When entering account balances into the
QuickBooks software, the offsetting entry is called opening balance equity.
When setting up an account in QuickBooks, it is necessary to create an account
for any previous account balances. In order to keep the books always in
balance, it is utilised to offer an offset to the other accounts. Compare the
total opening balance equity to the total beginning equity accounts indicated
in the prior account balances once the account entry process is complete for
all accounts. The first account entry was accurate if the balances are
identical. If not, check to determine if a data entry error occurred when
entering the initial account balances. In this particular guide, we will cover
what is exactly is opening balance equity, why it exists, and how to Enter,
Clear, and Close Opening
Balance Equity in QuickBooks.
What exactly is Opening
Balance Equity in QuickBooks?
Opening Balance Equity is a special QuickBooks account in the equity
section of the Balance Sheet. The most common reason for a balance in the
Opening Balance Equity account is the result of a bank reconciliation that was
not balanced to zero prior to completion.
The process of entering the ending balance, marking the items that have
cleared the bank, and reconciling the difference to zero is the correct
procedure.
Once the account is reconciled back to zero, it is recommended that
the account be marked as inactive.
Pointers needs to taken into
consideration
1. Before inputting the opening balance, it is
recommended that you always get in touch with an accounting expert. You can
click the link that asks “Should I enter an opening balance?” or use the F1 key
while setting up the account. You can find out information regarding the
opening balances in this way.
2. Additionally, if you don't have a balance
before the QuickBooks start date, you cannot input the opening balance.
3. The Opening Balances may be entered using one
or more GJE that you may have prepared from the Balance Sheet for the prior
fiscal year. This is possible if you launch a new company with a date that is
later than the actual one. If you are utilising journal entries to record the
opening balances, keep the following things in mind:
a. For the offset account, use the Opening
Balance Equity account to maintain the balance of the journal entries.
b. Instead of entering each revenue, expense, and
cost of goods sold, you can enter the amount for the prior year's retained
earnings when you enter balances from the beginning of the year.
c. There is a limit of one accounts payable or
receivable transaction per journal entry. In order to load the balances for
these accounts, you must have numerous journal entries.
d. In the names column of the journal entries for
the accounts payable, sales tax due, and receivable, don't forget to include
the vendor's or customer's name.
e. You can choose to alter both inventory
quantity and value by using the Inventory Adjustment screen rather than
inputting the Inventory Asset Balance through a journal entry.
Important Note:
1. You would begin keeping track of your
financial transactions in QuickBooks within the time period indicated by the
dates you specified for the beginning of your business.
2. When you enter an opening balance for the
first time in a balance sheet account, QuickBooks automatically creates it.
Additionally, when you enter opening balances, Opening balance Equity is
recorded by QuickBooks. By doing this, you can be confident that your company
will have a strong balance sheet.
3. These are the profits that the company's
owners have not yet shared. When your fiscal year is through, QuickBooks also
figures out your profit or loss. Retained Earnings is the equity that receives
this.
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How to Enter Opening Balance
in QuickBooks?
Bank or credit card accounts
l Initially, select the “Chart of Accounts” tab
from the Company menu
l Do a right-click in this window and choose
“New”
l Then decide between a bank account and a
credit card
l On the appeared screen for “Add New Account”
l Complete all the necessary fields
l Press the Enter Opening Balance button
l Only if you haven't entered a transaction yet
will this button be accessible
l The button will become the Change Opening
Balance button as soon as you enter a transaction
l Enter the ending date and ending balance from
your most recent bank or credit card statement
l After that, click on the Ok button
l Finally, select the “Save & Close” option
from the menu.
You must account for all pending credit card or bank transactions in
order to ensure the accuracy of all future reconciliation.
Perform the below steps after
entering the opening balances in QuickBooks
l If there are any outstanding checks, add them
to the ending balance on the bank statement; if there are any outstanding
deposits, decrease them.
l Enter the journal entry debiting the bank
account or credit card and crediting the opening balance equity
Choose the “Make General Journal Entries”
option from the Company menu
Set the date and make a few journal entries
Next, select the bank or credit card account
from the Account column, and then enter the sum you computed in step 2 in the
Debit column
Click Account in the following line, then
select "Opening Balance Equity" from the drop-down menu
After that, put the determined amount in the
credit field
l Use Opening Balance Equity to create checks
and deposits, then enter all of the outstanding transactions
l There won't be any changes to the prior
balance sheet as a result of this becoming available for reconciliation
l Now use the small reconciliation method to
match up the opening balance journal entry for each account.
Other Balance Sheet Accounts
Be careful when entering an opening balance for equity, fixed assets,
other assets, current assets, and other current liabilities as you run the risk
of making a duplicate accounting entry. Accounts Receivable and Payable are
viewed differently in QuickBooks.
Through the Chart of
Accounts:
l To access the Chart of Accounts, select the
same option from the company menu
l To open a new window in the Chart of Accounts
window, perform a right-click anywhere on the shown window
l Select the proper Account Type
l When you're on the Add New Account page:
Complete the necessary information
After that, hit the “Enter Opening Balanace”
tab
The opening balance amount and the date must
be entered in your next step
Use a date that is earlier than the start date
of QuickBooks
Now, hit the Ok button
l After saving, click on the “Save & Close”
button.
Using a Journal Entry:
l Make general journal entries by selecting it
from the Company menu
l Set the date and add the necessary number for
the journal entry
l Choose the account you want to enter from the
Account column
l The accounts can also be entered in the order
they appear on the trial balance or balance sheet
l Depending on the kind of account, enter a
positive value for the account balance in the right column as well
l For example:
For Asset accounts, positive balances will
show up in the Debit column
These positive balances are shown in the
Credit column for Liability and Equity
l After that, you have to repeat the steps 3 and
4 for each account
l Make that the sum in the Debit and Credit
columns is equal after all the balances have been entered
l To examine any discrepancy between the two
columns, you can use the Opening Balance Equity as the offset
l Now, hit the save and close button
l Create new journal entries to record the
balance for sales tax payable, accounts payable, and receivables. Any other
account that is not mentioned in the first journal entry may also be entered
l Finally, make a journal entry to allocate any
remaining balance in the opening balance equity account among the other
retained profits and equity accounts as desired.
Through the Register:
You must enter the opening balance in the account register whenever
there are transactions in the account
l From the Company menu, select “Chart of Accounts”
l Decide the account you want to enter the
opening balance for
l After that, choose Use Register in the Edit
drop-down menu
l For the new transaction, complete the
following fields:
l Opening balance's date
l Number/Type- Leave this field
l Payee- Opening Balance by Payee Type
(Optional)
l Select the “Opening Balance and Equity” option
l Payment or Deposit: If the opening balance is
positive, enter it in the Deposit box; if it is negative, enter it in the
Payment field.
l At last, hit the “Record” option.
Income and Expense Accounts:
Because the balance for the income and spending accounts derives from
entered transactions such bills, invoices, and checks, there is no opportunity
to establish a balance for these accounts.
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Customers and Vendors (A/R
and A/P)
For Outstanding Balance
before your start date:
There are several solutions available if any of your clients or
suppliers have an unpaid amount from before the start date:
Option 1: Put your start date in the As of date field and the outstanding
balance in the Opening balance field. This initial amount will be tracked to
Unrelated Income or Unrelated Expense. If you intend to set up jobs for
clients, you can provide an opening balance for each task. Furthermore, the
customer's name will include the sum of the balances for all of the jobs.
Remember that the opening balance field is only accessible at the time you add
new customers or vendors.
Option 2: Utilize the opening balance item that you will generate anew and use
the same in invoices to build opening balances for vendors and consumers. This
will help you decide which account you want entries to track to.
Option 3: Instead of entering the entire sum for each of the customers or
vendors, enter each individual outstanding bill or invoice. Customers and
vendors will both have open balances as a result of all the unpaid
transactions. And this will ultimately lead to opening balances for accounts
receivable and payable. You can use this option to keep track of all the
individual sales and bills that add up to your vendor and customer opening
balances.
For transactions that took place following
your start date:
If you discover that a customer's or a vendor's transactions occurred
on or after the start date, you have the choice to enter the relevant
individual transactions using the normal QuickBooks forms, which include:
l Deposits
l Vendor bills
l Bill payments
l Sales tax payments
l Invoices and sales receipts
l Vendor credits
l Customer payments and returns
How to Clear Opening Balance
equity in QuickBooks?
In QuickBooks, clearing or removing the opening balance equity is
rather easy.
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You only need to take the following actions:-
l First, click on the “Gear” button and then
select the “Chart of Accounts” option
l After selecting the account, click on the
“View Register” option
l Fill up the opening balance on the filter
using the drop-down option
l Once done with that, hit the “Apply” button
l Now, you’re supposed to click on the “Edit”
tab
l Moving forward, go to the “Deposit Transaction
and click” more
l Hit the Delete button as your next step
l At last, click on the “Confirm” button to
finish this process.
How to Close Opening Balance Equity
Account in QuickBooks?
l In the very first step, launch your QuickBooks
program
l Find the income statement and P& L report
l You now need to filter the income statement
report until the end of the fiscal period
l The opening balance should then be noted
l Find the New Journal entry Window and input
the date of the final day of the closing period to create a new journal entry
l Click on Opening Balance Equity Account after
opening the income statement, then create a debit account.
l Continue with the entry's last line; you must
select the income summary account
l Create credit for the entire initial balance
equity account
l Once finished, click Save, and then select
Close
l To zero off the equity or start a Balance
account, make sure all of your calculations are accurate.
Conclusion
Hopefully, this guide covered all the major information regarding how
to Enter, Clear, and Close Opening Balance Equity in QuickBooks. For more
information, you can easily reach the team of experts to get better assistance
with less delay. The team will dedicatedly be committed to serving your doubts
all round the clock.
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FAQs:
Q1. What can be reasons for
Opening Balance Equity in QuickBooks?
Ans: Several factors, including the following, lead to the QuickBooks
program creating an opening balance equity account:
l Establishing a database for new companies with
opening balances.
l Adding the first bank and credit cards with
account balances.
l Entering for the first time a new accounting
program.
l Fresh inventory being added as a new item on
the chart of accounts.
l With value balances, a new vendor or customer
entry (for example, outstanding balances which results in an accounts
receivable opening balance).
Q2. How to edit the opening
balance in bank, credit card, and other balance sheet accounts within
QuickBooks?
Ans: You can follow the below steps in order to edit the opening balance in
bank, credit card, and other balance sheet accounts:
l From the Lists menu, select the Chart of
Accounts
l On the account you wish to edit, perform
double-click on it
l Then, locate the opening balance transaction
in the account register (typically the first one)
l Additionally, Opening Balance Equity will be
listed in the Account box
l If necessary, update the date and the sum as
well
l To save all changes, select the “Record”
option.
Q3. What are the procedure
involved in editing the opening balance for income or expense accounts within
QuickBooks?
Ans: The below steps help you in editing the opening balance for income or
expense accounts:
l From the Lists Menu, choose “Chart of
Accounts”
l Next, double-click on the expense or income
that you want to change
l The Account Quick Report's date should then be
changed to reflect your start date
l In the Dates drop-down menu, select ALL if you
are unsure about the specific start date
l After that, you can look through the report to
find the correct transactions, which are typically among the first ones
l To QuickZoom a transaction, simply place the
mouse pointer over it. Double-click that when the magnifying glass displays
l Make all the necessary modifications. If the
modifications have an impact on the journal entry, the general journal entry
transaction must ensure that the total debits and total credits balance out
l In the end, select the “Ok” button.
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