The five step process:
1. Determine your start date.
2. Assemble your business records.
3. Set up your financial accounts.
4. Enter transactions.
5. Verify account balances.
Today I'll show you the first step to set up your Accounting Software
Step 1 - Determine your start date
The start date is a specific point in time that you choose. This should be a point in time that all of the financial account balances can be readily calculated. No reports or detail of transactions will be available in the Accounting System before the start date. After the beginning balances are entered, all transactions between the start date and the current date must be entered. The combination of these beginning balances and the subsequent transactions will accumulate to true, accurate current balances for all of your accounts -accounts receivable from customers, accounts payable due to vendors, bank accounts, credit card liabilities, as well as income and expense accounts.
Entering beginning balances as of the start date.
When you calculate the beginning balances of accounts, you need to calculate balances at a specific point in time - the start date. You should ignore payments received from customers after the close of business on that date and include amounts due to vendors as of the close of business on that date. This means that all transactions - checks written, payments received, invoices created, and so on, summarized by financial accounts - up to and through the close-of-business on the start date are reflected in the balances entered as of the start date.
To calculate the balance of an account as of the start date, begin with a statement from a bank, vendor, or credit card company that summarizes a period prior to the start date. Add any transactions incurred before the start date that are not reflected on the statement, and subtract any payments made but not posted on the statement. For accounts receivable, summarize the charges and payments for each customer, up to and including the start date, to determine the balance outstanding as of that date.
Beginning balances must be calculated for each account in the chart of accounts: bank accounts, accounts receivable, inventory, fixed assets, accounts payable, credit card liabilities, notes payable, and equity accounts. If the start date is the beginning of a new fiscal year, income and expense accounts will be zero, but if the start date is in the middle of a fiscal year, income and expense account balances must be calculated as well.
Go to Step 2