User Support Forum

Hello,

I'm trying to figure out a discrepancy between the equity accounts on the Trial Balance and the Changes in Equity reports. The CIE report shows an ending balance which takes into account the activity in it's associated accounts (income, release), as it should. But the Trial Balance shows no activity against the equity accounts at all, and the ending balance is the same as the beginning balance. Therefore the same account shows 2 different balances.

Is this because the fiscal year (or our last month) has not been closed yet? If so, the Trial Balance is not accurate when I send it to our Accountant for their Review. Nor is it accurate throughout the year.

Please let me know how I can have the TB and the CIE reports match the account totals.

(I did post a comment a few years ago about the TB not being a true TB for accounting purposes, but that's another subject )

Drummin' Mama wrote:Hello,

I'm trying to figure out a discrepancy between the equity accounts on the Trial Balance and the Changes in Equity reports. The CIE report shows an ending balance which takes into account the activity in it's associated accounts (income, release), as it should. But the Trial Balance shows no activity against the equity accounts at all, and the ending balance is the same as the beginning balance. Therefore the same account shows 2 different balances.

Is this because the fiscal year (or our last month) has not been closed yet? If so, the Trial Balance is not accurate when I send it to our Accountant for their Review. Nor is it accurate throughout the year.

Please let me know how I can have the TB and the CIE reports match the account totals.

(I did post a comment a few years ago about the TB not being a true TB for accounting purposes, but that's another subject )

FWIW ... I think you're trying to compare apples and oranges.

The trial balance is primarily used, as its description says, to verify that the posted debits and credits are in balance. If you don't have all zeros as the sum within each accounting fund, then there's a problem somewhere.

The CIE report is a report that shows the results of the transactions and gives a current balance.

Thank you for your reply Neil. However, this still does not answer the question as to why the TB has one amount and the CIE report has another. At what point does the TB show the actual balance in the equity accounts? This is a problem for our accountant doing the Review, as from their perspective there are two different figures for the same account.

Nancy

Drummin' Mama wrote:Thank you for your reply Neil. However, this still does not answer the question as to why the TB has one amount and the CIE report has another. At what point does the TB show the actual balance in the equity accounts? This is a problem for our accountant doing the Review, as from their perspective there are two different figures for the same account.

Nancy

I would think at close of the year, but I'll get someone to take a look at this thread.

Drummin' Mama wrote:The CIE report shows an ending balance which takes into account the activity in it's associated accounts (income, release), as it should. But the Trial Balance shows no activity against the equity accounts at all, and the ending balance is the same as the beginning balance.

That is how it works. The Trial Balance is showing you debit and credit amounts posted directly against the accounts. If you were using those equity accounts in transactions, then you would see the amounts on the Trial Balance agree with the amounts in the Direct Transactions column on the Changes in Equity report.

As Neil said, it's apples and oranges. If the Trial Balance were to include the debit and credit balances that closed to equity accounts as well as those same debit and credit balances on the income and expense accounts, the report would never balance. Those amounts would be doubled.

By definition a Trial Balance should be a list of the total amounts of debits and credits posted to each account, with a matching grand total for the debits and credits at the bottom. During the course of a fiscal year, the restricted 3000 accounts are not accurate if they only show the amount once a year is closed.

Maybe the way to do it would be that when income is received and when money is spent, the 3000 account should also be debited or credited accordingly, with the 4999 as the opposing entry, to have a running balance in the 3000 account. It's not doubling up on the TB, the TB should have matching Debits and Credits totals only. The TB in Power Church is not a true accounting TB as the totals should be the totals of all the debits and credits, not a report that totals zero. I have to "doctor" up the PC TB report to make it a true TB to send to our accountant each year for our Review.

Anyway I think I understand what's happening....PC adjusts the balance of the 3000 account upon closing the year. But if I understand it correctly, it does it without an opposing debit/credit, which wouldn't be the right way to do it.

Update: I just closed June (our fiscal year end) and the TB accounts still show the beginning balances for the year of the temporary restricted accounts when I print a June 30th TB. If I instead select July, the balances are changed at that point.

Drummin' Mama wrote:Update: I just closed June (our fiscal year end) and the TB accounts still show the beginning balances for the year of the temporary restricted accounts when I print a June 30th TB. If I instead select July, the balances are changed at that point.

That's the the way it should be.

FWIW .. you don't have to 'close' a fiscal year. Powerchurch recognizes the fiscal year you have setup under Preferences and does the adjustment when you open the new month.

In fact, it is highly recommended that you do not close any months until you have to, in this way you can have 18 months open at any one time to make corrections

This topic covers why leaving those months open is a good idea:

https://www.powerchurch.com/forum/viewt ... =3&t=11388

To understand why the account balances on the Changes in Equity report are not the same as the corresponding account balances on the Trial Balance you need to understand fundamental accounting principles. The first fundamental principle to understand is that Assets = Liabilities + Equity. This principle is the basis for the Balance Sheet report. The second fundamental principle to understand is that Income and Expense accounts are temporary accounts. They are temporary accounts because the balances in these accounts are closed out at the end of the fiscal year. The third fundamental principle to understand is that when the balances in the income and expense accounts are closed out, they are closed into the equity accounts. So when you are looking at the Changes in Equity report, the system is taking the balances in your income and expense accounts and "closing" them into the equity accounts to come up with the ending equity account balances. However, the actual equity accounts are not being posted to. Nor should they be. That is why the equity account balances on the Changes in Equity report and the Trial Balance report are not the same. To see what the true equity account balances are you should use either the Changes in Equity Report or the Balance Sheet report, not the Trial Balance report. Having said this, the Trial Balance report in PowerChurch is a true Trial Balance report for accounting purposes. Your Accountant should be able to use the Trial Balance and Account Close To reports to independently recreate the Balance Sheet, Income and Expense Statement, and Changes in Equity reports produced by PowerChurch. The fact that you can do so independently and get the recreated Balance Sheet to balance proves that the Trial Balance report in PowerChurch is a true Trial Balance report for accounting purposes.