Inactive accounts drive people crazy, but I get it. If they’re not being used, why not just delete them, right? Sort of like an empty soda can. It served its purpose but isn’t needed any longer. Why not throw it away?
The problem is that inactive accounts aren’t really like an empty soda can. They contain entries. Those entries are impacting today’s financial statements. I am old enough to remember paper check registers. They contained the checks written, deposits made, and other information regarding the account. There was a column along the right side, and it had a running balance. If a transaction was deleted, it impacted the entire running balance after it.
It’s the same thing with inactive accounts. If the account could be deleted, it would eliminate those entries. Today’s financial statements would get changed. And that’s not good. The best way to deal with inactive accounts is to reconcile them through their final statements. This will make sure they have a zero balance, then they can be hidden in the chart of accounts. Here is what I suggest:
1. Bring the account to a zero balance through a reconcilation process that includes the final account statement.
2. Go to the Chart of Accounts, highlight the account, right click, and select Make Account Inactive.
3. At the bottom of the Chart of Accounts, click the button that says Account. Select the option saying Hide Inactive Accounts. The account is now out of your view, and it retains the important information.
There is an exception to the “no deletion” rule. If the account was created in error, and if we are working in an open accounting period, and the transactions are unreconciled, then the transactions can be deleted. They should probably be re-entered in a new account.
If it is a bank account type, another option is to open it and go to the Write Checks screen. Scroll through each transaction, changing the account at the top of each of them, from the wrong account to the right one. When the account is empty, QuickBooks will let you delete it from the Chart of Accounts.
It might be tempting to void the transactions, but this is probably not the best choice in this case because QuickBooks will still not allow the account to be deleted.