welcome to the Advanced section of the changing accounting systems video course now we're doing
the advanced level of setup it's actually easier than some of the things that we've already done in
the course they're only called advanced level steps because they involve something called
workarounds a workaround is using the software differently than usual and this is to account
for something that's simply not available in the software advanced topics need an equity type of
account to balance the accounts before the main setup journal entry all of these events steps
must be done before the main setup journal entry in this specific video we will be addressing the
last part of the undeposited funds setup this specific condition invoice payments that are
applied to closed invoices it's very rare that invoice payments that have already been applied
to closed invoices will be sitting in undeposited funds on the day of setup it's the only detailed
part of the setup and it's the only part that's non-intuitive it's the only part that really
needs special steps to set up now we do not have this condition when changing over to the advanced
QuickBooks Online course this is just a general example just to make you aware of the steps if
you ever have this condition when you're changing over from one accounting system to another in a
previous video we already discussed how we split payments that are sinning in undeposited funds if
some of the payment was applied to a currently open invoice and the rest of the payment was
applied to an invoice that was already closed if the payments have been completely applied
to a currently open invoice then we enter them as part of the receivable setup just like we did in
a prior video and if the payment is completely applied to a closed invoice then we enter them
after the receivable setup the way I'm about to show you however we should take a brief moment and
discuss payments that are still in undeposited funds that are applied to both closed invoices
and open invoices well what would you do with a payment that was applied to both open and closed
invoices as of the transfer date the instructions say you would have to enter them as two separate
payments you would have to enter both of them with the same date the same check number but
the only difference is they would be two separate money amounts so don't be scared or intimidated or
confused it's the same payment you simply entered it twice with two different money amounts one
money amount will be the piece of the payment that has been applied to the currently open
invoice and that would be entered with all the other applied payments when you do your accounts
receivable setup then you would enter the piece of the payment that is not applied to any currently
open invoice with the other unapplied payments which is what I'm about to show you now in other
words everything above the line you enter during the accounts receivable setup and everything below
the line you enter exactly as I'm about to show you now now after we create a dummy customer in
the customer center we record the payments the payments that have been applied to closed invoices
using that dummy customer now we do not apply them to any of the invoices we must leave the
as an open credit do not destroy the correct balances and accounts receivable do not change
any of the invoices for example let's imagine on the transfer date there were two additional
payments and undeposited funds that were already applied to invoices that have been closed as of
you know closed or paid off as of the transfer date so for example on March 1 of 2017 the year
we were working with we receive cheque number 772 from Allen for $500 and on march 13th we received
cheque 883 from Betty for $600 we have to use the dummy customer instead of Allen and Betty so
that's very simple here we are back in QuickBooks Online and we click sales customers and now we
can click new customer and all you have to do is type the word dummy you don't have to use the word
dummy but it's a dummy customer because you're not really using it you're just you you're not really
using it in real life you're using it just as a workaround so now you have your dummy customer
and if I click here you see dummy customer is on the list now let's enter the March 12th check for
772 for Allen for five hundred dollars and do not apply it to an invoice but again we're not
going to choose Allen we're going to choose the dummy customer so very simple we go to the plus
sign and we click receive payment and we choose the dummy and we make sure that the date let me
just come here let me make sure that the date is March 12 March 12 of 2017 now the instructions
say we received check 772 for $500 no problem so we put check well payment method we put check and
then we put 772 and the amount is $500 now that's recording we click Save & close and we save it as
a credit in the dummy customer then on March 13th we had another one we put in the dummy customer
what's that that's check 883 for $600 so it's check 883 for $600 and that's all you have to do
to record them save as a credit now what we have is a dummy customer who has a credit balance of
$1,100 now again we did not apply to an invoice we left it as an open credit now we're going to
make an accounts receivable adjustment in the journal entries window and this is usually done
by an accountant user and we will use the equity type of account because for advanced portions of
the conversion of one system to another equity accounts are the ones used to balance everything
out now in this case it is correct and accounting theory to do this that's because these payments
are for income in the past that has been or will be closed to an equity account as per
normal accounting procedures so don't worry about the balance of the equity account owner's equity
will be corrected when we make our final journal entry setup right now our goal is simply to make
sure that the balance and accounts receivable is correct and the equity account will correct itself
later so we have to wipe out this dummy balance of the negative 1100 how do we do that click the plus
sign and we go to journal entry and of course the journal entry should really be the date of
conversion and the account were going to adjust now watch this carefully the account were going
to adjust this accounts receivable but if you're using accounts receivable or accounts payable
in a journal entry you are required to choose the specific customer that goes along with the change
in accounts receivable by choosing the specific customer you're keeping the subsidiary customer
balances equal to the total in the account and the chart of accounts accounts receivable and
because this dummy already has a credit balance we have to debit accounts receivable to wipe out
the credit balance and the balancing entry goes to either well now you have a choice with your
equity accounts I'm going to use opening balance equity but you could use the owners capital no
matter what it would have to be an equity type of account now when we click Save we will go
back to the trial balance and see that accounts receivable so you look at the dummy the dummy
now has a zero balance and if we click reports trial balance we see that accounts receivable
is now back to the corrected number and the only number that changed is opening balance equity and
that's going to be fixed anyway in the end when we make our final adjustment journal entry setup