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Level 1

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!

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Best answer April 12, 2019

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Anonymous
Not applicable

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.

View solution in original post

2 Comments
Highlighted
Anonymous
Not applicable

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.

View solution in original post

Highlighted
Level 1

Corrections to errors in a prior period

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

NM has CRS (combined reporting of sales tax (gross receipts) and NM withholding).  In quickbooks the correct way to process in to go to "Vendors - sales tax - Pay sales tax" to create the sales tax check (that we already paid online to the State of NM).  To relieve the NM withholding amount is in Payroll Liabilities window. Then when reconciling click on both amounts and that should total the amount that shows in your bank statement. The amount that was paid to NM.  My problem is that previous bookkeeper did the sales tax and withholding checks right but had an assistant that had minimum accounting knowledge and this assistant created 1 check in the write check window. Now I have the correct checks that were supposed to be clicked when reconciled sitting there since last year.  Outside to state/government all was filed and reported correctly but internally these old stuff is just sitting there. Nobody did anything about it.  I want to clean up. 

We also have checks that were created twice (duplicate). Write checks.  

In quickbooks desktop

1.- Do I do a j.e. for check.  Use the same accounts. cash and expense account.

2.- Do I use the same accounts when the original check had a COGS-FOOD account? or COGS-BEER?  

3.- Do I use the same accounts when the original check had a "distribution" (The owner wrote 2 checks - 1 a duplicate of the other but when he realized he wrote it twice. He only deposited once into his personal account and left the other unused.   I know accounting but I get a bit confused with Quickbooks.

 

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