Setting Starting Balances for all Accounts before Start Date

Hi, when setting a start date in Manager, the description reads:

If start date is specified, all accounts will have an option to set starting balances as of start date.

However, I have only been able to set starting balances for inventory items and cash accounts. I have not been able to set start date for other accounts such as sales, various expenses and so forth. How would I go about doing this?

You can only set starting balances for balance sheet accounts.

If you are transferring from another accounting system, then you enter a Starting Balance within the Retained Earnings account which represents the net position between the sales and expenses accounts.

@lubos - the text under Settings - Start Date could be clearer by being amended to:
If start date is specified, all Balance Sheet accounts will have an option to set starting balances as of start date

Thanks, got it. I have run into a separate problem however.

My fiscal year runs from May 1 to April 31. Around September 30 2016, my SSDs suddenly fried and I lost the better part of the 2016 fiscal years records (human error, my backups weren’t going to the HDD but rather saved locally on the SSD :head_bandage:). This is when I began using Manager to prevent similar issues from happening again. Luckily I have a very precise gross profit margin and other expenses recorded in an excel spreadsheet, so I can generate my retained earnings for 2016 prior to the SSD crash.

When I started using Manager on October 2 2016, I set that as the starting date. I didn’t choose May 1 2016 since I can’t recreate all those transactions anymore. I then added my inventory starting balances as of October 2nd as well as all bank account balances. However, I am not sure about retained earnings. Should my starting balance of retained earnings be that of all previous years the company has been operational, plus whatever retained earnings I have for the first half of 2016 fiscal year? Or, should starting balance for retained earnings only be for what was made in the first part of 2016?

I am thinking my P&L/Income Statement for 2016-17 will not be accurate since some of the income for the fiscal year is recorded in retained earnings. What would be the correct approach to produce an accurate P&L and Balance Sheet statement for fiscal year 16-17, given that I can’t recreate every sales invoice, purchase invoice and payments for the first part of 2016?

@Retained earnings is a term usually employed by accountants only for shareholder corporations. It is a corporation’s cumulative earnings since formations minus all dividends declared. So it represents the net of all profits (income less expenses) that have not been distributed to stockholders. Thus, for a particular fiscal year, the retained earnings formula is:

Beginning retained earnings + Net income during the period - Dividends paid = Ending retained earnings

Manager uses Retained earnings regardless of the type of company organization. For a sole trader/proprietor, it is a form of what is usually termed owner’s equity. For partnerships with capital accounts, it is the unallocated profits. Of course, financially, these options are equivalent.

In your situation, you should start with the retained earnings balance from your last complete fiscal year, then add and subtract relevant amounts for 2016-2017 until October 2, 2016.

If your quoted statement is true, why can’t you recreate the 2016-2017 fiscal year records? If, in fact, you cannot, you still need to transfer Retained earnings amounts to appropriate income and expense accounts by journal entry. Otherwise, your P&L for 2016-2017 will be wrong, leading to difficulties in year-end reporting and tax filing.

Thank you. So to clarify to make sure I understand what to enter into Manager:

  • Retained earnings starting balance = Retained earnings balance from my last complete fiscal year, then add and subtract relevant amounts for 2016-2017 until October 2, 2016.
  • Journal Entries to income and expense accounts: Net of these should be exactly equivalent to what my retained earnings were for 2016-2017 until October 2, 2017 (or for the entire Retained Earnings starting balance?)

I am only able to recreate sales but not purchase invoices, inventory movements nor payments or cash balances. I was not using a real accounting system before Manager, I was instead using an inventory tracker that only kept track of gross profit (it could handle item costs, shipping cost was added as a positive line item for the sale and a negative line item for the actual shipping cost). Not ideal, but given our humble beginnings was the best we could do at that time.

Your procedure looks correct. It sounds like you have the necessary information to journal over the income side of things. That will, of course, keep the tax man happy. But where will you get the expense information? Without this, you will overstate your net income. I’m referring here to expenses other than cost of goods, like rent, utilities, insurance, office supplies, and other operating costs.

I have these costs recorded in an excel sheet which I didn’t loose to the hardware failure, luckily! So I could journal these into the relevant expense accounts as well, and will of course deduct these when calculating my retained earnings for the beginning of 2016. So I think I should be ok.

@Tut I am facing a problem when making the journal entry. The journal entry is for sales and expenses which is credit and debit. Since I made income, sales are greater than expenses and the entry doesn’t balance. The difference, which is Net Income, cannot be applied to a debit account since I already set starting balances for the cash accounts.

How can I account for the sales and expenses before the start date but within the fiscal year with a journal entry as suggested, while still being balanced? What should the starting balance of retained earnings equal to, the money made in the first part of 2016 or retained earnings from the last fiscal year? Shall the income from the first half of the fiscal year be accounted for solely as a journal entry then? Sorry for all these questions, I am not sure I interpreted this correctly:

You basically answered this question when you asked earlier, “Should my starting balance of retained earnings be that of all previous years the company has been operational, plus whatever retained earnings I have for the first half of 2016 fiscal year?” The answer is yes, but I assumed that meant you knew these figures. But it sounds now like you were not keeping records that could tell you this.

So I’m going to assume you are a sole proprietor, since you haven’t mentioned shareholders, partners, or capital accounts of any kind. In that case, Retained earnings opening balance should be your owner’s equity in the company as of October 2, 2016. That will be the net of all capital you have invested in the company, plus all profits for however long you have been in business (which might be negative), less any draws you have taken out of the company. That should equal the difference between all assets (such as cash accounts, accounts receivable, and inventory on hand) and all liabilities (such as accounts payable and loan balances).

You are going to have to back into the Retained earnings opening balance. You say you know income and expenses for the current year. So you must transfer by journal enough current year income and current year expenses to their respective accounts to make your current P&L correct. Then, you will need to figure what opening balance would have been necessary to leave your October 2 equity position after the journal transfers you just made. Enter that as the opening balance on your start date.

The lesson here, which you have no doubt already absorbed, is that backups cannot be on the same drive as your current data file. :cry: