135: Adjusting Journal Entries In QuickBooks Whether You Are Starting A Business Or Side Hustle
135: Adjusting Journal Entries In QuickBooks Whether You Are Starting A Business Or Side Hustle, A Solopreneur, Entrepreneur, Mompreneur, Freelancer, Bookkeeper, Virtual Assistant, Business Owner, Or Self-Employed
Now that the tax deadline is behind us unless you filed an extension, it’s time for you to make sure that your books match your tax return. Most of my listeners on this podcast do their own bookkeeping for their business, and this is one of the steps that business owners are normally a little hesitant or unsure about how to handle. By being proactive and learning the right way to take care of this situation, you’ll be able to rely on your financial statements and utilize them in future planning for your business. In today’s podcast episode, I’m digging into how you should be recording any adjusting journal entries that should be made in your bookkeeping software so that your books match your tax return. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA; taking the initiative to ensure your books match your tax return is another way to Master Your Small Business Finances. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, FreshBooks, or HoneyBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
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Show Notes:
Now that the tax deadline is behind us unless you filed an extension, it’s time for you to make sure that your books match your tax return. Most of my listeners on this podcast do their own bookkeeping for their business, and this is one of the steps that business owners are normally a little hesitant or unsure about how to handle. By being proactive and learning the right way to take care of this situation, you’ll be able to rely on your financial statements and utilize them in future planning for your business. In today’s podcast episode, I’m digging into how you should be recording any adjusting journal entries that should be made in your bookkeeping software so that your books match your tax return. Whether you are starting a business or side hustle, you’re a self-employed individual, a solopreneur, entrepreneur, mompreneur, freelancer, small business owner, a remote, virtual, online, or in-house bookkeeper, or a virtual assistant or VA; taking the initiative to ensure your books match your tax return is another way to Master Your Small Business Finances. These tips are essential whether you are using a computerized software system like QuickBooks, Xero, Wave, FreshBooks, or HoneyBooks for your business finances; or doing your bookkeeping manually with an Excel spreadsheet or even a Google Document…
Welcome Back…So, you were able to file your tax return by the deadline, and you think you are done with the prior year. What if I told you there is one more thing you should be doing to close out that prior year? It isn’t hard, and many times it only takes a few minutes to do, but technically, your books are not complete until you make any adjusting entries to your books that were made when you had your tax return prepared. Adjusting journal entries are entries you need to make to get your financial statements to match what your tax return shows. One of the most common adjusting journal entries is the depreciation journal entry. If you are a small business and you don’t record your depreciation throughout the year, you will need to record any depreciation you are taking on your tax return in your books as well.
If you had a tax preparer do your tax return for your business, the first thing I want you to do is to ask them if there are any adjusting journal entries that need to be made in your books. More than likely, there will be at least one, but there could be many if the tax preparer found some items that needed to be cleaned up in your financial statements. If there are adjusting journal entries that need to be made, you do have a few options. If you are using QuickBooks Online, you can ask your tax preparer if you can add them as an accountant user if you haven’t already, and they could actually make the adjusting journal entries for you. If they already have access, you can ask them if they have already made these entries in your QuickBooks file, and if so, you are all set. If you are unable to add them as an accountant user, or they don’t want you to add them for some reason, your next step would be to ask your tax preparer to let you know of any adjusting journal entries that you should be making in your bookkeeping system so that the financial statements you generate from your bookkeeping software will match your tax return for the year.
When you get the list of adjusting journal entries, you’ll notice there should be a date of the journal entry as well as the accounts that need to be debited and credited and a dollar amount for each entry. Once you have this list, you will simply go to create a journal entry in your QuickBooks software, and you will enter the adjusting journal entries exactly as your tax preparer or accountant has them listed for you. Pay close attention to the date so that you are able to get your entries in the appropriate year.
When you have completed entering these adjusting journal entries, you can generate your balance sheet and your profit and loss reports so that you can compare these to the final financial statements your tax preparer used to prepare your tax return. If you see any discrepancies, you will want to double-check with your tax preparer and make any additional adjusting journal entries so that everything is in line with what your tax return is reporting.
One last thing that I would recommend, especially after you record your adjusting journal entries and you know your books are in sync with your tax return, is to close the books for that previous year. When you do this, it will prevent you from accidentally recording any entries into the year that you have just confirmed were correct. To close the books in QuickBooks, you will go to your settings and set a closing date. For example, in QuickBooks Online, you will click on the gear icon in the upper right and then select Account and Settings. From here, you will select Advanced, and you will see Close The Books in the Accounting section. You can then edit this date by using the year-end date of the year you are closing out. You will also notice that you have an option to enter a password if you want to make any changes to the books after the closing date. You can select this option, but just know that if you are making any changes to a period that has been closed out and you have already filed your tax return, you may need to amend your tax return. If you are using QuickBooks Desktop, you can click on the Edit button on the top menu bar and select Preferences. From here, you will select the Accounting tab, and under Company Preferences, you will want to change the date through which the books are closed to the correct period end date and make sure to save your changes.
Knowing you have everything in your books recorded, up to date, and matching your tax return will not only give you a sigh of relief, but you will also be able to be much more confident when you are looking back at your financial statements knowing everything is correct. This will also help you when you are budgeting or creating forecasts for the future of your business. If you have any questions about recording your adjusting journal entries or if you are ready to sign up for one of my free consultation sessions, you can go to www.FinancialAdventure.com and click on the work with me button. I’m looking forward to meeting with you soon and digging deeper to see where you currently are in your business and start creating the steps so that you can reach your vision and goals for the future, not only in your business but in your personal life as well. I’m ready to work with you and see all of your successes. We’ll work together to create your best work-life balance. I’ll post links to this and other valuable resources for business owners and accountants where you are listening to this podcast.
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