Methods for entering financial activity for the current year

After you have entered the starting balances, enter the net activity of the ledger accounts for the current year. It is important to note that you cannot directly enter the startup balances for the dedicated ledger accounts: Accounts Receivable, Accounts Payable, Service Receivables, and Inventory. How?

You can choose from four methods for entering the net activity. Entering the current activity for ledger accounts is nearly identical to entering the starting balances. Remember to adjust the posting period as necessary, and provide a description of what is reflected in the period balances.

Each successive method provides more detail for reports than the previous method and requires more time to enter data. Read each of the methods thoroughly before deciding which to use. Except where noted, you must first enter the starting balances of all the ledger accounts.

Method 1

When you post the starting balances, include all the period activity in the beginning balance. Post a single journal transaction to the period before the current posting period. Suppose you are setting up a new company during period 2. The net activity for period 1 is added to the starting balances. In the journal transaction, enter the total for each ledger account (beginning balance + period one net activity) and post the transaction to the end of period 1.

Method 1 is best suited for use near the start of a fiscal year. The method does not include the entry of historical information. It is not recommended for use during the middle of the fiscal year.

Method 2

Post the starting balances to period 0, and then post a journal transaction that contains the net activity for each ledger account during the current fiscal year. Post the transaction to the period before the current posting period. Suppose you are setting up during period 7. Create a journal transaction that contains the net activity for each account through the end of period 6. Then post the journal transaction to the end of period 6.

Method 2 provides data for a Year-to-Date Income Statement, and lets you view the entire activity for the year, but does not provide data for reports in periods before the setup.

When you close the books at the fiscal year-end, the balances roll over to the Last Year column in the Ledger Accounts window. This method does not set up individual period balances, so the period balances do not represent the true period activity.

Method 3

Post the starting balances to period 0; then in each of the prior periods, post a journal transaction that contains the net activity of each ledger account for that period. Suppose you are setting up during period 7. Create and post a journal transaction that contains the net activity for each account during period 1. Then repeat the process for periods 2 through 6.

Method 3 provides accurate period balances. Each account contains its correct period balances for the current fiscal year. When you close books at the fiscal year-end, the balances roll over to the Last Year column in the Ledger Accounts window. The ledger accounts therefore reflect the true activity in each period. This method lets you generate reports that compare data from the previous year to data in the current year.

Method 4

Post the starting balances to period 0; then enter each transaction for the current year. Method 4 requires a great deal of work. This method is only practical when no accounting has been posted for the current year, or it is only a few weeks into the new fiscal year.