I am a small sole proprietor who likes to do his own accounting, but I am not an accountant. I have run into a problem in Manager for which I am requesting help. I entered a Fixed Asset into an older version of Manager. This version of Manager had users enter a Starting Balance into the New Fixed Asset (Fixed Asset > Fixed Asset — Edit) function. I erroneously entered a Starting Balance equal to the cost of the Fixed Asset. Then I also entered a Payment transaction for the cost of the Fixed Asset (from a credit card account to “Fixed Assets, at cost” account). I discovered later that this doubled the depreciable balance of the Fixed Asset. However, I discovered this error almost a year later, after I had updated Manager to a current version. The current version of Manager sets Starting Balances under Settings. So I could not simply make a correction by editing my Fixed Asset and changing the Starting Balance to zero, which I believe the older version of Manager would have allowed me to do. I found that in updating to the current version of Manager, the Starting Balance for my Fixed Asset had been converted into a line item in a Journal Entry called “Starting Balances.” So here is my problem. If I replace the erroneous Starting Balance with zero in the Journal Entry, it throws the “Starting Balances” Journal Entry out of balance. I notice at the end of the Journal Entry, there is a credit entry for Owner’s Equity, which seems to balance the whole Journal Entry of Starting Balances. Not being an accountant, I do not know if decreasing the credit for Owner’s Equity by the amount of my erroneous Starting Value is proper. It would balance the Journal Entry, but will it throw other accounts associated with Owner’s Equity out of balance in my business? If so, how do I correct the fact that I entered an erroneous Starting Balance for a Fixed Asset before the update to Manager happened?
Just to clarify:
- If you go to ‘Starting Balances’ under ‘Settings’, it does not show a starting balance for that asset, correct?
- If you look at the transaction underlying the cost of the fixed asset, it shows a journal entry named “Starting Balance”, correct?
- And, if you go to the ‘Journal Entries’ tab, does it show the “Starting Balance” journal entry for that asset?
Anyway, I think if you delete that starting balance journal entry, that should not throw your balance off; however, I would strongly recommend talking to your CPA or tax preparer about this, especially if you have filed taxes at any point in the interim, as excess depreciable bases could have caused a severely incorrect deduction amount, and it would also affect equity, as you mentioned.
This is not not the solution as there are other starting balances in the journal.
This action will solve the issue.
To answer Acct1’s clarifying questions and suggestion:
If I go to “Starting Balances” under “Settings” and select “Fixed Assets,” I get a screen that says “Empty.” No Fixed Assets appear, including the one in question, presumably because I entered all my Starting Balances into the older version of Manager. They are now in the Journal Entry, not under Settings > Starting Balances > Starting Balances — Fixed Assets
If I look at the transaction underlying the cost of the Fixed Asset, there are two lines, one indicating the credit card transaction to pay for the asset, and one for a Journal Entry named Starting Balances.
If I go to the “Journal Entries” tab, it shows a “Starting Balance” journal entry for the asset.
As to the suggestion to delete that Starting Balance journal entry, I do not see how I can delete just that line of the Starting Balances Journal Entry. As AJD says, there are other Starting Balances in the journal entry. If instead of deleting that line, I enter a value of zero (0), it throws the whole Journal Entry out of balance.
So AJD’s reassurance helps, to know that I can decrease the Owner’s Equity by the amount of the erroneously entered Starting Balance to offset entering zero (0) in the journal entry for the asset’s Starting Balance.
Thank you both for your thoughts on how to solve my problem.