18 Nov Retained Earnings Balance Doesn’t Agree with the Prior Year
Retained Earnings is yet another special QuickBooks account. There is not a register for this account, nor can a quick report be created to review the detail in this account. Each time a Balance Sheet is created, all prior years Profit and Loss accounts are automatically “rolled” into this account.
The easiest way to describe this account is to compare it to the opening balance when completing the bank reconciliation. Going to the account register and adding or subtracting all the transactions with a checkmark in the cleared column calculates the opening balance for the reconciliation. Calculating all of the prior profit and loss amounts plus any transactions coded directly to Retained Earnings creates the Retained Earnings balance. That is the account balance that will appear on the Balance Sheet. Therefore, just like the opening balance on the bank reconciliation, if the amount does not agree with the balance previously calculated, a transaction has been added, modified, or deleted.
Discovering the transaction, and then correcting it as appropriate, will correct the balance.
If the change is that a single transaction has been entered, using the find function will locate it.
If it was that a transaction has been changed, it may be possible to review the audit trail report to see a prior transaction date with a current entered/modified date to narrow down the problem (if the audit trail preference was on the previous and current transaction will appear).
If the transaction was deleted, and the audit trail preference has been turned on, it is possible to scroll through the audit trail report to see the deleted transaction.
New with version 2002 and higher there is an additional option, for the time that the closing date has been entered and version 2002 or higher has been used, there is a new report available in QuickBooks Premier called the Closing Date Exception Report.
Otherwise, finding the change can be difficult. One suggestion is, as an additional line of security, a complete general ledger and related reports should be printed. If a change is then made, the research and analysis process will be greatly reduced.
For the older versions, to provide an additional level of protection for the prior year data, it is recommended that the “closed” periods be password protected and that no one but the admin password have access to change a closed period. For version 2002 the closing date step is critical to ensure that the Closing Date Exception Report will be available.