Accumulated Depr Starting Balance
Cal
Member Posts: 4
I finally found instructions for recording a starting balance for my accumulated depreciation ($2,500). It works fine as far as being reflected on the BS as a contra Asset account and my equity balance is correct but because the offsetting journal entry is "depreciation expense" it includes the $2,500 in my current P&L which incorrect. I wasn't able to assign it to the Equity account which I thought would be the proper way to handle it. There are so few instructions for the Starting Balance phase of using this software.
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Comments
@Cal,
If you are entering starting balances as of the beginning of the year, then the offset would be an equity account. This is done via journal entry. Here is an example. Let's say I have the following balances at the opening of my current year.
Cash 1000
Equipment 10000
Accumulated Depreciation 2000
Credit Card 500
Equipment Loan 5000
My journal entry would be (DR=Debit CR=Credit)
DR Cash 1000
DR Equipment 10000
CR Accumulated Depreciation 2000
CR Credit card 500
CR Equipment Loan 5000
CR Retained Earnings/Owner Equity 3500
Since accumulated depreciation represents Depreciation expense taken in the prior year, that amount would be reflected in Retained Earnings.
Hope that makes sense.
Thanks!.... it worked great...everything actually balanced and the Equity Section finally made some sense. It would have saved me so much time if WAVE would have provided some instructions for my "typical" situation. What they provided was confusing and not appropriate for this situation. This is not a new company. I use a calendar year, have prior year transactions, and want to use a Starting Balance date of March 1. Many professional accountants aren't in love with QB either.
I am a business coach (not an accountant) and I am looking for a bookkeeping program which is easier for my clients. Quickbooks is not working out well for many small businesses and they need an alternative.
In my opinion, WAVE needs to provide much better instructions (with more and better illustrations) to really make this program practical for small businesses. Many can't afford an accountant in these early stages of their business but need a good record keeping system (cash or accrual). As you know keeping a "balanced" set of books is not easy, but if it will just handle the P&L side of things that would be great. I was personally interested if it could balance a set of balanced books and it did.(if you enter the transactions correctly.) I am still playing with the software to see if I can recommend it. QB really needs some competition.
Curious: "Retained Earnings" has not typically been reflected in sole proprietor Balance Sheets. Why the change? Seems to make things more complex than necessary. My guess is they want the program to meet the needs of various business structures????
@Cal,
I think depending on the selection of entity type, Wave sets up owners equity or retained earnings. Regardless, there is always an equity account to reflect prior earnings.
Personally I like Wave over other programs due to it's ease of use. I do not like QB. As with everything whether you are paying for it or not, nothing is perfect and there is always room for improvement.
I created one company as a SP and another as a Corp and the Equity section of the BS is the same. My understanding of Retained Earnings is it represents all net income from day one less dividends...and a SP doesn't have dividends...but I guess you can call withdrawals dividends. QB does something a little odd also. Not sure why they strayed away from traditional terminology/presentations??? Maybe its a Canada thing?
You are so right...nothing is perfect. I will check out your website to see if any my clients could use your services.
Thanks again.