What Is a Rollforward in Accounting and Its Purpose?

An accounting rollforward is a schedule that tracks the activity in a balance sheet account from the end of one period to the next. Its primary function is to provide a clear summary of all transactions that caused the account’s balance to change. This process creates a transparent trail of how a final account balance was reached, serving as a tool for both internal accountants and external auditors to verify the integrity of financial statements.

Core Components of a Rollforward

A rollforward is built upon a straightforward formula: Beginning Balance plus Additions minus Subtractions equals the Ending Balance. Each piece of this equation represents an aspect of the account’s activity during a specific timeframe, such as a month or a quarter.

The beginning balance is the starting point for a rollforward and is the verified ending balance of the account from the preceding accounting period. This figure must be accurate, as any error will render the entire calculation incorrect.

Additions represent the total value of all transactions that increased the account’s balance during the period. The nature of these transactions depends on the specific account being analyzed. For an inventory account, additions would be the cost of new inventory purchased, while for a cash account, it would include cash receipts from customers.

Conversely, subtractions are the sum of all transactions that decreased the account’s balance. For a fixed asset account, a common subtraction is the period’s depreciation expense. Other examples include cash payments to suppliers or the book value of equipment that was sold.

The ending balance is the final calculated figure from the rollforward schedule. This number represents the expected balance after all additions and subtractions have been accounted for. A successful rollforward concludes when this calculated balance matches the account’s ending balance in the general ledger.

The Rollforward Process

Performing a rollforward involves a systematic process of gathering data to validate an account balance. The first action is to obtain the confirmed ending balance from the prior period’s general ledger. With the beginning balance established, the next step is to summarize the period’s activity by gathering all transactional data that impacts the account and categorizing it into additions and subtractions.

Once the beginning balance, total additions, and total subtractions are known, the ending balance can be calculated by applying the rollforward formula. The final step is to verify the result. The calculated ending balance from the schedule is compared to the actual ending balance in the current period’s general ledger. If the two figures match, the account is reconciled; if they differ, an investigation must be launched to identify the discrepancy.

Common Applications of Rollforwards

Rollforwards are a practical tool applied to many accounts to provide clarity, particularly for those with a high volume of activity or complex transactions, such as Property, Plant, and Equipment (PPE) and Retained Earnings. These schedules transform raw transaction data into a summary that explains changes over a period.

A PPE rollforward is a schedule used to track a company’s capital assets. It details how the gross value of assets and the associated accumulated depreciation change over time. The additions column would show the cost of new machinery purchased, while subtractions would include the original cost of any equipment sold during the period.

Another widespread use is the retained earnings rollforward, which is often included in a company’s Statement of Retained Earnings. This schedule starts with the beginning retained earnings balance. The primary addition is the company’s net income for the period, while the main subtraction is dividends paid to shareholders.