QuickBooks accounting software helps in accounting activity to keep track of accounts expenses and payroll. It is used by various small and big sized companies use QuickBooks accounting software to make their tasks easily done. Above all that, before getting started with a QuickBooks account, it is important to create an opening balance. In this article, we will provide all the relevant information about opening balance equity. Just stay tuned, till the end of the article.
- 1 What is Opening Balance Equity in QuickBooks?
- 2 Get insight into Retained Earnings as well as Opening Balance Equity
- 3 How to Enter Opening Balance Equity in QuickBooks?
- 4 Perform these steps After Entering your Opening Balances:
- 5 How to Clear Opening Balance Equity in QuickBooks?
- 6 Frequently Asked Questions
What is Opening Balance Equity in QuickBooks?
Open balance equity is an account that QuickBooks automatically generates once a company is created. In other words, it is an offsetting entry that is used when you entering account balance into your QuickBooks accounting software. It is comparable to Retained Earnings or Owner Capital, an equity account. The Open Balance Equity account is essentially a “plug” account (basic accounting debits = credits) used by QuickBooks to balance a transaction. For two reasons: starting account balances or forced changes, QuickBooks will enter a balance into the Open Balance Equity account.
Get insight into Retained Earnings as well as Opening Balance Equity
Retained Earnings: This account is used to track all the earnings and minus any distributions or dividends in previous years. This account should be stopped from posting any transactions unless you have written off or received adjustment entries from your CPA in the previous year. It otherwise collects its data on the profit and loss report from earnings.
Opening Balance Equity: This account is posted when you create a new account chart for a loan or item for which you enter the opening balance when setting up the QuickBooks account. For remaining earnings, this account should be closed out and not hold a balance.
How to Enter Opening Balance Equity in QuickBooks?
You need to enter open balance equity as a credit card or bank account. Follow the below-described instructions to enter opening balance equity in QuickBooks.
Bank or Credit Card Accounts:
- Initially, go to the Company menu and select “Chart of Accounts”
- Next, right-click anywhere within the Chart of Accounts
- And then hit “new”
- For Account Type, you have to select Credit card or Bank
- Now, proceed with the steps in the Add New Account screen:
- Fill out the required field with relevant information
- Hit Enter Opening Balance catch
- The Enter Opening Balance button will be available even after the account is set up if no transaction record exists
- After transactions are entered, you will see “Adjust Opening Balance” instead of entering the opening balance option
- Enter the Ending Date as well as Ending Balance before entering the QB Start Date from the last received statement
- Click “Ok”
- At last, click the Save & Close option.
If you have any outstanding credit card or bank charges, you have to pay for them in order for the potential correct reconciliation to take place.
Perform these steps After Entering your Opening Balances:
- Take the closing balance from your last bank statement:
- An amount can be raised by any outstanding controls
- Any outstanding deposits will reduce the amount
- Now, you have to enter journal entry crediting opening balance equity and debiting the credit card or bank account
- From the Company menu, pick Render General Journal Entries
- Type a number for the entry in the journal as well as set the date
- From the Account column and in the Debit Column, select a bank or credit card account
- Along with that, enter the amount that is calculated in step 2
- Using the drop-down menu, select the Account option
- Then select the Opening Balance Equity option
- Again from the Credit column, enter the amount that is calculated in step 2
- Enter the pending transactions using the Opening Balance Equity as the revenue/expense account by making checks or deposits
- Without affecting the balance sheet of the prior period and these transactions, reconciliation will be available
- Using the mini reconciliation process to reconcile each account’s opening balance journal entry.
How to Clear Opening Balance Equity in QuickBooks?
Clearing/deleting the opening balance equity in QuickBooks is pretty simple. You just have to follow the below-given steps:
- The very first, go to the “Gear” icon and then click Chart of Accounts
- Next, choose the account and then hit view register
- Using the drop-down menu fill in the opening balance on the filter
- Click Apply
- And then click “Edit”
- Now, move to the screen named “Deposit Transaction and hit” more
- After that hit the Delete button
- At last, click “Confirm”.
This article ends here with a hope that it helps you or rectifies your all queries. In case, you still any doubts or queries regarding Opening balance equity then feel free to reach out to QuickBooks technical support just by giving a call at this toll-free number. If you are unable to reach out to them via a toll-free number then you can even drop an email at or can do a 24*7 live chat with QuickBooks professionals.
Frequently Asked Questions
1️⃣ How can we enter an Opening Balance for Equity on other Balance Sheet Accounts?
There are various ways to enter an opening balance for equity, current asset, fixed asset, other current liability. But you need to carefully do this because it is possible that you may enter a double accounting entry. Both Accounts Receivable and Accounts Payable are considered different. However, you can enter it in various ways like:
● Through the Chart of Accounts
● Using a Journal Entry
● Through the Register
● Income and Expense Accounts.
2️⃣ How do I Calculate Opening Capital Balance?
You can easily calculate the opening capital balance using the formula: opening capital = closing capital + drawings – additional capital + profit + loss.
3️⃣ What are the Opening and Closing Balances?
The opening balance is nothing but the total amount of cash that you receive at the beginning of the month and the closing balance is the amount of cash at the end of the month.