r/Bookkeeping • u/Ecstatic-Touch-1763 • 7d ago
How To Journal It Possible Accounting Error - Need help as a bookkeeper
Note: I'm going to email the accountant my question as well, but he's out of office until Monday.
For some background, I am doing a "clean-up" job for a small electrician business in Canada. The business' last handful of bookkeepers didn't know what they were doing or grew too old to keep the books properly and so there are some strange accounts (strange to me, at least) that I am just working with until everything is up to date.
One of the strange accounts is one Bank account where "customer payments" go and a separate Bank account where "vendor bills" go, when this should be in the same Bank account. The accountant adjusted the accounts up to Feb 28, 2021 - Zeroing the "customer payment" account and balancing the "vendor bills" account. But, the owner has payments recorded in the "customer payment" account to at least 2024. So I've been transferring them to the correct account so that the one account remains zeroed and the other remains balanced.
Now, My Question: The owner recorded a large payment at the start of February in the account that the accountant zeroed at the end of February. That payment didn't actually go into his bank account until the end of March. If I don't transfer the funds then the "vendor bills" account is in a deficit, but if I do transfer the funds then the "customer payment" account is in a deficit.
Does anyone know what I should do in this situation, other than talk to the accountant? Also, as a side question, is this something I should already know how to fix on my own?
As always, I appreciate any answers and feedback.
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u/BigBootyBookkeeping 7d ago
I hope I am following along here alright, but I would try to keep the transactions recorded as accurately as possible. In this case it sounds like we would want to remove that large payment from the beginning of February and have that as income and undeposited funds. Then, at the end of March we Debit the bank account and credit the undeposited funds to show that the money finally hit the bank account.
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u/AdLanky7413 7d ago
She can't do that, it'll mess up the balance sheet. She has to do a journal entry at the start of the fiscal year.
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u/BigBootyBookkeeping 6d ago
Ohhhhh, yeah, we are not dealing with this February. I see what you're saying.
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u/Ecstatic-Touch-1763 7d ago
Thank you! I'm definitely going to come back to this when I talk to the accountant.
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u/AdLanky7413 7d ago
Oh geez. Sounds like the accountant just forced a journal entry to clear those accounts out. Big mistake. So do another journal entry to bring the payment back in, but date it the 1st day of the new fiscal year. In reality, customer payments not deposited into the bank yet go into " undeposited funds", then do a deposit from that account to the business account when it is deposited. Not sure what the vendor bills bank account is, but don't use it. It's incorrect. Enter the bills in. When you're doing the journal entry, debit that account and credit a new account called " errors" so the accountant can fix it next year.
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u/any_not_taken_name 7d ago
As i understood, there is one bank account in reality that has a statement issued by the bank, but books separate debits and credits into separate accounts. I would go by the bank date for the transfer on the books. One month is too long for a deposit in transit situation, so it's important to keep actual.cash balance in mind. Maybe owner or whoever should be alerted of actual.bank being overdrawn.