Like all the automatic bookkeeping Wave does for you, when we updated your account to the new accounting platform we automatically accounted for any changes between the old system and the new system. This guide outlines the details of these automatic entries to help you understand the changes you may see in your account.
There may be instances in which Wave added adjustment entries, used system clearing accounts, or skipped transactions in order to complete the update. This was essential to adhere to the rules of our more robust new accounting platform while maintaining the integrity of your financial reports. Not all accounts required these entries.
This guide explains the types of entries, how to find them, and how to interpret them.
Why did Wave make adjustment entries?
We wanted to preserve your historical financial reports unchanged. You’ve likely used these balances for tax reporting, and any changes would impact cumulative balances, like owner’s equity.
The adjustment entries Wave made during the update were made to ensure your historical balances remain the same on the new accounting platform.
Why are there discrepancies between the old and new systems?
There are several situations that might cause a discrepancy between balances in the old and new systems. In some cases, the issues are due to incomplete bookkeeping in the old system, or more rarely, due to a bug in the old system.
How does the update work?
First, we copy over every entry in your old account. Then, we compare the account balances in the old system to the generated account balances in the new system. If the two balances don’t match, we adjust them to the balance values from the old system, with one adjustment per fiscal year.
Adjustments for bugs in the old system
Bugs in the old system, though uncommon, meant that in some cases a transaction could be created, edited, or deleted on the transactions page, but reports weren’t updated accordingly. The new system corrects for this, but by doing so, it reflects a different account balance than the old system did.
Adjustments for foreign exchange gain/loss calculation changes
We enhanced how we calculate gain and loss for invoice and bill payments, as well as multi-day transfers. We’ve added adjustment entries to ensure that your books match the old system up until the time your account was updated. Going forward, gain and loss on foreign currency will use our new and improved calculations to ensure your gain and loss reporting is more accurate than ever.
Adjustments for bills and invoices with cash-account line items
Invoice and bill line items can only be assigned to income or expense accounts, and there were some instances where these line items were assigned to an ineligible account.
In order to maintain consistent reporting after the update, we set the account for any impacted invoice or bill line items to a system clearing account. Then, we created another system adjusting entry to move the amount from the clearing account to the originally assigned account.
A note about how this works for recoverable versus non-recoverable taxes:
If a recoverable tax is applied to the line item, the amount of the adjustment will be the line item amount exclusive of the tax amount. If a non-recoverable tax or no tax is applied, the adjustment will be for the total amount of the line item (tax inclusive).
Where will I see these entries?
To find any adjustment entries made during the update, use the filter function on the Transactions page and choose Journal from the dropdown menu. If you have a lot of journal entries, you can further filter for any adjustments by searching for "Migration Adjustment Entry".
These entries adjust the account balances in the new system to match the account balances as they were in the old system at the time that your account was updated. For any impacted account, you will see an entry at the end of each fiscal year to adjust the year-end balance. For your present fiscal year, an adjustment for year-to-date balances was created on the date of the update. Each is composed of net adjustments per account. This keeps each journal entry easy to find and read.
You may also see new asset accounts called system clearing accounts in your Chart of Accounts. These accounts were added to correct inaccurate behavior in the old system that affected transfers which took multiple days. These clearing accounts also correct for instances where an old bug allowed bills and invoices to have cash account line-items, which would result in invalid bookkeeping in the new system.
Why can’t I delete these entries?
These adjustments are essential to ensure your reporting remains consistent. Because they are system-created, they are non-recoverable once deleted. If your account was updated on or after October 15, 2019, we have locked all adjustments to prevent accidental deletion and maintain the integrity of your financial reporting.
If you are completely confident that you do not need some or all of these entries, you can create an offsetting journal entry:
- Duplicate the Wave adjustment entry.
- Swap all debits to credits, and vice versa.
How do I know what issues caused the adjustments to my account?
Look at each year's adjustment entry to understand which accounts were impacted. We recommend downloading any transactions from the old system that were skipped during the update. Find these under Settings > Data Export so you have all of the relevant information in front of you.
If you see a Gain or Loss on Foreign Exchange account, this indicates that the adjustment entry was made to correct for changes to the way this works between the two systems.
See a system clearing account? This indicates we corrected for a multi-day transfer, or because there was a bill or invoice with a cash account line-item that needed to be corrected, as described above.
Miscellaneous accounts indicate that the issue was caused by a bug in the old system that was corrected during the upgrade.
Things still look strange, what am I missing?
When reviewing the details of an adjustment entry, keep in mind that the entries are made on an account level. In cases where there were multiple adjustments to the same account during a fiscal year, you'll see the net debit or credit amount, rather than the individual line item debits or credits.
An example of a net adjustment
Let’s say there are two entries that need to be corrected at the end of the 2018 fiscal year. One is a transfer to Bank 1 and your Sales income account that was skipped during the update because it's not a supported transaction, and the other is an expense that was meant to be allocated to Bank 1, but the old system failed to save your changes, and reports reflected this as a transaction at Bank 2.
The first transaction, which was skipped, is replaced by an adjustment that Debits Bank 1 for $100, and Credits Sales for $100. This increases the balance of both accounts to match the original balances, before Wave removed the invalid transaction. The second transaction, which didn't update because of a bug, now reflects a $15 expense allocated to Bank 1. Although the bug gets corrected in the update, because there is now a $15 discrepancy between the account balances in the old and new systems, Wave adjusts it back to the historical balance. The adjustment Debits Bank 2 to return the $15 balance, and Credits bank 1 $15.
These two transactions are not related, but because Bank 1 is adjusted on an account level, you would see the Migration Adjustment Entry as:
Debit Bank 1 $85
Debit Bank 2 $15
Credit Sales $100
In a case like this, where a single account has transactions in multiple directions that need to be adjusted for, things can get tricky. As you review the transactions in your account, keep this in mind if you see something that doesn't make sense at first glance.
Did you check back to the skipped transactions in your account? Make sure you downloaded any skipped transactions, and keep them in mind when reviewing the adjustments.
Are there any transfers that crossed a year-end boundary? When Wave added a transfer clearing account in the update, it's possible that there are instances at the fiscal year-end where we adjusted back to the behavior of the old system. You can read about the changes to transfer clearing in the section above called "Adjustments for multi-day transfers."