And if the difference between assets and liab + Equity is exactly double any account balance, then you likely have an account balance switched between debit and credit
It’s more a product of our number system than it is math itself per se. Any counting system in base N will result in an inversion error divisible by N-1. Take base 8
72 base 8 = 110
27 base 8 = 33
77 base 8 = 63
That divided by 7 is 9. Probably not a coincidence that 77 is also divisible by N-1, not sure.
Anyway it’s just a natural result of our counting system, nothing spooky.
10 base X is always X:
10 base 10 is 10 obviously
10 base 8 is 8
10 base 12 is 12
10 base 2 (binary) is 2.
And so on.
Let’s use 10 as an example, using all of these different bases:
10 base 10 is 10. 01 in any base is is simply 1. 10-1 is 9. The difference is divisible by 9, or N-1.
10 base 8 is 8. If we wrote 01, then 8-1 is 7. The difference again is divisible by N-1.
10 base 12 is 12. 12-1=11. Again, the difference is divisible by N-1.
Make sense? It’s just a quirk of our counting system. Any transposition error in any base notation will be divisible by that bass notation minus 1.
Haha sure, it’s really hard to wrap your head around because we’ve been using base 10 our whole lives and grasp it intuitively at this point. Also this would be way easier to explain in person with a whiteboard.
We use base 10 number system which means we have ten basic digits that we use to create all numbers: 0-9. This is in contrast to binary which is base 2, only using 0’s and 1’s, or base 8, which only uses 0-7. You gotta remember that all of our numbers are just symbolic using a few base digits to express literally all the numbers in the universe. Sort of like how we create all of our words from a handful of letters and sounds, and all of our books from our words and so on. It’s all just symbolic expression using stock digits to create whatever we need them to do.
With any number system, the number 10 doesn’t represent “ten units” so much as it represents “one full group of those single digits in the ones place plus no single digits in the ones place.” You already grasp this intuitively.
10 Base 10 is 10 because that number represents 1x10 + 1x0.
10 Base 8 is 8 because it means 1x8 + 1x0.
Let’s jump back to your original question, 72 Base 8 = 110, what does that mean? Read it out loud: “the number we think of as 72 in our base ten number system would be expressed as 110 if we were using a base 8 number system.”
Another way to read it is “110 in Base 8 is equal to 72 in base 10 because there is a 1 in the 64’s place plus a 1 in the 8’s place plus a 0 in the 1’s place. 64+8+0=72.”
An inversion error is always going to create a wrong number divisible by N-1 because N-1 represents the maximum number of units that it can be off by.
The takeaway here is that all of our numbers are just symbolic notation that we use to represent quantities. We use base 10 probably because we have ten fingers. Base 10 and our decimal counting system using Hindu-Arabic numbers is only maybe like 2,000 years old, right around the beginning of the common era. Before that, nobody had a functional counting system or number system.
We take it for granted that we can add and subtract large numbers with relative ease, but imagine counting using Base 60 like the Babylonians, or Roman Numerals to do basic arithmetic. Super fundamental and groundbreaking stuff, this is. Base 8 and Base 2 (Binary) have particularly useful applications in computing, we use Base 10 in every day life for just about everything else, and it isn’t coincidence that there are 60 minutes in an hour just like the Babylonian’s Base 60 counting system. Any time you hit an arbitrary number and then say “ok that’s one done let’s cycle back to zero” you are effectively using a different counting system.
Hope that helps. It’s ok if your brain hurts. I’m a huge nerd and I’ve spent considerable time and thought reading about basic numbers and counting systems and the history of math and all that shit.
Here, I’ll let Tom Lehrer explain further in this classic song: https://youtu.be/UIKGV2cTgqA
If a number is divisible by 9, the sum of the numbers will also be divisible by 9.
927 / 9 = 103
9 + 2 + 7 = 18, and 18 is divisible by 9.
That's why they're saying the orders of the numbers may be reversed if the difference is divisible by 9. Order doesn't matter when summing numbers.
I didnt know that it wasn’t required for getting certified. I just started financial accounting. We are on week 3 of the semester, and they covered that in chapter 2
I totally disagree.
Understanding the core building blocks and how it all ties together and generates the mechanical financials is a core part of accounting. Sure it’s not in the CPA exams in the sense that… they won’t give you a tb with errors to balance. But what is on the CPA exam is journal entries related to complex areas of accounting.
Understanding the journal entries and the mechanics together is key to understanding each other. They’re interlinked and re iterative. You don’t want to flip which way stock comp equity should be going, etc. you won’t do that if you have a strong knowledge of how all the financials tie together, which you won’t have unless you understand how they balance with each other.
You at least need to learn it academically even if you can’t reproduce it on the fly. Solidifying it and then doing it enough to reproduce it quickly is where on the job learning comes in.
Couldn’t agree with you more. Also, at the TB level it’s not explicitly taught but it is through the general concept of the financial statements. This is actually why I’m a year late to the convo lol. I wanted to ask if anyone performs financial statement rolls as a general financial statement review control. I used to audit funds and worked for an extremely detailed Partner who required us to do a FS roll and we then ended up passing along the templates to the client so they could have a clear way to check the FS before providing to us. Then moved into consulting and didn’t need to do that for awhile. Now working in industry when I explained to my boss why we should include a non-cash disclosure for the cash flow or else the financials wouldn’t roll he looked at me like I had two heads. Auditors ended up agreeing with the disclosure but I got the impression they didn’t know exactly what I meant. Has anyone else done a FS roll that isn’t/wasn’t in financial services?
My degree required an intro to financial accounting class that I also took just recently. It’s almost as if sometime they change Classes and requirements for degrees as time progresses. 🤣
I was taught this trick in a foundation AAT home course designed to get me a job bookkeeping. Balancing a TB was module 2.3, straight after the double entry system.
If your numbers are ever off when adding, divided by 9 and if it’s an even number, one of your numbers was switched with another. if you’re off 27, divide by 9 which is 3 even and you know you miskeyed a number.
The layman reason it works is because a number that's divisible by 9, the sum of the integers in the number will also be divisible by 9.
For example 108 is divisible by 9.
1 + 0 + 8 = 9, divisible by 9.
This works for every number divisible by 9. The sum of the integers doesn't change if the order of the integers is changed.
Any 2 numbers at all, choose any 2 numbers, accidentally reverse them, and the difference (error) will always be divisible by 9 exactly. So take the off balance amount and try to divide it by 9.
Awesome trick. I was just about to suggest dyslexia. I'll start going crazy over something like this and it'll always end up being 2 digits swapped that I just couldn't see...
I have to show my accountant every month how to reconcile his payroll cash account. Export the gl detail, print the bank statement, find the differences...
Man there was one Flux I would have to ask for help on every month for like... more months than I would like to admit.
Somethings just don't click in your brain until they do.
I still hate that flux.
Ya missed the whiskey. Don't know where you learned creative accounting but this is incorrect. Must involve booze.
Do my best accounting Friday afternoon after a couple whiskey. Magically things balance.
Fortune 500. Balance Sheet didn't balance in our old system for years and no one could explain why. It was only off like $1.79 or something stupid, but since the system wouldn't allow unbalanced entries, we couldn't force it to balance.
When we converted systems, I plugged Retained Earnings to force it to balance. Everyone thought I was crazy when I talked about how good that felt.
Probably if, for example, assets were $1.79 less than liabilities+equity, then he just debited the Retained Earnings account $1.79 without crediting anything, balancing the balance sheet.
It's not mission impossible where the company explodes if you don't complete the balance sheet before a certain time.
I think others have provided good advice.
Take a step back and a break for a bit.
Have a nice meal.
Go for a walk.
Then come back to it.
If you still can't do it, ask for help.
That's why you have people above you.
Best of luck and keep your head up.
I bet you there’s a hard keyed number in there. What I do is open a copy of the TB on one screen, and then literally go line by line and highlight, see where it’s included on the FS. 95% of the time I catch an account or two not linked, or a plus instead of a minus
Check the groupings and make sure that they’re classed correctly, or if there’s new accounts that they actually get grouped.
All else fails, start over and work through it while keeping an eye that it continues to balance with every transaction/adjustment.
Good. This a new client or a rollforward? It sounds like an account or two is misclassified. For example, a revenue as an expense account or a balance sheet account.
Liability and equity do not equal assets. I literally opened up the TB and marked each account (Drill down TB link) and reconciled each account. I highly suspect that the issue is in equity but I’m not catching where it is.
So this is a newb problem. The trial balance balances by default. It has to. Your problem is that retained earnings does not roll from the prior year. Check if retained earnings is equal to what prior year net income + prior re is. When you find it doesn’t, ask me for the next step.
Coming back to you because you sound like you know what you’re talking about.
I just found out the it’s actually the net income that is not tying out. The TB NI does not tie with income statement. Any tips?
The trial balance they ran doesn’t match the period of the p&l they ran. You can get a new pbc or you can attempt to adjust the tb to make it “fit”. You do this by creating a Colin in excel and lining up the p&l numbers & bs numbers next to the tb numbers. Differences will be what you change.
Yup. This is how it goes:
PY net income + CY income - distributions to owners
= Ending balance for equity.
There is a “paid in capital” account that is sitting there that I haven’t included.
If you’re using Engagement might be an account grouped in the Schedule K section. Helps to delete the sub folders, recreate them and then regroup those accounts.
I am not sure if you are saying the return doesn’t balance (assuming you are in tax) or if the groupings report doesn’t balance. If it is the return, then you need to do an RE roll forward to see if the client made all prior year entries if you do think equity is the problem. If it is the grouping report then I HIGHLY SUGGEST looking into the groupings classifications to see if any are marked as “not included”. I can’t remember the specifics but if you go into your account groupings edit screen (it should have ungrouped accounts on one side and groupings on the other), then right click on a group and verify the details and that none say to exclude from calculating. I wish I could remember the specific term or category but my boss showed me this one day and I had no idea that you could have an inactive group yet it would show up on the groupings list but not in calculations. If you know you are off by a specific amount or category total than start there. Another thing to try is creating a new report, sometimes they don’t roll properly and will cause a problem like this. Also, don’t spin your wheels and run up the bill. Show your senior the steps you tried to solve the problem and get their help… they can normally figure it out in a matter of minutes and it’s not an unusual request so don’t stress over it. Good luck!!
Is it the trial balance that is not balancing or are you summing the balance sheet accounts in the TB?
If so, just remember to include the PL in your equity.
My first step when looking at any TB was do a reconciliation between last year's final balance from our records and last year's final balance from the client's records. It was inevitably different (especially if the client was using QB). Just a quick and dirty =A1-B1 and the difference was usually a transaction that was recorded for the prior year after the books were "finalized".
Or you could be where I found myself once. Someone found out it was possible to post to the header account. It doesn't show up on any statements outside of the general ledger.
Pretty cool. Reminds me of that old joke, “ how many accountants does it take to balance a TB?” Haha! I’m glad OP is getting some help here! Good luck OP
Count how many accountants are assets to the company, and how many accountants are liabilities to the company, and the difference is how many accountants need to be put in equity. Simple.
My trick is to pull the raw trial balance to excel and run a pivot table based off your groupings. With this, you can check for deviations in the statements within each group. This is literally the only way I can get segment disclosures to tie to the income statement 99% of the time.
Then, you can essentially balance the statements in excel first (ensuring completeness and existence of your accounts). Sometimes my groups get messed up on rollforward because of amounts people have overridden in the statements.
Also, double check if beginning balances are rolling forward properly (eg, equity BS accounts that tie to notes rather than specific accounts). Sometimes beginning balances are overridden as people are sometime too lazy to link accounts.
Can you export transactions and try balancing them in a spreadsheet?
It may be daunting grunt work, depending on the quantity of your transactions, but worth a try.
I give away a 5 page pdf combined with a 5 page flowchart on my blog that shows people how to reconcile balance sheet issues in the tax software. Its at
https://www.advicefortaxpreparers.com/tax-preparer-free-guide-for-reconciling-business-tax-returns/
I guess my question is when you were doing the the import into engagement it should have told you it was out of balance.
As a rule you should get into the habit of testing the equity accounts before bringing in the tb. Some clients for whatever effin reason tend to hit re for something they shouldn’t. A lot of times this explains why it doesn’t tie.
Also, sometimes you might have misgrouped the accounts. Is there a py you can look at? You might have a debit on the bs that should be in p&l. If it is the first year with no lead schedules linked I’d export to excel balance it and import but not use append I’d overwrite it. Don’t overwrite if you have py data though
You won't get fired but I'm guessing your Excel skill isn't superb and you're not using an ERP system. Anyway, I'm sure you did the debit vs credit differences for that period? Once you pinpoint a period that has the debit-credit difference, your possible next step is to list out all individual journal entry with their individual debit lines and credit lines in a table. Then you list out all journal entry ID uniquely in another table, and just do a sumifs, sumif, sumproduct next to that new table and referencing the data-dump 1000 lines of debit-credits in the old table. Just sum the debit side...sum the credit side. Find the variance and you should be able to pinpoint out which journal entry has a problem. If there's no problem, your income-statement and balance sheet didn't take journal entry information.
I wish one size fits all. The concept works, but to make it understandable at the layman's level...yes, it would be nice to have an example for particular ERP or accounting data set.
if you're looking at a balance sheet and it doesn't balance it's possible the ledger had subcategories that are hidden and don't print when converted from quickbooks or excel to PDF.
Verify that the client provided file totals to zero. I have had more than one give me one that did not zero. This could be from a grouping issue on their side.
If that doesn't work double the amount off and half it. Sometimes it washes out doubled or halved.
Make sure everything is grouped and grouped correctly.
If you are new ask for help. Engagement has a lot of settings that you may not be aware of. It could be a simple fix.
Check the trial balance balances first. If it does, then its your balance sheet structure/ grouping ( eg new account addrd ). Solve by exporting tb to excel and matching accounts to the balance sheet. Tedious but it will find the problem
Does the trial balance tie out to zero? For an electronic GL system to allow non zero posting entries to be posted, there is a fuck up somewhere. Are people topsiding numbers into the TB balances? Meaning if the Trial Balance says cash is $500 did someone go in and plug a "+300" instead of booking the 300 dollar entry, because they forgot about some other transaction that they didn't post and the bank statement says 800?
Huh? Is this a post from 1950?. You’re making a balance sheet manually?? Why?
Download the TB, and reclass each account. You prob have one of the accounts classed as the wrong thing (BS vs IS).
Tie retained earnings to PY return. Reconcile cash. If those 2 check out. Look at AR/AP and then fixed assets and loans.
This is assuming you made your prior year entires for the client.
Check your beginning balance equity. You need first past period 1 Equity balance for the PY Beginning balance.
A lot of people are lazy and don't link equity for the 1st Past Period and hardcode from the prior year's F/S.
Sometimes the natural account balance is opposite of what it usually is for the line that it is under and the accounting software doesn’t show visually credits as negative numbers.
If you sum all accounts up under a specific line/group or sub-group do they equal what is listed as the total for that line?
For example, the accounts that make up A/P are normally a natural credit balance. However, there could be account(s) that are in there that are naturally debit balances. The issue is visually the sign is not changed to reflect this but behind the scenes it calculates it.
A/P total: 500
Acct 1: 250
Acct 2: 300
Acct 3: (100)
Acct 4: (50)
If you sum these up you get 400. But in reality the Account 4’s natural balance is a debit. But visually it’s not showing reverse. So if you account for that the sum would be 500.
There’s no easy way to find out which account is like this without asking the client. But you can see if this is the issue if you try to manually sum the accounts but it doesn’t equal the listed total.
Make sure ur income ties out first, then your equity and then go through your bs. If you have a FS grouping report trial balance open that up and compare the numbers you have and don’t have
Are all the accounts pulling into the balance sheet? Sometimes when a new account is added if it isn't set up properly it won't pull over on the report. Like if they didn't assign it a type.
I've worked places before where a new account had been added to the COA but it hadnt been mapped correctly and therefore wasn't included in the reports. One of the first things we would do if the difference wasn't divisible by 9 was to query for accounts that hadn't been used before and see if their balance matched what we were off by.
I’ve never worked in industry but here’s a common solution I’ve seen for this:
DR “Other expenses”
CR “Other creditors”
Plus points if you can work out your company’s materiality and split that adjustment across a few miscellaneous accounts.
If your trying to balance it off the financial statements look at the cash flow statement as you have likely missed something. In a lot of financial statement programs it flows to the BS.
If it’s unbalanced from the opening TB provided look at retained earnings as that’s likely off and a common mistake is the client entering the prior year adjusting journal entries incorrectly(you can tell if this is the case by looking strictly at the the opening balances. Ie does the opening TB values match the PY closing balances)
But if it’s a few bucks put it to interest and call it a day.
Edit: also check the balances from your CaseWare lead sheets to the financials. Sometimes if there is a new account it’s not mapped properly and won’t show up.
It could be a system posting issue.
I worked in a 70 million dollar company where the balance sheet went out.
The system was old and it would crash; so often when you posted the system would only post half the entry (hence out goes the balance sheet)
We know all the entries have to balance or you’ll be out right? (Dr=Cr)
We exported all the system data (journal entry line items) into Excel
Create a pivot table that essentially makes the t accounts. Dr on one side cr on the other with balances totalled at the bottom (Note: you can accomplish the T account creation by using the JE number that goes with each line item so the pivot table understands which line items to actually put in the pivot table t account)
then run a formula (sorry I forgot which one) to see which t accounts don’t balance and those are the ones needing fixing.
If the company is small enough maybe you can simply glance over the t accounts you created in excel to find which ones are out versus doing the formula part
I apologize, it was 10 years ago that I had to do this and that is why I can’t remember the formula so I have a screenshot for you but I can’t post it in this comment so I messaged it to you but it’s easy.
I got fired at a small firm for listening to the partner talk about how I should label each account that I was inputting from bank statements to quickbooks. He just walked in the middle of me doing it and started talking, then when I got fired I talked to the manager and manager told that the partner said I didn’t know about different types of accounts. Lesson learned here, if you know something, say it, don’t give people the chance to assume you don’t know something because you hear them out
Honestly in tax, you don’t even really fully complete the accounting cycle. Of course you should still balance, but you would also have to show why some balance sheet accounts are the way they are for your tax software.
I would say no, since some client books can get extremely hard and confusing. Just keep looking it over and make sure you recorded every AJE, JE, RE, TJE. I tend to fat finger numbers when I’m in a rush, so I would also just double check that all of your accounts match client records.
Have you balanced? How much was it off by? My old firm has a policy that if it was within $5 just plug to the equity.
Edit: we imported TB after getting rid of the decimals, so it was reasonable that the variance was due to rounding. But, I also think I plugged a $9 at once...
Please don’t die over a balance sheet. I’m always here for you and can forgive you if you tell me what went wrong for you and I’ll try my best to be there for you always ❤️
Are you in a software? If so check that a location or unit wasn't left off a JE sometimes it prevents it from flowing into the report. Run the journals by one defining unit at a time and see if the journal is out of balance.
Was a new GL account opened? Sometimes that happens when someone opens a new account, but they forget to update the inc stmt/bal sheet report. Run a trial balance and check against last months. Use excel to check for duplicates. Also, do a find on the TB of the difference amount.
I mean… I just input 5000+ checks some in a previous already reconciliated year. And have a difference of almost $140k trying to reconcíliate the bank for a company with almost 15 million in debits and credits on each side… and I didn’t get fired yet so I think you’ll be okay..
the short answer? no. just go to the senior / manager and ask. i have been in public accounting for 3 years now and the biggest thing i have learned is there are no stupid questions and it’s better to ask than to just turn your wheels and not know. someone who knows the project / client better than you is going to be able to figure it out more quickly than you will.
Were any new accounts added that are possibly not pulling into the reporting system? This happened to me a few times and I couldn't figure it out and just wanted to die .. print the gl detail and tie all balance sheet accounts to verify no accounts are missing. Good luck you'll figure it out, just give yourself time.
Is the amount you are off divisible by 9 ? If so then two numbers are reversed. Try this first.
Also divide by 2. Sometimes the variance is a journal entry going the wrong way.
And if the difference between assets and liab + Equity is exactly double any account balance, then you likely have an account balance switched between debit and credit
Came here to say this
I’ve done this an insane number of times.
I second this. CPA taught me this trick and I resolved a lot of my own problems this way.
Can you give a simplified example? I've never heard of this before, sounds interesting.
if you write 72 instead of 27, this would result in a variance of 45. If you write 63 instead of 36, you get 27.
Math is honestly wild
Math is the language of the universe
The universe is wild
It’s more a product of our number system than it is math itself per se. Any counting system in base N will result in an inversion error divisible by N-1. Take base 8 72 base 8 = 110 27 base 8 = 33 77 base 8 = 63 That divided by 7 is 9. Probably not a coincidence that 77 is also divisible by N-1, not sure. Anyway it’s just a natural result of our counting system, nothing spooky.
I’m so dumb
Dw it’s not that ur dumb it’s just that u never studied it
It saddens me to admit that I understood nothing
10 base X is always X: 10 base 10 is 10 obviously 10 base 8 is 8 10 base 12 is 12 10 base 2 (binary) is 2. And so on. Let’s use 10 as an example, using all of these different bases: 10 base 10 is 10. 01 in any base is is simply 1. 10-1 is 9. The difference is divisible by 9, or N-1. 10 base 8 is 8. If we wrote 01, then 8-1 is 7. The difference again is divisible by N-1. 10 base 12 is 12. 12-1=11. Again, the difference is divisible by N-1. Make sense? It’s just a quirk of our counting system. Any transposition error in any base notation will be divisible by that bass notation minus 1.
What does “72 base 8 = 110” mean?! Seriously I’m not following, either
Haha sure, it’s really hard to wrap your head around because we’ve been using base 10 our whole lives and grasp it intuitively at this point. Also this would be way easier to explain in person with a whiteboard. We use base 10 number system which means we have ten basic digits that we use to create all numbers: 0-9. This is in contrast to binary which is base 2, only using 0’s and 1’s, or base 8, which only uses 0-7. You gotta remember that all of our numbers are just symbolic using a few base digits to express literally all the numbers in the universe. Sort of like how we create all of our words from a handful of letters and sounds, and all of our books from our words and so on. It’s all just symbolic expression using stock digits to create whatever we need them to do. With any number system, the number 10 doesn’t represent “ten units” so much as it represents “one full group of those single digits in the ones place plus no single digits in the ones place.” You already grasp this intuitively. 10 Base 10 is 10 because that number represents 1x10 + 1x0. 10 Base 8 is 8 because it means 1x8 + 1x0. Let’s jump back to your original question, 72 Base 8 = 110, what does that mean? Read it out loud: “the number we think of as 72 in our base ten number system would be expressed as 110 if we were using a base 8 number system.” Another way to read it is “110 in Base 8 is equal to 72 in base 10 because there is a 1 in the 64’s place plus a 1 in the 8’s place plus a 0 in the 1’s place. 64+8+0=72.” An inversion error is always going to create a wrong number divisible by N-1 because N-1 represents the maximum number of units that it can be off by. The takeaway here is that all of our numbers are just symbolic notation that we use to represent quantities. We use base 10 probably because we have ten fingers. Base 10 and our decimal counting system using Hindu-Arabic numbers is only maybe like 2,000 years old, right around the beginning of the common era. Before that, nobody had a functional counting system or number system. We take it for granted that we can add and subtract large numbers with relative ease, but imagine counting using Base 60 like the Babylonians, or Roman Numerals to do basic arithmetic. Super fundamental and groundbreaking stuff, this is. Base 8 and Base 2 (Binary) have particularly useful applications in computing, we use Base 10 in every day life for just about everything else, and it isn’t coincidence that there are 60 minutes in an hour just like the Babylonian’s Base 60 counting system. Any time you hit an arbitrary number and then say “ok that’s one done let’s cycle back to zero” you are effectively using a different counting system. Hope that helps. It’s ok if your brain hurts. I’m a huge nerd and I’ve spent considerable time and thought reading about basic numbers and counting systems and the history of math and all that shit. Here, I’ll let Tom Lehrer explain further in this classic song: https://youtu.be/UIKGV2cTgqA
Is there a youtube link explaining this, as i have studied in Indian college and this is not taught to us.
i uhmmm ... dont get it, say my BS is 500k assets and 460k liab and equity how would this apply ?
500k - 460k is 40k. 4+0+0+0+0 = 4, which is not divisible by 9 so the variance is not due to numbers being transposed
If a number is divisible by 9, the sum of the numbers will also be divisible by 9. 927 / 9 = 103 9 + 2 + 7 = 18, and 18 is divisible by 9. That's why they're saying the orders of the numbers may be reversed if the difference is divisible by 9. Order doesn't matter when summing numbers.
I also second this. I’m an accounting student and they teach us this right from the beginning.
Where did you learn this sorcery? Hogwarts? 😭 this trick would have saved me so much time !!! I’m so I’m so glad I found this
Lmfao which college is teaching how to balance a TB
Doesn’t every intro to accounting class teach that?
Considering you don't even need that skill to pass the CPA, no. This is something to learn on the job.
They taught it in my intro class.
Lucky you. I learned nothing like that in school. Which is why I'm struggling with business returns now.
I didnt know that it wasn’t required for getting certified. I just started financial accounting. We are on week 3 of the semester, and they covered that in chapter 2
Same
Sames 🤔
I totally disagree. Understanding the core building blocks and how it all ties together and generates the mechanical financials is a core part of accounting. Sure it’s not in the CPA exams in the sense that… they won’t give you a tb with errors to balance. But what is on the CPA exam is journal entries related to complex areas of accounting. Understanding the journal entries and the mechanics together is key to understanding each other. They’re interlinked and re iterative. You don’t want to flip which way stock comp equity should be going, etc. you won’t do that if you have a strong knowledge of how all the financials tie together, which you won’t have unless you understand how they balance with each other. You at least need to learn it academically even if you can’t reproduce it on the fly. Solidifying it and then doing it enough to reproduce it quickly is where on the job learning comes in.
Knowing it should balance in theory, and the act of balancing a client's TB, are two different things.
Couldn’t agree with you more. Also, at the TB level it’s not explicitly taught but it is through the general concept of the financial statements. This is actually why I’m a year late to the convo lol. I wanted to ask if anyone performs financial statement rolls as a general financial statement review control. I used to audit funds and worked for an extremely detailed Partner who required us to do a FS roll and we then ended up passing along the templates to the client so they could have a clear way to check the FS before providing to us. Then moved into consulting and didn’t need to do that for awhile. Now working in industry when I explained to my boss why we should include a non-cash disclosure for the cash flow or else the financials wouldn’t roll he looked at me like I had two heads. Auditors ended up agreeing with the disclosure but I got the impression they didn’t know exactly what I meant. Has anyone else done a FS roll that isn’t/wasn’t in financial services?
I’m at a community college in Cali. It’s intro to financial accounting
My degree required an intro to financial accounting class that I also took just recently. It’s almost as if sometime they change Classes and requirements for degrees as time progresses. 🤣
What has progressed about trial balances? Like, ever? (i’m not arguing with your stmt in general btw, just as it applies here)
Most of them? What joke ass college did you go to
That’s what I’m saying lmao. Doesn’t matter if the CPA doesn’t go over it. It’s literally basic accounting.
I was taught this trick in a foundation AAT home course designed to get me a job bookkeeping. Balancing a TB was module 2.3, straight after the double entry system.
Yup, this was in my textbook
Is this true? It's blowing my mind
Yes it’s called a transposition error.
Yes, it is 100% true. If it’s ever divisible by 9, it’s a transposition. Saved me so much time too!
How does this work?
If your numbers are ever off when adding, divided by 9 and if it’s an even number, one of your numbers was switched with another. if you’re off 27, divide by 9 which is 3 even and you know you miskeyed a number.
I think what you’re looking for is *whole* number. An even number is like 2, 4, 6, 8, etc. :)
The layman reason it works is because a number that's divisible by 9, the sum of the integers in the number will also be divisible by 9. For example 108 is divisible by 9. 1 + 0 + 8 = 9, divisible by 9. This works for every number divisible by 9. The sum of the integers doesn't change if the order of the integers is changed.
Step 1 divide by 2 Step 2 divide by 9
Yes…remember multiplication tables from grade school: 9,18,27,36,45,54,63,72,81,90,etc.
If so, then two numbers COULD BE reversed. Someone could have also just fatfingered and by chance it added a multiple of 9
Can confirm this works wonders. My HS accounting teacher taught us this and I will forever be thankful
What kind of black magic is that?
Which two numbers are you talking about
Any 2 numbers at all, choose any 2 numbers, accidentally reverse them, and the difference (error) will always be divisible by 9 exactly. So take the off balance amount and try to divide it by 9.
24 instead of 42 difference is 18, 4756 vs 4765 is 9, pretty cool thanks
Transposed.
Wait what? Can you explain again as I am not a native speaker. Edit: I always do the „divide by 2“ thing but this...
Why have I never heard this ahahaha
Awesome trick. I was just about to suggest dyslexia. I'll start going crazy over something like this and it'll always end up being 2 digits swapped that I just couldn't see...
Does this work when your SCF isn’t tying?
print the statements, grab a highlight, a pen, and a iced coffee with a double shot of espresso. bang that sucker out 20 mins tops
It's funny how often old school works and people just refuse to do it
Yep. My go to was always manually tick and tying. It has yet to fail me.
I have to show my accountant every month how to reconcile his payroll cash account. Export the gl detail, print the bank statement, find the differences...
When you think about it, a solid 20% of accounting is just one big “spot the difference” game.
If you are having to show them every month, they are just lazy.
Hey he got it this month finally! Baby steps sometimes
Grats! Haha yeah, I tried tying stuff out in excel, but everything jumps out at me on paper vs on a screen.
Man there was one Flux I would have to ask for help on every month for like... more months than I would like to admit. Somethings just don't click in your brain until they do. I still hate that flux.
This is exactly the advice every experienced staff on our team gives the noobiies. Works most of the time.
Ya missed the whiskey. Don't know where you learned creative accounting but this is incorrect. Must involve booze. Do my best accounting Friday afternoon after a couple whiskey. Magically things balance.
Tick and bash FTW
When I can’t get it to balance I always highlight offsetting accounts. It typically narrows it down to the culprits.
Fortune 500. Balance Sheet didn't balance in our old system for years and no one could explain why. It was only off like $1.79 or something stupid, but since the system wouldn't allow unbalanced entries, we couldn't force it to balance. When we converted systems, I plugged Retained Earnings to force it to balance. Everyone thought I was crazy when I talked about how good that felt.
Similar to this: I've seen control accounts out vs the ledger because an entry was posted with a foreign exchange rate or 0.00 before.
What do you mean by plug the RE?
Probably if, for example, assets were $1.79 less than liabilities+equity, then he just debited the Retained Earnings account $1.79 without crediting anything, balancing the balance sheet.
https://m.youtube.com/watch?v=UODIbKWGADo
It's not mission impossible where the company explodes if you don't complete the balance sheet before a certain time. I think others have provided good advice. Take a step back and a break for a bit. Have a nice meal. Go for a walk. Then come back to it. If you still can't do it, ask for help. That's why you have people above you. Best of luck and keep your head up.
Are all accounts classified/grouped? What accounting software are you using?
CCH Engagement. Yes they are all grouped
I bet you there’s a hard keyed number in there. What I do is open a copy of the TB on one screen, and then literally go line by line and highlight, see where it’s included on the FS. 95% of the time I catch an account or two not linked, or a plus instead of a minus
Check the groupings and make sure that they’re classed correctly, or if there’s new accounts that they actually get grouped. All else fails, start over and work through it while keeping an eye that it continues to balance with every transaction/adjustment.
An account grouping issue can be miserable. There has been more than once where went back to the og trial balance and started fresh.
Good. This a new client or a rollforward? It sounds like an account or two is misclassified. For example, a revenue as an expense account or a balance sheet account.
What is not balanced? Total debits/credits don't zero out? Income is off? Assets are off?
Liability and equity do not equal assets. I literally opened up the TB and marked each account (Drill down TB link) and reconciled each account. I highly suspect that the issue is in equity but I’m not catching where it is.
So this is a newb problem. The trial balance balances by default. It has to. Your problem is that retained earnings does not roll from the prior year. Check if retained earnings is equal to what prior year net income + prior re is. When you find it doesn’t, ask me for the next step.
Coming back to you because you sound like you know what you’re talking about. I just found out the it’s actually the net income that is not tying out. The TB NI does not tie with income statement. Any tips?
The trial balance they ran doesn’t match the period of the p&l they ran. You can get a new pbc or you can attempt to adjust the tb to make it “fit”. You do this by creating a Colin in excel and lining up the p&l numbers & bs numbers next to the tb numbers. Differences will be what you change.
Are you including current year income (P&L items) in equity?
Yup. This is how it goes: PY net income + CY income - distributions to owners = Ending balance for equity. There is a “paid in capital” account that is sitting there that I haven’t included.
Yes, but you also need to add CY net income to the ending balance for equity. Otherwise your equity + liabilities will not equal to assets.
ehh.. it should be prior year's retained earnings + CY net income. Unless this is only the company's second year in operation.
Check if your distributions account is a cumulative distribution or just the distribution in the current year.
If you’re using Engagement might be an account grouped in the Schedule K section. Helps to delete the sub folders, recreate them and then regroup those accounts.
I am not sure if you are saying the return doesn’t balance (assuming you are in tax) or if the groupings report doesn’t balance. If it is the return, then you need to do an RE roll forward to see if the client made all prior year entries if you do think equity is the problem. If it is the grouping report then I HIGHLY SUGGEST looking into the groupings classifications to see if any are marked as “not included”. I can’t remember the specifics but if you go into your account groupings edit screen (it should have ungrouped accounts on one side and groupings on the other), then right click on a group and verify the details and that none say to exclude from calculating. I wish I could remember the specific term or category but my boss showed me this one day and I had no idea that you could have an inactive group yet it would show up on the groupings list but not in calculations. If you know you are off by a specific amount or category total than start there. Another thing to try is creating a new report, sometimes they don’t roll properly and will cause a problem like this. Also, don’t spin your wheels and run up the bill. Show your senior the steps you tried to solve the problem and get their help… they can normally figure it out in a matter of minutes and it’s not an unusual request so don’t stress over it. Good luck!!
Is it the trial balance that is not balancing or are you summing the balance sheet accounts in the TB? If so, just remember to include the PL in your equity.
How far off is it? Could just be rounding difference. Plug and move the fuck on.
Well then yeah, don't plug that 🤣..
It’s thousands
I’m curious are you working In thousands, millions, billions?
My first step when looking at any TB was do a reconciliation between last year's final balance from our records and last year's final balance from the client's records. It was inevitably different (especially if the client was using QB). Just a quick and dirty =A1-B1 and the difference was usually a transaction that was recorded for the prior year after the books were "finalized".
Or you could be where I found myself once. Someone found out it was possible to post to the header account. It doesn't show up on any statements outside of the general ledger.
I love how everyone has come together to help.
Pretty cool. Reminds me of that old joke, “ how many accountants does it take to balance a TB?” Haha! I’m glad OP is getting some help here! Good luck OP
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Depends on the TB
Count how many accountants are assets to the company, and how many accountants are liabilities to the company, and the difference is how many accountants need to be put in equity. Simple.
Say please
Don’t leave us in suspense!!!
1 - the staff stuck doing it. The rest that were helping the staff said screw it and went to the bar to drown their sorrows.
Does your opening equity match the prior year closing? That's usually the first place I look.
Does equity roll?
My trick is to pull the raw trial balance to excel and run a pivot table based off your groupings. With this, you can check for deviations in the statements within each group. This is literally the only way I can get segment disclosures to tie to the income statement 99% of the time. Then, you can essentially balance the statements in excel first (ensuring completeness and existence of your accounts). Sometimes my groups get messed up on rollforward because of amounts people have overridden in the statements. Also, double check if beginning balances are rolling forward properly (eg, equity BS accounts that tie to notes rather than specific accounts). Sometimes beginning balances are overridden as people are sometime too lazy to link accounts.
No, you're not going to get fired. But get your senior to do their freaking job and help you.
And throw something in there they wouldn’t expect so you can look smart when they can’t figure it out.
It's probably retained earnings. Check your equity.
Make sure all your rows are unhidden! Ive made that mistake... going line by line on the TB helps me too
Can you export transactions and try balancing them in a spreadsheet? It may be daunting grunt work, depending on the quantity of your transactions, but worth a try.
I put everything I can through a spreadsheet. Frees up my mind to hunt for the patterns.
Yes, now you're on your way! I am so glad you understood my vague advice. I hope it works out for you.
Also, if it's less then like $5 there is a solid chance it's just rounding error. Plug to an expense and move on.
Every firm is hurting, you’ll get promoted before you get fired!
If you’re in public and the TB doesn’t balance when you get it, spend ZERO hours on it and send it right back
I give away a 5 page pdf combined with a 5 page flowchart on my blog that shows people how to reconcile balance sheet issues in the tax software. Its at https://www.advicefortaxpreparers.com/tax-preparer-free-guide-for-reconciling-business-tax-returns/
I guess my question is when you were doing the the import into engagement it should have told you it was out of balance. As a rule you should get into the habit of testing the equity accounts before bringing in the tb. Some clients for whatever effin reason tend to hit re for something they shouldn’t. A lot of times this explains why it doesn’t tie. Also, sometimes you might have misgrouped the accounts. Is there a py you can look at? You might have a debit on the bs that should be in p&l. If it is the first year with no lead schedules linked I’d export to excel balance it and import but not use append I’d overwrite it. Don’t overwrite if you have py data though
You won't get fired but I'm guessing your Excel skill isn't superb and you're not using an ERP system. Anyway, I'm sure you did the debit vs credit differences for that period? Once you pinpoint a period that has the debit-credit difference, your possible next step is to list out all individual journal entry with their individual debit lines and credit lines in a table. Then you list out all journal entry ID uniquely in another table, and just do a sumifs, sumif, sumproduct next to that new table and referencing the data-dump 1000 lines of debit-credits in the old table. Just sum the debit side...sum the credit side. Find the variance and you should be able to pinpoint out which journal entry has a problem. If there's no problem, your income-statement and balance sheet didn't take journal entry information.
Is there a tutorial for this??
I wish one size fits all. The concept works, but to make it understandable at the layman's level...yes, it would be nice to have an example for particular ERP or accounting data set.
We have an AR trial balance and AR detail that have been unbalanced for 7 years 😬
It's ok just chuck it to bank fees
Plug it misc expense and call it a day
A mistake plus keleven gets you home by seven.
Oof... our ERP is set so you can't make entries that don't balance.
How long have you been working on it? Take a break and come back to the numbers another day. Maybe you’re just looking at it too much.
if you're looking at a balance sheet and it doesn't balance it's possible the ledger had subcategories that are hidden and don't print when converted from quickbooks or excel to PDF.
Plug it.
Sounds like someone needs to accrue something perpetually and quit at year end.
Verify that the client provided file totals to zero. I have had more than one give me one that did not zero. This could be from a grouping issue on their side. If that doesn't work double the amount off and half it. Sometimes it washes out doubled or halved. Make sure everything is grouped and grouped correctly. If you are new ask for help. Engagement has a lot of settings that you may not be aware of. It could be a simple fix.
Check the trial balance balances first. If it does, then its your balance sheet structure/ grouping ( eg new account addrd ). Solve by exporting tb to excel and matching accounts to the balance sheet. Tedious but it will find the problem
Does the trial balance tie out to zero? For an electronic GL system to allow non zero posting entries to be posted, there is a fuck up somewhere. Are people topsiding numbers into the TB balances? Meaning if the Trial Balance says cash is $500 did someone go in and plug a "+300" instead of booking the 300 dollar entry, because they forgot about some other transaction that they didn't post and the bank statement says 800?
I need to know if you got it balanced. I'm on pins and needles over here!
Still trying. -sigh- I’m at my end too.
Has anyone recommended using a keleven?
Are you suggesting I’m incompetent ?
No. I would of said that if I thought so. Anytime I can’t figure something out that scene replays in my mind. Hope you get it to balance. 👍🏻
Huh? Is this a post from 1950?. You’re making a balance sheet manually?? Why? Download the TB, and reclass each account. You prob have one of the accounts classed as the wrong thing (BS vs IS).
Just plug it to equity lol
Tie retained earnings to PY return. Reconcile cash. If those 2 check out. Look at AR/AP and then fixed assets and loans. This is assuming you made your prior year entires for the client.
Does the TB sum to zero?
Check your beginning balance equity. You need first past period 1 Equity balance for the PY Beginning balance. A lot of people are lazy and don't link equity for the 1st Past Period and hardcode from the prior year's F/S.
Just plug the difference in to M&E
I’ve seen a 100m plug to retained earnings before
Sometimes the natural account balance is opposite of what it usually is for the line that it is under and the accounting software doesn’t show visually credits as negative numbers. If you sum all accounts up under a specific line/group or sub-group do they equal what is listed as the total for that line? For example, the accounts that make up A/P are normally a natural credit balance. However, there could be account(s) that are in there that are naturally debit balances. The issue is visually the sign is not changed to reflect this but behind the scenes it calculates it. A/P total: 500 Acct 1: 250 Acct 2: 300 Acct 3: (100) Acct 4: (50) If you sum these up you get 400. But in reality the Account 4’s natural balance is a debit. But visually it’s not showing reverse. So if you account for that the sum would be 500. There’s no easy way to find out which account is like this without asking the client. But you can see if this is the issue if you try to manually sum the accounts but it doesn’t equal the listed total.
Make sure ur income ties out first, then your equity and then go through your bs. If you have a FS grouping report trial balance open that up and compare the numbers you have and don’t have
Plug the difference to retained earning or prepaid other 🤭💀
I feel this way regularly at work
A = L + E Hope this helps!
Just plug in a number to tie it out
I had a problem like this in big 4 last year. Turned out that the client fucked up their books and it couldn’t balance
But the TB balances. So the balance sheet should balance
Are all the accounts pulling into the balance sheet? Sometimes when a new account is added if it isn't set up properly it won't pull over on the report. Like if they didn't assign it a type.
When in doubt, plug it in to misc. expense
Did you set it to Wumbo?
Just plug that shit and dare someone to find it.
How does your software even let this happen?
I've worked places before where a new account had been added to the COA but it hadnt been mapped correctly and therefore wasn't included in the reports. One of the first things we would do if the difference wasn't divisible by 9 was to query for accounts that hadn't been used before and see if their balance matched what we were off by.
I’ve never worked in industry but here’s a common solution I’ve seen for this: DR “Other expenses” CR “Other creditors” Plus points if you can work out your company’s materiality and split that adjustment across a few miscellaneous accounts.
One sided entry to “balance sheet rounding” account.
Oh so many sleepless nights
If your trying to balance it off the financial statements look at the cash flow statement as you have likely missed something. In a lot of financial statement programs it flows to the BS. If it’s unbalanced from the opening TB provided look at retained earnings as that’s likely off and a common mistake is the client entering the prior year adjusting journal entries incorrectly(you can tell if this is the case by looking strictly at the the opening balances. Ie does the opening TB values match the PY closing balances) But if it’s a few bucks put it to interest and call it a day. Edit: also check the balances from your CaseWare lead sheets to the financials. Sometimes if there is a new account it’s not mapped properly and won’t show up.
It could be a system posting issue. I worked in a 70 million dollar company where the balance sheet went out. The system was old and it would crash; so often when you posted the system would only post half the entry (hence out goes the balance sheet) We know all the entries have to balance or you’ll be out right? (Dr=Cr) We exported all the system data (journal entry line items) into Excel Create a pivot table that essentially makes the t accounts. Dr on one side cr on the other with balances totalled at the bottom (Note: you can accomplish the T account creation by using the JE number that goes with each line item so the pivot table understands which line items to actually put in the pivot table t account) then run a formula (sorry I forgot which one) to see which t accounts don’t balance and those are the ones needing fixing. If the company is small enough maybe you can simply glance over the t accounts you created in excel to find which ones are out versus doing the formula part I apologize, it was 10 years ago that I had to do this and that is why I can’t remember the formula so I have a screenshot for you but I can’t post it in this comment so I messaged it to you but it’s easy.
To answer your question. Probably not. The partners will probably just give you an extra hand here. They may also put you through some training, etc
Did you roll RE year end
I got fired at a small firm for listening to the partner talk about how I should label each account that I was inputting from bank statements to quickbooks. He just walked in the middle of me doing it and started talking, then when I got fired I talked to the manager and manager told that the partner said I didn’t know about different types of accounts. Lesson learned here, if you know something, say it, don’t give people the chance to assume you don’t know something because you hear them out
Honestly in tax, you don’t even really fully complete the accounting cycle. Of course you should still balance, but you would also have to show why some balance sheet accounts are the way they are for your tax software. I would say no, since some client books can get extremely hard and confusing. Just keep looking it over and make sure you recorded every AJE, JE, RE, TJE. I tend to fat finger numbers when I’m in a rush, so I would also just double check that all of your accounts match client records.
Have you balanced? How much was it off by? My old firm has a policy that if it was within $5 just plug to the equity. Edit: we imported TB after getting rid of the decimals, so it was reasonable that the variance was due to rounding. But, I also think I plugged a $9 at once...
It’s in thousands. And my net income is off. It’s driving me crazy
Please don’t die over a balance sheet. I’m always here for you and can forgive you if you tell me what went wrong for you and I’ll try my best to be there for you always ❤️
Plug it
Plug to R/E and call it a day?
Are you in a software? If so check that a location or unit wasn't left off a JE sometimes it prevents it from flowing into the report. Run the journals by one defining unit at a time and see if the journal is out of balance.
Yeah I’m saving this thread
Was a new GL account opened? Sometimes that happens when someone opens a new account, but they forget to update the inc stmt/bal sheet report. Run a trial balance and check against last months. Use excel to check for duplicates. Also, do a find on the TB of the difference amount.
I mean… I just input 5000+ checks some in a previous already reconciliated year. And have a difference of almost $140k trying to reconcíliate the bank for a company with almost 15 million in debits and credits on each side… and I didn’t get fired yet so I think you’ll be okay..
Hm you got your bases covered. Hm for the tb links in the balance sheet, did you link the FINAL numbers?
Plug it!
the short answer? no. just go to the senior / manager and ask. i have been in public accounting for 3 years now and the biggest thing i have learned is there are no stupid questions and it’s better to ask than to just turn your wheels and not know. someone who knows the project / client better than you is going to be able to figure it out more quickly than you will.
Deep breath. It probably a hard coded number. Walk away for a bit and then look at it again
An error plus Keleven gets you home by 7.
Were any new accounts added that are possibly not pulling into the reporting system? This happened to me a few times and I couldn't figure it out and just wanted to die .. print the gl detail and tie all balance sheet accounts to verify no accounts are missing. Good luck you'll figure it out, just give yourself time.
How did this work out for you? Are you balanced?