The QuickBooks Balance Sheet Out of Balance error occurs when the total value of assets on a balance sheet doesn’t match the combined value of liabilities and equities.
A balanced balance sheet should have assets equal to the total liabilities and equity. It can happen for various reasons, such as setting an incorrect closing date, linking transactions incorrectly, having a damaged company data file, or encountering problems with specific transactions.
If both the accrual and cash basis reports are imbalanced, it could indicate file corruption, while an imbalance in the accrual but not the cash basis report might point to issues with specific transactions.
The most common issue with an accrual basis balance sheet is when income or expense accounts show a balance without corresponding transactions to justify it.
This post will explore the various reasons behind this error and the different ways to fix it.
How To Know If Your Balance Sheet Is Out of Balance?
To address the QuickBooks Balance Sheet “Out of Balance” issue, it’s crucial to pinpoint when it has occurred.
Follow these steps to investigate and customize your Balance Sheet report.
- Identify the Problem Date: Determine the date when the Balance Sheet initially went out of balance.
- Access QuickBooks Reports: Open QuickBooks and navigate to the Reports section.
- Select Financial Reports: Under Reports, choose “Company and Financial.”
- Choose Balance Sheet Summary: Locate and click on “Balance Sheet Summary.”
- Customize the Report: To tailor the report to your needs, select “Customize Report.”
- Adjust Display Options: On the customization options page, go to the “Display” tab.
- Set Report Basis to Cash: Change the “Report Basis” to “Cash.”
- Specify Date Range: Modify the columns to match the specific year, month, week, or day when the QuickBooks Balance Sheet initially went out of balance.
If the QuickBooks trial balance issue persists, follow the solutions provided in this article.
However, if you are short on time or uncomfortable executing the instructions, contact the 24×7 QuickBooks error support team for assistance.
Why Is My QuickBooks Balance Sheet Out of Balance?
When you see the error pop up, it can be due to a few things:
Inventory Transactions:
Unconventional inventory transactions like those that drive quantity on hand into negative figures, change quantities for previously entered assemblies or involve mixing units of the same item.
Customer-Level Discounts and Payments:
Handling customers with multiple jobs, invoicing for all jobs, and receiving payments that include job-specific discounts. These discounts are typically recorded in the payment and Discount/Credit tab.
Journal Entries Linked to Credit Memos:
Some seemingly correct transactions can unbalance the Cash Basis. This often occurs with credit memos, job-related discounts, or offsetting general journal entries.
Data Corruption in Company Files:
Company file damage in QuickBooks is when it cannot accurately read the company file, often due to factors like file exceeding its size limit, hardware or software problems, sudden system shutdowns, network issues, virus or malware attacks, or resource shortages (like RAM or network equipment).
Using The Features for Multi-Currency:
In multi-currency mode, a problem occurs when the payment’s exchange rate differs from the invoice creation rate, causing a balance sheet discrepancy. Although QuickBooks acknowledges this issue, it requires significant software modification to be resolved.
Points To Remember Before Troubleshooting QuickBooks Balance Sheet Out of Balance Issue
- Yearly Total Adjustment: Adjust the reported totals by year before verifying the balance sheet’s accuracy.
- Log out and log in: Sign out of QuickBooks, then sign back into your QuickBooks file.
- Regular Backups: Ensure you back up your QuickBooks company file before troubleshooting.
- Multi-User Considerations: When operating in a multi-user environment, be mindful that it can affect the company file and potentially lead to balance sheet discrepancies.
- Data Repair and Primary System: If data damage occurs, repair it and access the file from the primary hosting system.
- QBWIN Log Review: Check and reload the QBWIN logs for a comprehensive overview of QuickBooks activity.
HFE.com: Quick Fixes
Problem: Inventory Transactions
Solution: Keep strict inventory control by reviewing unconventional transactions, accurately recording additions and subtractions, and promptly addressing negative quantities.
Problem: Customer-Level Discounts and Payments
Solution: Invoice each job separately for customers with multiple jobs, reconcile job-specific discounts, and verify the accuracy of discounts applied to payments.
Problem: Journal Entries Linked to Credit Memos
Solution: Keep note of journal entries linked to credit memos. Ensure the Accounts Receivable account is correctly specified on the first line of the journal entry.
Problem: Data Corruption in Company Files
Solution: Prevent data corruption by regular backups, addressing hardware/software issues promptly, maintaining system stability, monitoring network health, and employing antivirus protection.
Problem: Using Multi-Currency Features
Solution: Exercise vigilance with multi-currency exchange rates, keep QuickBooks updated for potential fixes and be aware that resolving multi-currency issues may require significant software modifications.
Resolving QuickBooks Balance Sheet “Out of Balance” Error
Here are the steps to fix a balance sheet that’s out of balance in QuickBooks.
Step 1: Run the Report on an Accrual Basis
Running the report on an accrual basis recognizes income and expenses when earned or incurred, regardless of when the cash is exchanged. It helps in identifying any unrecorded or incorrectly recorded transactions.
- Ensure the report is set to the accrual basis if it’s not already.
- Go to Reports > Company & Financial > Balance Sheet Summary.
- Select Customize Report.
- On the Display tab, choose Accrual under Report Basis.
- Click OK.
If the balance sheet remains out of balance on an accrual basis, you should rebuild your company file. If it’s still out of balance only on a cash basis or even after rebuilding, proceed to step 2.
Note if your balance is off only in cash, accrual, or both at this stage.
Step 2: Determine the Out-Of-Balance Date
Determine the date when the balance sheet first went out of balance.
- Go to Reports > Company & Financials > Balance Sheet Summary.
- Click Customize Report.
- Under Dates, select All.
- In the Report Basis section, choose accrual if the balance is off only in accrual; otherwise, select Cash.
- In the Columns section, pick Year.
- Click OK.
- Compare Total Assets to Total Liabilities and Equity to identify the date.
Refine the date using the same steps for month, week, and day.
Step 3: Identify the Problematic Transactions
To locate the transactions causing the balance sheet discrepancy, follow the below steps:
- Go to Reports and choose Custom Report, then Transaction Detail.
- On the Modify Report window, go to the Report Date Range section.
- Enter the date when the balance sheet went out of balance into the From and To fields.
- In the Report Basis section, pick accrual if your balance sheet shows discrepancies on the accrual basis. Otherwise, click on Cash if the issue is only with the cash basis.
- In the Columns section, uncheck Account, Split, Clr, and Class. Instead, select Amount to enhance readability. Ensure the Paid Amount column is also selected.
- Confirm your settings by clicking OK.
- Check the Paid Amount column for the ending balance. It should be the same as the amount currently out of balance.
Thoroughly check the report to identify the transactions responsible for the discrepancy.
Step 4: Adjust Transaction Dates
- After identifying problematic transactions, modify their dates. Note the original dates, then change each transaction to 20 years later.
- Save each transaction.
- Refresh the report; the Paid Amount column will show zero if done correctly.
- Revert the future-dated transactions to their original dates. This step can repair transaction links. If the issue persists, proceed to the next step.
Step 5: Delete and Re-Enter Transactions
If changing transaction dates doesn’t resolve the issue, you must delete and re-enter them.
If the balance sheet remains out of balance after these steps, try the advanced methods to troubleshoot balance sheet issues.
Advanced Guide to Address Balance Sheet Out of Balance Error in QuickBooks
Here are a few advanced methods to narrow down the problematic transactions that may be causing the balance sheet to go out of balance.
Method 1: Generate A Customer Report
To create a customer report, follow these steps:
- Start by navigating to the Reports menu. From there, select Custom Reports, and then choose Transaction Detail.
- The Modify Report window will open automatically. You can manually select Customize Report and proceed to the Display tab if it doesn’t.
- On the Display tab, make the following adjustments:
- Set the Report Basis to Accrual.
- In the From and To fields, specify when the Balance Sheet went out of balance.
- Under Total, select Customer.
- Next, go to the Filter tab and perform the following actions:
- In the Filters list, locate Transaction Type.
- From the Transaction Type dropdown, choose Multiple Transactions, and then check Invoice, Credit Memo, and Payment.
- Confirm your settings by selecting OK.
If the total amount matches the Balance Sheet’s out-of-balance amount on this date, search for the customer with a non-zero (positive or negative) sub-total. This customer likely has transactions causing the imbalance.
If the total doesn’t match the out-of-balance amount on this date and is non-zero (positive or negative), consider adding other transaction types to the transaction type filter, such as checks and journal entries.
Method 2: Run A Vendor Report
To generate a Vendor Report, follow these steps:
- Go to the Reports menu. From there, select Custom Reports, and then choose Transaction Detail.
- In the Modify Report window, select Customize Report and proceed to the Display tab.
- On the Display tab:
- Set the Report Basis to Accrual.
- In the From and To fields, specify when the balance sheet went out of balance.
- Under Total, select Customer.
- Next, navigate to the Filter tab and perform the following actions:
- In the Filters list, locate Transaction Type.
- From the Transaction Type dropdown, choose Multiple Transactions, and then mark Bill, Bill Credit, and Bill Payment.
- Confirm your settings by selecting OK.
If the total amount aligns with the Balance Sheet’s out-of-balance figure on this date, search for the vendor displaying a non-zero (positive or negative) sub-total. This vendor probably has transactions that are impacting the imbalance.
If the total doesn’t correspond to the out-of-balance amount on this date and remains non-zero (positive or negative), contemplate including additional transaction types in the Transaction Type filter, such as Journal Entries.
Method 3: Run A Journal Report
The journal report will help you locate the transactions where the debit total doesn’t match the credit total or one of its accounts is left blank under the Account column.
Once identified, open that transaction and delete or re-enter it as necessary.
- Go to Reports > Accountant and Taxes > Journal.
- Select Customize Report, and go to the Display tab.
- Set Report Basis to Accrual.
- Set the From and To fields to the date the Balance Sheet went out of balance.
- Select OK.
The debit and credit totals won’t match, confirming that you have identified the correct date when the balance sheet is out of balance.
Method 4: Generate A Report for Other Transactions
Some accounts may not be assigned any account, which can also throw your balance off. Follow the below steps to fix it.
- Go to Reports > Custom Reports > Transaction Detail.
- The Modify Report window opens; if not, select Customize Report and go to the Display tab.
- Set Report Basis to Accrual.
- Choose All from the Dates dropdown.
- Set Total by to Account List and mark Item in the Columns list.
- Select OK.
- Scroll to the bottom of the report. If the last group of transactions is labeled “No account,” and the Account column is blank, these transactions lack assigned accounts.
- To fix this, go to Lists > Item List, edit items, change the Account, then revert it to the original account.
- Repeat for each transaction with missing accounts.
Frequently Asked Questions
What should I do to maintain balance in my Balance Sheet?
To ensure your balance sheet remains balanced, you must be mindful of factors that can disrupt it. Like:
- Inventory Returns and Applied Discounts on Invoices: When dealing with inventory returns and applied discounts, ensure that your invoices accurately reflect both the sale and the discount. Always create a credit memo for returned inventory items and link it to the corresponding invoice when you receive payment.
- Caution with Journal Entries Linked to Credit Memos: Be careful when linking journal entries to credit memos. If a journal entry is adding to the discrepancy, review and edit the entry to confirm that Accounts Receivable is correctly specified as the source on the first line. Also, verify that the journal entry remains properly linked to the associated credit memo.
How frequently should I reconcile my accounts to prevent balance sheet errors?
To prevent balance sheet errors, it is advisable to reconcile your accounts regularly, typically monthly or quarterly.
What causes an unbalanced balance sheet?
An unbalanced balance sheet arises from discrepancies in your business’s equity. Equity increases with growing assets and decreases with reduced assets or higher liabilities. Your balance sheet will be unbalanced if the equity calculation doesn’t account for the assets and liabilities difference.
