How to show "Pending Settlement" on a Balance Report

Allocating the pending settlement to the proper account can be tricky, sgfee123. I have some information regarding this.

Proper recording of accounts for Pending Settlement varies since it can be considered a temporary asset once finalized. It can also represent a contingent liability on the balance sheet.

To display this in your balance sheet, we'll need to create a sub-account, as it is not part of the default accounts in QuickBooks Desktop (QBDT). It's also best to contact your accountant when choosing the correct account for the pending settlement to ensure proper recording.

Kindly follow these steps:

1. Go to the Lists menu, then choose Chart of Accounts.
2. Select an account, then press the Account dropdown.
3. Click New.
4. Choose one account type, then click Continue.
5. You can still change the Account type from the Account type dropdown.
6. You can enter Pending Settlement or anything according to your preference within the Account Name.
7. Put a checkmark in the Subaccount of field.
8. Click the dropdown, and from there, select the account that you want to allocate it to.
9. You can also fill out the Description, Note, and Tax-Line Mapping fields.
10. Click Save & Close or Save & New.

To know more about adding a sub-account and if you're using a Mac device, you can use this article: Add, edit, or delete accounts in QuickBooks Desktop.

Afterward, you can run and customize reports in QuickBooks Desktop to show relevant data.

We're still here if you have additional questions regarding running a report in QBDT.

Hi,

The “Pending Settlement” section on a brokerage statement is relevant for tax purposes. When a monthly brokerage statement is printed during the three days that a closing trade is waiting to settle, the trade appears in this section. For tax reporting, the IRS requires accounting for pending settlements on December 31, but not on a monthly basis1. Essentially, it signifies that the funds have been earmarked for a transaction but have not yet been transferred, affecting your available balance23. If you’re reconciling QuickBooks, including this section on your Balance Reports is advisable. If the issue persists, consult with a QuickBooks expert or support for further assistance.  However, it’s essential to consult with an accountant to ensure accurate reporting. 

Thank you both for your prompt responses. Looks like I did not state the question clearly.

Please allow me to take another stab at it.

Before I do, let me say that both responses were clear, easily understandable and to the point. They will be extremely helpful to the many who read them in the future. As for me,  I’ve been trading stocks and using Quickbooks for many years. So, I was already aware of the information presented.

What I don’t understand is the Accounting. Is “Pending Settlement” an Asset, a Liability or both (as in the example). If it is not both, where does the other side of the transaction come from? I’m trying to find the other half of the “Pending Settlement” Journal Entry so the Balance Sheet…balances. Is there a number on the Brokerage Statement that can be used as the other half of the Quickbooks Journal Entry or do I just use the same “Pending Settlement” number twice. Once as a Debit and once as a Credit?

Thanks again for you help,

Steve

Hello, @sgfee123. Thanks for getting back to us with more details.

In QuickBooks Desktop (QBDT), when a settlement is pending, it's considered a temporary asset until completed. Once finalized, it becomes a cash asset. It's not a liability because the company owes money to the broker for the purchase.

To balance the journal entry, the other side of the transaction should be a cash or bank account used to make the purchase. The amount should match the pending settlement. If the settlement amount was a debit, the cash/bank account should be credited with the same amount.

Additionally, there may be a number on the brokerage statement that can be used as the other half of the journal entry. However, it's essential to confirm with the brokerage firm that the number is indeed the correct amount for the purchase.

Furthermore, we recommend consulting a qualified accountant or financial professional for expert advice on properly recording and managing these transactions. If you need one, you can find an accountant here.

Here are some articles that will surely help you manage your balance sheet better:

• Fix a Balance Sheet that's out of balance
• Advanced troubleshooting for balance sheets out of balance

We understand the importance of accurate financial reporting and are always committed to providing you with the best possible support. If you have any further questions or concerns, please don't hesitate to reach out to us. We're here to assist you every step of the way.

Thank you for your reply.

I understand understand what you have said.

A picture of my quickbooks attempt to implement your suggestions and the brokerage statement used for data are attached. They have been combined into one PDF because only one attachment is allowed in a Community Reply.

I would be extremely grateful if you could take a quick look and see if I have it correct.

Two concerns:

• The “Cash and Cash Investments” of 7,995.92 on the Balance Sheet does not match the                            “Cash and Cash Investments” of 7,957.86 on the Brokerage Statement.
• Putting Securities as negative Assets on a Balance Sheet seems contradictory.                                            To me, an Asset implies a positive thing.

For all  I know, these two “concerns” may be perfectly normal and I am worrying for nothing.

Please let me know if I have finally gotten “Pending Settlement” correct.

Notes:  Pending Trades are located at the very end of the brokerage statement.

            I sell short more Options than I trade long. Thus, the negative number for Options (185.12).

Thank you for your help

Steve

Thank you all for your replies.

The discussion we’ve had over the last few days has cleared up questions and doubts I’ve had for a long time.

I’ve decided to post long open trades and long pending trades in the Assets section of the Balance Sheet and short open trades and short pending trades in the Liabilities section. Positive numbers will be used for both Assets and Liabilities.

The “Cash and Cash Investments” account (Type: Bank) will be used as the other side of all open and pending trade transactions.

The IRS only requires pending trades to be shown on the December Balance Sheet. It is optional for the other eleven months.

Thank you for your help,

Steve

Thank you for coming back to the Community, Steve.
 

It's great to learn that the resolution shared by my colleagues helped clear up your questions and doubts.  Your input serves as a motivation for us to consistently deliver the best service to our customers.
 

Don't hesitate to visit our forum again. If you have other questions about managing reports in QuickBooks Desktop (QBDT), I'd be delighted to provide the assistance you need.