 ($276675 ndash 1600)
bull One-half of the adjustment is 800
bull Deduct $800 from each ownerrsquos capital account
bull Change Credit to Accounts 3110 to $137538 and 3120 to $137537
Recommended