Accrued Expenses (Accruals)
Exchange Gains/Losses
Opening Balances

Accrued Expenses (Accruals)

In cases where a liability exists at the end of an accounting year but you have not yet received an invoice from the supplier, you need to create a general journal entry so that the profit and loss statement shows the true taxable profit (or loss) and so that the balance sheet will reflect the true situation. The most common example would be accountancy fees incurred but not yet billed. 

1. If you don’t already have an ‘Accrued Expenses’ account, create this now (type =’Other Current Liability’)
    
2. Create a general journal entry dated for the last day of the accounting year:
   Debit the relevant expense account, eg ‘Accountancy Fees’
   Credit the ‘Accrued Expenses’ account
    
3. When the relevant invoice is finally received, enter it into QuickBooks as normal then create another general journal entry for the same date as the invoice and for the amount of the original accrued expense:
   Credit the relevant expense account, eg ‘Accountancy Fees’
   Debit the ‘Accrued Expenses’ account

Exchange Gains/Losses

Whilst QuickBooks automatically calculates exchange rate gains/losses on foreign currency bills and invoices, manual adjustments have to be made for all your foreign currency accounts at least once a year (if only doing this once a year then the adjustmentrs should be dated for the final day of your accounting year).

Making these adjustments is fairly straightforward but what isn’t made clear is that, regardless of the date used, QuickBooks will use the account balance as of today’s date.  Therefore, you need to make these adjustments as soon as possible after the date to be used.

Opening Balances

Unless you are using QuickBooks from day one of your business, you will need to enter an opening balance for any suppliers who you owed money to at the start of the accounting year, for any customers who owe you money and for any bank accounts, loans etc. 

The help given in QuickBooks for entering an opening balance says “Type an opening balance based on the account's balance as of your QuickBooks start date”.  The problem is that the average user will probably enter the date for these opening balances as the QuickBooks start date.  Given that the start date will almost certainly be your accounting year start date, following this advice will result in incorrect information appearing in your Profit and Loss report.

For example, let’s assume that your company’s accounting year runs from 1st May and that you want to start using Quickbooks from 1st May 2005.  As at that date you owed one of your suppliers, Joe Bloggs, the sum of £500.  You will need to set up Joe Bloggs as a supplier with an opening balance of £500. If you were to input the corresponding date as 1st May 2005, that £500 would show on the Profit and Loss report for the Accounting Year 1st May 2005 to 30th April 2006 as an Uncatergorised Expense.  The correct date to use for the opening balance would be 30th April 2005.

Therefore, when entering opening balances as at the start of an accounting year, you should use the previous accounting year’s end date.