Historical Balancing Account
The Historical Balancing account (3-9999) holds a value based on:
- The total of Opening Balances set in the Asset accounts
- The total of Opening Balances set in the Liability accounts
- The total of Opening Balances set in other Equity accounts
- The total of Opening Balances set in the Income accounts
- The total of Opening Balances set in the Expense accounts
- The total of Opening Balances set in the Cost of Sales accounts
Although the values of all accounts affect the balance in the Historical Balance account, this synopsis presents information about the opening balances in the most commonly used accounts in order to demonstrate how AccountEdge uses the Historical Balance account.
- Historical Balance account = Assets − Liabilities − Already accounted for Equity amounts such as Owner Investment (AccountEdge automatically handles this after you enter the Asset, Liability and Equity account opening balances)
- Historical Balance account value is reduced by the Profit & Loss account opening balances (AccountEdge reduces (debits) the Historical Balance amount by the total current Fiscal Year Profit & Loss account value, and adds (credits) that value to the Current Year Earnings account)
- When the above 2 items are satisfied, if there is a balance in the Historical Balance account, it represents a balance from a prior Fiscal Year, so you could enter a Journal Entry removing (debit) that balance from the Historical Balance account, and adding (credit) it to the Retained Earnings account (or other Equity account that represents earnings from prior Fiscal Years, at the direction of your accounting professional)
Typically after the account opening balances are set, you'll need to move some or all of the value in the Historical Balancing account to other Equity accounts. If the Opening Balances represent balances of the current Fiscal Year, AccountEdge will move the current year values from the Historical Balancing account to the Current Year Earnings account after you enter your current Fiscal Year P&L account values. In either case, the result will be a zero value in the Historical Balancing account.
Historical Balancing Value
If you have a value in the Historical Balancing account, check
- The Historical Transactions you have entered, and verify corresponding Opening Balances were set in the Accounts Receivable and Accounts Payable accounts. Check the Historical Purchases / Sales FAQ for details.
- If the Opening Balances represent balances from a prior Fiscal Year, you will need to record a Journal Entry (Command Centers > Accounts > Record Journal Entry) removing the prior Fiscal Year value from the Historical Balancing account, and posting it to another Equity account such as Retained Earnings. You need to discuss the account usage with your accounting professional.
- If the Asset and Liability Opening Balances represent current Fiscal Year balances, you need verify corresponding Opening Balances are set in your Income, Expense and Cost of Sales accounts. As a result of entering Opening Balances in the latter 3 accounts, AccountEdge will automatically remove the value from the Historical Balancing account, posting the value to the Current Year Earnings account. The ability to enter Opening Balances in the Income, Expense and Cost of Sales accounts is available only when the Conversion Month is not equal to the first month of the Fiscal Year. If the Conversion Month is equal to the first month of the Fiscal Year, any Opening Balances will had to have come from a prior Fiscal Year.
- The Asset and Liability Opening Balances can represent both current and prior Fiscal Year values. When this is the case, verify the current Fiscal Year values have corresponding Opening Balances set in Income, Expense and Cost of Sales accounts, and a Journal Entry was recorded moving the prior Fiscal Year value to an Equity account representing prior Fiscal Year earnings (at your acounting professional's direction).
Ideally there should be a zero value in the Historical Balancing account (3-9999). If there is a value, perhaps it belongs in some other Equity account(s) (e.g., Owner Investment, Owner Withdrawal, Retained Earnings, Current Year Earnings, etc.). Or, it could be that the values in other non-equity accounts are incorrect. Below are tables that provide some information for this latter situation. The terms high and low are sometimes relative with respect to the value in other accounts, or can be interpreted as zero. Usually, if account opening balances are entered based on a balance sheet from an existing, operating company, there will be no value in the Historical Balancing account.
| Accounts | Values Are Too ... |
|---|---|
| Assets (1-xxxx) | high |
| Liabilities (2-xxxx) | low |
| Income (4-xxxx) | low |
| Cost of Sales (5-xxxx) | high |
| Expense (6-xxxx) | high |
| Other Income (8-xxxx) | low |
| Other Expenses (9-xxxx) | high |
| Accounts | Values Are Too ... |
|---|---|
| Assets (1-xxxx) | low |
| Liabilities (2-xxxx) | high |
| Income (4-xxxx) | high |
| Cost of Sales (5-xxxx) | low |
| Expense (6-xxxx) | low |
| Other Income (8-xxxx) | high |
| Other Expenses (9-xxxx) | low |