What is Opening Balance Equity in QuickBooks And How To Manage?

Under IFRS, the transparency of these allocations is paramount, as it affects the perceived accuracy of the company’s financial position and performance. If the journal accounting entry amount doesn’t match your bank account statement and you close it out, then the software will adjust the opening balance equity account balance. QuickBooks Online uses double-entry accounting, so this initial capital is necessary for recording the Opening Balance of new accounts.

Below are the journal accounting entries to close the opening balance equity and ensure presentable balance sheets. To adjust the opening balance of the bank account, the balance of this account will now be temporarily set to $100. Opening Balance Equity accounts show up under the equity section of a balance sheet along with other equity accounts like retained earnings. Once you have imported the detailed records of the last financial period, the opening balance equity must be corrected to zero, except in case it was non-zero in the last accounting period as well. Opening balance equity is an equity account and shows up in the equity section in the chart of accounts balance sheets.

Bank Reconciliation

Ignoring existing balances in Opening Balance Equity might result in potential understatement or overstatement of expenses and revenues. Ensuring all finances are accounted for will make filing your income taxes much easier. Maintain professional balance sheets and simplify accounting reports with FreshBooks. If you just opened a new account at your bank, use the day you opened the account.

The opening entry can now be recorded in the ledger using the general ledger journal. Contact us for a free assessment and see how Juna can help you level up. I now have as you did in the video a balance of zero when I go to reconcile. We invite all mid-sized and small businesses to take a free trial of accounting services. Once you agree, QuickBooks will automatically park the balance of the inactive account in the Opening Balance Equity account until you reallocate it to an active account. The image below shows where you can enter the opening balance for a new account, which you should never do.

Managing Opening Balance Equity for Presentable Balance Sheets

The main reason for a large amount in the opening balance equity account is bank reconciliation adjustments that were not done properly. Make sure the bank statement balance transaction accounts for uncleared bank checks while completing a bank reconciliation. The opening balance account may not display on the balance sheet in case the balance is zero.

The account is identified as Opening Balance Equity and is situated in the Equity section of the Chart of Accounts. I talked to my accountant and unfortunately he doesn’t have any idea . If you’ve checked everything over and can’t pinpoint an error, I’d recommend reaching out to an accountant. They can clear out accounts and ensure your opening balance is entered correctly. Once you create a bank account and enter an opening balance, QuickBooks will automatically post it in the Opening Balance Equity. Following the transaction the equity (share capital) of the business will increase by 100.

What is Used to Create QuickBooks Opening Balance Equity?

However, that is not the end of accounting tasks, and it might be better to outsource it to an accounting firm. The tips listed below will guide you on how to zero or correct the opening balance equity account. Here are the steps to correct the non-zero or non-matching value of opening balance equity. Therefore, there are three major types of accounts in the chart of accounts and balance sheets. Learning what the Opening Balance Equity in QuickBooks is and how to close it is essential to maintain a clean set of books. If you have a balance in this account, you need to work with your accountant to reallocate the balances to their proper accounts in the ledger.

• This is good because opening balance equity should be temporary by design.
• Moreover, we will also guide you on preventing a large opening balance equity.
• QB throws it in OBE when you create an account with a balance cause it do not know any better.
• The Opening Balance Equity account shouldn’t have a remaining balance.
• Opening Balance Equity is the offsetting input which is used by you while entering account balances into the QuickBooks accounting software.
• To fix this issue, the bookkeeper should review the general ledger and make sure that all prior account balances are accurate.