Locked lesson.

Upgrade

About this lesson

In this lesson, we discuss common mistakes found on the balance sheet report.

Quick reference

Balance Sheet

No matter how careful, we are all human and sometimes we assign the wrong account to transactions, this lesson will show you how to review your balance sheet report with the intention of finding transactions that need to be corrected.

When to use

I recommend you dedicate two minutes a month to reviewing your balance sheet report after reconciling the bank accounts. A quick double check will give you 12 chances each year to catch any mistakes and make your annual tax prep a bit easier because you'll be confident about your records. 

Instructions

  1. Generate the balance sheet report
  2. Review the assets and liabilities (but not equity)
    1. Look for numbers that are higher/lower than you expect, if this happen, investigate using the following routes:
      1. Bank accounts: Look at the register found in the chart of accounts
      2. Accounts receivable: Look at the accounts receivable aging report
      3. Inventory: Look at products and services behind the big gear in the upper right hand corner (inventory is not covered in this introductory course)
      4. Undepsoited funds: Look at bank deposit in the + New menu
      5. Fixed assets: Look at the register found in the chart of accounts
      6. Accounts Payable: Look at the accounts payable aging report
      7. Sales Tax: Click on the word taxes in the gray bar on the left (sales tax is not covered in this introductory course)
      8. Loans: Look at the register found in the chart of accounts

Hints & tips

  • I'm going to let you skip reviewing the equity portion of the balance sheet, mistakes might be hidden there but if you review your profit and loss as well as the rest of the balance sheet, you're likely to catch all of the mistakes that can hide here.
  • Reviewing the balance sheet really should take you about a minute. You're looking for glaringly obvious errors, a checking account balance of negative $1,000,000 is a clear sign that something has gone haywire. And as silly as that example sounds, I've seen it a handful of times.
  • Even if you have the best bookkeeper, please look at your balance sheet. It's always to your benefit to glance at your records. 
Login to download
  • 00:04 In this video I want to talk to you about finding errors or
  • 00:08 mistakes on your balance sheet.
  • 00:10 To get to the balance sheet, we're going to click on Reports on the left hand side.
  • 00:14 The balance sheet will often be in the Favorites box.
  • 00:16 In this case, we're just going to click on the text Balance Sheet.
  • 00:22 As a reminder when you look at the balance sheet, you're looking at things that you
  • 00:26 own, things that you owe, and the owner's money.
  • 00:31 When you're first getting to know your QuickBooks, you might not really
  • 00:34 understand what you see on your balance sheet, and that's okay.
  • 00:37 What I want you to do when you look over your balance sheet is to look for
  • 00:41 anything that seems just not right.
  • 00:44 Even if you don't know how to fix it,
  • 00:46 spotting things that are just not right is going to be key in helping you figure out
  • 00:51 what else might be wrong with your QuickBooks.
  • 00:53 So we're going to go top to bottom, the checking account.
  • 00:57 You'd have a good sense of if this is approximately correct.
  • 01:01 If it's approximately correct, then you don't need to do anything.
  • 01:04 If you say no, that's off by quite a bit, then,
  • 01:07 you want to investigate and figure out what's going on.
  • 01:11 Petty Cash, same thing.
  • 01:13 Uncategorized Asset, I want you to look around your office,
  • 01:17 you probably don't have anything called uncategorized asset, neither do I.
  • 01:23 This is a common mistake.
  • 01:25 When you're looking at the things that downloaded the Banking screen, QuickBooks
  • 01:30 will sometimes suggest uncategorized asset is a place to put something you purchased.
  • 01:34 Or QuickBooks will suggest it as a source for a payment to your credit card.
  • 01:39 So if you do see something such as uncategorized asset with a balance,
  • 01:44 I want you to click on the number.
  • 01:46 When you click on the number it's going to bring up
  • 01:49 a list of transactions that equal that number.
  • 01:51 So in this case it's a transfer.
  • 01:54 If I click on the transfer I can see,
  • 01:57 this memo says Anchor Listener Support, a fun fact with transfer,
  • 02:02 and I mean that sarcastically is that you can't change this.
  • 02:07 So I know that listener support is some sort of marketing.
  • 02:10 And so I want to say the money came out of Alaska Airlines for
  • 02:13 the purpose of marketing.
  • 02:15 Marketing is not on my drop down list, I can't choose Marketing.
  • 02:20 If this happens to you, you need to click on the More at the bottom of your screen
  • 02:24 and click on Delete, it says are you're sure you want to delete it?
  • 02:28 You say Yes.
  • 02:29 You will put it back in that Banking To Do List.
  • 02:33 Let's go back to the balance sheet look through a few more things.
  • 02:37 So Undeposited Funds, that's great.
  • 02:40 Fixed Asset, you have a good sense about your assets, you know what you have.
  • 02:45 Generally speaking, your fixed assets need to be clear and
  • 02:49 descriptive such as Speedy Car #3, and the number needs to be $2,500 or greater.
  • 02:55 Please don't put something small such as
  • 02:58 a $30 trip to Office Depot into your fixed assets.
  • 03:02 As you inch on down, you're going to take a look at the Liabilities.
  • 03:06 You're going to take a look at these again for logic, you're going to say yeah,
  • 03:10 that's about right, I definitely owe about that much money.
  • 03:13 So in this example, we have a credit card.
  • 03:16 The credit card has a negative balance of $17,000.
  • 03:20 I don't know about you, but I don't overpay my credit card by $17,000.
  • 03:25 This would be another indication of a small mistake on your balance sheet.
  • 03:29 So we can click on this just like we did before, and
  • 03:33 we can see a list of transactions.
  • 03:35 This is nice, but a little bit hard to read.
  • 03:40 So in this case, what I would say is go back to your balance sheet,
  • 03:44 identify what you're looking at.
  • 03:46 So it's the Alaska Airlines credit card.
  • 03:49 And then instead of trying to look at the transactions on the balance sheet by
  • 03:54 clicking on the number, go over to Accounting and then Chart of Accounts And
  • 03:58 pull up the register for that.
  • 04:00 All of the things that are on your balance sheet when you start your chart
  • 04:04 of accounts by type, they're all in the top.
  • 04:06 On the far right hand side, they'll have a blue hyperlink that says view register,
  • 04:11 making it slightly easier to read.
  • 04:13 So if we come down to the credit card, we can click on view register, and
  • 04:17 now we have a more familiar place.
  • 04:19 Let me click on the clear filters so you can see what's going on here.
  • 04:23 Now, what I can see is that I haven't reconciled this since January.
  • 04:28 So I probably wouldn't spend a lot of time investigating why it says negative 17,000.
  • 04:33 Instead, what I would do is reconcile my account, and then after I've reconciled,
  • 04:37 figure out do I have anything that's left over?
  • 04:40 As a reminder from previous video,
  • 04:42 we do sometimes have cases where things get doubled up.
  • 04:46 So these might be two separate payments,
  • 04:48 they may be one payment that got entered twice but on two different dates.
  • 04:52 So that's what I would encourage you to do.
  • 04:55 Let me go back to the Balance Sheet and just get to the end here.
  • 04:58 When you get down to the Equity section, you're going to see a lot of information.
  • 05:02 You might see stuff like I have here retained earnings and net income.
  • 05:06 You might see these two items plus more items.
  • 05:09 I don't want you to spend too much time stressing out and
  • 05:12 trying to figure out what's happening within the equity section.
  • 05:16 I think it's a fair bar to ask you in the beginning, just to take a look at
  • 05:20 the rest of the balance sheet and to investigate any mistakes you might have.

Lesson notes are only available for subscribers.

Gift this course