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ash0527
March 18, 2021
Question

Clearing Opening Balance Equity

  • March 18, 2021
  • 2 replies
  • 0 views

I am a new QBO user. When setting up the Chart of Accounts I used the Opening Balance Equity account to transfer starting equity from our bank balances, inventory, and to do the first reconciliation in January (followed all the steps outlined in QBO).
How do I correctly clear the Opening Balance Equity account to zero? It is my understanding that it should be cleared out and it's only used for set up. 
I have a sole prop. 

    2 replies

    LeithG
    LeithG
    March 18, 2021

    Hi ash0527

     

    Your owners equity will zero out if your entries all balanced; the only thing that should be left over is the ytd net/profit loss from your transfer. (Equity = assets - liabilities)

    Rebecca R
    Rebecca R
    March 18, 2021

    Welcome to the QuickBooks family @ash0527!

     

    Congrats on choosing QuickBooks Online to manage the books for your business. It sounds like you're doing a great job familiarizing yourself with the proper ways to enter account balances, and I commend you for that. These tasks can seem daunting, but with the right resources, you're on your way to becoming a pro. Let me give you a hand with the rest.

     

    You're correct in saying that the Opening Balance Equity account should have a $0.00 balance if everything has been set up correctly. Since you have a balance in your Opening Balance Equity account, then something was likely posted to it that shouldn't have been, or an entry was missed. If you run a Trial Balance report through the Reports menu for the end of the period, the entries made to the Opening Balance Equity account should have brought the balance back to $0.00.

     

    If you were using another accounting software prior to using QuickBooks Online, it's important to note that your opening balance entries should only be matched to your Balance Sheet account balanaces at the end of the last period, not Profit and Loss accounts. You can find these amounts by running a Trial Balance or a Balance Sheet report. 
     

    If you've checked everything over and can't pinpoint an error, reaching out to an accounting professional is the best way to get to the bottom of this. They're equipped with the know-how to correctly clear out accounts and ensure that your opening balances are entered accurately. You can invite your accountant to work with you in QuickBooks by navigating to the My Accountant tab. You can use the Find a pro to help button on that page to sift through the database of QuickBooks-certified ProAdvisors that are at your disposal as well. They'd love to get you back on the right track so that you can move forward with your bookkeeping tasks with ease.

     

    Take care and enjoy the rest of your week. I'm confident you'll have this sorted in no time.

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