Why are a set of financial statements printed out of Quickbooks not necessarily GAAP compliant or correct although they may appear to be at first glance or to a lay-person?

Answer 1

QuickBooks does a nice job of formatting the data that has been entered, but it cannot format data that has NOT been entered. For example, GAAP requires businesses to record amounts owed to vendors at year-end as payables. If these amounts have never been entered into QuickBooks, the statements look good to a casual observer but are not GAAP compliant.

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QuickBooks does a fantastic job with financial and managerial reporting. However the matter of data not being entered is a human error that applies to all accounting systems and is not unique to QuickBooks.

It is my understanding that some people consider the ability to edit/correct historical transactions directly (with the appropriate security level), to be the villain in the GAAP debate - even with QuickBooks' always-on audit trail system.

Personally, I love ability to edit directly. In most other accounting systems one has to use a journal entry to make an account classification correction or even to change descriptive text and in in the process one loses a lot of original context.

Most of the time the edit is to fix sloppy data entry or to correct coding. The real GAAP issue in my opinion regardless of the system, is poor training and systems that are more mouse driven, than keyboard driven.