Conversion balance in Xero
Conversion balances are the balances in your accounting system on the day you're converting to Xero.
Xero calculates and posts the journal your opening balances require.
Comparative balances are older balances you wish to compare against newer balances in your system.
The following diagram shows an example of the different balances held in Xero.
Entering conversion balances is split into four steps:
- Enter conversion date. This is the date you are going to start using Xero.
- Enter Conversion balances. These are the closing balances in your current accounting system, Excel spread sheet or other record keeping system, as at the last day you are using that form of accounting system. They will become the opening (conversion) balances in Xero.
- Enter historical invoices or bills. These are the invoices or bills that make up the balances of any accounts payable (Purchases) or accounts receivable (Sales) opening (conversion) balance.
- If you are completing the Xero Set up process for your new organisation in Xero, clicking the Finish button on the final screen will post the conversion balances and the historical invoices or bills. If you have already completed the Set up process and are entering or making changes to your balances, Confirm button will post any draft historical invoices or bills, and your conversion balances.
Entering comparative balances is done once the Set up process is complete from the Conversion Balances screen. When you select the comparative balance button, a table of accounts for the previous financial year will display (based on your conversion date and your reporting date) in the same format as your conversion balances. You can add as many previous years as required.
When you enter comparative balances:
- Your conversion journal will reverse.
- Your new comparative balances will post.
- Your new conversion journal will post. The new conversion journal will take into account your comparative balances, your posted historical invoices or bills, and the conversion balances you expect to show in all of your reports.
Follow these instructions if you're manually entering or adjusting conversion balances.
You'll need a copy of your previous accounting system's trial balance for the day before your conversion date. For example, if your conversion date is January, use your trial balance that is dated 31 December.
- In the Accounting menu, select Advanced, then click Conversion balances.
- Click Show all accounts. To add a new account, click Add a new line, then click Add new account.
Enter balances from your previous accounting system's trial balance into the debit and credit fields.
- Click Save.
- Enter any unpaid invoices and bills.
- Enter any outstanding overpayments and prepayments made or received prior to conversion. Make sure the transactions are dated pre-conversion, and the total values of the overpayments and prepayments are included in your conversion balances.
- Enter any unpaid expense claims dated prior to conversion. You'll need to include the total of these claims in the conversion balance screen, under the account code for unpaid expense claims.
- (Optional) To change conversion balances, click on the incorrect balances to replace with the correct balances, then click Save.
When you save your conversion balances, Xero posts a conversion journal that ensures all account balances equal what's entered in the Conversion Balances screen.
Conversion journals are posted every time you click Save, so any previous conversion journals are reversed and a new conversion journal is posted.