Opening Trial Balance

Did you enter the balance sheet at the last day of the previous year or as the first day of the new year?

What was the other side of the invoice?

Dear Sam Jay

I think the best an simplest way to do this is create a customer and add an invoice for 70000 for that customer.

The trial balance will then be

Debtors control Account   Debit 7,000

VAT Liability                    Credit 1166.67

Profit & Loss Account      Credit 5833.33

Ensure you have the dates correct when looking at your trial balance.

Helen

you should enter the nominal code for the invoice as Opening balance equity

Hi Sam Jay

I see what you are try to do. As you say the 7000 has already been reported as profit in prior financial year.  So if the amount is entered as an invoice it will debit debtors control account by 7000 which will show as profit in this years accounts.

Journal Entries

Accruals DR 7000  make sure you enter the customers name in the field, 7000 will now appear on their account as a journal entry no an invoice

Owners Equity CR 7000

When the payment is made make a deposit entry for the Make Deposits window entering the cutomers name in the field again.

These notional transactions will not show in your P/L but in your Balance Sheet as equity

Hope this helps

Helen

"I see what you are try to do. As you say the 7000 has already been reported as profit in prior financial year.  So if the amount is entered as an invoice it will debit debtors control account by 7000 which will show as profit in this years accounts."

No it wont if you post the other side to Opening balance equity

"Journal Entries

Accruals DR 7000  make sure you enter the customers name in the field, 7000 will now appear on their account as a journal entry no an invoice

Owners Equity CR 7000"

This entry should not be made. Why should you enter a Dr to Accruals?

How I enter opening balances is as follows:

I use the last date of the previous period - this seems more logical to me but the first date of the new period achieves the same result

QuickBooks suggests Opening balance equity but any account (eg Suspense) can be used.

Sales Invoices are posted individually with the real date of the invoice and the Cr is posted to Opening balance equity. Obviously credit notes are posted the opposite way.

Purchase Invoices (Bills) are posted individually with the real date of the invoice and the Dr is posted to Opening balance equity. Obviously credit notes are posted the opposite way.

The bank balances need to be entered. The usual suggestion is to enter each cash book balance as one amount - the other side should be Opening balance equity - but I prefer to enter the bank statement balance and the reconciling items individually with the correct dates and references. This will be useful when you reconcile the bank in the future. If you don't do this you can't do a reconciliation using the accounting software until all the pre-period end items have cleared.

The remaining balances on the trial balance are entered using one journal with the balancing amount posted to Opening balance equity.

If everything has been entered correctly Opening balance equity will be zero.

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