QuickBooks Live TAX CU Solution: Beginning Balance Reconciliation

These articles consist of both how to complete compliance requirements and bookkeeping best practices. Below is a summarized list of compliance requirements to help determine the difference:

• Beginning balances agree to supporting documentation.

When you're ready to start the cleanup, your client will have upload most or all of the documents. In addition to the info your client provides, you’ll need to make sure your client answers these questions or provides the documentation indicated:

• Does your client have a tax preparer?
  • If yes, request any adjusting journal entries that haven't been posted to the books.
• Do their books include all business liabilities and assets? (Verbal confirmation is acceptable. Make sure to note this in the client notes.)
  • If no, request additional documentation for liabilities and assets that aren't in the books and need to be recorded.
• Does your client have any depreciation schedules for the cleanup period in progress?
  • If yes, request these scheduled from your client.
• Does your client use QuickBooks Online to track inventory?
  • If yes, get info on their current inventory tracking methods and any documentation needed to reconcile inventory.

Each asset and liability account and the opening balance equity account need to be reconciled to a supporting document. You can do this by “marching down the balance sheet.” This means:

1. Start the reconciliation with the first asset account on the balance sheet. Use your client's supporting documents to reconcile the key beginning account balances. Continue down the balance sheet and reconcile all asset accounts.
2. In the liability section of the balance sheet: Start with the first liability account, reconcile key beginning account balances, and continue down the balance sheet and reconcile all liability accounts.
3. Reconcile the Opening Balance Equity account to zero ($0.00).

Helpful Article: QBK Solution: Check Accounts for Zero Balance Hub

Supporting documentation is any document that supports the balance on the balance sheet or any action that was taken in the books. Supporting documentation can be:

• Federal income tax return (Balance Sheet with related schedules)
• Bank account statements
• Credit card statements
• Loan statements
• Loan agreements
• Investor statements
• Client communications
• Meeting notes, and so on

If you client can't give you an account balance:

1. Tell them it’s important to get the correct account balance.
   • If they insist they can’t get the balance, ask if they believe the balance is correct or if the balance appears to be reasonable.
     • Yes - If your client says yes, note it in the file and leave the balance as is.
     • Unsure - If your client is unsure about the balance, confirm if the account should be left as is or removed.
     • No - If your client says no, adjust to the balance provided by your client.
   • Get written client responses whenever possible.
2. Update your client’s files with the results of the discussion.
   • Document your client's response regarding the account(s) and balance(s).
     • Note whether the missing balance is expected to be a temporary or a permanent issue.
     • Note your client’s response to the reasonableness of the account balance and the action taken (adjusted, removed, or reconciled to a new provided balance).
3. Provide your client with a written statement based on the result of the conversation, such as:
   • Account [NAME] is unchanged per your instructions.
   • Account [NAME] was adjusted to reflect the balance you provided, which is $XXX [Enter the exact amount].
   • Account [NAME] was deactivated per your instructions.

Additional Guidance

All reconciliations must correspond to supporting documentation or written and verbal confirmations. For guidance on the types of supporting documentation needed for key beginning accounts, see QBL TAX CU Solution: Beginning Balance Reconciliation. 

If you notice discrepancies between the supporting documentation and the beginning account balance, review QBK Solution: Prior Accounting Errors Discovered to learn how to resolve these discrepancies.

All documentation needs to be properly updated and filed to make sure balances can be verified for an evaluation or potential client dispute. 

• Make sure any client cases are properly updated.
• Confirm supporting documentation is appropriately filed.
• Confirm pertinent or permanent client responses are appropriately filed for future reference.

Add this checklist to your own to help make sure you’ve got this!

• Have you reconciled the beginning balances to the supporting documentation?

• QuickBooks Live TAX CU Solution: Beginning Balance Reconciliation
• QuickBooks Live TAX CU Solution: Bank and Credit Card Reconciliation