Easy Cash Management Question

djswim · 2009-07-16

So to bring in the initial bank account balance for a company, we plan on making a journal entry (one side G/L Cash Account, the other the Bank Account) equal to the Cash Account balance PLUS the sum of any outstanding items (checks/deposits/transfers). Then we'll make the associated ledger entries to get the outstanding items in one by one, bringing the Bank Account balance equal with the G/L Cash Account.

As the outstanding items clear the bank, we'll clear them on the Bank Rec. My question is this: What is best practice for clearing that initial entry (the one equal to cash account plus sum of outstanding items)?

Thanks in advance!

djswim · 2009-07-21

I hate doing this but I'll give it one bump.

Do people just leave that initial entry in there indefinitely and ignore it?

AdamRoue · 2009-07-21

You have already reconcilled it, so it is simply an opening balance that carries on, you never close it off. It is a bit like trying to close off the closing balance to the last statement, you do not close it off, it is reconcilled. Of course I have to be careful as if for instance you are in the US the reconciliation process is very different to the UK, although that should not alter the principle of the opening balance!

Alex_Chow · 2009-07-21

djswim wrote:

So to bring in the initial bank account balance for a company, we plan on making a journal entry (one side G/L Cash Account, the other the Bank Account) equal to the Cash Account balance PLUS the sum of any outstanding items (checks/deposits/transfers). Then we'll make the associated ledger entries to get the outstanding items in one by one, bringing the Bank Account balance equal with the G/L Cash Account.

As the outstanding items clear the bank, we'll clear them on the Bank Rec. My question is this: What is best practice for clearing that initial entry (the one equal to cash account plus sum of outstanding items)?

Thanks in advance!

Yes, this is the best practice to load in beginning bank balance. You would clear it when doing your first bank reconciliation.

Hmm.. This is a great topic that should be blogged..

djswim · 2009-07-21

But to clear it don't you have to fudge on the statement information that you give it, or do you take care of it in it's own separate reconciliation?

You could theoretically leave it in there forever, but that's not very tidy in my opinion.

Alex_Chow · 2009-07-21

Yes, so if the client is going live 1/1/09, and you're loading in beginning balance as of 12/31/08. Then you would do the reconciliation on 12/31/08.

djswim · 2009-07-22

Ok, so just so I can mark this "Solved", the initial entry comes in by itself and gets it's own fake bank rec. to clear it, with a statement balance of the amount.

That sound like it?

Alex_Chow · 2009-07-22

Yep, you got it. I wouldn't call it a fake bank rec. It's an initial bank rec that cleared all the previously cleared transactions.

Easy Cash Management Question

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