An account was set up as an asset, liability, equity, or suspense but should have been income or expense. Balances exist from last year that didn't get closed to Retained Earnings.

An income or expense account may show a balance on the YTD Ledger at the beginning of the new fiscal year. The balance should be zero (0.00).

Important

This process requires that you change some account balances manually. If you don't do these steps correctly, it can create an out of balance situation. Contact your Sage Consultant for assistance. You can also contact Sage Expert Services to schedule an appointment. This is a paid service. Sage Expert Services will contact you with a quote before scheduling.

Considerations

• Use these steps to change an asset, liability, equity, or suspense account to an income or expense account when you closed the last fiscal year
• Don’t use these steps if you closed two or more fiscal years with the incorrect account type
• See how to change between asset and liability types if you haven't closed the year
• See steps to change an income, cost, expense, or other income account to an asset, liability, or equity account
• Steps to use when the account has the wrong prefix for the Balance Sheet level

Correct the account, retained earnings, and statements

Change the account type and correct balances

1. Make a backup of your data.
2. Go to General Ledger, Tools, Options.
3. Select the Audit Setup Activity checkbox and click OK.
4. Go to Setup, Accounts.
5. Click List, select the account with the incorrect account type, and click OK.
6. Press TAB and select the correct Account Type such as Income, Cost, Expense, or Other income.
7. Go to the Balances (Accrual) or Balances (Cash) tab, depending on your Accounting Method.
    NOTE: If you're using Both as the Accounting Method, change both the Balances (Accrual) tab and the Balances (Cash) tab. To view your accounting method, go to File, Company Settings, General.
8. Enter the amount you need to close to retained earnings in the Prior year's adjustment box. The prior year's adjustment should have the same sign as this account. For example, if the balance of the account is $500.00 (a debit), the prior year's adjustment should be a debit $500.00.
9. Correct the Current balance and the Future balance to reflect the adjustment. Remove the amount that should have closed to retained earnings from the fields.
10. Click Save.
11. Click Close.
12. Go to Tools, Options.
13. Clear the Audit setup activity check box and click OK.

Close the correct amount to retained earnings

1. Reclose your fiscal year (Tasks, Close Fiscal Year). Only the accounts with an amount in the Prior year's adjustment box create closing transactions.
2. Go to Reports, Financial Statements.
3. Print a trial balance and roll it back to last year-end to confirm you made the proper corrections.
4. Verify the expense account is classified correctly, and your retained earnings account shows the correct balance.

Update the default statements with the account type change

Note: Recreating the default financial statements overwrites any customizations you saved to the default designs.

1. Launch Financial Statement Designer.
2. Go to File, Create.
3. Click Yes to every prompt.
4. Close all open windows.

Verify the base account is the correct type

1. Go to Setup, Prefix/Base, Base Accounts.
2. Click List.
3. Select the base account that corresponds with the full account that had the incorrect account type and click OK.
4. Select the correct Account Type such as Income, Cost, Expense, or Other income.
5. Click Save.
6. Click Close.
7. If you generated accounts with the incorrect base, update the full accounts to match.

A General Ledger account type was incorrectly set up as an income or expense account when the fiscal year was closed

How do I correct a General Ledger account set up as the wrong account type?

How do I reconcile General Ledger if it’s out of balance?

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