Details, details...Am I being picky?

[Bees Knees]

Client brings in his Quickbooks books a few weeks ago for his S corp. I look at the Income Statement and Balance Sheet, and notice that if you add his current year loss of $40,244.85 to his prior year ending Retained Earnings, I would have to enter a $71,783.13 plug to get it to balance.

I call client. Of course he can’t understand how that could happen. He has his “CPA” nephew call back. Also puzzled. I explain there is only one entry to retained earnings. You start with last year, add in net income or deduct loss, and there you have it. It should not be $71,783.13 different.

He calls back and explains he accidentally entered a whole bunch of 2006 transactions in 2005. Quickbooks lets you do that.

Now it balances, except his new numbers show a $15,189.60 book profit, as opposed to a $40,244.85 loss.

Details, details. Am I being picky?

[JohnH]

He will understand

He won't mind your being picky.
As long as you can assure him he doesn't have to pay any more tax, it's not a problem...

[dsi]

Bees, you did the right thing.

[Golden Rocket]

QB Retained Earnings

I have a handful of QB clients and this problem is common, because QB allows posting of backdated transactions with nothing more than a soft edit. If you never change the "closing date", you won't even get a soft edit. Reconciling Retained Earnings from year-to-year is a standard procedure with me.

The fact that there are differences in Retained Earnings tells me your client has changed the "closing date." That means SOMEONE in his company knew they were backdating transactions because they would receive the "soft edit" for every such transaction. In your example, the existence of missing income for 2005 (if indeed that is even true) would necessitate an amended return, and increased work and fee for you.

DCAA (Defense Contract Audit Agency) has refused to honor QB for government contractors because historical data can be changed without an audit trail.

[Jiggers]

QB, Quicken, whatever

Clients who want to do their own bookkeeping think that by purchasing a bookkeeping software automatically qualifies them or their secretary to be experienced bookkeepers/accountants.

It doesn't. Most information is entered using the "GIGO" method of accounting. "Garbage in, Garbage out"!

Clients just won't pay or hire a good secretary that is qualified to do accounting or even hire a good bookeeper/accountant. I have seen very large businesses with this problem and it makes filing their income tax return a big headache. A profitable headache, but still a headache. When I am rushed during tax season, I hate to take 8 hours to go through a client's general ledger trying to fix things.

[Uncle Sam]

Details..

Jiggers- You brought up the point that I've been complaining about for years. Clients are under the mistaken impression that simply because they bought a software program, and used it to do their bookkeeping - they were ENTERING THINGS PROPERLY.
In practically every case where I have a client that does their own bookkeeping, I have to review the posting information from the original entry to see where and how it was posted (not every, small petty transaction of course).
And I'm sure you'll agree with me - at times it makes things complicated and cumbersome and inefficient.

[Jiggers]

Uncle Sam, you are right

While I don't have time to review each entry, I do check certain categories. I look at various expense items such as Office Supplies, Repairs, Vehicle Expenses, etc. looking for items that should have been capitalized and depreciated. Large dollar amounts are questioned. For instance, Office supplies are normally $200 per month, one month it is $3,000. I find that includes a new computer, printer, scanner, desk, etc. Under vehicle expenses I look for the same thing. I have found Ford/GMAC/BANK payments for vehicles recorded as vehicle expenses.

I look at the various loans and get the client to verify the balances or provide me with something that does. The reason? Clients post total payments to the note amount without breaking out the interest. Or they post the total payment as cost of goods because that is what they did with the loan proceeds....purchased materials for production and they want to write off the loan payments that way.

[outwest]

Every problem is an opportunity..

I recognize that many on a board like this are tax return focused and poor client information is a headache to proper tax preparation. I'm a CPA so I come from the other side, I want to help get good financial information, the tax return is a byproduct. For me, helping fix accounting problems, training the bookkeeper, and establishing good procedures is my favorite part.

QB has been a great opportunity for me, and I've become quite good at spotting and fixing the foul ups. If they could do this themselves, they wouldn't need me.

Here are some of those opportunities:
1. As mentioned, get the closing date set but with a password only I know.
2. Schedule adjust and closing visit the first 2 weeks of January. This is the calm before the storm and good chance to clean up the books for a fee. Also has the effect of getting the business returns on my desk earlier in the season.
3. Newer versions have an always on audit trail. Good reason to get 07 or later.
4. Require users to be setup with passwords. Makes the audit trail better; you can see who did it and train them.
5. Most common things fouled up:
Payroll
AR & (less often) AP
Equipment purchases as expenses
Personal Expenses as business expenses.

In my view, only the AR/AP problems and dating problem are program issues, the rest are classic accounting issue no matter what you use.

FWIW

[Bees Knees]

Another issue this raises….

I don’t think there was any intent to conceal income. It was a simple error. Entering data and accidentally entering 05 instead of 06 on transactions from time to time, with no indication by the program that you are going outside your current accounting period. I understand why a software program would want to allow us to do that for various reasons, but it ought to pop up some extra dialogue boxes or something when you do, just to make sure that is what you want to do.

The only reason I found this error is because the 1120S requires a balance sheet. Most of my business clients are Schedule C. They give me a P&L but no balance sheet. Without the balance sheet, there is no way for us to suspect anything is wrong. How many Schedule C people using Quickbooks are making the same mistake and going undetected?

IRS has made some noise in the past to require a balance sheet for Schedule C. This is one reason why.

[BOB W]

My solution with clients with QB is "send me your CD and CR journals". I don't want to be dealing with fixes, fixes, fixes. I would rather re-entering data into my G/L program and get it right the first time.

Since my G/L program is the foundation for all other functions it eliminates multiple entries of the same data or having to make GJ entries to tie in for the month.

ONE SET OF KEYSTROKES WILL GIVE ME ALL THE REPORTS NEEDED TO COMPLETE THE WHOLE YEARS ACCOUNTING AND TAXES.

[JohnH]

Sched C Balance Sheet

A historical note here: I may be thinking about somethiing different, but I sem to recall that Sched C required a balance sheet back in the 1970's. Didn't they do away with it in the early 80's? Maybe they should bring it back for SP's over a certain revenue amount or net asset value.

Regarding QB users, I have a number of clients who use QB and, like the rest of you, I've seen some strange stuff. But overall I think it's the best value out there in the right hands. I tell clients not to waste money on the program unless they're willing to invest some $ in training. I encourage them to call or email me whenever they are in doubt about where to post a transaction. I also have each of them set up an account called "Accountant Review" and I tell them to use it to post any transaction when they are unsure about where it should go. I can then reclassify form that account as needed and give them feedback on what I did. Having 90% of the potential mis-postings in a readily identifiable account saves a lot (but not all) of the aggravation.

[ChEAr$]

A historical note here: I may be thinking about somethiing different, but I sem to recall that Sched C required a balance sheet back in the 1970's. Didn't they do away with it in the early 80's? Maybe they should bring it back for SP's over a certain revenue amount or net asset value.

Regarding QB users, I have a number of clients who use QB and, like the rest of you, I've seen some strange stuff. But overall I think it's the best value out there in the right hands. I tell clients not to waste money on the program unless they're willing to invest some $ in training. I encourage them to call or email me whenever they are in doubt about where to post a transaction. I also have each of them set up an account called "Accountant Review" and I tell them to use it to post any transaction when they are unsure about where it should go. I can then reclassify form that account as needed and give them feedback on what I did. Having 90% of the potential mis-postings in a readily identifiable account saves a lot (but not all) of the aggravation.

Well, John, if so, it must have been before 1973; not since, anyway.

I hate it when a new/prospective client says "I use QB, so it will be easy for you."
Yeah, sure!

I inform them I will take their check registers and sales journals, payroll registers, etc,
and enter all in MY program. And that i will charge them for it. And I do.

IMO, an 1120/1065 just ain't worth preparing unless you can do it YOUR way.
After all, YOU sign the return, too.