I am trying to enter YTD income and expenses in a new company file. The instructions say to use OBE, but I do not understand why it says to increase OBE for YTD expenses and decrease OBE for YTD income. When I do this and then go to clear out by OBE account, to which equity account do I post the offset? If I use RE as my offset, I am increasing RE for expenses.Thanks in advance for your input!
I don't use OBE for anything except when I need a wash account (which is basically its purpose anyway)
This is what I do:
Enter a journal entry for the trial balance as of previous year end (if the company was in business).
Then, enter a journal entry for all YTD totals. . .make this a month-end date. . .
If you have outstanding checks/deposits and/or if you have payables/receivables to track, the detail will need to be entered to get your file in working order.
Whatever month-end you choose, reconcile all bank, credit card, and loan accounts to the statements. Confirm accounts payable/accounts receivable/inventory and other balance sheet account balances.
Print your reports and move forward.
Hope this is helpful,
Thanks Laura! I read a lot of these postings and you always have great insight.
It seems that if I enter all the YTD balances in a JE, the resulting YTD Net Income or Loss would be the end result in OBE or RE. Therefore your OBE would not zero out until it is transferred to RE (in regards to your reply to a similar post above).
Does this sound right?
OBE includes all equity balances. You have to set up the common stock, add'l pd in cap, re and any other equity acct that you may have.
Actually, the other post about OBE was specifically in reference to entering opening balances in a new file.
This is what you would need to do, if you had not already done this.
If the process is followed as I described in that post, it will zero out the OBE account.
As for the other equity accounts that blrgcpa63 referred to, this should all be on the CPA's year-end trial balance. . .which is what you need to post beginning balances.
In your case, if you are posting YTD activity with a journal entry, the offset would be cash. . .if this is where the income went and how the expenses were paid.
You might have problems reconciling your books if you post totals. . .if you still have outstanding checks/deposits/bills/invoices.
You could post the 'closed' or 'reconciled' transactions (totals) using a journal entry, but then you would have to enter all unreconciled and outstanding info individually through the QuickBooks transaction windows,so that you can move forward and reconcile your accounts.
Just so you know, in QuickBooks, net income/loss automatically posts to Retained Earnings on the first day of the new fiscal year. Adjustments from R/E to other equity accounts might also then be necessary, but that depends on the type of company you have. The CPA can advise you on this when the time comes.
I hope this clarifies things for you.
Laura Dion
Certified QuickBooks ProAdvisor?
Cents-able Bookkeeping
Here's what I don't get. Lets say I start QB on April 1. I enter the bank account statement balance as of March 31, and there is one uncleared check for rent ($1,000). So I enter this check in QB with a March date (debit rent/credit bank account). This, according to the instructions, is necessary in order to do the April bank reconciliation.
Now, according to the instructions I have when setting up a file mid-year, I should JE all YTD income and expense account balances up to the Start Date, with the offset to OBE.
But, since the March rent expense is included in these income and expense entries, and I have now entered the rent check again as part of my setup routine, I end up duplicating the rent expense for March.
What have I done wrong?
All of your outstanding checks, deposits in transit, unpaid bills and open invoices should use Opening Balance Equity since those numbers are already captured in your journal entry.
Does this help?
_______________________________
Laura D
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Actually that does help Laura, and makes sense. But it is not what the Intuit training materials for QuickBooks certification say. They show examples entering outstanding checks with the applicable expense account shown, and make no reference to entering checks, invoices or bills with OBE as the offset account. Thanks!
You are welcome.
My posts and suggestions are a result of much trial and error - many times the 'help' files are not that 'helpful'. . .
If you are going to need cash basis reports (which I don't recommend), you will need to enter everything using the original expense and income accounts. Then, you will need to adjust your beginning balances to account for those numbers. . .
End result - you need a trial balance as of the date before you begin activity - one that is 'approved by' your accountant. . .and with no Opening Balance Equity amount (hopefully, your accountant won't overlook this. . .)
Laura D
