Recording expense opening balance

[Doug Laidlaw]

On Sat, 3 Oct 2009 04:29:41 pm maljam5 wrote:
> How do I record an expense opening balance. For instance, if I set up an
> expense account for 'phone bill' and I know that I have already spent $500
> year to date, what transfer account would I use to record this amount so
> that at the end of the year I can print a report on the total spent for the
> year?

By definition, you can't open your books with an expense already incurred.  As 
I see it, you have two options:

(a) Open your books as at the beginning of the fiscal year and in "phone bill" 
record an expense item "Expenses to date".  I am not sure what you do with the 
other half of the entry - it can't go to Cash, of course.  It could go to 
"opening balances".  The advantage of that is that you have a complete fiscal 
year for tax purposes.  Alternatively, you can record the complete history, if 
there are only a few transactions.

(b)  When my accountant set up my books, there was a balancing item 
"Preliminary expenses."  You could open your books as of today, and for the 
$500, debit Phone Bill and credit "Preliminary expenses."  That item would be 
written off at the end of the year.  I imagine that it would go in this year's 
Balance Sheet, but it is really part of your profit and loss.  "Preliminary 
expenses" would be transferred as one item; if you have expenses that belong 
to Gross Profit and others to Net Profit, you would need one account for each.

If you have an accountant doing your tax, that would be the best person to 
ask.

HTH,

Doug,
Not an accountant.