Reversal Journal Entry?

I switched from Reckon Accounting (Quickbooks) to Manager on 1 July 2019.
Unfortunately I have only just discovered an error in the starting balance of a Credit Card account. The starting balance should have been entered as a debit, but it was entered as a credit. So I figure I have do a reversal entry in the 2020 - 2021 accounts before I close them off.
What is the best way to correct this error?

First, are you sure you made this mistake? Assuming you set up the credit card as a bank account in Manager, it would normally have a credit balance. The only reason it would have a debit balance is if the card owed you money, in other words, if you had more refund amounts on the statement than expenditures.

Second, the best way to correct a starting balance error is to edit the bank account (the credit card) and correct the starting balance. This may mean that balance sheets created in the past were incorrect, but they will be automatically corrected by Manager once the starting balance is corrected. The only question is who you may need to disclose the correction to, if anyone. But you would need to do that regardless of how you made the correction.

Third, have you ever done a bank reconciliation on your credit card? If so, and if successful, that would prove your starting balance was not done incorrectly.

Fourth, you cannot use a journal entry to post to bank accounts, so a reverse journal entry is out of the question anyway.

Thanks for your prompt reply, Tut.

I’m sorry, I got that ass about. I should have said: “The starting balance should have been entered…” as a CREDIT, but it was entered as a DEBIT.

The credit card is set up as a bank account (Control account = Credit cards).

I checked the final (30-Jun, 2019) Trial Balance from Reckon/QuickBooks, and the CC balance is shown on the Credit side. But in Reckon/QB credit card account balances are shown as a positive number when the account is in credit, so that’s the number I entered into Manager (on 1-Jul, 2019).

To confirm that I had made a mistake in Manager, I did a Trial Balance at 1-July, 2019 and it showed the CC account opening balance on the (wrong) Debit side.

So I realised the starting balance should have been entered as a negative number.

If I just correct the starting balance error on 1-Jul-2019, by changing it from a positive number to a negative number, that changes my 2019 - 2020 year end balance sheet. And given I have already done my tax return for that year, I don’t know if I’m allowed to do that.

I’ll leave the question of reconciling my CC, because I know you would not approve of what I’m doing!

I’ve already scoured the forum for posts on the topic of using journal entries to post to bank accounts, so I had pretty much accepted that I couldn’t do it that way.

Does your tax authority require you to file a balance sheet? Generally, you only report income and deductible expenses to the tax authority. But that is why I wrote, “The only question is who you may need to disclose the correction to, if anyone.” If you were required to disclose your balance sheet, than you filed erroneously anyway and will need to submit a correction or amendment. But I doubt you had to do that. A more realistic scenario would be that you misrepresented your financial position on a loan application or something like that.

Thanks, Tut.

Looks like I don’t have to submit a balance sheet to the tax office (ATO), and I don’t think there’s anyone else that needs to know. So I’ll just correct the starting balance mistake and carry on :slightly_smiling_face: