I am creating starting balances for my business on Manager. For account receivable starting balance, you need to use an invoice and select a later date. Afterwards you adjust those inventory starting balances.
The problem is those invoices I created using previous accounting periods date generate a profit that add up to my retained earnings thereby increasing it and throwing my account out of balance. How do I correct this please?
Did you search and read all 5 guides about starting balances in the Guides section? And did you select the correct accounting year’s starting date on the summary page?
Yes. I read the guide on starting balance and it says nothing about the increment in retained earning. It only talk about correcting inventory quantity. The starting date on the summary pay only let’s you see income and expenditure transaction for the current year but doesn’t erase previous years profit that is added to retained earning.
And the other 4 guides?
That is incorrect. Starting balance invoices (both sales and purchase) should be dated on the dates they were actually issued. When all are entered, your Accounts receivalbe and Accounts payable balances should match the closing balances in your prior accounting system.
No, you do not “adjust” starting balances.
If you have created your starting balances correctly, your Retained earnings balance will match the corresponding balance in your old accounting system. Retained earnings is calculated automatically based on other inputs. If it doesn’t match your old system one of only two possibilities is to blame:
Current period income and expenses should not erase previous years’ Retained earnings. They add to or subtract from that balance. Retained earnings, as a balance sheet account, is perpetual. If you know the balance is wrong, your prior accounting may have been incorrect. Retained earnings in your prior system should have been reduced by transfers to capital, payments of dividends, owner’s draws, or similar actions affecting equity account balances. Proper entry of all starting balances should exactly duplicate the ending balance in your old system.
Actually, I meant creating invoice for transactions that took place in previous accounting system will reduce inventory again and you need to update it.
Anyway, thank you very much. I got it and it balanced now. Thanks.