How do I enter opening balances when I start a new set of books?

Pick your start date and know what it decides

An entity should prepare an opening statement of financial position at the date of transition to the framework, and that opening statement of financial position is the starting point for the entity's accounting under the framework. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status; applies on transition to the FRF for SMEs accounting framework)

“An entity should prepare an opening statement of financial posi- tion at the date of transition to the FRF for SMEs accounting framework.1 This opening statement of financial position is the starting point for the entity’s accounting under the framework.”

A tax year is an annual accounting period for keeping records and reporting income and expenses. (jurisdiction: United States — federal income tax, entity_scope: every taxpayer)

“tax year is an annual accounting period for keeping re- tax questions, tax returns, or payments to the above ad- cords and reporting income and expenses.”

Unless the taxpayer has a required tax year, the taxpayer adopts a tax year by filing its first income tax return using that tax year. (jurisdiction: United States — federal income tax, entity_scope: every taxpayer, conditions: taxpayer does not have a required tax year)

“Unless you have a required tax year, you adopt a tax feature or viewing the categories listed. year by filing your first income tax return using that tax Getting tax forms, instructions, and publications. year.”

A taxpayer that adopts the calendar year must maintain its books and records and report its income and expenses from January 1st through December 31st of each year. (jurisdiction: United States — federal income tax, entity_scope: every taxpayer, conditions: the taxpayer has adopted the calendar year)

“If you adopt the calendar year, you must maintain your 541 Partnerships books and records and report your income and expenses from January 1st through December 31st of each year.”

A fiscal year is 12 consecutive months ending on the last day of any month except December 31st, and a taxpayer allowed to adopt a fiscal year must consistently maintain its books and records and report its income and expenses using the time period adopted. (jurisdiction: United States — federal income tax, entity_scope: taxpayers allowed to adopt a fiscal year, conditions: the taxpayer is allowed to adopt a fiscal year)

“A fiscal year is 12 consecutive months ending on the last • Change your accounting period. day of any month except December 31st. If you are al- Tax on a short period tax return is figured differently for lowed to adopt a fiscal year, you must consistently main- each situation. tain your books and records and report your income and expenses using the time period adopted.”

A short tax year is a tax year of less than 12 months. (jurisdiction: United States — federal income tax, entity_scope: every taxpayer)

“A short tax year is a tax year of less than 12 months.”

Creating a new account in QuickBooks Desktop involves picking a start date and entering the real-life account balance as at that date so QuickBooks matches the bank records from the start. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article))

“When you create a new account in QuickBooks Desktop, pick a day to start tracking all of your transactions. You enter the balance of your real-life bank account for the day you pick. This way, QuickBooks matches your bank records from the start.”

The opening-balance journal entry should be dated the chosen opening balance date. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article), conditions: journal entry method)

“Set the date for the journal entry. It should be the date you pick for the opening balance.”

A Balance Sheet account being set up takes a starting point entered in the As of field. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced; QuickBooks Online Plus; QuickBooks Online Essentials; QuickBooks Ledger; Intuit Enterprise Suite, conditions: the account being set up is a Balance Sheet account)

“If you're setting up a Balance Sheet account, pick a starting point for the account and enter it in the As of field.”

Most businesses start tracking accounts from the beginning of the year so that QuickBooks matches bank records from the start. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced; QuickBooks Online Plus; QuickBooks Online Essentials; QuickBooks Ledger; Intuit Enterprise Suite)

“Most businesses choose to start tracking accounts from the beginning of the year. That way QuickBooks matches your bank records from the start.”

After the opening balance is set, only payments and deposits after the starting date need recording; items that cleared before that date do not. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced; QuickBooks Online Plus; QuickBooks Online Essentials; QuickBooks Ledger; Intuit Enterprise Suite)

“Now, you're ready to start recording new payments and deposits that happened after the starting date you choose. You don't need to enter anything that cleared the account before that date.”

An Opening Balance Date is entered, usually the date the business started using Zoho Books, for both new and existing businesses. (jurisdiction: not stated, entity_scope: Zoho Books organizations, platform: Zoho Books)

“Enter the Opening Balance Date . This date is usually the date you’ve started using Zoho Books (this applies to both new and existing businesses).”

Partly established. Established: what it determines about the split between opening position and ongoing activity (S12). Missing: how the start date is chosen; what a start date that does not fall on a period boundary costs the reader.

Required authority: high quality professional secondary reference, primary regulator or government. Highest achieved: high quality professional secondary reference, official platform documentation.

The routes your accounting software gives you for entering opening balances

See Creating a new account in QuickBooks Desktop involves picking a start date and entering the real-life account balance as at that date so QuickBooks matches the bank records from the start.

An account's opening balance is the starting point that summarises all past transactions occurring before it. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article))

“This starting point is the account's opening balance. It summarizes all the past transactions that came before it.”

Intuit warns users to be careful entering opening balances for balance sheet accounts, naming Fixed Assets, Equity, Long-term Liability, Other Assets, Other Current Assets and Other Current Liability accounts. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article))

“Be careful entering the opening balances for accounts on your Balance Sheet. This includes Fixed Assets, Equity, Long-term Liability, Other Assets, Other Current Assets, and Other Current Liability accounts.”

Opening balances are not needed for income or expense accounts, which track earnings and spending. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article))

“You don't need to enter opening balances for income or expense accounts. These accounts simply track your earnings and spending.”

Entering the opening balance as a journal entry is an alternative to the per-account method; Intuit describes it as potentially complicated and encourages working with an accountant. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article))

“As an alternative to the main method, you can enter the opening balance as a journal entry. This can be complicated. We encourage you to work with your accountant if you decide to do this:”

In an opening-balance journal entry, an asset account's opening balance is entered in the Debit column. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article), conditions: journal entry method)

“Asset: Enter the opening balance in the Debit column.”

In an opening-balance journal entry, a liability or equity account's opening balance is entered in the Credit column. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article), conditions: journal entry method)

“Liability and Equity: Enter the opening balance in the Credit column.”

Accounts receivable, accounts payable, sales tax payable and anything else not in the initial journal entry require additional journal entries. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article), conditions: journal entry method)

“Create additional journal entries to enter accounts receivable, accounts payable, sales tax payable, and anything else that wasn't included in the initial journal entry.”

See The opening-balance journal entry should be dated the chosen opening balance date.

Customer and vendor balances outstanding before the opening balance date are entered as individual unpaid invoices or bills, whose open balances collectively produce the Accounts Payable and Accounts Receivable opening balances. (jurisdiction: United States, entity_scope: QuickBooks Desktop company files, platform: QuickBooks Desktop, platform_edition: QuickBooks Desktop Premier Plus, QuickBooks Desktop Pro Plus, QuickBooks Accountant Desktop Plus, QuickBooks Desktop Enterprise Diamond, QuickBooks Desktop Enterprise Gold, QuickBooks Desktop Enterprise Platinum, QuickBooks Desktop Enterprise Accountant (as listed by the article), conditions: customers or vendors have outstanding balances from before the opening balance date)

“If your customers or vendors have outstanding balances from before your opening balance date, enter the individual unpaid invoices or bills. This creates open balances that collectively result in your Accounts Payable and Accounts Receivable opening balances.”

Intuit restricts the journal-entry method for a missing opening balance to accounts that have not yet been reconciled. (jurisdiction: United States, entity_scope: QuickBooks Online company files, platform: QuickBooks Online, platform_edition: QuickBooks Online (article labelled QuickBooks Ledger, Online Advanced, Essentials, Plus, Simple Start, Solopreneur, Online Free, Online Lite, Solopreneur Plus), conditions: Account has not yet been reconciled)

“Important: Only use this method if you haven't reconciled the account yet .”

In the QuickBooks Online opening-balance journal entry, the offsetting second-row account is Opening Balance Equity. (jurisdiction: United States, entity_scope: QuickBooks Online company files, platform: QuickBooks Online, platform_edition: QuickBooks Online (article labelled QuickBooks Ledger, Online Advanced, Essentials, Plus, Simple Start, Solopreneur, Online Free, Online Lite, Solopreneur Plus))

“On the second row of the Account column, select the dropdown and choose Opening Balance Equity .”

For Accounts Payable the opening-balance journal entry names the individual vendor owed in the Name field, entered as a credit to increase or a debit to decrease the balance. (jurisdiction: United States, entity_scope: QuickBooks Online Accounts Payable, platform: QuickBooks Online, platform_edition: QuickBooks Online (article labelled QuickBooks Ledger, Online Advanced, Essentials, Plus, Simple Start, Solopreneur, Online Free, Online Lite, Solopreneur Plus))

“Accounts Payable : On the first row in the Name field, select the vendor you owe money to. Enter the opening balance as a credit to increase the balance. Or enter the opening balance as a debit to decrease the balance.”

For Accounts Receivable the opening-balance journal entry names the individual customers who owe money in the Name field, entered as a debit to increase or a credit to decrease the balance. (jurisdiction: United States, entity_scope: QuickBooks Online Accounts Receivable, platform: QuickBooks Online, platform_edition: QuickBooks Online (article labelled QuickBooks Ledger, Online Advanced, Essentials, Plus, Simple Start, Solopreneur, Online Free, Online Lite, Solopreneur Plus))

“Accounts Receivable : On the first row in the Name field, select the customers who owe you money. Enter the opening balance as a debit if you want to increase the balance. Or enter the opening balance as a credit if you want to decrease the balance.”

The opening-balance journal entry must itself be marked reconciled, even on an account not yet reconciled, to keep it off a future reconciliation. (jurisdiction: United States, entity_scope: QuickBooks Online company files, platform: QuickBooks Online, platform_edition: QuickBooks Online (article labelled QuickBooks Ledger, Online Advanced, Essentials, Plus, Simple Start, Solopreneur, Online Free, Online Lite, Solopreneur Plus))

“Even if you haven't reconciled the account yet, you need to reconcile the journal entry. This prevents it from showing up on a future reconciliation:”

Most bank and credit card accounts are added automatically through the online-banking connection, while accounts such as loans and fixed assets must be added manually. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced; QuickBooks Online Plus; QuickBooks Online Essentials; QuickBooks Ledger; Intuit Enterprise Suite)

“While you can automatically add most bank and credit card accounts to your chart of accounts when you connect them to online banking, there are some accounts that you'll need to add manually, like loans and fixed assets.”

See A Balance Sheet account being set up takes a starting point entered in the As of field.

See Most businesses start tracking accounts from the beginning of the year so that QuickBooks matches bank records from the start.

The opening balance is the amount held in the real-life bank account on the chosen starting date. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced; QuickBooks Online Plus; QuickBooks Online Essentials; QuickBooks Ledger; Intuit Enterprise Suite)

“Then, enter the amount of money you had in your real-life bank account on that day. In QuickBooks, this is called an opening balance.”

The opening balance figure is taken from the bank or credit card statement and becomes the account's starting point so QuickBooks records agree with the bank's records. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced; QuickBooks Online Plus; QuickBooks Online Essentials; QuickBooks Ledger; Intuit Enterprise Suite)

“The best way to find this is on your bank or credit card statement. This number is very important. It becomes the account's starting point and will help ensure your QuickBooks records match your bank's records.”

See After the opening balance is set, only payments and deposits after the starting date need recording; items that cleared before that date do not.

The opening balance summarises the old transactions, so adding those transactions later without adjusting the opening balance double-counts the money. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Online Advanced; QuickBooks Online Plus; QuickBooks Online Essentials; QuickBooks Ledger; Intuit Enterprise Suite)

“Remember, all of your old transactions were summarized in the opening balance. If you add them now without adjusting the opening balance, you'll count your money twice.”

An opening balance field exists on new customer and vendor profiles, but entering it is not recommended. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Ledger, QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Solopreneur, QuickBooks Solopreneur Plus)

“But new customers and vendors are different. You have the option to enter opening balances when you're creating new customer or vendor profiles, but it's not recommended.”

For customers and vendors with balances open before the QuickBooks Online start date, the recommendation is to leave the opening balance blank and instead enter the individual unpaid invoices and unpaid bills. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Ledger, QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Solopreneur, QuickBooks Solopreneur Plus, conditions: the open balance predates the date the QuickBooks Online account was opened)

“If you have customers and vendors that have an open balance prior to the date you opened your QuickBooks Online account, it's recommended to leave the opening balance blank. Instead, add your customer's unpaid invoices or your vendor's unpaid bills to QuickBooks.”

Entering a customer opening balance causes QuickBooks to create a generic invoice for that customer, and invoices post to Accounts Receivable and Income accounts. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Ledger, QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Solopreneur, QuickBooks Solopreneur Plus)

“When you add a customer opening balance, QuickBooks creates a generic invoice for the customer. Invoices affect **Accounts Receivable (A/R)** and Income accounts.”

Entering a vendor opening balance causes QuickBooks to create a generic bill for that vendor, and bills post to Accounts Payable and Expense accounts. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Ledger, QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Solopreneur, QuickBooks Solopreneur Plus)

“When you add a vendor opening balance, QuickBooks creates a generic bill for the vendor. Bills affect **Accounts Payable (A/P)** and Expense accounts.”

See An Opening Balance Date is entered, usually the date the business started using Zoho Books, for both new and existing businesses.

The Other Accounts group covers assets and liabilities, income and expenses, bank balances and equity. (jurisdiction: not stated, entity_scope: Zoho Books organizations, platform: Zoho Books)

“Other accounts include your assets and liabilities, income and expenses, bank balances, and equity.”

Opening balances for other accounts are entered as Debit and Credit balances per account. (jurisdiction: not stated, entity_scope: Zoho Books organizations, platform: Zoho Books)

“Enter the Debit and Credit balances for different accounts.”

Opening Accounts Receivable is the closing customer-receivable balance and opening Accounts Payable the closing vendor-payable balance from the previous accounting system, and each can be entered by one of several routes. (jurisdiction: not stated, entity_scope: Zoho Books organizations, platform: Zoho Books)

“Accounts Receivable is the closing balance of the amount you receive from your customers in your previous accounting system. Whereas, Accounts Payable is the closing balance of the amount you owe your vendors in your previous accounting system. You can add the opening balance in one of the following ways:”

Any difference between the entered debits and credits is posted by Zoho Books to an Opening Balance Adjustment account. (jurisdiction: not stated, entity_scope: Zoho Books organizations, platform: Zoho Books)

“Enter all your balances and click Continue . The difference in the debits and credits will be included in the Opening Balance Adjustment account.”

The Sync option on the opening balances page pulls in data created before the opening balance date and adjusts the opening balances accordingly. (jurisdiction: not stated, entity_scope: Zoho Books organizations, platform: Zoho Books)

“The Sync option in the opening balances page sync all your data created before your opening balance date and adjust your balances accordingly.”

The Outstanding Opening Balance is a single amount held apart from Zoho Books sales and purchase transactions, and it is reduced by payments recorded other than payments against invoices or bills. (entity_scope: Zoho Books organizations recording customer/vendor opening balances, platform: Zoho Books)

“Outstanding Opening Balance is the amount the customer owes you or you owe a vendor, excluding the sales and purchase transactions recorded in Zoho Books. Each time you record a payment (other than the payments for invoices or bills), the outstanding opening balance decreases.”

Not established from an authoritative source.

Where the opening figures come from, and what to do when nothing agreed exists

After the period is closed the report is the post-closing trial balance, and it contains the beginning balances for the next year's accounting activity. (jurisdiction: not stated, entity_scope: not stated)

“Finally, after the period has been closed, the report is called the post-closing trial balance . This post-closing trial balance contains the beginning balances for the next year’s accounting activities.”

A trial balance states a total for each asset, liability, equity, revenue, expense, gain and loss account. (jurisdiction: not stated, entity_scope: not stated)

“This means that it states the total for each asset , liability , equity , revenue , expense , gain , and loss account.”

A trial balance carries only each account's ending balance, whereas the general ledger also carries the detailed transactions making up that balance or points to the subledger holding them. (jurisdiction: not stated, entity_scope: not stated)

“A trial balance only shows the ending balance in each account, while a general ledger also shows the detailed transactions that comprise the ending balance, or at least points toward the relevant subledger that contains this information.”

Equal debit and credit totals on a trial balance do not establish that the accounts it lists are free of error. (jurisdiction: not stated, entity_scope: not stated)

“Even when the debit and credit totals stated on the trial balance equal each other, it does not mean that there are no errors in the accounts listed in the trial balance.”

A trial balance cannot detect errors that leave debits and credits equal, including omitted transactions, the same wrong amount on both sides, misclassification, posting to the wrong account, and compensating errors. (jurisdiction: not stated, entity_scope: not stated)

“A trial balance cannot detect errors that do not disturb the equality of debits and credits. Examples include omitted transactions, posting the same incorrect amount to both sides, errors of principle such as misclassification, posting to the wrong account, and compensating errors where multiple mistakes offset each other.”

The trial balance is used primarily to confirm that total debits equal total credits, evidencing that no unbalanced journal entries exist that would prevent accurate financial statements. (jurisdiction: not stated, entity_scope: not stated)

“The report is primarily used to ensure that the total of all debits equals the total of all credits ; this means that there are no unbalanced journal entries in the accounting system that would make it impossible to generate accurate financial statements .”

The year-end book's supporting information starts with the general ledger and includes the detail behind ending asset and liability balances: the accounts receivable aging, accounts payable aging, ending inventory report and fixed asset register. (jurisdiction: Not stated in the document, entity_scope: Entities generally)

“The supporting information starts with the general ledger, and also includes the detail for the ending asset and liability balances. This means the accounts receivable aging, accounts payable aging, the ending inventory report, and the fixed asset register.”

A single-entry system can support a cash-basis income statement but cannot produce a balance sheet. (jurisdiction: Not stated in the document, entity_scope: Organizations using a single-entry system, accounting_basis: cash basis, conditions: single-entry system in use)

“Under a single-entry system, it is possible to maintain a cash-basis income statement , but not a balance sheet .”

The partial information available in the article's example consists of a cashbook of total cash received, a pile of supplier invoices, bank statements showing deposits and withdrawals, and inventory counts at the beginning and end of the year. (jurisdiction: Not stated in the document, entity_scope: Illustrative example — one small independently-owned restaurant, conditions: stated as an example, not a requirement)

“A cashbook showing total cash received A pile of supplier invoices Bank statements with deposits and withdrawals Inventory counts at the beginning and end of the year”

Estimates are acceptable when reconstructing incomplete records provided they are reasonable and based on objective evidence, drawn from supporting documents, historical trends and logical assumptions. (jurisdiction: Not stated in the document, entity_scope: Businesses with incomplete records, conditions: estimates are reasonable; estimates are based on objective evidence)

“Estimates are acceptable when reconstructing incomplete records if they are reasonable and based on objective evidence. Accountants use supporting documents, historical trends, and logical assumptions to fill gaps where precise data is unavailable.”

Documenting the estimates used in reconstruction provides transparency and helps auditors evaluate their reliability. (jurisdiction: Not stated in the document, entity_scope: Businesses with incomplete records)

“Proper documentation of these estimates ensures transparency and assists auditors in evaluating their reliability.”

Partly established. Established: what constitutes an acceptable source for the opening position (S28); what to do when nothing agreed exists (S48). Missing: how the reader confirms the source is complete and internally consistent.

Every category has to come in, not just the bank

An asset is a present right of an entity to an economic benefit. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“An asset is a present right of an entity to an economic benefit.”

A liability is a present obligation of an entity to transfer an economic benefit. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“A liability is a present obligation of an entity to transfer an economic benefit.”

See An entity should prepare an opening statement of financial position at the date of transition to the framework, and that opening statement of financial position is the starting point for the entity's accounting under the framework.

Ordinarily the following assets are separately presented in the statement of financial position: cash and cash equivalents; trade and other receivables; prepaid expenses; other financial assets; inventories; investments in nonconsolidated subsidiaries and nonproportionately consolidated joint ventures; and all other investments showing separately. Some of these items may instead be set out in notes or attached schedules, in which case the statement of financial position caption containing them should be identified. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Ordinarily, the following assets are separately presented. Some of these items may be set out more readily in notes to the financial state- ments or attached schedules. When this approach is used, the statement of financial position caption that contains these items should be identified. More detailed information about the following assets is presented in the chapters referenced: a. Cash and cash equivalents (see chapter 5) b. Trade and other receivables (see chapter 5) c. Prepaid expenses (see chapter 5) d. Other financial assets (see chapter 6, “Special Accounting Con- siderations for Certain Financial Assets and Liabilities”) e. Inventories (see chapter 12, “Inventories”) f. Investments in nonconsolidated subsidiaries and nonpropor- tionately consolidated joint ventures (see chapter 22, “Subsid- iaries” and chapter 24, “Interests in Joint Ventures”) g. All other investments showing separately”

The liabilities ordinarily presented separately are the main classes of current liabilities, liabilities for deferred income taxes, liabilities of disposal groups held for sale, obligations under capital leases, accrued benefit liability, long-term debt, asset retirement obligations, and other financial liabilities. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Ordinarily, the following liabilities should be separately presented: a. Main classes of current liabilities in accordance with paragraph 5.09 b. Liabilities for deferred income taxes (see chapter 21) c. Liabilities of disposal groups classified as held for sale (see chap- ter 15) d. Obligations under capital leases (see chapter 25, “Leases”) e. Accrued benefit liability (see chapter 20) f. Long-term debt (see chapter 6) g. Asset retirement obligations (see chapter 17) h. Other financial liabilities”

Not established from an authoritative source.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.

Unpaid invoices and bills go in one by one, never as a lump total

See A trial balance carries only each account's ending balance, whereas the general ledger also carries the detailed transactions making up that balance or points to the subledger holding them.

Customer billings and supplier invoices are handled through specialized software modules whose on-line form, once completed, causes the software to create the accounting record automatically. (jurisdiction: not stated, entity_scope: not stated)

“These transactions are handled through specialized software modules that present a standard on-line form to be filled out. Once you have filled out the form, the software automatically creates the accounting record.”

As the article's example of documentation review, the trade accounts receivable balance should exactly match the total of the open accounts receivable report. (jurisdiction: not stated, entity_scope: not stated, conditions: stated as an example, not a general rule)

“For example, if you are reconciling the trade accounts receivable account, the balance in the account should exactly match the total of the open accounts receivable report.”

See Customer and vendor balances outstanding before the opening balance date are entered as individual unpaid invoices or bills, whose open balances collectively produce the Accounts Payable and Accounts Receivable opening balances.

See For Accounts Payable the opening-balance journal entry names the individual vendor owed in the Name field, entered as a credit to increase or a debit to decrease the balance.

See For Accounts Receivable the opening-balance journal entry names the individual customers who owe money in the Name field, entered as a debit to increase or a credit to decrease the balance.

See An opening balance field exists on new customer and vendor profiles, but entering it is not recommended.

See For customers and vendors with balances open before the QuickBooks Online start date, the recommendation is to leave the opening balance blank and instead enter the individual unpaid invoices and unpaid bills.

Entering the individual unpaid invoices and bills lets the business record clear detail of what customers are paying for and what is being paid to vendors. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Ledger, QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Solopreneur, QuickBooks Solopreneur Plus)

“This lets you add clear details about what your customers are paying for and what you're paying your vendors for.”

Each entered unpaid invoice is dated with the actual date the products or services were provided. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Ledger, QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Solopreneur, QuickBooks Solopreneur Plus)

“Make sure the **Invoice date** is the actual date you provided the products or services.”

See Entering a customer opening balance causes QuickBooks to create a generic invoice for that customer, and invoices post to Accounts Receivable and Income accounts.

Because the opening-balance invoice is generic, what the customer is paying for is unclear, and the user can either add specific details to it or delete it. (jurisdiction: United States, entity_scope: Businesses using QuickBooks Online, platform: QuickBooks Online, platform_edition: QuickBooks Ledger, QuickBooks Online Advanced, QuickBooks Online Essentials, QuickBooks Online Plus, QuickBooks Online Simple Start, QuickBooks Solopreneur, QuickBooks Solopreneur Plus)

“Since the invoice is generic, it's unclear what the customer is paying for. To avoid any confusion later, you can add specific details to the invoice, or delete it.”

See Entering a vendor opening balance causes QuickBooks to create a generic bill for that vendor, and bills post to Accounts Payable and Expense accounts.

See Opening Accounts Receivable is the closing customer-receivable balance and opening Accounts Payable the closing vendor-payable balance from the previous accounting system, and each can be entered by one of several routes.

See The Outstanding Opening Balance is a single amount held apart from Zoho Books sales and purchase transactions, and it is reduced by payments recorded other than payments against invoices or bills.

Required authority: authoritative professional or accounting standard, official platform documentation. Highest achieved: official platform documentation.

Bringing in what you own: original cost and depreciation already taken, kept apart

Valuation accounts that increase or decrease the carrying amount of an asset or liability (for example an allowance for uncollectible amounts, or a bond premium) are part of the related asset or liability and are not assets or liabilities in their own right. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“In some instances, financial statements include separate items that increase or decrease the carrying amount of an asset or a liability. For example, an estimate of uncollectible amounts reduces a receivable to the amount expected to be collected, or a bond premium increases the face value of a bond payable to its proceeds or present value. Those “valuation accounts” are part of the related assets and liabilities but are not assets or liabilities in their own right.”

Material presentation items should not be netted in the financial statements unless the framework specifically allows it. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Material presentation items should not be netted in the financial statements, unless specifically allowed by the framework.”

Property, plant and equipment should be recorded at cost. (jurisdiction: United States, entity_scope: entities with property, plant, and equipment using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Property, plant, and equipment should be recorded at cost.”

Depreciation should be recognized over the useful life of the asset in a rational and systematic manner appropriate to the nature of an item of property, plant and equipment with a limited life and its use by the entity, and depreciation expense is calculated on the cost less any expected residual value. (jurisdiction: United States, entity_scope: entities with property, plant, and equipment using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Depreciation should be recognized over the useful life of the asset in a rational and systematic manner appropriate to the nature of an item of property, plant, and equipment with a limited life and its use by the entity. Depreciation expense is calculated on the cost less any expected residual value.”

The amount of depreciation of property, plant and equipment charged to income for the period should be disclosed, and in addition total accumulated depreciation should be disclosed. (jurisdiction: United States, entity_scope: entities with property, plant, and equipment using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“The amount of depreciation of property, plant, and equipment charged to income for the period should be disclosed (see chapter 7, “State- ment of Operations”). In addition, total accumulated depreciation should be disclosed.”

Gross cost is the asset's original cost; net cost or carrying amount is that original cost less accumulated depreciation and any impairment charges — so original cost and accumulated depreciation are distinct amounts of which the net figure is the difference. (jurisdiction: not stated, entity_scope: not stated)

“The original cost of the asset is known as its gross cost, while the original cost of the asset less the amount of accumulated depreciation and any impairment charges is known as its net cost or carrying amount .”

Accumulated depreciation is held in its own asset account carrying a credit balance — a contra asset account — separate from the fixed asset cost account. (jurisdiction: not stated, entity_scope: not stated)

“The accumulated depreciation account is an asset account with a credit balance (also known as a contra asset account ).”

On retirement or sale of an asset both the related accumulated depreciation and the original cost are reversed, removing all record of the asset from the balance sheet. (jurisdiction: not stated, entity_scope: not stated)

“When the asset is eventually retired or sold, the amount in the accumulated depreciation account relating to that asset is reversed, as is the original cost of the asset, thereby eliminating all record of the asset from the company's balance sheet .”

On the balance sheet, accumulated depreciation is presented as a reduction from the gross amount of fixed assets reported. (jurisdiction: not stated, entity_scope: not stated)

“Accumulated depreciation appears on the balance sheet as a reduction from the gross amount of fixed assets reported.”

Accumulated depreciation at a given date is calculated by running the asset's depreciation calculation from its acquisition date to that date. (jurisdiction: not stated, entity_scope: not stated)

“Calculating accumulated depreciation is a simple matter of running the depreciation calculation for a fixed asset from its acquisition date to the current date.”

To determine the basis of property, the taxpayer needs to know the property's cost or other basis. (jurisdiction: United States (U.S. federal income tax), entity_scope: Taxpayers depreciating property used in a trade or business or held for the production of income)

“the basis of your property. To determine basis, you need to know the cost or other basis of your property.”

Records must be kept showing the specific identification of each piece of qualifying section 179 property, and those records must show how the property was acquired, the person it was acquired from, and when it was placed in service. (jurisdiction: United States (U.S. federal income tax), entity_scope: Taxpayers depreciating property used in a trade or business or held for the production of income, conditions: Section 179 property)

“ Records you should keep. You must keep records account the items from that trade or business that are that show the specific identification of each piece of quali- passed through to the shareholders and used in determin- fying section 179 property. These records must show how ing each shareholder’s tax liability. However, you do not you acquired the property, the person you acquired it from, take into account any credits, tax-exempt income, the sec- and when you placed it in service.”

Partly established. Established: how items the business owns are brought in with their original cost and the depreciation already taken kept separate (S68). Missing: what is lost when a single net figure is entered.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference.

Bringing in what you still owe on borrowings

Borrowing cash obligates the entity to repay the amount borrowed; acquiring assets on credit obligates the entity to pay for those assets; selling products under warranty obligates the entity to pay, repair or replace defective products. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“Entities routinely incur liabilities in exchange transactions to acquire the funds, goods, and services they need to operate. For example, borrowing cash (acquiring funds) obligates an entity to repay the amount borrowed, acquiring assets on credit obligates an entity to pay for the assets, and selling products with a warranty or guarantee obligates an entity to either pay cash or repair or replace any products that prove defective.”

See The liabilities ordinarily presented separately are the main classes of current liabilities, liabilities for deferred income taxes, liabilities of disposal groups held for sale, obligations under capital leases, accrued benefit liability, long-term debt, asset retirement obligations, and other financial liabilities.

The current liability classification should include only that portion of long-term debt obligations, including sinking-fund requirements, payable within one year from the statement of financial position date. (jurisdiction: United States, entity_scope: entities with long-term debt using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“The current liability classification should include only that por- tion of long-term debt obligations, including sinking-fund requirements, payable within one year from the date of the statement of financial position.”

For bonds, debentures and similar securities, mortgages and other long-term debt, an entity should disclose the title or description of the liability, the interest rate, the maturity date, significant terms such as covenant details, the amount outstanding separated between principal and accrued interest, the currency if not the entity's measurement currency, and the repayment terms including sinking fund, redemption and conversion provisions. (jurisdiction: United States, entity_scope: entities with long-term debt using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“For bonds, debentures, and similar securities, mortgages, and other long-term debt, an entity should disclose a. the title or description of the liability; b. the interest rate; c. the maturity date; d. significant terms (for example, covenant details); e. the amount outstanding, separated between principal and ac- crued interest; f. the currency in which the debt is payable, if it is not repayable in the currency in which the entity measures items in its financial statements; and g. the repayment terms, including the existence of sinking fund, redemption, and conversion provisions.”

See In an opening-balance journal entry, a liability or equity account's opening balance is entered in the Credit column.

See Most bank and credit card accounts are added automatically through the online-banking connection, while accounts such as loans and fixed assets must be added manually.

Not established from an authoritative source.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.

Bringing in the owners' position and the accumulated results

Equity, or net assets, is the residual interest in an entity's assets remaining after deducting its liabilities. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“The terms equity or net assets represent the residual interest in the assets of an entity that remains after deducting its liabilities.”

Equity is the difference between assets and liabilities and is a residual affected by every event that changes total assets by an amount different from the change in total liabilities; it is increased or decreased by the entity's operations and other events affecting its assets and liabilities. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“The equity or net assets of a business entity and a not-for-profit entity is the difference between the entity’s assets and its liabilities. It is a residual that is affected by all events that increase or decrease total assets by amounts different from the amounts that increase or decrease total liabilities from those same events. Thus, equity or net assets of both a business entity and a not-for-profit entity is increased or decreased by the entity’s operations and certain other events and circumstances affecting the assets and liabilities of the entity.”

Amounts owed to owners in a nonowner role — wages due, products or services due, accounts payable — are liabilities, not equity. (jurisdiction: United States, entity_scope: business entities)

“Wages due, products or services due, accounts payable due, and other amounts due to owners in their roles as employees, customers, suppliers, and the like are liabilities and not part of equity.”

Equity is the ownership interest in the assets of an entity after deducting its liabilities; although total equity is a residual, it includes specific categories of items (for example types of capital stock, additional paid-in capital and retained earnings), and in this framework the term retained earnings also refers to owners' capital accounts depending on the nature of the entity. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“Equity is the ownership interest in the assets of an entity after deducting its liabilities. Although equity of an entity in total is a residual, it includes specific categories of items (for example, types of capital stock, additional paid-in capital, and retained earnings). As used in the FRF for SMEs accounting framework, the term retained earnings also refers to owners’ capital accounts, depending on the nature of the entity.”

Retained earnings comprises the accumulated balance of income less losses arising from the operation of the business after taking into account dividends and other amounts that may properly be charged or credited to it; when the accumulation is a negative figure “accumulated deficit” is a suitable designation; and in this framework the term retained earnings also refers to owners' capital accounts depending upon the nature of the entity. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“retained earnings. Comprises the accumulated balance of income less losses arising from the operation of the business after taking into account dividends and other amounts that may properly be charged or credited thereto. When the accumulation is a negative figure, “ac- cumulated deficit” is a suitable designation. As used in the FRF for SMEs accounting framework, the term retained earnings also refers to owners’ capital accounts, depending upon the nature of the entity.”

As applicable, an entity should present separately, either in the body of the financial statements or in the accompanying notes, the components of equity: retained earnings, additional paid-in capital, capital stock, noncontrolling interests, and other components of equity. (jurisdiction: United States, entity_scope: small- and medium-sized entities that elect to use the AICPA FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“As applicable, an entity should present separately the following components of equity either in the body of the financial statements or in the accompanying notes: a. Retained earnings b. Additional paid-in capital c. Capital stock d. Noncontrolling interests (see chapter 23) e. Other components of equity”

The financial statements of unincorporated businesses and partnerships should include a statement detailing the changes in the owners' equity during the period, detailing separately contributions of capital, income or losses, and withdrawals. (jurisdiction: United States, entity_scope: unincorporated businesses and partnerships using the FRF for SMEs accounting framework, accounting_basis: FRF for SMEs accounting framework (AICPA special purpose framework; not accounting principles generally accepted in the United States of America), conditions: use of the framework is optional; the document states it has no official or authoritative status)

“The financial statements of unincorporated businesses and partnerships should include a statement detailing the changes in the own- ers’ equity during the period, and this statement should detail separately contributions of capital, income or losses, and withdrawals.”

The retained earnings balance starts from prior retained earnings, is increased by net income, and is reduced by net losses, dividends and certain prior-period adjustments. (jurisdiction: not stated, entity_scope: not stated)

“The balance begins with prior retained earnings, increases with net income, and decreases with net losses, dividends, and certain prior-period adjustments.”

An accumulated deficit is a negative retained earnings balance, arising when cumulative losses and dividends since inception exceed cumulative profits. (jurisdiction: not stated, entity_scope: not stated)

“An accumulated deficit is a negative retained earnings balance. It occurs when a company’s cumulative losses and dividends exceed cumulative profits since inception.”

See In an opening-balance journal entry, a liability or equity account's opening balance is entered in the Credit column.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.

The opening position has to balance on its own

See Equity, or net assets, is the residual interest in an entity's assets remaining after deducting its liabilities.

Assets and liabilities are definitionally primary; equity is assets minus liabilities; investments by and distributions to owners and comprehensive income and its components result from increases and decreases in assets and liabilities. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“Assets and liabilities have conceptual and definitional primacy because the definitions of assets and liabilities and changes in those elements are foundational to the definitions of all other elements. Equity is assets minus liabilities. Investments by and distributions to owners and comprehensive income and its components are the result of increases and decreases in assets and liabilities.”

See The trial balance is used primarily to confirm that total debits equal total credits, evidencing that no unbalanced journal entries exist that would prevent accurate financial statements.

The general ledger accountant or, in a smaller business, the bookkeeper uses the trial balance at month-end and year-end close to confirm debit and credit totals match, and further investigation is needed when they do not. (jurisdiction: not stated, entity_scope: not stated)

“The main user of the trial balance is the general ledger accountant (or the bookkeeper in a smaller business). This person uses it as part of the month-end and year-end closing process, to ensure that the debit and credit totals match. If not, then further investigation is needed.”

A journal entry must contain at least two line items and its total debits must equal its total credits. (jurisdiction: not stated, entity_scope: not stated)

“The structural rules of a journal entry are that there must be a minimum of two line items in the journal entry, and that the total amount you enter in the debit column equals the total amount entered in the credit column.”

If trial-balance debit and credit totals are not identical, an error exists in the underlying transactions and should be corrected before proceeding. (jurisdiction: Not stated in the document, entity_scope: Entities generally)

“If not, then there is an error somewhere in the underlying transactions (an unbalanced entry) that should be corrected before proceeding.”

When a trial balance is prepared manually, unbalanced totals are likely caused by entering only part of a transaction, entering part of a transaction more than once, entering an incorrect amount, or entering a debit as a credit or the reverse. (jurisdiction: Not stated in the document, entity_scope: Entities preparing a trial balance manually, conditions: trial balance prepared manually)

“If the trial balance is being prepared manually, then likely reasons for unbalanced debit and credit totals are only entering a portion of a transaction, entering part of a transaction more than once, entering an incorrect amount, or entering an account as a debit instead of a credit (or vice versa).”

Where the beginning balance does not match the prior-period ending detail, the variance is investigated in the prior period; if the account has been unreconciled for some time the error may lie several periods back. (jurisdiction: Not stated in the document, entity_scope: Businesses generally, conditions: beginning balance does not match prior-period ending reconciliation detail)

“If the amounts do not match, investigate the reason for the variance in the prior period. If the account has not been reconciled for some time, it is possible that the error lies several periods in the past.”

Partly established. Established: that the opening position must balance on its own (S42); what to do when it does not (S34, S42). Missing: ruling out forcing it with an unexplained plug.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.

Items that had not cleared the bank at the start date

The book cash balance and the bank's ending cash balance are extremely unlikely to be identical, because of payments and deposits in transit, bank service fees, penalties and unrecorded NSF deposits. (jurisdiction: not stated, entity_scope: not stated)

“It is extremely unlikely that your ending cash balance and the bank's ending cash balance will be identical, since there are probably multiple payments and deposits in transit at all times, as well as bank service fees (for accepting checks , recording deposits, and so forth), penalties (usually for overdrafts), and not sufficient funds deposits that you have not yet recorded.”

The bank reconciliation starts from the bank's ending cash balance, adds deposits in transit, subtracts checks that have not yet cleared the bank, and adds or deducts other items. (jurisdiction: not stated, entity_scope: not stated)

“The essential process flow for a bank reconciliation is to start with the bank's ending cash balance, add to it any deposits in transit from the company to the bank, subtract any checks that have not yet cleared the bank, and either add or deduct any other items.”

A deposit in transit is cash or checks received and recorded by the entity but not yet recorded by its bank. (jurisdiction: not stated, entity_scope: not stated)

“Deposit in transit . Cash and/or checks that have been received and recorded by an entity, but which have not yet been recorded in the records of the bank where the entity deposits the funds.”

A deposit still in transit at month end does not appear on the bank statement and therefore becomes a reconciling item in the bank reconciliation. (jurisdiction: not stated, entity_scope: not stated)

“If this occurs at month-end, the deposit will not appear in the bank statement, and so becomes a reconciling item in the bank reconciliation.”

An outstanding check is a check payment recorded by the issuing entity that has not yet cleared its bank account as a deduction from cash. (jurisdiction: not stated, entity_scope: not stated)

“Outstanding check . A check payment that has been recorded by the issuing entity, but which has not yet cleared its bank account as a deduction from cash.”

A check not cleared by month end does not appear on the month-end bank statement and is therefore a reconciling item in that month's bank reconciliation. (jurisdiction: not stated, entity_scope: not stated)

“If it has not yet cleared the bank by the end of the month, it does not appear on the month-end bank statement, and so is a reconciling item in the month-end bank reconciliation.”

On entering the accounting software's bank reconciliation module, a listing of uncleared checks and uncleared deposits appears — so uncleared items are carried in the software as items awaiting clearing. (jurisdiction: not stated, entity_scope: not stated)

“Enter the bank reconciliation software module. A listing of uncleared checks and uncleared deposits will appear.”

After entering the bank statement's ending balance, the changes are posted and the module closed only when book and bank balances match; if they do not, review continues for additional reconciling items. (jurisdiction: not stated, entity_scope: not stated)

“Enter the ending balance on the bank statement. If the book balance and bank balance match, then post all changes recorded in the bank reconciliation and close the module. If the balances do not match, then continue reviewing the bank reconciliation for additional reconciling items.”

See The opening-balance journal entry must itself be marked reconciled, even on an account not yet reconciled, to keep it off a future reconciliation.

Once the opening-balance journal entry is created and reconciled, QuickBooks excludes it from future reconciliations, and the accounts should balance so the usual reconciliation steps can be followed. (jurisdiction: United States, entity_scope: QuickBooks Online company files, platform: QuickBooks Online, platform_edition: QuickBooks Online (article labelled QuickBooks Ledger, Online Advanced, Essentials, Plus, Simple Start, Solopreneur, Online Free, Online Lite, Solopreneur Plus))

“Now that you've created a journal entry, the opening balance is reconciled in your account and QuickBooks won't count it in future reconciliations. This should balance your accounts and you can follow the usual steps to reconcile the account .”

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference.

What not to enter: the history your opening position already stands for

An asset requires a right that exists at the financial statement date and that arose from past transactions, events or circumstances; a right expected only in the future is not an asset. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“To meet the definition of an asset, the right must be a present right; that is, the right exists at the financial statement date, not a right expected to occur in the future. The existence of a present right at the financial statement date means that the right and therefore the asset have arisen from past transactions or other past events or circumstances.”

A liability requires an obligation existing at the financial statement date; the settlement date may be in the future, and expected future transactions do not by themselves create obligations today. (jurisdiction: United States, entity_scope: business entities and not-for-profit entities)

“To have a liability, an entity must have a present obligation, that is, the obligation exists at the financial statement date. The settlement date of the liability may occur in the future, but the obligation must be present at the financial statement date. Transactions or other events or circumstances expected to occur in the future do not in and of themselves give rise to obligations today.”

See An account's opening balance is the starting point that summarises all past transactions occurring before it.

See After the opening balance is set, only payments and deposits after the starting date need recording; items that cleared before that date do not.

See The opening balance summarises the old transactions, so adding those transactions later without adjusting the opening balance double-counts the money.

See The Sync option on the opening balances page pulls in data created before the opening balance date and adjusts the opening balances accordingly.

Not established from an authoritative source.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.

Agreeing what you entered back to the source

See Equal debit and credit totals on a trial balance do not establish that the accounts it lists are free of error.

See A trial balance cannot detect errors that leave debits and credits equal, including omitted transactions, the same wrong amount on both sides, misclassification, posting to the wrong account, and compensating errors.

See The general ledger accountant or, in a smaller business, the bookkeeper uses the trial balance at month-end and year-end close to confirm debit and credit totals match, and further investigation is needed when they do not.

Financial statements are prepared from the adjusted trial balance. (jurisdiction: Not stated in the document, entity_scope: Entities generally)

“Prepare the financial statements from the adjusted trial balance.”

See Where the beginning balance does not match the prior-period ending detail, the variance is investigated in the prior period; if the account has been unreconciled for some time the error may lie several periods back.

All asset, liability and equity accounts are summarized and the aggregate amounts verified against the respective balance sheet line items. (jurisdiction: Not stated in the document, entity_scope: Businesses generally)

“Summarize all asset, liability, and equity accounts and verify that the aggregate amounts match the respective line items in the balance sheet .”

See As the article's example of documentation review, the trade accounts receivable balance should exactly match the total of the open accounts receivable report.

Where reconciliation shows an account balance is not correct, the balance is adjusted to match the supporting detail. (jurisdiction: not stated, entity_scope: not stated)

“If the account reconciliation reveals that an account balance is not correct, adjust the account balance to match the supporting detail.”

The reconciliation detail for each account is always retained, both as proof and as the starting point for reconciliations in subsequent periods. (jurisdiction: not stated, entity_scope: not stated)

“Also, always retain the reconciliation detail for each account, not only as proof, but also so that it can be used as the starting point for account reconciliations in subsequent periods.”

See Once the opening-balance journal entry is created and reconciled, QuickBooks excludes it from future reconciliations, and the accounts should balance so the usual reconciliation steps can be followed.

Partly established. Established: agree the entered opening position to the source line by line (S52). Missing: review the first period's statements against it before relying on them.

Required authority: high quality professional secondary reference, official platform documentation. Highest achieved: high quality professional secondary reference.

What to keep once the opening balances are in

The adjusted trial balance is typically printed, stored in the year-end book and archived. (jurisdiction: not stated, entity_scope: not stated)

“The adjusted trial balance is typically printed and stored in the year-end book , which is then archived.”

A journal entry is usually printed and filed in a binder of accounting transactions with the backup materials justifying it attached. (jurisdiction: not stated, entity_scope: not stated)

“A journal entry is usually printed and stored in a binder of accounting transactions, with backup materials attached that justify the entry.”

Journal entries and their attached documentation should be retained for a number of years, at least until the financial statements no longer need to be audited. (jurisdiction: not stated, entity_scope: not stated)

“Set a retention policy . Journal entries and attached documentation should be retained for a number of years, at least until there is no longer a need to have the financial statements of a business audited.”

See The year-end book's supporting information starts with the general ledger and includes the detail behind ending asset and liability balances: the accounts receivable aging, accounts payable aging, ending inventory report and fixed asset register.

See Documenting the estimates used in reconstruction provides transparency and helps auditors evaluate their reliability.

Each reconciliation adjustment entry should carry the appropriate debit and credit accounts, a clear description of the adjustment, and a reference to its supporting documentation. (jurisdiction: Not stated in the document, entity_scope: Businesses generally)

“Each entry should include the appropriate debit and credit accounts, a clear description of the adjustment, and a reference to supporting documentation.”

See The reconciliation detail for each account is always retained, both as proof and as the starting point for reconciliations in subsequent periods.

See Records must be kept showing the specific identification of each piece of qualifying section 179 property, and those records must show how the property was acquired, the person it was acquired from, and when it was placed in service.

No single accounting method is required of all taxpayers, but a taxpayer must use a system that clearly reflects income and expenses, must maintain records that enable it to file a correct return, and in addition to its permanent accounting books must keep any other records necessary to support the entries on its books and tax returns. (jurisdiction: United States — federal income tax, entity_scope: every taxpayer)

“No single accounting method is required of all taxpay- • 60 days after the partnership or S corporation has ers. You must use a system that clearly reflects your in- been notified by the IRS that the business year re- come and expenses and you must maintain records that quest has been denied. will enable you to file a correct return. In addition to your A PSC activates its back-up election by filing Form permanent accounting books, you must keep any other 8716 with its original or amended income tax return for the records necessary to support the entries on your books tax year in which the election is first effective and printing and tax returns.”

In addition to the business books, supporting documents must be kept; for most small businesses the business checkbook is the main source for entries in the books. (jurisdiction: United States (federal tax law, as administered by the IRS), entity_scope: small businesses)

“For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. In addition, you must keep supporting documents, explained later.”

Supporting documents are kept because they support the entries made in the books and on the tax return. (jurisdiction: United States (federal tax law, as administered by the IRS), entity_scope: everyone in business)

“It is important to keep these documents because they support the entries in your books and on your tax return.”

Where a computerized system is used, the business must be able to produce legible records sufficient to support and verify the entries made on its return and determine correct tax liability; the machine-sensible records must reconcile with the books and return and give enough detail to identify the underlying source documents. (jurisdiction: United States (federal tax law, as administered by the IRS), entity_scope: businesses using a computerized recordkeeping system)

“If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. To meet this qualification, the machine-sensible records must reconcile with your books and return. These records must provide enough detail to identify the underlying source documents.”

The books or records required by § 1.6001-1 are required to be kept available at all times for inspection by authorized internal revenue officers or employees, and to be retained for as long as their contents may become material in the administration of any internal revenue law. (jurisdiction: United States (federal), entity_scope: Persons required to keep books or records under § 1.6001-1)

“The books or records required by this section shall be kept at all times available for inspection by authorized internal revenue officers or employees, and shall be retained so long as the contents thereof may become material in the administration of any internal revenue law.”

Partly established. Established: why it will be needed (S40, S49, S57, S87, S90). Missing: what has to be retained - the source position, the schedule of what was entered and the entry itself.

What a complete opening position consists of

See An asset is a present right of an entity to an economic benefit.

See A liability is a present obligation of an entity to transfer an economic benefit.

See Equity, or net assets, is the residual interest in an entity's assets remaining after deducting its liabilities.

See Equity is the difference between assets and liabilities and is a residual affected by every event that changes total assets by an amount different from the change in total liabilities; it is increased or decreased by the entity's operations and other events affecting its assets and liabilities.

See Assets and liabilities are definitionally primary; equity is assets minus liabilities; investments by and distributions to owners and comprehensive income and its components result from increases and decreases in assets and liabilities.

See Amounts owed to owners in a nonowner role — wages due, products or services due, accounts payable — are liabilities, not equity.

See Borrowing cash obligates the entity to repay the amount borrowed; acquiring assets on credit obligates the entity to pay for those assets; selling products under warranty obligates the entity to pay, repair or replace defective products.

See An asset requires a right that exists at the financial statement date and that arose from past transactions, events or circumstances; a right expected only in the future is not an asset.

See A liability requires an obligation existing at the financial statement date; the settlement date may be in the future, and expected future transactions do not by themselves create obligations today.

See An entity should prepare an opening statement of financial position at the date of transition to the framework, and that opening statement of financial position is the starting point for the entity's accounting under the framework.

See Ordinarily the following assets are separately presented in the statement of financial position: cash and cash equivalents; trade and other receivables; prepaid expenses; other financial assets; inventories; investments in nonconsolidated subsidiaries and nonproportionately consolidated joint ventures; and all other investments showing separately. Some of these items may instead be set out in notes or attached schedules, in which case the statement of financial position caption containing them should be identified.

See The liabilities ordinarily presented separately are the main classes of current liabilities, liabilities for deferred income taxes, liabilities of disposal groups held for sale, obligations under capital leases, accrued benefit liability, long-term debt, asset retirement obligations, and other financial liabilities.

See For bonds, debentures and similar securities, mortgages and other long-term debt, an entity should disclose the title or description of the liability, the interest rate, the maturity date, significant terms such as covenant details, the amount outstanding separated between principal and accrued interest, the currency if not the entity's measurement currency, and the repayment terms including sinking fund, redemption and conversion provisions.

See Equity is the ownership interest in the assets of an entity after deducting its liabilities; although total equity is a residual, it includes specific categories of items (for example types of capital stock, additional paid-in capital and retained earnings), and in this framework the term retained earnings also refers to owners' capital accounts depending on the nature of the entity.

See Retained earnings comprises the accumulated balance of income less losses arising from the operation of the business after taking into account dividends and other amounts that may properly be charged or credited to it; when the accumulation is a negative figure “accumulated deficit” is a suitable designation; and in this framework the term retained earnings also refers to owners' capital accounts depending upon the nature of the entity.

See The retained earnings balance starts from prior retained earnings, is increased by net income, and is reduced by net losses, dividends and certain prior-period adjustments.

See An accumulated deficit is a negative retained earnings balance, arising when cumulative losses and dividends since inception exceed cumulative profits.

See After the period is closed the report is the post-closing trial balance, and it contains the beginning balances for the next year's accounting activity.

See A journal entry must contain at least two line items and its total debits must equal its total credits.

See Customer and vendor balances outstanding before the opening balance date are entered as individual unpaid invoices or bills, whose open balances collectively produce the Accounts Payable and Accounts Receivable opening balances.

See The opening balance summarises the old transactions, so adding those transactions later without adjusting the opening balance double-counts the money.

Partly established. Established: that it must balance without a forced adjustment (S42); how the residual accumulated component of the owners' position is composed (S19, S26). Missing: what a complete opening position for a new set of books consists of; amounts owed to and by the business coming in as the individual open items composing the totals; borrowings coming in as the principal outstanding at the start date rather than the payments remaining; that activity belonging to the period before that date is not entered again.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.

How depreciable items are carried once they are on the books

See Valuation accounts that increase or decrease the carrying amount of an asset or liability (for example an allowance for uncollectible amounts, or a bond premium) are part of the related asset or liability and are not assets or liabilities in their own right.

See Material presentation items should not be netted in the financial statements unless the framework specifically allows it.

See Property, plant and equipment should be recorded at cost.

See Depreciation should be recognized over the useful life of the asset in a rational and systematic manner appropriate to the nature of an item of property, plant and equipment with a limited life and its use by the entity, and depreciation expense is calculated on the cost less any expected residual value.

See The amount of depreciation of property, plant and equipment charged to income for the period should be disclosed, and in addition total accumulated depreciation should be disclosed.

See Gross cost is the asset's original cost; net cost or carrying amount is that original cost less accumulated depreciation and any impairment charges — so original cost and accumulated depreciation are distinct amounts of which the net figure is the difference.

See Accumulated depreciation is held in its own asset account carrying a credit balance — a contra asset account — separate from the fixed asset cost account.

See On retirement or sale of an asset both the related accumulated depreciation and the original cost are reversed, removing all record of the asset from the balance sheet.

See On the balance sheet, accumulated depreciation is presented as a reduction from the gross amount of fixed assets reported.

See Accumulated depreciation at a given date is calculated by running the asset's depreciation calculation from its acquisition date to that date.

See To determine the basis of property, the taxpayer needs to know the property's cost or other basis.

See Records must be kept showing the specific identification of each piece of qualifying section 179 property, and those records must show how the property was acquired, the person it was acquired from, and when it was placed in service.

Partly established. Established: how items the business owns are brought onto a new set of books (S23). Missing: why original cost and accumulated depreciation are carried separately rather than as a net figure.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference, official platform documentation.

What makes a source defensible, and the agreement step it supports

See After the period is closed the report is the post-closing trial balance, and it contains the beginning balances for the next year's accounting activity.

See A trial balance states a total for each asset, liability, equity, revenue, expense, gain and loss account.

See A trial balance carries only each account's ending balance, whereas the general ledger also carries the detailed transactions making up that balance or points to the subledger holding them.

See Equal debit and credit totals on a trial balance do not establish that the accounts it lists are free of error.

See The trial balance is used primarily to confirm that total debits equal total credits, evidencing that no unbalanced journal entries exist that would prevent accurate financial statements.

See The adjusted trial balance is typically printed, stored in the year-end book and archived.

See The year-end book's supporting information starts with the general ledger and includes the detail behind ending asset and liability balances: the accounts receivable aging, accounts payable aging, ending inventory report and fixed asset register.

See If trial-balance debit and credit totals are not identical, an error exists in the underlying transactions and should be corrected before proceeding.

See When a trial balance is prepared manually, unbalanced totals are likely caused by entering only part of a transaction, entering part of a transaction more than once, entering an incorrect amount, or entering a debit as a credit or the reverse.

See Financial statements are prepared from the adjusted trial balance.

See A single-entry system can support a cash-basis income statement but cannot produce a balance sheet.

See Estimates are acceptable when reconstructing incomplete records provided they are reasonable and based on objective evidence, drawn from supporting documents, historical trends and logical assumptions.

See Documenting the estimates used in reconstruction provides transparency and helps auditors evaluate their reliability.

See Where the beginning balance does not match the prior-period ending detail, the variance is investigated in the prior period; if the account has been unreconciled for some time the error may lie several periods back.

See All asset, liability and equity accounts are summarized and the aggregate amounts verified against the respective balance sheet line items.

See Each reconciliation adjustment entry should carry the appropriate debit and credit accounts, a clear description of the adjustment, and a reference to its supporting documentation.

See As the article's example of documentation review, the trade accounts receivable balance should exactly match the total of the open accounts receivable report.

See Where reconciliation shows an account balance is not correct, the balance is adjusted to match the supporting detail.

See The reconciliation detail for each account is always retained, both as proof and as the starting point for reconciliations in subsequent periods.

Partly established. Established: what constitutes an acceptable source for an opening position (S28); what to do when no agreed prior position exists (S48); the step that agrees the entered position to that source line by line (S52); what a chosen ledger start date determines about the split between opening position and ongoing activity (S12). Missing: how a reader confirms that source is complete and internally consistent; the artifacts that step produces and preserves - the source position, the schedule of what was entered and the entry itself; what a start date away from a reporting-period boundary costs the reader.

Uncleared items and a completable first bank reconciliation

See The book cash balance and the bank's ending cash balance are extremely unlikely to be identical, because of payments and deposits in transit, bank service fees, penalties and unrecorded NSF deposits.

See The bank reconciliation starts from the bank's ending cash balance, adds deposits in transit, subtracts checks that have not yet cleared the bank, and adds or deducts other items.

See A deposit in transit is cash or checks received and recorded by the entity but not yet recorded by its bank.

See A deposit still in transit at month end does not appear on the bank statement and therefore becomes a reconciling item in the bank reconciliation.

See An outstanding check is a check payment recorded by the issuing entity that has not yet cleared its bank account as a deduction from cash.

See A check not cleared by month end does not appear on the month-end bank statement and is therefore a reconciling item in that month's bank reconciliation.

See On entering the accounting software's bank reconciliation module, a listing of uncleared checks and uncleared deposits appears — so uncleared items are carried in the software as items awaiting clearing.

See After entering the bank statement's ending balance, the changes are posted and the module closed only when book and bank balances match; if they do not, review continues for additional reconciling items.

Required authority: authoritative professional or accounting standard. Highest achieved: high quality professional secondary reference.

The annual accounting period your books and return are kept on

See A tax year is an annual accounting period for keeping records and reporting income and expenses.

See Unless the taxpayer has a required tax year, the taxpayer adopts a tax year by filing its first income tax return using that tax year.

See A taxpayer that adopts the calendar year must maintain its books and records and report its income and expenses from January 1st through December 31st of each year.

See A fiscal year is 12 consecutive months ending on the last day of any month except December 31st, and a taxpayer allowed to adopt a fiscal year must consistently maintain its books and records and report its income and expenses using the time period adopted.

A taxpayer that files its first tax return using the calendar tax year and later begins business as a sole proprietor, becomes a partner in a partnership, or becomes a shareholder in an S corporation must continue to use the calendar year unless it obtains IRS approval to change it or is otherwise allowed to change it without IRS approval. (jurisdiction: United States — federal income tax, entity_scope: individuals who later become sole proprietors, partners in a partnership, or S corporation shareholders, conditions: first tax return was filed using the calendar tax year; the taxpayer later begins business as a sole proprietor, becomes a partner in a partnership, or becomes a shareholder in an S corporation)

“If you file your first tax return using the calendar tax 542 Form (and Instructions) year and you later begin business as a sole proprietor, be- 1128 Application To Adopt, Change, or Retain a Tax come a partner in a partnership, or become a shareholder Year in an S corporation, you must continue to use the calendar 1128 year unless you obtain approval from the IRS to change it, 2553 Election by a Small Business Corporation 2553 or are otherwise allowed to change it without IRS appro- 3115 Application for Change in Accounting Method 3115 val. See Change in Tax Year, later.”

Generally anyone can adopt the calendar year; however, a taxpayer must adopt the calendar year if it keeps no books or records, has no annual accounting period, its present tax year does not qualify as a fiscal year, or it is required to use a calendar year by a provision in the Internal Revenue Code or Treasury Regulations. (jurisdiction: United States — federal income tax, entity_scope: every taxpayer, conditions: keeps no books or records; has no annual accounting period; present tax year does not qualify as a fiscal year; required to use a calendar year by a provision in the Internal Revenue Code or Treasury Regulations)

“Generally, anyone can adopt the calendar year. How- Example. Assume a tax provision applies to tax years ever, you must adopt the calendar year if: beginning on or after July 1, which (for purposes of this example) happens to be a Sunday. For this purpose, a • You keep no books or records; 52-53-week tax year that begins on the last Tuesday of • You have no annual accounting period; June, which (for purposes of this example) falls on June • Your present tax year does not qualify as a fiscal year; 25, is treated as beginning on July 1. or • You are required to use a calendar year by a provision Short Tax Year in the Internal Revenue Code or Treasury Regula- A short tax year is a tax year of less than 12 months. A tions.”

Generally a taxpayer must file Form 1128 to request IRS approval to change its tax year. (jurisdiction: United States — federal income tax, entity_scope: every taxpayer, conditions: the taxpayer wants to change its tax year)

“Generally, you must file Form 1128 to request IRS appro- Under this procedure, the tax is figured by two separate val to change your tax year.”

See A short tax year is a tax year of less than 12 months.

The obligation to keep records that support the entries

See No single accounting method is required of all taxpayers, but a taxpayer must use a system that clearly reflects income and expenses, must maintain records that enable it to file a correct return, and in addition to its permanent accounting books must keep any other records necessary to support the entries on its books and tax returns.

See In addition to the business books, supporting documents must be kept; for most small businesses the business checkbook is the main source for entries in the books.

See Supporting documents are kept because they support the entries made in the books and on the tax return.

See Where a computerized system is used, the business must be able to produce legible records sufficient to support and verify the entries made on its return and determine correct tax liability; the machine-sensible records must reconcile with the books and return and give enough detail to identify the underlying source documents.

A person subject to tax under subtitle A of the Code, or required to file a return of information with respect to income, is required to keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits or other matters required to be shown in that return; the requirement is stated as a sufficiency standard measured against what the return must show, and applies except as provided in paragraph (b). (jurisdiction: United States (federal), entity_scope: Any person subject to tax under subtitle A of the Code, or required to file a return of information with respect to income, conditions: Except as provided in paragraph (b) of this section)

“Except as provided in paragraph (b) of this section, any person subject to tax under subtitle A of the Code (including a qualified State individual income tax which is treated pursuant to section 6361(a) as if it were imposed by chapter 1 of subtitle A), or any person required to file a return of information with respect to income, shall keep such permanent books of account or records, including inventories, as are sufficient to establish the amount of gross income, deductions, credits, or other matters required to be shown by such person in any return of such tax or information.”