How to zero out accounts when starting a new year
sanjeevj
Member Posts: 24
I'm a newbie and have used wave in 2018 (Great app, BTW)
How do I start a new year from zero?
For example, when I run reports > General Ledger for 2019, expense categories (say meals or Internet expense) still show "Starting Balance" carried over from 2018 and then the new transactions of 2019. Same happens for all other categories like income , payroll salary etc.
Assuming I have wrapped up everything related to 2018, How do I start from scratch?
The Only item I want to carry forward is the Cash in Business Banking account after wrapping up 2018 (Paying all bills, taxes etc) and start all other categories from Zero.
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Comments
Sanjeevnuts,
Accounting programs typically do not close out the accounts at year end and is not really necessary. That is because each time to run a report for a specific time, it will accumulate the data for requested time period. However, if you feel the need to start with zero balances you will need to prepare a closing entry. A closing entry is where you debit and credit the income and expense accounts with the offset being retained earnings (owners equity). You can also close out distributions to to retained earnings as well. By doing this you will start the next period with zero balances. However, any reports you run with cross over fiscal years will be incorrect because of the closing entry. Hope that makes sense. In practice, rarely have I seen closing entries. An example of why - If you close owners drawings each year you won't be able to easily tell have much you have withdrawn since inception. I would suggest leaving as is and not creating a closing entry.
Mike G, CPA
www.mgfinancial.net
Better Service - Better Pricing
Thank you for the advise.
I understand about owner's draw and such where cash is involved. I was more interested in zeroing out the expenses etc because once I have claimed the expenses in my taxes, I want the new year to start afresh. If I don't zero them out, they keep adding in the report even for the new term as they get carried over. It does show the "Balance Change" amount but to my simple mind I'd rather start from Zero.
For things like Bank balances, invoices etc, they would of course be carried over to the new year.
It may not be a good accounting practice but to clarify, I'm using wave only as a record keeping ledger to provide the amounts to my accountant at the end of year, and not as accounting software. It is very elegant and beats an Excel sheet any time !
sanjeevnuts,
No problem, but again you can just run and income statement for 1/1/2018 through 12/31/18 and a balance sheet for the same. Only the balance sheet will carry forward the balance. The income statement is not cumulative.
Mike G, CPA
Got that. Thanks!
I set year end to Jan 31 but it's still carrying forward transactions as "starting balance" on Feb 1. Why?