There’s a few things that you can do in QuickBooks that absolutely, positively drive your CPA crazy — and probably drive up your bill too.
1. Posting entries to retained earnings. Your current year’s begininng retained earnings should be the same as your prior year’s ending retained earnings. Many clients don’t understand this concept so they end up posting entries directly to retained earnings throughout the year. During tax time, you’re CPA will have to correct this so you generally shouldn’t post any entries to retained earning throughout the year. QuickBooks will automatically post entries that are suppose to hit retained earnings to the account at the end of the year. While there are exceptions — if your company issues a divided, for example — this is a good rule of thumb to follow.
2. Post all entries as adjusting entries. If you’re unfamiliar with QuickBooks, you may be tempted to post all your entries as adjusting entries. That’s not the best approach to take because you’re not posting the entries in the various modules, which will keep track of a lot of details of each transaction that’ll be useful to you and your CPA later. The rule of thumb is to use adjusting entries as a last resort. Post your entries through the appropriate module (receivables, payables, etc.) and make any corrections there too.
3. Post current year’s activity in prior year. Pay close attention to the date of the items you post in QuickBooks – especially the year. While QuickBooks is easy to use, it’s sometimes a little too easy. Unlike other accounting software programs, QuickBooks doesn’t let you finalize a year by preventing you from making changes to it. If you accidentally post an invoice to QuickBooks that’s dated five years ago, QuickBooks will let you post that invoice. That poses the problem that now your current year records are off becuase you’ve changed your past year’s records. Just be careful when entering your transactions and double check that date.