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PLEMCo
October 6, 2021
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Net Income does not match between PnL and BS reports

  • October 6, 2021
  • 1 reply
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In the equity section of the balance sheet, the "net income" line does not reflect the net income number from the Profit & Loss bottom line. In this case, the "net income" on the Balance Sheet is overstated. Total equity on the Balance Sheet however is correct because the overstatement of "net income" on the balance sheet is compensated by an understatement in retained earnings.


What is causing this mismatch in "net income" between balance sheet and Profit and Loss? How can this mismatch be fixed in the system?

Best answer by BigRedConsulting

@PLEMCo 

RE: You can see there is a mysterious "Closing Entry" at the end of February which has no significance to our FY Jan-Dec back in 2020. 

 

The Closing Entry isn't a real transaction. It's created at report time for the Balance Sheet report, based on your prior earnings. You can see it on a balance sheet detail report that includes the Retained Earnings account, such as the one you attached.

 

The entry is created to shift the Current Earnings (Net Income) for the fiscal year to Retained Earnings. This is how Retained Earnings is automatically populated. If you widen the date range on the report you attached, you'll probably see one of these each year. The only time you won't is when your Net Income for that year is exactly 0.00.

 

Since yours is appearing on 2/29/2020, I expect your fiscal year is currently set to start in March.  You can check by choosing Company | My Company, then click the edit icon in the upper right, and then pick Report Information:

1 reply

AlexV
AlexV
October 7, 2021

Hi PLEMCo!

 

Thanks for reaching out to us. The Balance Sheet report shows net income for the current fiscal year and it should match the net income on the Profit & Loss report. Let me help you in fixing it.

 

First, make sure that the filters like reporting method and dates are the same. Also, you'll want to review the fiscal year by following these steps:

  1. Go to the Company menu and select My Company.
  2. Select the Pencil icon.
  3. Under the Report Information tab, make sure Fiscal Year is set correctly.

 

If the same thing happens, you can rebuild your company file to resolve data damage. Please follow the steps in this article: Resolve Potential Data Issues in QuickBooks Desktop.

 

I also added this link: Customize reports. This will explain more about how to customize your reports to get the right data.

 

We'll be right here if you need more assistance with this. Thanks!

P
PLEMCoAuthor
October 7, 2021

First, thank you for the prompt response.

We think we've tracked down the source of the problem but can't tell how to fix it.

 

As I mentioned there is a unrecognizable figure that (on the BS) is traded off between the net income and Ret.Earnings(RE), so everything balances but then the Net incomes don't match between the BS v PnL reports.

I've attached all the transactions on the RE, and at the top there is a mysterious "Closing Entry" which accounts for the discrepancy. This was not entered by us nor is it editable or accessible.

I understand Quickbooks does this automatically.

 

The other unknown is why on the last day of February which on our Jan-Dec FY has no special place.

A few month ago our company was bought by another organization which uses a Mar to Feb FY, and they asked to move our data to their version of QB. It seems that our FY was shifted (unnecessarily) into the prior years and these extra entry was made without anyone knowing. I'd really like to have our Balance sheet not appear discrepant, at least for all prior years. Is there a way to delete the effect of this Closing entry on the reports?

BigRedConsulting
BigRedConsulting
October 7, 2021

If the P&L are both run on the same basis (cash or accrual) and both are run for This Fiscal Year-to-Date , OR as long as the P&L starts on the first day of your fiscal year and ends on the same date as the balance sheet, like then end of last month, then Net Income should match.

 

Basically, Net Income on the balance sheet will always be the same number as a P&L dated from the beginning of the fiscal year to whatever As of date appears at the top of the balance sheet.

 

 

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