Northwind Manufacturing, Inc.
GAAP review of QuickBooks data for the period Jan 1, 2025 – Dec 31, 2025. This is a sample engagement on demo data — no account required.
Total debits
$104,035,250
Total credits
$104,030,250
Out of balance
+$5,000
Issues found
52
36 integrity · 8 above materiality
The review ran 9 procedures across 9 areas and proposed 9 adjusting journal entries totaling $15,778,967 in impact.
Findings & proposed entries
Out-of-balance entry (Invoice txn-332)
Invoice txn-332 dated 2025-06-10 has debits 505000.00 and credits 0.00 — off by 505000.00. Each entry must balance.
$505,000
impact
Out-of-balance entry (Invoice txn-333)
Invoice txn-333 dated 2025-06-10 has debits 0.00 and credits 505000.00 — off by 505000.00. Each entry must balance.
$505,000
impact
Out-of-balance entry (Invoice txn-5)
Invoice txn-5 dated 2025-10-01 has debits 360000.00 and credits 0.00 — off by 360000.00. Each entry must balance.
$360,000
impact
Out-of-balance entry (Invoice txn-6)
Invoice txn-6 dated 2025-10-01 has debits 0.00 and credits 360000.00 — off by 360000.00. Each entry must balance.
$360,000
impact
Out-of-balance entry (Check txn-1)
Check txn-1 dated 2025-01-05 has debits 240000.00 and credits 0.00 — off by 240000.00. Each entry must balance.
$240,000
impact
Out-of-balance entry (Check txn-2)
Check txn-2 dated 2025-01-05 has debits 0.00 and credits 240000.00 — off by 240000.00. Each entry must balance.
$240,000
impact
Out-of-balance entry (Invoice txn-29)
Invoice txn-29 dated 2026-01-02 has debits 142000.00 and credits 0.00 — off by 142000.00. Each entry must balance.
$142,000
impact
Out-of-balance entry (Invoice txn-30)
Invoice txn-30 dated 2026-01-02 has debits 0.00 and credits 142000.00 — off by 142000.00. Each entry must balance.
$142,000
impact
Out-of-balance entry (Check txn-7)
Check txn-7 dated 2025-01-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-8)
Check txn-8 dated 2025-01-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-9)
Check txn-9 dated 2025-02-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-10)
Check txn-10 dated 2025-02-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-11)
Check txn-11 dated 2025-03-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-12)
Check txn-12 dated 2025-03-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-13)
Check txn-13 dated 2025-04-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-14)
Check txn-14 dated 2025-04-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-15)
Check txn-15 dated 2025-05-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-16)
Check txn-16 dated 2025-05-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-17)
Check txn-17 dated 2025-06-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-18)
Check txn-18 dated 2025-06-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-19)
Check txn-19 dated 2025-07-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-20)
Check txn-20 dated 2025-07-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-21)
Check txn-21 dated 2025-08-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-22)
Check txn-22 dated 2025-08-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-23)
Check txn-23 dated 2025-09-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-24)
Check txn-24 dated 2025-09-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-25)
Check txn-25 dated 2025-10-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-26)
Check txn-26 dated 2025-10-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-27)
Check txn-27 dated 2025-11-01 has debits 100000.00 and credits 0.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Check txn-28)
Check txn-28 dated 2025-11-01 has debits 0.00 and credits 100000.00 — off by 100000.00. Each entry must balance.
$100,000
impact
Out-of-balance entry (Bill txn-3)
Bill txn-3 dated 2025-04-09 has debits 38000.00 and credits 0.00 — off by 38000.00. Each entry must balance.
$38,000
impact
Out-of-balance entry (Bill txn-4)
Bill txn-4 dated 2025-04-09 has debits 0.00 and credits 38000.00 — off by 38000.00. Each entry must balance.
$38,000
impact
Trial balance is out of balance
Total debits (104035250.00) do not equal total credits (104030250.00); the trial balance is off by 5000.00. This is a fundamental integrity issue that must be resolved before relying on any other figure.
$5,000
impact
Out-of-balance entry (JournalEntry je-unbalanced)
JournalEntry je-unbalanced dated 2025-12-31 has debits 5000.00 and credits 0.00 — off by 5000.00. Each entry must balance.
$5,000
impact
Out-of-balance entry (Check txn-32)
Check txn-32 dated 2025-08-20 has debits 250.00 and credits 0.00 — off by 250.00. Each entry must balance.
$250
impact
Out-of-balance entry (Check txn-33)
Check txn-33 dated 2025-08-20 has debits 0.00 and credits 250.00 — off by 250.00. Each entry must balance.
$250
impact
Depreciation not recorded for the period
Depreciation expense is zero while depreciable assets are on the balance sheet. Depreciation should be recorded each period.
$4,466,667
impact
Rationale: No depreciation expense is recorded for the period, but depreciable assets totaling ~47962000 are on the books. The uploaded fixed-asset register indicates approximately 4466667 of depreciation is due.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Depreciation Expense | $4,466,666.67 | |
| Accumulated Depreciation | $4,466,666.67 | |
| Totals | $4,466,666.67 | $4,466,666.67 |
Possible stale accrual in Accrued Liabilities
Accrued Liabilities carries a 2000000 balance with no reversal activity during the period. Confirm the accrual is still valid or reverse it.
$2,000,000
impact
Current portion of Riverstone Bank Term Loan debt not classified as current
Amortization schedule indicates ~1800000 of Riverstone Bank Term Loan debt is due within a year, but it sits entirely in Term Loan (long-term).
$1,800,000
impact
Rationale: The uploaded amortization schedule for Riverstone Bank Term Loan shows ~1800000 due within 12 months, but Term Loan is presented entirely as long-term. The current portion should be reclassified to a current liability.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Term Loan | $1,800,000.00 | |
| Current Portion of Long-Term Debt | $1,800,000.00 | |
| Totals | $1,800,000.00 | $1,800,000.00 |
Prepaid Software & Other is not being amortized
Prepaid Software & Other has a 940000 balance and no amortization activity in the period. The benefit is likely being consumed and should be expensed.
$861,667
impact
Rationale: Prepaid Software & Other carries a 940000 balance with no amortization entries during the period. Prepaids should be expensed over the benefit period. Confirm the policy term; the suggested entry assumes an annual policy with ~1 month remaining.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Software Expense | $861,666.67 | |
| Prepaid Software & Other | $861,666.67 | |
| Totals | $861,666.67 | $861,666.67 |
Lease not recognized on the balance sheet (Sales office lease (FlexSpace Offices))
An uploaded lease ("Sales office lease (FlexSpace Offices)", 11000/mo for 48 months) has no ROU asset / lease liability on the books. Under ASC 842 most leases require a right-of-use asset and a lease liability of ~468384 (PV of payments at 6%).
$468,384
impact
Debt-issuance costs for Riverstone Bank Term Loan may need amortization
The schedule lists ~420000 of issuance/amendment fees for Riverstone Bank Term Loan. Under GAAP these are amortized to interest expense over the life of the debt (typically as a contra-liability). Confirm they are being amortized.
$420,000
impact
Upfront billing recognized in full (Service Revenue)
Invoice txn-6 looks like a multi-period contract billed upfront. ~270000 may need to be deferred to future periods.
$270,000
impact
Rationale: Invoice txn-6 (Annual support contract Oct 2025-Sep 2026) for 360000 appears to be an upfront billing for a contract spanning ~12 months but was recognized in full on 2025-10-01. Under ASC 606 only the earned portion (~90000) should be in revenue this period; the remainder is deferred.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Service Revenue | $270,000.00 | |
| Deferred Revenue | $270,000.00 | |
| Totals | $270,000.00 | $270,000.00 |
Prepaid Insurance is not being amortized
Prepaid Insurance has a 240000 balance and no amortization activity in the period. The benefit is likely being consumed and should be expensed.
$220,000
impact
Rationale: Prepaid Insurance carries a 240000 balance with no amortization entries during the period. Prepaids should be expensed over the benefit period. Confirm the policy term; the suggested entry assumes an annual policy with ~1 month remaining.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Insurance Expense | $220,000.00 | |
| Prepaid Insurance | $220,000.00 | |
| Totals | $220,000.00 | $220,000.00 |
Revenue dated outside the period
Invoice txn-30 for Product Revenue is dated 2026-01-02 but is recorded in the 2025 period. Revenue/expense should be in the period earned/incurred.
$142,000
impact
Rationale: Transaction txn-30 (Invoice) is dated 2026-01-02, which is outside the engagement period 2025-01-01 – 2025-12-31. Under the matching/cutoff principle it likely belongs in the adjacent period.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Product Revenue | $142,000.00 | |
| Deferred Revenue / Suspense | $142,000.00 | |
| Totals | $142,000.00 | $142,000.00 |
No inventory reserve recorded
Inventory of ~5400000 has no obsolescence/lower-of-cost-or-NRV reserve. Assess whether a reserve is needed.
$108,000
impact
Missing Rent Expense accrual for 2025-12
Rent Expense is recorded in 11 of 12 months but not in 2025-12. A period-end accrual is likely required.
$100,000
impact
Rationale: Rent Expense posts every month except 2025-12. Based on the recurring monthly amount (~100000), an accrual is likely needed for completeness of liabilities and expenses.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Rent Expense | $100,000.00 | |
| Accrued Liabilities | $100,000.00 | |
| Totals | $100,000.00 | $100,000.00 |
No allowance for doubtful accounts
Accounts receivable of ~6200000 has no allowance. Consider recording a reserve based on the AR aging and historical collectibility.
$93,000
impact
Rationale: Gross accounts receivable is ~6200000 with no allowance recorded. A reserve for expected uncollectible accounts is generally required; the suggested ~93000 uses a default 1.5% rate. Refine using the AR aging.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Bad Debt Expense | $93,000.00 | |
| Allowance for Doubtful Accounts | $93,000.00 | |
| Totals | $93,000.00 | $93,000.00 |
Capitalizable purchase expensed (Office Equipment Expense)
Bill txn-3 for 38000 appears to be a capital asset charged directly to expense. Consider capitalizing and depreciating it.
$38,000
impact
Rationale: Bill txn-3 (Plant floor CNC measurement system) for 38000 was charged to Office Equipment Expense. Items above the ~2500 capitalization threshold with a useful life beyond a year should be capitalized and depreciated, not expensed.
Proposed adjusting entry — Dec 31, 2025
| Account | Debit | Credit |
|---|---|---|
| Equipment | $38,000.00 | |
| Office Equipment Expense | $38,000.00 | |
| Totals | $38,000.00 | $38,000.00 |
Clearing account not cleared (Payroll Clearing)
Payroll Clearing should net to zero at period end but carries 5250. Investigate and clear the residual.
$5,250
impact
Residual balance in Payroll Clearing
Payroll Clearing carries a 5250 balance at period end. Undeposited/clearing balances often indicate transactions that have not been fully recorded or cleared.
$5,250
impact
Possible expense coded to a balance-sheet account
Check txn-32 ("Postage (miscoded)") for 250 was posted to Payroll Clearing, a balance-sheet account. It looks like an operating expense and may be miscoded.
$250
impact
| Acct | Account | Debit | Credit |
|---|---|---|---|
| 1010 | Operating Checking | $900,000.00 | |
| 1015 | Payroll Checking | $200,000.00 | |
| 1020 | Reserve / Money Market | $300,000.00 | |
| 1100 | Accounts Receivable | $6,200,000.00 | |
| 1200 | Inventory | $5,400,000.00 | |
| 1300 | Prepaid Insurance | $240,000.00 | |
| 1310 | Prepaid Software & Other | $940,000.00 | |
| 1450 | Payroll Clearing | $5,250.00 | |
| 1500 | Property, Plant & Equipment | $47,962,000.00 | |
| 1590 | Accumulated Depreciation | $13,000,000.00 | |
| 1700 | Goodwill | $2,500,000.00 | |
| 2000 | Accounts Payable | $3,100,000.00 | |
| 2100 | Accrued Liabilities | $2,000,000.00 | |
| 2200 | Deferred Revenue | ||
| 2600 | Line of Credit | $5,000,000.00 | |
| 2700 | Term Loan | $28,000,000.00 | |
| 3000 | Common Stock | $5,000,000.00 | |
| 3900 | Retained Earnings | $5,930,250.00 | |
| 4000 | Product Revenue | $38,000,000.00 | |
| 4100 | Service Revenue | $4,000,000.00 | |
| 5000 | COGS - Materials | $13,400,000.00 | |
| 5100 | COGS - Direct Labor | $7,200,000.00 | |
| 5200 | COGS - Manufacturing Overhead | $3,760,000.00 | |
| 6000 | Salaries & Wages | $5,400,000.00 | |
| 6010 | Payroll Taxes & Benefits | $1,500,000.00 | |
| 6100 | Rent Expense | $1,100,000.00 | |
| 6200 | Insurance Expense | ||
| 6300 | Depreciation Expense | ||
| 6400 | Office Equipment Expense | $38,000.00 | |
| 6500 | Utilities | $500,000.00 | |
| 6600 | Software & SaaS | $700,000.00 | |
| 6700 | Marketing | $800,000.00 | |
| 6800 | Professional Fees | $600,000.00 | |
| 6850 | Freight-out | $800,000.00 | |
| 6900 | Miscellaneous Expense | $90,000.00 | |
| 7000 | Interest Expense | $2,300,000.00 | |
| 7100 | Income Tax Expense | $1,200,000.00 | |
| Totals | $104,035,250.00 | $104,030,250.00 | |
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