QuickBooks: Making Sense Of The Opening Balance Equity Account

“What in the world is Opening Balance Equity?”

“How do I fix Opening Balance Equity?”

“How do I adjust Opening Balance Equity?”

These are just some of the questions that people have about the Opening Balance Equity account in QuickBooks. Opening Balance Equity is a QuickBooks only account that seems to be quite mysterious and confusing.

When should Opening Balance Equity be used?

Really the only time that Opening Balance Equity should be used is when you setup a new QuickBooks account. This is the best way to get balances from your chart of accounts into QuickBooks. It is used to provide an offset to the accounts, so that the books are always balanced.

Once the account entry process is completed for all accounts, compare the total Opening Balance Equity to the sum of all beginning equity accounts listed in the prior account balances. If the balances match, then the initial entry of accounts was accurate. If not, then review the initial account balances entry to see if there was a data entry error.

What should I do with Opening Balance Equity after the initial setup?

Once all initial account balances have been entered, the balance in the Opening Balance Equity account is moved to the normal equity accounts, such as Owner’s Equity or Retained Earnings.

Moved?

Yes a journal entry is done to zero out Opening Balance Equity. In a clean set of books there should be no balance in the Opening Balance Equity account.

If it's a positive balance, put a debit entry to the Opening Balance Equity account and a credit to the Owner’s equity account (or retained earnings account.)

If it's a negative balance, put a credit entry to the Opening Balance Equity account and a debit to the Owner’s Equity account (or retained earnings account.)

How should I manage the Opening Balance Equity account going forward?

After you make the journal entry to zero out Opening Balance Equity we want to shut down this account and make it inactive. This way no one can make any more additions or adjustments to the account.

In Closing

Remember that Opening Balance Equity is a QuickBooks only account. After the initial setup of QuickBooks the Opening Balance Equity balance needs to be moved to Equity and closed. If you have a balance in Opening Balance Equity there is problem that needs cleaned up.