I am having problems with the balance for my Fund Balance/ Net Asset Equity (NAE) account. When I run a report that includes all my accounts, I look at the balance for my NAE account and it is one value. I then run the same report filtered for my NAE account and get a different balance. Why are they not the same and which one is correct?
As an example, I am running a trial balance for the entire organization vs a General Ledger filtered for the NAE account.
The cause of this difference is a combination of two things:
The dates of the report a causing Revenue and Expense values to close into the NAE account.
The report logic when using filters doesn’t close Revenue and Expense values to NAE account.
Running Without Filtering
When you run the report and you do not filter on the NAE account the report goes back to the date specified for account balances begin. It takes the NAE balance at that time and then adds in the net of the revenues would close into the NAE account plus any activity directly recorded to the account.
So for example:
On 1/1/07 the balance of our NAE account is $1,000. Between 1/1/07 and 12/31/07 the net of revenues and expenses was $600. There was also a $100 adjustment to our NAE account on 6/30/07.
If we run our report with an account balances begin date of 1/1/07 and current period dates of 1/1/07 to 12/31/07 the balance in our NAE account will be $1000 (opening) + $100 (adjustment) = $1,100.
If we then change the dates of the report to simulate the year end close our balance will change
Our account balances begin date remains 1/1/07 but our current period dates are now 1/1/08 to 12/31/08. If you look at the bottom of the report on the setup tab you will see a note that a year end close will be simulated.
The balance in the NAE account will now be $1000 (previous balance) + $100 (adjustment) + $600 (Net Revenues/Expenses for 1/1/07-12/31/07) = $1,700.
Running When Filtering
If you run the same reports but simply add the filter of your NAE account, you will get a different result when you are crossing the fiscal year. When running the report from 1/1/07 to 12/31/07 and filtering the balance will still be $1,100. When running the report for 1/1/08 and beyond and filtering the balance will still be $1,100. The filter is excluding the net revenues/expenses from the report.
Which Number is Correct?
When doing a pseudo close the value given without the filter shows you what your balance would be if the year was closed. When using the filter, it shows you what the balance actually is (using nothing but the actual posted transactions). Which number is more useful depends on your reporting needs and what you are trying to figure out.
The difference in these two numbers is a condition caused by the pseudo close function. If you actually close the year, then this problem will go away as the Revenues and Expenses will go ahead and post to the NAE account.
MIP Fund Accounting