Correcting an "Out of Balance" Balance Sheet (Troubleshooting)

Modified on Thu, 15 Aug at 6:10 PM

This article explains how your balances can become "out of balance" and provides solutions for fixing the issue.

Reviewing Account Health Check Issues

Each day, Actionstep performs an automated health check on your system. If issues that are considered outside "normal" accounting practice are detected, admin users with access to Accounting will be alerted when they sign in to Actionstep. (Users without this level of access will not be notified.)

These notifications are displayed on the Health Check page (go to Admin > Audit Logs > Accounting health check). Once you have resolved the issues, you can use the Check again now button to make sure your changes fixed. If you are not sure how to resolve the issues being reported, please contact your firm's accountant. To address the issues later, click Continue to your home page.

NOTE: Actionstep does not automatically re-check that the issue is resolved. Even if you resolve the issue, the alert will still be shown on the Accounting Health Check page each time you sign in until you explicitly Check again now.

There are a few common problems that might create an out-of-balance error:

Date of opening balances has been changed
Opening balances are either incorrect or haven't been entered
Multi-currency or foreign exchange settings are configured incorrectly

Issue 1: Date of Opening Balances Has Been Changed

In this scenario, make sure your opening balances date is correct. You can check this by going to Admin > Accounting > Accounting preferences and scrolling to the Financial dates section. Then make sure the date of the opening balance is correct.

Issue 2: Opening Balances are Either Incorrect or Haven't Been Entered

The opening balances and opening balance date that you have set up will have an impact on your balances. You can check this by going to Accounting > Accounts > Accounts List. If your accounts are out of balance, you will see an error like the following:

To review and edit the opening balances, click Edit Accounts. Then, review the information on the page and make any adjustments. If you're unsure of how to correct your opening balances , contact your accountant.

Issue 3: Multi-Currency or Foreign Exchange Settings are Configured Incorrectly

When using foreign exchange or multiple currencies, a number of accounts need to be set up. Additionally, some accounts should not be set up. (For help, see Multi-Currency/FX Billing Configuration and Multi-Currency/FX Billing.)

By mapping some accounts in multiple currencies, you can receive funds in multiple currencies and convert the value of that currency into the system's "base currency" before those balances are recorded in financial statements. This means that every balance shown on the financial statements (Income Statement, Balance Sheet, Trial Balance Report, Cash Flow Report) will display their balances in the base currency.

NOTES:
• Current Year Earnings and Retained Earnings are equity accounts seen on the balance sheet whose balance is calculated automatically by taking the sum of the Income statement (total income-total expenses). So basically, at any point prior to closing out a financial year, the total you see at the bottom of your income statement all flows into that one account on the balance sheet.

• Since all foreign currency conversion happens prior to any balances making it to the income statement, there is no reason to set up a separate Current Year Earnings and Retained Earnings account for each currency. So at no time should equity accounts be set up in a separate currency as it is not required and will cause an imbalance.

Additionally, if you updated your exchange rate on the date of the issue or entered an invoice with a different exchange rate and your system accounts are not correctly configured, it's possible that only one side of a transaction is correctly recorded.

To fix this, go to Admin > Accounting > System Accounts and make sure you have setup the following system accounts in the correct currencies:

Accounts Receivable
Accounts Payable
Bank transactions
Tax
Deposits paid
Deposits received
FX Gain/Loss Receivables Realized (Difference between sales invoice posted rate and the actual payment rate.)
FX Gain/Loss Receivables Unrealized (Difference between sales invoice posted rate and the current rate for unpaid amounts)
Rounding Errors (When 1c rounding errors are detected in a database, the difference is posted to this account. Can occur in FX or BASE currency and appears to only occur when invoice is inclusive of tax.)

FX Gain/Loss Payables Realized / Unrealized (Same as above but purchases. Can be linked to the same account for convenience, if needed.)
FX Gain/Loss Bank Revaluations (Money gained or lost in bank transactions based on the value of the money deposits/withdrawals vs the current calculated balance)
FX Gain/Loss Other Assets (This calculates the revaluation of asset accounts which have a non-base currency (excluding bank + linked A/R + A/P accounts).)
FX Gain/Loss Other Liabilities (Same as assets, but for Liabilities.)