copy2012 Pearson Education Inc publishing as Prentice Hall
7-1
QUICKBOOKSreg 2011 A COMPLETE COURSE
CHAPTER 7mdashLECTURE GENERAL ACCOUNTING AND
END-OF-PERIOD PROCEDURES MERCHANDISING BUSINESS
All rights reserved No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any
means electronic mechanical photocopying recording or otherwise without the prior written permission of the publisher Printed in the
United States of America
Copyright copy 2012 Pearson Education Inc publishing as Prentice Hall
copy2012 Pearson Education Inc publishing as Prentice Hall
7-3
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 Owner Withdrawals are recorded rather than issuing paychecks 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-4
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 year
bull QuickBooks can keep track of fixed assets in one place
copy2012 Pearson Education Inc publishing as Prentice Hall
7-5
Fixed Asset Item List
bull To track fixed assets you create a Fixed Asset Item list
bull Fixed Asset List keeps records of an assetrsquos name date of purchase cost location warranty information serial number asset account etc
bull Fixed Asset List does not record depreciation or book value
copy2012 Pearson Education Inc publishing as Prentice Hall
7-6
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-7
Create a Fixed Asset Item List
bull To create click the List menu then click Fixed Asset Item List
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-8
Add Fixed Asset Item
bull Asset Name Store Fixtures
bull Purchase Description Store Fixtures
bull Date 123110
bull Cost $4500bull Asset
Account 1520 ndash Store Fixtures
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
All rights reserved No part of this publication may be reproduced stored in a retrieval system or transmitted in any form or by any
means electronic mechanical photocopying recording or otherwise without the prior written permission of the publisher Printed in the
United States of America
Copyright copy 2012 Pearson Education Inc publishing as Prentice Hall
copy2012 Pearson Education Inc publishing as Prentice Hall
7-3
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 Owner Withdrawals are recorded rather than issuing paychecks 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-4
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 year
bull QuickBooks can keep track of fixed assets in one place
copy2012 Pearson Education Inc publishing as Prentice Hall
7-5
Fixed Asset Item List
bull To track fixed assets you create a Fixed Asset Item list
bull Fixed Asset List keeps records of an assetrsquos name date of purchase cost location warranty information serial number asset account etc
bull Fixed Asset List does not record depreciation or book value
copy2012 Pearson Education Inc publishing as Prentice Hall
7-6
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-7
Create a Fixed Asset Item List
bull To create click the List menu then click Fixed Asset Item List
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-8
Add Fixed Asset Item
bull Asset Name Store Fixtures
bull Purchase Description Store Fixtures
bull Date 123110
bull Cost $4500bull Asset
Account 1520 ndash Store Fixtures
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-3
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 Owner Withdrawals are recorded rather than issuing paychecks 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-4
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 year
bull QuickBooks can keep track of fixed assets in one place
copy2012 Pearson Education Inc publishing as Prentice Hall
7-5
Fixed Asset Item List
bull To track fixed assets you create a Fixed Asset Item list
bull Fixed Asset List keeps records of an assetrsquos name date of purchase cost location warranty information serial number asset account etc
bull Fixed Asset List does not record depreciation or book value
copy2012 Pearson Education Inc publishing as Prentice Hall
7-6
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-7
Create a Fixed Asset Item List
bull To create click the List menu then click Fixed Asset Item List
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-8
Add Fixed Asset Item
bull Asset Name Store Fixtures
bull Purchase Description Store Fixtures
bull Date 123110
bull Cost $4500bull Asset
Account 1520 ndash Store Fixtures
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-4
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 year
bull QuickBooks can keep track of fixed assets in one place
copy2012 Pearson Education Inc publishing as Prentice Hall
7-5
Fixed Asset Item List
bull To track fixed assets you create a Fixed Asset Item list
bull Fixed Asset List keeps records of an assetrsquos name date of purchase cost location warranty information serial number asset account etc
bull Fixed Asset List does not record depreciation or book value
copy2012 Pearson Education Inc publishing as Prentice Hall
7-6
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-7
Create a Fixed Asset Item List
bull To create click the List menu then click Fixed Asset Item List
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-8
Add Fixed Asset Item
bull Asset Name Store Fixtures
bull Purchase Description Store Fixtures
bull Date 123110
bull Cost $4500bull Asset
Account 1520 ndash Store Fixtures
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-5
Fixed Asset Item List
bull To track fixed assets you create a Fixed Asset Item list
bull Fixed Asset List keeps records of an assetrsquos name date of purchase cost location warranty information serial number asset account etc
bull Fixed Asset List does not record depreciation or book value
copy2012 Pearson Education Inc publishing as Prentice Hall
7-6
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-7
Create a Fixed Asset Item List
bull To create click the List menu then click Fixed Asset Item List
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-8
Add Fixed Asset Item
bull Asset Name Store Fixtures
bull Purchase Description Store Fixtures
bull Date 123110
bull Cost $4500bull Asset
Account 1520 ndash Store Fixtures
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-6
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-7
Create a Fixed Asset Item List
bull To create click the List menu then click Fixed Asset Item List
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-8
Add Fixed Asset Item
bull Asset Name Store Fixtures
bull Purchase Description Store Fixtures
bull Date 123110
bull Cost $4500bull Asset
Account 1520 ndash Store Fixtures
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-7
Create a Fixed Asset Item List
bull To create click the List menu then click Fixed Asset Item List
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-8
Add Fixed Asset Item
bull Asset Name Store Fixtures
bull Purchase Description Store Fixtures
bull Date 123110
bull Cost $4500bull Asset
Account 1520 ndash Store Fixtures
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-8
Add Fixed Asset Item
bull Asset Name Store Fixtures
bull Purchase Description Store Fixtures
bull Date 123110
bull Cost $4500bull Asset
Account 1520 ndash Store Fixtures
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-9
View the Fixed Asset Item List
bull The Fixed Asset Item List shows Store Fixtures as a fixed asset
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-10
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-11
Reconcile Credit Card
bull Click the Reconcile icon
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending balance $122198
bull Finance Charge $000
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-12
Reconcile Credit Cardbull Click first two transactionsbull Notice Ending Balance of $122198 and Cleared Balance of $47198bull Difference is -$750bull Click Reconcile Now
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-13
Enter Adjustment for the Credit Card Reconciliation
bull There is a $-750 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-14
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-15
Enter Adjustment for the Credit Card Reconciliation
bull Position the cursor on the General Journal entry for -750
bull Double-click to view the Visa Account Register and the Adjustment
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-16
View the Adjustment for the Credit Card Reconciliation
bull In the Register review the transaction for Reconciliation Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-17
Undo Last Reconciliation
bull Click the Reconcile iconbull Account 2100 ndash Visabull Click Locate Discrepancies
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-18
Undo Last Reconciliation
bull On the Locate Discrepancies screen click Undo Last Reconciliation
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-19
Undo Last Reconciliation
bull To undo the reconciliation read the screen click Continue Beginning
Balance will be changed to $15000
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-20
Undo Last Reconciliation
bull Undoing a reconciliation does not remove any service charges interest or balance adjustments entered on the previous reconciliation
bull Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-21
Redo Credit Card Reconciliation
bull Click Restart Reconciliation At the top of
the screen note
bull Last reconciled date
bull Beginning balance amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-22
Redo Credit Card Reconciliation
bull Account 2100 ndash Visa
bull Statement Date 01312011
bull Ending Balance $122198
bull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-23
Redo Credit Card Reconciliation
bull Click Mark Allbull Redoing a
reconciliation does not remove the Journal entry entered previously
bull Go to the Journal entry from the previous reconciliation click the
013111 transaction for 750
Click Go To
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-24
Redo Credit Card Reconciliation
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-25
Redo Credit Card Reconciliation
bull The items in the Charges and Cash Advances column have been marked
bull 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-26
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-27
Withdrawal of Funds by Partner
bull Click Write Checks icon
bull Complete the Check Face Pay to the Order
Your Name Click QuickAdd and
add the your name to the Other list
Click OK
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-28
Withdrawal of Funds by Partner
Date 013111 Amount $500 Memo Owner Withdrawal
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-29
Withdrawal of Funds by Partner
bull Complete the check detail Account 3013 ndash Your
Name Drawingbull In a partnership a
drawing account and an investment account are created for each partner
bull Notice the account for the other partner 3014 ndash Larry Muir Drawing
bull It is used to write his withdrawal check
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-30
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-31
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-32
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 Make sure this account uses only your last name in this title
Example Horne amp Muir Capitalbull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-33
Organize Individual Partner Equity Accounts
bull Use the keyboard shortcut Ctrl+N to create a New account
bull Account type Equitybull Click Continue
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-34
Organize Individual Partner Equity Accounts
bull Enter the new 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-35
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-36
Organize Individual Partner Equity Accounts
bull Change account numbers for existing owner equity accounts
bull Edit 3011 ndash First and Last Name Investment Change the
account number to 3111
Subaccount of 3110 ndash First and Last Name Capital
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-37
Organize Individual Partner Equity Accounts
bull Change First amp Last Name Drawing to 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-38
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-39
Distribute Capital to Each Owner
bull View Equity section of the Balance Sheet
bull Notice the total value of 3110 ndash First amp Last Name Capital is $19500
bull The total value of Larry Muir Capital is also $19500
bull 3100 Your Name amp Muir Capital Other shows $2545944
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-40
Distribute Capital to Each Owner
bull The $2545944 represents equity for the owners that has not been recorded as an investment or a withdrawal
bull This could include net income from previous business periods and other equity items
bull Each owner has the same investment in the business so the $2545944 from Your Last Name amp Muir Capital should be equally divided between First amp Last Name Capital and Larry Muir Capital
bull Prepare a General Journal entry to transfer the amount to the two owners
bull Click Company on the Menu Barbull Click Make General Journal Entries
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-41
Distribute Capital to Each Owner
bull Debit 3100 $2545944 to transfer the capitalbull Credit 3110 and 3120 $1272972bull Use the Memo Transfer capital to owners
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-42
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 $3222972
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-43
Transfer Net Income to Partners
bull The Net Income of $347707 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-44
Transfer Net Income to Partners
bull 013111 Journal entry Debit 3000 Retained Earnings $347707 Credit 3110 First and Last Name Capital for
$173854 and 3120 Larry Muir Capital for $173853
bull The difference between the two amounts results because of an odd number in the amount
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-45
View Equity Section of the Balance Sheet
bull Note Retained Earnings shows -347707 and Net Income shows 347707
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-46
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-47
Prepare Adjustment for Merchandise Inventory
bull 013111 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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-48
Prepare Adjustment for Merchandise Inventory
bull Click the Inventory Activities icon
bull Click Adjust QuantityValue On Handhellip
bull Enter the Adjustment Date 013111
bull Click the drop-down list arrow for Adjustment Account
bull Click ltAdd Newgt
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-49
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 expense
bull Number 6190bull Account Name
Merchandise Adjustments
bull Click Save amp Close
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-50
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-51
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 Earnings
bull Click Save amp Close when finished
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-52
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
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053
copy2012 Pearson Education Inc publishing as Prentice Hall
7-53
Adjust Retained Earnings for Merchandise Adjustment
bull Go to Make General Journal Entries
bull Click Previous until you find the transaction for Retained Earnings
bull Change Debit to Account 3000 to $346107 ($347707 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 $173054 and 3120 to $173053