Balance sheet out of balance? Your balance sheet not only plays an important role in attracting investors but also allows you to see what your company is worth is at the moment. The balance sheet reveals the financial position of the company at any particular point in time. It reports how much assets, liabilities, and equity the company has at a given time. It can easily show how much the company owns and owes.
It is important that the balance sheet is always correct. The assets should always be equal to the liabilities combined with the equity (Assets = Liabilities + Equity).
Unbalanced Balance Sheet
Having a difference between the total assets and the sum of the liabilities and equity raises a red flag. It means that something is wrong and actions need to be taken to balance it out. In QuickBooks, it is possible to have either the accrual basis or the cash basis that are not balanced. But in some instances, both report types display a discrepancy in your balance sheet.
QuickBooks automatically creates a balance sheet, thus eliminating some other issues that usually cause the report to be out of balance. However, there are still a few reasons why the report does not balance even when using accounting software.
1. Data damage
Most unusual behaviors in QuickBooks, such as sudden discrepancies in reports, are caused by the file being damaged. So, if you pulled up a balance sheet for “all dates” where everything is balanced while “this fiscal year” gives you an out-of-balance report, it is most likely to be transaction damage. As usual, depending on the extent of the damage, it may be fixed easily by re-sorting the lists and rebuilding the data.
2. Incorrectly linked or entered transactions
Some transactions, although they appear to be entered correctly, can push the Cash Basis out of balance. The usual scenarios include the use of credit memos for returned inventories, discounts for jobs, and general journal entries that offset other transactions. Such entries need to be located and corrected manually to fix the issue.
When in multi-currency mode, the problem occurs when the exchange rate of the payment is different from the exchange rate from when the invoice was created. When this happens, the gain or loss does not reflect in the balance sheet, making it off by such-and-such an amount. This is already an identified issue within QuickBooks that has taken some time to be resolved, as it requires a major modification to the software. At the moment, QuickBooks users having this issue are being advised to sign up for an article to be notified if an update or fix becomes available.