How to Create the Starting QuickBooks 2014 Setup Trial Balance

Regardless of whether you use the Express Start version or the Advanced Setup/EasyStep Interview version of the QuickBooks Setup process, you don’t actually get a complete trial balance in the QuickBooks company file simply by setting up. You get only your bank account, accounts receivable, inventory, and accounts payable balances in QuickBooks.

Yet you need to enter all the missing trial balance information in QuickBooks, too, to begin getting good reports out of QuickBooks and to use QuickBooks for supplying financial data to your tax returns.

In order to record the rest of your starting trial balance, you record a journal entry. The journal entry records the remaining trial balance amounts for all your other accounts at the conversion or start date: accounts other than your bank accounts, accounts receivable, accounts payable, and inventory.

As a simple example to show you how this works, suppose that you have the trial balance shown in the table. Please notice that no balance is recorded for a bank account, no balance is recorded for accounts receivable (because this account doesn’t even show up in the trial balance), and no balances are recorded for inventory or accounts payable (because these accounts have zero balances at the conversion date).

A Trial Balance
Account Debit Credit
Cash $5,000
Inventory 0
Accounts payable $0
S. Nelson, capital 1,000
Merchandise sales 13,000
Cost of goods sold 3,000
Rent expense 1,000
Wages 4,000
Supplies 1,000 _____
Totals $14,000 $14,000

For purposes of this example (but not the next example), the cash balance isn’t a bank account but is actually cash: a desk drawer full of low-denomination, used bills with nonsequential serial numbers.

The figure shows how the Make General Journal Entries window looks when it records the missing trial balance information from the table. After this journal entry is recorded, the trial balance is correct as of the start date.

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If you want to try this on your own with no further instruction, choose the Company→Make General Journal Entries command. When QuickBooks displays the General Journal Entries window, use the Account, Debit, and Credit columns to record your journal entry.

If the idea of making a journal entry terrifies the heck out of you, you may find yourself in a bit of a pickle. You need to become comfortable working with double-entry bookkeeping in order to set up QuickBooks at a time other than at the beginning of the year.

This means, unfortunately, that if you’re setting up QuickBooks sometime during the middle of the year, you must enter a general journal entry in order to fix the weirdness that the QuickBooks Setup creates. If you don’t know how double-entry bookkeeping works — if debits and credits aren’t your friends — you probably need to get somebody’s help.

This shouldn’t be a big project if you decide to call your CPA. If she comes over to your office, and if you have the trial balance ready for her, it should take her only a few minutes to enter the necessary general journal entry. Perhaps you can buy her a nice lunch, and that will settle the score.

You probably won’t be lucky enough to have your starting trial balance journal entry be so simple. You probably will have to deal with a bank account and with account balances in your accounts receivable, accounts payable, or inventory accounts.

Suppose that you have the trial balances shown in this table. Note that in this example (unlike the preceding example), the first account shown — the one with $5,000 — is a bank account.

A Trial Balance
Account Debit Credit
Checking $5,000
Accounts receivable 5,000
Inventory 2,000
Accounts payable $1,000
Loan payable 5,000
S. Nelson, capital 2,000
Merchandise sales 13,000
Cost of goods sold 3,000
Rent expense 1,000
Wages 4,000
Supplies 1,000 _____
Totals $21,000 $21,000

Here’s the tricky part of recording this trial balance. You don’t need — I repeat, don’t need — to record all this trial balance information through a journal entry. Because the bank account, accounts receivable, accounts payable, and inventory portions have already been recorded if you added customer, vendor, item, and bank account information during the QuickBooks Setup process, you just need to enter the rest of the trial balance.

Because you won’t be recording all of the trial balance, however, your journal entry not only won’t match your actual trial balance, but also won’t balance. To make it balance, therefore, you plug the difference into an account that QuickBooks supplies for just this sort of bookkeeping madness: the Opening Balance Equity account.

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