Where do we find our beginning balances?

As Xero is a full double-entry accounting system, it maintains both income statement and balance sheet accounts. Many small businesses have come to my firm only to track sales and expenses. That is OK if you are on the cash basis of accounting and your US federal business tax return does not require you to complete Schedule L (Balance Sheet).

Note

If the business has total receipts and total assets at the close of the tax year lower than $250,000, then you do not need to complete the Schedule L section of the form that includes a detailed summary of everything on the balance sheet.

Keep in mind that we recommend that you always complete Schedules L and M (1, 2, 3) if applicable.

You want to ensure the beginning balances you enter into Xero are correct to avoid issues over time as you perform your bookkeeping and reporting in Xero.

In most cases, the best-known balances come from your tax return. That means you will use the prior...