Starting Balance

Mike_85

Apologies in advance if this is not the right place to post this question.

I've added a starting balance in my bank account. However, what do I select in the 'Choose a category' dropdown menu?

Mikeg

Mike_85,
How was the amount added obtained? Through sales or a contribution by owner? If you contributed then it would go to owners investment. If it was income that generated the balance then Sales.
Mike G, CPA
www.mgfinancial.net

Mike_85

Thanks, Mike.

It was the balance shown on my bank statement on the day I started using Wave and was money from sales.

However, if I marked it as Sales, wouldn't that give a false figure for sales when doing my accounts?

For example, if the opening balance was £20,000 and I started Wave on 1st April, wouldn't my sales appear as £20,000 plus whatever sales I made in April and May?

Mikeg

Mike_85,
I would capture all transactions that ran through the account for your current year reporting period. For example, let's say I start with a new client as of today. They report on a calendar year, then I would go back to 1/1/19 and start from there. Any starting balances would be coded to owners equity since they would have reported those transactions (balances in accounts) in the prior period.
Hope that makes sense
Mike G, CPA
www.mgfinancial.net

Mike_85

Sorry Mike, you've lost me.

I still don't know what to put in the dropdown menu for 'Choose a category' alongside my starting balance.

The money is what was in my bank account on the day I changed accounting software to Wave. It was generated from sales.

Mikeg

Mike_85,
Sorry for the confusion. I was trying to caution on just classifying as one item when it could comprise of multiple accounts. If all of the cash represents sales year to date and there are no expenses then it would be sales. It gets a bit more complicated if the balance represents activity that occurred prior to the start of your fiscal year or there were expenses paid during the current fiscal year.
Mike G, CPA
www.mgfinancial.net

Mike_85

Thanks, Mike.

To be honest, the balance does cover all activity that occurred prior to the start of the fiscal year. It's the amount of money that was in my bank account on the day I changed over to Wave.

Mikeg

Mike_85,
That was my thought. The opening balance you are speaking of covers activity that has occurred during your current fiscal year. If you post the opening balance as sales then your financial accounts would not be accurate. Hence why I suggested to go back to the beginning of your fiscal year and enter opening balances as of that date. Here is an example. Let's say I'm starting Wave now and have no balances in Wave. My fiscal year started 1/1/19 and have made sales and paid expenses from the start till now. As of today I have 5000 in the bank, 1000 in credit card debt. These balances reflect activity that has occurred from the beginning of the year till now. If I look back to 1/1/19 my balances were 6000 in the bank and 500 credit card balance. I would post my opening entry at the stated 6000 and 500 in the respective accounts and the difference (5500) would go towards owners equity dated 12/31/18. I would then import all transactions from 1/1/19 till now. I would now have an accurate income statement for my current fiscal year and if everything came through correctly for banking and credit card activity, my balance sheet would be accurate as well.
Mike G, CPA

Mike_85

Cheers, Mike - I'll give that a go.

Thanks for taking the time to help.

Mikeg

Anytime. Be happy to help if you have any other questions.
Mike G, CPA