Determining a System Start-Up Date

Consideration must be given as to what financial statement date would be most advantageous to use as a system start-up date. This date will be used as the cutoff date for all historical entries in the accounting system to be in balance and for current processing to begin. This date must be the beginning of a new month (fiscal period) and may be either a future date or a historical date.

Historical Date

The use of a historical date starts the bookkeeping from a status wherein all balances are correct and cross balances are in place. This makes the job of maintaining the system from that point much easier. The procedure for entering beginning balances is very straight forward.

Future Date

Selecting a future date could coincide with a year-end or a future statement date. The advantage of using a date in the future is that processing of current information may begin without establishing historical information. The disadvantage is the loss of fully accurate up-to-date information. Payroll, Payables and Receivables can begin and historical information can be entered over a period of time working toward the future system start-up date.

Order Of Entry

It is strongly suggested that all entries be done first through the original entry programs and not directly through General Ledger Transaction Entry. The final step will be to bring the General Ledger and Job Costs into balance. Entry of information into the accounting system eventually affects at least one of these two ledgers. If Accounts Payable balances were first entered directly to the General Ledger and then open invoices were entered and posted through Accounts Payable Invoice entry, some of the information would have been entered twice. It would be necessary to adjust the General Ledger balances back to what they were before the Accounts Payables postings affected them.

The problem of reconciling between journals and ledgers can be drastically simplified by the circumstance of not having any accounts payable outstanding at the system start-up date. This is true for all accrued assets or liabilities. Probably the most simplified version of beginning balances would be to have no outstanding Receivables or Payables, no current Work in Progress, and an audited statement as of the year end. This, of course, would only require the entering of General Ledger Account Balances. This situation is rarely the case.

It is rather common for one or more of the original entry journals to be zero at the chosen statement. This becomes another important factor in selecting the beginning statement date. It greatly smoothes the way to select a start-up date that allows the entry of beginning balances in a simple and easy manner. This usually involves the entry of current work from that statement date to the present. This may or may not be a desirable trade-off.