The most important step immediately following the conversion process when going from QuickBooks Desktop to QuickBooks Online, is checking that the Financial Statements for both company files balance to each other. In most conversions I’ve done, there is usually no issue with the Profit & Loss Statement. QuickBooks Online does a great job at maintaining account hierarchies as well (not pictured here – you’ll have to trust me on this one).
However, there is a consistent discrepancy with Balance Sheets when it comes to Accounts Receivable or Accounts Payable and tax liability accounts.
In most cases, it is because of how QuickBooks Desktop manages tax differently from QuickBooks Online. QB Desktop turns tax into a Customer Receivable or Vendor Payable, which is actually incorrect according to accounting standards. These amounts should stay on the Balance Sheet as a liability. This is why you will always see two tax accounts for each tax type in QB Online. One is the Payable (current activity for that tax liability) and the other is a Suspense (prior period activity where the return has already been done, but the payment has not yet been made or the refund has not yet been received).
The trouble comes when you try to convert a file that has a Customer AR or Vendor AP balance having to do with a tax return. Notice how the AR includes the refund on the Desktop side, but the Online side does not:
And here is an example of what that looks like when there is a payable owing:
During the conversion, the amount has moved from the AR or AP to the newly-created Suspense account on the Balance Sheet.
You now have two options: 1.) Move the balance back to AR or AP since that tax return has already been filed anyway, or 2.) Leave it where it is and just make sure when the tax payment is made or tax refund is received, that you offset the Suspense account.
Which is your preferred method? Do you have other Conversion questions? Join the discussion on Facebook in our QB-HQ Facebook Group – Your QuickBooks Head Quarters for Tips, Tricks and Training.