Wednesday, March 27, 2013

QuickBooks: Opening Bank Balance

“It is 2013, and I am entering the information for a client for 2012. They wanted to start a new data file for 2012 since the prior data files were not properly set up or maintained. Starting over was the best choice. 
My question is this, what should I use to start the bank accounts – that is, how do I have the reconciliation for January be correct when I know there will be checks from the prior year still in process of clearing?”

It is important to capture the true value for 2012, and you are correct, there are likely to be 2011 entries on the first few months of the bank and credit card statements. Here is what you should do:
  • Locate the last statement you received before your QuickBooks start date (in this case hopefully 12/31/11).
  • Create the first transaction in the bank register using the ending date and the ending balance of the bank statement. The account to use is opening balance equity.
  • As the current transactions are created based on each bank statement, you need to enter all the uncleared checks from the prior year. Be sure to use the date the original transaction happened. This will keep the past in the past, and the current year accurate.

This method is great for bank and credit card opening balances. However, if you are entering all the information from the prior year’s trial balance (hopefully prepared by a CPA) you may need to make some adjustments. This is because the trial balance ending values may include the uncleared checks.
Therefore, after all the information is entered from the prior year, review the trial balance on your new data file against that of the CPA and make one adjustment to Opening Balance Equity for each of the expense accounts that may be slightly different.
Now you have a correct check register and a correct trial balance for each expense account.

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