Using the Opening Balance Equity Account

One of the many errors I find when going to a client's site to review their new business set up using QuickBooks is having a balance left in the Opening Balance Equity Account.

This account is a default account set up in QuickBooks as an offset account while entering your opening balances in the program. To start with your new company set up, I generally instruct my clients to use the Trial balance from your CPA and use those ending balances as your beginning balances. If you do that, you will not have a balance left over in the opening balance equity account because your records will reflect the balances from the prior years records from your tax return or your trial balance. They will be balanced out completely.

Now, if you do have a balance in the opening balance equity account, you will need to go through it to see what is in there. If there is money in there from your beginning balance in your checking account? Is that from income earned last year or this year? You need to determine that in order to allocate it properly.

So, be sure to check that account out carefully and get it to a zero balance.