The balance sheet is a list of all the assets and liabilities of the organisation, and will probably have been prepared by your accountant. Remember that the balance sheet that is required is as at the Close-Off Date, and constitutes the opening balance of your accounts for MoneyWorks. The balance sheet may not be available until some time after you have commenced using MoneyWorks.
Before you start entering the balance sheet, you should ensure that all the necessary accounts have been created in your chart of accounts. The balance sheet will have accounts on it that you don’t normally use, such as “Issued & Paid Up Capital” to represent your share holding.
Some of the information (such as your opening receivables, payables, and bank balance) will have been already entered in the preceding steps. If this is the case, you should put these balances against the Setup account. This effectively cancels out the balances that were previously entered against the Setup account. When you have entered (and posted) the opening journal, the balance in the Setup account at the end of the setup period should be zero (make sure you check this).
To enter the balance sheet:
- Create a new journal transaction
- Ensure the General tab is selected
The journal will be a standard general ledger journal, not a stock journal.
- Ensure that the journal date is the same as the Close-Off date
This will ensure that it is put into the Setup Period.
- The journal description should read “Opening Balances” or similar
- For each entry in your balance sheet, create a detail line in the journal with the appropriate general ledger code, and the balance sheet amount debited or credited as appropriate
Remember that any lines referring to balances that have already been entered (such as Accounts Payable and Accounts Receivable, and possibly Bank and Stock) will be put against the appropriate Setup account.
- If you have used the Bank Balances window (or a previous journal) to enter bank balances, use the SETUP account instead of the bank account.
- If you didn’t use the Bank Balance window, debit the correct bank accounts with the balances. You must do a Bank Reconciliation to account for the opening transaction —see Bank Reconciliation.
- The accounts payable from your balance sheet will be represented by a credit to the SETUP account (or the SETUPP account, if you used that for opening payables). If you entered your opening invoices as GSTable, you need to credit the SETUP account by the net amount, and the GSTPaid account by the GST amount.
- The accounts receivables from your balance sheet will be represented by a debit to the SETUP account (or the SETUPD account). If you entered your opening invoices as GSTable, you need to debit the SETUP account by the net amount, and the GSTRec account by the GST amount.
- The stock on your balance sheet will be represented by a debit to the SETUP account (or the SETUPS account).
When you have entered the last line, the debits and credits should balance.
- When the journal is balanced, click OK
To debit or to credit: For non-accountants, it can be tricky to know whether to debit or credit an item. MoneyWorks normally takes care of this for you, but it cannot do so in journals. Here are some guidelines to help you decide for your opening journal:
- Current Assets (stock, receivables etc.) are normally entered as debits. Thus your bank account balance will be entered as a debit (unless you are overdrawn, in which case it will be a credit).
- Current Liabilities are entered as credits.
- Fixed Assets (computers, office equipment) are entered as debits.
- Term Liabilities (bank loans, mortgages) are entered as credits.
- Shareholders funds (share capital, retained earnings) are credits.
If you enter the journal the “wrong way round”, use the Reverse command in the Edit menu to reverse it (Windows users press Ctrl-Shift-V).
Checking the Journal: Once the journal is entered, you should check the balance sheet. The easiest way to do this is to print the Balance Sheet report as at the end of the Setup Period, and have the “Include Unposted” option set. This will treat the as yet unposted opening journal as if it had been posted.
Although the information in the report will probably be laid out differently, the actual values should be the same for each account. In particular the Setup Account(s) should have a zero balance.
When you are satisfied that the Journal is correct, you should post it.
Lock the Setup Period: As this will complete the setup process, you should close (or at least lock) the Setup Period —see Closing a Period.