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Experienced Member

Corrections to errors in a prior period

Hello.  I just took over the bookkeeping for a small medical practice.  The accounting/QuickBooks knowledge of my predecessors was pretty limited.  I am trying to clean things up and need to correct some old mistakes.  

 

The company pays most bills with a credit card.  In a prior period, it looks like when the card transactions were downloaded, some payments were debited to accounts payable, rather than to the credit card account, resulting in a debit balance in accounts payable.  Then journal entries were made to adjust the credit card balance.    

 

Is my best recourse here to just make this adjustment to Retained Earnings, and thereby avoid changing anything in the prior period?  I'm not sure if QuickBooks like R/E adjustments.  I am looking for recommendations.  Thank you!

Solved
Best answer 04-12-2019

Accepted Solutions
Established Community Backer ***

Re: Corrections to errors in a prior period

In QB you almost never post to RE - and when you try you'll get a warning not to.

If your intention is to leave the prior closed years unchanged then you should make all the correction entries using a current year date (perhaps Jan.01).

If you need to clear unapplied AP payments (debits) you will have to create offsetting Bills (credits) to the same vendors and then apply the old payments to the new bills

This must also create current year expenses - you can create a special account or use an existing one.  Prior year earnings were overstated - so this year they will be understated to balance.

1 Comment
Established Community Backer ***

Re: Corrections to errors in a prior period

In QB you almost never post to RE - and when you try you'll get a warning not to.

If your intention is to leave the prior closed years unchanged then you should make all the correction entries using a current year date (perhaps Jan.01).

If you need to clear unapplied AP payments (debits) you will have to create offsetting Bills (credits) to the same vendors and then apply the old payments to the new bills

This must also create current year expenses - you can create a special account or use an existing one.  Prior year earnings were overstated - so this year they will be understated to balance.