Don’t Click It – The Hidden Effect of the Void and Delete Functions in QuickBooks
As your accountant, I like to give you tips and pointers which will not only create fewer corrections at the end of the year but will also make your bookkeeping tasks easier throughout the year. One way I can help is by pointing out a few common errors we see in the bookkeeping submitted by clients and explain how these errors can be prevented.
This past tax season a common error I found was in adjustments to prior periods. The general rule is that after the tax return is completed, any further entries to that period should not be made. Why, you ask? Because making a prior period adjustment will make your books no longer match what the tax return is reporting.
While you may be aware of the importance of avoiding prior period adjustments, you may be unaware of the hidden ways QuickBooks makes these adjustments without your knowledge.
QuickBooks is somewhat deceiving in the process to void or delete outstanding transactions. The program has obvious buttons to “void” and “delete” but these buttons do not simply get rid of the old transactions. When these buttons are clicked, the program creates a background journal entry to adjust the period these old items were originally entered. So, while you may not mean to, if you click on void or delete for any period you have already reconciled or closed with the tax return, you are adjusting a prior period.
Instead of clicking on the “void” or “delete” buttons, you should clear out old transactions by doing a journal entry in the current un-reconciled period. The journal entry will void the check without corrupting your current year balances. The entry is just the reverse of the original transaction. So, if a check which needs to be voided was written for a utilities expense, the journal entry would be to Debit the checking account the check was written out of and Credit the utilities expense. Then, when completing the bank reconciliation for the current period, the original check which needs to be voided and the journal entry created to void the check both must be checked off. The combination of checking both these items will net to zero and get the voided check out of your system.
Therefore, if you find yourself needing to void or delete a transaction from a prior period, avoid the temptation to click the “void” or “delete” buttons.
Of course, if you find the reversing journal entry too complicated, we are here to help you. Feel free to let me know and either Rosie or I can walk you through the entry to void remove an un-cleared item.