How do i get rid of Open Balance Equity? (make it zero, it currently is a negative number).I have two clients I set up accounts for and when I opened up their bank accounts it but a negative number in that account code.
Any number in Opening Balance Equity indicates that all of your accounts have not been entered completely.
Once you enter all of your Balance Sheet accounts as of year end, including the equity accounts, your Opening Balance account should be zero.
Laura D
It might be that easy. . .I couldn't say without seeing your file. . .or knowing more detail.
First of all, are all of your balance sheet accounts entered in QuickBooks as of 12/31/07?
Laura D
Both of them didnt know what their ending balances were. The OBE came from the beginning balance of the bank accounts.
Any number in Opening Balance Equity indicates that all of your accounts have not been entered completely.
Once you enter all of your Balance Sheet accounts as of year end, including the equity accounts, your Opening Balance account should be zero.
First of all, are all of your balance sheet accounts entered in QuickBooks as of 12/31/07?
Laura D
If you entered the beginning bank balance during the set up of the bank account in the chart of accounts, Quickbooks automatically offsets the amount in the OBE. Since the beginning amount is generally from prior period activity, do a JE to retained earning to zero out the OBE.
This is a quick fix and may be all that is needed.
However, any amount in opening balance equity from setting up new accounts is an indication that there might be other unaccounted for beginning balance numbers.
I would suggest getting the CPA's advice on this one.
Laura D
Is there any instructions anywhere on how to establish Balance Sheet Acct balances on QkBks other than the opening Cash that is the only account asked for when setting up a new Company?
Thank You.
Barry
*This is what I do when I am starting a new file with existing data:
If you have an accurate trial balance from a previous month/year, enter it as one journal entry. (Do not enter any opening balances when setting up new accounts in the COA.)
Start your journal entry with a blank line.
For the Checking account, enter only the reconciled bank statement amount in that journal entry.
Enter all other Balance Sheet accounts except Accounts Payable and Accounts Receivable.
Enter your P & L accounts.
i If you want your income/expenses by job, you can enter each year-end amount on a separate line in order to attach the job name to it.
i If you want your income/expenses by class, you can enter each year-end amount on a separate line in order to attach the class to it.
Let the variance hit Opening Balance Equity.
Then, enter any outstanding checks/deposits and hit OBE. (use the write checks/make deposits windows)
Then, enter Unpaid Bills and Open Invoices, one at a time with the vendor/customer name. . offsetting OBE. (use the enter bills/create invoices windows - you will have to set up an item which points to OBE for the invoices)
When you complete these three steps, your OBE should be zero.
This will give you the detail of outstanding checks/deposits so that you can reconcile next month's bank statement.
This, also, will give you an accurate A/P and A/R with enough detail to move forward in paying bills and receiving payments.
Laura D
Laura,
Thank you for your quick response. As an example, if there are Inventory and Prepaid Balances and a Liability say LT Loan Payable.
The entry that you described would be and what is the balancing credit recorded to ?
Dr Cash (Bank Bal as you stated) 20,000.00
Dr Inty 1,000.00
Dr Prepaids 1,000.00
Cr Lt Loan Payable 25,000.00
Cr ?
Thanks very much,
Barry
If you enter all of your beginning balances as described in my previous post, the credit will go to Opening Balance Equity and that should zero that account out.
If that does not work, you haven't recorded everything correctly.
Laura D
You simply reclassify via journal entries into the proper accounts until the balance comes down to zero.
Attached is a file about QB start up balances--hopefully it will help too.
Michelle L. Long, CPA, MBA
Author of: Successful QuickBooks Consulting: The Complete Guide to
Starting and Growing a QuickBooks Consulting Business
MLongConsulting.com
Michelle - Just curious. . .is there any advantage of this procedure (that you attached to your last post) over the one previously posted (post 10)?
Always learning,
Laura D
Probably not except that it is easy to print out the PDF file and/or save it for future reference.
Michelle L. Long, CPA, MBA
Author of: Successful QuickBooks Consulting: The Complete Guide to
Starting and Growing a QuickBooks Consulting Business
MLongConsulting.com
Thanks for clarifying that. . .
I found that article/procedure difficult to follow, so I thought maybe I was missing something!!
Laura D
Hi
I have enteted all my opening balances. Now the opening balance equity in my balance sheet is in negative and its the exact amount when that needs to be decreased from the profil for the year figure to arrive at the right figure. Forexample , if my last year profit was USD50, my profit now is USD100 and Opening Balance Equity is -USD50. How to balance it out?
Michelle~
Can you repost the pdf? It is no longer available.
Thank you
