Intuit Accountants News Central

Most Common QuickBooks® Mistakes: Opening Balance Equity Account

Article Post Date
September 27th 2012 by Intuit Staff

QuickBooks® automatically records the following transactions to the Opening Balance Equity account:

Other common transactions that a user might assign to this account include:

Common Errors

Symptoms

Reviewing Balances in Open Balance Equity Account

To review the transactions in Opening Balance Equity account a report of the transactions is first created.

To create a report of the transactions in the Opening Balance Equity account:

  1. Click Reports > Company & Financial and select the Balance Sheet Standard report.
  2. Without adjusting the date, view the Equity section of the report to see whether a balance exists in the account.

The Opening Balance Equity account value might be equal to the prior year Retained Earnings. So, if a balance in the Opening Balance Equity account exists and if the balance is equal to the prior year’s Retained Earnings, the Opening Balance Equity can be closed into Retained Earnings – as discussed in the next section.

If, however, a balance remains on the Balance Sheet for Opening Balance Equity, you can review the individual transactions by creating the following report:

  1. Click Reports > Custom Transaction Detail Report. The Modify Report dialog appears, with the Display tab selected.
  2. Select the Report > Date Range to be reviewed. Choose All from the Dates drop-down menu.
  3. In the Columns section of the Display tab, click to place a check mark next to those data fields to be included on the report, or click to remove the check mark from those not to be included on the report. Be sure to include Type near the top of the list.
  4. Click the Filters tab.
  5. In the Choose Filter pane, select Account; from the Account drop-down menu select the Opening Balance Equity account, as shown in the image below.
  6. Optionally, for the Sort By drop-down list, select Type. This option groups the report by type of transaction, which might make reviewing the source of the transactions easier.

With the report sorted by type of transaction, determine whether errors in entries were made is the next step.

One of the most important things to know about the Opening Balance Equity account is that when a file is completely and successfully set up, no balances should remain in the Opening Balance Equity account.

Closing Opening Balance Equity to Retained Earnings

The Opening Balance Equity account should have a zero balance once a file is set up correctly. A correctly set up QuickBooks file assumes the following:

If the above stipulations are true, then the Opening Balance Equity is expected to equal the Retained Earnings balance from the accountant’s financials or from the prior software.

If it does not agree, continue to review the data to identify the errors.

If it does agree, then make the final entry in the startup process to close out the balance in Opening Balance Equity to Retained Earnings.

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  • About Intuit Staff

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