Account Register Is Off

by B Harkness
(NYC)

Account Register

Account Register

My account register displays a negative balance even though I reconcile it monthly. How can I correct the register balance or determine the accurate account balance?

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Aug 09, 2023
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Fixing Account Register Discrepancies
by: BB

If your account register is showing a negative balance but you're reconciling every month, there could be a few reasons for the discrepancy:

Missing Transactions: Check if there are any missing transactions that haven't been recorded in the register but have affected your bank balance.
Duplications: Ensure that no transactions have been entered more than once.

Timing Differences: Sometimes, outstanding checks or deposits in transit can cause differences.
Errors in Reconciliation: Review your previous reconciliations to ensure no errors were made.
To determine the accurate account balance:

Cross-check with your bank statements. If the bank statement balance matches your reconciled balance, it confirms that your reconciliation process is correct.

If there's still a discrepancy, review the individual transactions to find any mismatches or anomalies.

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Account Bookkeeping Question

Account Bookkeeping Question

Account Bookkeeping Question

When you make a payment for office supplies that were purchased on account in June, which accounting accounts are impacted?

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Aug 08, 2023
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Accounts Payable Process
by: BB

When you make a payment for office supplies that were purchased on account in June, the "Accounts Payable" account is credited (decreased) and the "Cash" or "Bank" account is debited (decreased).

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Bank Accounts Not Reconciled for Years

Bank Accounts Reconciliation

Bank Accounts Reconciliation

Hi, I recently started a new position with a company. I have no accounting training other than I have worked in Accounts Payables before for 6 months. The main person in charge of all the accounting transactions and bank balancing and reconciliations has not been doing it for a long time.

There is a Bank Operating Clients Trust Account which has not been reconciled since 2000. There is a Bank A Security Deposit Clients Trust Account which has not been reconciled since 2015. There is also a Bank B Security Deposit Clients Trust Account which has not been reconciled since 2015.

So, my boss has asked me to get all the reconciliations current because he was unaware, they were not being done, which he knows was his error for not making sure it was done. The person who was supposed to be doing it has been here since 2000.

So, I have come across many discrepancies and there are red flags for fraudulent characteristics and activity which I have researched. I have told my boss and so he would like to at least just start in 2017 and then for all the pre 2017 stuff I believe he plans to hire out or deal with after he has time to process all of this.

I can't use our software to reconcile because it won't let you skip years of reconciliations. My questions is would it be best to start January 2017 and then just get one big figure for him to get account correct and then go back to research later. Or should I just start in 2015 and as discrepancies come up add adjustments? Thanks for any help or advice please.

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Dec 01, 2017
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When To Start Reconciliations
by: BB

Thank you for your inquiry regarding Bank Accounts that have not been reconciled for years. It is typically best practice to do the reconciliations in chronological order. If tax returns have not been filed since 2015, I would recommend starting with January 2015.

If all tax returns are current, I would recommend starting with January 2017 as your boss said he would like to start with 2017 and then go back later to figure out any prior discrepancies.

You can do this by entering an Opening Balance Equity Adjusting Entry for the YTD discrepancy amount as of December 31 and then doing the reconciliations through current. I hope this helps!

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Bookkeeping Ledger Accounts

Bookkeeping Ledger Account

Bookkeeping Ledger Account

If a firm purchases office equipment which account should record the purcase the purchase account? Or do you make an office equipment account?

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Aug 09, 2023
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Difference Between Purchase and Equipment Accounts
by: BB

When a firm purchases office equipment, it's typically considered a long-term asset. Therefore, it should be recorded in an "Office Equipment" account rather than a general "Purchase" account.

The "Office Equipment" account will help track the value of the equipment, its depreciation over time, and any subsequent disposals or sales. Recording it in this specific account aids in providing a clear picture of the firm's asset base and its valuation over time.

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Clearing Accounts

by Karen
(Montana)

Clearing Accounts

Clearing Accounts

In the bar/restaurant industry, what is the purpose of "clearing" accounts like ATM clearing, and how are they reconciled?

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Aug 08, 2023
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Clearing Account Reconciliation
by: BB

In the bar/restaurant industry, "clearing" accounts, such as ATM clearing, are temporary holding places for transactions before they are finalized. They help in tracking and validating transactions.

For instance, ATM clearing might be used to temporarily hold funds until they are transferred to or from a bank account. These accounts are reconciled by matching the amounts in the clearing account with corresponding entries in the main account or actual bank statements to ensure accuracy and completeness.

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Current Ratio Account

Current Ratio Account Explained

Current Ratio Account Explained

What is current ratio? What is the formula for finding the current ratio?

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Aug 09, 2023
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Current Ratio Explained
by: BB

The current ratio is a liquidity ratio that measures a company's ability to cover its short-term obligations or liabilities with its short-term assets. It provides insights into the financial health of a company, particularly its short-term liquidity position.

The formula for finding the current ratio is:
Current Ratio = Current Assets / Current Liabilities


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Free Reserve Account

Reserve Club Account

Reserve Club Account

What is meant by free reserve in a club account?

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Aug 09, 2023
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Club Account Reserves
by: BB

In the context of a club or a similar organization, "free reserves" refer to the accumulated funds that are not earmarked for a specific purpose and can be freely utilized by the club for its general purposes or any other unforeseen requirements. Essentially, these reserves can be freely accessed without any restrictions as opposed to specific reserves which might be set aside for particular uses.

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Handling Pass-Through Account Transactions

by Jennifer
(Sunrise, FL, USA)

Pass-Through Account

Pass-Through Account

I'm assisting a company that acts as an intermediary between a title company and county courthouses. They receive funds from the title company, from which they pay the county, retaining only an $8 service fee per transaction. How can I correctly itemize the invoice to ensure the county fee isn't recorded as revenue, given that it's immediately remitted to the county?

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Aug 09, 2023
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Recording Intermediary Transactions
by: BB

Jennifer, the situation you're describing sounds like a "pass-through" or "trust" transaction where the company is merely facilitating the payment without truly earning it as revenue. Here's how you might handle it:

Trust or Pass-through Account: Set up a liability account, perhaps named "County Fees Payable" or "Trust Liability." When the title company pays, the entire amount goes into this account.

Invoice Breakdown: When invoicing the title company, itemize as follows:

County Fee: This should be linked to the "County Fees Payable" liability account.

Service Fee: This is recorded as revenue because it's the company's earnings.

Payment to County: When paying the county, reduce (debit) the "County Fees Payable" account and credit the bank account from which the payment is made.

This ensures the county fee never hits the revenue section of your income statement. Only the service fee will be treated as revenue.

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IT Accounts on sage

IT Company Account

IT Company Account

When accounting for an IT company using Sage, should I categorize server and website costs as direct expenses, or should I consider them as overheads?

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Aug 09, 2023
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IT Company Bookkeeping Basics
by: BB

For an IT company, server and website costs are integral to its operations. Typically, these costs should be categorized as direct expenses since they directly relate to the primary activities of the business. However, the specific classification might depend on how the company perceives and utilizes these costs in its operational framework.

If these costs directly contribute to generating revenue, they should be direct expenses. If they are more general costs not tied to a specific revenue-generating project, they might be better classified as overheads. It's essential to ensure consistency in your approach. If you decide to categorize them as direct expenses, you might need to adjust your chart of accounts in Sage accordingly.

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Juggling Two Bank Accounts

Inter-Account Transfer

Inter-Account Transfer

We have two businesses. One bank account I'll call Account A and the other Account B.

Account A has debit transactions that should have been made into Account B.

Is there a way to properly get that info into the Account B where it should have originated?

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Aug 09, 2023
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Inter-Account Transfer
by: BB

Yes, you can rectify this situation through an inter-company or inter-account transfer. Essentially, you'll record a transfer from Account A to Account B for the amount of the incorrect debit transaction. Here's how:

In your accounting software or records, note a withdrawal (or decrease) in Account A for the amount of the incorrect debit.

Simultaneously, record a deposit (or increase) in Account B for the same amount.

In the memo or description field, mention "Correction for incorrect debit" or something similar for clarity.

By doing this, you effectively "move" the transaction from Account A to Account B, ensuring both accounts reflect the proper balances.

Sep 30, 2011
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JUGGLING
by: Anonymous

Your Question:
Account A has a transaction (debit transaction) in it that should have been made in Account B.
My answer:
Use the General Journal to reverse the incorrect entries and attach a note as a reference
IE: If Account A had a debit of $400.00 that should have gone to Account B then make the following entry:
Account A CREDIT $400
Account B DEBIT $400

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Reviewing a Clients Account

by Keisha
(Bronx, NY)

Client Account Review

Client Account Review

What do I look for when reviewing a clients account?

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Aug 09, 2023
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Account Review Checklist
by: BB

When reviewing a client's account, you should focus on several key areas to ensure accuracy, compliance, and effective financial management. Here's a list of what to look for:

Account Reconciliations: Ensure that bank and credit card statements reconcile with ledger balances.

Outstanding Transactions: Identify any long-outstanding payables or receivables that may require follow-up or write-off.

Financial Statement Analysis: Review the profit & loss statement and balance sheet for anomalies or significant variances from previous periods or budgets.

Expense Analysis: Check for any unusual or unexpected expenses.

Revenue Recognition: Ensure revenues are recognized in the correct period and according to applicable accounting standards.

Tax Liabilities: Make sure all tax liabilities are accurately recorded and provisioned for.

Compliance: Ensure that the accounts adhere to relevant accounting standards and legal requirements.

Asset Management: Check for proper recording, valuation, and depreciation of assets.

Debt and Interest: Review loan accounts to ensure interest is correctly calculated and payments are up to date.

Internal Controls: Assess the effectiveness of internal controls and identify any areas of potential fraud or error.

Budget vs. Actual: Compare the actual financial performance against the budgeted or forecasted figures.

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Shareholders Account

by Tracy
(Vancouver, BC)

Shareholders Account

Shareholders Account

The owner has been purchasing supplies using cash and his personal Visa. I have created a Due to Shareholders account in QuickBooks. I have entered these entries by crediting Shareholders account and debiting the account of what was purchased, for example, office supplies.

My question is he periodically takes cash out of the business account, $100.00 here and $40.00 there. I know I have to now debit Shareholders account and credit another account.

My problem is I don't know what account to credit. I know it should be what he has purchased throughout the month, but I can't tell what he is paying himself for because he just takes out money here and there.

Should I create another account in QuickBooks to debit when he takes out cash?

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Aug 09, 2023
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Recording Owner's Draw in QuickBooks
by: BB

When the owner withdraws cash from the business, it's typically recorded as an owner's draw, which reduces the owner's equity in the business. Given that you already have a "Due to Shareholders" account (or an equivalent shareholder loan account), you can use this to track funds the business owes to the owner and vice versa.

When he takes cash out: Debit the "Due to Shareholders" account to decrease the liability (because the business is effectively repaying the owner). Credit the "Cash" or "Bank" account to reflect the reduction in cash.

If you're unsure what the cash withdrawal is for (whether it's for a specific reimbursement or just an owner's draw), it's common practice to record it as an "Owner's Draw" or "Shareholder Draw" account. This account is an equity account, and it helps you keep track of how much the owner has drawn out of the business for personal use.

So, in such a case: Debit the "Due to Shareholders" or "Owner's Draw" account. Credit the "Cash" or "Bank" account.

To ensure clarity and proper financial management, it's recommended to discuss the matter with the owner and maybe establish a more structured reimbursement process for personal purchases made on behalf of the business.

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Stock In Ledger Account

by Lucky Sharma
(Ambala Cantt)

Stock In Ledger Account

Stock In Ledger Account

If there's outstanding stock recorded in a ledger account and the business needs to register or update its details with the sales tax department, what steps should be taken?

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Aug 09, 2023
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Managing Stock in Ledger Accounts
by: BB

When there's outstanding stock in a ledger account and a business needs to interact with the sales tax department, follow these general steps (though specifics may vary based on local regulations):

Inventory Assessment: Ensure a complete and accurate stock take is conducted to determine the exact amount and value of the outstanding stock.
Update Records: Make certain that all accounting and business records accurately reflect the current status of stock and other assets.

Sales Tax Registration/Update: If the business is not already registered, proceed with the sales tax registration process. If the business is already registered, update the necessary details, including stock information, with the sales tax department.

Documentation: Ensure you have all relevant invoices, purchase orders, and receipts related to the stock. This is crucial for verification and audit purposes.

Seek Guidance: If uncertain about any steps, consult with an accountant or legal professional familiar with sales tax regulations in your jurisdiction to ensure compliance.

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Withdrawal Account

by Annie
(Hong Kong)

Withdrawal Account

Withdrawal Account

In a Partnership company, what does Withdrawal account come under: Assets, current assets, liabilities, current liabilities or any other? Thanking you.

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Aug 09, 2023
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Partnership Drawing Account
by: BB

In a partnership company, a Withdrawal account (often referred to as "Drawings" or "Partner's Draw") records the amount of money or other assets taken out of the business by the partners for personal use. This account reduces the partner's equity in the partnership, so it is neither an asset nor a liability. Instead, it is a contra-equity account. Therefore, the Withdrawal account falls under the equity section of the balance sheet, specifically under the partners' equity section.

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