Why your branch profit and loss does not foot — transcript

Play this as a presentation — one slide per step, with the same narration. Every word of every step is on this page.

Somebody has put a branch profit and loss next to the trial balance and the two do not agree. This lesson is the four reasons, all of them by construction, and the order to check them in. Twelve minutes, and the last step is a check you can run before the meeting.

Step 1 — Know what a set of books actually is

After this step you know what a report is a report of. A set of books is a binder. It names the ledgers a financial report reads, and the report engine sums every ledger linked to it. It has no company of its own — the company sits on each line inside it, next to the ledger — so a set of books can genuinely span two companies’ ledgers, which is how a management view of the group is produced in one statement. It sums; it does not eliminate. A sale from one of your companies to another is revenue in one and cost in the other, and both stay in the total, so this is a management view and never a statutory consolidation. A group can start with one statutory set per company holding one ledger, and add the management set later. Month end runs once per set of books, not once for the group.

Reference: Set of Books, Fiscal Years and Fiscal Periods — Three things, and what each one is for

Step 2 — Check the binder is not empty

After this step you have ruled out the failure that wastes an hour in the wrong place. Creating a set of books and linking a ledger to it are two actions, and the second is the one that is easy to skip. Nothing warns you at creation, and the only place the difference shows is the set of books’ own Ledgers tab, which nobody opens unprompted. It fails later, at month end, with a message about the set of books missing its primary ledger configuration — which reads like a problem with the ledger and is a problem with the link. So open the set of books, look at its Ledgers tab, and confirm there is something in it before you go any further with the month.

Reference: Financial Report — Troubleshooting

Step 3 — Know that the ad-hoc report shows only what you ticked

After this step a familiar false alarm goes away. The ad-hoc profit and loss report asks you to pick a dimension and then tick values in it, and the Search button stays disabled until you have ticked at least one. What it returns is those values and nothing else. There is no all-branches run and no total for everything. So a branch left unticked is not a column that shows zero — its revenue and its cost are simply not in the report and not in any subtotal. If the report is short against the trial balance, the first thing to check is whether every branch is ticked, including the ones that closed and the one somebody created last week.

Reference: Financial Report — What this report asks the server, and the four ways its total surprises you

Step 4 — Find the journal line with no branch on it

After this step you will usually have found your difference. The report brings in the branch master with an inner join, which means a journal line whose branch column is blank matches nothing and is dropped entirely. And nothing requires a branch on a manual journal line — the form asks for an account, and the backend never checks. So an accrual or a reclassification posted at month end with the branch picker left alone sits in the trial balance, is perfectly valid, and is invisible on every branch report. That is the usual culprit, it is usually exactly one entry, and the amount you are short is usually the amount of it.

Reference: Ledger And Journal — Journal — Line

Step 5 — Do not reconcile the cost of sales line to the journal

After this step you will stop trying to make two different measurements agree. The revenue and expense half of this report reads posted journal lines. The cost of goods sold row does not — it is a second query over your sales document lines, multiplying each line’s quantity by the stored unit cost your Cost Type picker names, moving average or first-in-first-out or one of the others. That is a feature: it gives you a margin before month end has journalled any cost of sales at all. It also means this figure and the one on a month-end snapshot are two different measurements of the same month. They will differ whenever the cost basis differs, a sale is not yet posted, or month end has not been run for the month.

Reference: Financial Report — What this report asks the server, and the four ways its total surprises you

Step 6 — Run the thirty-second check

After this step you can answer the question in the meeting. Open the report, set the date range to the month, choose Branch, and tick every branch in the list. Compare the revenue and expense lines, not the bottom line, with the same accounts in the trial balance for the same month and the same set of books; the cost of sales is a different measurement and gets its own check. If they agree, that half is done. If the report is lower by a whole shop, a branch is unticked. If it is lower by an odd amount, look for journal lines with no branch, because they are dropped. Then take the cost of sales on its own: set the Cost Type to the basis your company closes stock on, and make sure month end has been run for the month. Only then is a remaining difference the two measurements of the previous step, not a mistake.

Reference: Financial Report — Troubleshooting

How the steps fit together

    flowchart TD
  s1["Step 1 — Know what a set of books actually is"]
  s2["Step 2 — Check the binder is not empty"]
  s3["Step 3 — Know that the ad-hoc report shows only what you ticked"]
  s4["Step 4 — Find the journal line with no branch on it"]
  s5["Step 5 — Do not reconcile the cost of sales line to the journal"]
  s6["Step 6 — Run the thirty-second check"]
  s1 --> s2
  s2 --> s3
  s3 --> s4
  s4 --> s5
  s5 --> s6
  

Check yourself

Three to five questions on what you just heard. Every correct answer links to the page that makes it correct, so you can check the source, not just the mark.

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