How do I balance transactions made before the conversion date?

Joined
Mar 13, 2014
Messages
5
Reaction score
0
I am setting up new accounting software, and I want to include some expenses that happened before my conversion date. If I debit them to an expense account, where do I record the credit to make it balance?

I cannot credit the bank account as that will screw up my balance (it will no longer match my bank statement).
 

smallbushelp

VIP Member
Joined
Jun 22, 2015
Messages
191
Reaction score
20
Country
United States
You are correct that you can't credit the bank account. What type of entity is your business? Your offsetting credit will be to an equity account and accounting best practices would dictate that you use an Opening Balance Equity account. What about other types of accounts like assets and liabilities? If you are unsure how to do this, I would suggest that you consult a qualified accountant.
 
Joined
Mar 13, 2014
Messages
5
Reaction score
0
Thanks for the reply!

I have also come to the conclusion that I need some sort of special equity account for this, and Opening Balance Equity sounds correct.

A quick summary of my situation:


1) I am a sole proprietor
2) I was loaned $38,000 (liability) from a family member for the business
3) On my first stock purchase I made a loss of $7625.64
4) So I now have $30,374.54 cash and I still owe $38,000 on my loan


It was after this point, and after few other expenses, that I decided to setup correct accounting software.

This is what
my Opening Balances look like (also attached to this reply): http://awesomescreenshot.com/05051gk329

What I have done is put that loss of $7625.64 from the previous period into the Opening Balance Equity to make everything balance.

But is there another correct account I should be using? Some sort of account to show that it was a loss incurred for that amount?
 

Attachments

Last edited:

smallbushelp

VIP Member
Joined
Jun 22, 2015
Messages
191
Reaction score
20
Country
United States
You're welcome. Is Keen Leaf the accounting software you're using? I'm not familiar with it. I get the sense now that you don't have any bookkeeping or accounting training. If that's the case, then you probably need more help than can be provided in a forum like this. You may want to consult a qualified accountant in your area.

If I was helpful, I'd appreciate a "Like". And if you're in need, I'm available for accounting services and tax return preparation. Good luck.
 
Joined
Mar 13, 2014
Messages
5
Reaction score
0
I do have accounting training, as I hold a Bachelor of Business degree that requires courses in accounting. I'm just having trouble with this real life application. Thanks for the offer of accounting services but I am a small start-up with minimal funds and cant afford that right now.
 

kirby

VIP Member
Joined
May 12, 2011
Messages
2,444
Reaction score
332
Country
United States
  • Hi bennygill,
  • Question - did your business and its transactions start in 2015 or before 2015?
  • If before 2015 then you will have an entry to adjust equity - but I sense this may not be your case - that is - that you started all this in 2015 - is that so ?
 

smallbushelp

VIP Member
Joined
Jun 22, 2015
Messages
191
Reaction score
20
Country
United States
Sorry Benny, I just didn't want to overwhelm you with accounting procedures if you weren't familiar with them. Above, you mentioned a stock purchase; sounds like maybe you're a trader. In that case, you will want to create an income account to track your gains and losses on trading. You could call it "Gain/(Loss) on Trading Activity" or something like that. When you have a gain, the account will be credited. If you have a loss, it will be debited. The opening balance equity account is used as an offset account when you are entering all of the other items, like assets, liabilities, expenses and income. After all of these items are entered, the OBE account should be zero.
 
Joined
Mar 13, 2014
Messages
5
Reaction score
0
@kirby yes the business did start before 2015. What entry should I make in this case?

@smallbushelp Income from trading activity are currently coded to my "Sales" account. Would that be the same as "Gain/(Loss) on Trading Activity"? This seems like a good fit, just want to double check to make sure I've got it right.
 

smallbushelp

VIP Member
Joined
Jun 22, 2015
Messages
191
Reaction score
20
Country
United States
As long as your "sales" account is an income or revenue account, that should be fine. You can call it whatever you want.
 

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments. After that, you can post your question and our members will help you out.

Ask a Question

Top