Most business owners to be successful have a basic understanding of how to read their financial statements, however they often rely on others to prepare them and might overlook some accounts that should not be. Here are three accounts that we often see on QuickBooks financials that should alert you to ask questions.
Uncategorized Assets on the Balance Sheet
This is one of my most disliked accounts. I cannot find a reason when someone would use this account on purpose. (If you know when, please comment below). However sometimes QuickBooks Online in certain circumstances uses this as a default on the bank feed. If you are not paying attention it is easy to simply click add thinking it is an uncategorized expense and you will figure it out later. However, since this account sits on the Balance Sheet if the error is not caught before year end you may miss it as a tax deduction.
In order to correct this, you will need to review the transactions in the account and determine where they should be coded. Then depending on how old they are, create entries to reclassify them accurately.
Reconciliation Discrepancy on the Profit and Loss
This account is used as a default when you do not reconcile your checking or credit card accounts correctly. It is a huge red flag as the whole idea behind reconciling is to verify the information in QBO matches what happened in the checking or credit card account.
Ask Your Accountant or Uncategorized Expense on the Profit and Loss
These accounts are less scary, but you will need to review what is in them and reclassify to the correct account. Often when we are updating clients’ books, we may use these accounts if we have a question to continue with updating the books. Monthly or at a minimum annually you will want to adjust them to the right account and then the account will go away.
Look at your financials and see if any of these culprits are out there. If they are, do not panic there is still time to correct them. Contact your financial team or favourite bookkeeper to make the adjustments and be on your way to Happier Financials.
Now is the time to review your financials before bringing them to your CPA. Learn the three top accounts you do not want to see. If you do then they must be corrected and may even save you some money.