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Chart of Accounts

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Karen Posted: Tue, Jan 20 2009 9:41 PM
Does anyone start their Chart of Accounts with zero balances for the new year?  And what is the best way to do this?
Karen Ward Hall, Friedly & Ward Mountain Home, IDAHO TM7 BM+
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If you want to zero out the income statement accounts your best bet is to run a report dated 12/31 then create a journal entry. Credit/Debit  each account as appropriate to give it a zero balance and the net income (bottom line) offset would be to retained earnings.

 

Caren Schwartz (Moderator/CIC)

35-45 Consulting

& Time & Cents Consultants, LLC

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www.3545consulting.com / www.timeandcents.com

203-254-7736

Software for Managing Time, Money & Information

Time Matters, Billing Matters, Billing Matters Plus, PC Law CIC

 

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I actually don't zero out all my income and expense accounts as is typical with systems that have a year end processing. What I do is zero out retained earnings only. For small businesses and partnerships there may be an IRS requirement to distribute all retained earnings each year to the company owners. To do this, I either create a capital account (RE 2008 or Capital 2008), or journalize to the actual equity account, (Kathy Burger Owner Equity). I do a debit to retained earnings, (if I have a net income) and a credit to the capital or equity account. Just so that my retained earnings account on my balance sheet is 0.00 as of the first day of  my fiscal year. When I run the GL, I enter in date ranges and review the 'net change', or I run the income statement with a begin and end date to get the earnings for that particular period. As Caren suggested, some clients prefer to zero out all of the income and expense accounts at the end of each year. This requires offsetting debits and credits to each account, probably best dated 01/01/09 to bring the balances to zero. To know what needs to be done, print the income statement.

Kathy Burger PREMIER LEVEL CIC - PCLaw, Time and Billing Matters Plus Certified Kathy Burger Consulting, LLC 200 Windward Ave. Beachwood, NJ 08722 732-279-6301 Kathy@KathyBurgerConsulting.com

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I follow Kathy's procedures also and find it very easy to 'close' the year.  My only problem comes when some CPA's can't understand the net change figure but I usually can set them straight. 

Deanne Ikard Ikard Consulting Time Matters CIC Billing Matters/Billing Matters Plus CIC Time Matters Enterprise CIC LNTPA CIC PCLaw CIC 707-863-9718 Green Valley, CA Serving Northern California
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