Entering Opening Balances

Anyone involved with the accounting implementation for new xTuple installs should read this article for insights on best practices for entering opening balances.

We recommend entering G/L Chart of Account opening balances using one of two possible methods. Melissa Hinze with Paladin Logic, Ltd, and Mike Atherton with xTuple, respectively outline the two possible methods below:

Method #1 (strongly recommended, especially when first implementing xTuple on your site)

  1. Build out your full G/L Chart of Accounts in xTuple ERP.
  2. Decide the last period in which the legacy system will be the "System of Record" (SOR).
  3. After the fiscal year for which the legacy system is the SOR is closed, print a balanced Balance Sheet. For example, if the year 2008 is the last year in which the legacy system will be the SOR — that is, if 1/1/2009 will be the xTuple 'Accounting go-live' date — print out a balanced 2008 Balance Sheet.
  4. Log in to the xTuple ERP GUI, and navigate to Accounting -> Fiscal Calendar, and create fiscal years and accounting periods as needed.
  5. When creating Fiscal Years, you should create an initial year to contain any account balances you will be entering from your legacy system. This initial year can contain as few as one Accounting Period.
  6. Navigate to Accounting -> General Ledger -> Journal Entry -> Series, and enter the distribution date you want the beginning balance transaction to be posted to. If 2008 is the last year your legacy system will be the system of record, the beginning balance transaction should have a date within 2008 (e.g., 12/31/2008).
    • When you close the initial Fiscal Year (i.e., 2008) in xTuple, the retained earnings balance will be automatically calculated for you.
  7. Click New, and enter the first item on your Balance Sheet — enter the dollar amount, whether the amount is a debit or credit balance, and the account for which that amount corresponds. When finished, click Save.
  8. Continue clicking New and adding series items until all items on the Balance Sheet have been added. Once finished adding all items, the debit/credit amounts on the Series G/L Journal Entry form should match. If, after adding all the items, the debits and credits do not match, then either a series item was entered incorrectly or the Balance Sheet is not balanced; in this case, go back and double-check all the series entries to make sure there are no typos, and if this doesn't catch the problem, then check that the Balance Sheet is indeed balanced and correct.
  9. When all items in the G/L Series Journal Entry have been entered and the debit and credit amounts match, add a note describing that this is the beginning balance transaction, and click Post. This will post the transaction to the General Ledger, and all G/L Accounts will have their Beginning Balances set. Now the system is ready to have transactions imported (if data is being imported) or for transactions to be created through the use of the xTuple gui client.

Method #2 *

    1. Build out your full G/L Chart of Accounts in xTuple ERP.
    2. Decide the last period in which the legacy system will be the “System of Record” (SOR).
    3. After the last period for which the legacy system is the SOR is closed, print a (balanced) Balance Sheet.
    4. Print a Trial Balance in xTuple ERP for the same period — you will already be using xTuple ERP at this point.
    5. Analyze the ending balances for the last period for the legacy system and compare them account by account to xTuple ERP
      • some will be a 1 to 1 and in this case one determines the delta and whether that is a Debit or Credit
      • in some cases there will be accounts that are unique to xTuple ERP relative to the legacy system and vice versa. In these cases decisions will need to be made regarding adjusting entries, by how much and to which accounts.
    6. Create a G/L account called Implementation Account making it type Equity and linked to a sub account type that will NEVER be used in an FRE statement.
    7. Enter all of the adjusting entries described above for the last period in which the legacy system was the SOR. The new implementation G/L account will be the opposite side of every entry.
    8. Generate financial statements for this last period in both systems and compare. Because there will not be a 100% match account to account these reports will not match line for line but the major sections (Current Assets, Gross Margin on Sales etc.) should match or more analysis and adjustments are necessary.
    9. * This method leaves the 'flow-through' equity account in the Chart of Accounts. Because transactions have been posted to it, this account cannot be deleted, however, it does not have to appear on financial statements. To protect this account from being misued, the balance of the account should be monitored—it should be noted that once beginning balances are set (and if they are set correctly), this account should always have a balance of $0. Using method #1 eliminates the need for this 'flow-through' account, although it should be noted that in order to use method #1, a balanced Balance Sheet is required, and accounting data may need to be imported if there is any gap between the Balance Sheet date and the xTuple go-live date.