|
CAUTION: Don’t put the cart before the horse! Xebra Accounting gives you the ability to run a *Conditional Balance Sheet* before Month End Procedures have been run. The ‘Conditional’ reports are designed to provide management with the answer to, “How are we doing?” Don’t make the mistake of applying these review procedures to ‘Conditional’ reports. Doing so invites extra work and frustration. The error checking in the Month End Procedures will identify and help you correct most of the errors you will encounter.
Finding Problems
| 1. | If balancing the net cash change has been done properly at each month end close, there should never be a problem with the account balance on the balance sheet. To double check – For each checking account (including credit card, lines-of-credit, and loan checkbooks): |
| • | Navigate to the correct checkbook. |
| • | Select View > All Entries from the menu. |
| • | Scroll up to the last transaction in the last calendar month covered on the balance sheet you are reviewing. |
| • | Compare the balance on the transaction with the amount shown on the balance sheet for that account. They should match. |
| 2. | Cash asset and Loan liability accounts that do not have checkbooks are more difficult to resolve. Without the checkbook, you must rely on matching the balance sheet with bank statements. It is often difficult to determine what the balance was at the end of a given month when there is a lot of activity on the account. Statement periods do not always match your accounting period. When they do, it is not unusual for transactions performed on the last day of the month to appear on the following month’s bank statement. |
| 3. | Run a customer only A/R Aging for the last day of the last month on the balance sheet and compare the total with the Accounts Receivable account on the balance sheet. |
| 4. | Run an Accounts Payable Aging for the last day of the year you are reviewing. The total should match the Trade Accounts Payable account on the balance sheet. |
| 5. | It is a good idea to examine sensitive areas, especially at year-end. Where procedures are well established, it may not be necessary to reconcile these areas every month. |
| o | Employee FICA and Medicare should always equal Employer FICA and Medicare. Any discrepancy seen is probably the result of a typo made entering payroll information. |
| o | When State or Local taxes are a fixed % of gross pay, it is pretty easy to use the Gross Pay to calculate the amount of the taxes and verify the figures on the Income Statement. |
| o | On a quarterly basis, payroll tax reports filed should be reconciled to the Income Statement payroll expenses. |
| o | W-2 filings at the end of the calendar year should be reconciled to the Income Statement. If you operate on a fiscal year other than the calendar year, you will have to do some extra arithmetic. |
| • | Health insurance deducted from an employee’s pay and then paid to the health insurance provider is an error prone area. Premium rate changes don’t usually occur on even payroll period changes. If you are using individual GL accounts for each employee, a typo entering the payroll or distributing the accounts payable to the health insurance provider could cause the wrong employee’s account to be debited or credited. |
| • | Sales Tax Payable is difficult to reconcile. Some states insist on sales tax being paid when the customer is invoiced, even if the company operates on a cash basis. Other states allow sales tax to be paid on a cash basis, even if the taxing company operates on an accrual basis. To complicate things further, most states offer companies a discount to reward them for filing and paying promptly. |
| • | Accounts that reflect loans, draws, and expense advances to employees should receive attention. Tax auditors are always interested in ways employees can get money without payroll taxes being paid. |
| • | Loans from employees, owners, or shareholders are important for compliance to tax laws. |
| • | Your accountant may direct your attention to other accounts. |
|