There are 8 steps in record or set up of the beginning balance.
Step 1: Determine the date of the beginning balance and data preparation.
If you already created an account in PEAK with the previous information, you want to import data into PEAK. There are the techniques of importing data as follows:
1.1) Determine the date of the beginning balance
If you want to start creating an account in PEAK, you also want to record the beginning balance. The first step is considering the start date in PEAK. An appropriate date can either start with the beginning of the year (01 Jan XX) or during the year (01 Apr XX).
The start date in PEAK will determine when a brought forward balance should be recorded.
Technique: If you determine the start date to be 01 Jan, the advantage is that you can see and review the total year accounting information in one system. But if you do not record the data as at the beginning of the year, you need to keep accounting information in 2 systems (your previous system and PEAK), which you can review the previous information.
1.2) Prepare data for recording beginning balance
After identifying the start date, the next step is to prepare the information of the beginning balance. The information includes 3 parts, which are system information, transaction information and accounting information.
Part 1: System Information
It is the set-up information that helps the system for ready to use. They consist of 3 sections:
1. Contacts (Accounts Payable/Accounts Receivable): a list of
names, addresses or 13-digit tax ID numbers, and etc. Recommended to prepare in
PEAK formats excel file.
2. Inventory: a quantity of inventory and the inventory cost. Recommended to
prepare in PEAK formats excel file.
3. Cash Balance of each finance channels: such as
1) Petty cash
2) Bank deposits
3) Outstanding cheques
4) Deferred cheques
5) Advance receipt/payment (e.g. directors paid on behalf
of the entity)
Data used as the beginning balance can be imported after the system activation (can record the backdated transaction). However, the recommended data should be prepared first is inventory information as the system of cost calculation is FIFO method, so the transaction date will affect the cost. If the transaction has already recorded, then changed it later, it may cause the inaccurate cost. But we can adjust the cost calculation by making an adjustment in the daily journal.
Part 2: Transaction information
Existed transaction information before activating the system but will affect the date after activating the system such as:
1. Invoice (accounts receivable): not receive the payment yet or outstanding cheque.
2. Invoices (accounts payable): unpaid invoice or deferred cheque.
Outstanding transaction is the pending transaction to receive or make the payment after the activation date in PEAK, including deposit cheques and pay cheques.
Part 3: Accounting information
Accounting information should be prepared before importing is Trial Balance. If you activate the system on 01 Jan XX, the trial balance should be used as for the year ended (trial balance as of 31 Dec XX). Its information will include only the balance of assets, liabilities and shareholders' equity.
But if you activate the system during the year, the trial balance should be used as of the date before the activation date in PEAK. For example, if you want to activate PEAK on 01 Apr XX, the information of the trial balance should be taken from the beginning of the year, 01 Jan XX to 31 Mar XX. The information of assets, liabilities and shareholders' equity is reported as at 31 March XX. Income and expenses are reported from 01 Jan XX and 31 Mar XX.
Some items in trial balance may be adjusted before recording in PEAK, which we will talk about those adjustments in the next chapter.
- Completion of Record a Beginning Balance (Part 1/8) -
All how to record a beginning balance in PEAK.
Part 1: Record a Beginning Balance (Beginning Balance Part 1/8)