Discussion:Client didn't record assets on Quickbooks
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| 2 September 2009 | |
| This is a nightmare.
Client has assets that it has never recorded in Quickbooks. The prior accountant never reconciled Quickbooks with the tax return (this is the same client I am compiling the financial statements for to deliver to the bank). Of course, the assets are substantial. I have the building and land figures and can record those, but the other figures, which is mostly some additional buildings added to the property over the years, I don't have, but I have previous years figures for the information. I know I will contact the prior accountant for the depreciation schedules, but having those assets on the books will improve my client's position with the bank. What the heck do I do now? Tom | |
| 2 September 2009 | |
| explain why this will cost 3 times as much as you originally quoted | |
| 2 September 2009 | |
| Kevin,
That's not a bad idea! Of course, it's a non-profit... Tom | |
| 2 September 2009 | |
| I suppose so, but let's just screw this up so they don't!
Tom | |
| September 2, 2009 | |
| I would go back and match the Balance Sheet in Quickbooks to the tax return, starting two years back, with the adjustment(s) going thru Fund Balance, or even suspense.
In theory (!!), it should all balance out, assuming that the 'unrecorded" assets were just run thru QB as an expense (rather than capitalized), which would just end up reducing the fund balance anyway in the long run. See how much of a 'net' adjustment you end up with, and how far off the QB fund balance is from the tax return. Compare this difference to the amount of E & O insurance you have (just kidding - maybe), then decide if you need this headache in your professional life or not. I've tried this before; sometimes the difference is small enough for my comfort level. PS - good luck | |
| September 3, 2009 | |
| I would take last year's balances per QBs, line them up with the 990 balances, and then do one big JE on the last day of the prior year so that your beginning balances are correct. It shouldn't take very long, unless there are a lot of accounts that you have a hard time telling how they are grouped on the 990. | |
Seaside CPA (talk|edits) said: | 3 September 2009 |
| Chances are whoever prepared prior year tax return made some journal entries, & they probably just never got posted to clients books. If you have to get depreciation schedules from prior accountant, I would sure ask about copies of journal entries as well! | |
| 3 September 2009 | |
| What I think I am will do is, after consulting with the client last night, is act like a bookkeeper, make the entries and hand it back to them. Then they can take it from there.
Of course, they balked only after I told them all the hoops I was going to jump through and how much it would cost. Tom | |
| 3 September 2009 | |
| Is the tax return correct? If so then I would do as Natalie suggests and make one big entry to get the beginning balances correct. If the tax return is not correct I would still make the entry to get Qbooks to agree with the 990. Then I would make further adjustments to get Qbooks correct. Then you just issue a compilation report like usual. If you don't have a prior year F/S that you are correcting there is no prior period adjustment. If you are correcting a prior year, so what, issue the report and move on, it's no big deal and it wasn't your screw up. | |
| 3 September 2009 | |
| In reviewing my original post, I should not have said "the tax return" meaning the 990.
It comes from the state personal property return. The prior accountants office never reconciled the three together. I was taught over 25 years ago to match the books to the tax return to the personal property return. So, net assets being left off amount to approximately $360K. That's why I want to back away from a compilation until I satisfy myself that I have all the correct information. Tom | |
| September 4, 2009 | |
| Now I'm confused. What does a personal property return have to do with a 990? Is that something special in Maryland? | |
| 4 September 2009 | |
| Maryland has a personal property return. I don't know if Hawaii does, but when I was reviewing the client information I stumbled across a MD personal property from the previous year with $560K of net equipment and Quickbooks and the 990 only listed net equipment of $200K. Hence, the net equipment and therefore, net assets are understated by $360K.
I have to stop writing these when I'm tired I suppose. I really didn't realize how badly this thing has gotten to me. Tom | |
Seaside CPA (talk|edits) said: | 4 September 2009 |
| My first thought would be that Quickbooks & the 990 are correct, and assets previously disposed of did not get taken off of personal property return. I have lots of clients that I do bookkeeping and tax returns for, but they choose to prepare the personal property tax returns. I never see them, but I can assure you that they would probably not match my records. Did previous accountant prepare their personal property returns? If so, then not sure what the problem is. | |
| September 4, 2009 | |
| Tom - does the personal property tax statement list the assets by year (the ones around here are)? And is so, can you match to the F 990 deprec schedule by year? I agree with Seaside's theory that disposed of assets were never taken off - if my clients do their own pers. prop tax statements, they are usually a complete work of fiction when compared to an income tax return.
And a $360 thousand dollar difference/more than double ! - doesn't your client have any idea of what they own (cost of).. | |
| September 4, 2009 | |
| OK just a minute...."and the 990 only listed NET equipment of $200K" Do you mean net as in after accumulated depreciation?
My property tax statements show the assets at acquisition cost, by year(no depreciation). The county then factors in age, depreciation, obsolescence, magic wand etc to determine assessed value and the tax imposed. Are you comparing apples & apples, my dear? (PS - Tom, please don't stress so much over this. Remember the client created the problem, not you.) | |
| September 4, 2009 | |
| Personal property tax returns -- no, we don't have that in Hawaii. I had to look up information on Maryland's website to find out what you were talking about.
As already pointed out, there could be several reasons for differences between the property return and QBs. I think you need to start with who prepared the personal property return. I would then ask for details of the assets. If the client is hesitant about paying additional fees, I would explain the issue (e.g. different amounts reported) and ask them if they would like to reconcile the returns. | |
| 4 September 2009 | |
| Maybe some numbers would help:
Here's what is on the Quickbooks and 990: P&E $60K Major Improv. $15K
P&E $ 60K (only number that matched) Major Improv. $500K Land $100K Building $200K
After depreciation on the personal property return, there is a difference of $360K between it, the 990 and Quickbooks. Again, all for the same time frame (say, calendar end 12/31/08), prior accountant took the numbers from Quickbooks, did both the 990 and personal property return. I took into consideration assets that are retired, but that doesn't take into consideration why the land and building are missing from the books and the tax return. It's nowhere on either. As for the equipment, I can say that some is probably retired, but that doesn't account for some of the additional property not being on the books. By my calculations, close to $100K is still eligible for depreciation, yet the 990 and Quickbooks don't have them listed anywhere. I hope this clarifies this mess. As you can see, it's rather significant. Tom | |
| September 5, 2009 | |
| "I think you need to start with who prepared the personal property return. I would then ask for details of the assets." What Natalie said....someone has to know where the numbers came from !
ANY chance the property tax statement numbers are at fair market value rather than historical cost? (Since the big difference seems so be with assets/real property that could have appreciated - depending on whether they were acquired a while ago.) | |
| 5 September 2009 | |
| I took a peek at the Maryland personal property form. They have their own depreciation rates so the net assets would rarely match.
I have a vague recollection that pre-117 fund accounting allowed the immediate "expensing" of fixed assets. | |
| 5 September 2009 | |
| Actually, they are at historical cost on the personal property return. I noticed the number on Quickbooks for the P&E matched the both returns and the land value goes back a bunch of years (I traced it through real estate records), so I know it's historical cost.
I am going to have the client write their previous accountant for their depreciation schedules. I want to know where they got the numbers for the personal property return specifically as well as the 990. I can't believe for the life of me their tax department didn't look at both returns. I asked some friends out here about it and all of them were pretty horrified that they didn't reconcile both returns since they had both sets of records. I found out a little more about this client and it's a bit messy. I will just leave that alone. Suffice it to say, they only adopted computerized records 4 years ago. Tom | |
| 5 September 2009 | |
| I've had several nonprofit clients over the years that didn't have all of the fixed assets on the books. Usually for a variety of reasons like the buildings were so old that they had been acquired before records were kept or they just expensed them in prior years because no one told them they shouldn't. Sound like you need to work from the property tax records and just book a journal entry. It's not really that uncommon. | |
| September 7, 2009 | |
| It sounds like you're taking a good first step -- asking for the depreciation schedules. In the end, I think you'll probably need to book a prior period adjustment. I agree with Rkr that it's not uncommon to do so. | |
