Just thought I'd put out a couple of tips regarding where to look first if you do your financial reports and they come up out of balance. Here's how I attack it:
1) Can the amount you're off by be traced to a particular transaction? If so, go back to that transaction and see if you forgot to record both sides of the transaction. Remember, we are essentially using double entry accounting when doing the balance sheet and income statements, so anything that you only record one side of will be off by that amount. Even if you don't know it this is what you're doing. For example, if you're out of balance by $100 and you can track that down to a specific deposit into the bank account, the question becomes did you remember to recognize that $100 as income somewhere in one of the income accounts, or record it as a liability if it was a loan or advance of some sort?
See #3 for more.
2) It might be a transposition error (eg writing down $156 one place, and $165 as the other entry). How do you tell if it's this problem? If the difference is evenly divisible by 3, then it's probably a transposition error. For example, in the example above the difference between 156 and 165 is 9 (165-156=9). 9 is divisible by three. This will always be the case in a transposition error regardless of the amount, even with large amounts. For example, 5146 gets converted into 1546. This is a difference of 3600, which is divisible by 3 (1200). 145623 gets converted into 146523 (900 difference, which divides equally by 3). NOTE: This should work even if the transposed numbers are not next to each other.
3) Sometimes if you don't immediately recognize the amount, and it's not a transposition error, you have failed to post both sides of more than one transaction. Because these add up, they're hard to track. If you've been doing regular quarterly reports in the financial format used for the year end report (i.e. Balance sheet and income statement, with difference equal to zero), and you were in balance the previous report, all you should need to do is double check your entries since then. Have you recognized income/liability for each bank deposit? Making bank deposits increases your "Cash in Bank" balance, an asset, so you must make a corresponding increase in income or increase in liability to make the net effect zero. If you've written checks, did you decrease the bank account? Did you increase your expenses or decrease your liability? This works in reverse from income.
4) Did you copy the beginning numbers from the prior report correctly? It might sound brainless, but it's a common problem. In particular, did you change your beginning numbers from the last report because you found an error and decided to fix it? This can be fixed if it's still within the same year, but do it as 2 separate transactions (the original wrong one, and then the correcting one) - don't try to fix the original entry since it will only confuse you even more. It if happened in a prior year, fix it by making entries in the "other income/expense" lines and attach a note of explanation. Don't go back to your 2000 report and say "I goofed so I'll change the ending numbers". At this point 2000 is set in stone.
5) When all else fails, call your Regional or Kingdom Exchequer and ask for help. Sometimes a second pair of eyes will find it in seconds after you've torn your hair out for hours.
Tetchubah of Greenlake