Stuck with a negative in your QuickBooks Balance Sheet and stumped?

The Cash Basis Balance Sheet (CBBS) should not show Accounts Receivable (A/R) or Accounts Payable (A/P) balances because these accounts track open (unpaid) invoices and unpaid bills. Many companies use A/R and A/P accounts and report on the cash basis. QuickBooks was not designed to be used in this way and reporting anomalies result. The only way to assure that cash basis reports have no anomalies is to use only transactions that do not affect A/R or A/P.

Be aware that every QuickBooks transaction has one source account and one or more target accounts. You can view the posted accounts in any transaction by running the Transaction Journal report. The first line of the Transaction Journal Report shows the source account.

All subsequent lines in the transaction show the target accounts, they include:

              i.        An invoice with an item recording retainage to another current asset account.

             ii.        A payment from a customer not linked to an invoice.

            iii.        A payment linked to an invoice dated in the future if the report date is before the invoice date.

            iv.        A credit memo to a customer not linked to an invoice or a refund check.

             v.        A deposit recorded to the A/R account but not linked to a payment or an invoice.

            vi.        A journal entry crediting A/R as the source account and a target is a balance sheet account.

           vii.        A journal entry crediting A/R as a target account (e.g., transferring a credit to another job).

To solve the problem and remove the negative balance:

1.    Identify root cause of transaction and use the following:

a.    Open Invoices Report

b.    Unpaid Bills Report

c.    Customer Transaction Details Report

d.    Vendor Transaction Details Report

2.    Manually fix the root cause transaction:

This may include one or more of the following:

a.    Link transactions in the Receive Payment window (A/R).

b.    Link transactions in the Pay Bills window (A/P).

c.    Temporarily delete the transactions you identify as problems:

                              i.        Memorize the open transactions and then delete them.

                            ii.        Print your cash basis reports.

                           iii.        Reenter the transactions from the memorized transactions list.

d.    Edit your journal entries (JEs):

                              i.        Separate the A/P and A/R portions of journal entries that combine several transactions involving B/S accounts, into separate JEs.

                            ii.        Move the A/R portion to the first line (source) of the JE. Those JEs that are offset to an income or expense account will drop off the report. The JEs that are offset to a balance sheet account will remain on the report.

3.    Make preventative changes to your procedures.

We at Stenson Bookkeeping Simplified are ready to help at the end of telephone (214-543-1855), a text or an email (jlmottram@stensonfs.com).