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komatthew
March 1, 2025
Solved

Closed out CD account but not balance sheet is off

  • March 1, 2025
  • 2 replies
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Hi!

We have CD account, which we closed out. After the funds were transferred to our checking account, we now show a negative in the CD account on balance sheet. We started with $45,000 in the CD, and then we were deposited back $47,194. Now the balance sheet shows the CD account as -$2194. It seems the profit from the CD has caused a negative on the balance sheet. I just need to get this zeroed out, so the balance sheet has zero for CD account.

 

Thanks for any help!

    Best answer by FishingForAnswers

    @komatthew  Well, there's only three real situations that could be the case here.

     

    Either the CD was accruing interest, or it was not.

     

    If it was accruing interest, then the interest had to be showing up in the CD, or in another bank account.

     

    If it was not accruing interest, then the wrong amount was moved.

     

    If it was accruing interest and the interest was being deposited into another bank account, then the interest should have been recognized using the deposit function into said bank account as noted above, and the wrong amount was transferred over.

     

    If it was accruing interest and the interest was staying in the CD, then the interest should have been recognized using the deposit function into the CD as noted above, and the correct amount was transferred over.

     

    It's almost certainly option 3.

     

    Ideally, you would be able to figure out how much interest was accruing each period, whether that be month or quarter, and use the deposit function to recognize the interest income in your books and increase the CD balance by the same amount. At the very least, you should create one deposit entry per year dated at year end for the year's worth of interest income.

     

    At the end, if the entries were done correctly, your CD balance will zero out at the time of the transfer transaction.

    2 replies

    J
    Jayson_E
    March 1, 2025

    I can help you zero out the negative balance of the BD account in your balance sheet. komatthew. Let me add the specifics below.

     

    Before we begin, could you tell us why the starting amount is different from the deposit? Please note that the difference in amounts is causing a negative in your Balance Sheet.

     

    To clear it out, you can also create a journal entry to zero or clear out the amount in your financial report.

     

    1. Click the +New button.
    2. Select Journal entry.
    3. Choose an account from the Account field and enter it on the first line. Then, based on whether the transaction requires a debit or credit to this account, input the appropriate amount in either the Debit or Credit column. 
    4. On the next line, select the other account you're moving money to or from.
    5. Double-check the amounts, you should have the same amount in the column on one line and the Debit column on the other. This means the accounts are in balance.
    6. Click Save.

     

    However, it's best to reach out to your accountant for additional advice on this matter to make sure everything is handled properly since this will affect your financial reports.

     

    Once your negative balance is cleared out, you can now proceed on reconciling your account. Refer to this article for detailed guidelines: Reconcile an account in QuickBooks Online.

     

    We're always committed to helping you navigate QBO with ease and confidence, especially when managing your balance sheet. Don't hesitate to reach out if you have other concerns, and we'll get back to you promptly to address them.

    K
    komatthewAuthor
    March 1, 2025

    Thanks for the reply. The amounts are different because we made $2194 in interest on the CD, so when they deposited it back that's why the amounts were different.

     

    I tried the journal entry, but it doesn't work because the debit and credit need to match, and then that results in adding to my checking account. Right now my checking account matches the bank, so that can't change.

     

    Any other way to change it?

    FishingForAnswers
    FishingForAnswers
    March 1, 2025

    @komatthew  The likeliest explanation is that you were not accounting for the CD interest in such a way that the CD balance was increasing by the interest income each period.

     

    To give a proper answer, you'll need to explain how you were recognizing the CD interest income in your books.

     

    A standard way of doing this is by way of the Deposit function to the CD account using Interest Income as the source account; this recognizes your interest income at the same time as it increases the CD balance.

      K
      komatthewAuthor
      March 1, 2025

      Thanks for the reply.

      I wasn't recognizing the interest in the CD because for some reason it wasn't showing up from the bank. So basically I just told my account about the interest earned each year and then he added it to the taxes. Then when we closed out the account, the large chunk was deposited back into the checking. So maybe that could be why I have the negative? 

      Any way to fix this?

       

      Thanks!

        FishingForAnswers
        FishingForAnswersAnswer
        March 1, 2025

        @komatthew  Well, there's only three real situations that could be the case here.

         

        Either the CD was accruing interest, or it was not.

         

        If it was accruing interest, then the interest had to be showing up in the CD, or in another bank account.

         

        If it was not accruing interest, then the wrong amount was moved.

         

        If it was accruing interest and the interest was being deposited into another bank account, then the interest should have been recognized using the deposit function into said bank account as noted above, and the wrong amount was transferred over.

         

        If it was accruing interest and the interest was staying in the CD, then the interest should have been recognized using the deposit function into the CD as noted above, and the correct amount was transferred over.

         

        It's almost certainly option 3.

         

        Ideally, you would be able to figure out how much interest was accruing each period, whether that be month or quarter, and use the deposit function to recognize the interest income in your books and increase the CD balance by the same amount. At the very least, you should create one deposit entry per year dated at year end for the year's worth of interest income.

         

        At the end, if the entries were done correctly, your CD balance will zero out at the time of the transfer transaction.

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