How To Deal With Inaccurate Books
Intuit Academy - Free Training in QuickBooks
Bookkeeping requires you to balance more than just the bank account, as this reader points out.
I recently started working for a company that had a "professional" working on their books so I thought it wouldn't be too hard for me to take over now that the owner decided to hire an in-house bookkeeper (me).
However when I started working and looked at the chart of accounts, there were a lot of things that just looked way off. Huge Negative balances in multiple accounts including some payables, petty cash, some other odd accounts, and a balance for receivables for cash sales, which is definitely weird. Plus I don't think the company credit card account was ever reconciled.
Now, I have no idea where to begin to fix this since there has been at least 3 years worth of recorded information. Somehow the bank recs have still magically reconciled? What should I do?
Assuming your software is QuickBooks, Intuit Academy is currently running their summer school from June 1 to July 14, 2011. Sessions are free but you have to be registered on their site. (They archive the webinars so you can still watch them after the live event.)
Google "Intuit Learning Academy" and it should list learn.intuit.com. Click on the their "Summer Training Webinar Series". You'll find a course called "Common QuickBooks Mistakes Clients Make and How to Fix Them". It is a 2 part course. It should give you a starting point.
Two big possibilities that can cause a lot of trouble are:
1. Did the previous bookkeeper enter "receive payments" and also "make deposit"? If so, the bank reconciliation could be correct but income is probably recorded twice and accounts receivable would be overstated.
2. Did the previous bookkeeper "enter bills" into accounts payable but pay the invoice using "write cheques"? Again, the bank reconciliation could be correct but expenses are probably recorded twice and accounts payable would be overstated.
The cash sales receivable sounds like, as in one above, a daily cash summary is entered through "receive payments" in conjunction with "make deposit". By entering the transaction twice, instead of selecting the deposit from the undeposited list, the receivable doesn't clear.
It is probably easier for you to reconcile the credit card account because it has never been reconciled. Roll up your sleeves and begin reconciling it one month at a time. Who knows ... you may figure out what mistake was being made again and again and again.
The only caveat is ... I hope tax returns in prior years have not been filed. If that is the case, all correcting entries will need to be done in the current year. Also, as a general rule, you don't want to change previous bank reconciliations.
If previous year tax returns have been filed, you will need to keep a detailed list of all the problems for the accountant. There is the possibility that the accountant made adjusting entries to "fix" the accounts in the general ledger but not the sub-ledger so the tax returns could be filed. If this is the case, you should see if you can get hold of the adjusting entries.
The Intuit course covers many other common errors. It is worth taking even if you are in Canada. While there are some differences between Canada and the US, for the most part you should be able to figure it out. You leave with this wonderful handout to use for future reference.P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.
I apologize to my readers ... but while converting this submission to upgraded software, I lost all comments associated with this posting. The post was originally submitted in the summer of 2011. Lake