The balance sheet. What a wonderful thing. It’s a report that summarizes the financial position of a business. It shows the value of a company’s assets, liabilities and equity as of a particular day and time. The reason why it’s called a balance sheet is because the value of the assets are always exactly equal to the combined value of the liabilities and the equity. QuickBooks offers four different types of balance sheet reports. You can find these under Company & Financial on the Report Center or Reports menu.
The one thing that I find, that has become somewhat of a ‘pet peeve’ with me, is the balance sheet. It’s the compilation of everything financial about a business. What a balance sheet is made up of … starts out as information that someone, business owner or whomever may be responsible for keeping the books, has entered into the companies ‘ledger’ of accounts. It’s really really important to be accurate. The interesting problem that I see is that when bad data is entered … and maybe left unchecked… then a balance sheet is created with bad data. That’s a bad thing. Especially when that balance sheet is taken to an accountant or a CPA or a tax preparer and they do someone’s taxes based off of something that may be rather inaccurate. It’s what people who work with a lot of data call… ‘garbage in … garbage out’. In other words, the information is only as accurate as the data that’s put in. If you put in bad stuff, you’re going to get bad stuff coming out.
Thus the need to be accurate. When a balance sheet is ‘out of balance’ the three common causes I find are… the data file is damaged … someone has entered or linked transactions that are not compatible.. or somewhere along the line, inaccurate data has been entered. Strive to be correct and accurate when working with QuickBooks and it will pay dividends for you in the long run.
Posted by Kevin Beatty, CPA Rochester Tax Service