In this presentation, we will discuss an option to close out the drawers accounts at the end of the period when tracking tax deductible items which are not business related in what we're calling here the equity method within our business account within QuickBooks. Here we are on the home page we currently have the open windows open. In order to open the open windows, you go to the View drop down and select the open windows list. We're going to go into our reports into our balance sheet by going to the reports drop down company and financial and scrolling down to that balance sheet standard. We're going to change the date range up top to the customized report so we can see the range which will be a 10119 to 1230 119. That's been January 1 to December 31, the year 2019.

That being the year we are working on. We're also going to change the font size while we're here by going to the fonts and numbers tab. Go into the change font And making it I'm going to make it 11 and say, okay, and yes and Okay, there we have, we're concentrating down here on the equity section. We have included these drawers accounts and categorize them as things that we can then provide to the tax preparer. Now there's an issue with the draws that could you could consider it an issue or just not not really a problem. But I note that the draws account typically in normal financial accounting, we think of it as a temporary account, even though it's on the balance sheet.

In other words, we think that the draws should kind of start over like the income statement accounts do so we could track them as they go up, and they should then be closed out in the equity section to total equity. It should be closed out in this case to owner's equity after the period end, meaning for example, if we're providing this tax information as of the end of 2019. That's over we provided this reports what happens next year, as we enter this data in next year, well, let's pretend that we're going to just jump up we're not we haven't entered any more data. But let's change the date to 2020. And see what happens to this equity section. You'll note what will happen to this net income down here, it'll go it'll change, it'll, it won't be the same net income number.

So and let's do that. So I'm going to change the date to 20 the next year, the year after we entered this data. And when we do that, we see that the net income account went away. But these drawers accounts did not say these drawers accounts still represent the data from last year 2019. Now that's not to say that's not really a problem, because we can when we record this, we can let it just go up forever. It's just like every kind of notice all the other liability accounts or balance sheet accounts stayed the same as well.

That's called permanent accounts. Not really a problem because we can always do Just change the date range within the account and print the report meaning we can always just go into these reports, which I would suggest doing anyways, and change the date range from January through December of the current year. And that's not not an issue. However, if we want, we could do the year end adjusting entry closing these accounts out, so that this report will reflect just the current year's data. So to get an idea of what we mean, I'm going to go into our check register, we'll practice entering some data for the following year for 2020 and just see what the difference will be. So just for practice, we're going to go into our banking account and go to the register as we did before, and we're going to go into the checking account.

And we're going to enter some data as of the next year 2020. And so let's make this as of let's just make it in the middle of the year. Oh 615 2020. So the key been It's to the year is 2020. Now, and I'm not going to We don't even need a check number, I'm just going to say, we'll just make it a test. And we'll put this information in and we have the American Red Cross.

And let's just say that we had 300 there. And that's going to go to our drawers account. So we're just entering the same kind of data into the drawers accounts, we could see what will happen as the year passes to the following year. And then we had, I'll keep the same date, test for the check number. We paid my college again, let's say another 1020. And that's going to my college again, a draws account.

And then we've got the same date, test to ease childcare. That's another area that we put into draws childcare that we're going to track for personal purposes and we're going to say let's say that that was 390 and, okay, and then test, we're gonna say, Blue Cross, that's gonna be our insurance. So it's already going notice they're all populated for us, which is nice. So the next time these come around, we don't have to rethink it, we're going to say 630. And in the end, we had one, let's make one more test, we're going to to state taxes for the property tax. So that's going to go into our draws account for state taxes, property tax, and we're going to say that was 327.

Now let's go back to our balance sheet. And remember that the last year we ran with as of the end of 2019, that was our data. So if I change this to 2019, here is our data for 2019. If we change it now, back to 2020. Let's see what happens his numbers when I click it down here, it's gonna go boom, they increase, meaning they're doubling, they're not started at zero if I go into this item here and I say, Oh 10120 that being January through December, you can see it has a beginning balance, it didn't start at zero and roll up. So the reason that's not really a problem, I'm going to I'm going to close this back out.

And I'm going to close I'm gonna change the date range up top customized reports. And we'll change the date range from Oh 10119 I mean, let's say two zero to 1231 to zero so the year 2020, January through December 2020. And, okay. Now, these these accounts, these numbers, we don't want to get to the tax preparer because there you have two years worth of data in them. But what we can provide the tax prepared is the report by double clicking on this item. And giving this report this is the report we want to give.

So usually for sole proprietor they're the main report is going to be the income statement, the profit and loss, which is going to be recorded on the schedule C. And then this data, which we're going to give by report, which will give us the detail. And we'll also make sure to tell them that we want just the activity column, not the balance column, they're not picking up the balance, we might even want to just cross this out. When we run the report, you know, make sure to to not pick that we want this number the activity in the current time period. So if we do that, then we just go through each of these reports in the following year. And just say, yeah, make sure you pick up the activity amount not the balance because it has prior years information in it. That would be the easiest thing to do.

If you do that, then you don't have to worry about closing out the drawers accounts. You just got to make sure that you print the right reports at the end of the We're just note that these will go up forever as all permanent accounts do. And that you just want to make sure that you're picking up the current data for the current year we're working on for the tax data. If however you want to close it out as would be normally kind of what we would do in financial accounting, you could do a journal entry at the end of the year. Or you could do a, I use the registers, which I'll show you to use the registers now. So for example, if you want this to go back down to zero at the end of the year, or maybe January of the next year, so that it'll then include just one year's worth of data, we can then go, I'm going to go to the lists of top chart of accounts.

And what we're going to do is go to all these accounts, these draws accounts and I want to make them go back to zero, as of the end of the time period or the beat. I'll make them go to zero at the beginning of the next time period to do I'm just going to double click on it. And that'll take me to the register. This is going to look like the check register. But it's not the same as the check register. But it's a similar format that QuickBooks has, for every type of balance sheet account, what we're going to do is we're going to zero this amount out as of the end of the time period as of the end of 2019.

Before we entered this item, so we'll start at zero. So at the end of 2020, we'll just have 2020 data. So to do that, we're going to make that happen as of Oh, 101. to zero, the beginning first day of 2020, we're not going to put a vendor, this is an in decrease, so I'm going to do the opposite. I'm going to increase it to get it to zero before the new data before this was entered. And so this is going to be four 346. And the other accounts going to be the other equity account.

So the other equity account for a sole proprietorship will be the owner's equity account. So not the draws, owner's equity. It's an equity type account. So this Just a normal kind of closing entry we would do for financial accounting. Again, you don't have to do it. But if you want to close it out so that you only have the current data in the current year, you can do this.

And then if we say, okay, it's gonna say, hey, you're hitting the retained earnings account, we're gonna say that's okay, I'm paraphrasing, of course. And that's it. So close this back out. So now it went back to zero. And notice it adjusted the order by date, went back to zero as of the end of 2020, or the end of 2019, beginning of 2020. And then this is the 2020 data.

So if we go to the balance sheet, then closing this out, balance sheet open windows. Yes. Customize the reports. I'm going to make it from January through December 2020. So January 2019, through December 2020, that whole range two years. Okay.

Then here's our data for that particular state local taxes. If we double click on it, You'll see that it goes to zero, right at the beginning of 2020. And then the urine data, then this 327, is what happened in 2020. So that's a way that we can, we can close it out. And then when we look at this report, we only see the activity for the current period, the difference went to equity, the owner's equity, which is just another equity account. So we just moved it from draws to this equity account, which is typically what we do in a closing entry.

But again, you don't have to do that. Because we could always just print this report, as of Oh 10120 and just show the, show the activity for the current time period, we'd have to go to two this time, right, we can just show the activity for this year. And even if the beginning balance was something other than zero, it would still give us the data we need. So we'll close this back out and we'll do that for the rest of them here. If we go to the Chart of Accounts, and we went to charity. We can go to draws charity.

And we could say okay, before we close before we enter the new data in 2020, it was at 315. So as of 101, to zero at the beginning of the year, we're going to put an increase of this amount of 315 before the new data. So 315 and it's going to go to the other equity account, the equity account for owner's equity, and enter. It's going to go into it's going to give us an error because or a message to warn to be careful because it's going to an equity account, but then it goes to zero. And this is the current data. I'm going to do that again closing this out.

We're going to go to the child care same thing. We'll just say that it was 121 before the current year stuff. So as of Oh 101 20, we're going to say that we want 125. And it's going to go to an equity account. So we'll select the equity accounts, and we want to make it go to the owner's equity. And okay, and Okay, closing that back out.

We're going to then go to the draws for the education. Same things, here's where it was before the 2020 data. So as of January 1 of the current year, we are going to go on this side and put 1000 and that's going to go into the draws account, or natural has, it's gonna go into the owner's equity, owner's equity and okay. Closing that back out medical costs, doing the same thing if we go into that item. That was at 195 before, actually we didn't do it. 2020.

So at that time, 32 so we'll put in 232. And that's going to go to owner's equity here owner's equity. And then Okay, closing that back out. Then we have the medical insurance going into that item. And it was at 500 before the 2020 stuff, so we're gonna say that's going to be an increase of 500 to owner's equity. Same same procedure record, okay, it's zero before they'd current activity, okay.

And we could do the same thing to the master drawls accounts, the draws account that doesn't that's not related to our tax items, but I'm going to keep that the way it is because it's not affecting our tax items. So then we'll go to our balance sheet and say, refresh that information. And now if we've ran it as of the end of 2020, these should give us These balances are correct now as of the end of the time period. So we could just give this kind of summary report and say, Hey, this is how much we paid for 2020. It's not including the prior year. If we double click on it, then we can kind of see the close out happen.

This is making it go to zero, because we did it in January. And then we can see the current year activity here. If we change the dates to January of 2020. Then we have this information. And again, you don't really it's not necessary to do this, because you could just run the activity. And if the beginning balance isn't zero, if it doesn't go back down to zero, that's okay.

Because you can just pick up the activity column what's what went up during this time period. So this is a closing process that you could do each year if you if you decide not to do it. The method should still work as long as we go in and actually go into each of these accounts and print Provide the report for the current time period for the current year, you'll note that these numbers will change. If I change this date up top, and we go back to 2019. Now, it'll just it'll just show that 2019 data. And then if we go back up to 2020, it'll just show the 2020.

And it's not going to double it, it's just showing the activity for 2020. So again, one method we could use to close it out, not necessarily as long as we if we note that these accounts like all balance sheet accounts will just keep on going up as part of equity as a you know, as a component of the total equity. And if we want the detail of it, we need to go into each of these and run the reports as of the Year for tax preparation, oh 101 to zero to 1231. And that'll give us the activity necessary whether we close it out or not.