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sosos4you
January 7, 2025
Question

adjustments via journal entires for previous years

  • January 7, 2025
  • 1 reply
  • 0 views

Hello Support and community,

I am using quickbooks online

 

I recently took over bookkeeping for a client who has had 3 other bookkeepers since 2021 (the start of her business).. I have found that over half of the entries during that time were improperly categorized.

 

In late 2021 my client purchased a home on 5 acres with the desire to turn the home into rental duplex and land into an orchard.  The rental remodel took until early 23 to be ready for tenants. 

 

The previous bookkeepers classified large quantities of Capital Improvements as expenses. (hundreds of thousand of dollars).  

 

Large farm equipment was "expensed" rather than put into assets

 

Year end 2021 and 2022 JEs were made moving Owner's Investment into Retained Earnings (there were no earnings at all)

 

There are many other issues - however I main question is --

 

Can I make journal entries to previous years and date them as last day of the year in each of the years? So they will reflect on that years balance sheet.

i.e.

Can I Reverse the JEs for OI into RE and date them in the corresponding year?

 

Can I use journal entries to move expenses (a bulk amount) out of expenses into capital improvements?

 

I have manually (paper and pencil) corrected the entries and created spreadsheets with the correct data and submitted to my client's CPA - she has determined clients tax returns for the years in question need to be amended.

 

My main objective is to begin 2025 with as accurate of a balance sheet as possible via journal entries (that can hopefully be dated as year end in corresponding years.).

and

If this is possible how do I do it?

 

I am not closing 2024 nor will I begin 2025 until I determine if my quest if possible - If it is not. I may simply set up a new company and stat from scratch since the previous years are such a mess. 

 

I have hard copies of detailed balance sheets, P&L and transaction reports for each year with all pertinent notations.

 

Happy New Year to All and thank you in advance for your feedback!!

Martella

 

1 reply

Rainflurry
Rainflurry
January 7, 2025

@sosos4you 

 

"Can I make journal entries to previous years and date them as last day of the year in each of the years? So they will reflect on that years balance sheet.

i.e. Can I Reverse the JEs for OI into RE and date them in the corresponding year?"

 

Are you asking if you can you make the journal entries (JEs) or how to make them?  Yes, IMO, you can and should make the adjusting entries as of 12-31 in 2021 and 2022 with accurate notations of exactly why the entries are being made.  Did you client pay for the property, improvements, and equipment personally?  is that why there are entries to the owner's equity account which were then improperly reclassified to RE?

 

"Can I use journal entries to move expenses (a bulk amount) out of expenses into capital improvements?"

 

Yes.  Again, I'm not sure if you're asking if or how.  Your client's CPA should give you the proper adjusting entries to be made.  You can do your best to reclass the expenses to fixed assets at this point and adjust as needed when getting the entries from the CPA.  The entries aren't necessarily straightforward but, again, you can make the adjusting entries and adjust as needed after getting the final entries from your client's CPA.   

 

 

S
sosos4youAuthor
January 7, 2025

 

Thank You Rainflurry, your help is greatly appreciated.  I would also like to know "how" to make the journal entries to past years - I suspect it is the same as any journal entry - however I would appreciate any tips being that my tasks are a bit  out of the ordinary.  Thank you sooooooo much for your time

Peace and Blessings

Martella

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