To illustrate the setup of the Accounts Receivable beginning balances, suppose we have the following general ledger account balances.
100 Cash 100.00
200 Account Receivable 200.00
300 Inventory 800.00
400 Accounts Payable 300.00
500 Notes Payable 400.00
600 Capital 400.00
After entering the general ledger accounts into the General ledger master file, make a general journal entry for each of the general ledger account balances. The following screen shows the general journal entry entered for the beginning balances.
Next, the customers must be entered into the Customer master file and an accounts receivable controlling account must be assigned to each one. The screen below shows the entry for customer jones.
The accounts receivable controlling account 200 has been assigned as the controlling account for jones.
To summarize what has occurred so far, the Customer master records have been entered using the Customers data entry form. The accounts receivable controlling account number was entered in the Controlling Account field for each customer record entered. The beginning balance of the accounts receivable general ledger account has been entered with a general journal entry.
The next step in preparing for the entry of invoices for the customers' beginning balances is the set up of an inventory product code to use in the detail of our invoices. This product code is entered using the Inventory Products data entry screen. Included in this product code setup is the assignment of a general ledger sales account. If you have the C/Books Inventory Control System you must also assign a general ledger controlling account and a cost of goods sold account. This product code should be unique. Its only use is to facilitate the setup of the customer balances. Let's use the product code beginbal, to easily identify the product. The following shows what the inventory screen looks like if you have the C/Books Inventory Control System.
Why do we use the Inventory account for both the cost of goods sold and the controlling account? To begin with, the cost of goods sold account could really be any account due to the fact the product cost is zero. Zero cost means no cost of goods sold when invoiced. It also means that the Inventory account balance won't be changed. The sales account is posted to when you enter each invoice.
When invoices are entered, the debit and credit actions are as follows:
1. a debit to the customer's balance and thus the accounts receivable controlling account;
2. a credit to the sales account assigned to the product code (accounts receivable controlling).
The net effect on the accounts receivable controlling account is zero. Zero amounts were posted for the inventory costs so the net effect on the inventory account is also zero. The only effect this entry has is to increment the customer balance field.
For those who do not have the C/Books Inventory Control System, the inventory screen is displayed as below.
Notice that the accounts receivable controlling account is entered into the Sales Account field.
To illustrate the entry of the beginning balance invoice, suppose we are setting up the beginning balance for Mr. Jones of $53.70. The general journal entry has been completed, and the balance in the accounts receivable controlling account has been established. The invoice appears as follows:
The date of each of the beginning balance invoices should be in the period preceding the first month of operation on the C/Books Accounting System. For example, to start using this accounting software November 1, the beginning balance invoices should have a date October 31. After all the general ledger accounts have been entered and the closing routines have been run, the balances that have been entered are installed as beginning balances for November.
If aging of the beginning balances is required, the date of the invoices must vary to encompass several periods. In this case, you must run the closing routines for each period the invoices affect. See the C/Books General Ledger Manual Chapter 14, Closing Processes for specific instructions on closing a period.
For reference purposes, it is suggested that the invoice number be somehow flagged as a beginning balance invoice. For example, you might want to start with invoice number BB0001, with the BB signifying beginning balance. This aids reconciling all the beginning balance invoices to the beginning balance of the accounts receivable controlling account.
The detail line portion of the form appears as follows:
After you have stored the detail line, press the NEXT <F7> button to display the Tax & Discount screen. Leave the tax fields blank. If the customer can still qualify for a prompt payment discount, enter the appropriate pay terms. Otherwise, enter a pay terms that does not allow a discount (i.e., n/30).
The actual full image of the Enter Invoices screen together with the Detail and the Tax portions, as you may normally see it, looks like this:
Note: If the beginning balance of a customer includes a credit, the credit memo must be entered using the Enter Credit Memos screen.