Recording of pre-opening costs

Recording pre-opening costs in QuickBooks involves creating journal entries to account for expenses incurred before a business or project’s official opening. Here’s how to do it:

Step 1: Create a Journal Entry for Pre-Opening Costs:

  1. Go to the QuickBooks homepage.
  2. Click on the “Create” button (usually represented by a plus “+” sign) at the top of the screen.
  3. Under the “Other” column, select “Journal Entry.”

Step 2: Enter the Pre-Opening Cost Details:

In the journal entry:

  • Debit a specific pre-opening cost expense account for the amount of the pre-opening costs incurred. Enter this as a positive value.
  • Credit a liability account to represent the deferred pre-opening costs or prepaid expenses. Enter this as a positive value. This liability account represents the amount that you haven’t yet recognized as an expense.
  • Add a memo or description to explain the nature of the entry, including the purpose of the pre-opening costs and details about the costs incurred.

Step 3: Review and Save the Journal Entry:

Review the journal entry details to ensure accuracy and save the journal entry.

Step 4: Reconcile Your Accounts:

After recording the pre-opening costs, reconcile your accounts in QuickBooks with your actual financial statements to ensure accuracy.

Step 5: Recognize Expenses Over Time:

As your business or project progresses and begins generating revenue, you should recognize the pre-opening costs as expenses. This involves creating additional journal entries to debit the deferred expense liability account and credit the appropriate expense accounts.

For example, if you have pre-opening rent expenses, you would debit the liability account and credit the rent expense account as you incur rent expenses each month after the opening.

Step 6: Consult with Your Accountant:

Pre-opening costs can have accounting and tax implications, and it’s advisable to consult with your accountant or financial advisor to ensure that you’re correctly accounting for pre-opening costs and addressing any specific tax or compliance requirements.

By following these steps, you can accurately record pre-opening costs in QuickBooks, helping you maintain accurate financial records and track the expenses incurred before your business or project’s official opening.

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