Using QuickBooks Add/Edit Multiple List Entry for Opening Balances

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I think I've heard my fellow ProAdvisors say more than once not to ever use the Opening Balance field for Vendors and Customers.

For years when ProAdvisors used those fields, the Opening amounts for Vendors were credited to Accounts Payable and debited to Opening Balance Equity. Similarly, the Opening amounts for Customers were Debited to Accounts Receivable and credited to Opening Balance Equity. 

Then, several years back, Intuit changed all that. While the AP and AR accounts remain appropriate, the Vendor amounts get debited to a QuickBooks special "expense type" account called Uncategorized Expense. And the Customer amounts get credited to a special "income type" QuickBooks account called Uncategorized Income.

For example, in the illustration below, a New Customer by the name of "A New Customer" was entered with an Opening balance of $3,000 in the Add/Edit Multiple List Entry "Customer" window.

As you can see, the amount was credited to the "Uncategorized Income" account that QuickBooks immediately created for just this purpose.

If we actually open the transaction that QuickBooks posts as an Invoice, you'll see there is something unusual about this transaction, even though it's an Invoice, an item based transaction. There is no item. That's because QuickBooks has recorded the off-setting Uncategorized Income account within the guts of the Invoice – out of sight of the User Interface.

Now, we could perform a Journal Entry to reclassify the account from Uncategorized Income to another account if needed, but that seems to defeat the purpose of not manually entering the Invoice individually in the first place, as would even changing the item to something appropriate.

I know, let’s just change the Uncategorized Income account. Maybe we want this income to go to an equity account to offset our Trial Balance entries if we were just starting this file.

When we go to edit the account, there is a big problem.

Normally, you could change the Account Type of an Income account. But because this is a '"special" QuickBooks created account, you can't do that. 

Rats, what are we to do? All of those journal entries or invoice changes just don't appeal to me.

Before we go on, this is the point where I must tell you to perform a "backup" of your QuickBooks Company file. We don't expect anything to go wrong during this process, but better safe then sorry.

Now that the safety message is behind us, I can tell you there is a solution to this issue. It starts by making a new Income account called, "Ucat Income." It doesn't really matter, but I just like making it a shortened version of the account we intend to obliterate. 

You can see my new account below:

Returning back to the QuickBooks created "Uncategorized Income" account, we now will merge it into our new "Uncat Income" account:  

When you attempt to merge the two accounts, QuickBooks says the original Uncategorized Income account was created for specific transactions. We already knew that, so just go ahead and click OK to that message. QuickBooks merges the two accounts. 

Now Edit the "Uncat Income" account. Notice (shown below) that even though our $3,000 opening balance now is in this account, that the Account Type is back to being "editable."

I now can change the type. In this case, I want an Equity Account I can use to offset Imported Trial balances for historical Accounts Receivable from an old accounting system.

If I open a QuickReport for the account, I just configured via the step-by-step process outlined above. You can see that my $3,000 opening balance is in this account.

Of course, I wouldn’t do this for a single transaction. I'd do it if I were copying a large number of new customers from a spreadsheet or report into the Add/Edit Multiple List Entry window with their Opening balances as of the specified date. I'd also do it along with their other information like addresses and phone numbers.

By the way, if you use the built-in Excel import feature in QuickBooks, you have the same issue, because the same two accounts get created if you post customer or vendor open balances via that route.

But you can use this process to easily change the off-setting accounts as part of an overall file historical posting strategy.

Would I do this in every situation? It's doubtful, because I have other tools available. But if I didn't and I needed to import a lot of balances, this is an easy way to get them into QuickBooks and to adjust the account that QuickBooks auto assigns such transactions to without having to perform a lot of subsequent changes.