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Two helpful QuickBooks tips to protect prior period data

QuickBooks, bookkeepingIt’s hard to deny how easy QuickBooks accounting software is to use. However, the very thing you love about the software can also be a source of trouble for you when it comes to certain activities. Because it is so easy to use, transactions can be changed easily, most times without thought to how these changes may affect prior periods. Because of this, there are two tips I often give clients who use QuickBooks.

Set a closing date

This should be done at the close of each year-end, after all adjustments have been made. Once this closing date has been set, any changes made to periods prior to the closing date will require a password. This is done so that you are notified and prompted prior to the change being posted into QuickBooks. To enter a closing date, select the Edit menu, choose Preferences, then Accounting, select the Accounting Preferences tab, then choose Set Date/Password and enter the closing date and password in the respective spaces.

Voiding checks without affecting a prior period

If you void a check in QuickBooks, the system will void the check in the period the check was written rather than the period the check was voided. Often, this check may have been written in a period that has already been audited or closed out. To avoid changing information presented in prior period financial statements, you can make the following entries into QuickBooks:

  1. From the check register, find the check that needs to be voided and select “void check.”
  2. Enter a journal entry dated the same date as the original check. Select the account that was debited when the original check was created and enter the check amount in the debit column. Then select the appropriate checking account the original check was written from and enter the check amount in the credit column.
  3. Enter a journal entry dated in the current period, reversing the entry in b. above.

When you prepare the next bank reconciliation, you must clear the two journal entries you made above. Otherwise, these transactions will continue to show up on the bank reconciliation report as an outstanding transaction. Also, don’t forget to add memos to each transaction to explain what was done.

If your organization has an audit, one of the first things your auditor will look at is whether the beginning equity balance agrees with the prior year ending balance. If there is a difference, most times you will not know how or what makes up this difference. Tip 1 is a simple step you can take to prevent changes to prior period balances. Setting a closing date and password prevents unauthorized or accidental changes from happening.

For more information on helpful things QuickBooks can do, check out this article on why CPAs everywhere love it.

While these QuickBooks tips may be easy to implement, we understand if you still have questions. Our professionals have many years of experience working with construction, dealerships, restaurants, nonprofits, governments, and technology industries. Feel free to contact a Henry+Horne professional adviser; we would love to answer them as well as any other questions you may have.

Sharlynn Garza, CPA

Comments

  1. Lori Kearns says:

    Why has intuit not fixed this. Voiding checks is done all the time. Why would you ever want to void the check in the prior period? At least give us an option. This is so stupid to have to do all this to void a check.