Opening Balance Equity

The "Opening Balance Equity" account probably is one of the most misunderstood accounts in QuickBooks. QuickBooks automatically creates this account the first time you enter an opening balance for a balance sheet account. QuickBooks then automatically posts the offsetting entry to the opening balance for each asset and liability account to the "Opening Balance Equity" account. Since the only purpose of the "Opening Balance Equity" account is to offset beginning balance sheet balances as of the QuickBooks start date, you should:

    1. Verify that the only amounts posted to "Opening Balance Equity" relate to the setup of balance sheet accounts as of the QuickBooks start date. Reclassify any amounts resulting from other transactions.
    2. Verify that the adjusted balance in the "Opening Balance Equity" account equals the total equity amount in the client's balance sheet immediately preceding the QuickBooks start date.
    3. Transfer the balance in the "Opening Balance Equity" account to the applicable equity accounts (such as retained earnings, proprietor's capital, or partners' capital).
    4. You can transfer the balance in the "Opening Balance Equity" account to the applicable equity accounts via a journal entry or by double-clicking on the "Opening Balance Equity" account in the chart of accounts to record the transfer directly in the "Opening Balance Equity" account register.

You should not post transactions to the "Opening Balance Equity" account. However, QuickBooks automatically posts unresolved bank statement and credit card reconciliation differences to the "Opening Balance Equity" account. In addition, many users post other transactions to the "Opening Balance Equity" account since they do not understand that the only purpose of that account is to offset beginning balance sheet balances as of the QuickBooks start date. Consequently, you should not post any transaction to "Opening Balance Equity."

In addition, practitioners should review that account each accounting period to verify that its balance is zero. If the balance is not zero, practitioners should review the detail transactions posted to the account and transfer the transaction amounts to the appropriate accounts.

If you need additional
information, please contact us.

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Opening Balance Equity

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