I've written about Out-of-balance Balance Sheets numerous times in the past. I even discussed how Out-of-Balance Sales Receipts can cause the Balance Sheet problem. ProAdvisors need to be aware of these problems because they should be able to respond to their clients who are getting Out-of-balance Balance Sheet messages in newer version of QuickBooks.
I think users are seeing Out-of-balance Balance Sheets more now than in the past, because a few years ago, you could have an Out-of-balance Balance Sheet in QuickBooks and the Verify Data utility didn't even fail. The corresponding notification level within the QBWin.log file didn't even trigger notification of the actual condition of the balance sheet.
Then, in 2016, people started taking notice. It happened when Intuit revised the Verify and Rebuild routines, and the related reporting with the release of the Verify and Rebuild Reports, (what I call the "layman's version of the QBWin.log"). It also happened in the pop-up notification that your Balance Sheet says is Out-of-balance when you attempt to run a Balance Sheet. Suddenly, people who never noticed that their Assets didn't equal their Liabilities & Equity were made aware of the Balance sheet issue.
Well, as it turns out, a couple of months back, I re-encountered a number of causative Sales Receipt transactions that were out-of-balance after being called in to assist with recovery of data following a cyber-crime incident.
Then, last week, my good friend, Laura Madeira, sent me an email discussing a client she had who experienced several instances of where Sales Receipts were out-of-balance. Laura subsequently posted her findings in the Woodard Network forum, after she spent some time testing with QuickBooks Enterprise 2017 and confirming that out-of-balance Sales Receipts were possible.
But, the problem of Out-of-balance Sales Receipts in QuickBooks isn't new at all. And it isn't exclusive to QuickBooks 2017 (desktop versions). It has been around for some time. I first wrote about it in relationship to QuickBooks 2014.
As it happens, a Sales Receipt in QuickBooks can have an amount posted on a row within the detail section of the transaction without recording any 'item'. While QuickBooks 'Money-in' transactions only post 'items' via the GUI (graphic user interface), there is an 'account' field on the backside of the transaction.
Third-party products have been known to post Sales Receipts directly to accounts using this 'behind-the-scenes' account field without making use of any item(s). This generally doesn't present a problem since the transaction remains in balance.
But I have also seen (in my data analysis/repair) business Sales Receipts posted by third-party utilities that managed to post an amount without any associated item or account.
But this Out-of-balance Sales Receipt problem isn't only associated with third-party utilities. It can be replicated using the GUI itself. Generally, I have seen this where either the client is non-taxable, or all the items in the item list are non-taxable, or sales tax is turned off.
Apparently, in these conditions, part of the error checking routine that would insure all amounts on the form are tracked for sales tax purposes is bypassed.
Below is an example of a Sales Receipt created using the QuickBooks 2014 (Desktop) GUI in which a $1.00 amount has been posted to the Sales Receipt without any "Item" association.
When the transaction is saved, the Master Record posts a debit to either the bank account or undeposited funds (depending on how you have configured your default receipts), but the sum of the Target Records (all the associated transaction detail lines) does not equal the Master Record, since the amount without an item is not credited against any account.
OOB Sales Receipt & Transaction Journal
I have also illustrated the associated Transaction Journal (above). You can see the Debit is for $721.00 (in this case to my Checking account), but the Credit is for $720.00 (to Misc. Income).
So, where is the $1.00 (shown in the blue box in the actual Sales Receipt)? Well, it's off in "Lost in QuickBooks Land".
This immediately throws the Balance Sheet out-of-balance, as you can see below:
OOB Balance Sheet
The quintessential accounting equation of Assets = Liabilities + Equity is "Out-of-balance" because not all of our Debits equal our Credits. We are off by the $1.00.
My client with so many of these problems was using QuickBooks 2016. They both manually key transactions and import transactions. And, it was somewhat difficult to detect which methods were used for every transaction that had the problem.
Laura reported that her client was using QuickBooks (Desktop) 2017 and that she was able to reproduce it within the 2017 products. She is, of course, well versed in Beta testing and product review, so I have no doubt that she's seeing exactly what she described in her post.
I believe this is a bug that has managed to slip through, in part, because Sales Receipts are a less common form of Money-in transaction used on a day-to-day basis.
While I see a lot of Sales Receipts being posted by third party solutions like ECommerce/Shopping-cart integrators, for the most part, those products use QuickBooks items. And we rarely see this problem with those transactions.
The other common use of Sales Receipts are people posting end-of-day Sales Summaries from Point-of-sale systems that don't integrate with QuickBooks, or from manual cash registers.
Again, because of the complexity of those postings, people tend to be meticulous in making certain that that QB Sales Receipt matches exactly with their other system, so I wouldn't expect to see many out-of-balance situations there.
I think this occurs when people are either careless, attempt to change something on a Sales Receipt and fail to properly record the changes, or they are using some third party import tool that wasn't properly configured.
There is one bit of good news. Generally it's easy enough to track down these out-of-balance situations. Simply use the QuickBooks "search" or "find" feature to look for the amount the Balance Sheet is Out-of-balance. You normally will be able to track down the culprit transaction in no time.
Hopefully, if Intuit has enough people "bug" them about this "bug," then perhaps they can get it resolved in a future release of the products versions that are still under support.