Making Financial Statements Mean Something - Part 2
In part 1 we talked about the setting up of a set of books with the goal of being able to produce a fi nancial statement. In self-installed systems the accuracy of any reports will be dependent on what the system uses to build those reports. In other words, it is dependent on the foundation you build for the results you will achieve.
The foundation of anything is worth a little extra time. Time spent on the foundation comes back later as a better built structure. Your bookkeeping software produces your fi nancial statements so making sure the accounts in that bookkeeping system are set up properly is important to what you get in return. The saying goes, “garbage in, garbage out”. Th e default setting for a new account in QuickBooks is a bank account. So if you set up an account to keep up with how much you are paying in utilities, and QuickBooks thinks that is a bank account, then your assets (What you own) will contain an account for utilities (What should be grouped with what you spent to make income). The information in this statement would be useless, and your tool is broken.
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